AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 2003
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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STAKE TECHNOLOGY LTD.
(Exact name of registrant as specified in its charter)
Canada
(State or other jurisdiction of incorporation or organization)
Not Applicable
(I.R.S. Employer Identification Number)
2838 Highway 7
Norval, Ontario, Canada L0P 1K0
(905) 455-1990
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
STEVEN R. BROMLEY
Executive Vice President and Chief Financial Officer
Stake Technology Ltd.
2838 Highway 7
Norval, Ontario, Canada L0P 1K0
(905) 455-1990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Robert T. Lincoln, Esq.
Dunnington, Bartholow & Miller LLP
666 Third Avenue
New York, NY 10017
(212) 682-8811
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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Calculation of Registration Fee
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Title of each class Amount to be Proposed maximum Proposed maximum Amount of
Of securities to be registered (4)(5) offering price per Aggregate offering registration fee (8)
Registered unit (6)(7) Price (3)(4)(5)(6)
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Senior Debt Securities (1)(3)
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Subordinated Debt (1)(3)
Securities
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Special Shares (1)(3)
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Warrants to Purchase (1)(2)(3)
Common Shares
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Common Shares (1)(3)
without par value
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Total $ 100,000,000 100% $100,000,000 $ 8,090.00
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(1) Such indeterminate number, principal amount or liquidation amount of
senior debt securities, subordinated debt securities, special shares,
warrants to purchase common shares and commons shares of Stake Technology
Ltd. as may from time to time be issued at indeterminate prices. The
securities registered hereunder shall not have an aggregate offering price
which exceeds $100,000,000 in U.S. dollars or the equivalent in any other
currency. Amount also includes such indeterminate number of senior debt
securities, subordinated debt securities, special shares and common shares
of Stake Technology Ltd. as may be issued upon conversion of or in
exchange for any senior debt securities, subordinated debt securities or
special shares that provide for conversion of or in exchange for other
securities or upon exercise of warrants for common shares.
(2) Warrants may be sold separately or with senior debt securities,
subordinated debt securities, special shares or common shares.
(3) No separate consideration will be received for the senior debt securities,
subordinated debt securities, special shares or common shares issuable
upon conversion of or in exchange for senior debt securities, subordinated
debt securities or special shares.
(4) In U.S. dollars or the equivalent thereof in any other currency, currency
unit or units, or composite currency or currencies.
ii
(5) Such amount represents the principal amount of any senior debt securities
or subordinated debt securities issued at their principal amount, the
issue price rather than the principal amount of any senior debt securities
or subordinated debt securities issued at an original issue discount, the
liquidation preference of any special shares, the amount computed pursuant
to Rule 457(c) for any common stock, the issue price of any warrants and
the exercise price of common shares issuable upon exercise of warrants.
(6) Estimated solely for the purpose of computing the registration fee.
(7) Exclusive of accrued interest and distributions, if any.
(8) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
iii
THE INFORMATION IN THIS PROSPECTUS IS NOT NECESSARILY COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 25, 2003
PROSPECTUS
STAKE TECHNOLOGY LTD.
$100,000,000
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
SPECIAL SHARES
COMMON SHARES
WARRANTS TO PURCHASE COMMON SHARES
Stake Technology Ltd. intends to offer at one or more times separately or
in combination, senior debt securities, subordinated debt securities, special
shares, common shares and warrants to purchase common shares with a total
offering price not to exceed $100,000,000. We will provide the specific prices
and other terms of these securities in supplements to this prospectus. You
should read this prospectus and the applicable supplement carefully before you
invest.
We may sell the securities (or any combination) to or through one or more
underwriters, dealers or agents. The names of the underwriters, dealers or
agents will be set forth in supplements to this prospectus.
Our common shares are traded on the Nasdaq Smallcap Market under the
symbol "STKL" and are listed and posted for trading on the Toronto Stock
Exchange under the symbol "SOY."
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INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY XX, 2003
TABLE OF CONTENTS
PAGE
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Forward-Looking Statements ............................................... 2
About This Prospectus .................................................... 3
Presentation of Financial and Other Information .......................... 3
The Company .............................................................. 3
Recent Developments ...................................................... 4
Risk Factors ............................................................. 6
Use of Proceeds .......................................................... 13
Ratios of Earnings to Fixed Charges ...................................... 13
Description of Equity Securities ......................................... 13
Description of Debt Securities ........................................... 14
Description of Warrants .................................................. 17
Plan of Distribution ..................................................... 17
Tax Consequences ......................................................... 17
Legal Matters ............................................................ 18
Experts .................................................................. 18
Indemnification of Directors and Officers ................................ 18
Enforceability of Civil Liabilities ...................................... 18
Where You Can Find More Information ...................................... 19
Documents Incorporated by Reference ...................................... 19
FORWARD-LOOKING STATEMENTS
This prospectus, including the documents incorporated by reference,
contains certain statements that are "forward-looking" statements that involve
risks and uncertainties. These statements involve known and unknown risks,
uncertainties and other factors, including the risks outlined under the section
entitled "Risk Factors," which may cause our actual results, performance or
achievements to be materially different from any future results, performances or
achievements expressed or implied by the forward-looking statements.
Forward-looking statements include, but are not limited to, statements about
future operations, projections of our future results of operations or of our
financial condition.
In some cases, you can identify forward-looking statements by terms such
as "anticipate," "believe," "could," "continue," "estimate," "expect," "intend,"
"may," "might," "ongoing," "plan," "potential," "predict," "project," "should,"
"will," "would" or the negative of these terms, and similar expressions intended
to identify forward-looking statements. These statements reflect our current
views with respect to future events and are based on assumptions and subject to
risks and uncertainties. We discuss many of these risks in this prospectus in
greater detail under the heading "Risk Factors." Also, these forward-looking
statements represent our estimates and assumptions only as of the date of this
prospectus, and we are under no obligation to update any of these
forward-looking statements after the date of this prospectus to conform such
statements to actual results, unless required by law. You should read this
prospectus completely and with the understanding that our actual future results
may be materially different from what we expect. We qualify all of the
forward-looking statements by these cautionary statements. Given these
uncertainties, you should not place undue reliance on these forward-looking
statements.
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (SEC) utilizing a "shelf" registration, or
continuous, process. Under this shelf process, we may, from time to time, sell
any combination of the following securities described in this prospectus in one
or more offerings with a total offering price not to exceed $100,000,000:
o senior debt securities;
o subordinated debt securities;
o special shares;
o common shares; and
o warrants to purchase common shares.
The common shares and the special shares are referred to as the equity
securities; the senior debt securities and the subordinated debt securities are
referred to as the debt securities; the equity securities, the debt securities
and the warrants are referred to as the securities.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell the securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. A prospectus supplement may include a discussion of risks or other
special considerations applicable to the offered securities or to us. A
prospectus supplement may also add, update or change information in this
prospectus. If there is any inconsistency between the information in this
prospectus and the applicable prospectus supplement, you must rely on the
information in the prospectus supplement. Please carefully read both this
prospectus and the applicable prospectus supplement together with additional
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION."
We are also filing with the securities regulatory authorities in certain
provinces of Canada a preliminary short form prospectus, under which some of the
securities registered under the registration statement of which this prospectus
forms a part may be offered and sold, subject to the applicable securities law
of such provinces of Canada. Certain information incorporated in the Canadian
preliminary short form prospectus, including certain financial statements
prepared in accordance with the accounting principles generally accepted in
Canada (Canadian GAAP), are also incorporated in this prospectus. See "WHERE YOU
CAN FIND MORE INFORMATION."
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Our financial statements have been prepared in accordance with Canadian
GAAP. For disclosure of the principal differences between Canadian GAAP and the
accounting principles generally accepted in the United States, see Note 18 to
the Audited Consolidated Financial Statements for the year ended December 31,
2002 and Note 12 to the Interim Consolidated Financial Statements for the three
months ended March 31, 2003. We publish our Audited Consolidated Financial
Statements in U.S. dollars. All dollar amounts in this prospectus are expressed
in U.S. dollars. References to "US $" or "$" are to U.S. Dollars and references
to "CDN $" are to Canadian dollars.
THE COMPANY
We were incorporated under the Canada Business Corporations Act on November 13,
1973. Our principal executive offices are located at 2838 Highway 7, Norval,
Ontario, Canada, L0P 1K0, telephone: (905) 455-1990, fax: (905) 455-2529.
Unless otherwise indicated or unless the context otherwise requires, all
reference in this prospectus to "we" or "us" include StakeTechnology Ltd. and
its subsidiaries.
Our web page describing our business, products, technology and news releases,
can be visited at www.staketech.com. Our web site and other websites referenced
in this prospectus and documents incorporated by reference herein do not form
part of this prospectus.
3
Our Business
We operate in three principal businesses: (1) sourcing, processing, packaging
and distribution of natural and organic food products, (referred to as the Food
Group) (2) processing, distribution and recycling of environmentally responsible
industrial mineral products, (referred to as the Environmental Industrial Group)
and (3) engineering and marketing of a proprietary clean pulping system using
patented steam explosion technology (referred to as the Steam Explosion
Technology Group).
The Food Group, which represented approximately 80% of our fiscal 2002
consolidated revenues, consists of the SunRich Food Group ("SunRich"), recently
acquired Opta Food Ingredients, Inc. ("Opta") and the newly formed Canadian
Organic Food Group. These groups form the backbone of our vertically integrated
food operations, focused on the natural and organic foods markets. SunRich
produces organic and non-genetically modified (non-GMO) food ingredients with a
specialization in soy and other natural and organic food products. SunRich is
headquartered at 3824 - 93rd Street S.W., Hope, Minnesota, 56046-0128,
telephone: (507) 451-3316, fax: (507) 451-2910. Opta is the world's largest
supplier of oat fibre to the food industry based on management's estimate of
these markets. Its mission is to resolve its customers' product formulation
challenges through innovating, manufacturing and selling proprietary ingredients
to improve the nutritional content, healthfulness, texture and taste of foods.
Opta is headquartered at 25 Wiggins Avenue, Bedford, Massachusetts, 01730,
telephone: (781) 276-5100, fax (781) 276-5101. The Canadian Organic Food Group
consists of the 2002 acquisitions of Wild West Organic Harvest Co-operative
Association ("Wild West") of Richmond, British Columbia, Simply Organic Co. Ltd.
("Simply Organic") of Toronto, Ontario and Organic Kitchen of Toronto, Ontario,
Sunrich Valley, a new division launched in 2002, and the 2003 acquisition of
Kettle Valley Dried Fruits Ltd. and its related companies ("Kettle Valley").
Wild West specializes in the distribution of natural and organic foods
throughout Western Canada. Simply Organic is a growing natural and organic foods
distribution business serving the Central Canada market. Organic Kitchen
provides organic feeds and partners with processors to market organic poultry
and other organic meat products. Sunrich Valley markets a full line of organic
dairy products under the trademark Mu. Kettle Valley operates from facilities in
Summerland, B.C. where it produces natural and organic fruit bars and fruit
leathers with an apple base and markets these products under the Kettle Valley
Real Fruit Snacks and Frunola brands.
The Environmental Industrial Group, which represented approximately 20% of our
fiscal 2002 consolidated revenues, consists of BEI/PECAL, one of our divisions,
Temisca Inc., Virginia Materials Inc. ("Virginia Materials") and International
Materials & Supplies, Inc. ("International Materials"). The Environmental
Industrial Group processes, sells and distributes abrasives and other industrial
minerals to the foundry, steel and marine/bridge cleaning industries; sources
specialty sands and garnets for the water filtration industry; and recycles
inorganic materials under special permits from government authorities at both
its Waterdown, Ontario and Norfolk, Virginia sites. The Environmental Industrial
Group is located at 407 Parkside Drive, Waterdown, Ontario, L0R 2H0, telephone:
(905) 689-6661, fax: (905) 689-0485.
The Steam Explosion Technology Group is located on our corporate property in
Norval, Ontario. This division holds a number of patents on its steam explosion
process and is marketing a clean pulping system with a special focus on China,
the world's largest user of non-woody pulp. The Steam Explosion Technology uses
high temperature and pressure rather than chemicals to process non-woody fibres
into pulp which can be used to produce various paper products. The Steam
Explosion Group is also pursuing opportunities to leverage this technology to
North American companies for food grade applications, primarily to convert
complex sugars into food grade sweeteners. The Steam Explosion Technology Group
is located at 2838 Hwy 7, Norval, Ontario, L0P 1K0, telephone: (905) 455-1990,
fax: (905) 455-2529.
RECENT DEVELOPMENTS
Change of Corporate Name
At our annual and special meeting of shareholders held in Toronto, Canada on
June 18, 2003, our shareholders approved a special resolution to change our name
to SunOpta Inc. The proposed name change is intended to more accurately reflect
our stated mission and focus on the development of vertically integrated natural
and organic food businesses. We intend to file articles of amendment to change
our name and implement the proposed name change throughout the organization on
or before December 31, 2003.
4
Acquisitions during 2003 and 2002
Kettle Valley
On May 1, 2003, we acquired 100% of the outstanding shares of Integrated Drying
Systems Inc. and its wholly-owned subsidiaries, Kettle Valley Dried Fruits Ltd.
and Kettle Valley Dried Fruits, Inc. Purchase consideration totaled $2,668,000
and included a contribution of cash, common shares and notes payable. Kettle
Valley produces natural and organic fruit bars and fruit leathers with an apple
base and markets these products under the Kettle Valley Real Fruit Snack and
Frunola brands and realized revenues of approximately $4.0 million in 2002.
Kettle Valley operates two production facilities in Summerland, British
Columbia, the heart of the British Columbia apple growing district, and is
currently constructing a third plant in the State of Washington, the center of
the apple growing district of the Western United States. In addition, Kettle
Valley produces a number of private label products for customers in the United
States, Canada and the United Kingdom. Kettle Valley products are sold through
agents and distributors to the health food and mass markets as well as to
various school districts which are committed to improving the dietary content of
student lunches.
Opta
On December 4, 2002, we completed our cash tender offer for Opta (formerly
listed on the Nasdaq - OPTS) for $2.50 per share in accordance with the terms of
our tender offer for all of the outstanding shares of Opta. Approximately 92.6%
of the outstanding common shares of Opta were tendered. On December 18, 2002, we
merged Opta with Stake Acquisition Corp., one of our wholly-owned subsidiaries.
As a result of this merger and pursuant to applicable law, the remaining 7.4% of
Opta's outstanding common shares were converted into a right to receive $2.50
per share in cash from us. The total purchase price including associated costs
was $28.6 million.
Opta is an innovator, manufacturer and marketer of proprietary food ingredients
that improve the nutritional content, healthfulness, texture and taste of its
customers' food products. Opta's food ingredients are used by more than 350 food
companies, including some of the largest consumer packaged food companies and
largest quick service restaurant chains in the United States. For the nine-month
period ended September 30, 2002, Opta's sales were $21.1 million from its four
manufacturing plants. As of September 30, 2002, Opta's net assets were
approximately $38.1 million, which included approximately $9.5 million in cash
and short-term investments. See "Significant Acquisitions".
Simply Organic
On December 1, 2002, we acquired privately owned Simply Organic, a Toronto based
distributor of natural and organic food products. The purchase price included
aggregate cash payments of $187,000 and contingent consideration of $160,000
payable upon achieving certain gross margin targets over the next two to four
years. Simply Organic was established in November, 2000 and had annualized
revenues of approximately $3.5 million in 2002.
Simply Organic distributes a broad range of regionally and internationally grown
and produced certified organic food products including our line of organic dairy
products, marketed under the trademark Mu, throughout much of Ontario to both
the mass market and natural food retail outlets. It has recently expanded to a
new 14,000 square foot refrigerated warehouse.
Wild West Organic Harvest
On November 1, 2002, we acquired privately owned 632100 B.C. Ltd., formally
operated as Wild West Organic Harvest Co-Operative Association, a Vancouver,
British Columbia based distributor of organic and natural food products. The
purchase price included aggregate cash payments of $889,000 and contingent
consideration of $144,000 payable upon achieving certain gross margin targets
over the next two to four years. Wild West had annualized revenues of
approximately $11.0 million in 2002.
Wild West distributes approximately 2,400 products throughout Western Canada to
both the mass market and natural food retail outlets. Wild West has a historical
annual growth rate of 43% over the last three years and operates from a newly
expanded 38,000 square foot refrigerated and frozen warehouse facility.
5
Organic Kitchen
On July 2, 2002, we acquired organic feed and related inventories, the Organic
Kitchen trademark and the businesses of Organic Kitchen Inc. and Cloud Mountain
Inc. (together forming Organic Kitchen). Consideration consisted of $297,000
paid in cash on closing. In addition, we will pay 10% of the pre-tax profits
earned to December 31, 2005, up to a maximum of $1,268,000. This contingent
consideration will be recorded as an increase to goodwill when the amount of the
contingency is determinable. No contingent consideration was paid in 2002.
Financings during 2003 and 2002
Bank Financing
We completed two bank refinancings in 2002 with a Canadian chartered bank and
its U.S. subsidiary and have completed a further refinancing in February, 2003.
The first refinancing in March, 2002 was used to consolidate a number of
separate banking and private lending relationships. This new facility included a
CDN $5 million line of credit, a $5 million line of credit, and a $15 million
two year term facility payable quarterly based on a seven year amortization
period.
In November, 2002, we entered into a tender facility agreement with the
above-mentioned Canadian chartered bank and its U.S. subsidiary for $17 million,
which was used solely for the purchase of Opta's outstanding common shares
pursuant to the cash tender offer.
In February, 2003, we entered into an amended and restated banking agreement
with a syndicate consisting of several Canadian chartered banks and one of its
U.S. subsidiaries. This amended facility increased the term debt to $21.7
million and the U.S. line of credit to $9 million. The incremental proceeds from
this facility, in addition to cash on hand were used to repay the tender
facility. The term facility is due in March 2005 with a renewal option by the
syndicate and us. Principal payments are made quarterly and amortized over seven
years. The interest rate under the term facility varies depending on the
underlying debt instrument selected and our debt/EBITDA ratio. We intend to
renew the facility when it matures in March 2005.
In May, 2003, we amended our February, 2003 facility to increase our Canadian
line of credit by CDN $2.5 million to CDN $7.5 million. The additional line was
used to repay Kettle Valley's bank debt and will be used to complete the
expansion of Kettle Valley into a third facility.
Convertible Debenture
In December 2002, we issued to Claridge Israel LLC ("Claridge"), our largest
shareholder, a $5 million convertible debenture due November 30, 2004. The
debenture bears interest at the rate of 5.5% per annum and is convertible into
our common shares at a price of $3.00 per share on and after November 30, 2003.
The conversion price can be reduced to as low as $2.55 if we issue common shares
at a price less than $3.00 per share at any time before it matures. The funds
were specifically used for the acquisition of Opta. In conjunction with such
debenture, we issued warrants to Claridge to purchase up to 250,000 of our
common shares at an exercise price of $3.25 per share, expiring November 30,
2004. The debenture is secured by second mortgages on certain of our properties
in Norval, Hamilton and Flamborough, Ontario.
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. Accordingly, in analyzing an investment in these securities,
prospective investors should carefully consider, along with other matters
referred to in this prospectus, the risk factors set forth below. Prospective
investors should carefully consider the following risk factors, together with
all of the other information appearing, or incorporated by reference, in this
prospectus, in light of his or her particular financial circumstances and/or
investment objectives.
6
We Need Additional Capital to Maintain Current Growth Rates
Our two facilities in Alexandria, Minnesota operate at, or near, capacity on
many of their processing lines. Continued growth in these operations is reliant
upon our ability to increase capacity through internal capital projects, new
facilities or acquisition. Our ability to raise capital, through equity and/or
debt financing, is directly related to our ability to continue to grow and
improve returns from operations. Additional capital through equity financing may
also result in additional dilution to our current shareholders and a decrease in
our share price if we are unable to realize returns equal to or above our
current rate of return. We will not be able to maintain our growth rate and our
strategy as a consolidator within the natural and organic food industries
without further capital.
Our Business May Be Materially and Adversely Affected by Our Increased Levels of
Debt
In order to finance our business and acquisitions, we have issued
convertible securities and have entered into bank facilities allowing for
draw-downs of, or filed the registration statement of which this prospectus
forms a part for offerings of, significant levels of debt compared to historical
levels, and we may need to secure additional sources of funding, which may
include debt or convertible debt financing, in the future. A high level of debt,
arduous or restrictive terms and conditions relating to accessing certain
sources of funding, failure to meet certain covenants under our credit
agreement, poor business performance or lower than expected cash inflows could
have adverse consequences on our ability to fund our business and future
acquisitions. In particular, the credit agreement we entered into in connection
with the bank facilities requires the maintenance of certain financial ratios,
including debt-to-tangible net worth ratio, debt-to-consolidated earnings before
interest, taxes, depreciation and amortization (EBITDA) ratio, fixed charge
coverage and working capital ratio. In addition, such credit agreement contains
covenants restricting additional debt, the payment of dividends, corporate
events, liens, sale and leasebacks, and investments, among others.
Exercise of Warrants and Stock Options and Issuance of Additional Securities
Could Dilute the Value of Our Common Shares
As of March 31, 2003, there are approximately 6,474,654 warrants and stock
options outstanding to purchase our common shares, with exercise prices ranging
from $1.06 to $3.72 per common share. The exercise of our warrants and stock
options could result in dilution in the value of our common shares and the
voting power represented thereby. Furthermore, to the extent the holders of our
warrants and stock options exercise such securities and then sell our common
shares they receive upon exercise, our share price may decrease due to the
additional amount of common shares available in the market. The subsequent sales
of these shares could encourage short sales by our shareholders and others which
could place further downward pressure on our share price. Moreover, the holders
of our warrants and stock options may hedge their positions in our common shares
by short selling our common shares, which could further adversely affect our
stock price.
In addition, to attract and retain key personnel or to raise capital, we may
issue additional securities, including stock options. No prediction can be made
as to the effect, if any, that future issuance of stock options or sales of our
common shares, or the availability of common shares for future sale, will have
on the market price of our common shares prevailing from time to time. Sales of
substantial amounts of our common shares in the public market, or the perception
that such sales could occur, may adversely affect the market price of our common
shares and may make it more difficult for us to sell our equity securities in
the future at a time and price which we deem appropriate.
Consumer Preferences for Natural and Organic Food Products are Difficult to
Predict and May Change
80% of our fiscal 2002 consolidated revenue was derived from the Food Group. Our
success depends, in part, on our ability to offer products that anticipate the
tastes and dietary habits of consumers and appeal to their preferences on a
timely and affordable basis. A significant shift in consumer demand away from
our products or products that utilize our integrated ingredients, or our failure
to maintain our current market position could reduce our sales, which could harm
our business. Consumer trends change based on a number of possible factors,
including nutritional values, such as a change in preference from fat free to
reduced fat to no reduction in fat; and a shift in preference from organic to
non-organic and from natural products to non-natural products. These changes
could lead to, among other things, reduced demand and price decreases, which
could have a material adverse effect on our business.
7
We Operate in a Highly Competitive Industry
We carry on businesses in highly competitive product and geographic markets in
the U.S. and Canada. The Food Group's specialty grains and inputs and food
ingredients compete with large companies in the U.S. commercial grain
procurement market, major chemical companies with food ingredient divisions,
other food ingredient companies, stabilizer companies and consumer food
companies that also engage in the development and sale of food ingredients. The
Food Group's consumer products operation competes against conventional food
distributors, providers of organic meat and organic dairy products and
significantly larger food companies that provide specialty or high end products.
Many of these competitors have financial resources and staff larger than ours
and may be able to benefit from economies of scale, pricing advantages and
greater resources to launch new products that compete with our offerings. We
have little control over and cannot otherwise affect these competitive factors.
If we are unable to effectively respond to these competitive factors or if the
competition in any of our product markets results in price reductions or
decreased demand for our products, our business, results of operations and
financial condition will be materially impacted.
We Rely on Our Manufacturing Facilities
We own, manage and operate a number of manufacturing, processing and packaging
facilities located throughout the United States and Canada. The Food Group
operates from thirteen processing facilities (ten owned, three leased) in five
U.S. states and two Canadian provinces. The Environmental Industrial Group
operates from seven locations (four owned, three leased) located throughout the
United States and Canada. The Steam Explosion Technology Group operates its
facilities at our corporate location in Norval, Ontario.
An interruption in or the loss of operations at one or more of these facilities,
or the failure to maintain our labor force at one or more of these facilities,
could delay or postpone production of our products, which could have a material
adverse effect on our business, results of operations and financial condition
until we could secure an alternate source of supply.
The Loss of Key Management or Our Inability to Attract and Retain Management
Talent Could Adversely Affect our Business
Our future prospects depend to a significant extent upon the continued service
of our key executives. In particular, we are highly dependent upon the services
of Jeremy N. Kendall, our chairman of the board and chief executive officer. We
believe Mr. Kendall's management expertise, knowledge and vision are critical
factors in our continuing growth. Furthermore, our continued growth depends on
our ability to identify, recruit and retain key management personnel. The
competition for such employees is intense. We are also dependent on our ability
to continue to attract, retain and motivate our sourcing, production,
distribution, sales, marketing and other personnel.
We Rely on Our Ability to Manage Our Supply Chain Efficiently
Our supply chain is complex. We rely on third parties for our raw materials and
for the manufacturing, processing and distribution of many of our products. The
inability of any of these third parties to deliver or perform for us in a timely
or cost-effective manner could cause our operating costs to rise and our margins
to fall. Many of our products are perishable and require timely processing and
transportation to our customers. Many of our products can only be stored for a
limited amount of time before they spoil and cannot be sold. We must
continuously monitor our inventory and product mix against forecasted demand, or
risk having inadequate supplies to meet consumer demand as well as having too
much inventory that may reach its expiration date. If we are unable to manage
our supply chain efficiently and ensure that our products are available to meet
consumer demand, our operating costs could increase and our margins could fall.
Volatility in the Prices of Raw Materials Could Increase Our Cost of Sales and
Reduce Our Gross Margin
Raw materials used in the Food Group and the Environmental Industrial Group
represent a significant portion of our cost of sales. Our cost to purchase these
materials, such as organic grains and abrasive industrial minerals, from our
suppliers can fluctuate depending on many factors, including weather patterns,
economic and political conditions and pricing volatility. In addition, we must
compete with our competitors for limited supplies of these raw materials. If the
cost of these materials increases due to any of the above factors, we may not be
able to pass along the increased costs to our customers.
The Food Group enters into exchange-traded commodity futures and options
contracts to hedge its exposure to price fluctuations on grain transactions to
the extent considered practicable for minimizing risk from market price
fluctuations.
8
Futures contracts used for hedging purposes are purchased and sold through
regulated commodity exchanges. Inventories, however, may not be completely
hedged, due in part to our assessment of our exposure from expected price
fluctuations. Exchange purchase and sales contracts may expose us to risk in the
event that a counter-party to a transaction is unable to fulfill our contractual
obligations. We are unable to hedge 100% of the price risk of each transaction
due to timing, availability of hedge contracts and third party credit risk. In
addition, we have a risk of loss from hedge activity if a grower does not
deliver the grain as scheduled.
Technological Innovation by Competitors Could Make Our Products Less Competitive
Competitors include major chemical companies, other food ingredient companies
and consumer food companies that also engage in the development and sale of food
ingredients. Many of these companies are engaged in the development of
texturizers and other food ingredients and have introduced a number of
texturizers into the market. Existing products or products under development by
our competitors could prove to be more effective or less costly than any
products which have been or are being developed by us.
We Rely on Protection of Our Intellectual Property and Proprietary Rights
We and particularly our Food Group and Steam Explosion Technology Group depend,
in part, on our ability to protect intellectual property rights. We rely
primarily on patent, copyright, trademark and trade secret laws to protect our
proprietary technologies. The failure of any patents or other intellectual
property rights to provide protection to our technologies would make it easier
for our competitors to offer similar products, which could result in lower sales
or gross margins.
The Food Group has developed a number of new ingredients and alternatives to
accommodate new product adaptation of these and other ingredients into various
food items. The nature of a number of the Food Group's products and processes
requires us to create and maintain a number of patents and trade secrets. The
Food Group's policy is to protect its technology by, among other things, filing
patent applications for technology relating to the development of its business
in the U.S. and in selected foreign jurisdictions.
Our trademarks and brand names are registered in the United States, Canada and
other jurisdictions and we intend to keep these filings current and seek
protection for new trademarks to the extent consistent with business needs. We
rely on trade secrets, proprietary know-how and confidentiality agreements to
protect certain of the technologies and processes used by the Food Group.
In addition, the Steam Explosion Technology Group holds a number of patents on
its steam explosion process and is marketing a clean pulping system with a
special focus on China. We recognize that there exists a threat of others
attempting to copy our proprietary steam explosion technology. To mitigate this
risk, the normal business practice of the Steam Explosion Technology Group
includes the signing of confidentiality agreements with all parties to which
confidential information is supplied including all customers and licensees. We
also hold several patents on our equipment and process technology.
We are Subject to Substantial Environmental Regulation and Policies
We are, and expect to continue to be, subject to substantial federal, state,
provincial and local environmental regulation. Specific to the Environmental
Industrial Group are regulations governing the recycling of solid waste material
regulated by the Ontario Ministry of Environment and Energy and the Commonwealth
of Virginia, Department of Environment Quality. Some of the key regulations
include:
o Air Quality - regulated by Environmental Protection Agency (EPA) and
certain city/state air pollution control groups. Emission reports
are filed annually;
o Waste Treatment/Disposal - solid waste is either disposed of by a
third-party or in some cases we have a permit to haul and apply the
sludge to land. Agreements exist with local city sewer districts to
treat waste at specified levels of biochemical oxygen demand (BOD)
and total suspended solids (TSS);
o Sewer - agreements with the local city sewer districts to treat
waste as specified limits of BOD and TSS, which requires
weekly/monthly reporting as well as annual inspection; and
o Hazardous Chemicals - various reports are filed with local
city/state emergency response agencies to identify potential
hazardous toxic chemicals being used, including reports filed with
the Department of Public Safety Emergency Response Commission in
Minnesota and the Kentucky Emergency Response Commission.
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Permits are required from various state, provincial and local authorities,
including the Minnesota Pollution Control Agency, the Commonwealth of Virginia,
Department of Environmental Quality and the Ontario Ministry of Environment
related to air quality, storm water discharge, solid waste, land spreading and
hazardous waste.
In the event that our safety procedures for handling and disposing of
potentially hazardous materials in certain of our businesses were all to fail,
we could be held liable for any damages that result and any such liability could
exceed our resources. We may be required to incur significant costs to comply
with environmental laws and regulations in the future. In addition, changes to
environmental regulations may require us to modify our existing plant and
processing facilities and could significantly increase the cost of those
operations.
Our soymilk processing facility and aseptic packaging facility, both located in
Alexandria, Minnesota, are currently not in complete compliance with the
industrial permit limits for the discharge of industrial wastewater. To regain
compliance, we will apply for increased discharge limits. We will also
re-engineer certain processes, including the installation of pretreatment
equipment at the two facilities within the next 18 months. The estimated capital
cost is $1.2 million, however operational cost savings will be derived from this
capital expenditure. If we fail to regain compliance through the foregoing
actions, we could be required to reduce our discharge of such industrial
wastewater to approved levels, which may force us to reduce production and/or
transfer part of our production capabilities to other facilities.
The foregoing environmental regulations, as well as others common to the
industries in which we participate, can present delays and costs that can
adversely affect business development and growth. If we fail to comply with
applicable laws and regulations, we may be subject to civil remedies, including
fines, injunctions, recalls or seizures, as well as potential criminal
sanctions, which could have a material adverse effect on our business, results
of operations and financial condition. In addition, any changes to current
regulations may impact the development, manufacturing and marketing of our
products, and may have a negative impact on our future results.
The Food Group Is Subject to Significant Food Regulations
The Food Group is affected by state and federal fertilizer, pesticide, food
processing, grain buying and warehousing, and wholesale food regulations.
Government-sponsored price supports and acreage set aside programs are two
examples of policies that may affect the Food Group. The Food Group is currently
in compliance with all state and federal regulations. Because the Food Group is
involved in the manufacture, supply, processing and marketing of organic seed
and food products, it is voluntarily subject to certain organic quality
assurance standards.
Certain food ingredient products are regulated under the 1958 Food Additive
Amendments to the Federal Food, Drug and Cosmetic Act of 1938 (FDCA), as
administered by the United States Food and Drug Administration (FDA). Under the
FDCA, pre-marketing approval by the FDA is required for the sale of a food
ingredient which is a food additive unless the substance is generally regarded
as safe (GRAS) under the conditions of its intended use by qualified experts in
food safety. We believe that most products for which the Food Group has retained
commercial rights are GRAS. However, such status cannot be determined until
actual formulations and uses are finalized. As a result, the Food Group may be
adversely impacted if the FDA determines that our food ingredient products do
not meet the criteria for GRAS.
In December 2000, the USDA adopted regulations with respect to a national
organic labeling and certification program which became fully effective in
October 2002. These regulations, among other things, set forth the minimum
standards producers must meet in order to have their products labeled as
"certified organic." We currently manufacture and distribute a number of organic
products that are covered by these new regulations. While we believe our
products and our supply chain are in compliance with these regulations, changes
to food regulations may increase our costs to remain in compliance. In addition,
in January 2001, the FDA proposed new policy guidelines regarding the labeling
of genetically engineered foods. These guidelines, if adopted, could require us
to modify the labeling of our products, which could affect the sales of our
products and thus harm our business. We could lose our "organic" certification
if a facility becomes contaminated with non-organic materials or if we do not
use raw materials that are certified organic. The loss of our "organic"
certifications could materially harm our business, results of operations and
financial condition.
Product Liability Suits, if Brought, Could Have a Material Adverse Effect on Our
Business
As a manufacturer and marketer of natural and organic food products and
environmental mineral products, we are subject to the risk of claims for product
liability. If a product liability claim exceeding our insurance coverage were to
be successfully asserted against us, it could harm our business.
10
Our Steam Explosion Technology Is Not Yet Widely Accepted
The Steam Explosion Technology Group has yet to gain wide acceptance within the
industry and, consequently, earnings can fluctuate from quarter to quarter. Its
patented steam technology, while proven, has yet to develop a firm customer
base. The success of this division will depend upon its ability to promote
commercial acceptance of our steam explosion technology.
We Are Subject to Financial Exposure Related to Bonding and Guarantees
For the Steam Explosion Technology Group to enter markets such as China, we
expect to have to provide substantial performance guarantees in the form of
process guarantees and equipment guarantees. These guarantees will need to be
backed by bank guarantees and/or surety bonds. We endeavor to reduce the
associated risks, however there will always remain a possibility that our
guarantees or bonds could be called, rightfully or wrongfully and/or that the
equipment supplied fails to meet the guarantees and warranties provided
resulting in potential financial losses.
We Are Subject to Dividend Restrictions and Potential Withholding Taxes on
Dividends
We have not paid dividends on our common shares since our inception and have
used available cash resources to fund growth. Moreover, we are precluded under
the terms of various agreements with our creditors from paying dividends until
the related indebtedness has been satisfied. We will consider paying dividends
on our common shares in the future when circumstances permit, having regard to,
among other things, our earnings, cash flow and financial requirements, as well
as relevant legal and business considerations. Accordingly, investors may not
receive a return on investment in our common shares through the payment of
dividends in the foreseeable future and may not realize a return on investment
even if they sell their shares. Any future payment of dividends to holders of
our common shares will depend on decisions that will be made by the Board of
Directors and will depend on then existing conditions, including our financial
condition, contractual restrictions, capital requirements and business
prospects. Also, if we pay dividends, the receipt of cash dividends by United
States shareholders from a Canadian corporation may be subject to a 5% to 15%
Canadian withholding tax.
Loss of Our Key Customer Could Materially Reduce Sales and Earnings
We have one customer, The Hain Celestial Group, whose purchases from us in
fiscal 2002 amounted to more than 10% of our revenue. As a result of this
concentration of our customer base, the loss or cancellation of business from
The Hain Celestial Group could materially and adversely affect our business,
financial condition or results of operations.
Our Operating Results and Share Price are Subject to Significant Volatility
Our net sales and operating results may vary significantly from period to period
due to:
o changes in our operating expenses;
o management's ability to execute our business and growth strategies;
o personnel changes;
o demand for natural products;
o supply shortages;
o general economic conditions;
o changes in customer preferences and demands for natural and organic
food products;
o volatility in commodity prices resulting from poor growing
conditions, natural disasters or otherwise; and
o future acquisitions, particularly in periods immediately following
the consummation of such acquisition transactions while the
operations of the acquired businesses are being integrated into our
operations.
In addition, our share price is more volatile than other larger public
companies. Announcements regarding:
o fluctuations in financial performance from period to period;
o mergers and acquisitions;
o strategic partnerships or arrangements;
o litigation and governmental inquiries;
o changes in governmental regulation and policy;
o patents or proprietary rights;
11
o changes in consumer preferences and demand;
o new financings; and
o general market conditions
may have a significant impact on our share price. Higher volatility increases
the chance of larger than normal price swings which reduces predictability in
the share value of our stock and could impair investment decisions. In addition,
price and volume trading volatility in the U.S. stock markets can have a
substantial effect on our share price, frequently for reasons other than our
operating performance. These broad market fluctuations could adversely affect
the market price of our common shares.
Fluctuations in Exchange Rates Could Adversely Affect Our Results of Operations
and Financial Condition
We are exposed to foreign exchange rate fluctuations as the financial results of
our Canadian Corporate office and our Canadian subsidiaries are translated into
U.S. dollars on consolidation. A 10% movement in the levels of foreign currency
exchange rates in favor of (against) the Canadian dollar with all other
variables held constant would result in a decrease (increase) in the fair value
of our net assets by $2,263,000. The Environmental Industrial Group has Canadian
based receivables and payables that on a net basis provide limited exchange
exposure. The Canadian Organic Food Group has exposure of U.S. dollars as its
U.S. payables are greater than U.S. receivables. U.S. based Food operations have
no exposure to other currencies since almost all sales and purchases are made in
U.S. dollars. We intend to hold excess funds in the currency in which the funds
are likely to be used, which will from time to time potentially expose us to
exchange rate fluctuations when converted into U.S. dollars. Should the foreign
exchange rates change to levels different than we anticipate, our business,
financial condition and results of operations may be materially adversely
affected.
Fluctuations in Interest Rates Could Adversely Affect Our Financial Condition
and Liquidity
We have outstanding debts in both fixed rate and floating rate interest
instruments and are therefore subject to different types of interest rate risk.
Fixed rate debts may have their fair market value adversely affected by a
decline in interest rates. In general, longer date debts are subject to greater
interest rate risk than shorter dated securities. Floating rate term debt gives
less predictability to cash flows as interest rates change. As of March 31,
2003, the weighted average interest rate of the fixed rate term debt was 9.1%
and $5,476,000 of our outstanding term debt is at fixed interest rates. Variable
rate term debt of $21,275,000 at an interest rate of 3.78% is partially hedged
by variable rate cash equivalent investments. We look at varying factors to
determine the percentage of debt to hold at fixed rates, including the interest
rate spread between variable and fixed (swap rates), our view on interest rate
trends, the percentage of offset to variable rate debt through holding variable
rate investments and our ability to manage with interest rate volatility and
uncertainty. Given the short duration of our fixed rate debt, changes in
interest rates would have a negligible effect on fixed rate debt valuations.
However, should the interest rates change to levels different than we
anticipate, our financial condition and liquidity may be materially adversely
affected.
Certain Officers and Directors and Our Principal Shareholder May be Able to
Control Our Actions
Certain of our officers and directors beneficially own 10.8% of our common
shares as of June 30, 2003. In addition, Claridge owns 19.6% of our outstanding
common shares, holds all of the debenture issued in December 2002 and holds
warrants to acquire an aggregate of 2,500,000 common shares. Stephen Bronfman,
one of our directors and holder of less than 1% of our outstanding common shares
as of June 30, 2003, also acts as Chairman of Claridge Inc., an affiliate of
Claridge and has voting and investment decision over 24% of our outstanding
common shares as of June 30, 2003, assuming the exercise of all warrants to
acquire common shares held by Claridge. By virtue of their significant
shareholdings, certain of our officers and directors and our principal
shareholder may therefore be in a position to significantly influence the
election of our directors and other stockholder actions.
We May Not Be Able to Effectively Manage Our Growth and Integrate Acquired
Companies
Our growth strategy inherently assumes that we will be able to identify suitable
acquisition candidates on terms acceptable to us and that these acquisitions, if
pursued and completed, will be integrated successfully. Our ability to
effectively integrate current and future acquisitions, including our ability to
realize potentially available marketing opportunities and cost savings in a
timely and efficient manner will have a direct impact on our future results. We
may encounter problems in connection with the integration of any new businesses,
such as:
o integration of distribution channels of an acquired brand or
business' with our own;
12
o integration of an acquired company's products into our product mix;
o amount of cost savings that may be realized as the result of our
integration of an acquired brand or business;
o unanticipated quality and production issues with acquired products;
o adverse effects on business relationships with our suppliers and
customers;
o diversion of management attention;
o difficulty with personnel and loss of key employees;
o compatibility of financial control and information systems; and
o exchange rate risk with respect to our acquisitions in Canada.
We Are a Canada Corporation and it May Be Difficult to Enforce Civil Liability
Provisions of the United States Federal Securities Laws
We are a Canada corporation and a majority of our officers and directors, as
well as certain of the experts named herein are residents of Canada and a
substantial portion of our assets and the assets of such persons are located
outside the United States. As a result, it may be difficult for investors to
effect service of process within the United States upon the Company or such
persons, or to enforce in United States Courts judgments against them obtained
in such courts predicated upon the civil liability provisions of the United
States Federal security laws. ( See "ENFORCABILITY OF CIVIL LIABILITIES", page
17).
USE OF PROCEEDS
The applicable prospectus supplement will set forth the proposed use of
the proceeds.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our consolidated ratio of earnings to fixed
charges for the periods indicated:
Three
months
ended
March 31,
2003 2002 2001 2000 1999 1998
---------------------------------------------------
Ratio of Earnings to Fixed Charges
(Canadian GAAP) (1) 3.60 3.51 1.09 2.28 4.61 5.45
----------
(1) The ratio of earnings to fixed charges is determined by dividing fixed
charges into income before fixed charges and income taxes. Fixed charges
consist of interest expenses and that portion of rental payments which is
considered as being representative of the interest factor implicit in our
operating leases.
DESCRIPTION OF EQUITY SECURITIES
We have an authorized share capital consisting of an unlimited number of
common shares and an unlimited number of special shares, issuable in series. As
of June 30, 2003, there were 43,206,278 common shares issued and outstanding as
fully paid and non-assessable shares and no special shares issued and
outstanding.
Common Shares
Holders of our common shares are entitled to receive notice of any of our
meetings of shareholders, to attend such meetings and to cast one vote per
common share at all such meetings. Holders of our common shares do not have
cumulative voting rights with respect to the election of directors and,
accordingly, holders of a majority of our common shares entitled to vote
13
in any election of directors may elect all directors standing for election.
Holders of our common shares are entitled to receive ratably such dividends, if
any, as and when declared by the board of directors at its discretion from funds
legally available for such dividends and upon our liquidation, dissolution or
winding up are entitled to receive ratably our net assets after payment of debts
and other liabilities, in each case subject to the rights, privileges,
restrictions and conditions attaching to any other series or class of shares
ranking senior in priority to or ratably with the holders of our common shares
with respect to dividends or liquidation. See "Dividend Policy". Our common
shares do not by their terms carry any pre-emptive, subscription, redemption or
conversion rights. Our outstanding common shares are, and the common shares
offered by this prospectus, when issued and paid for, will be, fully paid and
non-assessable.
In accordance with the provisions of the Canada Business Corporations Act (the
"CBCA"), the amendment of certain rights of holders of a class of shares,
including our common shares, requires the approval of not less than two-thirds
of the votes cast by the holders of such shares voting at a special meeting of
such holders. Pursuant to our by-laws, a quorum for a meeting of the holders of
our common shares is two persons, present in person or by proxy. Therefore, it
is possible for the rights of the holders of our common shares to be modified
otherwise than by the affirmative vote of the holders of a majority of the then
issued and outstanding common shares. In circumstances where the rights of our
common shares may be amended, however, holders of our common shares have the
right under the CBCA to dissent from such amendment and require us to pay them
the then fair value of their common shares.
Special Shares
Our special shares may, from time to time, be issued in one or more series. Our
Board of Directors is authorized to create and attach special rights and
restrictions to a series of shares. Except with respect to matters as to which
the holders of our special shares are entitled to vote as a class, the holders
of our special shares will not be entitled to vote at our meetings of
shareholders. In the event that we are liquidated, dissolved or wound up, or in
the event of any distribution of our assets for the purpose of the winding-up of
our affairs, holders of our special shares are entitled, unless otherwise
provided in the special rights and restrictions attached to the shares, after
the payment of unpaid dividends, to be paid the amount of capital paid up per
share from our assets before the holders of our common shares receive any
assets. No series of special shares have been designated or issued.
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms that will apply to any of the
debt securities that we may offer pursuant to this prospectus. The specific
terms of the offered debt securities, and the extent to which the general terms
described in this section apply to debt securities, will be described in the
related prospectus supplement at the time of the offer.
General
As used in this prospectus, any reference to "debt securities" refers to
the senior and subordinated debentures, notes, bonds, and other evidences of
indebtedness that we may issue and the relevant trustee authenticates and
delivers under the indenture. We may issue debt securities under an indenture
between us and a qualified trustee. This indenture is referred to in this
prospectus as the "indenture." The trustee under the indenture is referred to in
this prospectus as the "trustee."
Under applicable Canadian law, a Canadian licensed trust company may be
required to be appointed as co-trustee under the indenture in certain
circumstances. It is anticipated that applications will be made to the
appropriate Canadian regulatory authorities for exemptive relief from this and
other requirements of Canadian law applicable to the indenture. If such relief
is not obtained, the applicable legislative requirements will be complied with
at the time of the applicable offering.
The Indenture
The material provisions of the indenture are summarized in the following
pages. The summary is not complete and is qualified in all respects by reference
to the Trust Indenture Act and the form of the indenture, which is filed as an
exhibit to the registration statement of which this prospectus forms a part. You
should read the indenture for provisions that may be important to you. If a
different indenture for a series of debt securities is used, those details will
be provided in a prospectus supplement and the forms of any other indentures
will be filed with the SEC at the time they are used.
Unless we state otherwise in the related prospectus supplement, the
indenture does not limit the amount of debt securities that we may issue under
such indenture. The related prospectus supplement for the debt securities being
offered
14
will include specific terms of the debt securities. These terms will include
some or all of the following:
o the title of the debt securities and whether such debt securities
are senior or subordinated;
o the total principal amount and permitted denomination of the debt
securities;
o the percentage of the principal amount of the debt securities at
which the debt securities will be issued and any payments due if the
maturity of the debt securities is accelerated;
o the currency or currencies in which the principal of and interest on
the debt securities will be payable;
o the dates on which the principal of the debt securities will mature;
o the interest rate for the debt securities or the method that will be
used to determine the interest rate;
o the dates on which interest on the debt securities will be payable
and the manner in which interest will be paid;
o any mandatory or optional repayment or redemption provisions;
o any sinking fund provisions;
o any index used to determine the amount of payments of principal
and/or interest;
o any additional payment provisions;
o any provision relating to the issuance of discounted debt
securities; and
o in the case of debt securities that are convertible into common
shares, the conversion price, the period during which the debt
securities may be converted and any other terms of conversion which
may differ from the indenture or supplemental indenture.
Some of the debt securities may be sold at a substantial discount below
their stated principal amount and may provide for the payment of no interest or
interest at a rate which at the time of issuance is below market rates. We will
describe the U.S. and Canadian federal income tax consequences and other special
considerations applicable to any discounted debt securities in the prospectus
supplement relating to the discounted debt securities.
We may issue some or all of the debt securities in temporary or permanent
global form. Until definitive debt securities are ready for delivery, we may use
temporary debt securities, which shall be substantially in the form of
definitive securities but may have variations we consider appropriate for
temporary securities. Without unreasonable delay, we shall deliver definitive
securities in exchange for temporary securities. We may issue a global security
only to a depository, which may transfer a global security only to its nominee
or to a successor depository. A global security will represent the amount of
debt securities specified in the global security and may have variations that
the depository requires or that we consider appropriate for such a security.
Ranking of Debt Securities
We may issue unsecured senior or subordinated debt securities from time to
time. Neither the senior debt securities nor the subordinated debt securities
will be secured by any of our property or assets. Thus by owning a debt
security, you are one of our unsecured creditors.
The senior debt securities will constitute part of our senior debt and
will rank equally with all of our other unsecured and unsubordinated debt.
The subordinated debt securities will constitute part of our subordinated
debt and will be subordinate in right of payment to all of our senior
indebtedness, as that term is defined in the indenture. The prospectus
supplement for any series of subordinated debt securities will indicate the
approximate amount of senior indebtedness outstanding as of the end of our most
recent fiscal quarter.
Certain Covenants Required by the Indenture
The indenture for the debt securities requires us to comply with certain
customary covenants. They include the payment of principal of and interest on
the debt securities, delivery of annual compliance reports and certain SEC
reports to the trustee, and notification to the trustee of any legal proceeding,
event of default (as defined below), any cure or waiver of an event of default,
and if and when the debt securities are listed on any stock exchange.
In addition, the indenture prohibits us from consolidating or merging with
or into any other corporation and from selling, transferring or leasing all of
our property or substantially all of our property to any corporation, unless:
(1) either we shall be the resulting or surviving entity or such
corporation is organized and existing under the laws of the United
States;
15
(2) if we are not the resulting or surviving entity, such corporation
assumes by supplemental indenture all of our obligations under the
debt securities and the indenture; and
(3) no default exists immediately before and immediately after the
transaction.
Events of Default
"Event of default," when used in the indenture with respect to any of the
debt securities, means any of the following:
(1) a default in the payment of interest on any of the debt securities
when it becomes due and payable and such default continues for a
period of 30 days;
(2) a default in the payment of the principal of any of the debt
securities when it becomes due and payable at maturity, upon
redemption or otherwise;
(3) failure to comply with any of our other agreements in the debt
securities or the indenture and such failure continues for the
period and after the notice specified below;
(4) pursuant to or within the meaning of any bankruptcy law (as defined
below), the commencement of a voluntary case, consent to the entry
of an order for relief against us in an involuntary case, consent to
the appointment of a custodian (as defined below) of us or for all
or substantially all of our property, or the making of a general
assignment for the benefit of our creditors; or
(5) the entering of an order or decree by a court of competent
jurisdiction under any bankruptcy law that (i) is for relief against
us in an involuntary case, (ii) appoints a custodian of us or for
all or substantially all of our property, or (iii) orders the
liquidation of us, and the order or decree remains unstayed and in
effect for 60 days.
Any of the foregoing will constitute an event of default whether it is
voluntary or involuntary, or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body. The term "bankruptcy law" means title 11,
U.S. Code or any similar U.S. federal or state law for the relief of debtors.
The term "custodian" means any receiver, trustee, assignee, liquidator or
similar official under any bankruptcy law.
A default under clause (3) above is not an event of default until the
trustee or the holders of at least 25% in principal amount of the debt
securities notify us and the trustee of the default and we do not cure the
default, or it is not waived, within 60 days after receipt of the notice. The
notice must specify the default, demand that it be remedied to the extent
consistent with law, and state that the notice is a "notice of default."
If an event of default occurs and is continuing, the trustee by notice to
us, or the holders of at least 25% in principal amount of the debt securities by
notice to us and the trustee, may declare the principal of and accrued interest
on all the debt securities to be due and payable. In addition, the trustee may
pursue any available remedy to collect the payment of principal or interest on
the debt securities or to enforce the performance of any provision of the debt
securities or the indenture. The trustee may maintain a proceeding even if it
does not possess any of the debt securities or does not produce any of them in
the proceeding. A delay or omission by the trustee or the holder of any debt
securities in exercising any right or remedy accruing upon an event of default
shall not impair the right or remedy or constitute a waiver of or acquiescence
in the event of default. All remedies are cumulative to the extent permitted by
law.
Discharge of Obligations
Under the indenture, we will be discharged from our non-administrative
obligations under any of the debt securities if:
(1) either (A) all of the outstanding debt securities have been
delivered to the trustee for cancellation, or (B) all such debt
securities not theretofore delivered to the trustee for cancellation
(i) have become due and payable, (ii) will become due and payable at
their stated maturity within one year, or (iii) are to be called for
redemption within one year under arrangements satisfactory to the
trustee for the giving of notice of redemption by the trustee in our
name and at our expense, and, in the case of (i), (ii), and (iii)
above, we have deposited or caused to be deposited with the trustee
as trust funds an amount sufficient to pay and discharge all of the
outstanding debt securities;
(2) we have paid or caused to be paid all other sums payable under the
indenture by us; and
(3) we have delivered to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent in
the indenture provided for relating to the satisfaction and
discharge of the indenture
16
have been complied with.
Amendments of the Indenture
Under the indenture, we and the trustee may modify our rights and
obligations, and the rights of the holders of debt securities with the consent
of the holders of at least a majority of the principal amount of the outstanding
debt securities issued under the indenture affected by the modification.
However, we must get the consent of the holder of each debt security affected to
make any of the following changes to the debt securities:
(1) reduce the amount of the debt securities whose holders must consent
to an amendment;
(2) reduce the interest on or change the time for payment of interest on
any of the debt securities;
(3) reduce the principal of or change the fixed maturity of any of the
debt securities;
(4) reduce the premium payable upon the redemption of any of the debt
securities or change the time at which any of the debt securities
may or shall be redeemed;
(5) change the currency in which payments are made;
(6) change any of the provisions governing (i) acceleration, (ii)
holders' right to receive payment, and (iii) amendments to the
indenture requiring the consent of the holder of each debt security
affected;
(7) make any change that adversely affects the right to convert any of
the debt securities; or
(8) make any change that adversely affects the preference or priority of
the debt securities.
DESCRIPTION OF WARRANTS
This section describes the general terms that will apply to any warrants
for the purchase of our common shares that may be offered by us, referred to in
this prospectus as "warrants" pursuant to this prospectus.
Warrants may be offered separately or together with any of the securities
offered by this prospectus. Each series of warrants will be issued under a
separate warrant agreement to be entered into between us and one or more banks
or trust companies acting as warrant agent. The applicable prospectus supplement
will include details of the warrant agreements covering the warrants being
offered. The warrant agent will act solely as our agent and will not assume a
relationship of agency with any holders of warrant certificates or beneficial
owners of warrants. The specific terms of the warrants, and the extent to which
the general terms described in this section apply to those warrants, will be set
forth in the applicable prospectus supplement. These terms will include some or
all of the following:
o the designation and aggregate number of warrants;
o the price at which the warrants will be offered;
o the currency or currencies in which the warrants will be offered;
o the designation and terms of the common shares purchasable upon exercise
of the warrants;
o the date on which the right to exercise the warrants will commence and the
date on which the right will expire;
o the number of common shares that may be purchased upon exercise of each
warrant and the price at which and currency or currencies in which that
amount of securities may be purchased upon exercise of each warrant;
o the designation and terms of any securities with which the warrants will
be offered, if any, and the number of the warrants that will be offered
with each security;
o the date or dates, if any, on or after which the warrants and the related
securities will be transferable separately;
o whether the warrants are subject to redemption or call and, if so, the
terms of such redemption or call provisions;
o material United States and Canadian tax consequences of owning the
warrants; and
o any other material terms or conditions of the warrants.
PLAN OF DISTRIBUTION
The applicable prospectus supplement will describe the plan of
distribution.
TAX CONSEQUENCES
Where appropriate, the applicable prospectus supplement will describe the
Canadian tax considerations and U.S. federal income tax considerations relevant
to the securities being offered by this prospectus.
17
LEGAL MATTERS
Basman Smith LLP, Toronto, Ontario, our Canadian counsel, and Dunnington,
Bartholow & Miller LLP, New York, New York, our U.S. counsel, have passed upon
the validity of the issuance of the securities offered by this prospectus.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-K/A for the year ended December 31, 2002 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
Independent Public Accountants, given on the authority of said firm as experts
in auditing and accounting.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Canada Business Corporations Act (the "CBCA"), our by-laws and
insurance policies maintained by us provide for the indemnification of our
directors and officers in respect of certain liabilities incurred in the course
of their duties.
Under the CBCA, we may indemnify a present or former director or officer,
or former director or officer or another individual who acts or acted at our
request as a director or officer, or an individual acting in a similar capacity,
of another entity, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment reasonably incurred by the
individual in respect of any civil, criminal, administrative, investigative or
other proceeding in which the individual is involved because of the association
with us or another entity. However, we will only indemnify an individual if the
following conditions of indemnification are met: (a) the individual acted
honestly and in good faith with a view to our best interests, or as the case may
be, to the best interests of the other entity for which the individual acted as
director or officer or in similar capacity at our request; and (b), in the case
of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, if she or he had reasonable grounds for believing her or his
conduct was lawful. In the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, an individual is entitled to
indemnity from us if the foregoing conditions of indemnification are met and the
individual was not judged by the court or other competent authority to have
committed any fault or omitted to do anything that such individual ought to have
done. Further, with the approval of a court, we may indemnify an individual in
respect of an action by us or on our behalf or other entity to procure a
judgment in his or her favor, to which the individual is made a party because of
his or her association with us or such other entity so long as the foregoing
conditions of indemnification are met.
Our by-laws also provide for the mandatory indemnification of our
directors and officers in respect of any action, suit or proceeding that is
proposed or commenced in respect of anything done by the director or officer
arising from the duties of that office and in such other circumstances that the
CBCA permits or requires to the fullest extent provided by the CBCA.
We have purchased and intend to maintain insurance on behalf of any person
who is or was one of our directors or officers, or is or was one of our
directors or officers serving at our request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such, so
long as the director or officer acted honestly and in good faith with a view to
our best interests.
Insofar as indemnification for liabilities arising under the U.S.
Securities Act may be permitted to directors, officers or controlling persons
pursuant to the foregoing provisions, those provisions are, in the opinion of
the SEC, against public policy as expressed in the U.S. Securities Act and are
therefore unenforceable.
ENFORCEABILITY OF CIVIL LIABILITIES
We are a Canadian corporation with our registered office in Canada and
representative offices in the United States and Canada. A majority of our
officers and directors, as well as certain of the experts named in this
prospectus, are residents of Canada and a substantial portion of our assets and
of such persons are located outside the United States. As a result, it may be
difficult for investors to effect service of process within the United States on
us or such directors, officers or experts or to enforce in United States courts
judgments against them obtained in such courts predicated upon the civil
liability provisions of the United States federal securities laws. We have been
advised by our Canadian counsel, Basman Smith LLP of Toronto, Ontario, that
there is doubt as to whether Canadian courts would: (a) enforce judgments of
United States courts obtained in actions against us or such directors, officers
or experts predicated upon the civil
18
liability provisions of the United States federal securities laws or the state
securities or "blue sky" laws of any state within the United States; or (b)
enforce, in original actions, liabilities against us or such persons predicated
solely upon the United States federal securities laws or any such state
securities or blue sky laws.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational reporting requirements of the Exchange
Act, and therefore we file reports, proxy statements and other information with
the SEC and since our listing on the Toronto Stock Exchange on November 6, 2001
these types of documents are also filed with the Ontario Securities Commission
and the Toronto Stock Exchange. You may read and copy these reports and other
information at the Public Reference Room maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. In addition, the SEC
maintains a home page at www.sec.gov that contains certain reports and other
information filed by us. You may also read and copy any of the reports and any
other information that we file with the Ontario Securities Commission and the
Toronto Stock Exchange at the Canadian System for Electronic Document Analysis
and Retrieval's home page at www.sedar.com.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information from other
documents that we file with them, which means that we can disclose important
information by referring to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information. This prospectus incorporates by reference the documents listed
below.
(1) Amendment No. 4 to our Annual Report on Form 10-K for the year ended
December 31, 2002, filed July 14, 2003, SEC file no. 0-9989.
(2) Amendment No. 2 to our Quarterly Report on Form 10-Q for the three months
ended March 31, 2003, filed July 14, 2003, SEC file no. 0-9989.
(3) Our Information Circular and Proxy Statement filed May 21, 2003 relating
to our 2003 Annual and Special Meeting of Shareholders held on June 18,
2003.
(4) Our amendment to Form 8-K filed February 14, 2003, SEC file no. 0-9989.
(5) Our Form 8-K filed February 5, 2003, SEC file no. 0-9989.
We also incorporate by reference additional documents that we may file
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this prospectus and prior to the entire time all of the shares of
our common stock offered by this prospectus are sold. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
We undertake to provide without charge to each person, including any
beneficial owner, to whom a prospectus is delivered, a copy of these filings, at
no cost, by writing or telephoning us. Any requests should be directed to:
Stake Technology Ltd.
2838 Highway 7, Norval, Ontario, Canada L0P 1K0
Attention: Steven R. Bromley, Executive Vice President
and Chief Financial Officer
Tel: (905) 455-1990 Fax (905) 455-2529
Email: sbromley@staketech.com
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
19
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses (in US$) to be
incurred in connection with the issuance and distribution of the securities
being registered hereby:
SEC registration fee ................................................ $ 8,090
Trustee fee and expenses ............................................ $ *
Rating agency fee ................................................... $ *
Listing fees ........................................................ $ *
Accounting fees and expenses ........................................ $ *
Legal fees and expenses ............................................. $ *
Printing and engraving expenses ..................................... $ *
Miscellaneous ....................................................... $ *
TOTAL .................................................... $ *
* The expenses, all of which are to be incurred and satisfied by the
Registrant in connection with the issuance and distribution of the
securities being registered, have been estimated pursuant to the
instructions to Item 511 of Regulation S-K, subject to future
contingencies.
Item 15. Indemnification of Directors and Officers
Section 124 of the Canada Business Corporations Act (the "CBCA") provides,
in pertinent part, as follows:
(1) Indemnification A corporation may indemnify a director or officer
of the corporation, a former director or officer
of the corporation or another individual who acts
or acted at the corporation's request as a
director or officer, or an individual acting in a
similar capacity, of another entity, against all
costs, charges and expenses, including a amount
paid to settle an action or satisfy a judgment,
reasonably incurred by the individual in respect
of any civil, criminal, administrative,
investigative or other proceeding in which the
individual is involved because of that association
with the corporation or other entity.
(2) Advance of costs A corporation may advance moneys to a director,
officer or other individual for the costs, charges
and expenses of a proceeding referred to in
subsection (1). The individual shall repay the
moneys if the individual does not fulfill the
conditions of subsection (3).
(3) Limitation A corporation may not indemnify an individual
under subsection (1) unless the individual
(a) acted honestly and in good faith with a view
to the best interests of the corporation,
or, as the case may be, to the best
interests of the other entity for which the
individual acted as director or officer or
in a similar capacity at the corporation's
request; and
(b) in the case of a criminal or administrative
action or proceeding that is enforced by a
monetary penalty, the individual had
reasonable grounds for believing that the
individual's conduct was lawful.
(4) Indemnification in A corporation may with the approval of a court,
derivative actions indemnify an individual referred to in subsection
(1), or advance moneys under subsection (2), in
respect of an action by or on behalf of the
corporation or other entity to procure a judgment
in its favour, to which the individual is made a
party because of the individual's association with
the corporation or other entity as described in
subsection (1) against all costs, charges and
expenses reasonably incurred by the individual in
connection with such action, if the individual
fulfils the conditions set out in subsection (3).
II-1
(5) Right to indemnity Despite subsection (1), an individual referred to
in that subsection is entitled to indemnity from
the corporation in respect of all costs, charges
and expenses reasonably incurred by the individual
in connection with the defence of any civil,
criminal, administrative, investigative or the
proceeding to which the individual is subject
because of the individual's association with the
corporation or other entity as described in
subsection (1), if the individual seeking
indemnity
(a) was not judged by the court or other
competent authority to have committed any
fault or omitted to do anything that the
individual ought to have done; and
(b) fulfils the conditions set our in subsection
(3).
(6) Insurance A corporation may purchase and maintain insurance
for the benefit of an individual referred to in
subsection(1) against any liability incurred by
the individual
(a) in the individual's capacity as a director
or officer of the corporation; or
(b) in the individual's capacity as a director
or officer, or similar capacity, of another
entity, if the individual acts or acted in
that capacity at the corporation's request.
Pursuant to its by-laws, the undersigned registrant shall indemnify any
person, and his or her heirs and legal representatives who is or was a director
or officer of the registrant, or who acts or acted at the request of the
registrant as a director or officer of a body corporate of which the registrant
is or was a shareholder or creditor, against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably
incurred by such person in respect of any civil, criminal or administrative
action or proceeding to which such person is made a party by reason of being or
having been a director or officer of the registrant or such body corporate, if
such person acted honestly and in good faith with a view to the best interests
of the registrant, and, in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, such person had reasonable
grounds for believing that his or her conduct was lawful. No director or officer
of the registrant shall be indemnified by the registrant in respect of any
liability, costs, charges or expenses that such person sustains or incurs in or
about any action, suit or other proceeding as a result of which he or she is
adjudged to be in breach of any duty or responsibility imposed upon him or her
under the CBCA or under any other statute unless, in an action brought against
him or her in their capacity as director or officer, he or she have achieved
complete or substantial success as a defendant. Subject to the limitations
contained in the CBCA, the registrant may purchase, maintain or participate in
such insurance for the benefit of such persons as the board of directors may,
from time to time, determine.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the United States Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable. The registrant is subject, insofar as its Articles of
Amalgamation and internal affairs are concerned, to the laws of Canada, and it
has been advised by its Canadian counsel, Basman Smith LLP, that, in their
opinion, Canadian courts would allow indemnification for liabilities arising
under the Securities Act, provided that the indemnification came within the
limits of the above quoted sections of the CBCA, since such provisions are not
contrary to the public policy of Canada. (See "Enforceability of Civil
Liabilities.")
Item 16. Exhibits
1.1 Form of Underwriting Agreement for senior debt securities*
1.2 Form of Underwriting Agreement for subordinated debt securities*
1.3 Form of Underwriting Agreement for common shares*
1.4 Form of Underwriting Agreement for special shares*
1.5 Form of Underwriting Agreement for warrants*
4.1 Form of Indenture
5.1 Opinion of Basman Smith LLP, as to the legality of securities*
12.1 Computation of ratios of earnings to fixed charges (Canadian and/or
US GAAP)*
23.1 Consent of Basman Smith LLP
23.2 Consent of PricewaterhouseCoopers LLP
25.1 Statement of Eligibility and Qualification on Form T-1 of
_________.*
* To be filed subsequently by amendment or as an exhibit to a document to be
incorporated by reference into this registration statement in connection
with an offering of applicable securities.
II-2
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Exchange Act of 1934, as amended (the
"Exchange Act") that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was
declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the Town of Norval, Province of Ontario, Canada, on this
25th day of July, 2003.
STAKE TECHNOLOGY LTD.
By: /s/ Steven R. Bromley
------------------------------------
Steven R. Bromley
Executive Vice President and Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, each person whose signature appears below
constitutes and appoints Jeremy N. Kendall and Steven R. Bromley as his or her
true and lawful attorneys-in-fact, each acting alone, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully for all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Jeremy N. Kendall Chairman and Chief Executive Officer July 25, 2003
-------------------------- (Principal Executive Officer)
Jeremy N. Kendall
/s/ Steven R. Bromley Executive Vice President and Chief July 25, 2003
-------------------------- Financial Officer (Principal Financial Officer)
Steven R. Bromley
/s/ Cyril A. Ing Director July 25, 2003
--------------------------
Cyril A. Ing
/s/ Joseph Riz Director July 25, 2003
--------------------------
Joseph Riz
/s/ James K. Rifenbergh Director and Authorized July 25, 2003
-------------------------- Representative in the United States
James K. Rifenbergh
/s/ Dennis W. Anderson Director July 25, 2003
--------------------------
Dennis W. Anderson
/s/ Allan Routh Director and President of the Grains and Soy July 25, 2003
-------------------------- Products Group
Allan Routh
/s/ Katrina Houde Director July 25, 2003
--------------------------
Katrina Houde
/s/ Camillo Lisio Director July 25, 2003
--------------------------
Camillo Lisio
/s/ Stephen R. Bronfman Director July 25, 2003
--------------------------
Stephen R. Bronfman
/s/ Robert Fetherstonaugh Director July 25, 2003
--------------------------
Robert Fetherstonhaugh
II-5
INDEX TO EXHIBITS
Exhibit No. Page
4.1 Form of Indenture X-1
23.1 Consent of Basman Smith LLP Y-1
23.2 Consent of PricewaterhouseCoopers LLP Z-1