TO: Cellulosic Sugar Producers Co-operative Ltd. (the “Co-operative”)
THE UNDERSIGNED (the “Subscriber”) hereby irrevocably subscribes for and agrees to purchase the number and class of securities (the “Shares”) of the Co-operative set out below to be issued for the aggregate consideration set out below, upon and subject to the terms and conditions set out in the attached “Terms and Conditions of Subscription” (the “Terms and Conditions”). This page plus the Terms and Conditions are collectively referred to as the “Subscription Agreement”.
ISSUER: Cellulosic Sugar Producers Co-operative Ltd.
(1) FIVE (5) MEMBERSHIP SHARES $500
SUBSCRIBED FOR AT $100.00 PER SHARE:
(2)___ CLASS 1 PREFERENCE SHARES SUBSCRIBED FOR AT $200.00 PER SHARE $_________
DATED this ____ day of ______________________, 201___.
NAME OF SUBSCRIBER:_________________________________
SIGNATURE OF SUBSCRIBER:___________________________________
ADDRESS OF SUBSCRIBER:_____________________________________
(City/Municipality, Province, Postal Code)
SOCIAL INSURANCE NUMBER OR
BUSINESS TAX NUMBER (as applicable): ________________________________________
Cellulosic Sugar Producers Co-operative Ltd. hereby accepts the above Subscription on the Terms and Conditions contained in this Subscription Agreement.
DATED this ____ day of ______________________, 201___.
CELLULOSIC SUGAR PRODUCERS
I have the authority to bind the Co-operative.
TERMS AND CONDITIONS OF SUBSCRIPTION
1. SUBSCRIPTION AND CLOSING
1.1 The Subscriber irrevocably subscribes for the Shares at the subscription price and agrees to purchase, in accordance with the terms of this Subscription Agreement, the number of Shares set out on the cover page hereof.
1.2 The Subscriber’s subscription for the Shares evidenced by the Subscriber’s execution of this Subscription Agreement is subject to acceptance or rejection in whole or in part by the board of directors of the Co-operative in its sole discretion. In the event that Subscriber’s subscription is rejected, the Co-operative shall return all related subscription funds to the Subscriber without interest or deduction. Pending the decision of the board of directors of the Co-operative, Subscriber's subscription funds shall be held in escrow with Concentra Trust pursuant to the terms and provisions of an escrow agreement between the Co-operative and Concentra Trust. The Co-operative will, upon request of the Subscriber, provide Subscriber with a copy of the escrow agreement.
1.3 The Subscriber acknowledges and agrees that the articles of the Co-operative provide that a term of issuance of the Shares by the Co-operative shall be that the Subscriber must sign a producer agreement in a form prescribed by the board of directors of the Co-operative.
2. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER
2.1 The Subscriber represents, warrants and certifies to the Co-operative as follows and acknowledges the Co-operative is relying upon such representations, warranties and certifications in determining whether or not to issue Shares to the Subscriber pursuant to this Subscription Agreement:
(a) The Subscriber is purchasing the Shares as principal, and not on behalf of or in trust for any other party;
(b) This Subscription Agreement has been duly authorized, executed and delivered by the Subscriber and constitutes a legal, valid, binding and enforceable obligation of the Subscriber;
(c) If an individual, the Subscriber has attained the age of majority and is legally competent to execute this Subscription Agreement and to complete the subscription for Shares hereunder;
(d) The Subscriber has been advised there can be no assurance the Subscriber will receive any patronage or dividends on the Shares or be able to redeem these Shares upon request, nor can there be any assurances the Co-operative will be profitable or solvent;
(e) The Subscriber shall, no later than concurrently with having its subscription for Shares of the Co-operative accepted by the board of directors of the Co-operative, sign a producer agreement in a form prescribed by the board of directors of the Co-operative; and
(f) Prior to entering into this Agreement, Subscriber acknowledges having received the Offering Statement for the Co-operative.
2.2 By accepting the Shares, the Subscriber covenants and agrees with the Co-operative that the foregoing representations and warranties in Section 2.1 are true and correct as at the time of completion of the Subscription Agreement for the Shares and will remain true and correct up to and including the time of the issuance of the Shares to the Subscriber. The Subscriber covenants and agrees to indemnify and save harmless the Co-operative against all losses, costs, expenses, damages or liabilities which the Co-operative may suffer or incur as a result of any such representations and warranties being incorrect.
3. COVENANTS AND ACKNOWLEDGEMENTS OF THE SUBSCRIBER
3.1 The Subscriber hereby covenants, acknowledges and agrees with the Co-operative that:
(a) Speculative Investment:
The Co-operative is a new business. It currently does not have any significant assets or other financial resources and does not have any previous experience in the cellulosic glucose market. The Co-operative's financial success is dependent upon the Co-operative successfully raising sufficient member equity and obtaining debt financing from lenders. Therefore, the Shares being offered are highly speculative and involve a high degree of risk.
(b) Market for Shares:
There is no market for the Shares being subscribed for and none is expected to develop. The Subscriber may not be able to sell the Shares purchased. No Shares may be transferred without the express consent of the Board of Directors of the Co-operative, which consent may not be given, as such consent is within the sole and unfettered discretion of such board of directors.
(c) Long-Term Investment:
Purchases of the Shares offered should be considered long-term investments which will not be suitable for investors who may need to sell their Shares quickly in order to raise money. Subscribers who require regular, guaranteed returns from their investments should not purchase the Shares.
(d) Comet Biorefining (Sarnia) Inc.:
The Co-operative is being formed for the purpose of investing in Comet Biorefining (Sarnia) Inc. There are a number of agreements that have to be entered into and equity and debt raised in order for such investment to proceed.
(e) Unknown Risk Factors:
The Co-operative may also be subject to other unknown or unforeseen risk factors that could potentially affect its profitability and solvency. This is particularly the case given the cellulosic processing technology is considered by the Co-operative to be novel and, as such, unforeseen complications can be expected to occur. Some of these risk factors could also include, but are not limited to, failure to comply with governing statutes and increased competition. Any adverse unforeseen risk factors that materialize may negatively affect the Co-operative’s profitability and solvency.
4. REPRESENTATIONS AND WARRANTIES OF THE CO-OPERATIVE
4.1 The Co‑operative represents and warrants to the Subscriber as follows and acknowledges that the Subscriber is relying on such representations and warranties in making an investment in Shares hereunder:
(a) The Co‑operative is incorporated and validly subsisting under the laws of the Ontario Co-operative Corporations Act; and
(b) Subject to and wholly conditional upon the acceptance of this Subscription Agreement by the board of the Co‑operative pursuant to and in compliance with the provisions of Section 1.2 hereof, all necessary corporate action will have been taken by the Co‑operative to allot and issue the Shares purchased by the Subscriber and, upon the board of the Co‑operative accepting this Subscription Agreement, the Shares shall be validly issued as fully paid and non-assessable Shares in the capital of the Co‑operative.
5. RELIANCE BY CO-OPERATIVE AND SURVIVAL
5.1 The Subscriber acknowledges and agrees that the representations, warranties, covenants, acknowledgements and agreements made by the Subscriber in this Subscription Agreement are made with the intention that they may be relied upon by the Co‑operative in determining the Subscriber’s eligibility to purchase the Shares and that they shall in each case survive the closing of the transactions contemplated hereby notwithstanding any subsequent disposition by the Subscriber of the Shares.
6.1 The Subscriber hereby agrees to keep confidential all information which may be provided to the Subscriber relating to the business and affairs of the Co‑operative upon becoming a shareholder of the Co‑operative, and not to distribute or otherwise make available any such information to any other person or otherwise exploit any such information.
7. FURTHER ASSURANCES OF SUBSCRIBER
7.1 The Subscriber shall execute and deliver such additional instruments, certificates and other documents as may be required or requested by the Co‑operative, acting reasonably, to permit the purchase of the Shares or otherwise to carry out the provisions and intent of this Subscription Agreement.
8,1 No rights or obligations of the Subscriber hereunder may be assigned without the prior written consent of the Co‑operative. The Co-operative may assign its interest in this Subscription Agreement.
9. GOVERNING LAW
9.1 This Subscription Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. The Subscriber irrevocably attorns to the non-exclusive jurisdiction of the Courts of Ontario with respect to any matters arising out of this Subscription Agreement.
10. ENTIRE AGREEMENT
10.1 This Subscription Agreement constitutes the only agreement between the Co‑operative and Subscriber with respect to the subject matter hereof and shall supersede any and all prior negotiations and understandings. There are no representations, warranties, covenants or other agreements relating to the subject matter hereof except as stated or referred to herein or therein. This Subscription Agreement shall be read with such changes in number and gender as the context or reference to parties may require.
11.1 The Co‑operative shall be entitled to rely on delivery by facsimile or electronic PDF of an executed copy of this Subscription Agreement by Subscriber and acceptance by the Co‑operative of that delivery shall be legally effective to create a valid and binding agreement between the Subscriber and the Co‑operative in accordance with the terms of this Subscription Agreement.
11.2 Time shall be of the essence in this Subscription Agreement and every part hereof and no extension or variation to this Subscription Agreement shall operate as a waiver of this provision.
11.3 This Subscription Agreement shall ensure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, legal personal representatives, successors and permitted assigns.
THIS PRODUCER AGREEMENT (the “Agreement”) made as of the ____ day of __________________, 201__.
B E T W E E N:
CELLULOSIC SUGAR PRODUCERS CO-OPERATIVE LTD.,
a co-operative corporation incorporated pursuant to the
provisions of the Co-operative Corporations Act (Ontario)
(hereinafter referred to as the “Co-operative”)
OF THE FIRST PART;
- and -
Postal Code :________________________________________
Telephone No.: ______________________________________
(hereinafter referred to as the “Grower”)
OF THE SECOND PART.
NOW THEREFORE IN CONSIDERATION of the sum of One Dollar ($1.00) now delivered by the Co-operative to the Grower and for other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto do hereby agree as follows:
1. Supply of Biomass - The Grower agrees to grow ______________ acres of corn stover or wheat straw biomass for purchase by the Co-operative, such corn stover producing no less than an average of 1.5 metric tonnes per acre and such wheat straw producing no less than an average of 1.2 metric tonnes per acre, all to be in accordance with the Co-operative's quality specifications prescribed by the Co-operative from time to time on the terms and conditions hereinafter set forth. The Grower acknowledges and agrees with the Co-operative that, unless agreed to the contrary by the Co-operative, the Grower will grow _____________ acres of _______________ pursuant to the terms and provisions of this Agreement (the corn stover or wheat straw biomass that the Grower is contractually obligated to grow being hereinafter sometimes referred to as the "Biomass"). The Grower acknowledges and agrees that the Co‑operative will be relying upon the Grower's covenants herein in order to fulfill the Co‑operative's contemplated contractual obligations to supply corn stover and wheat straw in prescribed amounts to Comet Biorefining (Sarnia) Inc. or any successor in interest to Comet Biorefining (Sarnia) Inc. (collectively “Comet”). In the event that circumstances dictate the Grower cannot plant enough corn or wheat, as the case may be, to meet the foregoing minimum Biomass acreage and Biomass yield per acre requirements, the Grower will find an alternative supply of Biomass to grow to meet the minimum requirements set forth in this Section 1 from another producer who is approved by the Co-operative, such approval not to be unreasonably withheld or, provided the prior written approval of the Co-operative is obtained, the Grower supplies an equal amount of the one of corn stover or wheat straw that it is not contracted to grow to cover the shortfall in contracted Biomass at a time acceptable to the Co-operative.
2. Representations, Warranties and Covenants of Grower - The Grower acknowledges and agrees with the Co-operative that, in dealing with the Co-operative, certain preconditions must be met. Accordingly, the Grower represents, warrants and covenants to the Co-operative as follows, and acknowledges that the Co-operative is relying upon the truth and accuracy of the following representations, warranties and covenants in entering into this Agreement with the Grower and that the Co-operative will suffer loss should the following representations, warranties and covenants not be true and correct at all times during the currency of this Agreement:
(a) That the Grower is acting for their own account and is familiar with the aims and objectives of the Co-operative and has been informed of the nature of the Co-operative’s activities including, without limitation, its contractual arrangements with Comet;
(b) That the Grower will not hold the Co-operative or any person acting on its behalf liable for any action and will not make any financial or legal claims in connection therewith including, without limitation, should the Co-operative decide not to harvest Grower's Biomass in any year;
(c) The Grower shall provide accurate maps to the Co-operative to assist in coordination of field activities;
(d) The Grower will at all times provide the Co-operative with unlimited lane and/or yard access required to access the Biomass and to pile the harvested Biomass and load trucks;
(e) The Grower will not destroy the Biomass through tillage or other means until such time as the Co-operative has harvested the Biomass or the Co-operative has provided a written release of its right to harvest the Biomass on the particular field to the Grower;
(f) That the Co-operative has, in reliance of the Grower contracting with the Co-operative to supply a certain tonnage of Biomass produced on a certain prescribed number of acres, covenanted and agreed with Comet to supply a corresponding amount of Biomass to Comet for processing and, as a result of the failure of Grower to supply the prescribed tonnage, acreage and quality of Biomass set forth in Section 1 hereof, the Co-operative will have breached its contractual obligations to Comet;
(g) That the Co-operative has the right to approve in its sole and unfettered discretion the Grower’s lands relating to the condition of said lands and the Grower’s growing practices and that should the Co-operative request the Grower make modifications to the Grower's lands and/or Grower's growing practices, the Grower will make such modifications;
(h) The Grower shall comply with the Co-operative’s quality specifications to ensure the Co-operative is able to comply with Comet’s quality specifications for corn stover and wheat straw the Co-operative is selling to Comet. The Grower will, without in any way limiting the generality of the foregoing, ensure the Biomass to be shipped by Grower shall not contain a harmful residue making the Biomass unacceptable for processing as a result of the improper application of recommended pesticides or pesticides or chemicals not recommended by the Ontario Ministry of Agriculture or successor and/or the Co‑operative, Comet or others. Furthermore, the Biomass must not have levels of decay or foreign matter that are unacceptable to the Co-operative, Comet and/or others or else the Biomass may be rejected; and
(i) That it is a term of the Articles of the Co-operative that, as a member of the Co-operative, the Grower will subscribe for that number of Class 1 Preference shares of the Co-operative as is prescribed by the board of directors of the Co-operative from time to time, the present intention being that the number of Class 1 Preference shares of the Co-operative to be subscribed for by the Grower will be equal to the number of acres of Biomass that the Grower has contracted to grow for the Co-operative.
3. Term of Supply – Subject always to the application of Sections 8, 18 or 19 hereof, the obligation of the Grower to supply Biomass pursuant to the provisions of Section 1 hereof shall continue until the end of the year that the Grower ceases to be a member of the Co-operative or such other date as the parties may mutually agree to. In addition to the foregoing Sections 8, 18 and 19, the Co-operative may also terminate the obligation of the Grower to supply pursuant to the provisions of Section 7 hereof, and the Grower acknowledges and agrees that such right of the Co-operative terminate the Grower's obligation to supply pursuant to Section 7 is only one of several options that the Co-operative is entitled to exercise pursuant to the provisions of Section 7 of this Agreement.
4. Harvesting of Biomass – Subject always to and conditional upon the Grower fulfilling its representations, warranties and covenants in Section 2 hereof, including, without limitation, those relating to access to the field and non-destruction of the Biomass through tillage or other means until such time as the Co-operative has harvested the Biomass, and subject always to the terms and provisions hereinafter contained, the Co-operative will harvest the Biomass within a ninety (90) day period of harvest, save and except that where conditions do not permit harvest of the Biomass within ninety (90) days of harvest, the Co-operative will attempt to harvest the Biomass when and if conditions permit prior to Grower planting the field the following spring. The Co‑operative agrees with the Grower that it will use its best efforts to minimize any damage to the field during the harvesting of Biomass. Notwithstanding any of the foregoing, the Grower acknowledges and agrees with the Co-operative that the Co-operative has no obligation whatsoever to harvest the Biomass contracted pursuant to this Agreement and, in the event that Grower's Biomass is not harvested, the Co-operative has no obligation to pay or compensate the Grower, whether for the unharvested Biomass or in any other way whatsoever. Grower acknowledges and agrees with the Co-operative that the Co-operative intends to enter into a contract to sell corn stover and wheat straw to Comet and due to a variety of factors including, without limitation, climatic and field conditions and that Comet’s processing plant may have a sufficient quantity of corn stover, wheat straw and other biomass to process from other sources, Grower's Biomass may not be required. Grower acknowledges and agrees with the Co-operative that the Co‑operative is entitled, in its sole and unfettered discretion, to determine where it shall source its corn stover and wheat straw in any particular year to meet its contractual obligations to Comet.
5. Payment for Biomass - The Co-operative agrees to pay the Grower Twenty-Five Dollars ($25.00) per one metric tonne of corn stover harvested by the Co-operative and Forty Dollars ($40.00) per one metric tonne of wheat straw harvested by the Co-operative, in both instances weight corrected to fifteen and one-half percent (15.5%) moisture, payable in two (2) instalments: the first instalment to be an amount equal to what the Co-operative believes to be one-half of the amount payable for the harvested corn stover or wheat straw, as the case may be, payable within sixty (60) days of harvest, with the balance being paid based on the weight corrected as aforesaid and being due and payable on the later of (i) April 15th immediately following harvest and (ii) sixty (60) days following the actual amount harvested being verified by weight and moisture analysis. Any tax that may be exigible shall be paid in addition to the foregoing.
6. Primary Customer - The Grower may only sell its Biomass to someone other than the Co-operative if the Co-operative has given its consent to the Grower doing so, which consent the Co-operative may withhold in its sole and unfettered discretion.
7. Breach and Consequences Thereof - Subject to Section 9 herein, in the event that the Grower:
(a) fails to comply with the supply provisions contained in Section 1 hereof;
(b) breaches any other term of this Agreement;
(c) breaches any of the terms of the by-laws of the Co-operative;
(d) declines or otherwise fails to subscribe for that number of Class 1 Preference shares of the Co-operative that the Board of Directors of the Co-operative advises the Grower that Grower is to purchase; or
(e) in the opinion of the Board of Directors of the Co-operative, acts in a manner that is contrary to the interests of the Co-operative,
then the Co-operative is entitled give notice to the Grower that the Grower is in breach of this Agreement. The parties agree that the Co-operative has the right to exercise any remedies that may be available to the Co-operative at law including, without limitation, termination of this Agreement without prejudice to the Co-operative's right to sue for damages arising as a result of the Grower’s failure to comply with this Agreement, or to continue with this Agreement and to sue the Grower for damages caused as a result of Grower’s failure to comply with the terms and provisions of this Agreement to date, or to, if available, procure alternative supply, with all acquisition costs for that alternative supply being at the cost of the Grower, the Co-operative being entitled to offset any amounts owing to Grower until the costs of the Co-operative for such alternative supply have been satisfied in full, all the foregoing to be without prejudice to the right of the Co-operative to proceed against the Grower in a claim for damages in the event of a subsequent breach by the Grower of the terms of this Agreement, Furthermore, the Board of Directors of the Co-operative may also, at their option in the event of default or breach by Grower of the terms of this Agreement, move to expel the Grower from membership in the Co-operative pursuant to Section 66 of the Co-operative Corporations Act (Ontario) R.S.O. c.C.35, as amended and successor legislation thereto, and to redeem or purchase the Grower's Membership shares and Class 1 Preference shares.
8. Termination by Co-operative – The Co-operative shall be entitled to terminate this Agreement effective immediately and without financial obligation to Grower upon giving notice to the Grower in the event the Co‑operative’s contract with Comet to supply corn stover and wheat straw to Comet is terminated for whatever reason.
9. Force Majeure - The Grower and Co-operative shall be excused for non-fulfilment of any part of this Agreement caused by inability beyond the control of either party including, without limitation, by acts of God, fire, lack of transportation or receiving facilities, floods, strike, earth quake, winds, hail, invasion, acts of third parties (including Comet or other processors), order of civil, statutory, regulatory or military authorities, all to the extent that fulfilment of this Agreement has been hindered or prevented in whole or in part by any one or more of such causes. Provided, however, that upon the determination of such cause the party shall move diligently to fulfil its obligations hereunder.
10. Time - Time shall in all respects be of the essence of this Agreement.
11. Non-Waiver - Any waiver or condoning by one party of any breach of this Agreement by the other party shall not operate as a waiver or condoning of any subsequent breach of this Agreement by the other party.
12. Governing Laws - This Agreement shall be governed by, and interpreted in accordance with, the laws of the Province of Ontario and, to the extent applicable, the laws of Canada.
13. Earlier Agreements and Amendments - This Agreement constitutes the entire agreement between the parties relative to the subject matter hereof and supersedes all earlier agreements, arrangements or understandings in that regard, written or oral. This Agreement may not be amended except by an instrument in writing duly executed by the parties hereto.
14. Notices - Any notice or other written matter required or permitted to be given hereunder by one party to the other shall be deemed to be sufficiently given if delivered or if mailed in Canada by registered or certified mail, postage prepaid, and addressed to the Co-operative at 835 Park Avenue West, Chatham, Ontario, N7M 5J6 and to the Grower at the address first above written or at such other address which either party may have given to the other party in the manner herein provided, and any such notice or other written matter, shall be deemed to have been received upon delivery, or if mailed as aforesaid, shall be deemed to have been received on the third business day following the date of mailing.
15. No Agency or Joint Venture - Nothing herein shall constitute either party the agent of the other party or place the parties in a relationship of parties in a joint venture.
16. Amendments - This Agreement may not be amended except by a document signed in writing by both parties hereto.
17. Severability - If a Court of competent jurisdiction should determine that any provision of this Agreement is void or unenforceable, such provision shall be deemed to be severable and such determination shall not affect the validity or enforceability of any other provision of this Agreement. However, this Agreement shall always be construed to bring its terms into conformity with the provisions of the Co-operative Corporations Act (Ontario) R.S.O. 1990 c.C.35, as amended and successor legislation thereto.
18. Successors and Assigns – The Grower cannot assign its interest in this Agreement without the prior written consent of the Co-operative, which consent the Co-operative may withhold in its sole and unfettered discretion. The Co-operative may assign its interest in this Agreement and, in the event the Co-operative is voluntarily wound-up or dissolved, this Agreement shall be assigned to Comet prior to such wind-up or dissolution and the parties acknowledge and agree this Agreement shall, subject to any agreement between the Grower and Comet to the contrary, expire three (3) years from the date of such assignment. Subject to the foregoing, this Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.
19. Grower to Accommodate Modifications – The Grower covenants and agrees with the Co-operative that the Grower will accommodate modifications or amendments that may be reasonably requested by the Co-operative from time to time to account for any request made by the Co-operative's lenders, by Comet, as may be required by law or as may be deemed necessary in the circumstances by the Co-operative.
20. Conditions Precedent – Notwithstanding any of the foregoing, this Agreement shall be wholly conditional upon (i) the Co-operative becoming a shareholder of Comet; and (ii) the Co‑operative entering into an agreement to supply corn stover and wheat straw to Comet. If both of these conditions precedent are not satisfied, this Agreement shall be null and void.
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IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the date first above written.
CELLULOSIC SUGAR PRODUCERS
I/We have the authority to bind the Co-operative.
EXECUTED in the presence of:
_____________________________________ ) _______________________________________________
Name of Witness: ) Name of Grower: