EXHIBIT 10.3 (d)
DEBENTURE PURCHASE AGREEMENT entered into on the 4th day of December, 2002
BY AND AMONG: STAKE TECHNOLOGY LTD., a corporation duly incorporated
according to law, herein acting and represented by
Xxxxxx X. Xxxxxxx, its Chairman and Chief Executive
Officer, and Xxxx Xxxxxxxx, its Vice-President and
Treasurer,
(hereinafter referred to as the "Corporation")
AND: CLARIDGE ISRAEL LLC, a company duly formed according to
law, herein acting and represented by Xxx Xxxxxx, its
Manager,
(hereinafter referred to as the "Purchaser")
WHEREAS the Corporation desires to issue and sell to the
Purchaser and the Purchaser, subject to the terms and conditions hereinafter set
forth, desires to purchase an aggregate of Five Million Dollars (U.S. Funds)
(U.S.$5,000,000) principal amount of debentures;
WHEREAS, subject to the terms and conditions hereinafter set
forth, the Purchaser desire to purchase the debentures.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
Article 1
INTERPRETATION
1.1 DEFINITIONS. For the purposes hereof, the following terms shall have
the following respective meanings:
(a) "Additional Shares" means all Common Shares, Options or
Convertible Securities issued by the Company, other than:
(i) the Shares issuable upon conversion of Debentures or upon
the exercise of the Warrants issued hereunder;
(ii) in connection with a Capital Reorganization;
(iii) Employee Shares,
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(iv) three million, nine hundred and seventy-four thousand,
six hundred (3,974,600) shares issuable upon the exercise
of currently outstanding warrants;
(b) "Applicable Laws" means in respect of any Person, property,
transaction or event, all applicable federal, provincial, state,
local, municipal and regional laws, statutes, ordinances, rules,
by-laws, policies, guidelines, treaties and all applicable
regulations, guidelines, directives, standards, requirements,
judgments, orders, decisions, rulings, permits, authorizations,
injunctions, awards and decrees of any Governmental Authority
and all applicable common laws and laws of equity;
(c) "Bank" means the Bank of Montreal and Xxxxxx Trust and Savings
Bank;
(d) "Business" means the business carried on by the Corporation on
the date hereof;
(e) "Business Day" means a day, other than Saturday or Sunday, on
which Canadian chartered banks are open for the transaction of
business in Toronto, Ontario;
(f) "Capital Reorganization" has the meaning ascribed thereto in
section 4.5;
(g) "Closing Date" means the closing date with respect to the sale
or other disposition of a Property;
(h) "Common Shares" means the shares of any class in the capital of
the Corporation which shall not limit the holder thereof to a
fixed sum or percentage in respect of dividends and in the
distribution of assets upon the liquidation, dissolution or
winding up of the Corporation;
(i) "Conversion Period" means the period commencing on the earlier
of
(i) fifteen (15) Business Days following a Closing Date
unless a Repayment Notice is sent to the Debentureholders
and the Sales Proceeds are applied in accordance
therewith, and
(ii) December 1, 2003
and terminating on the date of repayment in full of
the Debentures (and, for greater certainty, shall not
be curtailed by the transmission of a Repayment
Notice or a Prepayment Notice);
(j) "Conversion Price" means the price per Share at which the
Debentures shall be convertible into Shares in accordance with
the provisions hereof, such price being Three Dollars (U.S.
Funds) (U.S.$3.00), subject to adjustment in accordance with the
provisions of sections 4.5 and 4.6;
(k) "Conversion Right" has the meaning ascribed thereto in section
4.1;
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(l) "Convertible Securities" means any evidences of indebtedness,
preferred shares or other securities convertible into or
exchangeable for Common Shares;
(m) "Corporation's Auditors" means the independent firm of chartered
accountants duly appointed as auditors of the Corporation;
(n) "Debentureholders" means the Debentureholders of the Debentures
from time to time;
(o) "Debentureholders Resolution" means a written instrument or
instruments in counterpart executed by holders of not less than
sixty-six and two thirds percent (66-2/3rds %) of the principal
amount of the outstanding Debentures;
(p) "Debentures" means the Debentures to be issued pursuant to
section 2 hereof;
(q) "Default" means the occurrence of an Event of Default;
(r) "Default Rate" means a fluctuating interest rate per annum equal
to the Prime Rate plus four percent (4%) per annum. Each change
in such fluctuating interest rate shall take effect
simultaneously with the corresponding change in the Prime Rate;
(s) "Documents" means this agreement, the Registration Agreement
Amendment and the Debentures and Warrants;
(t) "Employee Shares" means options to subscribe for Common Shares
under existing stock option plans or any similar plans hereafter
adopted;
(u) "Environmental Laws" shall mean all applicable federal,
provincial, state, municipal, local and foreign laws and
regulations, ordinance, code, guideline, policy, rule of civil
or common law now or hereafter in effect of any governmental,
judicial or administrative authority having jurisdiction and in
each case as amended and any judicial or administrative order,
consent, decree or judgment of any governmental, judicial or
administrative authority having jurisdiction relating to
pollution or protection of human health, Hazardous Materials or
safety, the environment and natural resources (including,
without limitation, ambient air, surface water, ground water,
wetlands, land surface or sub-surface strata, wildlife, aquatic
species, vegetation or sub-surface strata, emissions,
discharges, releases or threatened releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, treatment, storage, disposal, transport or
handling of Hazardous Materials and vegetation);
(v) "Event of Default" has the meaning set out in section 7.1;
(w) "Financial Statements" means the audited consolidated financial
statements for the annual periods ended December 31, 2000 and
2001
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and the unaudited interim consolidated financial statements
for the nine (9) months ended September 30, 2002;
(x) "Financial Statements Date" means the date ten (10) Business
Days following delivery by the Corporation to the Bank of the
audited consolidated financial statements of the Corporation for
the 2003 fiscal year;
(y) "GAAP" means Canadian generally accepted accounting principles
as adopted by the Canadian Institute of Chartered Accountants
from time to time, consistently applied;
(z) "Governmental Authority" means any government, parliament,
legislature or commission or board of government, parliament or
legislature, or any political subdivision thereof, or any
quasi-governmental authority, or any court or, without
limitation of the foregoing, any other law, regulation or
rule-making entity, including, without limitation, any central
bank, fiscal or monetary authority or authority regulating
financial institutions, having or purporting to have
jurisdiction in the relevant circumstances, or any Person acting
or purporting to act under the authority of any of the
foregoing, including, without limitation, any arbitrator, or any
other authority charged with the administration or enforcement
of any Applicable Laws;
(aa) "Hazardous Materials" means any substance, material or waste
which is regulated by or forms the basis of liability now or
hereafter under any Environmental Laws, including any material
or substance which is (i) defined as a "solid waste", "hazardous
waste", "hazardous substance", "extremely hazardous waste",
restricted hazardous waste", "pollutant", "hazardous
constituent", "special waste", "toxic substance", "toxic waste",
"dangerous waste" or other similar term or phrase under any
Environmental Laws, and (ii) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance;
(bb) "Interest Period" means each three month period commencing on
the first day of January, April, July and October of each year,
provided that the first Interest Period shall commence on the
date hereof and terminate on December 31, 2002;
(cc) "Licenses" has the meaning ascribed thereto in section 5.1(a);
(dd) "Liens" means all mortgages, charges, assignments, hypothecs,
pledges, security interests, liens, restrictions and other
encumbrances and adverse claims of every nature and kind and
howsoever arising;
(ee) "Material Adverse Change" means a material adverse effect on:
(i) the business, operations, management, property, financial
condition or prospects of the Corporation and the Subsidiaries,
taken as a whole; (ii) the ability of the Corporation or any
Subsidiary to perform any of its obligations under any Document
to which it is a party; or (iii) the validity
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or effectiveness as against, or the enforceability against, the
Corporation or any Subsidiary of any Material Contract to which
it is a party;
(ff) "Material Authorization" means, with respect to any Person, any
approval, permit, licence or similar authorization (including
any trademark, trade name or patent) from, and any filing or
registration with, any Governmental Authority required by such
Person to own its undertaking and property or to carry on its
business as currently carried on by it or as contemplated to be
carried on by it in each jurisdiction in which it does so or is
contemplated to do so, where the failure to have such approval,
permit, licence, authorization, filing or registration would or
could reasonably be expected to result in a Material Adverse
Change in the Corporation or any Subsidiary;
(gg) "Material Contract" means any agreement, instrument or other
document to which the Corporation or any Subsidiary is a party
or to which any of its undertaking or property may be subject:
(i) which if breached, not performed, cancelled, terminated or
not renewed, would or may reasonably be expected to result in a
Material Adverse Change in the Corporation or any Subsidiary, or
(ii) other than those agreements which are terminable without
penalty on notice from the Corporation of thirty (30) days or
less, those for the supply of materials intended for resale and
which have been entered into in the ordinary course of business
having a value, in each case, of less than Five Hundred Thousand
Dollars ($500,000) and verbal employment agreements of
indefinite duration;
(hh) "Material Subsidiaries" means collectively International
Materials & Supplies Inc.; Nordic Aseptic, Inc., Northern Food
and Dairy, Inc., Stake Technology (U.S.A.) Inc., Stake Tech LP,
Stake Technology LLC, SunRich, Inc., SunRich Food Group, Inc.,
Temisca, Inc., Virginia Materials, Inc., 1108176 Ontario
Limited, 3060385 Nova Scotia Co. and 558497 Ontario Ltd. and
"Material Subsidiary" means any of the foregoing. If and when
acquired the following will also be "Material Subsidiaries" from
the date of acquisition, Opta Food Ingredients, Inc., Simply
Organic Inc. and 632100 B.C. Ltd.;
(ii) "Maturity Date" means the earliest of (a) November 30, 2004, (b)
a Repayment Date, or (c) such other date as the principal of the
Debentures shall become payable in accordance with the
provisions hereof;
(jj) "Officers' Certificate" means a certificate signed by the
Chairman of the Board and/or the President and one of the
Vice-Presidents of the Corporation;
(kk) "Ontario Properties" means the properties bearing civic numbers
0000 Xxxxxxx #0, Xxxxxx Xxxxxxx, 000 Xxxxxxxx Xxxxx, Xxxxxxxx
(formerly Town of Flamborough), Ontario and 00 Xxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxx, together with all buildings and appurtenances
situate thereon;
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(ll) "Opta Property" means the property bearing civic number 00
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx, together with all
buildings and appurtenances situate thereon;
(mm) "Opta Documents" means the security documents contemplated in
section 3.6 hereof with respect to the Opta Property, together
with a legal opinion in form and content satisfactory to the
Purchaser;
(nn) "Options" means any rights, options or warrants to subscribe
for, purchase or otherwise acquire either Shares or Convertible
Securities;
(oo) "Person" means an individual, partnership, corporation, trust,
unincorporated association, joint venture or other entity or a
foreign state or political subdivision thereof or any agency of
such state or subdivision;
(pp) "Prepayment Notice" means a prepayment notice contemplated in
section 3.4;
(qq) "Prime Rate" means the rate of interest expressed as the annual
rate announced by Bank of Montreal, as its prime rate from time
to time for commercial loans denominated in Canadian currency
made in Canada to commercial borrowers;
(rr) "Property" means one of the Ontario Properties or the Opta
Property, as the case may be;
(ss) "Registration Agreement Amendment" means the agreement of even
date between the Corporation and the Purchaser supplementing the
registration agreement between the parties dated September 26,
2001;
(tt) "Repayment Date" means the dated fixed by the Corporation for
the repayment of the Sales Proceeds in the Repayment Notice,
which date shall be not less than thirty (30) days nor more than
sixty (60) days after the date of transmission of the Repayment
Notice;
(uu) "Repayment Notice" means a notice from the Corporation to the
Debentureholders stipulating (i) that it will apply the full
Sales Proceeds (save and except that in the event of the sale of
the Opta Property, the Corporation shall be entitled to apply a
minimum Two Million Dollar (U.S. Funds) (U.S.$2,000,000) cash
amount or grant the Debentureholders a first security interest
on such amount) in repayment of the Debentures on a pro rata
basis among the Debentureholders, (ii) the amount thereof, and
(iii) the Repayment Date (other than in the event that the
Corporation grants a first security interest as contemplated in
subparagraph (i) above);
(vv) "Sales Proceeds" means the gross sales price of a Property, net
of real estate commissions;
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(ww) "Securities Law Reports" means (i) the Form 10-K for the annual
period ended December 31, 2001 and the Form 10-Q for the
quarterly periods ended March 31, June 30 and September 30, 2002
filed in accordance with U.S. Securities Laws and (ii) quarterly
or annual financial statements and other information filed in
accordance with Canadian Securities Laws;
(xx) "Securities Laws" means the Federal, Provincial or state laws,
regulations or policies of Canada and the United States or any
other Governmental Authority having jurisdiction and the rules,
regulations and policies of the TSX or NASDAQ on which the
Shares are listed for trading;
(yy) "Shares" means the Common Shares of the Corporation as currently
constituted or, upon any subdivision or consolidation thereof,
the shares resulting therefrom or, upon the occurrence of a
Capital Reorganization, the shares and/or other securities
and/or property substituted for the Shares or into which Shares
are reclassified or changed;
(zz) "Subsidiary" has the meaning given to that term in the Canada
Business Corporations Act;
(aaa) "2003 Budget" means the budget of the Corporation for its 2003
fiscal year, a copy of which has been delivered to the Bank and
the Purchaser;
(bbb) "Taxes" means all taxes of any kind or nature whatsoever
including, without limitation, income taxes, sales or
value-added taxes, levies, stamp taxes, royalties, duties, and
all fees, deductions, compulsory loans and withholdings imposed,
levied, collected, withheld or assessed as of the date hereof or
at any time in the future, by any Governmental Authority having
power to tax, together with penalties, fines, additions to tax
and interest thereon;
(ccc) "Underlying Securities" means the Common Shares issuable upon
exercise of the Warrants or conversion of the Debentures;
(ddd) "Warrantholders" means the Warrantholders of the Warrants from
time to time;
(eee) "Warrants" means the Warrants to be issued pursuant to Article 2
hereof.
1.2 GENDER AND NUMBER. Words importing the singular number include the plural
and vice versa and words importing gender include the neuter, feminine and
masculine genders.
1.3 HEADINGS. The division of a Debenture into Articles, Sections, subsections
and clauses, and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation hereof.
1.4 APPLICABLE LAW. A Debenture shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
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1.5 BUSINESS DAY. In the event that any day on or before which any action is
required to be taken hereunder is not a Business Day, then such action shall be
required to be taken on or before the requisite time on the next succeeding day
that is a Business Day.
1.6 MONETARY REFERENCE. Any reference in a Debenture to "Dollars", "dollars"
or "$" shall be deemed to be a reference to lawful money of the United States of
America.
1.7 INVALIDITY OF PROVISIONS. Each of the provisions contained in a Debenture
is distinct and severable and a declaration of invalidity or unenforceability of
any such provision by a court of competent jurisdiction shall not affect the
validity or enforceability of any other provision hereof or thereof.
1.8 TIME OF THE ESSENCE. Time shall be of the essence hereof.
Article 2
ISSUANCE OF THE DEBENTURES
2.1 ISSUANCE. On the date hereof, the Corporation shall issue to the Purchaser
and the Purchaser shall purchase from the Corporation, (i) Five Million Dollars
($5,000,000.00) principal amount of Debentures, payable on the date hereof by
certified cheque or wire transfer of immediately available funds. In addition,
on the date hereof in conjunction with the issuance of the Debentures and
without additional consideration, the Corporation will issue to the Purchaser a
Share Purchase Warrant to purchase two hundred and fifty thousand (250,000)
common shares at a price of Three Dollars and Twenty-Five Cents ($3.25) per
share.
2.2 FORM OF DEBENTURE. The Debentures shall be issued in the form set forth in
the first schedule of this agreement with such additions, deletions and
alterations as the parties may agree.
2.3 FORM OF WARRANT. The Warrants shall be issued in the form set forth in the
second schedule of this agreement with such additions, deletions and alterations
as the parties may agree.
2.4 EXCHANGE OF DEBENTURES. A Debenture may be exchanged for a similar
Debenture in an equal aggregate amount but in any other denomination upon
presentation and surrender thereof by the Debentureholders.
2.5 LOST OR DEFACED DEBENTURES. If any Debenture is lost or defaced, the
Corporation shall execute and deliver a replacement Debenture for the same
series and denomination upon indemnification in an amount and subject to terms
and conditions satisfactory to the Corporation.
2.6 TRANSFER OF DEBENTURES. The Corporation shall record transfers of
Debentures made by the registered holder (or by his duly appointed attorney) by
written instrument. No service charge shall be paid for any registration of
transfer or exchange of the Debentures (or the conversion thereof pursuant to
Article 4) and the Corporation shall pay any tax or other governmental charge
that may be imposed in connection with any registration of transfer or exchange
of the Debentures (or the conversion thereof pursuant to Article 4), excluding
therefrom any income or analogous taxes upon the Debentureholders.
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2.7 The provisions of sections 2.4, 2.5 and 2.6 shall apply mutatis mutandis
with respect to the Warrants and the Warrantholders.
Article 3
PRINCIPAL, INTEREST AND COLLATERAL SECURITY
3.1 PRINCIPAL. The Corporation shall pay to the Debentureholder the
outstanding principal amount of the Debentures (unless such Debentures shall
have been converted in accordance with the provisions hereof) together with all
accrued and unpaid interest thereon on the Maturity Date on presentation and
surrender of the Debenture. In the event of a Repayment Notice, the Corporation
shall pay to the Debentureholders, on a pro rata basis, the Sales Proceeds on
the Repayment Date. In such event, the principal amount and accrued interest on
the Debentures shall be adjusted accordingly.
3.2 INTEREST. Subject to deduction for any applicable Canadian withholding
tax, interest shall be payable on the principal amount of each Debenture,
together with accrued and unpaid interest for any prior Interest Period on the
last Business Day of each Interest Period from the date hereof at the rate of
five and one-half percent (5.5%) per annum from the date hereof until the
Maturity Date and from the Maturity Date if not paid thereon at a rate equal to
the Default Rate.
3.3 PLACE OF PAYMENT. The Corporation shall make all principal and interest
payments pursuant to the Debentures to the Debentureholders at such place or
places as the Debentureholders may individually advise the Corporation. The
Shares issuable to the Debentureholders pursuant to the conversion of the
Debentures shall also be delivered to the Debentureholders as aforesaid.
3.4 RIGHT OF PREPAYMENT. The Corporation may prepay the Debentures, in whole
or in part, at any time upon fifteen (15) Business Days prior written notice. In
the event that the date fixed for prepayment occurs during the Conversion
Period, the Debentureholders may exercise the Conversion Right at any time prior
to the repayment on the date fixed for prepayment.
3.5 MANDATORY PREPAYMENT. In the event that the Closing Date precedes the
Financial Statements Date and in the event that the Bank consents to the
transmission of the Repayment Notice, the Corporation shall, within the ten (10)
Business Days next following obtention of the Bank's consent, transmit a
Repayment Notice to the Debentureholders and shall apply the Sales Proceeds
(other than such portion of the Sales Proceeds relating to the Opta Property the
immediate repayment of which is waived at such time by Debentureholders
Resolution transmitted at least ten (10) days prior to the Repayment Date) to
the repayment of the Debentures on the Repayment Date.
In the event that the Closing Date is subsequent to the Financial
Statements Date and the Corporation's financial results meet the 2003 Budget
in the opinion of the Bank (or in the event that the Bank otherwise consents to
the application of the Sales Proceeds to the repayment of the Debentures), the
Corporation shall, within the ten (10) Business Days next following the Closing
Date, transmit a Repayment Notice to the Debentureholders and shall apply the
Sales Proceeds to the repayment of the Debentures on the Repayment Date.
3.6 COLLATERAL SECURITY. The obligations of the Corporation hereunder shall be
secured by (a) a mortgage on the Ontario Properties in the form set forth in the
third schedule of
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this agreement, and (b) a mortgage over the Opta Property by Opta Food
Ingredients, Inc., together with such other documents from Opta Food
Ingredients, Inc as may be required to give a valid and enforceable mortgage
over the Opta Property, in each case with such additions, deletions and
alterations as the parties may agree.
3.7 CANCELLATION of Matured Debentures. All matured Debentures after payment
or conversion shall be cancelled by the Corporation and no Debentures shall be
issued in substitution therefor.
Article 4
CONVERSION
4.1 CONVERSION AT THE OPTION OF THE DEBENTUREHOLDERS. A Debentureholder may
elect at any time or from time to time, at the Debentureholder's option, during
the Conversion Period or in the circumstances set forth in section 7.3, to
convert a Debenture or any portion of the then outstanding principal and all
accrued and unpaid interest of a Debenture into fully paid and non-assessable
Shares at the Conversion Price (the "Conversion Right").
4.2 CONVERSION PROCEDURE. Upon the exercise of its Conversion Right, the
Debentureholder shall surrender the Debenture, together with the conversion form
attached thereto, duly executed (the "Conversion Notice"), to the Corporation at
its address set forth under section 8.1 or at such other place as the
Corporation may advise the Debentureholder in writing. Conversion shall be
deemed to have been effected on the date (the "Conversion Date") on which the
Conversion Notice is actually received by the Corporation. Within the next five
(5) Business Days, the Corporation shall issue and deliver to the
Debentureholder:
(a) a certificate or certificates representing the number of Common
Shares (and/or other Shares, as the case may be) purchased upon
exercise of the Conversion Right, rounded down to the nearest
whole number, registered in the name of the Debentureholder or
otherwise as directed in the Conversion Notice; and
(b) cash for any fractional shares in an amount equal to the product
of (x) the Conversion Price per Share and (y) any fraction of a
Share remaining after conversion pursuant to section 4.2((a);
and
(c) in the event of any partial conversion of a Debenture, a new
Debenture in identical form, the principal amount of which shall
be equal to the amount of principal and accrued and unpaid
interest owing under a Debenture which was not converted under
this Article 4 hereof.
The Debentureholder shall be deemed to have become a beneficial
shareholder and shareholder of record of Common Shares (and/or other Shares, as
the case may be) on the date that conversion is deemed to have been effected
pursuant to this Article 4.
4.3 RESERVATION AND ISSUANCE OF SHARES. The Corporation shall, prior to
issuance of any Shares hereunder, and from time to time as may be necessary
(and within the five [5] Business Days next following an adjustment pursuant to
this Article 4), reserve out of its authorized but unissued Shares a sufficient
number of Shares to permit the conversion of all Debentures into Shares. The
Corporation covenants that all securities, including any shares into which the
Shares may be converted, that may be issued upon exercise of the Conversion
Right
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will, upon issuance, be duly authorized, validly issued, fully paid and
non-assessable and free from pre-emptive rights, adverse claims and all taxes,
liens and charges caused or created by the Corporation with respect to the
issuance thereof.
The Corporation will use its best efforts to cause prompt compliance with
all applicable securities laws regulating the offer and delivery of Shares upon
conversion of the Debenture, if any.
4.4 CASH DISTRIBUTIONS. In case the Corporation shall pay or make a dividend
or other distribution on its Shares exclusively in cash subsequent to the date
hereof and prior to the Conversion Period, adequate provision shall be made so
that the Debentureholder shall have the right to receive upon conversion the
amount of cash it would have received had it exercised its Conversion Right
immediately prior to the record date for such dividend or distribution.
4.5 ADJUSTMENT FOR CAPITAL REORGANIZATION. If at any time after the date
hereof and prior to the Conversion Date, there is (i) a payment of a stock
dividend or other distribution of securities of the Corporation to holders of
the Corporation's Shares (and/or other Common Shares, as the case may be), or
(ii) a subdivision, consolidation, split or other reclassification of the Shares
(and/or other Common Shares, as the case may be) at any time outstanding, or
(iii) a change of the Shares (and/or other Common Shares, as the case may be)
into other shares or into other securities, whether of the Corporation or of
another body corporate, or (iv) a consolidation, amalgamation or merger of the
Corporation with or into any other Person (other than a consolidation,
amalgamation or merger which does not result in any reclassification of the
outstanding Shares [and/or other Common Shares, as the case may be] or a change
of the Shares [and/or other Common Shares, as the case may be] into other
shares), or (v) a transfer of the undertaking or assets of the Corporation as an
entirety or substantially as an entirety to another Person in which the
Shareholders of the Corporation are entitled to receive shares, other securities
or other property, or (vi) any other capital reorganization, (any of such events
being called a "Capital Reorganization"), the Debentureholder who exercises the
Conversion Right after the effective date of such Capital Reorganization will be
entitled to receive, in lieu of the number of Shares (and/or other Common
Shares, as the case may be) to which the Debentureholder was previously entitled
upon such conversion, the aggregate number of shares, other securities or other
property which the Debentureholder would have been entitled to receive as a
result of such Capital Reorganization if the Conversion Right had been exercised
immediately prior to the Capital Reorganization.
The Corporation will take all steps necessary to ensure that, on a Capital
Reorganization, the Debentureholder will, if it exercises its Conversion Right
hereto, receive the aggregate number of Shares, other securities or other
property to which it is entitled as a result of the Capital Reorganization.
Appropriate adjustments will be made in the application of the provisions set
forth in this Article 4 with respect to the rights of the Debentureholder under
a Debenture after such Capital Reorganization such that the provisions set forth
in this Article 4 (including adjustment of the Conversion Price then in effect
and the number of shares issuable upon conversion of the Debenture) shall be
applicable after that event as nearly equivalently as may be practicable.
4.6 ADJUSTMENT FOR DILUTING ISSUES. In the event that the Corporation shall
issue Additional Shares without consideration or for a consideration per share
less than the applicable Conversion Price in effect on the date of and
immediately prior to such issue (the "Effective Conversion Price"), then the
Effective Conversion Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying the Effective
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Conversion Price by a fraction, the numerator of which shall be the number of
Shares outstanding immediately prior to such issue plus the number of Shares
which the aggregate consideration received by the Corporation for the total
number of Additional Shares so issued would purchase at the Effective Conversion
Price, and the denominator of which shall be the number of Shares outstanding
immediately prior to such issue plus the number of such Additional Shares so
issued. For all purposes of this section 4.6, all Shares issuable upon the
exercise, conversion or exchange of outstanding Options or Convertible
Securities, as the case may be, shall be deemed to be outstanding and have been
issued at the lowest applicable exercise of conversion price of such options or
convertible securities. To the extent that any Options (or the conversion or
exercise right for any Convertible Securities) are not exercised prior to the
expiration thereof, the Conversion Price shall be readjusted appropriately.
In determining whether any Additional Shares are issued for less than the
Effective Conversion Price, and in determining the aggregate offering
consideration received for such Additional Shares, there shall be taken into
account the fair market value of any consideration received by the Corporation
for such Additional Shares (the fair market value of any such non-cash
consideration to be determined in good faith by the board of directors of the
Corporation).
The maximum cumulative reduction of the Conversion Price pursuant to this
section 4.6 shall be fifteen percent (15%).
4.7 NOTICE AS TO ADJUSTMENT. The Corporation shall from time to time, within
the ten (10) Business Days following the occurrence of any event which requires
an adjustment or readjustment as provided in sections 4.5 or 4.6, deliver a
notice in writing (an "Adjustment Notice") to the Debentureholders specifying
the nature of the event requiring the same, the amount of the adjustment or
readjustment and the new Conversion Price, and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
Within the fifteen (15) Business Days next following receipt of an
Adjustment Notice, a Debentureholder may notify the Corporation and the
Corporation's Auditors in writing that it disputes the contents of the
Adjustment Notice. In the event that the parties are unable to resolve such
dispute, the subject matter will be conclusively determined by a firm of
chartered accountants (other than the Corporation's Auditors) as may be selected
by a majority in interest of the Debentureholders and the Corporation. Such
chartered accountants will be given access to all necessary records of the
Corporation and will deliver a notice to the Corporation and the
Debentureholders setting forth their determination and the definitive adjustment
or readjustment.
Article 5
REPRESENTATIONS AND WARRANTIES
5.1 In order to induce the Purchaser to enter into the present agreement and
to purchase the Debentures, the Corporation represents and warrants as follows:
(a) the Corporation and each Material Subsidiary has been duly organized
and is validly existing under the laws of its jurisdiction of
incorporation. The Corporation has all requisite power and authority
to carry out its obligations under each of the Documents. The
Corporation and the Material Subsidiaries have the full corporate
power and authority and possesses all governmental franchises,
licenses, permits, authorizations
Page 13
and approvals (collectively the "Licenses") necessary to enable it
to own, lease or otherwise hold its properties and assets and to
carry on its business as it is now being conducted and to own its
property and none of the business operations of the Corporation or
any Material Subsidiary are presently being conducted in a manner
that violates in any respect any of the terms or conditions under
which any License was granted and there has not been any claim by
any jurisdiction to the effect that the Corporation or any Material
Subsidiary is required to qualify or otherwise be authorized to do
business therein;
(b) except for the Material Subsidiaries, the Corporation has no
Subsidiaries and has no investment or proposed investment in any
person which is or would be material to the business and affairs of
the Corporation;
(c) the Corporation is a reporting company under the Securities Laws and
is not in default of any requirement thereof, is in compliance with
its timely disclosure obligations thereunder and there are no
outstanding reports filed under the Securities Laws on a
confidential basis;
(d) the Underlying Securities upon full payment for the Warrants or
exercise of the Conversion Right, have been or shall be, as the case
may be, validly created, authorized and issued as fully paid and
non-assessable securities in the capital of the Corporation. All
necessary corporate action has been taken by the Corporation to
allot and authorize the issuance of the Underlying Securities;
(e) all consents, approvals, permits, authorizations or filings as may
be required under applicable securities laws or otherwise necessary
for the execution and delivery of, and the performance by the
Corporation of its obligations under the Documents and the
transactions contemplated hereby have been made or obtained, as
applicable;
(f) the Corporation has all requisite power and authority to execute and
deliver the Documents and to consummate the transactions
contemplated therein. All acts and other proceedings required to be
taken by the Corporation to authorize the execution, delivery and
performance of the Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and
properly taken. Each of the Documents has been duly authorized,
executed and delivered by the Corporation and constitutes a valid
and binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law);
(g) there has not been filed any petition or application, or any
proceeding commenced which has not been discharged, by or against
the Corporation or any Material Subsidiary with respect to any
assets of the Corporation or any Material Subsidiary under any law,
domestic or
Page 14
foreign, relating to bankruptcy, reorganization, fraudulent
transfer, compromise, arrangements, insolvency, readjustment of debt
or creditors' rights, and no assignment has been made by the
Corporation or any Material Subsidiary for the benefit of creditors;
(h) none of the execution and delivery of the Documents, the performance
by the Corporation of its obligations thereunder and the
consummation of the transactions contemplated by the Documents,
including the issuance and delivery of the Underlying Securities,
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, (whether after
notice or lapse of time or both), (A) any statute, rule or
regulation applicable to the Corporation and including, without
limitation, applicable Securities Laws; (B) the constating
documents, by-laws or resolutions of the directors and shareholders
of the Corporation which are in full force and effect at and as of
the date hereof; (C) any mortgage, note, indenture, contract,
agreement, instrument, lease or other document to which the
Corporation is a party or by which it is bound; or (D) any
judgement, decree or order binding the Corporation or, the property
or assets of the Corporation in each case which default or breach
might reasonably be expected to materially adversely affect the
business, operations, capital or condition (financial or otherwise)
of the Corporation or its assets;
(i) the authorized capital of the Corporation consists of an unlimited
number of Shares of which forty-one million, nine hundred and
eighty-two thousand, five hundred and eighteen (41,982,518) Shares
are issued and outstanding as fully paid and non-assessable as at
the date hereof and an unlimited number of special shares, none of
which have been issued or are outstanding. Except for the
conversion, exercise or exchange rights that attach to the
Debentures, Warrants, or to warrants, options and convertible
securities listed on the Disclosure Schedule made as part hereof and
attached hereto (the "Disclosure Schedule"), there exist no rights
to purchase or otherwise acquire any securities of the Corporation;
(j) there has not occurred any Material Adverse Change with respect to
the Corporation or any of its Subsidiaries which is or would be
material to the Corporation on a consolidated basis;
(k) the Securities Law Reports were, on the dates of their respective
filings, in compliance in all material respects with the
requirements of their respective report forms and the Securities
Laws and did not, on the date of filing, contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. There have not been any Material Adverse
Changes to the assets, liabilities, financial position or business
of the Corporation or any of its Material Subsidiaries since the
filing of the Securities Law Reports and no transaction has been
entered into by the Corporation or any Material Subsidiary which is
or may be material to the Corporation on a consolidated basis;
Page 15
(l) the Financial Statements have been prepared in accordance with GAAP
and present fairly, in all material respects, the assets,
liabilities, retained earnings, profit and loss, financial condition
and results of operations of the Corporation for the periods then
ended;
(m) the Corporation and each Material Subsidiary is in good standing and
entitled to all benefits under all contracts to which it is a party
and is not dependent upon the guarantee of or any security provided
by a third party. The Corporation and each Material Subsidiary is
not knowingly in breach or default of any material obligations under
any Material Contract. There is no breach or default of or under any
agreement that has resulted or could result in the breach of any
other agreement, deed or instrument to which the Corporation or any
Material Subsidiary is a party or by which any of their property is
bound. There exist no state of facts which, after notice or lapse of
time, or both, would constitute a default or breach by the
Corporation (or any Material Subsidiary) of any Material Contracts
to which it is a party;
(n) the Corporation or one of its Material Subsidiaries is the sole
registered and beneficial owner of all issued and outstanding
securities of each Material Subsidiary (except for certain Class "H"
Shares of Temisca, Inc. pledged to its creditors and the Class A and
B preferred shares of 1108176 Ontario Limited which are owned by
Xxxxx Xxxxxx) and no holder of outstanding shares in the capital of
the Corporation will be entitled to any pre-emptive or any similar
rights to subscribe for any of the Common Shares or other securities
of the Corporation and, except as set forth on the Disclosure
Schedule or contemplated by the present agreement, no rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for any shares in the capital of the Corporation or any
of its Material Subsidiaries are outstanding or are contemplated;
(o) the Corporation and each of its Material Subsidiaries has conducted
and is conducting its business in compliance with all Applicable
Laws of each jurisdiction in which such business is carried on,
except where the failure to do so would not have an adverse material
effect on the Corporation or any Material Subsidiary. Neither the
Corporation nor any of its Material Subsidiaries has received any
notice or other communication with respect to a possible violation
or contravention of Applicable Laws;
(p) the business of the Corporation and each of its Material
Subsidiaries has been and is in compliance with all applicable
Environmental Laws except where such non-compliance would not have
an adverse material effect on the Corporation or any Material
Subsidiary; neither the Corporation nor any of its Subsidiaries has
used or permitted to be used, except in compliance with all
Environmental Laws, any of its properties or facilities or any
property or facility which it previously owned or leased, to
generate, manufacture each and every element, compound, chemical
mixture, contaminant, pollutant, material waste and other substance
which is defined, determined or identified as hazardous or
Page 16
toxic under any Environmental Law to which the Corporation or its
Subsidiaries is subject or release of which is prohibited under any
such Environmental Law ("Hazardous Materials"), process, distribute,
use, treat, store, dispose of, transport or handle any Hazardous
Materials and neither the Corporation nor any of its Subsidiaries
has caused or permitted, nor has there been any release, of any
Hazardous Materials on, in, around, from or in connection with any
of its properties or assets or their use, or any property or
facility which it previously owned or leased, or any such releases
on or from a facility owned or operated by any third party but with
respect to which the Corporation or one of its Subsidiaries is or
may reasonably be alleged to have liability. All Hazardous Materials
and all other wastes and other materials and substances used in
whole or in part by the Corporation or its Subsidiaries have been
disposed of, treated and stored by the Corporation and its
Subsidiaries in compliance with all Environmental Laws; neither the
Corporation nor any of its Subsidiaries has received any notice of,
nor been prosecuted for, non-compliance with any Environmental Laws,
and neither the Corporation nor any of its Subsidiaries has settled
any allegation of non-compliance prior to prosecution; and there are
no notices, orders or directions relating to environmental matters
requiring, or notifying the Corporation or one of its Subsidiaries
that it is or may be responsible for, any contaminant, clean-up,
remediation or corrective action, or any work, repairs, construction
or capital expenditures to be made under Environmental Laws with
respect to the business or any property of the Corporation and its
Subsidiaries;
(q) the Corporation is a "qualifying issuer", as such term is defined in
section 1.1 of the Multilateral Instrument 45-102-Resale of
Securities";
(r) except as specifically disclosed in the Securities Law Reports, no
legal or governmental proceedings are pending by any Governmental
Authority to which the Corporation or any of its Material
Subsidiaries is a party or to which the property of the Corporation
or any of its Material Subsidiaries is subject that would result
individually or in the aggregate in any Material Adverse Change in
the operation, business or condition of the Corporation or any
Material Subsidiary and, to the best of its knowledge, information
and belief, no such proceedings have been threatened against or are
contemplated with respect to the Corporation, a Material Subsidiary
or any of its or their property;
(s) the Corporation and each of its Material Subsidiaries has timely
filed all necessary tax returns and notices and has paid or made
provision for all applicable taxes of whatsoever nature for all tax
years to the date hereof to the extent such taxes have become due or
have been alleged to be due except where the failure to file such
tax returns and notices would not have an adverse material effect on
the Corporation or any Material Subsidiary and the Corporation is
not aware of any material tax deficiencies or material interest or
penalties accrued or accruing, or alleged to be accrued or accruing
thereon which have not otherwise been provided for by the
Corporation and its Subsidiaries;
Page 17
(t) the Corporation and its Material Subsidiaries possess all Material
Authorizations necessary or appropriate to conduct the business
operated by them and neither the Corporation nor any Material
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization,
permit or licence which, by itself or in the aggregate, if the
subject of an unfavourable decision, ruling or finding, would have
an adverse material effect on the conduct of the business,
operations, financial condition or income of the Corporation taken
as a whole;
(u) to the best of the Corporation's knowledge, information and belief,
none of the directors or officers of the Corporation or any of its
Subsidiaries is or has ever been subject to prior regulatory,
criminal or bankruptcy proceedings in Canada or elsewhere during the
past five (5) years;
(v) the Corporation and Subsidiaries have all proprietary rights
provided in law to all patents, trademarks, service marks, trade
names, copyrights, industrial designs, software, firmware, trade
secrets, know-how, show-how, concepts, information and other
intellectual and industrial property (collectively, "Intellectual
Property") necessary to permit them to conduct their business,
except where the failure to do so would not have an adverse material
effect. Neither the Corporation nor any of its Subsidiaries have
interfered with or infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property rights of third parties
and the Corporation and the Subsidiaries have not received any
complaint, claim, demand or notice alleging any such interference,
misappropriation or violation;
(w) the Corporation or one of its Subsidiaries is the exclusive owner of
or possesses adequate enforceable rights to use the Intellectual
Property free and clear of any encumbrances which would have an
adverse material effect on the Corporation or a Subsidiary, and has
no knowledge of any claim of adverse ownership in respect thereof;
(x) neither the Corporation nor any Subsidiary is aware of a claim of
any infringement or breach by the Corporation or any of its
Subsidiaries of any industrial or intellectual property rights of
any other person, nor has the Corporation or any of its Subsidiaries
received any notice, nor is the Corporation (or any Subsidiary)
otherwise aware, that the use of the business names, trademarks,
servicemarks, copyrights and other industrial or intellectual
property of the Corporation or any of its Subsidiaries infringes
upon or breaches any industrial or intellectual property rights of
any other person and neither the Corporation nor any Subsidiary has
any knowledge of any infringement or violation of any of the rights
of the Corporation in such intellectual and industrial property and
is not aware of any state of facts that casts doubt on the validity
or enforceability of any such intellectual or industrial property
rights;
(y) no royalty or other fee is required to be paid by the Corporation or
any Subsidiary to any other Person (as defined by applicable
Securities Laws) in respect of the Intellectual Property and there
are no restrictions
Page 18
on the ability of the Corporation to exploit or assign all rights in
the Intellectual Property;
(z) there are no claims against the Corporation or any Subsidiary in
connection with product warranties or the product or sale of
defective or inferior products. Neither the Corporation nor any
Subsidiaries have during the past five (5) years, made or
participated in any recall of products from their customers, whether
on a voluntary basis or pursuant to a notice or request received
from any Governmental Authority. Neither the Corporation nor any
Subsidiaries have received any notice from any Governmental
Authority during the past five (5) years alleging any violation or
possible violation of any Applicable Laws or referring, directly or
indirectly, to the possible potential recall of any products;
(aa) except as specifically disclosed in the Securities Law Reports,
there is presently no material plan in place for retirement bonus,
pension benefits, unemployment benefits, deferred compensation,
severance or termination pay, insurance, sick leave, disability,
salary continuation, legal benefits, vacation or other employee
incentives or compensation that is contributed to or required to be
contributed to, by the Corporation for the benefit of any current or
former director, senior officer, or consultant of the Corporation;
(bb) except as specifically disclosed in the Securities Law Reports,
neither the Corporation nor any of its Subsidiaries owes any money
to, nor has the Corporation or any of its Subsidiaries any present
loans to, or borrowed any monies from, is or otherwise indebted to
any officer, director, employee, shareholder or any person not
dealing at "arm's length" (as such term is defined in the Income Tax
Act (Canada)) with the Corporation except for usual employee
reimbursements and compensation paid in the ordinary and normal
course of the business of the Corporation;
(cc) except as specifically disclosed in the Securities Law Reports or as
set forth on the Disclosure Schedule, neither the Corporation nor
any of its Subsidiaries is a party to any contract, agreement or
understanding except in the normal course of business with any
officer, director, employee, shareholder or any other person not
dealing at arm's length with the Corporation;
(dd) except as specifically disclosed in the Securities Law Reports, to
the best of the Corporation's knowledge, information and belief, no
present or former officer, director or shareholder of the
Corporation or any of its Subsidiaries has any cause of action, or
other claim whatsoever, against, or owes any amount to, the
Corporation or any of its Subsidiaries except for any liabilities
reflected in the Securities Law Reports and claims in the ordinary
and normal course of the business such as for accrued vacation pay
and accrued benefits under any employee plans;
(ee) all material accruals for unpaid vacation pay, premiums for
unemployment insurance, health premiums, pension plan premiums,
Page 19
accrued wages, salaries and commissions and employee benefit plan
payments have been reflected in the books and records of the
Corporation and each Subsidiary;
(ff) there has not been and there is not currently any material
disagreement or other difficulty with any of the employees of the
Corporation or any of its Subsidiaries which is adversely affecting
or could reasonably adversely affect, in a material manner, the
carrying on of the business of the Corporation or any of its
Subsidiaries;
(gg) to the best of the Corporation's knowledge, information and belief,
the Corporation and each Material Subsidiary is in compliance with
the provisions of applicable worker's compensation, applicable
employee health and safety, training and similar legislation in each
jurisdiction where it carries on business;
(hh) no property or asset of the Corporation or any of its Subsidiaries
has been taken or expropriated by any federal, state, provincial,
municipal or other authority nor has any notice or proceeding in
respect thereof been given or commenced nor is the Corporation aware
of any intent or proposal to give any such notice or commence any
such proceeding;
(ii) with respect to each premises which is material to the Corporation
or any Material Subsidiary and which the Corporation or any of its
Subsidiaries occupies (the "Material Premises"), the Corporation or
any of its Subsidiaries either owns such Material Premises or has
the exclusive right to occupy and use the Material Premises;
(jj) the Corporation or a Subsidiary owns each of the assets shown or
reflected on the Financial Statements or otherwise on the books of
the Corporation or a Subsidiary (except only those assets which have
been disposed of in the ordinary course of business since the dates
thereof) and all other assets acquired since the dates thereof with
good and marketable title, free and clear of all Liens, other than
as set forth therein. Neither the Corporation nor any Subsidiary has
received in respect of its assets or any of them any notice of
conflict with the asserted rights of any other party. The
Corporation and the Subsidiaries own or lease all of the assets
necessary for or that are used by them in the conduct of the
Business;
(kk) each of the leases pursuant to which the Corporation or any of its
Subsidiaries occupies any Material Premises is in good standing and
in full force and effect, and none of the Corporation or any of its
Subsidiaries (as the case may be) or, to the best of the knowledge,
information and belief of the Corporation, any other party thereto,
is in breach of any material covenants, conditions or obligations
contained therein; and
(ll) the Corporation has not incurred any obligation or liability for
broker's or finder's fees or other payment with respect to the
transactions contemplated in the Documents.
Page 20
Article 6
COVENANTS
6.1 AFFIRMATIVE COVENANTS. So long as any Debentures are outstanding or the
Corporation has any obligations hereunder, the Corporation covenants and agrees
that:
(a) PUNCTUAL PAYMENT. The Corporation shall pay all principal and
interest and other amounts payable by it hereunder at the times and
places and in the manner provided herein;
(b) CONDUCT OF BUSINESS. The Corporation shall, and shall cause each
Subsidiary (other than vertical amalgamations or mergers among
wholly-owned subsidiaries or between a Subsidiary and the
Corporation) to, maintain its existence, power and capacity and
carry on its business in a commercially reasonable manner so as to
preserve and protect its undertaking and property and the revenues
to be earned therefrom;
(c) MATERIAL AUTHORIZATIONS. The Corporation shall, and shall cause the
Subsidiaries to, preserve and keep all Material Authorizations in
full force and effect;
(d) COMPLIANCE WITH APPLICABLE LAWS AND MATERIAL OBLIGATIONS. The
Corporation shall, and shall cause all Subsidiaries to, comply with
(i) all Applicable Laws, (ii) all Documents and all Opta Documents,
and (iii) all Material Contracts and other obligations, any of the
foregoing of which if not complied with would or could reasonably be
expected to result in a Material Adverse Change;
(e) PAYMENT OF TAXES. The Corporation shall, and shall cause the
Subsidiaries to, pay, withhold and remit all Taxes required by
Applicable Laws;
(f) BOOKS AND RECORDS. The Corporation shall, and shall cause the
Subsidiaries to, maintain adequate books, accounts and records in
accordance with GAAP consistently applied;
(g) INSURANCE. The Corporation shall, on a consolidated basis, maintain
with responsible and reputable insurers, insurance in respect of its
undertaking and property against such casualties and contingencies
and in such types and in such amounts and with such deductibles and
other provisions as are customarily maintained or caused to be
maintained by Persons engaged in the same or similar businesses in
the same jurisdictions under similar conditions;
(h) OPTA DOCUMENTS. Not later than February 15, 2003, the Corporation
shall cause to be delivered to the Purchaser, the Opta Documents in
form and content satisfactory to the Purchaser. The Corporation
shall give notice forthwith of any proposed sale or other
disposition of the Opta Property; and
Page 21
(i) NOTICE OF DEFAULT. The Corporation shall promptly notify the
Debentureholders in writing of the occurrence of a "Default" as such
term is defined in the Subordination and Priority Agreement dated as
of December 4, 2002 among the Corporation, the Purchaser and the
Bank, as such agreement may be amended, supplemented or restated
from time to time, or any other occurrence which could, pursuant to
such agreement, prevent the Corporation from making, or the
Debentureholders from accepting and retaining, any payment of
principal or interest to the Debentureholders as required hereunder.
6.2 NEGATIVE COVENANTS. So long as any Debentures are outstanding or the
Corporation has any obligations hereunder, the Corporation covenants and agrees
that, without the prior written consent of Debentureholders evidenced by
Debentureholders Resolution, it will not:
(a) declare or pay any dividends, purchase, redeem, retire or otherwise
acquire for value any of its capital to its shareholders or make any
distributions of assets to its shareholders;
(b) modify or supplement its articles or by-laws; and
(c) make any loans or guarantee the obligations of any other person,
firm or corporation, other than a Subsidiary.
Article 7
EVENTS OF DEFAULT
7.1 The occurrence of any of the following shall be an Event of Default
hereunder:
(a) the Corporation shall fail to pay any principal amount of the
Debentures or interest thereon on the due date;
(b) any representations or warranties set forth in Article 5 are
incorrect in any material respect;
(c) the Corporation shall fail to fulfill any of the covenants set forth
in Article 4 or Article 6 or perform or observe any other terms,
covenants or agreements contained herein on its part to be performed
and any such failure shall remain unremedied for twenty-one (21)
days after written notice shall have been given to the Corporation
by Debentureholders Resolution;
(d) the Corporation and/or any of its Subsidiaries shall fail to pay any
debt or other interest or premium thereon when due (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable
grace period, if any, specified in such agreement or instrument
relating to such debt (other than in the event that the debt does
not relate to monies borrowed and the Corporation is contesting its
liability therefore in good faith); or any other default under any
agreement or instrument relating to any such debt or any other event
shall occur and shall continue after the applicable
Page 22
grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate or to permit
the acceleration of the maturity of such debt; or any such debt
shall be deemed to be due and payable or required to be prepaid
prior to the statutory maturity thereof;
(e) either the Corporation or any of the Subsidiaries is in violation of
or in default with respect to, and any event has occurred which,
with the lapse of time or action by a third party, would result in
the violation of or a default with respect to any Material Contract;
(f) the Corporation and/or any of the Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Corporation or any of the Subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it
or for any substantial part of its property which shall not be
discharged within sixty (60) days of appointment; or the Corporation
or any of the Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (f);
and
(g) any judgment or order for the payment of money shall be rendered
against the Corporation and/or any of the Subsidiaries and either
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order; or there shall be any period of
twenty-one (21) consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect.
7.2 The Corporation shall send a written notice to the Debentureholders
advising them of an Event of Default not later than the second (2nd) Business
Day next following the occurrence thereof. If any Event of Default shall have
occurred and be continuing and in the event that such default is not remedied
within the five (5) following days, the Debentureholders may, by a
Debentureholders Resolution delivered to the Corporation, declare the principal
and interest of all Debentures then outstanding to be due and payable; in which
event, anything herein to the contrary notwithstanding, the principal amount and
accrued interest shall forthwith become immediately due and payable to the
Debentureholders without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Corporation.
7.3 In the event that the principal and interest of all Debentures then
outstanding becomes due and payable pursuant to section 7.2 but all or any
portion of such amount is not paid or permitted to be paid for any reason or
cause whatsoever, including as a result of the terms of the Subordination and
Priority Agreement dated as of December 4, 2002 among the Corporation, the
Purchaser and the Bank, as such agreement may be amended, supplemented or
restated from time to time, the Debentureholders may, in addition to their other
rights and recourses hereunder and at law, elect to convert all or any portion
of the Debentures then outstanding into fully paid
Page 23
and non-assessable Shares at the Conversion Price and the provisions of Article
4 hereof shall apply.
Article 8
MISCELLANEOUS
8.1 Any notice, demand, request or other instrument which may be or is
required to be given under this agreement shall be delivered in person or sent
by registered mail, postage prepaid, and shall be addressed:
(a) if to the Corporation, at:
0000 Xxxxxxx 0
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: the Chief Financial Officer
with a copy to:
Xxxxxxxxxx, Xxxxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, X.X.
X.X.X. 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
(b) if to the Purchaser, at:
c/o Mr. Xxxxx Xxxxx
Davies Xxxx Xxxxxxxx & Xxxxxxxx
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, X.X.
X.X.X. 00000
with a copy to:
Davies Xxxx Xxxxxxxx & Xxxxxxxx
1501 XxXxxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xx. Xxxxxxx Xxxxxxxx
Any such notice, demand, request or consent shall be deemed to have been given
or made on the day upon which such notice, demand, request or consent is
received and any party may at any time give notice in writing in the manner
aforesaid to the others of any change of address of the party giving such notice
and from and after the giving of such notice the address therein specified
Page 24
shall be deemed to be the address of such party for the giving of notices and
other communications hereunder.
8.2 The Corporation shall reimburse to the Purchaser all of its costs and
expenses with respect to the preparation and negotiation of the Documents
including, without limitation, its professional fees.
8.3 The present agreement may be executed by the parties hereto in separate
counterparts, each of which, when so executed, shall be an original, but all
such counterparts together shall constitute the present agreement.
8.4 All previous communications between the parties hereto, either verbal or
written, relative to the subject matter of this agreement, are superseded
hereby. No modification of this agreement shall be binding upon any party unless
made in writing.
8.5 This agreement shall be construed and interpreted in accordance with the
laws of the Province of Ontario.
8.6 This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, legal representatives, successors and
assigns.
[signatures on next page]
IN WITNESS WHEREOF, the parties hereto have executed the
present Debenture Purchase Agreement at the place hereinabove mentioned.
STAKE TECHNOLOGY LTD.
Per:_____________________________________
CLARIDGE ISRAEL LLC
Per:_____________________________________
Per:_____________________________________
