SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

       |X| ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001
                           Commission File No. 0-9989

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                              STAKE TECHNOLOGY LTD.
                              ---------------------

             (Exact name of registrant as specified in its charter)

                                     CANADA
                         (Jurisdiction of Incorporation)

                                 Not Applicable
                      (I.R.S. Employer Identification No.)

                                 2838 Highway 7
                         Norval, Ontario L0P 1K0, Canada
                    (Address of Principle Executive Offices)

                                 (905) 455-1990
              (Registrant's telephone number, including area code)
              ----------------------------------------------------

           Securities registered pursuant to Section 12(b) of the Act:

               Securities registered pursuant to 12(g) of the Act:

                           Common Shares, no Par value
                           ---------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes |X| No |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

Yes |X| No |_|

Revenue for the year ended December 31, 2001: CDN $143,069,000

At March 8, 2002 the registrant had outstanding 41,129,328 common shares, the
only class of registrant's common stock outstanding. There were no other classes
of stock outstanding and the aggregate market value of voting stock held by
non-affiliates at such date was US$76,136,543. The Company's common shares
traded on Nasdaq Small Cap Market tier of The Nasdaq Stock Market under the
symbol STKL and on November 6, 2001 the Company listed on the Toronto Stock
Exchange under the symbol SOY.

There are 58 pages in the December 31, 2001 10-K including this page and the
index after the cover page.


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Stake Technology Ltd.                                   December 31, 2001 - 10-K

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STAKE TECHNOLOGY LTD.

--------------------

Table of Contents

-------------------

FORM 10-K                                                                   Page
                                                                            ----


PART I


Item 1.    Business............................................................4

Item 2.    Properties.........................................................20

Item 3     Legal Proceedings..................................................20

Item 4.    Submission of Matters to a Vote of Security Holders................21


PART II


Item 5.    Market for Registrant's Common Equity and Related Stockholder
           Matters............................................................22

Item 6     Selected Financial Data............................................25

Item 7.    Management's Discussion and Analysis of Financial Conditions
           and Results of Operations..........................................26

Item 7A    Quantitative and Qualitative Disclosures about Market Risk.........37

Item 8     Financial Statements and Supplementary Data........................38

Item 9.    Changes In and Disagreements with Accountants on Accounting
           and Financial Disclosure...........................................38


PART III


Item 10.   Directors and Executive Officers of the Registrant.................39

Item 11.   Executive Compensation.............................................50

Item 12.   Security Ownership of Certain Beneficial Owners and Management.....53

Item 13.   Certain Relationships and Related Transactions.....................53


PART IV

Item 14.   Exhibits, Financial Statements Schedules and Reports on Form 8-K...55
Index to Financial Statements................................................F-1


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Stake Technology Ltd.                 ii                December 31, 2001 - 10-K

<PAGE>

Currency Presentation

All dollar amounts herein are expressed in Canadian dollars. Amounts expressed
in United States dollars are preceded by the symbols "US$". On March 8, 2002,
the noon buying rate, in New York City for cable transfers in Canadian dollars
for customs purposes by the Federal Reserve Bank of New York was US$0.6306 for
$1.00 Canadian.

The following table sets forth, for each of the years indicated, information
with respect to the exchange rate of the Canadian dollar into United States
currency. (1) The rates of exchange for the Canadian dollar, expressed in US
dollars, in effect at the end of the years indicated, (2) the average of
exchange rates in effect on the last day of each month during such years and (3)
the high and low exchange rates during such years.


<TABLE>
<CAPTION>
=========================================================================================================
RATES                1997            1998             1999            2000             2001
---------------------------------------------------------------------------------------------------------
<S>                  <C>             <C>              <C>             <C>              <C>
Last Day (1)         $0.6999         $0.6530          $0.693          $0.6666          $0.6279

---------------------------------------------------------------------------------------------------------
Average (2)          $0.7221         $0.6712          $0.673          $0.6733          $0.6457

---------------------------------------------------------------------------------------------------------
High (3)             $0.7467         $0.7045          $0.6537         $0.6973          $0.6711

---------------------------------------------------------------------------------------------------------
Low (3)              $0.6945         $0.6382          $0.693          $0.6413          $0.6230

=========================================================================================================
</TABLE>


Note Regarding Forward-Looking Financial Information

Certain statements included herein may constitute "forward-looking statements"
within the meaning of the United States Private Securities Litigation Reform Act
of 1995. These forward-looking statements include, but are not limited to
references to business strategies, competitive strengths, goals, capital
expenditure plans, business and operational growth plans and references to the
future growth of the business. These forward looking statements are based on
certain assumptions and analyses made by the Company in light of its experience
and its interpretation of current conditions, historical trends and expected
future developments as well as other factors that the Company believes are
appropriate in the circumstance.

However, whether actual results and developments will agree with expectations
and predications of the Company is subject to many risks and uncertainties
including, but not limited to; general economic, business or market risk
conditions; competitive actions by other companies; changes in laws or
regulations or policies of local governments, provinces and states as well as
the governments of United States and Canada; many of which are beyond the
control of the Company. Consequently all forward-looking statements made herein
are qualified by these cautionary statements and there can be no assurance that
the actual results or developments anticipated by the Company will be realized.


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Stake Technology Ltd.                  3                December 31, 2001 - 10-K

<PAGE>


PART I


Item 1. Business

Overview

Stake Technology Ltd. ("Stake" or the "Company") operates in three principal
businesses; (1) natural food product sourcing, processing, and packaging, (2)
processing, distribution and recycling of environmentally responsible aggregate
products and (3) engineering and marketing of a clean pulping system using
patented steam explosion technology.

The Company was incorporated under the laws of Canada on November 13, 1973. The
principal executive offices are located at 2838 Highway 7, Norval, Ontario,
Canada, L0P 1K0, telephone: (905) 455-1990, fax: (905) 455-2529, e-mail:
info@staketech.com and web site: www.staketech.com.

The SunRich Food Group consists of Sunrich, Inc. (Sunrich), Northern Food and
Dairy, Inc. (Northern), and Nordic Aseptic, Inc. (Nordic). Sunrich, Northern and
Nordic form the basis of the Company's Food Group and operate under the
management of the SunRich Food Group, Inc., producing organic and non-GMO food
ingredients with a specialization in soy milk and other soy and natural food
products. The Food Group operates from five plants in Minnesota and one plant in
both Iowa and Wyoming. The SunRich Food Group can be contacted at 3824 - 93rd
Street S.W., Hope, Minnesota, 56046-0128, telephone: (507) 451-3316, fax: (507)
451-2910, e-mail: info@sunrich.com and web site: www.sunrich.com.

The Environmental Industrial Group includes BEI/PECAL, a division of the
Company, Temisca Inc., Virginia Materials inc. (Virginia Materials) and 51% of
International Materials & Supplies, Inc. (International Materials). This Group
processes, sells and distributes abrasives and other industrial materials 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 operates from
manufacturing and distribution facilities in Waterdown, Ontario; Hamilton,
Ontario; Ville Marie, Quebec; New Orleans, Louisiana; Norfolk, Virginia;
Keeseville, New York and a warehouse and sales facility in Montreal, Quebec. The
Environmental Industrial Group can be contacted at 407 Parkside Drive,
Waterdown, Ontario, Canada, L0R 2H0, telephone: (905) 689-6661, fax: (905)
689-0485, e-mail: info@barnesenvironmental.com and web site: www.bei.ca.

The StakeTech Steam Explosion Group is a division of Stake Technology Ltd. and
is located within the corporate office of the Company in Norval, Ontario. There
are separate buildings at this location which contain a demonstration unit of
this division's steam explosion technology process as well as laboratory and
office facilities. This division holds numerous patents on its technology and is
currently marketing this clean pulping system with a special focus on
opportunities in China. The Steam Explosion group can be contacted at 2838 Hwy
7, Norval, Ontario, Canada, L0P 1K0, telephone: (905) 455-1990, fax: (905)
455-2529, e-mail: info@staketech.com and web site: www.steamexplosion.com.

Listing on the Toronto Stock Exchange

The Company listed its common shares on the Toronto Stock Exchange (TSE) under
the symbol "SOY" on November 6, 2001. This listing is in addition to the
Company's listing on the Nasdaq Small Cap Market under the symbol "STKL". The
listing in Canada on the TSE was completed with the intent of broadening
investor and analyst interest in the Company in Canada and to access funds in
Canadian capital markets more efficiently.

Private Placements

During 2001, the Company completed four private placements, which resulted in
11,061,498 common shares being issued for net proceeds of $31,500,000 CDN
(US$20,035,000). These transactions also resulted in 705,750 warrants
exercisable at US $1.75 until March 31, 2004; 3,450,000 warrants exercisable at
US $2.40, (1,200,000 until March 31, 2004 and 2,250,000 until September 30,
2004) plus underwriter options. The underwriter options relate to the third and
fourth private placements and are for 144,000 options exercisable at US $2.00
until June 8, 2003, that if


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Stake Technology Ltd.                  4                December 31, 2001 - 10-K

<PAGE>

exercised allow the underwriter to also receive 72,000 warrants at US $2.40
until March 31, 2004, plus an additional 150,000 underwriter options at US
$2.00, that if exercised prior to September 28, 2003, allow the underwriter to
also receive 112,500 warrants exercisable at US $2.40 until September 30, 2004.

Segmented Information

The Company operates in three industries:

      (1) The SunRich Food Group produces, packages and markets organic and
      non-GMO food products and ingredients with a focus on soy milk and related
      soy and natural food products; and

      (2) The Environmental Industrial Group manufactures, processes, sells and
      recycles inorganic materials which are commonly used in the foundry,
      steel, bridge and ship cleaning industries; and

      (3) The Steam Explosion Technology Group owns numerous patents on steam
      explosion technology systems and designs and subcontracts the manufacture
      of equipment that process non-woody fibres with a high pressure steam
      process.

The Company's operations and assets are located in both Canada and the United
States.

Acquisitions during 2000 and 2001

The SunRich Food Group

Jenkins & Gournoe, Inc.

In February, 2001, the Company's wholly owned subsidiary, SunRich Food Group,
Inc. acquired 100% of the common shares of Jenkins & Gournoe, Inc. (First Light
Foods), a private Illinois company that owned certain soy trademarks including
Soy-Um and Rice-Um. The total acquisition purchase price was $2,887,000
(US$1,925,000) and was paid by the issuance of 833,333 common shares issued by
Stake, 35,000 warrants exercisable at US$1.70 for five years, $557,000
(US$365,000) (including acquisition costs) in cash, a note payable for
$1,049,000 (US$700,000), repayable quarterly over 2 years by payments of
US$87,500, with interest at 8.5%. There is also contingent consideration that
may be payable on this acquisition if; (a) certain predetermined profit targets
are achieved, up to an additional 140,000 warrants may be issued in 2002 through
to 2005, as well as (b) a percentage of gross profits in excess of US$1,100,000
per annum from 2001 to 2005 will be paid to the vendors of First Light Foods.
The acquisition of First Light Foods complements the SunRich Food Group's
strategy of becoming a vertically integrated business providing expertise from
seed to merchandisable products of soy milk.

As the acquisition of First Light Foods closed February 1, 2001, its operations
are included for the 11 months of 2001 starting February 1, 2001 and its assets
are included in the December 31, 2001 balance sheet.

Northern Food & Dairy, Inc.

On September 15, 2000, the Company acquired 100% of the common shares of
Northern Food & Dairy, Inc. (Northern) for total consideration of $11,190,000.
The consideration paid consisted of the issuance of 7,000,000 common shares of
Stake, 500,000 common share warrants exercisable at US$1.50 over five years and
cash consideration of $608,000. The issuance of the shares for acquisition
represented approximately 24.5% of the outstanding common shares of the Company
after the transaction, and resulted in Mr. Dennis Anderson, the principal vendor
of Northern owning 19% of Stake, at December 31, 2000. Mr. Anderson remains the
President of Northern and is the Executive Vice President of Operations of the
SunRich Food Group.

Northern is a US based manufacturer and supplier of soy milk concentrate and
other natural food products and ingredients that are produced in three
production facilities in northern Minnesota and a fourth facility in Afton,
Wyoming. The Afton facility commenced operation late in 2001 and was built to
serve the western US market. Northern is one of the largest manufacturers of soy
milk concentrate in the US. Northern also produces other specialty food
ingredients including dietary fibres, natural food preservatives, grain
fractions, dried honey coatings, dried molasses, cheese flavours, starter media,
margarine enhancement and dried meat flavours.


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Stake Technology Ltd.                  5                December 31, 2001 - 10-K

<PAGE>

As the acquisition of Northern was completed on September 15, 2000, the net
assets of Northern are included in the December 31, 2001 and 2000 balance
sheets. Northern's results of operations are included for all of 2001 and for
the 106 day period from September 16 to December 31, 2000.

Nordic Aseptic, Inc.

In April of 2000, Sunrich (Stake's only food company as at December 31, 1999)
and Northern created a joint venture to purchase an aseptic packaging plant
located in Alexandria, Minnesota, to be known as Nordic Aseptic, Inc. (Nordic).
This plant packages aseptic beverages, primarily soy milk, and at the time was
producing for Sunrich and Northern's largest soy milk customer.

Nordic assumed control of the plant in April 2000 and on August 15, 2000, Nordic
acquired certain assets of Hoffman Aseptic Inc. through the assumption of
certain debts and the payment of cash consideration of $380,000.

Under the terms of the agreement, the joint venture partners were responsible
for the operations of the plant from April 19, 2000 and therefore the operating
results of Nordic were accounted for based on Sunrich's 50% proportionate
interest from April 19, 2000 to September 15, 2000. Upon the acquisition of
Northern on September 15, 2000, 100% of Nordic's operating results were included
for the period from September 16 to December 31, 2000. Operations of Nordic are
included for all of 2001. The net assets of Nordic are included in the December
31, 2001 and 2000 balance sheets.

Environmental Industrial Group

Virginia Materials

Effective October 31, 2001, the Company's wholly owned subsidiary, Virginia
Materials acquired certain assets of Virginia Materials and Supplies, Inc. as
well as 51% of the outstanding common shares of International Materials and
Supplies, Inc. (International Materials) for cash consideration (including
acquisition costs) of $2,777,000 (US$1,751,000) plus deferred purchase
consideration of $1,824,000 (US$1,150,000) and contingent consideration. The
deferred purchase consideration will be paid upon the Company's purchase of the
vendor's inventory. Management estimates that it will take approximately 18
months to purchase all of the inventory.

In addition, the Company will pay 50% of the profits for a two-year period from
the date of the acquisition. The vendor's share of profit is considered
contingent consideration.

Virginia Materials is a supplier of abrasives to the shipbuilding and repair
industry. It has a production facility located in Norfolk, Virginia and a second
plant is scheduled to open in the second quarter of 2002 in Baltimore, Maryland.
Virginia Materials also recycles spent abrasives which are used in the
production of Portland cement and converts aluminum smelting waste into a
roofing and abrasive product.

International Materials produces industrial garnets as a by-product from a
mining operation and processes these garnets for sale to the water filtration,
water jet cutting and abrasives markets.

As the acquisition of Virginia Materials was completed on October 31, 2001, the
net assets of Virginia Materials are included in the December 31, 2001 balance
sheet. Virginia Materials results of operations are included for the 61 day
period from October 31, 2001 to December 31, 2001.

Temisca Inc.

On October 31, 2000, the Company acquired the outstanding shares of Temisca Inc.
(Temisca), a private sand deposit and processing company in Ville Marie, Quebec.
The purchase price was $1,676,000 consisting of cash consideration of $926,000
and the issuance of a note payable of $750,000. The note payable bears interest
at 5% and is repayable over five years.


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Stake Technology Ltd.                  6                December 31, 2001 - 10-K

<PAGE>

The acquisition of Temisca gives the Environmental Industrial Group its first
directly controlled raw material source, allowing the Group to increase its
sales to existing and new customers. The properties of the Temisca sands are
suited to filtration, frac sand, golf course sand and abrasive applications.

As the acquisition of Temisca was completed on October 31, 2000, the net assets
of Temisca are included in the December 31, 2001 and 2000 balance sheets.
Temisca's results of operations are included for a full year in 2001 and for the
61 day period from October 31, 2000 to December 31, 2000.

PECAL

On February 29, 2000, the Company acquired 100% of the outstanding shares of
George F. Pettinos (Canada) Limited, operating as PECAL, from US Silica Company
for cash consideration of $4,682,000. The acquisition of PECAL complemented the
business of the Company's division, Barnes Environmental International (BEI)
(now all part of the Environmental Industrial Group). PECAL was a direct
competitor of BEI in the sand, coated sand, bentonite, chromite, and zircon
businesses and they possessed strengths in several other businesses that were
closely related to BEI's existing markets. PECAL added to the Environmental
Industrial Group's product lines in several key areas and has built sales in the
Ontario and US markets. The PECAL administration office located at a separate
rented site was closed in May 2000 and certain employees were relocated to the
Environmental Industrial Group's Waterdown office.

As the acquisition of PECAL was completed on February 29, 2000, the net assets
of PECAL are included in the December 31, 2001 and 2000 balance sheets. PECAL's
results of operations are included for all of 2001 and for the 10 month period
of February 29, 2000 to December 31, 2000.

SunRich Food Group

The SunRich Food Group has been built over the past three years with the
acquisition of four companies, starting with Sunrich Inc. in August, 1999, the
purchase of Nordic Aseptic, Inc. in August, 2000, the acquisition of Northern
Food & Dairy, Inc. in September, 2000 and the acquisition of First Light Foods
(Jenkins & Gournoe) in February, 2001. The acquisition of these companies
coupled with significant internal growth and development has established a
unique vertically integrated food company with significant presence in the
growing soy and natural foods markets.

The SunRich Food Group is composed of three key vertically integrated business
groups:

1) Product and Ingredients Group - This group sources and markets Identity
Preserved (IP) specialty grains and natural certified organic food ingredients
to domestic and foreign food processors. Products include specialty soybeans, IP
corn, soy milk powders, grain (corn, rice and oat) sweeteners and maltodextrins,
organic vegetable oils, organic corn, soy and oat flours and organic feed
ingredients.

2) Technical Processing Group - This group focuses on the technical processing
of specialty and functional food ingredients. Principal products and processes
include soy milk extraction; fractionalizion, extraction and hydrolyzation of
various grain products; extraction and refining of soluble fiber; fermentation
and hydrolyzation of natural food preservatives; various drying processes for a
variety of technically difficult products; and formulating and blending of
various dairy products.

3) Packaging Group - This group focuses in the aseptic packaging of shelf stable
beverages and liquid products. Products packaged include shelf stable soy milk,
rice beverages and soy/fruit smoothies.

Vertical integration of soy milk concentrate and organic sweetener production
allows the SunRich Food Group to control the entire production chain from
sourcing specific IP soybeans and grains through processing, formulating and
packaging of branded soy milk and beverages.

The Group's sales revenue slows during December to March each year when bulk
grain shipments are inhibited by winter weather. Food ingredient sales,
processing revenue and retail food product sales are not as seasonal except for
lapses in production when customers draw down inventories at the end of certain
periods.


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Bulk commodity products sales are freight cost sensitive. This can limit their
competitiveness in particular markets. Competitive bulk and container freight
costs give the group access to Japanese and Mexican export markets but
uncompetitive European freight limits possibilities in that market. Food
ingredients enjoy much wider distribution because of their product uniqueness
and higher margin that diminishes the effect of freight costs.

Major Developments during 2001

During 2001, the Sunrich Food Group acquired 100% of the outstanding shares of
Jenkins & Gournoe, Inc. (First Light Foods). This company owned certain beverage
trademarks including Soy-Um and Rice-Um. These marks are co-branded and product
is subsequently sold to a major California based retailer. This acquisition
compliments the Food Group's strategy of vertical integration from field to
table.

In September, 2001 the SunRich Food Group commissioned its second soy milk
concentrate plant in Afton, Wyoming to service customer demands on the west
coast of the United States. Subsequent to commissioning, the Company announced
plans to further expand this facility. When fully operational, this facility
effectively doubles the Food Group's soy concentrate production capacity.

Major Products

Identity Preserved grains: The demand for non-genetically modified soybeans from
foreign customers and the increased demand from domestic soyfoods manufacturers
has continued to fuel an increase in business volume. These trends are expected
to continue in the future as the soy and natural foods markets continue to grow.

Soy milk and soy ingredients: Soy milk and soy ingredients are marketed
throughout the United States where the Group has a strong presence. The SunRich
Food Group is continuing to develop new product offerings and customers as the
demand for soy based products continue to grow.

Organic and Natural Food Ingredients: The natural foods market is one of the
fastest growing segments in the food industry. The SunRich Food Group markets
grain sweeteners and maltodextrins under the names Maisweet, Arrosweet and
Oatsweet. Organic and natural vegetable oils were introduced in 2000 and are
sold to customers throughout the United States, Hong Kong and Japan.

Aseptic Packaging: Processing and packaging of shelf stable liquid products is
performed at Nordic Aseptic. Major products packed include soy milk and related
soy line beverages.

Custom Ingredients: The Company produces a number of unique functional food
ingredients on a contract basis utilizing customer's proprietary technology.
Products produced include:

      Benefiber: A soluble guar based fiber food ingredient, produced under
      license for Japanese and US based customers.

      Betatrim: Fractionalized oat based food ingredients produced under
      agreement for domestic customers.

      Microgard: A natural food preservative.

      Dairy Blends: The Group produces custom blended powdered dairy ingredients
      for several customers in the United States.

Powdered Honey and Molasses: The Group produces and markets dried sweeteners
such as powdered honey and molasses, which are sold to United States food
manufacturers.

Toll Spray drying: Technical processing and spray drying is contracted with
various customers to produce various food ingredients.


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Competition

The SunRich Food Group's specialty grain operation competes in the larger US
commercial grain procurement market. The SunRich Food Group's organic specialty
grains compete in the smaller niche US commercial organic grains market.

Food ingredients are unique niche items usually developed or processed for
specific customers. Primary customers are Japanese or American. The SunRich Food
Group competes with other product developers and specialty processors for the
specialty ingredient business.

The SunRich Food Group's competitive advantages are:

      o     Established IP grain producer network with over 20 years of
            experience.

      o     Grain conditioning and storage facilities.

      o     Organically certified handler and processor.

      o     Technical staff that identifies product specifications to meet the
            needs of the end user and create innovative products or processes.

      o     Modern processing facilities.

      o     The ability to process, formulate and package for the retail market.

      o     Fully integrated from the seed to the end product.

Distribution, Marketing and Sales

Sunrich is located in Hope, Minnesota one mile west of the Interstate 35 and
alongside the Union Pacific Railroad. The railroad is used for the grain
elevator business and distribution of products nationally. The Hope facility is
70 miles south of Minneapolis/St. Paul, which gives it access to the Mississippi
River for grain transporting and "containerized" shipments to the west coast for
export. A second facility is located in Cresco, Iowa. This facility is 120 miles
southwest of Hope, Minnesota and produces organic corn milled products.

Northern Food and Dairy is headquartered in Alexandria, Minnesota, 120 miles
northwest of Minneapolis/St. Paul. The Alexandria processing plant is located
near Interstate 94, the prime transportation link to and from the area. The
Afton, Wyoming plant is situated on the Idaho/Wyoming border and is utilized to
serve the west coast soy concentrate market. The Bertha drying plant is located
approximately 40 miles northeast of Alexandria, Minnesota where its key supply
plant is located. The Fosston, Minnesota natural preservative facility is
located three hours north of Alexandria, Minnesota.

Nordic Aseptic is located near Interstate 94 in Alexandria, Minnesota. The
facilities are 120 miles northwest of Minneapolis/St. Paul.

The SunRich Food Group ensures that it provides its customers with the highest
quality organic, non-GMO and identity-preserved specialty grains, by serving as
a grower's supplier of seed, purchaser of the grower's specialty crops and
distributor of identity-preserved specialty products. The SunRich Food Group's
"full circle" approach allows the SunRich Food Group to satisfy the specific
needs of foreign and domestic food manufacturers and processors by providing
products in the varieties and quantity needed in a timely fashion; transporting
products to meet customers' needs by being able to package in containers, truck,
rail or barge; providing product information and technical support during the
growing, processing, and marketing phases, and offering complete service of
product, including grading, formulation, processing, quality control and
packaging.


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Suppliers

SunRich Food Group's raw materials and packaging needs are sourced from various
suppliers who provide products that are delivered on contract to comply with
required specifications. Products are sourced from over 1,000 suppliers with
availability subject to world market conditions. There are a number of
alternative sources of supply for all raw materials with critical process
customer supply relationships highlighted below.

Identity Preserved and organic grains are primarily sourced from over 1,200
North American growers and suppliers via annual contracts or spot market
purchases. There is ample supply of grains to satisfy SunRich Food Group's needs
with expanding production in other parts of the world to provide additional
supply if crop or market conditions limit North American supply. The SunRich
Food Group has the ability to divert available product based on market demand
and customer requirements in order to maximize return.

Dairy ingredients are purchased from a number of suppliers, primarily dairy
producer cooperatives. Product is purchased in the spot market with certain
ingredients purchased via short-term supply contracts.

Maltodextrin is purchased on contract from several suppliers. There is
substantial production capacity among these United States suppliers for
maltodextrin.

Honey, molasses, high fructose corn syrup and flour are purchased to
specification in the spot market. The supply for these ingredients is sufficient
for the present. Supply shortfalls would have an effect on availability and
price and would be reflected in finished product pricing for the Group.

Other ingredients such as guar, oat flour and carbon are supplied by process
customers and are not sourced directly from SunRich Food Group suppliers.

Regulation

The SunRich Food Group is affected by governmental agricultural regulations and
policies. State and federal fertilizer, pesticide, food processing, grain buying
and warehousing, and wholesale food regulations are examples of regulations that
affect this Group. Government-sponsored price supports and acreage set aside
programs are two examples of policies that may affect this Group. There can be
no assurance that government policies will not change from time to time in a
manner adverse to the SunRich Food Group's business regulations or that may
present delays and costs that could adversely affect this Group.

In addition, several of the SunRich Food Group's business activities are subject
to US environmental regulations. The SunRich Food Group is involved in the
manufacture, supply, processing and marketing of organic seed and food products
and, as such, is voluntarily subject to certain organic quality assurance
standards. The SunRich Food Group is currently in compliance with all state and
federal fertilizer, pesticide, food processing, grain buying and warehousing,
and wholesale food-handling regulations. Regulatory agencies include the United
States Department of Agriculture (USDA), which monitors both the food processing
and agricultural grain business. While the SunRich Food Group endeavours to
comply in all material respects with applicable environmental, safety and health
regulations, there can be no assurance that existing environmental regulations
will not be revised or that new regulations will not be adopted or become
applicable that may have a material adverse effect on the SunRich Food Group's
business or financial condition.

Research and Development

In 2001, the SunRich Food Group developed a number of new soy ingredients and
alternatives to accommodate new product adaptation of these ingredients into
various food items. The expanding interest to incorporate soyfoods in consumers'
diets creates numerous opportunities to develop soy ingredients that can be
incorporated into food developer's menu items. The SunRich Food Group continues
to research products and processing systems that are required to serve the
growing natural foods market.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 10                December 31, 2001 - 10-K

<PAGE>

Employees

The SunRich Food Group has 232 full-time employees; 74 salaried and 158 hourly
workers. The salaried employees are engaged in executive and administrative
activities, production management, sales and marketing, accounting,
administration and customer service. The 158 hourly workers are engaged in
production, elevator operations, maintenance, and delivery services. The SunRich
Food Group has no union activity and management considers its relations with its
SunRich Food Group employees to be good.

Properties

The SunRich Food Group operates from ten company owned production, warehousing
and office facilities located in Minnesota, Iowa and Wyoming and two leased
warehouse properties. In addition the company owns a waterfront property that is
used to provide temporary accommodations for out of town personnel. The
facilities are further detailed within the property section.

The Environmental Industrial Group

The Environmental Industrial Group has two principal business lines:

      (1)   The manufacture and distribution of industrial mineral based
            products such as speciality sands, bentonite clays, silica free
            abrasives, garnets and other products for the foundry, shipbuilding,
            bridge repair and steel industries. Many of these products can
            subsequently be recycled; and

      (2)   The recycling of waste industrial mineral by-products and materials
            from site reclamation projects; these materials are cleaned, crushed
            and blended to specific chemistry for resale to cement, steel and
            related industries.

The Environmental Industrial Group's processing of cement additives and certain
abrasives slow down during January to March corresponding to reduced cement
production and difficult winter operating conditions, while the foundry and
steel businesses are not considered seasonal. The establishment of the Louisiana
manufacturing facility during 1998 and the subsequent acquisition of Virginia
Materials helps mitigate the seasonality of the Environmental Industrial Group
sales.

The distribution of products is freight sensitive for lesser value added
products and is focused on the Ontario and Quebec markets while the higher value
products such as abrasives, garnets, resin-coated sand and frac sand are shipped
throughout the US. The annual volume of materials processed and distributed is
approximately 250,000 tonnes.

Major Developments during 2001

Effective October 31, 2001, the Environmental Industrial Group acquired certain
assets of Virginia Materials & Supplies, Inc. as well as 51% of the outstanding
common shares of International Materials and Supplies, Inc. (International
Materials). Virginia Materials is a supplier of abrasives to the shipbuilding
and bridge repair industry with a production facility located in Norfolk,
Virginia with a second plant scheduled to open in the second quarter of 2002 in
Baltimore, Maryland. International Materials produces industrial garnets as a
by-product from a mining operation and processes these garnets for sale to the
water filtration, water jet cutting and abrasives markets. These acquisitions
have broadened the Group by expanding the product range in the area of abrasives
and garnet offered to existing customers and will provide the basis for entry
into new market areas, especially in the northeast United States.

Major Products

Barshot/Crystalgrit: The Environmental Industrial Group has a licence agreement
with the patent holder of "Specular Hematite as an Impact Material" which gives
the Group the exclusive right to market this material in the two central
Canadian provinces, Great Lakes and Northeast Atlantic region states and the
state of Alabama and the non-exclusive right for the balance of North America.
The Group also has the first right of refusal for a licence in 5 other US
states.


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Stake Technology Ltd.                 11                December 31, 2001 - 10-K

<PAGE>

Specular Hematite is marketed under the name "Barshot" or "Crystalgrit" as a
recyclable abrasive providing higher profit margins for the user and competing
with existing materials such as garnet, staurolite, aluminium oxide, various
slags and steel grit.

The Group is continuing to develop agents/distributors primarily for the US
exclusive territory, focusing on companies and contractors capable of recycling
Barshot or Crystalgrit.

In 2001, the Environmental Industrial Group continued to develop certain
specialty grades of Specular Hematite to be used in industrial markets for
higher value applications.

Slag Abrasives: The Environmental Industrial Group continues to market copper
slag abrasives under the name "Ebony Grit" into the Ontario and Quebec markets.
In 2001, the Group continued shipments to New York, New Jersey and Michigan,
significantly expanding sales of this product. With the acquisition of Virginia
Materials the Environmental Industrial Group has expanded its product offering
with a coal slag abrasive under the name of "Blackblast". This product is
marketed primarily into the Virginia, North Carolina, West Virginia and Alabama
markets and will be expanded and offered across the entire Environmental Group
network in the future.

Garnets: In 2001 the Environmental Industrial Group expanded its product
offering and current markets served with the purchase of 51% of the outstanding
common shares of International Materials and Supplies, Inc., a producer of
garnets for the water jet cutting, water filtration and abrasive industries. The
Group also continued its exclusive agreement with a sand supplier in China,
complimenting this with a Distributor Agreement with a garnet sand supplier in
India. These high value products are sold to the water jet cutting and wet and
dry abrasive blasting markets.

Silica Sands: The Environmental Industrial Group continues to supply its major
foundry customers in Quebec and Ontario with silica products, however, growth in
this market in 2001 was limited due to continued competition from lake sand
suppliers. The acquisition of Temisca Inc. in 2000 provided the Group with a
lower cost and secured supply of silica raw materials which has allowed the
Group to remain the key supplier in this market. The properties of the Temisca
silica sands are suited to the filtration, frac sand, golf course sand and
abrasive applications.

Resin Coated Sand: With the acquisition of PECAL in 2000, the Group continues to
be a dominant supplier of resin coated sand in Ontario and Quebec with the
products manufactured at the PECAL Hamilton facility and through the
distribution of a US sourced product. Resin coated sand is used exclusively by
the foundry industry.

Zircon Sands: The Environmental Industrial Group continues to recycle higher
value added products, and in this regard has an agreement with a large
automobile manufacturer in southern Ontario to recycle very high value zircon
sand used in the manufacturing of engine castings. This product is produced at
the Waterdown location, with a portion of the recycled product sold back to the
automobile manufacturer, and the remainder sold into the industrial materials
market.

The Environmental Industrial Group is committed to providing quality products
and services. A quality system was put into place during 1996 and in 1997 the
BEI operations within the Environmental Industrial Group were awarded ISO-9002
registration. A number of ISO-9002 update audits have been successfully
completed since that time. In the first quarter of 2001, the PECAL facility
achieved ISO registration and by the end of 2003, the Group is striving to have
all of its operations ISO-9002 registered.

Competition

The Environmental Industrial Group conducts business throughout North America
with a focus by key region. Key regions comprise the Quebec-Detroit corridor
with expansion into Northern Ontario and Northern Quebec. With new locations in
Virginia and New York, the group has increased its presence and competitive edge
in these areas for the abrasive and garnet markets. It also distributes through
its facility in New Orleans to the Louisiana Gulf region. The Group is
competitive in abrasive and value added products in surrounding areas such as
Michigan, New Jersey and Ohio.


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Stake Technology Ltd.                 12                December 31, 2001 - 10-K

<PAGE>

The Group competes against a variety of competitors servicing the foundry,
steel, abrasive, water jet and filtration industries. Each of these product
categories are normally served by as many as three competitors. The Group
competes through a combination of exceptional product quality and customer
service combined with competitive pricing in these markets.

In 1994, the Waterdown site was awarded a Certificate of Approval from the
Ontario Ministry of Environment and Energy to recycle non-hazardous and
hazardous solid waste. The significance of this Certificate of Approval is that
the Environmental Industrial Group can recycle certain types of solid waste,
which could not be recycled without a Certificate of Approval, as many materials
have been declared hazardous by the Ontario Ministry of Environment and Energy.
The Certificate of Approval has no fixed expiry date, however the Company must
comply with requirements listed in the terms of the Certificate of Approval to
maintain its good standing.

Materials that can be recycled under the Certificate of Approval represent
approximately 25% of the materials processed by the Environmental Industrial
Group. However, management expects that through product formulation changes, the
Group will be able to process additional quantities of materials and incorporate
these materials into certain of its existing products. In addition to its higher
profit potential, there is a strong strategic fit for the Environmental
Industrial Group to process non-hazardous, hazardous and recyclable materials.

The Certificate of Approval serves as a barrier to entry for other operators.
The Environmental Industrial Group has one of only two Certificates of Approval
in Ontario for the recycling of these materials. The Environmental Industrial
Group therefore competes in its recycling business with the holder of the other
Certificate of Approval; Philip Services Corp. and Ontario landfill site
operators, including those operated by municipal and regional governments.
Furthermore, due to the difficulty in gaining local community and political
support, it is very expensive and time consuming to obtain a Certificate of
Approval.

At present, most solid industrial waste that is hazardous is disposed of at
hazardous waste landfill sites. There are three hazardous landfill sites
operating in this market; Chemical Waste Management (New York state),
Safety-Kleen (Sarnia, Ontario) and Stablex (Blaineville, Quebec).

In general, the Environmental Industrial Group's competitive advantages in its
core recycling area include:

      o     Superior knowledge of many industrial minerals and the local markets
            for these materials.

      o     Long-standing relationships with both generators and potential users
            of industrial mineral waste.

      o     Efficient and cost effective material handling and processing
            skills, based on decades of experience.

      o     Expertise necessary to provide cement and other companies with
            materials of a consistent and reliable quality and the ability to
            adjust chemical composition as required.

      o     The ability to combine the sale of certain materials with a waste
            removal service as one transaction.

      o     The ability to inventory some materials. This is attractive to
            cement companies as a source of uninterrupted and "just-in-time"
            supply.

      o     The Environmental Industrial Group's Waterdown site is known in the
            market as a recycler, in contrast to the large traditional waste
            management companies, which derive most of their profit from
            landfill and trucking operations.

      o     The Specular Hematite licence and certain exclusive supply
            arrangements.

Suppliers

Most of the Environmental Industrial Group's critical raw materials are
purchased through approved suppliers to ensure the highest quality and the
supplier's ability to adhere to the Group's requirements.


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Stake Technology Ltd.                 13                December 31, 2001 - 10-K

<PAGE>

There is an abundance of inorganic materials that are increasingly becoming
subject to federal, provincial and state legislative restrictions. The Group
expects the supply of contaminated materials from remediation projects to
continue to increase, due to increased awareness by the general public and the
resulting laws that will require these wastes to be recycled in the future.
However, the availability of these materials could be reduced if the demand for
recycling subsides.

While the Environmental Industrial Group's sources of hazardous and
non-hazardous waste materials are expected to eventually come from a wider
variety of industries, many of the opportunities to date have come from its
existing customer base in the foundry, steel and industrial blasting industries.

The Environmental Industrial Group receives materials from in excess of 2,000
suppliers. While the Group has several alternative sources of supply for many of
the inputs it requires, it also has several key supplier relationships, which
are summarized below.

The Group obtains its key abrasive raw materials from certain Canadian mines.
Specular Hematite reserves at the current mine supplier are estimated to be
sufficient to supply the Group's needs for many years. Ebony Grit, a product
produced from copper slag is supplied on an exclusive basis by a Canadian mining
and refining company. Blackblast, a product produced from coal slag is supplied
on an exclusive basis by a US power plant. The Environmental Industrial Group
has adequate inventory reserves of this product to meet 2002 demand.

The Group has the exclusive right to distribute certain high purity silica sand
to the foundry industry in Quebec and Ontario for US Silica.

The Group represents Bentonite Performance Minerals, focusing on sales to the
foundry market, as well as other bentonite sales to the industrial market in
Quebec and Ontario.

The Group now produces its own garnet at it's Keesville, New York facility. In
addition the group has an exclusive North American Agreement to market garnet
from a supplier in India and a second agreement with a supplier in China.

Regulation

The Environmental Industrial Group's business primarily involves the handling of
materials, which are inorganic and mineral based. These types of materials are
generally benign and should not give rise to environmental problems.

Accordingly, to date there has been low potential for environmental liabilities
to arise. The Ontario Ministry of Environment and Energy has the right to
inspect the Waterdown site and review the results of third party monitoring and
perform its own testing. Similar rights of inspection exist at our facility in
Norfolk, Virginia.

Based on known existing conditions and the Group's experience in complying with
emerging environmental issues, the Company is of the view that future costs
relating to environmental compliance will not have a material adverse effect on
its financial position, but there can be no assurance that unforeseen changes in
the laws or enforcement policies of relevant governmental bodies, or the
discovery of changed conditions on the Company's real property or in its
operations, will not result in the occurrence of significant costs.

Research and Development

Environmental: In 2001, the Environmental Industrial Group continued to evaluate
the processing and recycling of a number of waste mineral streams into higher
value added products. These spent materials, originating primarily from the
foundry, steel and industrial sectors can often be separated back into their
original composition, which increases the value of the recycled product and can
lead to a greater number of markets.

Specular Hematite: In 2001, the Environmental Industrial Group continued to
study the use of Specular Hematite in a number of value-added markets, requiring
fast cutting and cleaning speed, as well as developing new markets in nuclear
shielding, non-slip flooring and ballast products.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 14                December 31, 2001 - 10-K

<PAGE>

Employees

The Environmental Industrial Group has 82 employees, 36 salaried and 46 hourly
workers.

The Environmental Industrial Group's 14 production and maintenance employees at
the Waterdown location are represented by Teamsters Local Union #879. The
current Collective Bargaining Contract with the Teamsters expires June 30, 2002.
The 10 hourly employees at the plant in Hamilton are represented by United
Steelworkers of America #16506 and the Agreement is in effect to February, 2005.
The Company experienced no work stoppages in 2001 and management considers
relations with the unions to be good.

Properties

The Environmental Industrial Group operates from seven locations. The primary
operating facility with administrative, laboratory and principal production is
located on a 31.6 acre site at 407 Parkside Drive, Waterdown, Ontario, Canada
L0R 2H0, located 40 miles west of Toronto. In addition, the Group owns a
production facility in Hamilton, Ontario, a distribution/warehouse facility in
Lachine (Montreal), Quebec and the Temisca sand property in located in northern
Quebec. The Group also leases production/distribution facilities in New Orleans,
Louisiana, Norfolk, Virginia and Keesville, New York.

The main Waterdown site has a Canadian Pacific Railways rail spur and good
access to major highways. This property is owned by the Company and is used for
the processing, storage and distribution of numerous abrasives and related
industrial materials.

The Hamilton production facility consists of 3.55 acres and is used in the
processing of sands and related materials to the steel and foundry industries.

The Montreal distribution/warehouse facility was purchased by the Company in
2001. Prior to this the facility was leased. The facility sits on 3 aces of land
and contains a 20,000 square foot warehouse and office building.

The Temisca (Ville Marie, Quebec) sand deposit and production facility consists
of approximately 100 acres of sand quarry that are owned and 100 acres of
industrial property that are leased. There is production and storage equipment
on this site.

The Louisiana facility is leased from the Port Authority of New Orleans. The
facility is used for processing abrasives for supply primarily to the
shipbuilding and repair industry.

Virginia Materials is located on Peterson Street in Norfolk, Virginia on
approximately 12 acres of land. This facility is leased and the Company owns
certain assets located on the leased property.

International Materials is located in Keeseville, New York on 5 acres of leased
property. The facility is used to process industrial garnets recovered from a
mining operation for sale to the water filtration, water jet cutting and
abrasive industries.

Steam Explosion Technology Group

The Company has developed the StakeTech System, including process engineering
and the hardware required.

The patented StakeTech System provides a method for the rapid and continuous
steam treatment of biomass under high pressure. The suitable raw materials
include wood chips, sugarcane bagasse, cereal straws and waste paper. In their
natural state, these materials are not easily separated into their component
parts. By processing with the addition of high-pressure steam, the StakeTech
System breaks the chemical and physical bonds that exist between the components
of these materials allowing their subsequent separation and processing into
products and components that potentially have wide and diverse applications. The
Company has demonstrated its equipment and technology on a commercial scale in
several applications including the production of the sweetener xylitol, alcohol
and pulp for paper.


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Stake Technology Ltd.                 15                December 31, 2001 - 10-K

<PAGE>

In 1993, the Company completed the turnkey supply of a US$3 million biomass
demonstration plant to the Italian Commission for New Technology for Energy and
the Environment ("ENEA") in Italy. This plant is the first facility in the world
to utilize continuous steam explosion combined with continuous extractions to
fractionate biomass into its components to serve in several fibre and chemical
end-use applications.

In 1996, the Company delivered a StakeTech System to Weyerhaeuser Company
(Weyerhaeuser), which passed its performance tests and was fully accepted by
Weyerhaeuser. This was the first sale of a StakeTech System to the pulp and
paper industry.

Since 1995, the Company has focused marketing efforts relative to the Steam
Explosion Technology on the production of pulp for paper from non-woody fibres
and the production of cellulose derivatives.

In August, 1999, Pacitec Inc. (Pacitec) acquired exclusive rights to market
StakeTech's proprietary pulping systems for non-wood applications in China for a
license fee of US$4.0 million payable over twelve years. Under this agreement
Pacitec has the right to terminate this contract at the end of any scheduled
renewal period, the current period is due to end July 28, 2002. Maintenance of
these rights is conditional on Pacitec making scheduled license fee payments and
selling a minimum of 40 StakeTech Systems valued at approximately US$160 million
over the twelve-year period. The Company retains all rights to the design and
manufacture of StakeTech's proprietary steam explosion pulping systems.

Pacitec is a US trade and development company with offices in Arlington, Texas
and Beijing, China. Pacitec specializes in developing business opportunities in
China and acts as a sales agent for such companies as Halliburton Energy
Services and Kellogg Brown & Root. Pacitec is in partnership with the China
National Beijing Contracting & Engineering Institute for Light Industry (BCEL),
a leading engineering design institute in China.

StakeTech's steam explosion business is not affected by seasonality.

Major Developments in Steam Explosion Technology in 2001

In 2001, the Steam Explosion Technology Group continued to focus on marketing
pulping systems to China through Pacitec Inc. In 2001, Pacitec maintained its
exclusive rights and all license fee payments due from Pacitec were received.

In conjunction with Pacitec, the Company is now pursuing equipment sales to
three separate projects in China.

Competition

The Company is focussing its marketing efforts on applying the Steam Explosion
Technology to the production of pulp for paper from non-woody fibres. The
Company believes the ability of StakeTech Systems to operate at high pressure
presents advantages in terms of reducing chemical requirements and improving
product yields.

The Company's success in marketing to the pulp and paper industry will depend on
the extent to which the StakeTech System can be shown to have advantages over
the technology of existing suppliers. These existing suppliers include,
Ahlstrom, Kvaerner, Metso and Andritz. The Company is aware of other groups that
are attempting to develop and market new pulping processes. These include the
NACO process from Italy, the Saicca process from Spain and the Anbokem process
from Canada.

It is anticipated that competition from suppliers of alternative systems and
equipment in these markets will be strong and that the potential advantages for
the StakeTech System will have to be demonstrated.

Suppliers

Waste biomass such as straw is currently available in abundant supply in many
parts of the world. If other economic uses for waste biomass increase, the
Company may find that the supply of such raw materials is reduced and this could
have a materially adverse effect on the Company's steam explosion technology
business.


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Stake Technology Ltd.                 16                December 31, 2001 - 10-K

<PAGE>

In respect of the manufacturing of the customized steam explosion technology
systems, the Company provides equipment fabricators with detailed drawings and
equipment specifications. All major equipment components have at least two
alternate suppliers.

Regulation

Stake steam explosion technology may use chemicals in addition to steam to treat
fibrous material. This technology does not generally produce appreciable
pollutants and the Company believes that its existing facilities are in full
compliance with applicable laws concerning the environment. To date the Company
has not found it necessary to spend significant amounts in order to comply with
applicable environmental laws. It is anticipated that future sales or licenses
of the Company's technology will be made where the StakeTech System is but one
part of a larger process, as for example in the manufacture of pulp. In these
instances, the overall project may be subject to federal, state or local
provisions regulating the discharge of materials into the environment.
Compliance with such provisions may result in significant increases in the costs
associated with the overall project.

Proprietary Technology

The Company recognizes that there exists a threat of others attempting to copy
the Company's proprietary StakeTech System and/or appropriate the 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. The Company also holds several patents on its equipment and
process technology.

In 2000, the company received approval of a patent application made under the
Patent Cooperation Treaty (PCT) agreement. This patent application covers
certain proprietary equipment designs relating to the StakeTech System and this
approval served as the basis for a patent application made in China in January
2001. China is a signatory to the PCT.

Financial Exposure Related to Bonding and Guarantees

To enter new markets such as China, the Company expects 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. The Company will endeavour to reduce the associated risks,
however there will always remain a possibility that the Company's guarantees or
bonds could be called, rightfully or wrongfully and/or the equipment supplied
fails to meet the guarantees and warranties provided resulting in potential
financial losses to the Company.

Research and Development

In 2001, Steam Explosion research and development activities related to client
specific investigations and focused on the production of pulp from straw from
China.

Employees

The Steam Explosion Technology Group has 2 employees; 1 engaged in technical
support and R&D and 1 engaged in marketing and sales. Since the division
subcontracts out the production of its equipment, it does not anticipate
significantly increasing the size of its work force until it receives a contract
for its equipment. The Company depends and will continue to depend in the
foreseeable future on the services of its employees in this division. The loss
of one senior person, Mr. John Taylor would have a serious adverse effect on the
Company's ability to successfully develop the steam explosion business.

SunRich Valley, a Division of Stake Technology Ltd.

During 2001 The Company completed an in depth study and decided to enter the
Canadian organic dairy business. As a result the Company has commenced business
in Canada under the name SunRich Valley, a division of Stake Technology Ltd.
(SunRich Valley), with an initial focus on marketing organic dairy products. The
business currently employs four personnel in management, sales, administration
and producer development and expects to realize its


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Stake Technology Ltd.                 17                December 31, 2001 - 10-K

<PAGE>

first sales late in the first quarter of 2002. The business currently operates
from the Company's corporate office in Norval, Ontario.

Corporate Office

The corporate office of Stake is located in owned premises in Norval, Ontario.
Seven staff are employed in a variety of management, financial and
administration roles.

Environmental Hazards

The Company believes, with respect to both its operations and real property,
that it is in material compliance with environmental laws at all of its
locations and specifically with the requirements of its Certificate of Approval
issued by the Ontario Ministry of the Environment and Energy on the
Environmental Industrial Group property in Waterdown, Ontario, Canada.

Easton Minerals Ltd.

In addition to its core businesses, the Company has a 32% interest in Easton
Minerals Ltd. (Easton), a mining exploration company listed on the Canadian
Venture Exchange (EM-CDNX). Easton is in the process of diversifying its
business interests beyond mining exploration. During 2001, Easton entered into
an acquisition agreement with a third party and the stock was halted from
trading pending regulatory review of the transaction. The shares of Easton
resumed trading on January 28, 2002 upon receipt of conditional approval of the
acquisition. The Company's investment is represented by two of Stake's directors
who are members of the Easton Board of Directors. It is the Company's intention
to sell its interest in Easton in the future, as mining development and
exploration is not related to the Company's primary businesses.

Employees

As of March 18, 2002 the Company had 327 employees broken out by division below:

------------------------------------------------------------------------------
Divisions                                                 Number of Employees
------------------------------------------------------------------------------
Sunrich Food Group                                                        232
------------------------------------------------------------------------------
Environmental Industrial Group                                             82
------------------------------------------------------------------------------
Steam Explosion, SunRich Valley and Corporate Office                       13
------------------------------------------------------------------------------
Total                                                                     327
------------------------------------------------------------------------------

Risk Factors

The Common Shares of the Company are speculative in nature and involve a high
degree of risk. Accordingly, in analyzing an investment in these securities,
prospective investors should carefully consider the following risk factors,
together with all of the other information appearing, or incorporated by
reference, in this document, in light of his or her particular financial
circumstances and/or investment objectives.

Dependence on Key Personnel, including Directors and Officers

The Company is wholly dependent upon the personal efforts and abilities of its
Officers and Directors. The loss or unavailability to the Company of the
services of its officers, particularly Jeremy N. Kendall, Chairman and Chief
Executive Officer of the Company, John Taylor, President and Chief Operating
Officer of the Company or Allan Routh, President and Dennis Anderson, Executive
Vice President and Director of Operations of SunRich Food Group, Inc., the
Company's wholly-owned subsidiary, would have a materially adverse effect on the
Company's business prospects, ability to raise funds and its potential earning
capacity. If the Company were to lose the services of any of the aforementioned
officers and directors before a qualified replacement could be obtained, its
business could be materially and adversely affected.

Northern Food and Dairy, Inc. has key man insurance for Dennis Anderson in the
amount of U.S. $1,000,000. The beneficiary of this insurance is Northern. The
Company does not carry any other insurance on other executives to compensate for
any such loss. The ability of the Company to attract and retain qualified
management and technical


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Stake Technology Ltd.                 18                December 31, 2001 - 10-K

<PAGE>

personnel as employees or consultants is critical to the operations of the
Company. To date, the Company has been able to attract and retain sufficient
professional employees and consultants, however, there can be no assurance that
the Company will be able to do so in the future. If the Company were unable to
employ the qualified employees and consultants needed, then its business would
be materially and adversely affected.

Future Capital Needs

The costs associated with some of the growth of the Company's present business
operations and to fund the acquisition strategies of the Company will likely
require additional capital, which may result in additional dilution to the
Company's shareholders. The ability of the Company to raise such funds may delay
or prevent the Company from meeting some of its strategic goals.

Competition

The Company and its subsidiaries carry on their businesses in competition with
companies and individuals with financial resources and staffs larger than the
Company's and the Company is, therefore, subject to competitive factors over
which it has little control or can otherwise affect. Extreme competition for
financial resources exists in our businesses and this competition for funds may
also create risks for the Company if the Company is unable to attain the funds
needed to carry out its strategic plans.

Governmental Regulation and Policies

The Company and its subsidiaries are, and are expected to continue to be,
subject to substantial federal, state, provincial and local environmental
regulation. These regulations exist in virtually all the Company's operational
business locations throughout North America and can present delays and costs
that can adversely affect business development.

Consolidation Within the Food Group's Industry May Require Access to Greater
Financial Resources

The SunRich Food Group, Inc., the Company's wholly-owned subsidiary competes
with substantially larger companies in the natural food, grain and specialty
grain markets who have greater financial resources than the Company. The SunRich
Food Group's ability to retain market share is uncertain because these food
businesses continue to consolidate, leaving potentially less market share for
smaller competitors.

Stake's Steam Explosion Technology Group

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 the StakeTech system.

Lack of Dividends; Dividend Restrictions

Stake has never paid dividends on its common shares and does not contemplate
paying cash dividends in the foreseeable future. Moreover, Stake is precluded
under the terms of various agreements with its creditors from paying dividends
until the related indebtedness has been satisfied. It is the Company's intention
to retain future earnings to fund growth. Accordingly, investors will not
receive a return on investment in Stake 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 Stake
security holders will depend on decisions that will be made by the Board of
Directors and will depend on then existing conditions, including the Company's
financial condition, contractual restrictions, capital requirements and business
prospects. The receipt of cash dividends by United States shareholders from a
Canadian corporation, such as Stake, is subject to a 15% Canadian withholding
tax.


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Stake Technology Ltd.                 19                December 31, 2001 - 10-K

<PAGE>


I
tem 2. Properties

A detailed description of these properties is included in the business segment
earlier in this document.

SunRich Food Group

The SunRich Food Group operates from thirteen locations in Minnesota, Iowa and
Wyoming, eleven owned and two leased.


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Division                             Address
-------------------------------------------------------------------------------------------------------------------
<S>                                  <C>
Sunrich, Inc.                        3824-93rd St. SW, Hope, MN 56046
-------------------------------------------------------------------------------------------------------------------
                                     616-6th Avenue W. Cresco, Iowa 52136
-------------------------------------------------------------------------------------------------------------------
Northern Food & Dairy, Inc.          2214 Geneva Rd. NE Alexandria, MN 56308
-------------------------------------------------------------------------------------------------------------------
                                     601-3rd Avenue W. Alexandria, MN 56308
-------------------------------------------------------------------------------------------------------------------
                                     4601 Co. Road 13 NE Alexandria, MN 56308
-------------------------------------------------------------------------------------------------------------------
                                     3035 Evergreen Lane S. Alexandria, MN 56308
-------------------------------------------------------------------------------------------------------------------
                                     308-2nd Avenue NW, Bertha, MN 56437
-------------------------------------------------------------------------------------------------------------------
                                     701 W. 1st Street, Fosston, MN 56542
-------------------------------------------------------------------------------------------------------------------
                                     2442 County Road 120 NE, Alexandria, MN 56308
-------------------------------------------------------------------------------------------------------------------
                                     199 W. 2nd Avenue, Afton, Wyoming 83110
-------------------------------------------------------------------------------------------------------------------
Nordic Aseptic, Inc.                 3915 Minnesota Street, Alexandria, MN 56308
-------------------------------------------------------------------------------------------------------------------
                                     4761 Hwy 27 East, Alexandria, MN 56308   (Leased)
-------------------------------------------------------------------------------------------------------------------
                                     3810 Minnesota Street, Alexandria, MN 56308 (Leased)
-------------------------------------------------------------------------------------------------------------------
</TABLE>


Environmental Industrial Group

The Environmental Industrial Group operates from seven locations, four owned and
three leased.


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Division                                        Address
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>
BEI                                             407 Parkside Drive, Waterdown, Ontario
-------------------------------------------------------------------------------------------------------------------
                                                70 Brant Street, Hamilton, Ontario
-------------------------------------------------------------------------------------------------------------------
                                                2270-43rd Avenue, Lachine, Quebec
-------------------------------------------------------------------------------------------------------------------
                                                Elaine Street, New Orleans, Louisiana   (Leased)
-------------------------------------------------------------------------------------------------------------------
Temisca, Inc.                                   1299 Rang I, St. Bruno de Guiges, Quebec
-------------------------------------------------------------------------------------------------------------------
Virginia Materials & Supply, Inc.               3306 Peterson Avenue, Norfolk, Virginia   (Leased)
-------------------------------------------------------------------------------------------------------------------
International Materials and Supplies, Inc.      56 Industrial Park Rd, Keeseville, New York   (Leased)
-------------------------------------------------------------------------------------------------------------------
</TABLE>


Steam Explosion Technology Group, SunRich Valley and Executive Offices

The Company's Executive Group, the Steam Explosion Technology Group and Sunrich
Valley organic dairy operation are located at 2838 Highway 7, Norval, Ontario,
Canada L0P 1K0. The property is approximately 10 acres, is owned by the Company
and is within 15 minutes of Pearson (Toronto) International Airport. The
property consists of three principal buildings, the corporate office, which
covers approximately 7,500 square feet, a separate laboratory and office
facility and a pilot plant facility.


Item 3. Legal Proceedings

The Company has filed a claim against a former director relating to certain
actions taken when he was the President of its operating division, BEI. The
former director has counter-claimed against the Company and its subsidiaries,
the Chairman of the Company and Easton, the Company's 32% equity investment. The
Company and its legal counsel believe that the counter-claim is without merit.

During 2001, the SunRich Food Group commenced an action against a supplier for
failure to adhere to the terms of a supply contract. The Company and its legal
counsel believe that this claim has merit. It cannot however be


--------------------------------------------------------------------------------
Stake Technology Ltd.                 20                December 31, 2001 - 10-K

<PAGE>

determined if there will be any recovery by the Company at this time and the
Group is providing for the costs of pursuing this suit on a monthly basis. Other
than this action, the SunRich Food Group is not currently a party to any
material litigation.

The Environmental Industrial Group is not currently a party to any material
litigation.

The Steam Explosion Technology Group is not currently a party to any material
litigation.


Item 4. Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of the Company's shareholders during the
fourth quarter of the year ended December 31, 2001.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 21                December 31, 2001 - 10-K

<PAGE>


PART II


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's common shares trade in US$ on The Nasdaq Small Cap Market tier of
The Nasdaq Stock Market under the symbol STKL, and as of November 6, 2001, the
Company's shares trade in Canadian $ under the symbol SOY on the Toronto Stock
Exchange. The following table indicates the high and low bid prices for Stake's
common shares for each quarterly period during the past two years as reported by
Nasdaq. The prices shown are representative inter-dealer prices, do not include
retail mark ups, markdowns or commissions and do not necessarily reflect actual
transactions.

Trade Prices on Nasdaq (US Dollars)


<TABLE>
<CAPTION>
==================================================================================================================
2001                                                    HIGH                 LOW
------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                                  <C>
First Quarter                           US$1.75                              US$1.375
------------------------------------------------------------------------------------------------------------------
Second Quarter                          US$2.45                              US$1.49
------------------------------------------------------------------------------------------------------------------
Third Quarter                           US$2.05                              US$1.41
------------------------------------------------------------------------------------------------------------------
Fourth Quarter                          US$2.17                              US$1.63
------------------------------------------------------------------------------------------------------------------
2000                                                    HIGH                 LOW
------------------------------------------------------------------------------------------------------------------
First Quarter                           US$2.4688                            US$0.7812
------------------------------------------------------------------------------------------------------------------
Second Quarter                          US$1.9062                            US$1.0312
------------------------------------------------------------------------------------------------------------------
Third Quarter                           US$1.8125                            US$1.0938
------------------------------------------------------------------------------------------------------------------
Fourth Quarter                          US$1.8125                            US$1.25
==================================================================================================================
</TABLE>


The Company listed on the Toronto Stock Exchange on November 6, 2001, therefore
information is only provided for the fourth quarter of 2001.

Trade Prices on TSE (Canadian Dollars)


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
2001                                   High                                  Low
-------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                   <C>
Fourth Quarter - 06/11/01 forward      $3.85                                 $2.65
-------------------------------------------------------------------------------------------------------------------
</TABLE>


At December 31, 2001, the Company has 714 record holders. Based on proxy
requests from shareholders and nominee holders at the last annual meeting date,
the Company estimates that there are at least an additional 3,000 beneficial
holders of the Company's common shares.

The Company has never paid dividends on its common stock and does not anticipate
paying dividends for the foreseeable future. The receipt of cash dividends by
United States shareholders from a Canadian corporation, such as the Company, may
be subject to Canadian withholding tax.

Issuance of securities and use of proceeds

Acquisition of Jenkins & Gournoe (First Light Foods)

In February 2001, the Company issued to the shareholders of Jenkins & Gournoe,
Inc., (Jenkins & Gournoe) which operated under the name First Light Foods,
833,333 of its common shares as a component of the purchase price for 100% of
the common stock of Jenkins & Gournoe. In addition, the Company also issued
35,000 warrants to acquire common shares of the Company, which are exercisable
at US $1.70 per share for five years ending February, 2006. Up to an additional
140,000 warrants to acquire common shares of the Company may be issued prior to
2005 if First Light


--------------------------------------------------------------------------------
Stake Technology Ltd.                 22                December 31, 2001 - 10-K

<PAGE>

Foods achieves certain pre-determined gross profit targets. The exercise price
for these warrants, if issued, will be the market price of the Company's common
shares at the time the warrants are issued. The warrants will have a term of
five years from the date of issue.

Private Placement 1 - 2001

On April 18, 2001, the Company entered into a transaction for the private
placement of 1,411,498 units. Each unit was comprised of one common share plus a
warrant to purchase one-half of a common share. As a result, the company issued
1,411,498 common shares and 705,750 whole warrants which are exercisable at US
$1.75 to purchase 705,750 common shares until March 31, 2004. The net proceeds
of this transaction was $ 2,651,000 (US $1,728,000) after associated commission,
legal and other related costs.

Private Placement 2 - 2001

The Company entered into an agreement on May 18, 2001 for the private placement,
outside of the United States of 2,400,000 units at US $2.00 per unit. Each unit
consisted of one common share plus a warrant to purchase one-half of a common
share. As a result, the Company issued 2,400,000 common shares and 1,200,000
whole warrants which are exercisable at US $2.40 to purchase 1,200,000 common
shares until March 31, 2004. The net proceeds of this transaction was $6,279,000
(US $4,375,000) after associated commission, legal and other related costs.

The Company's agent on this transaction was paid a cash commission and was
granted a compensation warrant, exercisable until June 8, 2003, to purchase
144,000 option units at US $2.00 per unit. Each option unit is comprised of one
common share plus a warrant to purchase one-half a common share. If exercised in
full, the Company will issue 144,000 common shares and 72,000 whole warrants
which are exercisable at US $2.40 to purchase 72,000 common shares until March
31, 2004.

Private Placement 3 - 2001

The Company entered into a subscription agreement on September 28, 2001 for the
private placement of 3,000,000 units at US $2.00 per unit. Each unit consisted
of one common share plus a warrant to purchase three quarters of a common share.
As a result, the Company issued 3,000,000 common shares and 2,250,000 whole
warrants which are exercisable at US $2.40 to purchase 2,250,000 common shares
until September 30, 2004. The net proceeds of this transaction was $8,841,000
(US $5,650,000) after associated commission, legal and other related costs.

The Company's agent on this transaction was paid a cash commission and was
granted a compensation warrant, exercisable until September 28, 2003 to purchase
150,000 option units at US $2.00 per unit. Each option unit is comprised of one
common share plus a warrant to purchase three-quarters of a common share. If
exercised in full, the Company will issue 150,000 common shares and 112,500
whole warrants which are exercisable at US $2.40 to purchase 112,500 common
shares until September 30, 2004.

Claridge Group Pre-emptive Rights

As part of the subscription agreement, Claridge and the Claridge Group (as
defined below) were granted a contractual pre-emptive right, for as long as they
collectively remain the beneficial owners of five percent (5%) or more of the
Company's outstanding common shares, to purchase a portion of any proposed
offering of the Company's common shares or securities convertible into common
shares (or units if offered in units) to any third party for the purpose of
obtaining financing for the Company. The portion of any such financing to be
offered to each member of the Claridge Group shall be equal to the percentage
that the common shares then owned by such member represents to the total number
of common shares issued and outstanding at the time of such proposed financing.
The Claridge Group is defined as (i) Charles R. Bronfman and his lineal
descendants; (ii) the spouses of any one or more of the foregoing; (iii) any
trust of which any one or more of such persons is a beneficiary; (iv) a
partnership in which one or more of the foregoing entities owns a majority
interest; and (v) any company directly under the control of one or more of the
foregoing.

Under the subscription agreement the Company shall give notice to Claridge and
each member of the Claridge Group, who holds common shares, of any such proposed
offering of common shares or securities convertible into


--------------------------------------------------------------------------------
Stake Technology Ltd.                 23                December 31, 2001 - 10-K

<PAGE>

common shares, whether such offerings be by way of private placement or to the
public by way of prospectus, registration statement or otherwise.

Private Placement 4 - 2001

On December 21, 2001, the Company closed a private placement of 4,250,000 common
shares at US $2.10. The net proceeds of this transaction was $13,279,000 (US
$8,282,000) after associated commission, legal and other related costs. By
agreement, one tenth of the gross proceeds is being held in escrow until the
later of (i) a registration statement registering these Shares under the
Securities Act of 1933 has been filed and declared effective by the SEC, or (ii)
four months from the closing date of this private placement, April 21, 2002. A
registration statement was filed by the Company in compliance with such
agreement on February 20, 2002.

Exemption From Registration

The Company's common shares issued in the acquisition and private placements
described above, were issued pursuant to exemptions from the registration
requirements of the Securities Act of 1933 (the "Act") provided by Section 4 (2)
of the Act or Regulation D promulgated under the Act, and in the case of
issuance to non-US persons were issued in transactions to which the Act did not
apply.

Options exercised during the year

During the year ended December 31, 2001, employees and directors exercised
999,425 common share options and an equal number of common shares were issued
for net proceeds of $1,651,000. Subsequent to December 31, 2001, employees
exercised 48,100 common share options and an equal number of common shares were
issued for net proceeds of $130,000.

Use of 2001 private placement and option proceeds

From the proceeds of the 2001 placements, the Company repaid a US $1,000,000
corporate loan that was drawn in 2000 to provide working capital to Northern.
The Company also transferred US $5,911,000 during 2001 and US $700,000
subsequent to December 31, 2001 to the SunRich Food Group, Inc. to fund the
Wyoming soy plant expansion; to replace funds used in the start up of Nordic,
pay corporate income taxes; to reduce lines of credit and improve the Group's
working capital. Of the US$5,911,000 transferred during 2001, US $2,206,000 was
specifically used to repay a line of credit due to US Bank, as this line of
credit was not renewed under the existing terms.

In addition, during 2001 the Company also repaid Canadian lines of credit
totalling $1,755,000, paid the purchase price of $2,777,000 to acquire certain
assets Virginia Materials and Supplies, Inc. and 51% of the outstanding common
shares of International Material and Supplies, Inc. and paid approximately
$800,000 to purchase BEI/PECAL's Montreal distribution centre. In 2002, $500,000
has been used to draw down Canadian lines of credit and $640,000 has been
provided to Virginia Materials, Inc. to finance working capital and capital
additions. The remaining proceeds will be used for working capital as needed and
for future business acquisitions.

As of December 31, 2001, the Company had 41,081,228 common shares outstanding.
As a result of certain departed employees 48,100 options were exercised into
common shares in the first quarter of 2002. As of March 8, 2002, 41,129,328
common shares are outstanding. In addition 7,115,475 common shares have been
reserved for issuance and are detailed as follows:

      1)    Warrants to purchase 500,000 common shares exercisable at US $1.50
            expiring September 15, 2005 from the acquisition of Northern;
      2)    Warrants to purchase 35,000 common shares exercisable at US $1.70
            expiring February 28, 2006 from the acquisition of Jenkins &
            Gournoe, Inc.;
      3)    Warrants to purchase 705,750 common shares exercisable at US $1.75
            expiring March 31, 2004 from the private placement completed on
            April 18, 2001;
      4)    Warrants to purchase 1,200,000 common shares exercisable at US $2.40
            expiring March 31, 2004 from the private placement completed on June
            8, 2001;


--------------------------------------------------------------------------------
Stake Technology Ltd.                 24                December 31, 2001 - 10-K

<PAGE>

      5)    Option to acquire 144,000 common shares which may be acquired by the
            agent under the terms of the May 18, 2001 private placement
            agreement which was completed June 8, 2001 at US $2.00 until June 8,
            2003;
      6)    Warrants to purchase 72,000 common shares, which may be acquired by
            the agent under the terms of the May 18, 2001 private placement
            agreement, which closed on June 8, 2003, if the 144,000 options
            (noted above in 5) are exercised. The warrants to purchase 72,000
            common shares are exercisable at US $2.40 expiring March 31, 2004;
      7)    Warrants to purchase 2,250,000 common shares exercisable at US $2.40
            expiring September 30, 2004 from the private placement completed on
            September 28, 2001;
      8)    Option to acquire 150,000 common shares which may be acquired by the
            agent under the terms of the September 28, 2001 private placement
            agreement at US $2.00 until September 28, 2003;
      9)    Warrants to purchase 112,500 common shares, which may be acquired by
            the agent under the terms of the September 28, 2001 private
            placement agreement if the 150,000 options (noted above in 8) are
            exercised. The warrants to purchase 112,500 common shares are
            exercisable at US $2.40 expiring September 30, 2004; and
      10)   Options to acquire 1,946,225 common shares previously granted to
            employees, directors and consultants under various Company stock
            option plans.

      In addition, if certain pre-determined profit targets are achieved by the
      First Light Foods business, which was acquired in February 2001, up to an
      additional 140,000 warrants may be issued in 2002 through to 2005, at a
      rate of up to 35,000 per year. Subsequent to December 31, 2001, the 35,000
      warrants issuable in 2002 have been cancelled as First Light Foods did not
      meet their profit targets for 2001, therefore 105,000 warrants may be
      issued in 2003 to 2005 at a rate of up to 35,000 per year.


Item 6. Selected Financial Data

The following information has been summarized from the Company's consolidated
financial statements.

Summary


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                      2001             2000            1999            1998           1997
----------------------------------------------------------------------------------------------------------------
<S>                                 <C>              <C>              <C>            <C>            <C>
Total revenues                      $143,069,000     $101,653,000     $47,304,000    $22,077,000    $16,847,000
----------------------------------------------------------------------------------------------------------------
Net earnings - CDN GAAP                   31,000        3,374,000       1,524,000        822,000        149,000
----------------------------------------------------------------------------------------------------------------
Net earnings - US GAAP                 (328,000)        2,571,000       1,449,000        761,000      (139,000)
----------------------------------------------------------------------------------------------------------------
Total assets                         127,521,000       92,866,000      35,434,000     16,096,000     15,024,000
----------------------------------------------------------------------------------------------------------------
Long-term debt (includes              26,517,000       31,555,000       4,113,000      2,100,000      2,600,000
current portion)
----------------------------------------------------------------------------------------------------------------
Other long-term obligations            7,147,000        4,008,000       1,426,000        986,000      1,123,000
includes future taxes (includes
current portion)
----------------------------------------------------------------------------------------------------------------
Basic earnings per share - CDN             $0.00            $0.15           $0.09          $0.06          $0.01
GAAP
----------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per                $(0.01)            $0.11           $0.08          $0.05        $(0.01)
share - US GAAP
----------------------------------------------------------------------------------------------------------------
Cash dividends                                --               --              --             --             --
----------------------------------------------------------------------------------------------------------------
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 25                December 31, 2001 - 10-K

<PAGE>


Item 7. Management's Discussion and Analysis of Financial Conditions and Results

Revenues for 2001 grew by 41% to $143,069,000 versus $101,653,000 in 2000. Net
earnings for the year were $31,000 or $0.00 per share compared to $3,374,000 or
$0.15 per share in 2000. The company's financial position improved dramatically
over the course of 2001 with working capital improving by over $24,000,000 and
the ratio of long-term debt to equity improving to 0.38:1 from 0.95:1 in 2000.

Operating results in 2001 were negatively impacted by a number of factors,
including ongoing losses before income taxes of $2,945,000 at Nordic Aseptic,
Inc., the company's aseptic packaging operation. In addition, the Environmental
Industrial Group was negatively effected in 2001 by the impact of both the
general economic slowdown in the foundry and steel industries and the fall out
as a result September 11th tragedy on the bridge repair and shipbuilding
industries.

With the exception of Nordic, all operating companies were profitable in 2001. A
great deal of energy and focus has been directed to addressing the operating
issues at Nordic and management is confident that the operations will be
profitable in 2002.

The assets of the Company have grown 37% to $127,521,000 from $92,866,000 in
2000, driven primarily by the proceeds of equity financing throughout the year.
These financings increased the number of common shares outstanding from
28,186,972 to 41,081,228.

The changes to the size of the Company's operations and assets are primarily a
result of the Company's business acquisition strategy combined with the specific
financing activities. These items are summarized below.

Business Acquisitions

The acquisitions of the companies detailed below have been accounted for using
the purchase method and the purchase price has been allocated to the assets
acquired and the liabilities assumed based on management's best estimates of
fair values, and described in detail in table format in note 2 to the audited
consolidated financial statements. The consolidated financial statements include
the results of operations of the acquired businesses from the date of
acquisition.

Virginia Materials - On October 31, 2001, the Company's wholly-owned subsidiary,
Virginia Materials, Inc., acquired certain assets of Virginia Materials and
Supplies, Inc. as well as 51% of the outstanding common shares of International
Materials and Supplies, Inc. (International Materials) for cash consideration
and acquisition costs of approximately $2,777,000 (US $1,751,000), plus deferred
purchase consideration of $1,824,000 (US $1,150,000) and contingent
consideration. The deferred purchase consideration will be paid upon the
Company's purchase of the vendor's inventory. Management estimates that it will
take approximately 18 months to purchase all the inventory. In addition, the
Company will pay 50% of the profits for a two-year period from the date of the
acquisition. The vendor's share of profit is considered contingent
consideration.

Virginia Materials is a supplier of abrasives to the shipbuilding and repair
industry. It has a production facility located in Norfolk, Virginia and a second
plant is scheduled to open in the second quarter of 2002 in Baltimore, Maryland.
Virginia Materials also recycles spent abrasives which are used in the
production of Portland cement and converts aluminum smelting waste into a
roofing and abrasive product.

International Materials produces industrial garnets as a by-product from a
mining operation and processes these garnets for sale to the water filtration,
water jet cutting and abrasives markets.

This business is operated within the Environmental Industrial Group.

First Light Foods - On February 1, 2001, the Company acquired 100% of the common
shares of Jenkins and Gournoe, Inc., which operated under the name of First
Light Foods. Consideration consisted of the issuance of 833,333 common shares,
$557,000 (US $365,000) in cash, a $1,049,000 (US $700,000) note payable that is
repayable quarterly over 2 years by payments of US $87,500, plus interest at
8.5% and 35,000 warrants exercisable at US $1.70 for five years to February,
2006. In addition, contingent consideration may be payable on this acquisition
if; (a) certain predetermined profit targets are achieved by the acquired
business up to an additional 140,000 warrants may be issued in 2002 through


--------------------------------------------------------------------------------
Stake Technology Ltd.                 26                December 31, 2001 - 10-K

<PAGE>

to 2005, and (b) a percentage of gross profits in excess of US $1,100,000 per
annum from 2001 to 2005 will be paid to the vendors of First Light Foods. First
Light Foods owns several trademarked brands that are co-branded as private label
brands for a major California food chain. The acquisition of First Light Foods
is included in the operations of the SunRich Food Group and compliments this
Group's strategy of becoming a vertically integrated business from seed to
merchandisable products of soymilk.

Temisca - On October 31, 2000, the Company acquired 100% of the outstanding
common shares of Temisca Inc., a private sand deposit and manufacturing company
in Ville Marie, Quebec. The purchase price was $1,676,000 and was paid via cash
consideration of $926,000 and the issuance of a $750,000 note payable bearing
interest at 5% with repayment terms over 5 years.

Northern - On September 15, 2000, the Company acquired 100% of the outstanding
common shares of Northern Food & Dairy, Inc, from its three shareholders, for
total consideration of $11,190,000. The consideration paid consisted of the
issuance of 7,000,000 common shares ($10,552,000), 500,000 common share warrants
exercisable at US$1.50 for five years ($30,000), and cash consideration of
$608,000. Northern is a US based manufacturer and supplier of soymilk and other
natural food products and ingredients. This business is operated within the
SunRich Food Group.

Nordic - On April 19, 2000, Sunrich and Northern created a corporate joint
venture to operate an aseptic packaging plant owned by Hoffman Aseptic Inc. The
plant packages aseptic soy milk. Nordic assumed management control of the plant
on April 19, 2000 and on August 15, 2000, Nordic acquired certain assets of
Hoffman Aseptic Inc. by the assumption of certain debts and the payment of cash
consideration of $380,000. Upon the acquisition of Northern on September 15,
2000, the Company acquired the remaining 50% interest in Nordic Aseptic, Inc..
This business is operated within the SunRich Food Group.

PECAL - On February 29, 2000, the Company acquired 100% of the outstanding
common shares of George F. Pettinos (Canada) Limited, also operated as PECAL,
from US Silica for cash consideration of $4,682,000. In certain markets, PECAL
was a competitor of the Environmental Industrial Group. This business is
operated within the Environmental Industrial Group.

Financing Activities

Private Placement 1 - 2001 - On April 18, 2001, the Company entered into a
transaction for the private placement of 1,411,498 units. Each unit was
comprised of one common share plus a warrant to purchase one-half of a common
share. As a result, the company issued 1,411,498 common shares and 705,750 whole
warrants which are exercisable at US $1.75 to purchase 705,750 common shares
until March 31, 2004. The net proceeds of this transaction was $2,651, 000 (US
$1,728,000) after associated commission, legal and other related costs.

Private Placement 2 - 2001 - The Company entered into an agreement on May 18,
2001 for the private placement, outside of the United States of 2,400,000 units
at US $2.00 per unit. Each unit consisted of one common share plus a warrant to
purchase one-half of a common share. As a result, the Company issued 2,400,000
common shares and 1,200,000 whole warrants which are exercisable at US $2.40 to
purchase 1,200,000 common shares until March 31, 2004. The net proceeds of this
transaction was $6,279,000 (US $4,375,000) after associated commission, legal
and other related costs.

Private Placement 3 - 2001 - The Company entered into a subscription agreement
on September 28, 2001 for the private placement of 3,000,000 units at US $2.00
per unit. Each unit consisted of one common share plus a warrant to purchase
three quarters of a common share. As a result, the Company issued 3,000,000
common shares and 2,250,000 whole warrants which are exercisable at US $2.40 to
purchase 2,250,000 common shares until September 30, 2004. The net proceeds of
this transaction was $8,841,000 (US $5,650,000) after associated commission,
legal and other related costs.

Private Placement 4 - 2001 - On December 21, 2001, the Company closed a private
placement of 4,250,000 common shares at US $2.10. The net proceeds of this
transaction were approximately $13,279,000 (US $8,282,000) after associated
commission, legal and other related costs. By agreement, one tenth of the gross
proceeds is being held in escrow until the later of (i) a registration statement
registering these Shares under the Securities Act of 1933 has been filed and
declared effective by the SEC, or (ii) four months from the closing date of this
private placement,


--------------------------------------------------------------------------------
Stake Technology Ltd.                 27                December 31, 2001 - 10-K

<PAGE>

April 21, 2002. A registration statement was filed by the Company in compliance
with such agreement on February 20, 2002.

2001 Operations Compared with 2000 Operations

Consolidated

Revenues in 2001 increased by 41% ($41,416,000) to $143,069,000 from
$101,653,000 in 2000 and the Company's earnings for 2000 decreased to $31,000 or
$0.00 per common share compared to $3,374,000 or $0.15 per common share for the
year ended December 31, 2000. The increase in the Company's revenues in 2001 is
due to a number of factors including the acquisitions of First Light Foods
($9,607,000) and Virginia Materials ($1,407,000) plus the full year impact of
the acquisitions completed in 2000. (PECAL, Northern, Nordic and Temisca).

Earnings decreased due to a number of factors including the significant loss
issues at Nordic, weak market/economic conditions that impacted the
Environmental Industrial Group, increased costs of operating a growing public
organization and the benefit of previously unrecognized income tax loss carry
forwards having been fully realized in 2000.

EBITDA (earnings before interest, taxes, depreciation and amortization)
increased by 29% to $8,115,000 from $6,439,000 in 2000. The increase was due to
increased amortization and interest expenses offset by lower earnings as noted
above.

US readers should note that due to differences between Canadian and US GAAP, the
loss for 2001 under US GAAP is ($328,000) or ($0.01) per common share versus
earnings of $2,571,000 or $0.11 per common share in 2000. Note 16 to the audited
financial statements itemize these differences.

Cost of sales increased by 42% to $123,363,000 for the year ended December 31,
2001 compared to $87,046,000 for the year ended December 31, 2000. Consistent
with the revenue analysis above, the increase in cost of sales is related to the
sales increase resulting from the acquisitions completed in 2000 and 2001.

The Company's consolidated gross margin was 13.8% in 2001 compared to 14.4% in
2000. Excluding the impact of the losses incurred related to Nordic Aseptic,
gross margin increased to in excess of $21,000,000 or 14.8%.

Research and development costs increased in 2001 to $757,000 from $200,000 in
2000. The increase is due in most part to activities in the Food Group related
to expanded product development initiatives and a study of the European soy
opportunities.

Selling, general and administration expenditures increased 53% in 2001 to
$16,990,000 compared to $11,094,000 for the year ended December 31, 2000. The
increase in administrative costs is due to the acquisitions made in 2000 and
2001, increased bad debt provisions, the higher costs of operating a larger
public company and increased amortization of trademarks, patents and goodwill.

Interest on long-term debt, other interest expense and financing charges
increased to $3,073,000 in 2001 from $1,527,000 in 2000. The bulk of this
increase is due to the SunRich Food Group's debt obligations. Interest expense
related to the SunRich Food Group totalled $2,560,000, ($1,111,000 in 2000)
including $294,000 of financing charges related to the write-off of costs due to
the new banking agreement. Canadian debt held by the Environmental Industrial
Group and Corporate Office represents $513,000 of interest expense in 2001
($416,000 in 2000).

Interest and other income increased to $846,000 in 2001 from $402,000 in 2000
due to an increase in interest earned on higher cash/investment balances
throughout the year and the annualised impact of interest income on the long
term receivable.

The gain on purchase of preference shares of $24,000 (2000 - $175,000) results
from the purchase of the preference shares outstanding in a subsidiary company
at a value less than their carrying value.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 28                December 31, 2001 - 10-K

<PAGE>

The share of losses of equity accounted investee of $42,000 (2000 - $48,000) and
dilution gain of $140,000 in 2000 is related to the Company's 32% equity
investment in Easton Minerals Ltd. (Easton), a mining exploration company listed
on the Canadian Venture Exchange (EM-CDNX). Dilution gains result from the
increase in equity value of Easton due to issues of capital above Stake's
carrying cost for this investment. US readers should note that dilution gains
are not recognized as income for US GAAP purposes due to the development stage
nature of Easton, and accordingly, the effects of this gain are reversed in Note
16 of the Company's financial statements.

The Company's investment in Easton is carried at a book value of $583,000.

(2000 - $442,000). During 2001 Easton entered into an acquisition agreement with
a third party and the stock was subsequently halted from trading pending CDNX
review of the transaction. The stock resumed trading on January 28, 2002 and
since that time the value of the Company's shareholdings have ranged from
$265,000 to $707,000 based on limited traded volumes. It is unlikely that these
values could be realized upon the sale of all or a position of the Company's
holding in Easton, particularly given the significant number of shares held by
the Company.

Income taxes increased as a percentage of earnings in 2001 due to expenses in
most part to loss carry forward benefits realized in 2000 and increases in
non-deductible expenses in 2001. In 2000 the Company recorded the benefit of
previously unrecognized Canadian tax loss carry forwards of $1,798,000 (1999 -
$635,000) and provided a tax provision of $864,000 (1999 - $183,000) on the net
earnings of the SunRich Food Group. Due to the complex US tax structure, the
Company was unable to recognize the tax benefit of Nordic's start-up losses. The
Company has since restructured the SunRich Food Group, which provides for more
effective tax strategies. The Nordic tax loss carry forward will be recognized
when Nordic becomes profitable.

Segmented Operations Information

The SunRich Food Group

The SunRich Food Group contributed $111,452,000 or 77.9% of total Company
consolidated revenues in 2001 versus $69,822,000 or 68.7% in 2000. The increase
of $41,630,000 in Food Group sales (59.6%) was due to a number of factors
including the acquisition of First Light Foods in 2001, which contributed sales
of $9,607,000, increased sales at Nordic in 2001 versus 2000 of $10,016,000, in
addition to the full impact of the Northern acquisition completed in 2000.

Gross margin in the SunRich Food Group increased by $4,968,000, an increase of
54.6% to $14,069,000 in 2001 versus $9,101,000 in 2000, representing 71.4% of
the Company's 2001 consolidated gross margin. The increase in gross margin
resulted from the acquisitions noted above, combined with improved product
margins on food ingredient and organic feed products, partially offset by the
significant losses incurred at Nordic during the year. Excluding losses at
Nordic, gross margin increased to 13.9% of revenues versus 13.0% in the prior
year.

Research and development costs increased to $547,000 in 2001 as a result of
expanded product development initiatives and a study of opportunities related to
the European soy foods market. Continued product development is important as the
soy and natural food markets continue to grow.

Selling, general and administrative expenses increased to $10,985,000 in 2001
versus $7,072,000 in 2000. The increase is due primarily to the acquisition of
First Light Foods in 2001, the full impact of the Northern and Nordic
acquisitions in 2000 and increased payroll and related costs as the organization
continues to support the growth in operations.

Interest expense on long-term debt and other interest increased to $2,266,000 in
2001 versus $1,111,000 in 2000. The increase was due to the full impact of the
acquisitions noted above, in addition to increased use of operating lines of
credit throughout the year to support Nordic losses and capital expansion
projects.

Pre-tax earnings of the SunRich Food Group were $790,000 in 2001 versus
$1,230,000 in 2000. Results were positively impacted by the additions of First
Light Foods and Northern, but negatively impacted by the near $3,000,000 pre-tax
loss at Nordic. The Company expects Nordic to be profitable in 2002.

Net earnings improved to $494,000 in 2001 versus $366,000 in 2000.


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Stake Technology Ltd.                 29                December 31, 2001 - 10-K

<PAGE>

Environmental Industrial Group

The Environmental Industrial Group contributed $31,045,000 or 21.7% of the total
Company consolidated revenues, versus $31,286,000 or 30.8% in 2000. Revenues
were favourably impacted by the acquisition of Virginia Materials in 2001 plus
the full effect of the Temisca and PECAL acquisitions completed in 2000. These
increases were partially offset by weak market and economic conditions in the
steel and foundry businesses, the loss of a key distribution agreement, the
economic impact of the September 11th tragedy on the demand for abrasives and
increased competition in the silica sands market.

Gross margin in the Environmental Industrial Group increased to $5,187,000 in
2001 versus $5,014,000 in 2000, representing 26.3% of the Company's consolidated
gross margin in 2001. The increase in margin resulted primarily from the
acquisition and economic impacts as noted above. As a percentage of revenues,
gross margin improved to 16.7% in 2001 from 16.0% in 2000.

Selling, general and administrative expenses increased to $3,885,000 in 2001
versus $2,409,000 in 2000. The increase is due in most part to the acquisition
of Virginia Materials in 2001, the full effect of the Temisca and PECAL
acquisitions in 2000 and increased costs related to provisions for doubtful
accounts.

Interest expense on long-term debt and other interest increased to $463,000 in
2001 versus $416,000 in 2000. The increase in interest expense resulted from
additional borrowings required to finance the acquisitions noted above, and
increased use of operating lines at times during the year to support internal
expansion projects.

Pre-tax earnings of the Environmental Industrial Group were $1,052,000 in 2001
versus $2,579,000 in 2000. Results were positively impacted by the additions of
Virginia Materials, Temisca and PECAL, but negatively impacted by unfavourable
economic and market conditions and increased competitive pressures in key
product groups.

Net earnings were $782,000 in 2001 versus $2,513,000 in 2000 as a result of the
factors noted above.

Steam Explosion Technology Group and Corporate Activities

Revenues for the Steam Explosion Technology Group were $572,000 in 2001 versus
$545,000 in 2000. Both periods reflect revenues earned from steam explosion
licence fees and consulting. No steam explosion equipment sales were recorded in
either 2001 or 2000.

Gross margin in the Steam Explosion Technology Group was $450,000 in 2001 versus
$492,000 in 2000. The gross margin as a percentage of revenue of 78.7% (90.2% in
2000) reflects the nature of the revenues with minimal associated cost of sales.

The Steam Explosion Technology Group and Corporate selling, general and
administration expenses were $2,227,000 in 2001 versus $1,366,000 in 2000. The
increase was due to an increase in the costs of administering a growing public
company including incremental payroll and related costs, public relations and
professional fees, in addition to the ongoing marketing and travel costs
incurred to secure a steam explosion equipment sale in China.

The net loss before taxes of $1,578,000 in 2001 versus $1,303,000 in 2000
reflects the positive effect of foreign exchange gains and interest and other
income partially offset by the increase in selling, general and administration
costs as noted above.


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Stake Technology Ltd.                 30                December 31, 2001 - 10-K

<PAGE>

Liquidity and Capital Resources at December 31, 2001

Current Assets

Cash and cash equivalents increased to $5,358,000 at December 31, 2001 (2000 -
$1,013,000). The balance is due in most part to cash held at the corporate level
of $4,290,000 due to funds from private placements completed in 2001, plus cash
at SunRich Food Group of $2,723,000 from customer deposits normally received
each December. These amounts are partially offset by the Environmental
Industrial Group line of credit of $1,783,000 that is netted against corporate
cash.

As of December 31, 2001 the company had restricted cash of $1,827,000 (2000 -
Nil) and marketable securities of $10,045,000 (2000 - Nil). The restricted cash
relates primarily to funds received on the last private placement that will be
released upon final approval of S-3 filing and clearance of the Ontario
Securities Commission hold period. The marketable securities are funds from the
last private placement, held at year end in a mutual fund corporation which
holds cash equivalents.

Trade accounts receivable increased to $13,343,000 at December 31, 2001 from
$13,111,000 at December 31, 2000. Trade receivables at December 31, 2001 related
to the SunRich Food Group were $8,104,000 (2000 - $8,250,000). Days sales
outstanding improved within the Food Group versus 2000. Trade receivables in the
Environmental Industrial Group were $5,239,000 (2000 - $4,836,000). Lower
accounts receivable balances due to lower fourth quarter year over year sales
were offset by higher receivables as a result of the Virginia Materials
acquisition in the amount of $909,000.

The note receivable of $3,668,000 (2000 - $5,186,000) and the other long-term
payable of $1,926,000 (2000 - $1,651,000) are all related to an agreement with a
major European based company to supply product. This agreement required Northern
to expand a food processing plant to the customer's specifications and this was
completed in 2001. In accordance with the terms of the agreement the customer
pays 36 monthly instalments of US$119,000 (total receipts in 2001 - $2,219,000,
2000 - $543,000). The agreement also requires that the Company provide the
customer with a product rebate beginning October 2003 until US$1,720,000 is
repaid. Upon the application of purchase accounting in 2000, both the receivable
and payable were fair valued using a discount rate of 9.5 %.

Inventories increased $6,724,000 to $22,014,000 at December 31, 2001. The
SunRich Food Group accounts for $16,446,000 of the total balance (2000 -
$10,064,000) and Environmental Industrial Group $5,568,000 (2000 - $5,226,000).
The Steam Explosion Technology Group is not required to carry significant
inventories. The higher balances in the SunRich Food Group are primarily due to
a change in business practise at Nordic from simply billing a major customer for
processing and packaging to buying and invoicing the full product cost including
raw materials. In addition, the SunRich Food Group increased its inventory of
finished goods related to a specific customer. The Virginia Materials
acquisition increased inventories within the Environmental Industrial group by
$621,000.

Future income tax assets of $1,057,000 at December 31, 2001 (2000 - $954,000)
consists of $715,000 (2000 - $715,000) of Canadian tax losses and scientific
research expenditures recorded by the Canadian entity in 2000 and the remaining
balance of $342,000 (2000 - $239,000) relates to the SunRich Food Group's
accounting reserves not deductible for tax until realized. The Company believes
that it is more likely than not that the tax benefit of the recorded assets will
be realized.

Property, Plant and Equipment

In 2001, the Company spent $6,223,000 (2000 - $5,353,000) on capital
expenditures; the SunRich Food Group spent $4,125,000 (2000 - $4,631,000) on
capital expenditures, principally on the acquisition and build-out of the
production facility in Afton, Wyoming ($1,814,000) and the upgrade of the Hope
conditioning plant ($1,476,000). In 2001, $2,054,000 (2000 - $667,000) was spent
in the Environmental Industrial Group, $730,000 for the purchase of a warehouse
and the remaining on general additions and replacements including, scales,
forklifts and computer equipment. In 2001, $44,000 (2000 - $55,000) was spent by
the Steam Explosion Technology Group and at corporate office primarily on
computer and lab equipment


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Stake Technology Ltd.                 31                December 31, 2001 - 10-K

<PAGE>

Investments

Investments increased to $583,000 in 2001 (2000 - $442,000), due primarily to
net advances of $183,000 (2000 - $60,000) offset by the equity loss on Easton of
$42,000 (2000 - $48,000).

Goodwill

Goodwill increased to $13,602,000 at December 31, 2001 from $11,231,000 at
December 31, 2000. This increase was due to $2,488,000 in goodwill recorded on
the acquisition of Virginia Materials and International Materials offset by
normal amortization.

Pre-operating Costs

In 2001 the company deferred $51,000 in costs related to the start-up of an
organic dairy business based in Canada. Amortization of these costs will
commence no later than June 30, 2002 and will be amortized on a straight-line
basis to December 31, 2003. In 2000, the Company deferred $768,000 of
pre-operating costs related to Nordic, which was comprised of the portion of the
operating losses from April to December 31, 2000 that were related to the start
up phase of the plant. This amount is being written off equally over a 36-month
period. As at December 31, 2001 the unamortized balance is $512,000. Readers
should note that the $51,000 and $768,000 of pre-operating costs would have been
expensed under US GAAP in 2001 and 2000 respectively.

Patents, Trademarks, Licenses and Other Assets

Patents, trademarks, licences and other assets have increased to $4,266,000 at
December 31, 2001 (2000 - $432,000) due to the acquisition of trademarks related
to First Light Foods of $3,999,000 partially offset by standard amortization
expense.

Current liabilities

Accounts payable and accrued liabilities increased to $20,437,000 in 2001

(2000 - $19,359,000). The increase is due primarily to the Virginia Materials
acquisition.

Customer deposits of $2,213,000 at December 31, 2001 (2000 - $1,262,000) are
related to cash deposits made by the SunRich Food Group customers in 2001 for
year 2002 customer purchases. No recognition of revenue or accrual of costs is
booked on these transactions until the goods are shipped.

The current portion of Preference Shares in subsidiary companies increased from
$387,000 in 2000 to $458,000 in 2001 and is due to accelerated payments on
preferred shares related to the purchase of land in the BEI acquisition. This
acceleration is due to the repayment of specific outstanding debt.

New Financing Arrangement Replacing Existing Lines of Credit and Long Term Debt

On March 15, 2002, the Company entered into a new financing arrangement with a
major Canadian bank and its U.S. subsidiary. This arrangement includes the
following components:

1.    US $15,000,000 demand loan with scheduled quarterly payments to amortize
      the debt over seven years.

      Interest on the demand loan is payable at the borrower's option at U.S.
      dollar base rate or U.S. LIBOR plus a premium based on certain financial
      ratios.

      While this loan is payable on demand, the lender has indicated that it is
      not their intention to demand repayment of this loan in 2002. Accordingly,
      the only repayment required in 2002 in respect of this loan relates to the
      regular quarterly payments, which in 2002 amount to $1,750,000 (US $
      1,100,000).

2.    CAN $4,000,000 line of credit facility


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Stake Technology Ltd.                 32                December 31, 2001 - 10-K

<PAGE>

      Interest on borrowings under this facility is payable monthly and accrues
      at the borrower's option based on various reference rates including
      Canadian or U.S. bank prime, or Canadian bankers' acceptances, plus a
      margin based on certain financial ratios of the Company.

3.    US $5,000,000 line of credit facility

      Interest on borrowings under this facility is payable monthly and accrues
      at the borrower's option based on various reference rates including U.S.
      bank prime, or LIBOR, plus a margin based on certain financial ratios of
      the Company.

Total debt of $24,604,000 outstanding at December 31, 2001 was repaid on March
15, 2002 with the proceeds of the new financing arrangement.

The US $15,000,000 demand loan and the Canadian and U.S. line of credit
facilities described above are collateralised by a first priority security
against all of the Company's assets in both Canada and the United States.

The current and long-term portion of the outstanding debt at December 31, 2001
reflects repayment terms contained in the new financing arrangement. Under new
accounting guidelines effective January 1, 2002 all the outstanding new debt as
per current terms would be classified as short term to satisfy Canadian GAAP.
This classification would be required as the facilities are all due on demand.
The Company intends to review these terms in the future. As long as the company
continues to make regular scheduled payments and maintain certain financial
ratios, it is not the banks intention to demand repayment of this facility.

Under U.S. GAAP, the entire US$15 million demand loan would be classified as a
current liability. As a result, currently liabilities would increase by
$21,503,000 and long-term debt would decrease by $21,503,000.

Bank Indebtedness

Bank indebtedness as of December 31, 2001 was $1,921,000 (2000 - $3,405,000).
The decrease versus 2000 was due to the repayment and cancellation of a line of
credit used in the SunRich Food Group and the netting of the Environmental
Industrial Group bank debt of $1,783,000 against corporate cash as the line was
held at the same institution.

Long Term Debt

As at December 31, 2001, the company's long term debt, including current
portion, was $26,517,000, a decrease of $5,038,000 versus the prior year.
Repayment of debt totalled $9,856,000, which included scheduled repayments plus
an accelerated US$1,000,000 on one of the Food Group loans. New debt during the
year totalled US$2,119,000. Included in this was debt with a related party for
US$1,000,000 which was used to repay the amount noted above, plus debts related
to the Virginia Materials and First Light Foods acquisitions. The remaining
difference is attributable to exchange on US denominated debt.

The new financing arrangements previously stated replaces all but $1,913,000 of
the year-end debt including obligations under capital leases. This debt is
secured against specific equipment or is uncollateralized.

Other long-term liabilities

The Company had deferred purchase consideration of $1,657,000 at December 31,
2001 relating to the Virginia Materials acquisition. The deferred purchase
consideration will be paid on the purchase of the vendor's inventory as
acquired. It is expected to take approximately 16 months from December 31, 2001
to satisfy this liability.

The long-term future tax liability of $2,901,000 (2000 - $1,508,000) relates
principally to the SunRich Food Group and represents differences between the
accounting and tax basis of assets and liabilities primarily related to
property, plant and equipment and trademarks offset by the benefit of losses
carried forward and the long term portion of the scientific research
expenditures tax benefit.


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Stake Technology Ltd.                 33                December 31, 2001 - 10-K

<PAGE>

The long-term portion of Preference Shares of subsidiary companies was reduced
to $205,000 from $462,000 as a result of payments in 2001, which totalled
$186,000 in cash payments and the accelerated payments classified as current.

Cash Flow

For the year ended December 31, 2001, cash flow provided by operations before
working capital changes increased by $985,000 to $5,406,000 (2000 - $4,421,000),
due principally to a $3,115,000 increase in amortization and a decline in the
future tax recovery of $1,170,000, offset by lower net earnings of $3,343,000.

Cash flow provided by operations after working capital changes was $510,000 for
the year ended December 31, 2001 (2000 - $55,000) as a result of an increase in
inventory of $5,389,000 partially offset by lower accounts receivable balances
and higher customer deposits.

Cash used in investment activities increased to $17,588,000 in 2001 (2000 -
$10,820,000) as a result of an investment of $10 million in marketable
securities. During 2001, less cash was utilized in the acquisition of businesses
($3,460,000 in 2001 vs. $5,359,000 in 2000), capital spending increased $870,000
(2001 - $6,223,000 vs. 2000 - $5,353,000) and Northern received a full year
repayment from its note receivable in 2001 compared to three months in 2000.

Cash provided by financing activities was $21,317,000 in 2001 (2000 -
$9,270,000). The increase in cash from financing in 2001 is due to the four
equity placements during the year and proceeds from stock options for total
equity proceeds of $33,151,000. This was offset by net repayment of debt and
bank indebtedness of $9,821,000 and restricted cash primarily related to the
last private placement of $1,827,000.

2000 Operations Compared with 1999 Operations

Consolidated

Revenues in 2000 increased by 115% to $101,653,000 from $47,304,000 in 1999 and
the Company's earnings for 2000 increased by 121% to $3,374,000 or $0.15 per
common share compared to $1,524,000 or $0.09 per share for the year ended
December 31, 1999. The increase in the Company's revenues was due to the 2000
results having Sunrich's operations being included for twelve months rather than
five months in 1999 and the acquisitions of PECAL, Northern ,Nordic and Temisca
during 2000.

While earnings increased 121%, earnings per share increased 67% as earnings per
share in 2000 was based on an increased number of shares outstanding due to the
acquisition transactions in 2000. The weighted average number of common shares
in 2000 was 22,975,986 (1999 - 17,384,644).

US readers should note that due to differences between Canadian and US GAAP,
earnings for the 2000 under US GAAP are $2,571,000 or $0.11 per common share
(1999 - $1,449,000 or $0.08 per common share).

Cost of sales increased by 117% to $87,046,000 for the year ended December 31,
2000 compared to $40,127,000 for the year ended December 31, 1999. As noted in
the revenue analysis above, the increase in cost of sales was related to the
sales increase resulting from the acquisitions made in mid 1999 and during 2000.

The Company's consolidated gross margin was 14.4% in 2000 compared to 15.2% in
1999 as a result of product mix in businesses acquired.

Research and development costs related to the Steam Explosion Technology Group
were $200,000 in 2000 compared to $367,000 in 1999. The decrease in research
based steam explosion activities in 2000 was as a result of a more focused
effort towards the marketing and sale of the technology rather than research.

Selling, general and administration expenditures increased 116% in 2000 to
$11,094,000 compared to $5,136,000 for the year ended December 31, 1999. The
increase in administrative costs was due to the acquisitions made in mid 1999
and during 2000, and the increased costs of operating a larger public company.


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Stake Technology Ltd.                 34                December 31, 2001 - 10-K

<PAGE>

Interest on long-term debt and other interest expense increased to $1,527,000 in
2000 from $361,000 in 1999, due principally to the SunRich Food Group's debt
obligations. Canadian debt held by the Environmental Industrial Group and
Corporate represented $416,000 of interest expense in 2000 and SunRich Food
Group's interest expense in 2000 was $1,111,000.

Interest and other income increased to $402,000 in 2000 from $181,000 in 1999
due an increase in interest earned in the Company in 2000 over 1999, principally
due to the interest income on long term receivable.

The gain on purchase of Preference Shares of $175,000 (1999 - $nil) resulted
from the purchase of the Preference Shares outstanding in a subsidiary company
at a value less than their carrying value

The share of losses of equity accounted investees of $48,000 (1999 - $321,000)
and dilution gain of $140,000 (1999 - $nil) related to the Company's 32% equity
investment in Easton Minerals Ltd. (Easton) a mining exploration company listed
on the Canadian Venture Exchange (EM-CDNX). Dilution gains result from the
increase in the equity value of Easton due to issues of capital above Stake's
carrying cost of this investment.

Earnings before taxes increased by 134% to $2,506,000 in 2000 from $1,072,000 in
1999, as a result of these changes.

The Company recorded the benefit of previously unrecognized Canadian tax loss
carry forwards of $1,798,000 (1999 - $635,000) and provided a tax reserve of
$864,000 (1999 - $183,000) on the net earnings of the SunRich Food Group. The
net tax recovery contributed to an overall increase in net earnings of 122% to
$3,374,000 from $1,524,000 in 1999.

Segmented Operations Information

The SunRich Food Group

The SunRich Food Group contributed 68.7% or $69,822,000 of the $101,653,000 in
total revenue (1999 - five months - $24,991,000). In 2000, SunRich sales were
$59,693,000, and Northern sales were $10,129,000, for the three and one-half
month period since acquisition on September 15, 2000. As Nordic was in
pre-operating stage until December 31, 2000 all revenues and certain operating
costs were deferred in accordance with Canadian GAAP.

The Sunrich Food Group's cost of sales in 2000 was $60,721,000 (1999 - five
months - $22,340,000). The SunRich Food Group's margin in 2000 was 13% (1999 -
10.6%). The increased margin results from higher margins in the food processing
business of Northern.

In 2000, the SunRich Food Group's administration costs were $7,072,000 (1999 -
five months - $2,005,000). The increase in these costs is due to the twelve
versus five months of administration costs being included for SunRich, and the
administration costs of Northern and Nordic since acquisition.

Pre-tax earnings of the SunRich Food Group were $1,230,000 (1999 - five months -
$492,000). The net earnings of the Sunrich Food Group were $366,000 (1999 - five
months - $309,000). The net earnings of the SunRich Food Group were
significantly impacted by the after tax loss from the veggie burger business
that was closed prior to December 31, 2000.

The Company has not recognized the benefits of the Nordic tax losses of
approximately $2,200,000. Therefore, the effective tax rate increased in 2000 to
70% compared to 37% in 1999. The benefit of a portion of these losses will be
recognized when Nordic becomes profitable.

Environmental Industrial Group

The Environmental Industrial Group contributed 30.8% or $31,286,000 of 2000
consolidated sales (1999 - $21,829,000). In 2000, the Environmental Industrial
Group sales increased by 43.3% due to the purchase of PECAL in February and
Temisca in October, 2000 and growth in the existing business lines. Sales
consisted of sales of abrasives, foundry sands and other products of $29,081,000
(1999 - $19,215,000), recycling revenues of $1,832,000 (1999 - $2,614,000) and
Temisca sales for two winter months were $373,000 (1999 - $nil).


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Stake Technology Ltd.                 35                December 31, 2001 - 10-K

<PAGE>

Cost of sales in 2000 attributable to the Environmental Industrial Group were
$26,272,000 (1999 - $17,667,000), The Environmental Industrial Group's margin
decreased to 16% in 2000 from 19.1% in 1999, due to tight price competition in
some of the Environmental Industrial Group's principal product lines.

The Environmental Industrial Group's operations accounted for $2,579,000 of
consolidated administration costs (1999 - $1,722,000). The 49.8% increase in
these costs is due to the addition of three salesmen and the retention of
administration staff from the PECAL acquisition to create a new customer service
function for the Environmental Industrial Group and the costs of running a
larger Group with more locations.

Pre-tax earnings from operations of the Environmental Industrial Group were
$2,579,000 (1999 - $2,058,000).

Tax expense of $66,000 (1999 - $nil) for the Environmental Industrial Group
relates to the earnings of Temisca Inc. Due to the loss carry forwards of the
Canadian legal entity, no provision for income taxes has been recorded for the
earnings of BEI/PECAL. The benefits of these loss carry forwards of $1,798,000
(1999 - $635,000) has been recorded in the Steam Explosion Technology Group and
Corporate segment.

Net earnings of the Environmental Industrial Group were $2,513,000 for fiscal
2000 compared to $2,058,000 for fiscal 1999.

Steam Explosion Technology Group and Corporate Activities

Of the $101,653,000 in total revenues 0.5% or $545,000 were derived from the
Steam Explosion Technology Group and corporate sales (1999 - $484,000).

The Steam Explosion Technology Group and general corporate revenues of $545,000
in 2000 were generated from steam explosion licence fee revenue and private
industry projects of $231,000 (1999 - $410,000) and other corporate revenues
were $314,000 (1999 - $74,000). No steam explosion equipment sales were made in
2000 or 1999.

Steam Explosion Technology Group's cost of sales was $53,000 (1999 - $120,000),
which primarily relates to standard amortization charges.

Steam Explosion Technology Group and corporate margins were $492,000 or 90.3% on
$545,000 of revenue or (1999 - $364,000 on $484,000 of revenue or 75.2%) due to
the nature of the revenues in this Group.

Steam Explosion Technology Group's marketing and demonstration and corporate
administration expenses were $1,517,000 (1999 - $1,226,000). The increase in
these costs were due to more aggressive investor relations activities, the
increased costs of insurance, salaries and other costs of operating a larger
public company and increased marketing and travel costs incurred towards
securing a steam explosion equipment sale in China.

The loss from operations before tax of $1,303,000 (1999 - $1,478,000) is
principally due to the additional corporate costs of operating a larger public
company being charged to this segment.


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Stake Technology Ltd.                 36                December 31, 2001 - 10-K

<PAGE>


I
tem 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk

The primary objective of the Company's investment activities is to preserve
principal and limit risk. To achieve this objective, the company maintains its
portfolio in a variety of securities, including both government and corporate
obligations and money market funds. These securities are generally classified as
cash equivalents and are recorded on the balance sheet at fair value with
unrealised gains or losses reported through profit and loss.

Debt in both fixed rate and floating rate interest carry varying degrees of
interest rate risk. Fixed rate debt may have its 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 debt is generally subject to less interest rate risk than fixed rate debt.
As of December 31, 2001, the weighted average interest rate of the fixed rate
debt was 7%. With the new financing arrangement as of March 15, 2002 interest
expense is expected to decline. Presently the Company's new debt is at floating
interest rates that are partially hedged to variable rate investments. Remaining
fixed debt is under $2,000,000 and consequently the fair value would not be
materially affected by changing interest rates.

Foreign currency risk

All US subsidiaries use the US dollar as their functional currency. These
subsidiaries are subject to risks typical of multi-jurisdiction businesses,
including, but not limited to differing economic conditions, changes in
political climate, differing tax structures, other regulations and restrictions,
and foreign exchange rate volatility. Accordingly, the Company's future results
could be materially adversely affected by changes in these or other factors. The
company is exposed to foreign exchange rate fluctuations as the financial
results of US subsidiaries are translated into Canadian dollars on
consolidation. A 10% movement in the levels of foreign currency exchange rates
in favour of (against) the Canadian dollar with all other variables held
constant would result in a decrease (increase) in the translated value of the
Company's net assets in subsidiaries by $2,436,000. These changes would flow
through the Company's cumulative translation adjustment account.

During the year the company realized substantial exchange gains on US
denominated net assets at corporate, due primarily to funds held in US dollar
cash equivalents. The Company's Environmental Group has US based receivables and
payables that on a net basis provide limited exchange exposure. The Company's
Food Group also has limited net exposure to other currencies including Canadian.
It is the company's intention to hold funds in the currency in which the funds
are likely to be used, which will from time to time, potentially expose the
company to exchange rate fluctuations when converted into Canadian dollars. At
year-end US dollar funds were US$2,500,000. A 10% movement in the level of
foreign currency in favour of (against) the Canadian dollar would result in a
decrease (increase) in the company's year end financial instruments by $400,000.
International sales are made by our US based Food Group in US dollars to avoid
currency exposure.

Commodity risk

The SunRich 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 practical for minimizing risk from market price
fluctuations. 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 the Company's assessment of its exposure from
expected price fluctuations. Exchange purchase and sales contracts may expose
the Company to risk in the event that a counterparty to a transaction is unable
to fulfill its contractual obligation. The Company manages its risk by entering
into purchase contracts with pre-approved producers. The Company has a risk of
loss from hedge activity if a grower does not deliver the grain as scheduled.
Sales contracts are entered into with organizations of acceptable
creditworthiness, as internally evaluated. All futures transactions are marked
to market. Gains and losses on futures transactions related to grain inventories
are included in cost of goods sold. As at December 31, 2001, the quantity of
grain not hedged is not significant and therefore a change in the market price
would not have a material impact. There are no futures contracts in the
Environmental Industrial Group or the Steam Explosion Technology Group or
related to corporate activities.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 37                December 31, 2001 - 10-K

<PAGE>


Item 8. Financial Statements and Supplementary Data

Financial statements are set forth on pages F-1 through F-42 of this Report and
are incorporated herein by reference.


Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 38                December 31, 2001 - 10-K

<PAGE>


PART III


Item 10. Directors and Executive Officers of the Registrant

(a)   Identification of directors and executive officers as at March 8, 2002 is
      set forth below:


<TABLE>
<CAPTION>
===================================================================================================================================
                                                                                               Number of Shares
                                  Year First                                                     Beneficially
            Name                   Elected                Position              Class of    Owned/Number of Vested
         Directors:            Director/Officer         With Company             Shares             Options            % of Class
----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>               <C>                              <C>           <C>                        <C> 
Jeremy N. Kendall                     1978         Chairman of the Board,        Common        420,317/359,500 (1)         1.83%
                                                     C.E.O. & Director
----------------------------------------------------------------------------------------------------------------------------------
Cyril A. Ing, P. Eng.                 1984         Secretary and Director        Common          66,335/63,500 (2)         0.30%
----------------------------------------------------------------------------------------------------------------------------------
Joseph. Riz, CMA                      1986          Independent Director         Common          33,600/63,500 (3)         0.23%
----------------------------------------------------------------------------------------------------------------------------------
John D. Taylor                        1994      President, C.O.O. & Director     Common         97,027/199,500 (4)         0.70%
----------------------------------------------------------------------------------------------------------------------------------
Tim Bergqvist                         1989          Independent Director         Common          20,000/63,500 (5)         0.20%
----------------------------------------------------------------------------------------------------------------------------------
Michael Boyd                          1995          Independent Director         Common               0/16,000 (6)        0.038%
----------------------------------------------------------------------------------------------------------------------------------
James Rifenbergh                      1996          Independent Director         Common        313,448/113,500 (7)          1.0%
----------------------------------------------------------------------------------------------------------------------------------
Allan Routh                           1999       Director and President of       Common        553,781/110,000 (8)         1.56%
                                                       the Food Group
----------------------------------------------------------------------------------------------------------------------------------
Dennis Anderson                       2000      Director and Executive Vice      Common        3,806,335/4,000 (9)         8.93%
                                                 President of Operations of
                                                       the Food Group
----------------------------------------------------------------------------------------------------------------------------------
Larry (Andy) Anderson, CPA            2000         Director and Part-time        Common         367,089/3,000 (10)         0.87%
                                                  Financial Officer of the
                                                         Food Group
----------------------------------------------------------------------------------------------------------------------------------
Katrina Houde                         2000          Independent Director         Common             0 /16,000 (11)        0.038%
----------------------------------------------------------------------------------------------------------------------------------
Camillo Lisio                  August 2001          Independent Director         Common             0/ 16,000 (12)        0.038%
----------------------------------------------------------------------------------------------------------------------------------
Stephen Bronfman (A)          October 2001          Independent Director         Common              0/10,000 (13)        0.023%
----------------------------------------------------------------------------------------------------------------------------------
Robert Fetherstonhaugh (A)        December          Independent Director         Common              0/10,000 (14)        0.023%
                                      2001
----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Other officers:
----------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>                              <C>      <C>                             <C> 
Leslie N. Markow, CA                  1997      Chief Administrative Officer     Common         29,050/61,000 (15)         0.21%
----------------------------------------------------------------------------------------------------------------------------------
David Kruse, CMA                      2000          Vice President , COO         Common              0/19,500 (16)        0.046%
                                                  Environmental Industrial
                                                           Group
----------------------------------------------------------------------------------------------------------------------------------
Steven R. Bromley, CGA           September        Chief Financial Officer        Common         10,000/10,000 (17)        0.047%
                                      2001
===================================================================================================================================
All  Directors  and  Officers                                                    Common   5,716,982/1,138,500 (18)        16.07%
as a group
===================================================================================================================================
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 39                December 31, 2001 - 10-K

<PAGE>

Percentage ownership is calculated based on 41,081,228 total common shares
outstanding at December 31, 2001, plus all common shares subject to an option
currently exercisable, which at December 31, 2001 totaled 1,575,425 of which
1,137,500 are related to directors and officers noted above and described below.
The remaining 437,925 are options vested to other employees of the Company. This
calculation does not include options that have not vested or that have not yet
been approved by the directors or warrants or underwriter options/warrants
currently outstanding. Therefore, the "Percentage of Class" column is based on
42,656,653 common shares.

(A)   Pursuant to the subscription agreement dated September 28, 2001 (described
      under "Issuance of Securities and Use of Proceeds" - "Private Placement 3
      - 2000"), so long as any member of the Claridge Group (as defined in such
      subsection) remains the beneficial owner of at least five percent (5%) of
      the Company's issued and outstanding common shares, the Company will
      nominate for election and recommend to its shareholders a person
      designated by Claridge to serve on the Company's Board of Directors. For
      so long as the beneficial holdings of Claridge shall be at least fifteen
      percent (15%) of the Company's issued and outstanding common shares, the
      Company shall nominate a second designee of Claridge. Claridge currently
      beneficially owns more than fifteen percent (15%) of the Company's issued
      and outstanding common shares. Messrs. Bronfman and Fetherstonhaugh
      presently serve on the Company's Board pursuant to this agreement.

(1)   Includes options to purchase 4,500 common shares at US$1.06 per share
      pursuant to 1998 Stake Employee/Director Stock Option Plan

      Includes options to purchase 355,000 common shares at US $1.86 per share
      pursuant to 2001 Stake Employee/Director Stock Option Plan.

(2)   Includes options to purchase 7,500 common shares at US$1.06 per share
      pursuant to 1998 Stake Employee/Director Stock Option Plan

      Includes options to purchase 10,000 common shares at US$1.313 per share
      pursuant to the 1996 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 40,000 common shares at US $1.86 per share
      pursuant to the 2001 Stake Stock Option Plan.

      Includes options to purchase 6,000 common shares at US $2.10 per shares
      pursuant to 2002 Stake Stock Option Plan.

(3)   Includes options to purchase 7,500 common shares at US$1.06 per share
      pursuant to 1998 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 10,000 common shares at US$1.31 per share
      pursuant to the 1996 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 40,000 common shares at US $1.86 per share
      pursuant to 2001 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 6,000 common shares at US $2.10 per shares
      pursuant to 2002 Stake Stock Option Plan.

(4)   Includes options to purchase 4,500 common shares at US$1.06 per share
      pursuant to 1998 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 195,000 common shares at US $1.86 per share
      pursuant to 2001 Stake Employee/Director Stock Option Plan.

(5)   Includes options to purchase 7,500 common shares at US$1.06 pursuant to
      the 1998 Stake Employee/Director Stock Option Plan.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 40                December 31, 2001 - 10-K

<PAGE>

      Includes options to purchase 10,000 common shares at US$1.31 per share
      pursuant to the 1996 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 40,000 common shares at US $1.86 per share
      pursuant to 2001 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 6,000 common shares at US $2.10 per shares
      pursuant to 2002 Stake Stock Option Plan.

(6)   Includes options to purchase 10,000 common shares at US$1.31 per share
      pursuant to the 1996 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 6,000 common shares at US $2.10 per shares
      pursuant to 2002 Stake Stock Option Plan.

(7)   Includes options to purchase 7,500 common shares and 50,000 common shares
      at US$1.06 per share pursuant to the 1998 and 1999 Stake Employee/Director
      Stock Option Plans respectively.

      Includes options to purchase 10,000 common shares at US$1.31 per share
      pursuant to the 1996 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 40,000 common shares at US $1.86 per share
      pursuant to 2001 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 6,000 common shares at US $2.10 per shares
      pursuant to 2002 Stake Stock Option Plan.

(8)   Includes options to purchase 110,000 common shares at US$1.06 pursuant to
      1999 Stake Option Plan.

(9)   Includes options to purchase 4,000 common shares at US$1.31 per share
      pursuant to the 1999 Stake Employee/Director Stock Option Plan.

(10)  Includes options to purchase 3,000 common shares at US$1.31 per share
      pursuant to the 1999 Stake Employee/Director Stock Option Plan.

(11)  Includes options to purchase 10,000 common shares at US$1.31 per share
      pursuant to the 1996 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 6,000 common shares at US $2.10 per shares
      pursuant to 2002 Stake Stock Option Plan.

(12)  Mr. Lisio was made a director of the Company on August 21, 2001 and 10,000
      options were granted upon him joining at US$1.61 per share pursuant to the
      2001 Stake Employee/Director Stock Option.

      Includes options to purchase 6,000 common shares at US $2.10 per shares
      pursuant to 2002 Stake Stock Option Plan.

(13)  Mr. Bronfman was elected a director of the Company on September 28, 2001
      and 10,000 options were granted at US $2.10 per shares pursuant to the
      2002 Stake Employee/Directors Stock Option Plan.

(14)  Mr. Fetherstonhaugh was elected a director of the Company on December 13,
      2001 and 10,000 options were granted at US $2.10 per shares pursuant to
      the 2002 Stake Employee/Directors Stock Option Plan.

(15)  Includes options to purchase 4,000 common shares at US$1.31 per share
      pursuant to the 1996 Stake Employee/Director Stock Option Plan.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 41                December 31, 2001 - 10-K

<PAGE>

      Includes options to purchase 4,500 common shares at US$1.06 pursuant to
      the 1998 Stake Stock Option Plan

      Includes options to purchase 52,500 common shares at US $1.86 per share
      pursuant to 2001 Stake Employee/Director Stock Option Plan.

(16)  Includes options to purchase 5,000 common shares at US $1.86 per share
      pursuant to 2001 Stake Employee/Director Stock Option Plan.

      Includes options to purchase 4,500 common shares at US$1.06 pursuant to
      the 1998 Stake Stock Option Plan.

      Includes options to purchase 10,000 common shares at US$1.31 per share
      pursuant to the 1993 Stake Employee/Director Stock Option Plan.

(17)  Includes options to purchase 10,000 common shares at US$1.53 from the 1999
      Stake Employee/Director Stock Option Plan.

(18)  Summary of Employee/Director Stock Option Plans:


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                 #Held by           Total
                                                 # Held by     # Held by        Employees
      Expiry date            Exercise Price      Directors      Officers       /Consultants
-----------------------------------------------------------------------------------------------------------------
<S>                        <C>                    <C>                 <C>             <C>              <C>
December 11, 2003               US$1.86             454,000           31,000           92,100            577,100
-----------------------------------------------------------------------------------------------------------------
December 31, 2003          US$0.75 to US$1.86       279,500           23,000           39,625            342,125
-----------------------------------------------------------------------------------------------------------------
August 2, 2004                  US$1.06             100,000               --           52,800            152,800
-----------------------------------------------------------------------------------------------------------------
December 31, 2004          US$1.06 to US$1.86        77,500           12,500           34,000            124,000
-----------------------------------------------------------------------------------------------------------------
April 5, 2005                   US$1.41                  --               --           16,000             16,000
-----------------------------------------------------------------------------------------------------------------
August 2, 2005                  US$1.06             110,000               --           10,400            120,400
-----------------------------------------------------------------------------------------------------------------
October 1, 2005              US$1.31-$1.53            7,000               --           45,400             52,400
-----------------------------------------------------------------------------------------------------------------
December 20, 2005               US $1.31             10,000           14,000           59,000             83,000
-----------------------------------------------------------------------------------------------------------------
May 5, 2006                     US$1.80                  --               --           59,500             59,500
-----------------------------------------------------------------------------------------------------------------
June 4, 2006                    US $1.53                 --           10,000               --             10,000
-----------------------------------------------------------------------------------------------------------------
August 21, 2006                 US$1.61              10,000               --            5,000             15,000
-----------------------------------------------------------------------------------------------------------------
September 20, 2006              US $1.80                 --               --            5,500              5,500
-----------------------------------------------------------------------------------------------------------------
December 12, 2006               US $2.10                 --               --           17,600             17,600
-----------------------------------------------------------------------------------------------------------------
                   Total                          1,048,000           90,500          436,925          1,575,425
-----------------------------------------------------------------------------------------------------------------
</TABLE>


(b)   Set forth below is a biographical description of each director and officer
      of the Company:

Jeremy Kendall has served as a Director of the Company since September 1978. In
June 1983, he was elected Chairman of the Board and Chief Executive Officer of
the Company. He is Chairman of the Board of all of the Company's subsidiaries
except 1108176 Ontario Limited. He is also Chairman of Jemtec Inc. (6/91 to
present), Easton Minerals Ltd. (1/95 to present). In the past 5 years, Mr.
Kendall has served on the following board of directors: BI Inc. (9/81 to 11/00),
Brigdon Resources Inc. (6/93 to 2/99) and Redaurum Ltd. (6/94 to 12/98). He is
also a Director of a number of private and charitable organizations.

Cyril Ing is a Professional Engineer and was elected a Director in January 1984
and became an employee in August 1985. He was an independent consultant
specializing in engineering projects involving the combustion of biomass from
May of 1982 to August 1985. For the previous 10 years he was President of the
Conat Group, a holding company, whose major subsidiary, Westair Systems Inc., is
a distributor and manufacturer of industrial dehumidification equipment. In
March 1990, Mr. Ing retired from full time employment. In the past 5 years, Mr.
Ing has served on the following board of directors: Wisper Inc. (11/99 to
present), and Jemtec Inc. (11/99 to present).

Joseph Riz was elected a Director of the Company in July 1986. He is presently
Managing Director of Tricapital Management Ltd., a merchant banking and
financial advisory firm. From 1983 to 1985 he was an Executive Vice


--------------------------------------------------------------------------------
Stake Technology Ltd.                 42                December 31, 2001 - 10-K

<PAGE>

President of Crowntek, Inc. In the past 5 years, Mr. Riz has served on the Board
of Directors of Telepanel Systems Inc. (4/89 to present).

Tim Bergqvist was elected a Director of the Company in January of 1989. He has
recently retired as the Chairman of Eucalyptus Pulp Mills PLC. He is currently
Chairman of Quinta da Rosa (Vinhos do Porto) Lda in Portugal. In the past 5
years, Mr. Bergqvist has not served on any other reporting issuers Board of
Directors.

John Taylor was elected to the Board of Directors in December 1994. He was
appointed President and Chief Operating Officer of the Company in 1991. From
1986 to 1991, Mr. Taylor was the Company's Vice President of Marketing and
Planning. In the past 5 years, Mr. Taylor has not served on any other reporting
issuers Board of Directors.

Michael Boyd was elected to the Board of Directors in December 1995. Mr. Boyd
was the former Managing Director Merchant Banking of HSBC Capital (Canada) Inc.,
a merchant-banking subsidiary of the HSBC Bank of Canada. In the past 5 years,
Mr. Boyd has served on the following Board of Directors: Wescam Inc. (06/98 to
present), Afton Food Group Ltd. (5/00 to present), Rtica Inc. (5/97 to present),
and Funtime Gaming Inc. (6/96 to 8/99).

Jim Rifenbergh was elected to the Board of Directors in April 1996. Mr.
Rifenbergh is Past President and Chairman of Brown Printing Company of Waseca,
Minnesota, a large printing company with plants throughout the United States. He
is also a Director of a number of other private companies and organizations. In
the past 5 years, Mr. Rifenbergh has served on the Board of Directors of ARC
Capital Inc. (6/96 to 12/96).

Allan Routh was elected to the Board of Directors in September 1999. Mr. Routh
is President of the SunRich Food Group, Inc., the Company's wholly owned
subsidiary. Mr. Routh has been involved in the soy industry since 1984. Mr.
Routh has been President and Chief Executive Officer of Sunrich, Inc. since
1994. Mr. Routh is presently serving a term on the Board of Directors of the
Soyfoods Association of North America and served as its President between 1999
and 2000. In the past 5 years, Mr. Routh has not served on any other reporting
issuers Board of Directors.

Dennis Anderson was elected to the Board of Directors in September 2000. Mr.
Anderson is the Executive Vice President Operations of the SunRich Food Group,
Inc., the Company's wholly owned subsidiary. Mr. Anderson was the owner of
Northern Food & Dairy, Inc. for five years prior to the Company's' acquisition.
In the past 5 years, Mr. Anderson has not served on any other reporting issuers
Board of Directors.

Larry (Andy) Anderson was elected to the Board of Directors in September 2000.
Mr. Anderson is a CPA and a member of the American Institute of CPA's and
Minnesota Society of CPA's and acts as a part time financial officer to the
SunRich Food Group, Inc.. Prior to his involvement with the SunRich Food Group,
Inc., Mr. Anderson was a partner in a Minneapolis CPA firm for more than five
years prior to the Company's acquisition of Northern. In the past 5 years, Mr.
Anderson has not served on any other reporting issuers Board of Directors.

Katrina Houde was elected to the Board of Directors in December 2000. Ms. Houde
is currently an independent consultant. For the five years prior to her election
to the Stake Board, Ms. Houde was with Cuddy International Corp., a large
international poultry company with 2,200 employees worldwide. Ms. Houde held
several senior executive positions at Cuddy International Corp., and served as
President of Cuddy Food Products. Her positions at Cuddy encompassed a wide
range of responsibilities including human resources, IT, finance, public
relations, strategic planning, and governmental affairs, as well as overall
accountability for all operating divisions. In the past 5 years, Ms. Houde has
not served on any other reporting issuers Board of Directors.

Camillo Lisio spent the last 18 years with Saputo Inc., most recently as
President and Chief Operating Officer, until his recent decision to pursue other
business and personal interests. Mr. Lisio has been active in business and civic
affairs. Other than serving on the Board of Directors of Saputo Inc., he was
also a director of the Santa Cabrini Hospital, the International Dairy Foods
Association and the National Dairy Council of Canada. Early in his career, he
was with CFMB, a multilingual radio station in Montreal, where as interim
President, he transitioned the station following the death of the founder. In
the past 5 years, Mr. Lisio has served on Board of Directors: of Saputo Inc.
(03/98 to 4/01) and Uniforet Inc. (10/98 to 4/01).


--------------------------------------------------------------------------------
Stake Technology Ltd.                 43                December 31, 2001 - 10-K

<PAGE>

Stephen Bronfman is Chairman of Claridge SRB Investments Inc., a privately held
company with worldwide interests, formed in 1998 to manage his existing holdings
and to evaluate future investment opportunities. The Claridge Group currently
owns approximately 17.0% of the issued and outstanding common shares of Stake
Technology Ltd.. Mr. Bronfman has been active in numerous business and civic
affairs. Mr. Bronfman sits on the Board of Directors of The David Suzuki
Foundation; The Saidye Bronfman Centre for the Arts; The Samuel and Saidye
Bronfman Family Foundation; and The Summit School Foundation. Previously Mr.
Bronfman served on the Board of Directors of The Seagram Company, Ltd. and was
Co-Chairman of the Executive Committee of the Montreal Expos Baseball Club.

Robert Fetherstonhaugh is a Chartered Accountant and is the Executive Vice
President of The Claridge Group. Mr. Fetherstonhaugh has a broad business
background both in North America and internationally, previously serving as
Deputy Chairman of Trader.com, an international publishing company, and a former
partner at KPMG. Mr. Fetherstonhaugh is also currently a director of Trader.com
and Unity Wireless Corporation.

Steven Bromley is a Certified General Accountant and joined the Company in June
2001. The Board of Directors appointed Mr. Bromley Chief Financial Officer on
September 19, 2001. Prior to joining the Company, Mr. Bromley spent over 13
years in the Canadian dairy industry in a wide rage of financial and operational
roles with both Natrel Inc. and Ault Foods Limited. In his last position with
Natrel Inc., Mr. Bromley served as Vice President, Business Development and
Information Systems. From 1997 to 1999 he served on the Board of Directors of
Natrel, Inc.. In the past 5 years, Mr Bromley has not served on any other
reporting issuers Board of Directors.

Leslie Markow is a Chartered Accountant and joined the Company in 1991. Ms.
Markow was appointed Chief Financial Officer in 1997 and held this position
until September 2001 at which time Ms Markow shifted responsibilities to become
the Chief Administrative Officer. Ms. Markow was with Coopers & Lybrand, now
known as PricewaterhouseCoopers LLP, from 1983-1991, last as an Audit Manager.
She is also CFO and nominated as a director of Easton Minerals Limited as well
as being a director of Jemtec Inc., both CDNX listed companies.

David Kruse is a Certified Management Accountant and joined the Company in 1997.
Mr. Kruse was appointed Vice President of the Company and the Chief Operating
Officer of the Environmental Industrial Group in 2000. In the past 5 years, Mr.
Kruse has not served on any reporting issuers Board of Directors

Audit Committee

The following three independent Directors are members of the audit committee:
Michael Boyd, Joseph Riz, and Katrina Houde.

Mr. Boyd is chairman of the Audit Committee. The Audit Committee's duties and
responsibilities are documented in a formal audit committee charter. These
duties include (a) providing oversight of the financial reporting process and
management's responsibility for the integrity, accuracy and objectivity of
financial reports and related financial reporting practices; (b) recommending to
the Board of Directors the appointment of the Company's auditors; (c) providing
oversight of the adequacy of the Company's system of internal controls; and (d)
providing oversight of management practices relating to ethical considerations
and business conduct, including compliance with laws and regulations.

The audit committee meets formally four times a year, once to review the 10K and
annual audited financial statements and before each quarter's earnings are filed
to review interm financial statements and Form 10Q which is filed with the
Securities and Exchange Commission/Nasdaq in the US and the Toronto Stock
Exchange and Ontario Securities Commission in Canada. Other meetings may be held
as at the discretion of the Chair of the Audit Committee, Mr. Michael Boyd.
During, 2001, the audit committee met four times. The Audit Committee has free
and unfettered access to PricewaterhouseCoopers, the Company's auditors.

Corporate Governance (Executive Committee) and Compensation Committee

The following three independent Directors are members of the Corporate
Governance (Executive Committee) and Compensation Committee: Camillo Lisio, Joe
Riz and Robert Fetherstonhaugh.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 44                December 31, 2001 - 10-K

<PAGE>

On September 13, 2001 the Company created, by board resolution, the Corporate
Governance Committee. This committee also acts as the Company's Compensation
Committee. The Company and the Corporate Governance Committee have developed a
set of formal Corporate Governance Policies that are monitored on an ongoing
basis to ensure that the Company is in compliance with its Corporate Governance
Policies.

The function of the Compensation Committee is to determine the compensation of
the CEO as well as to review and approve the compensation recommended by the CEO
for all other senior officers and employees of the Company. In addition, this
committee oversees the Option Plans of the Company. The Compensation Committee
formally meets in person once a year, normally in December. In addition, several
telephone meetings are held during the year for administrative matters connected
to the responsibilities of this Committee.

Statement of Stake Technology Ltd.'s Corporate Governance Practices:


<TABLE>
<CAPTION>
           Governance Guidelines                       Stake Technology Ltd.'s Practices
<S>        <C>                                         <C>
1.         The Board of the Directors is responsible   In accordance with the Canada Business Corporations Act,
           for the stewardship of Stake Technology     the business of the Corporation is managed under the
           Ltd. ("Corporation"), and specifically      direction of its Board of Directors. The Chairman and
           for:                                        Chief Executive Officer makes recommendations to the
                                                       Board of Directors with respect to matters of corporate
                                                       policy after discussion, when appropriate, with the
                                                       members of Senior Management. The Board of Directors
                                                       then takes the decisions that it deems appropriate,
                                                       supervises the execution of such decisions and reviews
                                                       the results obtained.

  (a.)     adoption of a strategic planning process    The duties of the Board of Directors include the review
                                                       on an annual basis of the three-year strategic plan for
                                                       each operating group of the Corporation.

  (b.).    identification of principal risks, and      The Board of Directors' duties include the review of
           implementing risk managing systems          overall business risks and of the Corporation's
                                                       practices and policies for dealing with these risks.

                                                       In addition, the Audit Committee assesses principal
                                                       risks which the Corporation faces and, where
                                                       appropriate, proposes the implementation of risk
                                                       management systems.

  (c.)     succession planning and monitoring senior   The Board Governance Committee reviews, reports, and
           management                                  where appropriate, provides recommendations to the Board
                                                       of Directors on succession planning matters and, with
                                                       the Audit Committee and the Board of Directors, monitors
                                                       the performance of senior management.

  (d.)     communications policy                       Each of the Board of Directors and the Audit committee
                                                       reviews and, where required, approves statutory
                                                       disclosure documents prior to their distribution to
                                                       shareholders.

                                                       In addition, the Corporation has a shareholder relations
                                                       process to respond to shareholder questions and
                                                       concerns. All communications from shareholders are
                                                       referred to the Chairman or the appropriate corporate
                                                       officer for response. Management promptly advises the
                                                       Board of Directors if shareholders raise any significant
                                                       issues. In addition, the Corporation communicates with
                                                       its shareholders, securities analysts and the media
                                                       regularly on developments in its business and results,
                                                       through the annual report, interim financial statements
                                                       and reports to shareholders, press releases and material
                                                       change reports as per communication policy.

  (e.)     integrity of internal control and           The Board of Directors' duties include the assessment of
           management information systems              the integrity
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 45                December 31, 2001 - 10-K

<PAGE>


<TABLE>
<S>        <C>                                         <C>
                                                       of the Corporation's internal controls and information
                                                       systems. In addition, the Audit Committee has oversight
                                                       responsibility of internal controls and management
                                                       information systems.

2.         Majority of Directors should be             The Board of Directors is composed of fourteen persons.
           "unrelated" (independent of management      Of the fourteen Directors, nine are "unrelated" under
           and free from conflicting interest) to      the Guidelines and the five others are Senior Officers
           the Corporation and the Corporation's       of the Corporation. The composition of the Board of
           significant shareholder, if any.            Directors fairly reflects, therefore, the investment in
                                                       the Corporation by the shareholders.

3.         Disclose for each Director whether he is    Jeremy N. Kendall         Related         Chairman and Chief
           related, and how that conclusion was                                                  Executive Officer
           reached
                                                       John D. Taylor            Related         President and Chief
                                                                                                 Operating Officer
                                                       Allan Routh               Related         Director and President of
                                                                                                 the SunRich Food Group,
                                                                                                 Inc.
                                                       Dennis Anderson           Related         Director and Executive
                                                                                                 Vice President -
                                                                                                 Operations of the SunRich
                                                                                                 Food Group, Inc.
                                                       Larry (Andy) Anderson     Related         Director and Part-time
                                                                                                 Financial Officer of the
                                                                                                 Sunrich Food Group, Inc.
                                                       Cyril A. Ing              Unrelated
                                                       Joseph Riz                Unrelated
                                                       Tim Bergqvist             Unrelated
                                                       Michael Boyd              Unrelated
                                                       Jim Rifenbergh            Unrelated
                                                       Katrina Houde             Unrelated
                                                       Camillo Lisio             Unrelated
                                                       Robert Fetherstonhaugh    Unrelated
                                                       Stephen Bronfman          Unrelated

4.         Appoint a Committee of Directors            The Chairman of the Board or other Directors submits to
           responsible for proposing to the full       the Board Governance Committee candidates to fill
           Board of Directors new nominees to the      vacancies on the Board of Directors. If the candidacy is
           Board and for assessing Directors on an     endorsed by the Board Governance Committee, it is then
           ongoing basis                               submitted to the approval of the Board of Directors. New
                                                       Directors are then included in an orientation and
                                                       education program (see Item 6).

5.         The Board Governance Committee is           The Board Governance Committee is composed of three
           composed exclusively of outside Directors   outside Directors.

6.         Implement a process for assessing the       An annual review of Board members is undertaken by the
           effectiveness of the Board of Directors,    Board Governance Committee with advice from the Chairman
           its Committees and individual Directors     and CEO.
           in accordance with overall governance
           policy
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 46                December 31, 2001 - 10-K

<PAGE>


<TABLE>
<S>        <C>                                         <C>
7.         Provide orientation and education           New Directors participate in an initial information
           programs for new Directors                  session on the Corporation in the presence of Management
                                                       representatives. In addition, they are furnished with
                                                       appropriate documentation relating to the commercial
                                                       activities of the Corporation and the internal
                                                       organization of the Corporation; monthly reports
                                                       detailing the commercial activities of the Corporation
                                                       and the internal organization of the Corporation. The
                                                       meetings in which new Directors participate (including
                                                       annual strategic planning sessions) as well as
                                                       discussions with other Directors and with management
                                                       permit new Directors to familiarize themselves rapidly
                                                       with the operations of Corporation. Facility visits can
                                                       also be arranged for new Directors.

8.         Consider reducing the size of the Board     The Board of Directors is of the view that its size and
           of Directors, with a view to improving      composition is somewhat larger than ideal and intends to
           effectiveness                               reduce its size from 14 to 9 over a period of time,
                                                       reducing both related and unrelated Directors.

9.         The Board of Directors should review        The Board Governance Committee of the Board of Directors
           compensation of Directors in light of       reviews periodically compensation policies in light of
           risks and responsibilities                  market conditions and practice and in light of risks and
                                                       responsibilities.

10.        Committees of the Board of Directors        The Board Governance Committee is composed of three
           should generally be composed of unrelated   unrelated Directors. The Board Governance Committee has
           (non-management) Directors, a majority of   the responsibility, upon the recommendation of the
           whom are unrelated Directors                Chairman and Chief Executive Officer, for defining
                                                       salary classes and levels and extent of participation in
                                                       the incentive program. In addition, this Committee
                                                       determines, based on the proposal of the Chairman of the
                                                       Board, the persons eligible to benefit from the stock
                                                       option plan and in which proportion, according to their
                                                       position. The Board Governance Committee also assesses
                                                       the performance of the Chairman and Chief Executive
                                                       Officer; the Committee's recommendations in this regard
                                                       are then presented to the Board of Directors. When a
                                                       vacancy on the Board of Directors needs to be filled,
                                                       the Chairman of the Board recommends the person or
                                                       persons whom he deems appropriate to fill the vacancy
                                                       and submits his proposal to the Board Governance
                                                       Committee. The Board Governance Committee can then
                                                       endorse such recommendations, which, if endorsed, are
                                                       presented to the Board of Directors.

11.        The Board of Directors should expressly     The Board Governance Committee is responsible for
           assume responsibility for, or assign to a   developing and monitoring the Corporation's approach to
           committee the general responsibility for,   governance issues and for the Corporation's response to
           approach to corporate governance issues     the Guidelines and recommending these policies to the
                                                       Board of Directors.

12.a.      Define limits to Management's
           responsibilities by developing mandates
           for:

  (i)      the Board of Directors                      The Board of Directors is, by law, responsible for
                                                       managing the business and affairs of the Corporation.
                                                       Any responsibility, which is not delegated to either
                                                       Management or a Committee remains with the Board of
                                                       Directors. In general, all matters of policy and all
                                                       actions proposed to be taken which are not in the
                                                       ordinary course of business require the prior approval
                                                       of the Board of Directors or of a Board committee to
                                                       which approval authority has been delegated.
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 47                December 31, 2001 - 10-K

<PAGE>


<TABLE>
<S>        <C>                                         <C>
  (ii)     the CEO                                     The corporate objectives which the Chairman and Chief
                                                       Executive Officer is responsible for meeting, with the
                                                       rest of Management placed under his supervision, are
                                                       determined by the strategic plans and the budget as they
                                                       are approved each year by the Board of Directors.
                                                       Performance of the Chairman and Chief Executive Officer
                                                       and Management is assessed against the achievement of
                                                       the strategic plans and the budget.

  b.       the Board of Directors should approve       The Board of Directors governs the strategic plan and
           CEO's corporate objective                   budgets for the Corporation.

13.        Establish procedures to enable the Board    While there are no formal structures in place to ensure
           of Directors to function independently of   that the Board of Directors can function independently
           management                                  of Management, the Board of Directors of the Corporation
                                                       is free to ask one or more members of Management to
                                                       withdraw during certain discussions and the Directors of
                                                       the Corporation would not hesitate to meet without the
                                                       presence of the members of Management who are also
                                                       Directors, including the Chairman and Chief Executive
                                                       Officer, if the circumstances were to so require.

14(a.)     establish an Audit Committee with a         The roles and responsibilities of the Audit Committee
           specifically defined mandate                have been specifically defined by the Audit Committee
                                                       and approved by the Board of Directors and include the
                                                       review of the annual and interim financial statements of
                                                       the Corporation. The Audit Committee has direct
                                                       communication channels with both the internal financial
                                                       management and external auditors to discuss and review
                                                       specific issues as appropriate.

  (b.)     all members should be non-management        The Audit Committee is composed of three outside
           Directors                                   Directors, all of whom are "unrelated" and are advised
                                                       by the Vice President, Finance and Chief Financial
                                                       Officer who can facilitate the understanding by the
                                                       remaining members of the Committee of given situations.

15.        Implement a system to enable individual     Individual Directors could, if required, retain outside
           Directors to engage outside advisors, at    advisors at the Corporation's expense.
           the Corporation's expense
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 48                December 31, 2001 - 10-K

<PAGE>

Board Compensation

In addition to annual grants of options, Directors who are not Company officers
receive a director fee of $1,500 for each board meeting attended in person as
well as $250 for participating in committee meetings and telephone meetings,
plus reimbursement of travelling and administrative expenses to attend meetings
and manage their Board responsibilities. The Corporate Secretary receives an
additional $500 per quarter for his additional responsibilities.

(c)   Identification of Executive Officers of Registrant:

The following table shows certain information with respect to the Company's
Officers, including its Executive Officers as of March 8, 2002:


<TABLE>
<CAPTION>
===================================================================================================================
Name                       Age            Officers of Stake
-------------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>
Jeremy N. Kendall  *       62             Chairman of the Board (1983)
                                          Chief Executive Officer (1983)
                                          Director (1978)
===================================================================================================================
John D. Taylor  *          49             Director (1994)
                                          President and Chief Operating Officer (1991)
                                          Vice President, Marketing and Planning (1986)
===================================================================================================================
Cyril A. Ing *             69             Corporate Secretary and Director (1984)
===================================================================================================================
Steven R. Bromley  *       42             Vice President, Finance and Chief Financial Officer (2001)
===================================================================================================================
Leslie N. Markow  *        41             Vice-President,  Corporate  Compliance/Regulatory  Reporting  and  Chief
                                          Administration Officer (2001)
                                          Vice President, Finance and Chief Financial Officer (1997- 2001),
                                          Controller (1991-1997), Assistant Corporate Secretary (1993)
===================================================================================================================
David Kruse  *             34             Vice President, COO, Environmental Industrial Group (2000)
===================================================================================================================
</TABLE>


*     Director and Officer biographies are detailed in the proceeding pages

There are no family relationships between any of the Officers or Directors of
the Company.

Officers of the Company are elected by the Board of Directors at its first
meeting after each Annual Meeting of Shareholders and serve a term of office
until the next Annual Meeting. Officers elected by the Board of Directors at any
other time serve a term of office until the next Annual Meeting.

The Annual Meeting of Shareholders for 2002 will be held on June 18, 2002 at a
location in downtown Toronto, Ontario, Canada.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 49                December 31, 2001 - 10-K

<PAGE>


Item 11. Executive Compensation

The following tables set forth all remuneration paid by the Company and its
subsidiaries during the last three years ended December 31, 2001, 2000 and 1999
to its C.E.O. and top four executive officers as well as top two divisional
employees earning in excess of US$100,000:

                           SUMMARY COMPENSATION TABLE
                             (STATED IN US DOLLARS)


<TABLE>
<CAPTION>
                                                    Annual Compensation                        Awards                Payouts
================================================================================================================================
                                                                         Other
   Name and Principal Occupation                                         Annual     Restricted                      All Other
                                                                      Compensation    Stock     Option    LTIP     Compensation
                                        Year      Salary      Bonus        (6)        Awards     SARs    Pay-outs      (7)
--------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>      <C>         <C>           <C>             <C>       <C>      <C>      <C>
Jeremy N. Kendall - C.E.O.              2001     $167,332    $13,347       $14,001         --        --       --       $269,123
--------------------------------------------------------------------------------------------------------------------------------
                                        2000     $169,263    $45,590        $6,910         --        --       --             --
--------------------------------------------------------------------------------------------------------------------------------
                                        1999     $154,478     $4,889       $17,524         --        --       --             --
--------------------------------------------------------------------------------------------------------------------------------
John D. Taylor - C.O.O.                 2001     $109,679    $10,968       $10,003         --        --       --       $147,828
--------------------------------------------------------------------------------------------------------------------------------
                                        2000     $115,479    $32,870       $15,560         --        --       --             --
--------------------------------------------------------------------------------------------------------------------------------
                                        1999     $112,245    $14,747       $11,494
--------------------------------------------------------------------------------------------------------------------------------
Steven R. Bromley - C.F.O (1).          2001      $60,282     $6,236       $10,425         --        --       --             --
--------------------------------------------------------------------------------------------------------------------------------
Leslie N. Markow - C.A.O (2)            2001      $90,381     $8,314       $11,937         --        --       --        $39,800
--------------------------------------------------------------------------------------------------------------------------------
                                        2000      $69,014    $11,824       $13,137
--------------------------------------------------------------------------------------------------------------------------------
                                        1999      $60,573     $5,358        $7,745
--------------------------------------------------------------------------------------------------------------------------------
David Kruse - VP, COO Environmental     2001      $83,925     $1,358       $11,049         --        --       --         $3,790
Industrial Group (3)
--------------------------------------------------------------------------------------------------------------------------------
                                        2000      $62,618     $8,457       $12,345                                      $12,345
--------------------------------------------------------------------------------------------------------------------------------
Allan Routh - Director and              2001     $116,923    $40,000        $5,370         --        --       --             --
President of the SunRich Food Group
(4)
--------------------------------------------------------------------------------------------------------------------------------
                                        2000     $110,000    $20,000        $6,555
--------------------------------------------------------------------------------------------------------------------------------
                                        1999      $44,423    $60,000        $3,774
--------------------------------------------------------------------------------------------------------------------------------
Dennis Anderson - Director and          2001     $130,960    $18,689        $2,619         --        --       --             --
Executive Vice President of
Operations of the Food Group (5)
--------------------------------------------------------------------------------------------------------------------------------
                                        2000      $18,689         --          $761         --        --       --             --
================================================================================================================================
</TABLE>


      (1)   Mr. Steven R. Bromley joined the Company on June 4, 2001 and was
            appointed Vice President, Finance and Chief Financial Officer in
            September 2001, at an annual salary before bonuses and benefits of
            US$103,292.

      (2)   Ms. Leslie N. Markow was the Vice President, Finance and Chief
            Financial Officer in 1999, 2000. In September 2001, Ms. Markow
            relinquished this position and assumed the role of Chief
            Administrative Officer.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 50                December 31, 2001 - 10-K

<PAGE>

      (3)   Mr. David Kruse was appointed a Vice President of the Company during
            2000; therefore 1999 earnings are not reported.

      (4)   Mr. Alan Routh joined the Company in August 1999; therefore 1999
            compensation reflects the five month period from August to December
            1999.

      (5)   Mr. Dennis Anderson joined the Company in September 2000; therefore
            2000 compensation reflects the period of September 16 to December
            31, 2000.

      (6)   Other annual compensation represents taxable benefits for automobile
            use or reimbursement of costs, life insurance, retirement savings
            contributions, and interest on short-term loans.

      (7)   All Other compensation is the value received over exercise price of
            stock options exercised.

Executive employment contracts

Mr. Jeremy Kendall, Chairman & C.E.O., entered into an employment contract with
the Company in October 2001 for a period through February 26, 2020. The contract
anticipates that on February 26, 2005, his 65th birthday, Mr. Kendall may elect
to relinquish the role of C.E.O. and maintain being the Chairman of the Board,
subject to shareholder and Board approval, at a reduced level of compensation.
The contract provides for consulting fees to be paid on a sliding scale over
time until February 20, 2020 to Mr. Kendall or his spouse. These consulting fees
are to be paid even if Mr. Kendall retires fully, the Company no longer requires
his services or if Mr. Kendall passes away before February 26, 2020.

Mr Allan Routh, President of The SunRich Food Group, Inc. has an annual
employment contract renewable on a mutual basis between Mr. Routh and the
Company each August 1st.

Mr. Dennis Anderson, Executive Vice President of The SunRich Food Group, Inc.
has an initial 2 year employment contract that may be renewed on a mutual basis
between Mr. Anderson and the Company starting at the end of the first two year
period which expires on September 20, 2002.

None of the other executives listed in the Summary Compensation Table above have
employment contacts.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 51                December 31, 2001 - 10-K

<PAGE>

The following table contains information concerning individual grants of stock
options made during the last completed fiscal year, to the following executive
officers:

                        OPTION GRANTS IN PAST FISCAL YEAR


<TABLE>
<CAPTION>
===============================================================================================================================
                                                      % of Total Options     Exercise on
           Name                 Options Granted      Granted to Employees     base price             Expiration Date
                                                        in Fiscal Year       (US$/Share)
-------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                            <C>               <C>            <C>
 Jeremy N. Kendall - C.E.O.         355,000                  29.3%              $1.86         225,000 on December 11, 2003,
                                                                                              102,500 on December 31, 2003,
                                                                                               27,500 on December 31, 2004
-------------------------------------------------------------------------------------------------------------------------------
 John D. Taylor - President         195,000                  16.1%              $1.86         112,000 on December 11, 2003,
        and C.O.O.                                                                             55,000 on December 31, 2003,
                                                                                               27,500 on December 31, 2004
-------------------------------------------------------------------------------------------------------------------------------
 Steven R. Bromley - C.F.O      50,000 - 10,000              4.1%              $1.53125                June 4, 2006
                              vested on grant and
                               10,000 on each of
                              June 4, 2002 to 2005
===============================================================================================================================
 Leslie N. Markow - C.A.O.           52,500                  4.3%               $1.86          17,000 on December 11, 2003,
                                                                                               23,000 on December 31, 2003,
                                                                                               12,500 on December 31, 2004
===============================================================================================================================
     David Kruse - Vice              5,000                   0.4%               $1.86               December 11, 2003
      President, COO
 Environmental Industrial
           Group
===============================================================================================================================
</TABLE>


No options were granted to Mr. Routh or Mr. Dennis Anderson during 2001.

                         DECEMBER 31, 2001 OPTION VALUES
                             (STATED IN US DOLLARS)


<TABLE>
<CAPTION>
===============================================================================================================================
                 (a)                       (b)           (c)                (d)                           (e)
-------------------------------------------------------------------------------------------------------------------------------
                 Name                     Shares       Value
                                         Acquired   Realized in   Number of Unexercised     Value of Unexercised in the Money
                                            on        2000 ($)     Options at 12/31/01             Options at 12/31/01
                                         Exercise                 Vested/Not Yet Vested           Vested/Not Yet Vested
                                            in
                                         2001 (#)
-------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>              <C>                          <C>
Jeremy N. Kendall - C.E.O.               355,000      $269,123         359,500/3,000                $115,032/$3,321
===============================================================================================================================
John D. Taylor - C.O.O.                  195,000      $147,828         199,500/3,000                 $65,432/$3,321
===============================================================================================================================
Steven R. Bromley - C.F.O.                  --            --           10,000/40,000                 $6,388/$25,550
===============================================================================================================================
Leslie N. Markow - C.A.O.                 52,500       $39,800          61,000/9,000                 $24,685/$8,463
===============================================================================================================================
David Kruse - Vice President, COO          5,000        $3,790         19,500/18,000                 $15,102/16,176
Environmental Industrial Group
===============================================================================================================================
Allan Routh - Director and President        --            --          110,000/90,000               $238,700/$99,630
of the SunRich Food Group
===============================================================================================================================
Dennis Anderson - Director and              --            --            4,000/4,500                  $2,571/$3,857
Executive Vice President of
Operations of the Food Group
===============================================================================================================================
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 52                December 31, 2001 - 10-K

<PAGE>


Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information concerning share ownership of
all persons known by the Company to own beneficially 5% or more of the Company's
outstanding Common Shares and all directors and officers of the Company as a
group as of March 8, 2002.


<TABLE>
<CAPTION>
====================================================================================================================
               Name and Address                 Class of Share    Amount of Ownership       Percent of Class (2)
             of Beneficial Holder
--------------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>                            <C>
Claridge Israel LLC                                 Common           7,011,600                      17.0%
C/o Davies Ward Phillips and Vineberg
625 Madison Avenue Floor 12
New York, New York 10022
====================================================================================================================
Gruber & McBaine Capital Management                 Common           3,837,100                      9.3%
50 Osgood Place, San Francisco
California USA 94133
====================================================================================================================
Dennis Anderson                                     Common           3,806,335                      9.3%
2214 Geneva Road NE, Alexandria
Minnesota USA 56308
====================================================================================================================
All Directors and Officers                        Common (1)       1,910,647(a)                    4.6% (a)
As a group (sixteen) - (a) excluding Dennis                        5,716,982(b)                   13.9% (b)
Anderson who is disclosed above and (b)
not excluding Mr. Anderson's shares
====================================================================================================================
</TABLE>


(1)   For details of shares owned by officers and directors - Identification of
      Directors and Executive Officers.

(2)   Percentage ownership is calculated based on total Common Shares
      outstanding at March 8, 2002 of 41,129,328. It does not include warrants
      or options that have vested or have not yet vested.


Item 13. Certain Relationships and Related Transactions

Warrants

During 1995, the Company issued 1,220,000 warrants to acquire additional
1,220,000 common shares. Of these warrants, 37,500 warrants were exercised in
1996, and the remaining 1,182,500 warrants; 650,000 were exercisable at US$2.25,
and 532,500 were exercisable at US$2.00. In 1997, these warrants were extended
to December 31, 1998.

In 1995, a management director of the Company subscribed for and paid for 75,000
common shares in the private placement of shares. This transaction entitled this
director the right to exercise 37,500 warrants of the 532,500 warrants noted
above at US$2.00 for 2 years. In addition, an independent director of the
Company held 70,000 of the 532,500 warrants noted above which entitled this
director to exercise 70,000 common shares at US$2.00 for 2 years to October 3,
1997. As described above, both of these warrants were extended to December 31,
1998.

In 1997, subsequent to the extension of the expiration date, the third party
holder of the 650,000 warrants exercisable at US$2.25, and the independent
director of the Company who held 70,000 of the 532,500 warrants exercisable at
US$2.00 asked the Company to find interested parties to purchase their
respective warrants. As a result of this request, third parties purchased the
right to 525,000 of the US$2.25 warrants and 13,000 of the US$2.00 warrants.

Employees purchased the right to 125,000 of the US$2.25 warrant and 37,000 of
the US$2.00 warrant. The director sold 37,000 warrants to employees of the
Company and 13,000 to a third party for $0.15 per warrant. During 1998, all
1,182,500 warrants including those noted above held by employees and a director
had their expiry date extended to June 30, 2000, by the Company's Board.

In December 1998, the Company offered all the warrant holders of the 1,182,500
warrants a 4 for 1 exchange for their warrants at a price of US$0.50 until
January 31, 2000 (162,000 warrants were held by employees and 20,000 by


--------------------------------------------------------------------------------
Stake Technology Ltd.                 53                December 31, 2001 - 10-K

<PAGE>

the director). As a result, employees and the director were offered the same
terms and conditions as all of the warrant holders which was:

(a)   by exchanging their existing warrants 45,500 new warrants would be issued,
      exercisable at US$0.50 expiring on January 31, 2000; and

(b)   provided that this US$0.50 warrant was exercised prior to January 31,
      2000, 45,500 additional warrants would be issued with an exercise price of
      US$1.00 to December 31, 2000, rising to US$2.00 on January 1, 2000 and
      expiring on December 29, 2000.

In January, 1999 all 45,500 exchanged warrants were exercised for proceeds of
$34,000, and 45,500 new warrants were issued to the respective employees and
director with an exercise price of US$1.00 to December 31, 1999, increasing to
US$2.00 on January 1, 2000 and expiring on December 31, 2000.

During 1999, two employees exercised 35,400 of the 45,500 new warrant issued to
employees and a director for gross proceeds of $35,400.

In October 2000, the Board of Directors authorized a 30-day reduction in the
exercise price of these warrants reducing the price to US$1.50 from US$2.00. A
director exercised 9,375 warrants at US$1.50 for gross proceeds of $21,900 and
the remaining 725 warrants issued to other employees expired without being
exercised.

Loans

Included in other long-term debt is an uncollateralized loan due to a
shareholder of US$1,592,000 (2000 - $nil) bearing interest at 6% with interest
only payable to January 31, 2003, at which time the full note is due. Also
included in other long-term debt is an uncollateralized loan of US$154,000

(2000 - $178,000) due to a shareholder, payable in monthly instalments of
principal and interest of US$2,543 through to August 24, 2005, bearing interest
at 8%.

In March 2002, both notes were repaid as part of the Company's new financing
arrangements with the Bank of Montreal and Harris Trust and Savings Bank.

Rental property

The Company leases certain real estate to a shareholder under operating leases
that expire in August 2010. Annual rental under each of the leases is $2.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 54                December 31, 2001 - 10-K

<PAGE>


Item 14. Exhibits, Financial Statements and Reports on Form 8-K

STAKE TECHNOLOGY LTD.                                                  Form 10-K


<TABLE>
<CAPTION>
(a) Documents filed as part of this Report                                              Page
                                                                                        ----
<S>                                                                                     <C>
         1.  Consolidated Financial Statements                                          F-1

         Independent Auditors' Report                                                   F-2

         Consolidated Balance Sheets as at
         December 31, 2001 and 2000                                                     F-3, F-4

         Consolidated Statements of Earnings -
         For the Years ended December 31, 2001, 2000 and 1999                           F-5

         Consolidated Statements of Retained Earnings -
         For the Years ended December 31, 2001, 2000 and 1999                           F-6

         Consolidated Statements of Cash Flows -
         For the Years ended December 31, 2001, 2000 and 1999                           F-7

         Notes to Consolidated Financial Statements -
         For the Years ended December 31, 2001 and 2000                                 F-8 - F42
</TABLE>


         3.  Exhibits

         3.1      -     Amalgamation of Stake Technology Ltd and 3754481 Canada
                        Ltd. (formerly George F. Pettinos (Canada) Limited) (I)

         3.3      -     Bylaw No. 14 approved by shareholders - June 17, 1997
                        (D)

         10.1     -     Court Order dated January 20, 1995 awarding certain
                        assets of Barmin Inc. to Barnes Environmental Inc. (A)

         10.2     -     Shareholder Agreement dated January 20, 1995 between
                        Stake Technology Ltd., Bentonite of Canada Inc. and
                        Barnes Environmental Inc. (A)

         10.3     -     1993 Employee/Director Stock Option Plan dated May 19,
                        1993 (B)

         10.4     -     Share Purchase Agreement dated November 15, 1995 between
                        Stake Technology Ltd., Bentonite of Canada Inc. and
                        Peter Barnes. (B)

         10.5     -     1996 Employee/Director Stock Option Plan dated September
                        27, 1996 (C)

         10.6     -     1998 Stock Option Plan dated December 12, 1997 (E)

         10.7     -     Agreement and Plan of Reorganization among Stake
                        Technology Ltd, Stake Minnesota, Inc. and SunRich, Inc.
                        dated April 8, 1999. (F)

         10.8     -     1999 Stock Option Plan dated February 18, 1999 (G)

         10.9     -     Agreement to purchase George F. Pettinos (Canada)
                        Limited dated February 28, 2000 (I)

         10.10    -     Agreement to purchase Northern Food & Dairy, Inc. dated
                        September 15, 2000 (H)


--------------------------------------------------------------------------------
Stake Technology Ltd.                 55                December 31, 2001 - 10-K

<PAGE>

Exhibits (continued)

         10.11    -     Agreement to purchase Temisca, Inc. dated October 31,
                        2000 (I)

         10.12          Credit Agreement with Bank of Montreal dated February 28
                        2002 (J)

         10.13          Facility B Loan Authorization Agreement with Harris
                        Trust and Saving Bank (J)

         10.14          2001 Stock Option Plan dated March 13, 2001 (J)

         21       -     List of subsidiaries (J)

         24       -     Powers of Attorney (J)

         (A)      Previously filed as an Exhibit to Company's annual report of
                  Form 10-KSB for the year ended December 31, 1994 and
                  incorporated herein by reference.

         (B)      Previously filed as an Exhibit to Company's annual report of
                  Form 10-KSB for the year ended December 31, 1995 and
                  incorporated herein by reference.

         (C)      Previously filed as an Exhibit to Company's annual report of
                  Form 10-KSB for the year ended December 31, 1996 and
                  incorporated herein by reference.

         (D)      Previously filed as an Exhibit to Company's annual report of
                  Form 10-KSB for the year ended December 31, 1997 and
                  incorporated herein by reference.

         (E)      Previously filed as an Exhibit to Company's annual report of
                  Form 10-KSB for the year ended December 31, 1998 and
                  incorporated herein by reference.

         (F)      Previously filed as an Exhibit to the Company's registration
                  statements number 333-10454 on Form S-4 filed June 24, 1999.

         (G)      Previously filed as an Exhibit to Company's annual report of
                  Form 10-KSB for the year ended December 31, 1999 and
                  incorporated herein by reference.

         (H)      Previously filed as an Exhibit to the Company's Form 8K filed
                  September 28, 2000.

         (I)      Previously filed as an Exhibit to Company's annual report of
                  Form 10-KSB for the year ended December 31, 2000 and
                  incorporated herein by reference.

         (J)      Filed herewith.

         No filings of 8K in 2001

         Filings of 8K in 2000

         Form 8K filed March 12, 2000 relating to the acquisition of PECAL.

         Form 8K filed September 28, 2000 relating to the acquisition of
         Northern Food & Dairy, Inc.

         Form 8K amendments filed November 28, 2000 relating to the
         acquisition of Northern Food & Dairy, Inc.


--------------------------------------------------------------------------------
Stake Technology Ltd.                 56                December 31, 2001 - 10-K

<PAGE>

STAKE TECHNOLOGY LTD.


Date:  March 27, 2002                          /s/ Steven R. Bromley
       --------------                          ---------------------
Stake Technology Ltd.
Steven R. Bromley
Vice President, Finance and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated have signed this report below.


<TABLE>
<CAPTION>
Signature                             Title                                                   Date
------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                                                     <C>
            *                                                                                 March 27, 2002
-----------------------------
Jeremy N. Kendall                     Chairman, Chief Executive Officer
                                      And Director (Principal Executive Officer)
                                                                                              March 27, 2002
-----------------------------
John D. Taylor                        President and Chief Operating Officer

            *                                                                                 March 27, 2002
-----------------------------
Steven R. Bromley                     Vice President, Finance and Chief Financial
                                      Officer (Principal Financial and Accounting Officer)

            *                                                                                 March 27, 2002
-----------------------------
Cyril A. Ing                          Director and Corporate Secretary

            *                                                                                 March 27, 2002
-----------------------------
Joseph Riz                            Director

            *                                                                                 March 27, 2002
-----------------------------
Tim Bergqvist                         Director

            *
-----------------------------
Michael Boyd                          Director                                                March 27, 2002

            *
-----------------------------
Jim Rifenbergh                        Director                                                March 27, 2002

            *
-----------------------------
Allan Routh                           Director                                                March 27, 2002

            *
-----------------------------
Dennis Anderson                       Director                                                March 27, 2002

            *
-----------------------------
Larry Anderson                        Director                                                March 27, 2002

            *
-----------------------------
Katrina Houde                         Director                                                March 27, 2002

            *
-----------------------------
Camillo Lisio                         Director                                                March 27, 2002
</TABLE>



--------------------------------------------------------------------------------
Stake Technology Ltd.                 57                December 31, 2001 - 10-K

<PAGE>


<TABLE>
<S>                                   <C>                                                     <C>
-----------------------------
Stephen Bronfman                      Director                                                March 27, 2002

-----------------------------
Robert Fetherstonhaugh                Director                                                March 27, 2002
</TABLE>


* By his signature set forth below, Steven R. Bromley, pursuant to a duly
executed power of attorney filed with the Securities and Exchange Commission as
an exhibit to this report, has signed this report on behalf of and as
Attorney-In-Fact for this person.


/s/ Steven R. Bromley - Steven R. Bromley -Attorney-in-Fact
---------------------


--------------------------------------------------------------------------------
Stake Technology Ltd.                 58                December 31, 2001 - 10-K





                                  EXHIBIT 10.12

     (Note Schedules to this Exhibit have not been filed due to their size,
     but are available on request for inspection at the Company's offices)


<PAGE>

                                  Exhibit 10.12

                                CREDIT AGREEMENT

                          Made as of February 28, 2002

                                      Among

                              STAKE TECHNOLOGY LTD.

                                  TEMISCA, INC.

                                  STAKE TECH LP

                                  as Borrowers

                                       and

                                BANK OF MONTREAL
                                    as Lender

                                       and

                              CERTAIN AFFILIATES OF
                                  THE BORROWERS
                                   as Obligors


<PAGE>
                                      -i-


                                Table of Contents

Table of Contents..............................................................i

SECTION 1 INTERPRETATION.......................................................2

       1.1      Certain Defined Terms..........................................2
       1.2      Business Day..................................................24
       1.3      Conflict......................................................24
       1.4      Currency......................................................25
       1.5      Time..........................................................25
       1.6      GAAP..........................................................25
       1.7      Headings and Table of Contents................................25
       1.8      Number and Gender.............................................25
       1.9      References....................................................25
       1.10     Statutory References..........................................25
       1.11     Time of Day...................................................25
       1.12     Governing Law.................................................26
       1.13     Entire Agreement..............................................26
       1.14     Severability..................................................26
       1.15     Schedules.....................................................26

SECTION 2 REPRESENTATIONS AND WARRANTIES......................................27

       2.1      Representations, Warranties and Agreements of the Obligors....27
       2.2      Deemed Repetition.............................................33

SECTION 3 THE CREDIT FACILITIES...............................................33

       3.1      Establishment of Credit Facilities............................33
       3.2      Availability of Credit Facilities.............................34
       3.3      Revolving Nature of Facility A................................34
       3.4      Purpose.......................................................35
       3.5      Initial and Maximum Utilization...............................35
       3.6      Borrowing Procedures - General................................36
       3.7      Libor Loans...................................................37
       3.8      Bankers' Acceptances..........................................38
       3.9      Letters of Credit and Letters of Guarantee....................40
       3.10     Hedge
 Contracts...............................................40
       3.11     Prime Loans and USBR Loans....................................41
       3.12     Conversion Option.............................................41
       3.13     Conversion and Rollover Not Repayment.........................42
       3.14     Mandatory Conversion of Libor Loans and Bankers' Acceptances..42
       3.15     Deposit of Proceeds of Loans and Discount Proceeds............42
       3.16     Evidence of Obligations.......................................43


<PAGE>
                                      -ii-


SECTION 4 INTEREST, FEES AND EXPENSES.........................................43

       4.1      Interest on Prime Loans.......................................43
       4.2      Interest on USBR Loans........................................43
       4.3      Interest on Libor Loans.......................................44
       4.4      Fees on Bankers' Acceptances..................................44
       4.5      Letters of Credit and Letters of Guarantee....................45
       4.6      Hedge Contracts...............................................45
       4.7      Applicable Pricing............................................45
       4.8      Interest on Overdue Amounts...................................46
       4.9      Interest Act..................................................46
       4.10     Limit on Rate of Interest.....................................46
       4.11     Substitute Basis of Advance - Libor Loans.....................47
       4.12     Indemnity.....................................................48
       4.13     Breakage Costs................................................49
       4.14     Change in Circumstances.......................................49

SECTION 5 REDUCTION AND REPAYMENT.............................................50

       5.1      Payment on Demand.............................................50
       5.2      Repayment.....................................................50
       5.3      Mandatory Repayment - Currency Fluctuations...................50
       5.4      Optional Prepayment...........................................52

SECTION 6 PAYMENTS AND TAXES..................................................52

       6.1      Payments Generally............................................52
       6.2      Taxes.........................................................52
       6.3      No Set-Off....................................................53
       6.4      Application of Payments Before Exercise of Rights.............53
       6.5      Application of Payments After Exercise of Rights Under
                Section 10.2..................................................54

SECTION 7 SECURITY DOCUMENTS..................................................54

       7.1      Security Documents............................................54
       7.2      Further Assurances............................................60

SECTION 8 CONDITIONS PRECEDENT................................................61

       8.1      Conditions Precedent to Disbursements of Advances.............61
       8.2      Conditions Precedent to All Advances..........................63
       8.3      Waiver of a Condition Precedent...............................63

SECTION 9 COVENANTS...........................................................64

       9.1      Affirmative Covenants.........................................64
       9.2      Negative Covenants............................................67


<PAGE>
                                     -iii-


       9.3      Financial Covenants of the Borrowers..........................70
       9.4      Accounting, Financial Statements and Other Information........71

SECTION 10 DEFAULT AND ENFORCEMENT............................................72

       10.1     Events of Default.............................................72
       10.2     Rights upon Default and Event of Default......................77
       10.3     Waiver of Default.............................................77

SECTION 11 REMEDIES...........................................................78

       11.1     Remedies Cumulative...........................................78
       11.2     Remedies Not Limited..........................................78
       11.3     Set-Off, etc..................................................78
       11.4     Lender May Perform Covenants..................................79

SECTION 12 FEES...............................................................79

       12.1     Arrangement Fee...............................................79

SECTION 13 MISCELLANEOUS......................................................79

       13.1     Assignment....................................................79
       13.2     Amendments....................................................80
       13.3     Notice........................................................80
       13.4     Disruption of Postal Service..................................81
       13.5     Environmental Indemnity.......................................81
       13.6     Further Assurances............................................81
       13.7     Judgment Currency.............................................81
       13.8     Waivers.......................................................82
       13.9     Reimbursement of Expenses.....................................82
       13.10    Submission to Jurisdiction....................................82
       13.11    Counterparts..................................................83


<PAGE>

                                CREDIT AGREEMENT

This credit agreement is made as of February 28, 2002

A M O N G

                                    STAKE TECHNOLOGY LTD.

                                                       and

                                    TEMISCA, INC.

                                                       and

                                    STAKE TECH LP

                                    as Borrowers

                                                       and

                                    BANK OF MONTREAL

                                    as Lender

                                                       and

                                    CERTAIN AFFILIATES OF THE BORROWERS

                                    as Obligors

RECITALS:

A.    The Borrowers have requested that the Lender provide them with certain
      credit facilities and the Lender has agreed to make the requested credit
      facilities available to the Borrowers upon and subject to the terms and
      conditions of this Agreement.

B.    Each of 558497 Ontario Limited, 1510146 Ontario Inc., Sunrich Food Group,
      Inc., 3060385 Nova Scotia Company, Stake Technology LLC, Stake Technology
      (USA), Inc., Northern Food & Dairy, Inc., Nordic Aseptic, Inc., Virginia
      Materials Inc., International Materials & Supplies Inc. and Sunrich, Inc.
      will benefit from the Credit Facilities made available by the Lender to
      the Borrowers and, in order to induce the Lender to provide such Credit
      Facilities, each such corporation agrees to provide certain Security
      Documents in favour of the Lender and to be party to this Agreement in
      accordance with the terms hereof.

FOR VALUE RECEIVED, the parties agree as follows:


<PAGE>
                                      -2-


                                   SECTION 1
                                 INTERPRETATION

1.1 Certain Defined Terms

The terms defined below shall have the indicated meanings unless the context
expressly or by necessary implication requires otherwise:

"Acceptance Fee" means a fee payable by the Borrowers with respect to the
acceptance of a Bankers' Acceptance under this Agreement, as set out in Section
4.4(a).

"Accounts Receivable" means all "accounts", as such term is defined in the PPSA,
now or hereafter acquired by the Borrowers and includes all of the Borrowers'
accounts, contract rights, instruments, documents, chattel paper, general
intangibles relating to accounts, drafts and acceptances, and all other forms of
obligations owing to the Borrowers arising out of or in connection with the sale
or lease of Inventory or otherwise, all guarantees and other security therefor,
whether secured or unsecured, now existing or hereafter created, and whether or
not specifically sold or assigned to the Lender hereunder or in connection
herewith.

"Additional Obligor" means any Person who has executed and delivered an
Additional Obligor Counterpart and such additional Security Documents as may be
required by the Lender in its discretion.

"Additional Obligor Counterpart" means a counterpart to this Agreement in the
form attached as Schedule A executed and delivered by any Additional Obligor and
the Lender.

"Advance" means an extension of credit under any Credit Facility by the Lender
to a Borrower by way of:

      (a)   the advance of a Prime Loan, a USBR Loan, the acceptance of Bankers'
            Acceptances or the issuance of a Letter of Credit or a Letter of
            Guarantee, in the case of Facility A;

      (b)   the advance of a USBR Loan or a Libor Loan, in the case of Facility
            C; or

      (c)   the issuance of a Hedge Contract by the Lender, in its sole
            discretion, in the case of Facility D.

"Affiliate" has the meaning given to it in the Business Corporations Act
(Ontario), as in effect on the date of this Agreement.

"Agreement" means this Credit Agreement, including the Schedules hereto, as
amended, varied, supplemented, restated, renewed or replaced at any time and
from time to time.

"Applicable Law" means, at any time, in respect of any Person, property,
transaction or event, all laws, statutes, regulations, treaties, judgments and
decrees applicable to that


<PAGE>
                                      -3-


Person, property, transaction or event (whether or not having the force of law
with respect to regulatory matters applicable to the Lender) and all applicable
requirements, requests, official directives, consents, approvals,
authorizations, guidelines, decisions, rules, orders and policies of any
Governmental Authority having or purporting to have authority over such Person,
property, transaction or event.

"Associate" has the meaning given in the Business Corporations Act (Ontario), as
in effect on the Closing Date.

"Auditors" means PricewaterhouseCoopers LLP or any other independent chartered
accounting firm of national standing or otherwise acceptable to the Lender
providing audit services to the Borrowers from time to time.

"Bankers' Acceptance" and "B/A" each means a bill of exchange, including a
depository bill issued in accordance with the Depository Bills and Notes Act
(Canada), in the Lender's usual form denominated in Canadian Dollars, drawn by a
Borrower and accepted by the Lender.

"Basis Point" and "bp" each means one one-hundredth of one percent (.01%).

"Borrower" means (a) in respect of Facility A, the Facility A Borrowers, (b) in
respect of Facility C, LP, and (c) in respect of Facility D, Stake. For greater
certainty, the reference to the term "Borrower" or "Borrowers" without reference
to any applicable Credit Facility, unless the context expressly or by necessary
implication requires otherwise, is a reference to all of the Persons referred to
above.

"Borrower's Account" means an account of any of the Borrowers maintained, as
applicable, at the Chicago Branch, the Branch of Account or any other branch of
the Lender in Canada as the Borrowers may from time to time advise the Lender in
writing and includes those accounts listed on Schedule B and "Borrower's
Accounts" means any two or more such accounts.

"Branch of Account" means the branch of the Lender located at 1 First Canadian
Place, 100 King Street West, Toronto, Ontario, M5X 1A1.

"Business Day" means a day on which chartered banks are open for
over-the-counter business in Toronto, Ontario and Chicago, Illinois and excludes
(a) Saturday, Sunday and any other day which is a statutory holiday in Toronto,
Ontario in respect of Facility A and Facility D and Chicago, Illinois in respect
of Facility C and (b) in respect of Libor Loans, any other day on which
transactions cannot be carried out by and between banks in the London Interbank
Market.

"Business Plan" means collectively the business plans prepared in form and
content satisfactory to the Lender from time to time, (a) for each of the
primary operating Obligors on an unconsolidated basis, and (b) for the Obligors
on a consolidated basis, each including budgets and projections for a one year
period and detailing any proposed Capital Expenditures showing all adjustments
made to prepare the business plan of the Obligors on a consolidated basis from
the business plan of the Obligors on a


<PAGE>
                                      -4-


unconsolidated basis. For greater certainty, budgets will be prepared for each
of the key operating divisions (Corporate, Steam Explosion, Food Group and
Environmental Industrial) plus related groups within the applicable division.

"Canadian Dollar Amount" means, for any amount on any particular date, the
aggregate of:

      (a)   the portion, if any, of the amount denominated in Canadian Dollars;
            and

      (b)   the amount in Canadian Dollars (determined on that date unless
            otherwise specified herein in accordance with Section 1.4) of the
            portion, if any, of the amount denominated in US Dollars.

"Canadian Dollars "and the symbols "$" and "C$" each means lawful money of
Canada.

"Canadian Pension Plans" means, in respect of any Person, all plans or
arrangements which are considered to be pension plans for the purposes of any
applicable pension benefits standards statute or regulation in Canada
established, maintained or contributed to by such Person for its employees or
former employees.

"Capital Asset" means, at any time, for any Person, the capital or fixed assets
of that Person determined on a consolidated basis in accordance with GAAP.

"Capital Expenditure" means any expenditure for the acquisition, improvement or
maintenance of a Capital Asset.

"Capital Lease" means, with respect to a Person, any lease or other arrangement
relating to property or assets which would be required to be accounted for as a
capital lease on a balance sheet of that Person in accordance with GAAP. The
amount of any Capital Lease at any date shall be the amount of the obligation in
respect thereof which would be included on the balance sheet.

"CDOR Rate" means, on any day, the annual rate of interest which is the
arithmetic average of the "BA 1 month" rates applicable to Canadian Dollar
banker's acceptances identified as such on the Reuters Screen CDOR Page at
approximately 10:00 a.m. on such day (as adjusted by the Lender after 10:00 a.m.
to reflect any error in any posted rate or in the posted average annual rate) or
if such date is not a Business Day then on the immediately preceding Business
Day. If the rate does not appear on the Reuters Screen CDOR Page as contemplated
above, then the CDOR Rate shall be the rate per annum quoted from time to time
by the Lender as being its reference rate then in effect for determining fees on
Canadian Dollar denominated bills of exchange accepted by the Lender.

"Certificate" means, in respect of a Person that is not an individual, a written
certificate signed in the name of the Person by an appropriate officer thereof
and in respect of a Person that is an individual, a written certificate signed
by that individual.

"Change of Circumstance Notice" has the meaning ascribed thereto in section
4.14.


<PAGE>
                                      -5-


"Chicago Branch" means the branch of the Lender located at 115 South LaSalle
St., 12-W, Chicago, Illinois 60603.

"Claim" means any claim of any nature whatsoever including any demand, cause of
action, suit or proceeding.

"Closing" shall mean the closing on the Closing Date of the transactions
contemplated herein.

"Closing Date" means February 28, 2002.

"Collateral" means the undertaking, property and assets covered by the Security
Documents and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired by any Obligor, or any other party to a Security
Document that may at any time be or become subject to a Lien in favour of the
Lender to secure any or all of the Obligations. When used in relation to any
Person, the term "Collateral" means the undertaking, property and assets covered
by those Security Documents to which that Person is a party and any other
property, real or personal, tangible or intangible, now existing or hereafter
acquired by that Person, that may at any time be or become subject to a Lien in
favour of the Lender to secure any or all of the Obligations.

"Commitment" means:

      (a)   with respect to Facility A, $4,000,000 as such amount may be reduced
            or cancelled in accordance with this Agreement;

      (b)   with respect to Facility C, US$15,000,000 as such amount may be
            reduced or cancelled in accordance with this Agreement; and

      (c)   with respect to Facility D, up to $1,000,000 in Deemed Risk Content
            as such amount may be reduced or cancelled in accordance with this
            Agreement.

"Consolidated Borrower" means Stake and all Included Subsidiaries on a
consolidated basis.

"Contingent Obligations" means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person: (a) with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (b) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; (c) under
any Swap Transaction; (d) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement; (e)
for the obligations of another through any agreement to purchase, repurchase or
otherwise acquire any obligation of another Person


<PAGE>
                                      -6-


or any property constituting security therefor, or to provide funds for the
payment or discharge of such obligation; and (f) to maintain the solvency,
financial condition or any balance sheet item or level of income of another
Person. The amount of any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed or supported.

"Contract Period" means the period selected by the Borrower and accepted by the
Bank in respect of an Advance during which the interest rate, discount rate or
stamping fee with respect to any Advance is established in accordance with
Section 3.7 with respect to Libor Loans, Section 3.8 with respect to Bankers'
Acceptances, Section 3.9 with respect to Letters of Credit or Letters of
Guarantee and Section 3.10 with respect to Hedge Contracts.

"Conversion" means the conversion of an outstanding Advance, or a portion of an
outstanding Advance, into an alternative type of Advance under Section 3.12.

"Conversion Date" means the Business Day that a Borrower elects as the date on
which a Conversion is to occur.

"Credit Facilities" means, collectively, Facility A, Facility C and Facility D
"Credit Facility" means any one of them.

"Debt" of a Person means, without duplication:

      (a)   all debts and liabilities of the Person for borrowed money;

      (b)   all Contingent Obligations of the Person;

      (c)   any obligation, contingent or other, which is required to be
            classified in accordance with GAAP upon the Person's balance sheet
            as a liability;

      (d)   any obligation secured by any Lien existing on property owned or
            acquired by the Person subject to the Lien whether or not the
            obligation secured thereby shall have been assumed;

      (e)   any debt or liability of the Person representing the deferred
            acquisition cost of property or assets created or arising under any
            conditional sale agreement or other title retention agreement even
            though the rights and remedies of the seller under that agreement in
            the event of default are limited to repossession or sale of property
            or assets covered thereby;

      (f)   any liabilities, contingent, unmatured or other, under indemnities
            given in respect of any bankers' acceptance, letter of credit or
            letter of guarantee;

      (g)   any operating lease under which the Person has furnished a residual
            value guarantee in respect of which the Person is liable as lessee;
            and


<PAGE>
                                      -7-


      (h)   any Capital Lease by which the Person is bound.

but "Debt" does not include deferred Taxes.

"Debt to Net Worth Ratio" means, with respect to the Consolidated Borrower, (a)
Debt divided by (b) Net Worth.

"Debt Service" means, for any period, the amount required by the Obligors to
service the outstanding Debt during that period and includes without limitation
interest, required principal payments, payments required or made under any
Capital Lease, payments made in respect of letters of credit or letters of
guarantee and the stamping fees and discount rates associated with bankers'
acceptances facilities, less interest and required principal equivalent payments
due under the Rhodia Note Receivable.

"Deemed Risk Content" means, in respect of a Hedge Contract, a percentage of the
principal amount contracted with respect to such Hedge Contract as will be
advised by the Lender upon request, which such percentage is subject to change
without notice to the Borrowers, from time to time according to the Lender's
policy.

"Default" means an event, circumstance or omission which is an Event of Default
or which, with any or all of the giving of notice, lapse of time, or a failure
to remedy the event, circumstance or omission within a period of time, would be
an Event of Default.

"Discount Proceeds" means, for any Bankers' Acceptance issued hereunder, an
amount calculated on the applicable Drawdown Date as follows:

                                        1
                                -----------------
                                  1 + [DR(CP)]
                                          ----
                        (                 365             )      x BA

Where:

      (a)   BA = the face amount of the Bankers' Acceptance

      (b)   DR = the Discount Rate applicable to the Bankers' Acceptance
            expressed as a decimal

      (c)   CP = the applicable Contract Period in days

      (d)   the product of [DR (CP/365)] is rounded up or down to the fifth
            decimal place and .000005 is rounded up

"Discount Rate" means with respect to an issue of Bankers' Acceptances with the
same maturity date, the discount rate for B/As for such term accepted by the
Lender at or about 10:00 a.m. (Toronto time) on that day as quoted by the
Lender.


<PAGE>
                                      -8-


"Dispute" means any cause asserted for non-payment of Accounts Receivable
including any dispute, claim, complaint, set-off, defence, contra account or
counterclaim (real or asserted), lawful or unlawful, whether arising from or
relating to a sale of merchandise by a Borrower or any other transaction or
occurrence.

"Documents" means this Agreement, the Security Documents, and all Certificates,
instruments, agreements and other documents delivered, or to be delivered, to
the Lender under this Agreement or any Security Document and, when used in
relation to any Person, "Documents" means the Documents executed and delivered
by such Person.

"Drawdown Date" means any Business Day on which an Advance is made or is deemed
to be made.

"EBITDA" means, with respect to any fiscal period of the Consolidated Borrower,
the net income of the Consolidated Borrower (adjusted from time to time, with
the prior written consent of the Lender, for extraordinary gains or losses,
income or expenses) for that period, plus, to the extent deducted in determining
the net income, interest and income taxes accrued during that period, and
eliminating any non-cash items deducted or added in determining that net income,
including depreciation, depletion and amortization expenses and unrealized
foreign exchange losses or gains.

"EDC" means Export Development Corporation and its successors and assigns.

"EDC Insured Accounts Receivable" means Accounts Receivable which are, other
than with respect to the requirement that the account debtor in respect of the
Accounts Receivable be located in Canada or the United States of America, are
Eligible Accounts Receivables and are insured by an EDC Policy.

"EDC Policy" means, from time to time, one or more EDC comprehensive insurance
policies issued by EDC in favour of a Borrower which insures the payment of
certain Accounts Receivable owing to a Borrower from time to time and wherein
EDC acknowledges that all payments under such EDC Policy have been assigned to
the Lender, a certified copy of which such EDC Policy and acknowledgment shall
be provided to the Lender upon issuance.

"Eligible Accounts Receivable" shall mean each Account Receivable arising in the
ordinary course of the Facility A Borrowers' or Virginia Materials' business
from the sale of Inventory which meets the requirements of the Lender set out
herein and which such requirements may change from time to time. An Account
Receivable shall not be deemed eligible unless such Account Receivable is
subject to the Lender's perfected, first priority security interest and no other
Liens other than Permitted Liens, and is evidenced by an invoice or other
documentary evidence satisfactory to the Lender. In addition, and without
limiting the Lender's discretion to establish criteria of eligibility in its
reasonable credit judgment from time to time, an Account Receivable shall not be
an "Eligible Accounts Receivable" if:


<PAGE>
                                      -9-


      (a)   it arises out of a sale made by the Borrower or Virginia Materials
            to an Affiliate of the Borrower or Virginia Materials or to a Person
            controlled by an Affiliate of the Borrower;

      (b)   it is due or unpaid more than 90 days after the original invoice
            date;

      (c)   30% or more of the aggregate amount of the Accounts Receivable from
            the account debtor are unpaid more than 60 days after the invoice
            due date;

      (d)   any covenant, representation or warranty contained in this Agreement
            with respect to such Account Receivable has been breached;

      (e)   the account debtor is also the Borrower's or Virginia Materials'
            creditor or supplier, or the account debtor has disputed liability,
            or the account debtor has made any claim with respect to any other
            Account Receivable due from such account debtor to the Borrower or
            Virginia Materials, or the Account Receivable otherwise is or may
            become subject to any right of setoff by the account debtor;

      (f)   any one or more of the following events has occurred and is
            continuing with respect to the account debtor on such account: (i)
            death or judicial declaration of incompetency of an account debtor
            who is an individual; (ii) the filing by or against the account
            debtor of a request, proposal, notice of intent to file a proposal,
            proceeding, action or petition for liquidation, reorganization,
            arrangement, adjustment of debts, adjudication as a bankrupt,
            winding-up, or other relief under the bankruptcy, insolvency,
            restructuring, liquidation, winding-up, corporate or similar laws of
            Canada, any province or territory thereof, or any foreign
            jurisdiction, now or hereafter in effect; (iii) the making of a
            general assignment by the account debtor for the benefit of
            creditors; (iv) the appointment of a receiver, trustee, monitor,
            custodian, liquidator, administrator, interim receiver, monitor or
            trustee or other official for the account debtor or for any of the
            assets of the account debtor, including "trustee" under the
            Bankruptcy and Insolvency Act, (Canada); (v) the institution by or
            against the account debtor of any other type of insolvency,
            liquidation, bankruptcy, winding-up or reorganization proceeding
            (under the laws of Canada, the United States of America or
            otherwise, including applicable corporate statutes, the Bankruptcy
            and Insolvency Act (Canada) and the Companies' Creditors Arrangement
            Act (Canada) or of any formal or informal proceeding for the
            dissolution or liquidation of, settlement of claims against, or
            winding up of affairs of, the account debtor; (vi) the sale,
            assignment, or transfer of all or any material part of the assets of
            the account debtor; (vii) the nonpayment generally by the account
            debtor of its debts as they become due; (viii) the failure,
            cessation of the business of the account debtor as a going concern
            or insolvency of the account debtor; or


<PAGE>
                                      -10-


            (ix) the account debtor calling a meeting of its creditors or
            indicating its consent to any proceeding or action hereinabove
            described;

      (g)   the sale giving rise to the Account Receivable is to an account
            debtor outside Canada or the United States of America, unless the
            sale is on letter of credit, guarantee or acceptance terms, in each
            case acceptable to the Lender in its reasonable credit judgment, or
            unless the Account Receivable is an EDC Insured Accounts Receivable;

      (h)   the sale giving rise to the Accounts Receivable to the account
            debtor is on a bill-and-hold, guaranteed sale, sale-and-return, sale
            on approval, consignment or any other repurchase or return basis or
            is evidenced by chattel paper;

      (i)   the Lender believes, in its reasonable credit judgment, that
            collection of such Account Receivable is insecure or that such
            Account Receivable may not be paid by reason of the account debtor's
            financial inability to pay and written notice thereof has been
            provided to the Borrower;

      (j)   the account debtor is the United States of America, any state or any
            department, agency or instrumentality of any of them, unless the
            Borrower assigns its right to payment of such Account Receivable to
            the Lender pursuant to the Assignment of Claims Act of 1940, as
            amended (31 U.S.C. Sub-Section 203 et seq.) or has otherwise
            complied with other applicable laws, statutes, regulations or
            ordinances;

      (k)   the account debtor is Canada or any province thereof, or any agency
            or instrumentality thereof, unless the Borrower has complied with
            all applicable laws, statutes (including the Financial
            Administration Act (Canada)) and regulations in order to duly and
            validly assign such Account Receivable;

      (l)   the goods giving rise to such Account Receivable have not been
            shipped and delivered to and accepted by the customer or the
            services giving rise to such Account Receivable have not been
            performed by the Borrower and accepted by the customer or the
            Account Receivable otherwise does not represent a final sale;

      (m)   the Accounts Receivable of the account debtor exceed a credit limit
            determined by the Lender, in its sole discretion acting reasonably
            of which the Borrower has received prior written notice, to the
            extent such Accounts Receivable exceeds such limit;

      (n)   any Account Receivable to the extent rebilled or to the extent
            subject to any credit notes, allowances, or rebates, including
            volume rebates;

      (o)   the Account Receivable is subject to any offset, deduction (other
            than ordinary course volume rebates deducted as provided in
            paragraph (m)


<PAGE>
                                      -11-


            above), defence, Dispute, or counterclaim or if the Account
            Receivable is contingent in any respect or for any reason;

      (p)   the Borrower or Virginia Materials has made any agreement with any
            account debtor for any extension of the time for payment or any
            deduction from payment, except for discounts or allowances made in
            the ordinary course of business for prompt payment, all of which
            discounts or allowances are reflected in the calculation of the face
            value of each respective invoice related thereto;

      (q)   shipment of the merchandise or the rendition of services has not
            been completed or the Account Receivable otherwise represents a
            progress billing or the account debtor's obligation to pay is
            otherwise conditional upon completion of any further performance
            under any contract, agreement or arrangement;

      (r)   any return, rejection or repossession of the merchandise has
            occurred;

      (s)   such Account Receivable is subject to a Lien ranking in priority to
            the Liens granted to the Lender under the Security Documents;

      (t)   such Account Receivable is not payable to the Borrower or Virginia
            Materials; or

      (u)   such Account Receivable is not otherwise satisfactory to the Lender
            as determined in good faith by the Lender in the exercise of its
            reasonable credit judgment upon written notice being provided to the
            Borrower;

provided, however, that the Lender will provide the Facility A Borrowers with 20
days prior written notice if the Lender is to change any of the criteria
relating to the determination of Eligible Accounts Receivable and such change
will take effect with the delivery of the Borrowing Base certificate immediately
following the expiry of such notice.

"Eligible Inventory" means the aggregate Inventory of the Facility A Borrowers
and Virginia Materials calculated at the lower of cost and net realizable value
less:

      (a)   Inventory that does not meet the quality or other standards imposed
            by any Governmental Authorities;

      (b)   Inventory that is unsaleable;

      (c)   Inventory that is subject to any Lien ranking in priority to the
            Liens granted to the Lender under the Security Documents;

      (d)   Inventory that is not in the possession of the Borrower or Virginia
            Materials either on premises owned by the Borrower or Virginia
            Materials or in respect of which the Lender has not received a
            waiver of the

<PAGE>
                                      -12-


            Landlords' rights in respect of such Inventory in form and substance
            satisfactory to the Lender;

      (e)   Inventory located outside Canada or the United States, other than
            Inventory for which title has passed to a Facility A Borrower or
            Virginia Materials, which is insured to the full value thereof and
            for which the Lender shall have in its possession (i) all negotiable
            bills of lading properly endorsed in favour of the Lender, and (ii)
            all non-negotiable bills of lading issued in the Lender's name.

      (f)   any other Inventory deemed ineligible by the Lender it is sole
            discretion,

      provided, however, that the Lender will provide the Facility A Borrowers
      with 20 days prior written notice if the Lender is to change any of the
      criteria relating to the determination of Eligible Inventory and such
      change will take effect with the delivery of the Borrowing Base
      Certificate immediately following the expiry of such notice.

"Environmental Activity" means any activity, event or circumstance in respect of
a Hazardous Substance including its storage, use, holding, collection, purchase,
accumulation, assessment, generation, manufacture, construction, processing,
treatment, stabilization, disposition, handling or transportation or its Release
into the natural environment including movement through or in the air, soil,
subsoil, surface water or groundwater.

"Environmental Laws" means all Applicable Laws pertaining to environmental or
occupational health and safety matters, in effect as at the date hereof and as
may be brought into effect or amended at a future date, including those
pertaining to reporting, licensing, permitting, investigation, remediation and
clean-up in connection with any presence or Release of a Hazardous Substance or
threat of same or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling and the like of a
Hazardous Substance.

"Event of Default" means any of the events or circumstances specified in Section
10.1.

"Excluded Taxes" means, in relation to the Lender, any Taxes imposed on the net
income or capital of the Lender by any Governmental Authority as a result of the
Lender (a) carrying on a trade or business or having a permanent establishment
in any jurisdiction or political subdivision thereof, (b) being organized under
the laws of such jurisdiction or any political subdivision thereof, or (c) being
or being deemed to be resident in such jurisdiction or political subdivision
thereof.

"Existing Borrowers' Debt" means those Debts listed in Schedule R.

"Facility A" has the meaning given to it in Section 3.1(a).


<PAGE>
                                      -13-


"Facility A Borrower" means either or both of Stake or Temisca, which may obtain
Advances under Facility A and all of whose liability to the Lender under
Facility A is joint and several.

"Facility A Borrowing Base" means, as of any date of determination thereof by
the Lender from time to time, an amount equal to the aggregate at such time of:

(a)   75% of the value of Eligible Accounts Receivable;

(b)   90% of the value of EDC Insured Accounts Receivable, less any claims made
      by the Borrowers under and, without duplication, amounts received by the
      Borrowers pursuant to the EDC Policy in any particular calendar year,
      provided however that the amount available to the Borrowers from time to
      time under this clause (b) shall not at any time exceed an amount equal to
      the then maximum coverage amount for EDC Insured Accounts Receivables
      insured by the EDC Policy;

(c)   100% of Accounts Receivable arising on sales on letter of credit,
      guarantees or acceptance terms acceptable to the Lender; and

(c)   50% of the value of Eligible Inventory;

provided, however, that the Lender will provide the Facility A Borrowers with 20
days prior written notice if the Lender is to change any of the criteria
relating to the Facility A Borrowing Base, which change shall take effect with
the delivery of the Facility A Borrowing Base Certificate immediately following
the expiry of such notice.

"Facility A Pricing Grid" has the meaning given to in Section 4.7(a).

"Facility C" has the meaning given to it in Section 3.1.

"Facility C Pricing Grid" has the meaning given to in Section 4.7(b).

"Facility D" has the meaning given to it in Section 3.1(c).

"Federal Funds Effective Rate" means, for any day, the annual rate of interest
quoted for that day in H.15(519) opposite the caption "Federal Funds
(Effective)". If H.15(519) is not available for the relevant day, the Federal
Funds Effective Rate shall be the annual rate of interest quoted for that day in
the Composite 3:30 p.m. Quotations for US Government Securities for that day
under the caption "Federal Funds Effective Rate". If neither of the foregoing
quotations is available, the "Federal Funds Effective Rate" shall be the average
of the quotations for that day on overnight federal funds (those words to have
the meaning generally given to them by money market brokers of recognized
standing doing business in the United States of America) transactions received
by the Lender from three federal funds brokers of recognized standing selected
by the Lender. For the purposes of this definition, "H.15(519)" means the weekly
statistical release published by the Board of Governors for the Federal Reserve
System of the United States or any successor and "Composite 3:30 p.m. Quotations
for US


<PAGE>
                                      -14-


Government Securities" means the daily statistical release published by the
Federal Reserve Bank of New York or any successor.

"Fiscal Quarter" means each three month period of any Obligor, as the case may
be, all of which currently end on March 31, June 30, September 30 and December
31.

"Fiscal Year" means the fiscal year of each Obligor, all of which currently end
on December 31.

"Fixed Charge Coverage" means, with reference to the Consolidated Borrower (a)
EBITDA, divided by (b) Debt Service.

"Funded Debt" means, with reference to the Consolidated Borrower at any time and
without duplication:

      (a)   all debts and liabilities for borrowed money including the
            Obligations;

      (b)   other than the deferred net profit interest payable to Jack Burns by
            Viginia Materials, all debts or liabilities representing the
            deferred acquisition cost of property or assets created or arising
            under any conditional sale agreement or other title retention
            agreement even though the rights and remedies of the seller under
            that agreement in the event of default are limited to repossession
            or sale of property or assets covered thereby;

      (c)   all liabilities, contingent, unmatured or other, under indemnities
            given in respect of any bankers' acceptance, letter of credit or
            letter of guarantee;

      (d)   all operating leases under which a residual value guarantee or the
            equivalent has been furnished.

      (e)   all Capital Leases; and

      (f)   all liabilities under Swap Transactions determined on a "mark to
            market" basis,

after deducting all cash on deposit with the Lender and the value of all
marketable securities acceptable to the Lender in its sole discretion and which
are subject to Liens in favour of the Lender under the Security Documents but
excludes, to the extent included above, Subordinated Debt, accounts payable
incurred in the ordinary course of the Borrowers' business, payment obligations
with respect to the Rhodia Price Reduction, and the amount of the Rhodia
Receivable, provided, however that all payments under the Rhodia Receivable are
current.

"Funded Debt to EBITDA Ratio" means, with reference to the Consolidated Borrower
(a) Funded Debt including amounts due to Affiliates, divided by (b) EBITDA.

"GAAP" means generally accepted accounting principles in effect from time to
time in Canada applied in a consistent manner from period to period including
the accounting


<PAGE>
                                      -15-


recommendations published in the Handbook of the Canadian Institute of Chartered
Accountants.

"Government Approvals" means, with respect to any Person, all licenses, permits,
consents, authorizations and approvals from any and all Governmental Authorities
required for the conduct of that Person's business as presently conducted.

"Governmental Authority" means any domestic or foreign government including any
federal, provincial, state, territorial or municipal government and any
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government or any person, body, department, bureau, agency,
board, tribunal, commission branch or office thereof or having or claiming to
have jurisdiction over the Obligations or any of their respective property or
assets.

"Harris" means Harris Trust and Savings Bank and its successors and assigns.

"Harris Loan Agreement" has the meaning ascribed thereto in Section 8.1(i).

"Hazardous Substance" means any solid, liquid, gas, odour, heat, sound,
vibration, radiation or combination of them that may impair the natural
environment, injure or damage property or plant or animal life or harm or impair
the health of any individual and includes, but is not limited to, petroleum, its
derivatives, by-products or other hydrocarbons, asbestos, controlled products,
wastes and any other materials are regulated by Environmental Laws or which may
not by their nature be hazardous, either in fact or as defined in or pursuant to
any Environmental Laws but which become prohibited, controlled or regulated by
any Governmental Authority.

"Hedge Agreement" has the meaning set forth in Section 3.10(d).

"Hedge Contract" means a Swap Transaction issued under Facility D for the
purchase of any currency with any other currency at an agreed rate of exchange
on a specified date, an interest rate or currency swap or any other interest or
exchange rate exposure management arrangement.

"Hedge Contract Exposure" means, with reference to any Hedge Contract, the
amount owing to the issuer of that Hedge Contract in the event of a default
under and determined in accordance with the terms of the applicable Hedge
Agreement.

"Included Subsidiary" means (a) any Subsidiary of Stake, other than 1108176
Ontario, which, at any time has assets or revenues of greater than or equal to
C$100,000, and (b) 1108176 Ontario if (i) 1108176 Ontario becomes a direct or
indirect wholly-owned subsidiary of Stake, or (ii) the consent of Bentonite of
Canada Inc. is obtained to the grant of a security interest in favour of the
Lender, (A) by 1108176 Ontario in the real property located at 411 Parkside
Drive, Waterdown, Ontario and (B) by Stake in the common shares of 1108176
Ontario owned by Stake;


<PAGE>
                                      -16-


"including" means "including without limitation" and the term "including" shall
not be construed to limit any general statement which it follows to the specific
or similar items or matters immediately following it.

"Indemnified Person" means the Lender and its officers, directors, employees,
attorneys and agents.

"Intellectual Property" means all trade or brand names, business names,
trade-marks (including logos), trade-mark registrations and applications, brand
names, service marks, service mark registrations and applications, copyrights,
copyright registrations and applications, issued patents and pending
applications and other patent rights, industrial design registrations, pending
applications and other industrial design rights, trade secrets, proprietary
information and know-how, equipment and parts lists and descriptions,
instruction manuals, inventions, inventors' notes, research data, blue prints,
drawings and designs, formulae, processes, technology and other intellectual
property, together with all registered user agreements, technology transfer
agreements and other agreements or instruments relating to any of the foregoing.

"Interest Expense" means, with reference to the Borrowers and any period, the
cost of advances of Funded Debt outstanding during that period including
interest charges, the interest component of Capital Leases, fees payable in
respect of letters of credit and letters of guarantee and discounts incurred and
fees payable in respect of bankers' acceptances, all determined on a
consolidated basis.

"Interest Payment Date" means, in respect of any Facility, the last Business Day
of each month or such other day of each month as the Lender and the Borrowers
may otherwise agree.

"Inventory" means inventory of the Borrowers and Virginia Materials now or
hereafter acquired consisting of all readily saleable finished goods for which
an identifiable market is discernable but shall not include work in progress
unless such work in progress is, in the opinion of the Lender in its sole
discretion, in a readily saleable condition.

"International Materials" means International Materials and Supplies Inc., a
corporation incorporated under the laws of Virginia, and its successors and
permitted assigns.

"Issuance Date" means the date on which a Letter of Credit, Letter of Guarantee
or Hedge Contract is issued by the Lender at the request of a Borrower.

"ITA" means the Income Tax Act (Canada) and any successor thereto, and any
regulations promulgated thereunder.

"Landlord" means any landlord of a Borrower pursuant to a lease agreement
between such landlord and a Borrower, whether oral or in writing, in respect of
the lease of any property.


<PAGE>
                                      -17-


"Lender" means the Bank of Montreal, through its Canadian operations in respect
of Facility A and Facility D, and through the Chicago Branch in respect of
Facility C, and its successors and assigns.

"Letter of Credit" means a standby documentary credit issued by the Lender at
the request and for the account of a Borrower to beneficiaries resident in
Canada.

"Letter of Guarantee" means a letter of guarantee issued by the Lender at the
request and for the account of a Borrower to beneficiaries resident in Canada.

"LIBOR" means the rate of interest per annum for deposits in US Dollars
appearing on page 3750 of the Telerate screen as of 11:00 a.m. London time two
Business Days in Toronto and London prior to the relevant Drawdown Date or
Rollover Date, for the designated maturity and the amount selected, provided
that if Telerate page 3750 is unavailable, then LIBOR shall be determined by the
Lender with reference to Reuters page LIBO as of 11:00 a.m. London time two
Business Days in Toronto and London prior to the relevant Drawdown Date or
Rollover Date, for the designated maturity and the amount selected, further
provided that if Reuters page LIBO is unavailable, then LIBOR shall be
determined by the Lender as the rate, if any, at which it is prepared to offer
deposits to leading banks in the London interbank eurocurrency market in US
Dollars, for the designated maturity and the amount selected, for delivery on
the relevant Drawdown Date or Rollover Date.

"Libor Interest Date" means, with respect to any Libor Loan, the date falling on
the last day of each Contract Period applicable to the Libor Loan and, if the
applicable Contract Period is longer than three months, the date falling every
three months after the beginning of the Contract Period and the last day of the
Contract Period.

"Libor Loan" means an Advance which is denominated in US Dollars and in respect
of which a Borrower has elected to pay interest in accordance with Section 4.3.

"Lien" means any mortgage, charge, lien, hypothec or encumbrance, whether fixed
or floating on, or any security interest in, any property, whether real,
personal or mixed, tangible or intangible, any pledge or hypothecation of any
property, any deposit arrangement, priority, conditional sale agreement, other
title retention agreement or equipment trust, Capital Lease or other security
arrangement of any kind.

"LLC" means Stake Technology LLC, a limited liability company formed under the
laws of the State of Delaware and its successors and permitted assigns.

"Loan" means a Prime Loan, a USBR Loan or a Libor Loan and "Loans" means any
combination of them.

"Loss" means any loss whatsoever, whether direct or indirect, including
expenses, costs, damages, judgments, penalties, awards, assessments, fines and
any and all fees, disbursements and expenses of counsel, experts and
consultants.


<PAGE>
                                      -18-


"LP" means Stake Tech LP, a limited partnership formed under the laws of the
State of Delaware and its successors and permitted assigns.

"Material Adverse Change" means, with reference to any Person, a change that
would reasonably be expected to have a Material Adverse Effect on that Person.

"Material Adverse Effect" means a material adverse effect on (a) the business,
operations, or property or financial or other condition of a Person which would
negatively affect the ability of that Person to perform and discharge its
obligations under this Agreement, any of the other Documents, or its Material
Contracts, (b) the Collateral, the Lender's Liens on the Collateral or the
priority of those Liens, or (c) the Lender's ability to enforce its rights or
remedies under this Agreement or any of the other Documents.

"Material Contract" means, in respect of any Person, any contract or agreement
to which the Person is a party or by which it is bound which is material to its
business, having regard to its subject matter or the potential consequences of
breach or termination.

"Material License" means, in respect of any Person, any license granted to such
Person which is material to its business, having regard to its subject matter or
the potential consequences of breach or termination.

"Maturity Date" means, subject to the Lender's right to demand payment of one or
more of the Credit Facilities at any time and from time to time notwithstanding
the Borrowers' compliance or non-compliance with any or all of the provisions of
the Documents, with respect to Advances under Facility C, the date which is 84
months from the initial Drawdown Date under Facility C.

"Net Worth" means, with respect to the Consolidated Borrower, the sum of the
book value of all common share capital, contributed surplus, retained earnings
and unrealized foreign currency adjustments held by the Consolidated Borrower
plus any preferred share capital (other than the Class H preferred shares in the
capital of Temisca) and Subordinated Debt, less Accounts Receivable owed by
Affiliates to the Obligors, investments in Affiliates and deferred charges.

"Nordic" means Nordic Aseptic, Inc., a corporation incorporated under the laws
of Minnesota, and its successors and permitted assigns.

"Northern Food" means Northern Food and Dairy, Inc., a corporation incorporated
under the laws of Minnesota, and its successors and permitted assigns.

"Obligations" means all loans, advances, debts, liabilities and obligations for
the performance of covenants, tasks or duties or for the payment of monetary
amounts (whether or not performance is then required or contingent, or whether
or not those amounts are liquidated or determinable) owing to the Lender under
any or all of the Documents and all covenants and duties regarding those
amounts, of any kind or nature, present or future, whether or not evidenced by
any agreement or other instrument, owing under any or all of the Documents
including all obligations owed under the Credit Facilities.


<PAGE>
                                      -19-


"Obligor" means each of the Borrowers, any other Person and their respective
successors and permitted assigns delivering any of the Security Documents or any
Additional Obligor and "Obligors" means all of them. For greater certainty, the
term "Obligor" includes, 558497 Ontario, 1510146 Ontario, Sunrich Food, Nordic,
Northern Food, Sunrich, Stake USA, ULC, LLC, Virginia Materials and
International Materials.

"Original Currency" has the meaning given to it in Section 13.7(a).

"Other Currency" has the meaning given to it in Section 13.7(a).

"Permitted Liens" means, with respect to any property or asset of any Person:

      (a)   in respect of personal property:

            (i)   Liens arising under the Documents or intended to be created
                  pursuant to this Agreement or any Security Document;

            (ii)  Liens for Taxes against personal property (A) which are not
                  delinquent or remain payable without penalty or which are
                  being contested in good faith in accordance with Section
                  9.1(h) by appropriate proceedings and for which appropriate
                  reserves have been taken in accordance with GAAP, provided
                  that, in respect of this clause (ii), all such Liens secure
                  claims in the aggregate at any time outstanding for the
                  Borrowers not exceeding $100,000, excluding any such Lien
                  where there is any material risk that enforcement proceedings
                  in respect thereof will result in the seizure or sale of the
                  relevant property or assets;

            (iii) carriers', warehousemen's, mechanics', landlords',
                  materialmen's, repairmen's or other similar Liens arising in
                  the ordinary course of business which are not delinquent for
                  more than 90 days or remain payable without penalty or which
                  are being contested in good faith and by appropriate
                  proceedings diligently prosecuted, which proceedings have the
                  effect of preventing the forfeiture or sale of the property or
                  assets subject thereto and for which adequate reserves in
                  accordance with GAAP are being maintained;

            (iv)  Liens (other than any Lien imposed in respect of a Canadian
                  Pension Plan) consisting of pledges or deposits required in
                  the ordinary course of business in connection with workplace
                  safety insurance, employment insurance and other social
                  security legislation or to secure the performance of tenders,
                  statutory obligations, surety, stay, customs and appeals
                  bonds, bids, leases, governmental contracts, trade contracts,
                  performance and return of money bonds and other similar
                  obligations (exclusive of obligations for the payment of
                  borrowed money) or to secure liability to insurance carriers;


<PAGE>
                                      -20-


            (v)   Purchase Money Liens securing indebtedness not in excess of
                  $100,000 in the aggregate;

            (vi)  Liens arising in respect of indebtedness between any of the
                  Obligors provided that such indebtedness is assigned to the
                  Lender and such Liens are subordinated to Liens arising under
                  the Security Documents;

            (vii) Liens acceptable to the Lender in its sole discretion arising
                  in respect of Existing Borrowers' Debt; and

            (viii) any interest or title of a lessor or sublessor under any
                  lease permitted by this Agreement; and

      (b)   in respect of real property (whether leased or owned):

            (i)   permits, licenses, agreements, restrictions, easements,
                  rights-of-way and other similar interests in land (including
                  permits, licenses, agreements, restrictions, easements and
                  rights-of-way for sidewalks, public ways, sewers, drains, gas
                  steam and water mains, utilities, telephone and telegraph
                  conduits, poles, wires and cables) which will not, in the
                  reasonable opinion of the Lender materially impair the use or
                  the value of the real property and improvements thereon;

            (ii)  reservations, limitations, provisos and conditions, if any,
                  expressed in any original grants from the Crown;

            (iii) Liens for Taxes against real property which are not delinquent
                  or remain payable without penalty or which are being contested
                  in good faith in accordance with Section 9.1(h) by appropriate
                  proceedings and for which appropriate reserves have been taken
                  in accordance with GAAP, provided that, in respect of this
                  clause (iii), all such Liens secure claims in the aggregate at
                  any time outstanding for the Borrowers not exceeding $100,000,
                  excluding any such Lien where there is any material risk that
                  enforcement proceedings in respect thereof will result in the
                  seizure or sale of the relevant property or assets;

            (iv)  the Liens of the Security Documents created or intended to be
                  created pursuant to this Agreement or any Security Document;
                  and

            (v)   any interest or title of a lessor or sublessor under any real
                  property lease permitted by this Agreement.

"Person" means any natural person, sole proprietorship, partnership, syndicate,
trust, joint venture, Governmental Authority or any incorporated or
unincorporated entity or association of any nature.


<PAGE>
                                      -21-


"PPSA" means the Personal Property Security Act (Ontario).

"Pricing Grids" means the Facility A Pricing Grid and the Facility C Pricing
Grid and "Pricing Grid" means either one of them.

"Prime Loan" means an Advance which is denominated in Canadian Dollars and in
respect of which a Borrower has elected to pay interest in accordance with
Section 4.1(a).

"Prime Rate" means, with respect to a Prime Loan on any day, the greater of (a)
the annual rate of interest announced from time to time by the Lender as being
its reference rate then in effect for determining interest rates on Canadian
Dollar denominated commercial loans made by it in Canada, and (b) the CDOR Rate
in effect from time to time, plus 100 Basis Points per annum. Any change in
Prime Rate shall be effective on the date the change becomes effective
generally.

"principal amount" means (a) with reference to any Loan, the principal amount
thereof; (b) with reference to a Bankers' Acceptance, the face amount thereof;
(c) with reference to a Letter of Credit or a Letter of Guarantee, the maximum
amount payable to the beneficiary thereof; and (d) with reference to a Swap
Transaction, an amount determined by the Lender from time to time in its sole
discretion as the amount which would be owing to the issuer of that Swap
Transaction in the event of a default under that Swap Transaction determined in
accordance with any Hedge Agreement or, in the case of an Advance by way of
Hedge Contract, the anticipated credit exposure for that Hedge Contract
determined as of the Issuance Date by the Lender in its discretion, acting
reasonably, based on its usual practices.

"Purchase Money Liens" means any Lien on specific fixed assets (including
Capital Leases but, for greater certainty, excluding real property) to secure
the payment of the purchase price of those fixed assets where the amount of the
obligations secured does not exceed 100% of the lesser of the cost or fair
market value of those fixed assets; and extensions, renewals or replacements of
such Lien if the amount of the obligations secured thereby is not increased.

"Release" means a discharging, spraying, injection, abandonment, depositing,
spilling, leaking, seeping, pouring, emitting, emptying, throwing, dumping,
placing, pumping, escaping, leaching, migrating, dispensing, dispersal,
disposing, and exhausting, and when used as a noun has a correlative meaning.

"Reuters Screen LIBO Page" means the display designated as page LIBO on the
Reuters Monitor Money Rates Service or other page as may, from time to time,
replace that page on that service for the purpose of displaying interbank
offered rates for deposits in the London interbank market.

"Rhodia Price Reduction" means amounts due to Rhodia Inc. by Northern pursuant
to the Rhodia Rider.

"Rhodia Receivable" means the amount due to Northern Food by Rhodia Inc.
pursuant to the Rhodia Rider.

<PAGE>
                                      -22-


"Rhodia Rider" means Rider No. 5 to the manufacturing agreement between Rhodia
Inc. and Northern dated September 1, 1999 attached hereto as Exhibit A to
Schedule L.

"Rollover" means the rollover of an Advance by way of Libor Loan, Bankers'
Acceptance, Letter of Credit or Letter of Guarantee for an additional Contract
Period under Section 3.7(c), Section 3.8(h) or Section 3.9(h), respectively.

"Rollover Date" means the Business Day on which a Rollover occurs.

"Scheduled Payments" means payments made in accordance with Section 5.2(a) and
"Scheduled Payment" means any such payment.

"Schedules" means the schedules attached to and forming part of this Agreement,
as particularized in Section 1.15.

"Security Documents" means the Documents creating Liens on the assets of the
Obligors, in favour of the Lender, and all other instruments, agreements,
guarantees and documents which have been or may hereafter from time to time be
executed in connection therewith, including the Documents set out in Section 7.1
and, when used in relation to any Person, the term "Security Documents" means
the Security Documents executed and delivered by such Person.

"Senior Funded Debt to EBITDA Ratio" means, with reference to the Consolidated
Borrower, the Consolidated Borrower's Funded Debt divided by the Consolidated
Borrower's EBITDA.

"Stake" means Stake Technology Ltd., a corporation incorporated under the laws
of Canada, and its successors and permitted assigns.

"Stake USA" means Stake Technology (USA), Inc., a corporation incorporated under
the laws of Delaware, and its successors and permitted assigns.

"Subordinated Debt" means Debt owing by any Obligor where the payee has agreed
to postpone payment of all principal and interest on such Debt to payment and
satisfaction in full of the Obligations and has subordinated any security taken
in respect of such Debt to the position of the Lender under the Security
Documents, all in form and substance satisfactory to the Lender in its
discretion.

"Subsidiary" of a Person means (a) any corporation of which the Person and/or
any one of its Affiliates holds, directly or indirectly, other than by way of
security only, securities to which are attached more than 50% of the votes that
may be cast to elect directors of such corporation, (b) any corporation of which
the Person and/or any one of its Affiliates has, through operation of law or
otherwise, the ability to elect or cause the election of a majority of the
directors of such corporation, (c) any partnership, limited liability company,
unlimited liability company or joint venture in which such Person and/or one or
more of its Affiliates has, directly or indirectly, more than 50% of the votes
that may be cast to elect the governing body of such entity or otherwise control
its activity, and (d) any partnership, limited liability company, unlimited
liability company or joint venture in


<PAGE>
                                      -23-


which such Person and/or one or more of its Affiliates has, through operation of
law or otherwise, the ability to elect or cause the election of a majority of
the members of the governing body of such entity or otherwise control its
activity.

"Sunrich" means Sunrich, Inc., a corporation incorporated under the laws of
Minnesota, and its successors and permitted assigns.

"Sunrich Food" means Sunrich Food Group, Inc., a corporation incorporated under
the laws of Minnesota, and its successors and permitted assigns.

"Swap Transaction" means an agreement which may be entered into between the
Lender and the Borrowers in connection with the management of foreign exchange
risks in all major currencies acceptable to the Lender and includes (a) foreign
currency options, (b) foreign exchange forward contracts, and (c) financial
products offered by the Lender to the Borrowers in connection with management of
interest rate risks including forward rate agreements and interest rate swaps.

"Tax" and "Taxes" include, at any time, all taxes, surtaxes, duties, levies,
imposts, rates, fees, assessments, withholdings, dues and other charges of any
nature imposed by any Governmental Authority (including income, capital
(including large corporations), withholding, consumption, sales, use, transfer,
goods and services or other value-added, excise, customs, anti-dumping,
countervail, net worth, stamp, registration, franchise, payroll, employment,
health, education, business, school, property, local improvement, development,
education development and occupation taxes, surtaxes, duties, levies, imposts,
rates, fees, assessments, withholdings, dues and charges) together with all
fines, interest, penalties on or in respect of, or in lieu of or for
non-collection of, those taxes, surtaxes, duties, levies, imposts, rates, fees,
assessments, withholdings, dues and other charges.

"Temisca" means Temisca, Inc., a corporation incorporated under the laws of
Quebec, and its successors and permitted assigns.

"ULC" means 3060385 Nova Scotia Company, an unlimited liability company formed
under the laws of Nova Scotia, and its successors and permitted assigns.

"US Base Rate" means, with respect to a USBR Loan on any day, the greater of (a)
the annual rate of interest announced from time to time by the Lender as being
its reference rate then in effect for determining rates on US Dollar denominated
commercial loans made by it in Canada, and (b) the Federal Funds Effective Rate
in effect from time to time (multiplied by 365 or 366/360 if the rate is
calculated on the basis of a 360 day year), plus 100 Basis Points per annum. Any
change in the US Base Rate shall be effective on the date the change becomes
effective generally.

"USBR Loan" means an Advance which is denominated in US Dollars and in respect
of which the Borrowers has elected to pay interest in accordance with Section
4.2(a).

"US Dollars" and the symbol "US$" each means lawful money of the United States
of America.


<PAGE>
                                      -24-


"Virginia Materials" means Virginia Materials Inc., a corporation incorporated
under the laws of Delaware, and its successors and permitted assigns.

"Working Capital Ratio" means, with reference to the Consolidated Borrower,
current assets divided by current liabilities.

"written" or "in writing" includes printing, typewriting, or any electronic
means of communication capable of being legibly reproduced at the point of
reception.

"558497 Ontario" means 558497 Ontario Limited, a corporation incorporated under
the laws of Ontario, and its successors and permitted assigns.

"1108176 Ontario" means 1108176 Ontario Limited, a corporation incorporated
under the laws of Ontario, and its successors and permitted assigns.

"1510146 Ontario" means 1510146 Ontario Inc., a corporation incorporated under
the laws of Ontario, its successors and permitted assigns.

1.2 Business Day.

If under this Agreement any payment or calculation is to be made, or any other
action is to be taken, on or as of a day which is not a Business Day, that
payment or calculation is to be made, and that other action is to be taken, as
applicable, on or as of the next day that is a Business Day unless the Business
Day next following the day is in the next following month, in which event the
payment, calculation or action shall be made or taken on or as of the
immediately preceding Business Day.

1.3 Conflict.

If there is a conflict or inconsistency between any provision of this Agreement
and any provision of another document contemplated by or delivered under or in
connection with this Agreement, the relevant provision of this Agreement is to
prevail. For greater certainty, notwithstanding events of default set forth in
the Security Documents, the Events of Default shall, if the Events of Default
conflict with the events of default set forth is such Security Documents, be the
Events of Default to the extent required to remove the conflict, and if a
particular event of default is set out in such other Security Document and is
not set out in this Agreement, provided that such event of default does not
pertain to representations, warranties, covenants or other matters relating
specifically to the property secured, charged or hypothecated by the relevant
Security Document, the particular event of default shall not be effective as an
event of default in that Security Document. For greater certainty, the events of
default contained in the Security Documents will only be effective and apply to
the extent that the relevant representation, warranty and/or covenant relating
specifically to the property secured, charged or hypothecated by such Security
Document is not addressed in the Credit Agreement.


<PAGE>
                                      -25-


1.4 Currency.

Unless otherwise specified, all amounts are stated in Canadian Dollars. For the
purpose of determining the aggregate Canadian Dollar Amount outstanding on any
date of one or more Advances made hereunder, unless otherwise specified, the
principal amount of any Loans made in US$ and the face amount of any Letters of
Credit and Letters of Guarantee denominated in US$ shall be converted to
Canadian Dollars at the Lender's applicable noon spot buying rate on such date,
or, if such date is not a Business Day, on the next Business Day.

1.5 Time.

Time shall be of the essence in all provisions of this Agreement.

1.6 GAAP.

Unless otherwise expressly provided, all accounting terms used in this Agreement
shall be interpreted, all financial information shall be prepared and all
financial calculations shall be made in accordance with GAAP, consistently
applied from period to period.

1.7 Headings and Table of Contents.

The division of this Agreement into sections, the insertion of headings and the
provision of a table of contents are for convenience of reference only and are
not to affect the construction or interpretation of this Agreement.

1.8 Number and Gender.

Unless otherwise specified, words importing the singular include the plural and
vice versa and words importing gender include all genders.

1.9 References.

Unless otherwise specified, references in this Agreement to Sections and
Schedules are to sections of, and schedules to, this Agreement.

1.10 Statutory References.

Unless otherwise specified, each reference to an enactment is deemed to be a
reference to that enactment, and to the regulations made under that enactment,
as amended or re-enacted from time to time.

1.11 Time of Day.

Unless otherwise specified, references to time of day or date mean the local
time or date in the City of Toronto, Province of Ontario or in respect of
Facility C, the City of Chicago, Illinois.


<PAGE>
                                      -26-


1.12 Governing Law.

This Agreement and each of the Documents are governed by, and are to be
construed and interpreted in accordance with, the laws of the Province of
Ontario and the laws of Canada applicable in the Province of Ontario.

1.13 Entire Agreement.

This Agreement and all Documents constitute the entire agreement between the
parties with respect to the subject matter and supersede all prior agreements,
negotiations, discussions, undertakings, representations, warranties and
understandings, whether written or oral including a summary of terms and
conditions submitted to the Obligors by the Lender.

1.14 Severability.

If any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, the illegality, invalidity or
unenforceability of that provision will not affect:

      (a)   the legality, validity or enforceability of the remaining provisions
            of this Agreement; or

      (b)   the legality, validity or enforceability of that provision in any
            other jurisdiction.

1.15 Schedules.

The following Schedules are attached to and form part of this Agreement:

Schedule                        Description
--------                        -----------

A                               Additional Obligor Counterpart
B                               Branch of Account
C                               Business and Operations
D                               Governmental Approvals
E                               Litigation
F                               Unpaid Taxes
G                               Subsidiaries
H                               Labour Matters
I                               Real Property and Locations of Collateral
J                               Intellectual Property
K                               Environmental Matters
L                               Material Contracts and Material Licenses
M                               Notice of Advance
N                               Rollover and Conversion Notice
O                               Bankers' Acceptance Power Of Attorney
P                               Repayment Schedule
Q                               Prepayment Notice


<PAGE>
                                      -27-


R                               Existing Debt
S                               Transactions with Affiliates
T                               Compliance Certificate
U                               Cancellation Notice

                                   SECTION 2
                         REPRESENTATIONS AND WARRANTIES

2.1 Representations, Warranties and Agreements of the Obligors.

Each Obligor, for itself and only with respect to itself, makes the following
representations and warranties to the Lender, all of which shall survive the
execution and delivery of this Agreement and acknowledges and confirms that the
Lender is relying on such representations and warranties in entering into this
Agreement and making Advances hereunder:

      (a)   Corporate Status. It (i) is a duly organized and validly existing
            corporation in good standing under the laws of the jurisdiction of
            its incorporation, (ii) has the power and authority to own its
            property and assets and to transact the business in which it is
            engaged and presently proposes to engage, and (iii) is duly
            qualified as a foreign corporation or an extra-provincial
            corporation and is in good standing in each jurisdiction where the
            ownership, leasing or operation of its property or the conduct of
            its business requires such qualification.

      (b)   Power and Authority. It has the corporate power to execute, deliver
            and perform the terms and provisions of each of the Documents and
            has taken all necessary action to authorize the execution, delivery
            and performance by it of each of such Documents. It has duly
            executed and delivered each of the Documents, and each Document
            constitutes its legal, valid and binding obligation enforceable
            against it in accordance with its terms, subject to (i) applicable
            bankruptcy, reorganization, moratorium or similar laws affecting
            creditors' generally, (ii) the fact that specific performance and
            injunctive relief may only be given at the discretion of the courts,
            and (iii) the equitable or statutory powers of the courts to stay
            proceedings before them and to stay the execution of judgments.

      (c)   No Violation. Neither the execution, delivery or performance by it
            of the Documents, nor compliance by it with the terms and provisions
            thereof, (i) will contravene any Applicable Law, (ii) will conflict
            with or result in any breach of any of the terms, covenants,
            conditions or provisions of, or constitute a default under, or
            result in the creation or imposition of (or the obligation to create
            or impose) any Lien (except pursuant to the Security Documents) upon
            any of its property or assets pursuant to the terms of any
            indenture, mortgage, deed of trust, credit agreement, loan agreement
            or any other agreement, contract or instrument to which it is a
            party or by


<PAGE>
                                      -28-


            which it or any of its property or assets is bound or to which it
            may be subject, or (iii) will violate any provision of its
            constating documents.

      (d)   Business and Operations. Its business and operations and locations
            of its business and operations are accurately described in Schedule
            C.

      (e)   Governmental Approvals. Except as set forth in Schedule D, no order,
            consent, certificate, approval, permit, license, authorization or
            validation of, or filing, recording or registration with or
            exemption by (except as have been obtained or made prior to the date
            hereof or exist and are in full force and effect) any Person
            (including any Governmental Authority), is required to authorize, or
            is required in connection with (i) the execution, delivery and
            performance by it of any Document, or (ii) the legality, validity,
            binding effect or enforceability with respect to it of any such
            Document.

      (f)   Security Documents. The Security Documents create valid and
            enforceable Liens upon the Collateral on the terms set out therein,
            subject only to the terms of this Agreement and to Permitted Liens,
            and the Security Documents have been registered or recorded in all
            places where registration and recording is necessary to protect the
            charges and security interests created therein.

      (g)   Title to Collateral. It has good and marketable title to all
            Collateral free and clear of all Liens except Permitted Liens.

      (h)   Financial Statements; Financial Condition; Undisclosed Liabilities.

            (i)   The consolidated financial statements submitted to the Lender
                  for the 9 month period ending September 30, 2001 and each
                  subsequent set of audited and internally prepared financial
                  statements submitted to the Lender present fairly (subject, in
                  the case of interim internally prepared financial statements,
                  to normal year end adjustments) the financial position of the
                  Obligors, as at the date of said statements and the results of
                  operations for the periods covered thereby and all such
                  financial statements have been prepared in accordance with
                  GAAP consistently applied except to the extent provided in the
                  notes to said financial statements. Since September 30, 2001
                  there has been no Material Adverse Change to any Obligor; and

            (ii)  Except as fully reflected in the financial statements and the
                  notes related thereto described in Section 2.1(h)(i), there
                  were no liabilities or obligations with respect to it of any
                  nature whatsoever (whether absolute, accrued, contingent or
                  otherwise and whether or not due) which, either individually
                  or in aggregate, would be material to it. It does not know of
                  any basis for the assertion

<PAGE>
                                      -29-


                  against it of any liability or obligation of any nature
                  whatsoever that is not fully reflected in the financial
                  statements and notes related thereto described in Section
                  2.1(h)(i) which, either individually or in the aggregate,
                  would be material to it.

      (i)   Litigation. Except as set forth on Schedule E, there are no actions,
            suits or proceedings pending or threatened (i) with respect to any
            Document or the transactions contemplated thereby, or (ii) that are
            reasonably likely to have a Material Adverse Effect on it.

      (j)   True and Complete Disclosure. All factual information heretofore or
            contemporaneously furnished by or on behalf of it in writing to the
            Lender (including all information contained in the Documents) for
            purposes of or in connection with this Agreement or any transaction
            contemplated herein, is true and accurate in all material respects
            on the date as of which such information is dated or certified and
            is not incomplete by omitting to state any fact necessary to make
            such information (taken as a whole) not misleading at such time in
            light of the circumstances under which such information was
            provided.

      (k)   Tax Returns and Payments. Except as set forth in the financial
            statements for the 12 month period ending December 31, 2000 or
            Schedule F, (i) it has filed or caused to be filed all Tax returns
            which are required to have been filed with respect to its five most
            recent tax years, and has paid all Taxes shown to be due and payable
            on those returns or any assessments made against it and all other
            Taxes, fees or other charges imposed on it by any Governmental
            Authority, other than those the amount of or validity of which is
            currently being contested in good faith by appropriate proceedings
            being diligently pursued, and with respect to which adequate
            reserves in conformity with GAAP have been provided in its books and
            of which the details have been provided to the Lender, and (ii) no
            Liens for Taxes have been filed and, to its knowledge, no claims are
            being asserted against it with respect to any Taxes.

      (l)   Subsidiaries. It has no Subsidiaries other than those listed on
            Schedule G. Schedule G correctly sets forth, the percentage
            ownership (direct and indirect) of it in each class of shares of
            each of its Subsidiaries and also identifies the direct owner
            thereof and also identifies any other owner of shares or options of
            any of its Subsidiaries.

      (m)   No Restrictions. There does not exist any encumbrance or restriction
            on its ability to (i) pay dividends or make any other distributions
            on its shares or any other interest or participation in its profits,
            or to pay any Debt owed by it, (ii) make loans or advances, or (iii)
            transfer any of its properties or assets, except, in each case, for
            such encumbrances or restrictions existing under or by reason of (i)
            Applicable Law, (ii) this Agreement or the other Documents, (iii)
            customary provisions restricting subletting or assignment


<PAGE>
                                      -30-


            of any lease governing any of its leasehold interests, or (iv)
            customary provisions restricting the assignment of contracts,
            permits and/or licenses.

      (n)   Compliance with Applicable Laws, etc. It (i) has obtained and is in
            compliance with all Governmental Approvals which are necessary for
            the conduct of its business as presently conducted and the use of
            its property and assets (both real and personal), each of which is
            in full force and effect, is a good, valid and subsisting approval
            which has not been surrendered, forfeited or become void or voidable
            and is unamended, and (ii) is in compliance with all Applicable
            Laws, including Environmental Laws.

      (o)   Labour Matters. There are no strikes or other labour disputes
            against it that are pending or, to its best knowledge, threatened.
            All payment due from it on account of employee insurance of every
            kind and vacation pay have been paid or accrued as a liability on
            its books. It does not have any obligation under any collective
            agreements or under any consulting or management agreement requiring
            payments which cannot be cancelled without material liability. It is
            in material compliance with the terms and conditions of all
            consulting agreements, management agreements and employment
            agreements, if any. There is no organizing activity involving it or,
            to its knowledge, threatened by any labour union or group of
            employees. No labour union or group of employees has made a pending
            demand for recognition. Except as set forth in Schedule H, there are
            no complaints or charges against it pending or threatened to be
            filed with any Governmental Authority or arbitrator based on,
            arising out of, in connection with, or otherwise relating to the
            employment or termination of employment of any individual by it.

      (p)   Insurance. It maintains insurance in compliance with Section 9.1(b)
            and all premiums and other sums of money payable for that purpose
            have been paid.

      (q)   Location of Collateral. All of the Collateral is located at the
            locations identified in Schedule I or is in transit to or from such
            locations. It has no material account debtors resident outside of
            Canada or the United States of America that are not insured to at
            least 90% of their book value by EDC.

      (r)   Intellectual Property. It has no material Intellectual Property
            other than the Intellectual Property listed in Schedule J.


<PAGE>
                                      -31-


      (s)   Real Property.

            (i)   All real property owned or leased by it and the nature of its
                  interest (both registered and beneficial) therein, is
                  correctly set forth on Schedule I. It has good and marketable
                  title to all real property owned by it free and clear of all
                  Liens other than Permitted Liens.

            (ii)  The real property owned or leased by it described in Schedule
                  I has full, free and unobstructed access to and from adjoining
                  public highways, streets and/or roads, and it has no knowledge
                  of any existing fact or condition which could reasonably be
                  expected to result in the amendment or termination of such
                  access. All entrances/exits to such real property are
                  permitted under Applicable Law and allow free and
                  uninterrupted ingress and egress to public highways, streets
                  and/or roads.

            (iii) There are no outstanding work orders, notices of deficiency
                  and/or notices of violation issued by any Governmental
                  Authority affecting or pertaining in any respect to part or
                  all of its real property, other than those received and
                  addressed in the normal course of business and which, in the
                  aggregate, would not have a Material Adverse Effect.

            (iv)  Each of the Permitted Liens registered against its real
                  property is in good standing and there are no unresolved
                  disputes concerning the same except as disclosed in Schedule
                  E.

            (v)   To the extent possible as of the date hereof, each of any
                  outstanding site-plan, development and other municipal
                  agreements entered into by it have been complied with and
                  satisfied.

            (vi)  All its real property is zoned to permit its present use.

            (vii) No written notice has been received by it from any
                  Governmental Authority or from any other source whatsoever
                  (and it has otherwise no knowledge thereof), advising of,
                  ordering, directing or requiring that any alteration, repair,
                  improvement or other work be done with respect to its real
                  property or relating to its non-compliance with any Applicable
                  Law regarding land use or any other Applicable Law material to
                  its real property which has not or will not be complied with
                  within the relevant permitted period or relating to any
                  threatened or impending condemnation, or relating to any
                  changes (actual, pending or proposed) to any zoning or other
                  land use law regulating or affecting the use to which such
                  real property may be put.


<PAGE>
                                      -32-


            (viii) It is not aware of any expropriation or pending expropriation
                   of part or all of its real property.

            (ix)   It has not received notice of and, to the best of its
                   knowledge, information and belief, after having made due
                   enquiry, is not otherwise aware of any natural or artificial
                   condition upon its real property which shall or could result
                   in a Material Adverse Change or materially adversely limit or
                   materially adversely affect the intended use of the real
                   property.

            (x)    It has not received written notice of and is not otherwise
                   aware of any pending or proposed amendment to any Applicable
                   Law relating to its real property, or of any planning report
                   or other government study concerning the real property, any
                   of which shall or could result in any Material Adverse Change
                   or materially adversely affect the intended use of the real
                   property.

            (xi)   Taxes on its real property have not been reduced, deferred or
                   eliminated pursuant to government schemes such as (but not
                   limited to) a farm rebate tax program, a managed forest tax
                   rebate program or conservation land tax rebate program; save
                   for increases that will result from the development of its
                   real property in the ordinary course, it has no knowledge of
                   any proposal by a municipal corporation or other Governmental
                   Authority to increase Taxes relating to or in respect of its
                   real property other than normal annual tax increases levied
                   from time to time.

            (xii)  It has no knowledge of any existing or future obligation to
                   pay or any proposed assessment of local improvement charges
                   in relation to its real property. It has done no act nor
                   executed any agreement with a municipal corporation or other
                   Governmental Authority the effect of which would be to
                   provide for a future obligation to pay or a future assessment
                   of local improvement charges in connection with the real
                   property.

      (t)   Environmental Matters.

            (i)    It does not engage in any Environmental Activity which, if
                   conducted improperly, could reasonably be expected to have a
                   Material Adverse Effect on it or the value of its property
                   and, except as disclosed in Schedule K, no material amount of
                   Hazardous Substances are stored in or present in any form in
                   or under any premises or lands owned, leased or operated, at
                   any time by it and which, if Released, could reasonably be
                   expected to have a Material Adverse Effect on it or the value
                   of its property.


<PAGE>
                                      -33-


            (ii)  To its knowledge, there is no material amount of asbestos in
                  any form present or suspected to be present at any premises
                  owned leased or operated, at any time, by it.

            (iii) It has a waste management program in compliance with
                  Applicable Law to deal with Hazardous Substances generated in
                  the ordinary course of business, including but not limited to
                  waste generated by its production activities.

      (u)   Representations and Warranties in Other Documents. All
            representations and warranties made by it in the Documents other
            than this Agreement are true and correct in all material respects as
            of the time as of which such representations and warranties were
            made.

      (v)   Material Contracts. All of its Material Contracts and Material
            Licenses are listed on Schedule L and true and complete copies
            thereof have been provided to the Lender.

      (w)   GST Matters. There are no outstanding obligations owed by any
            Obligor to Canada Customs and Revenue Agency for payment of goods
            and services tax.

      (x)   Debt. It has, as of the Closing Date, no Debt other than that listed
            in Schedule R.

      (y)   Rhodia Rider. A true and complete copy of the Rhodia Rider is
            attached hereto as Exhibit A to Schedule L.

2.2 Deemed Repetition.

The representations and warranties made in Section 2.1 shall (a) continue in
effect until payment and performance of all the Obligations, and (b) be deemed
to be repeated on each Drawdown Date, Interest Payment Date, Rollover Date and
Conversion Date, mutatis mutandis, as if made on that date.

                                   SECTION 3
                              THE CREDIT FACILITIES

3.1 Establishment of Credit Facilities.

Subject to the terms and conditions of this Agreement, the Lender has
established the following demand Credit Facilities:

      (a)   in favour of the Facility A Borrowers on a joint and several basis,
            a demand revolving credit facility ("Facility A") in the aggregate
            principal amount of up to $4,000,000;


<PAGE>
                                      -34-


      (b)   in favour of LP, a demand non-revolving reducing credit facility
            ("Facility C") in the aggregate principal amount of up to
            US$15,000,000; and

      (c)   in favour of Stake, a demand treasury facility ("Facility D"), at
            the sole discretion of the Lender, up to an aggregate principal
            amount not to exceed $1,000,000 in Deemed Risk Content.

3.2 Availability of Credit Facilities.

Subject to the provisions of this Agreement:

      (a)   Facility A. The Facility A Borrowers on a joint and several basis
            may borrow, repay and reborrow under Facility A up to the lesser of
            the Facility A Borrowing Base and a maximum principal amount of
            $4,000,000.

      (b)   Facility C. LP may borrow by way of a single drawdown under Facility
            C up to a maximum principal amount of US$15,000,000.

      (c)   Facility D. Stake may obtain Advances under Facility D at the sole
            discretion of the Lender up to a maximum principal amount not to
            exceed $1,000,000 in Deemed Risk Content and the Lender may cancel
            the availability of Facility D at any time without notice to Stake.

      (d)   Types of Advances. The Lender agrees to make:

            (i)   Facility A available by way of Prime Loans, USBR Loans,
                  Bankers' Acceptance, Letters of Credit or Letters of
                  Guarantee;

            (ii)  Facility C available by way of USBR Loans or Libor Loans; and

            (iii) Facility D available by way of Hedge Contracts.

3.3 Revolving Nature of Facility A.

Subject to the provisions of this Agreement:

      (a)   Facility A. The Facility A Borrowers may increase or reduce the
            amount of Advances outstanding under Facility A by borrowing,
            repaying and reborrowing Prime Loans and USBR Loans, by causing the
            acceptance of Bankers' Acceptances and funding them at maturity, and
            by causing the issue and re-issue of Letters of Credit or Letters of
            Guarantee from time to time.

      (b)   Cancellation of Unused Portion. The Facility A Borrowers may cancel
            any unused portion of Facility A at any time without penalty upon
            giving one Business Day's prior written notice to the Lender of such
            cancellation in the form attached hereto as Schedule U.
            Notwithstanding any other


<PAGE>
                                      -35-


                                                                            
            provision of this Agreement, upon cancellation such cancelled
            portion will not be available for reborrowing by the Facility A
            Borrowers.

3.4 Purpose.

      (a)   Facility A. The proceeds of Advances made by the Lender under
            Facility A shall be used by the Facility A Borrowers solely to
            provide for ongoing general corporate and working capital purposes
            of the Facility A Borrowers. For greater certainty proceeds of
            Facility A will be used for corporate head office, Steam Explosion,
            BEI/Pecal, Temisca and Virginia Materials.

      (b)   Facility C. The proceeds of the single Advance made by the Chicago
            Branch under Facility C shall be used by LP primarily to indirectly
            refinance, certain existing indebtedness. For greater certainty, the
            proceeds of the advance under Facility C shall be used by the LP
            primarily to subscribe for a wholly-owned equity interest in ULC
            which in turn will use the proceeds of such equity injection to
            subscribe for a wholly-owned equity interest in LLC which in turn
            will use the proceeds from such equity injection to make a secured
            loan to Sunrich Food for the purpose of refinancing existing Debt of
            Sunrich Food and its Subsidiaries.

      (c)   Facility D. The proceeds of Advances made by the Lender under
            Facility D shall be used by Stake solely to assist in foreign
            exchange and interest rate risk management by Stake.

3.5 Initial and Maximum Utilization.

      (a)   Facility A. Advances under Facility A shall not at any time exceed
            the Facility A Borrowing Base. Stake, on behalf of the Facility A
            Borrowers, shall submit monthly within thirty days after the last
            day of the month or, if that day is not a Business Day, the next
            preceding Business Day, a certified aged statement of Accounts
            Receivable and listing of Inventory in form and substance
            satisfactory to the Lender in its sole discretion (the "Borrowing
            Base Certificate").

      (b)   Facility C. Only one Advance is available under Facility C. The
            Advance shall be based upon a written payout statements,
            satisfactory to the Lender, from those creditors identified by the
            Lender evidencing the amount of the existing debt to and an
            undertaking to release and discharge all security held by such
            creditors and shall be paid by the Lender directly to LP. Any unused
            portion of Facility C shall be cancelled immediately upon the making
            of the Advance.

      (c)   Facility D. Advances under Facility D shall not, in the aggregate,
            have a Deemed Risk Content, as determined from time to time by the
            Lender in its sole discretion, in excess of $1,000,000. Advances
            under Facility D shall be made available to Stake at the sole
            discretion of the Lender upon


<PAGE>
                                      -36-


            request of Stake in order to hedge interest rate and foreign
            exchange exposure.

3.6 Borrowing Procedures - General.

      (a)   Notice of Borrowing. All Advances require the delivery of prior
            notice to the Lender. To request an Advance, the applicable Borrower
            shall give to the Lender written notice substantially in the form
            attached as Schedule M, indicating the amount of the requested
            Advance, at or before the time set out below opposite the type of
            Advance that the applicable Borrower wishes to request:


<TABLE>
<CAPTION>
            Type of Advance                             Time of Notice
            ---------------                             --------------
<S>                                                     <C>
            Prime Loans, USBR Loans, Bankers'           Before 11:00 a.m. one Business Day prior
            Acceptance and Letters of Credit and        to the requested Drawdown Date.
            Letters of Guarantee less than or equal
            to $10 million

            Prime Loans, USBR Loans, Bankers'           Before 11:00 a.m. two Business Days
            Acceptance and Letters of Credit and        prior to the requested Drawdown Date.
            Letters of Guarantee greater than $10
            million

            Libor Loans                                 Before 11:00 a.m. three Business Days
                                                        prior to the requested Drawdown Date.

            Hedge Contracts                             Before 11:00 a.m. one Business Day prior
                                                        to the requested Issuance Date.
</TABLE>


            Each notice given in respect of an Advance by way of Prime Loan or
            USBR Loan shall indicate the amount of the required Advance and the
            date funds are required. Each notice given in respect of an Advance
            by way of Libor Loan shall indicate the amount of the required
            Advance, the date funds are required and the duration of the initial
            Contract Period applicable thereto. Each notice given in respect of
            an Advance by way of Bankers' Acceptances shall indicate the amount
            of the Bankers' Acceptances to be issued and the applicable Contract
            Period of the Bankers' Acceptances. Each notice given in respect of
            an Advance by way of Letters of Credit or Letters of Guarantee shall
            indicate the amount of the Letter of Credit or Letter of Guarantee
            to be issued, the applicable Contract Period, the beneficiary, the
            terms of draw under the requested Letter of Credit or Letter of
            Guarantee and all other relevant information.


<PAGE>
                                      -37-


            Each notice given in respect of an Advance by way of Hedge Contract
            shall indicate the amount of the Hedge Contract to be issued, the
            applicable Contract Period and all other relevant information
            required by the Lender in the circumstances.

      (b)   Limits on Advances. Notwithstanding any other term of this
            Agreement, a Borrower shall not request from the Lender an Advance
            under any Credit Facility if, on the day notice of the Advance is
            given pursuant to Section 3.6(a), after giving effect to the
            Advance, in the case of Facility A and Facility D the Canadian
            Dollar Amount, and in the case of Facility C the US Dollar amount,
            of the principal amount of all Advances outstanding from the Lender
            under that Credit Facility would exceed the maximum aggregate
            principal amount available under that Credit Facility or, in the
            case of Facility A, the then current Facility A Borrowing Base. No
            Advance under any Credit Facility shall have a Contract Period that
            extends beyond the Maturity Date of that Credit Facility.

      (c)   Lender Determination. Each determination by the Lender of the Prime
            Rate, the US Base Rate, the CDOR Rate, an Acceptance Fee, an
            issuance fee for a Letter of Credit or a Letter of Guarantee and
            LIBOR shall, in the absence of manifest error, be final, conclusive
            and binding on the Borrowers.

3.7 Libor Loans.

      (a)   Minimum Advance. Each Advance by way of Libor Loan shall be in a
            minimum aggregate amount of US$1,000,000 and larger whole multiples
            of US$100,000.

      (b)   Term. Each Libor Loan shall have a Contract Period of not less than
            30 days or such greater period in multiples of 30 days to a maximum
            of 180 days, or a longer term, subject to availability. No Contract
            Period shall extend beyond the Maturity Date of the applicable
            Advance or Credit Facility.

      (c)   Rollover of Libor Loans. At least three Business Days before the
            expiry of the Contract Period of each Libor Loan, a Borrower shall
            notify the Lender by irrevocable telephone notice, followed by
            written confirmation on the same day in form and substance
            substantially in accordance with Schedule N, if it intends to:

            (i)   enter into a new Contract Period with respect to the maturing
                  Libor Loan, or

            (ii)  repay the maturing Libor Loan.

            If a Borrower fails to provide the foregoing notice or make the
            required payment, payment of its Obligations to the Lender with
            respect to that


<PAGE>
                                      -38-


            maturing Libor Loan shall be funded with an Advance under a USBR
            Loan in the amount outstanding under that Libor Loan.

3.8 Bankers' Acceptances.

      (a)   Minimum Advances. Each Advance by way of Bankers' Acceptance shall
            be in a minimum aggregate face amount of $500,000 and larger whole
            multiples of $100,000.

      (b)   Term. Each Bankers' Acceptance shall have a Contract Period of not
            less than 10 days or such greater period in multiples of 10 days to
            a maximum of 180 days or a longer term, subject, in all cases, to
            availability.

      (c)   Discount Rate. On each Drawdown Date on which Bankers' Acceptances
            are to be accepted, the Lender shall advise the Borrower as to the
            Lender's determination of the applicable Discount Rate for the
            Bankers' Acceptances which the Lender has agreed to purchase.

      (d)   Purchase. If the Lender purchases a Bankers' Acceptance accepted by
            it, the Borrower shall sell and the Lender shall purchase the
            Bankers' Acceptance at the applicable Discount Rate. The Lender
            shall provide to the Borrower's Account the Discount Proceeds less
            the Acceptance Fee payable with respect to that Bankers' Acceptance.

      (e)   Sale. The Lender may from time to time hold, sell, rediscount or
            otherwise dispose of any or all Bankers' Acceptances accepted and
            purchased by it.

      (f)   Bankers' Acceptances in Blank. To facilitate the acceptance of
            Bankers' Acceptances under this Agreement, the Borrowers shall, upon
            execution of this Agreement, if so requested by the Lender, and from
            time to time as required, provide to the Lender Bankers' Acceptances
            substantially in the form as may be acceptable to the Lender duly
            executed and endorsed in blank by the Borrowers, in quantities
            sufficient for the Lender to fulfill its obligations under this
            Agreement or, if so requested by the Lender, provide to the Lender,
            a power of attorney substantially in the form of Schedule O executed
            by the Borrowers in favour of the Lender authorizing the Lender to
            execute drafts in the form attached thereto. If Bankers' Acceptances
            have been provided to the Lender duly executed and endorsed in blank
            by the Borrowers, the Lender is hereby authorized to issue Bankers'
            Acceptances endorsed in blank in face amounts as may be determined
            by the Borrowers provided that the aggregate amount thereof is equal
            to the aggregate amount of Bankers' Acceptances required to be
            accepted by the Lender. The Lender shall not be responsible or
            liable for its failure to accept a Bankers' Acceptance as required
            under this Agreementif the cause of the failure is, in whole or in
            part, due to the failure of the Borrowers to provide to the Lender
            on a timely basis a



<PAGE>
                                      -39-


            sufficient number of duly executed Bankers' Acceptances or a duly
            executed power of attorney, as applicable, nor shall the Lender be
            liable for any damage, loss or other claim arising by reason of any
            loss or improper use of any Bankers' Acceptance except a loss or
            improper use arising by reason of the gross negligence or willful
            misconduct of the Lender or its employees.

      (g)   Execution. Drafts drawn by a Borrower to be accepted as Bankers'
            Acceptances shall be signed by a duly authorized officer or officers
            of the Borrower or by its attorneys. Notwithstanding that any Person
            whose signature appears on any Bankers' Acceptance may no longer be
            an authorized signatory for the Borrower at the time of issuance of
            a Bankers' Acceptance, that signature shall nevertheless be valid
            and sufficient for all purposes as if the authority had remained in
            force at the time of issuance and any Bankers' Acceptance so signed
            shall be binding on the Borrower.

      (h)   Rollover. At or before 1:00 p.m. two Business Days before the
            maturity date of any Bankers' Acceptance, the Borrower shall give to
            the Lender written notice substantially in the form attached as
            Schedule N if the Borrowers intends to repay the maturing Bankers'
            Acceptances on the maturity date or if the Borrower intends to issue
            Bankers' Acceptances on the maturity date to provide for the payment
            of the maturing Bankers' Acceptances. Otherwise, the Borrower shall
            provide payment to the Lender of an amount equal to the aggregate
            principal amount of the Bankers' Acceptances issued by the Borrower
            on their maturity date. If the Borrower fails to make the payment,
            the Borrower's obligations in respect of the maturing Bankers'
            Acceptances shall be deemed to have been converted on the maturity
            date thereof into Prime Loans.

      (i)   Waiver of Presentment and Other Conditions. Each Borrower waives
            presentment for payment and any other defence to payment of any
            amounts due to the Lender in respect of a Bankers' Acceptance
            accepted and purchased by it pursuant to this Agreement which might
            exist solely by reason of the Bankers' Acceptance being held, at the
            maturity thereof, by the Lender in its own right and each Borrower
            agrees not to claim any days of grace if the Lender as holder sues
            the Borrower on the Bankers' Acceptance for payment thereunder.

      (j)   Depository Bills and Notes Act. At the option of the Borrowers and
            the Lender, Bankers' Acceptances under this Agreement to be accepted
            by the Lender may be issued in the form of depository bills for
            deposit with The Canadian Depository for Securities Limited pursuant
            to the Depository Bills and Notes Act (Canada). All depository bills
            so issued shall be governed by the provisions of this Section 3.8.


<PAGE>
                                      -40-


3.9 Letters of Credit and Letters of Guarantee.

      (a)   Currency. Each Letter of Credit and each Letter of Guarantee shall
            be issued in Canadian Dollars, US Dollars or such other currency as
            the Lender may agree in its sole discretion and shall mature on a
            Business Day.

      (b)   Letter of Credit and Letter of Guarantee Sublimit. The aggregate
            principal amount Advances which may be outstanding by way of Letter
            of Credit and Letter of Guarantee shall not exceed $1,000,000.

      (c)   No Guarantees. No Advance by way of the issue of a Letter of Credit
            or Letter of Guarantee shall be used by the Borrowers for the
            purpose of incurring Contingent Obligations of the type described in
            clause (a) of the definition of "Contingent Obligations".

      (d)   Other Documentation. The issue of a Letter of Credit or a Letter of
            Guarantee is subject to the execution and delivery of an application
            and agreement and an indemnity in the Lender's standard form or
            other specific agreement relative to the instrument in form and
            substance satisfactory to the Lender acting reasonably (the "L/C
            Agreement").

      (e)   Retirement. A Letter of Credit or Letter of Guarantee may only be
            retired on its maturity date unless and to the extent it has been
            honoured or unless the written consent of the beneficiary of the
            instrument has been obtained and the original instrument has been
            returned to the Lender.

      (f)   Drawings. Any drawing under a Letter of Credit or Letter of
            Guarantee shall be funded by a Loan by way of a Prime Loan (if drawn
            in Canadian Dollars) or by way of a USBR Loan (if drawn in US
            Dollars or any other currency).

      (g)   Term. Each Letter of Credit and each Letter of Guarantee shall have
            a Contract Period of not less than 30 days or more than 364 days.

      (h)   Rollover. Before the maturity date of any Letter of Credit or Letter
            of Guarantee the Borrower shall notify the Lender at its Branch of
            Account by notice substantially in the form attached as Schedule O
            if it wishes the issue of a replacement Letter of Credit or Letter
            of Guarantee on the maturity date. If the Borrower fails to provide
            the foregoing notice, the maturing Letter of Credit or Letter of
            Guarantee shall expire on its maturity date.

3.10 Hedge Contracts.

      (a)   Hedge Contract Sublimit. The aggregate principal amount of all
            outstanding Hedge Contracts shall not at any time exceed $1,000,000
            in Deemed Risk Content.


<PAGE>
                                      -41-


      (b)   Term. Each Hedge Contract that consists of a foreign exchange
            forward contract shall have a Contract Period of not more than 365
            days and each Hedge Contract that consists of an interest rate
            hedging instrument shall have a contract period of not more than
            five years and three months.

      (c)   Subject to Approval. The Lender may refuse to issue a Hedge Contract
            at any time at its sole discretion.

      (d)   Other Documentation. The issuance of a Hedge Contract is subject to
            the execution and delivery of specific agreements as may be required
            by the Lender on its standard forms and modified by such schedules
            and addenda as are customarily used by the Lender (the "Hedge
            Agreement"). In the event of a conflict between the terms and
            conditions of the Hedge Agreement and this Agreement, the Hedge
            Agreement shall prevail notwithstanding Section 1.13.

3.11 Prime Loans and USBR Loans.

Each Advance by way of Prime Loan shall be in a minimum aggregate principal
amount of $100,000 and larger whole multiples of $100,000. Each Advance by way
of USBR Loan shall be in a minimum aggregate principal amount of US$100,000 and
larger whole multiples of US$100,000.

3.12 Conversion Option.

Subject to this Agreement, a Borrower may, during the term of this Agreement,
effective on any Business Day, convert, in whole or in part, an outstanding
Advance (other than an Advance by way of Letter of Credit, Letter of Guarantee
or Hedge Contract) into another type of Advance permitted under the relevant
Credit Facility (other than an Advance by way of Letter of Credit, Letter of
Guarantee or Hedge Contract) upon giving written notice to the Lender in
substantially the form attached hereto as Schedule N, the notice period being
that which would be applicable to the type of Advance into which the outstanding
Advance is to be converted under Section 3.6. Conversions under this Section
3.12 may only be made provided that:

      (a)   notwithstanding any other term in this Agreement, no Advance
            denominated in C$ may be converted into an Advance denominated in
            US$ and no Advance denominated in US$ may be converted into an
            Advance denominated in C$;

      (b)   each conversion into an Advance shall be for minimum aggregate
            amounts and whole multiples in excess thereof as are specified in
            respect of that type of Advance in this Section 3;

      (c)   an Advance by way of Libor Loan may be converted only on the last
            day of the relevant Contract Period; if less than all of the Libor
            Loan is converted, after the conversion not less than US$1,000,000
            shall remain as a Libor Loan;


<PAGE>
                                      -42-


      (d)   an Advance by way of Bankers' Acceptance may be converted only on
            the last day of the relevant Contract Period; if less than all
            Advances by way of Bankers' Acceptances are converted, after the
            conversion not less than C$500,000 or US$500,000, depending on the
            currency of the Advance, shall remain as Advances by way of Bankers'
            Acceptances to the Borrowers having the same maturity date;

      (e)   a conversion into an Advance by way of Libor Loan shall only be made
            to the extent that the conditions outlined in Section 4.11 shall not
            exist on the relevant Conversion Date; and

      (f)   no demand shall have been made and no Default or Event of Default
            shall have occurred and be continuing on the relevant Conversion
            Date or after giving effect to the conversion of the Advance to be
            made on the Conversion Date.

3.13 Conversion and Rollover Not Repayment.

No Conversion or Rollover shall constitute a repayment of any Advance or a new
Advance.

3.14 Mandatory Conversion of Libor Loans and Bankers' Acceptances.

Notwithstanding Sections 3.8(h), 3.9(h) and 3.10, and subject to Section 10.2,
if a Default or Event of Default has occurred and is continuing on the last day
of a Contract Period, as regards a Libor Loan, or upon the maturity date, as
regards a Bankers' Acceptance, (a) in respect of an Advance by way of a Libor
Loan, the Borrower shall be deemed to have converted the Advance into a USBR
Loan as of the last day of the applicable Contract Period, and (b) in respect of
an Advance by way of Bankers' Acceptances, the Borrower shall be deemed to have
converted the Advance into a Prime Loan or USBR Loan (depending on the currency
of the Advance) in an amount equal to the principal amount of the Bankers'
Acceptances on the maturity date.

3.15 Deposit of Proceeds of Loans and Discount Proceeds.

The Lender shall credit to the applicable Borrower's Account on the applicable
Drawdown Date (a) the proceeds of each Advance by way of Prime Loan, USBR Loan
or Libor Loan made, and (b) the Discount Proceeds less the applicable Acceptance
Fee with respect to each Bankers' Acceptance purchased by the Lender on that
Drawdown Date. Where a Borrower has made separate arrangements for the purchase
of Bankers' Acceptances issued under this Agreement, the Lender shall debit the
applicable Borrower's Account for the applicable Acceptance Fee upon acceptance
and the Borrower shall deposit the Discount Proceeds to the applicable
Borrower's Account stipulated by the Borrower immediately upon receipt.


<PAGE>
                                      -43-


3.16 Evidence of Obligations.

The Lender shall open and maintain at its Branch of Account and the Chicago
Branch, as applicable, accounts and records evidencing the Obligations of the
Borrowers under this Agreement. The Lender shall record in those accounts by
appropriate entries all amounts owing on account of those Obligations and all
payments on account thereof. Those accounts and records will constitute, in the
absence of manifest error, conclusive evidence of the Obligations outstanding
from time to time, the date each Advance was made and the amounts that each
Borrower has paid from time to time on account of the Obligations.

                                   SECTION 4
                           INTEREST, FEES AND EXPENSES

4.1 Interest on Prime Loans.

      (a)   Rate. Each Borrower shall pay to the Lender interest on Prime Loans
            outstanding to it under each Credit Facility at a rate per annum
            equal to the Prime Rate plus the applicable margin set out in the
            Pricing Grid. The obligations of the Facility A Borrowers in respect
            of Facility A are joint and several in this regard.

      (b)   Change in Rate. Each change in the fluctuating interest rate
            applicable to each Prime Loan will take place simultaneously with
            the corresponding change in the Prime Rate without the necessity for
            any notice to the Borrowers.

      (c)   Calculation. Interest on Prime Loans shall be payable monthly in
            arrears on every Interest Payment Date and on the Maturity Date, as
            applicable, for the period from and including, as the case may be,
            the Drawdown Date, the Conversion Date or the immediately preceding
            Interest Payment Date to but excluding the first-mentioned Interest
            Payment Date or the Maturity Date, as applicable, and shall be
            calculated daily on the principal amount of each Prime Loan
            remaining unpaid on the basis of the actual number of days elapsed
            in a year of 365 days.

      (d)   Payment of Interest. Interest on Prime Loans shall be paid on every
            Interest Payment Date and on the Maturity Date, as applicable, by
            debit to the Borrowers' Account by the Lender.

4.2 Interest on USBR Loans.

      (a)   Rate. Each Borrower shall pay to the Lender interest on USBR Loans
            outstanding to it under each Credit Facility at a rate per annum
            equal to the US Base Rate plus the applicable margin set out in the
            relevant Pricing Grid. The obligations of the Facility A Borrowers
            in respect of Facility A are joint and several in this regard.


<PAGE>
                                      -44-


      (b)   Change in Rate. Each change in the fluctuating interest rate
            applicable to each USBR Loan will take place simultaneously with the
            corresponding change in the US Base Rate without the necessity for
            any notice to the Borrowers.

      (c)   Calculation. Interest on USBR Loans shall be payable monthly in
            arrears on every Interest Payment Date and on the Maturity Date for
            the period from and including, as the case may be, the Drawdown
            Date, the Conversion Date, or the immediately preceding Interest
            Payment Date to but excluding the first-mentioned Interest Payment
            Date or the Maturity Date, as applicable, and shall be calculated
            daily on the principal amount of each USBR Loan remaining unpaid on
            the basis of the actual number of days elapsed in a year of 365 or
            366 days, as applicable.

      (d)   Payment of Interest. Interest on USBR Loans shall be paid on every
            Interest Payment Date and on the Maturity Date by debit to the
            applicable Borrower's Account by the Lender.

4.3 Interest on Libor Loans.

      (a)   Rate. Each Borrower shall pay to the Lender interest on Libor Loans
            outstanding to it at a rate equal to LIBOR plus the applicable
            margin set out in the relevant Pricing Grid.

      (b)   Calculation. Interest on each Libor Loan shall be payable on each
            Libor Interest Date applicable to the Libor Loan, for the period
            commencing from and including the first day of the Contract Period
            or the immediately preceding Libor Interest Date, as the case may
            be, applicable to the Libor Loan, to but excluding the first
            mentioned Libor Interest Date, and shall be calculated daily on the
            principal amount of each Libor Loan remaining unpaid on the basis of
            the actual number of days elapsed in a year of 360 days.

      (c)   Payment of Interest. Interest on Libor Loans shall be paid on each
            Libor Interest Date by debit to the applicable Borrower's Account by
            the Lender.

4.4 Fees on Bankers' Acceptances.

      (a)   Rate. Upon acceptance of a Bankers' Acceptance by the Lender under a
            Credit Facility, the Borrower shall pay to the Lender at the
            Lender's Branch of Account a fee (the "Acceptance Fee") at the rate
            per annum equal to the CDOR Rate plus the applicable fee set out in
            the relevant Pricing Grid. The obligations of the Facility A
            Borrowers in respect of Facility A are joint and several in this
            regard.

      (b)   Calculation. The Acceptance Fee shall be payable on issuance of each
            Bankers' Acceptance calculated on the face amount of each Bankers'
            Acceptance on the basis of the number of days in the Contract Period
            for


<PAGE>
                                      -45-


            the Bankers' Acceptance and a year of 365 or 366 days, as
            applicable. Each determination by the Lender of the Acceptance Fee
            applicable to any Banker's Acceptance shall, in the absence of
            manifest error, be final, conclusive and binding upon the Borrowers.

4.5 Letters of Credit and Letters of Guarantee.

Upon the issue of a Letter of Credit or a Letter of Guarantee by the Lender, the
Borrower shall pay to the Lender a fee at the rate per annum set out in the
relevant Pricing Grid on issue. Issuance fees shall be calculated on the
principal amount of each Letter of Credit or Letter of Guarantee on the date of
issue. Issuance fees shall be calculated on the basis of the number of days in
the applicable Contract Period and a year of 365 days. The obligations of
Facility A Borrowers in respect of Facility A are joint and several in this
regard.

4.6 Hedge Contracts.

Hedge Contracts shall be issued at market prices in effect on the date of
issuance as determined by the Lender. Each determination by the Lender of the
market price for a Hedge Contract shall, in the absence of manifest error, be
final, conclusive and binding upon the Borrower.

4.7 Applicable Pricing

The Borrowers shall pay to the Lender interest and fees in respect of Advances
obtained by the Borrowers under the Credit Facilities in accordance with the
relevant Pricing Grid below. The applicable margin or fee payable by the
Borrowers will be established quarterly and will be effective at the beginning
of the third month of each Fiscal Quarter of the Borrowers and is based upon the
attainment by Stake, on a consolidated basis, in its four previous Fiscal
Quarters of the Funded Debt to EBITDA Ratio, calculated quarterly, as set out in
Section 9.3, on the last day of any Fiscal Quarter based on the most recent
period of twelve fiscal months completed and ending on or immediately prior to
such day. For greater certainty, the applicable pricing as of the Closing Date
shall reflect Stake's most recent Fiscal Quarter immediately preceding the
Closing Date.

      (a)   Facility A Pricing Grid. The Facility A Borrowers shall jointly and
            severally pay to the Lender interest in respect of Advances obtained
            by the Facility A Borrowers under Facility A in accordance with the
            pricing grid below (the "Facility A Pricing Grid"):


<TABLE>
<CAPTION>
        ----------------------------------------------------------------------------------------------------
          Pricing                                 Prime Rate                            BA's/LC's/LG's
           Level        Senior Debt/EBITDA     US Base Rate Plus  Libor Rate Plus            Fee
        ----------------------------------------------------------------------------------------------------
        <S>                  <C>                     <C>               <C>                  <C>
             1.              < 1.5:1.0               0.00%             0.90%                0.90%
        ----------------------------------------------------------------------------------------------------
             2.              > 1.5:1.0               0.15%             1.15%                1.15%
                             -
        ----------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>
                                      -46-



<TABLE>
        ----------------------------------------------------------------------------------------------------
             <S>             <C>                     <C>               <C>                  <C>
             3.              > 2.0:1.0               0.40%             1.40%                1.40%
                             -
        ----------------------------------------------------------------------------------------------------
             4.              > 2.5:1.0               0.65%             1.65%                1.65%
                             -
        ----------------------------------------------------------------------------------------------------
</TABLE>


      (b)   Facility C Pricing Grid. The LP shall pay to the Lender, at its
            Chicago Branch, interest and fees in respect of Advances obtained by
            the [LP] under Facility C in accordance with the pricing grid below
            (the "Facility C Pricing Grid"):


<TABLE>
<CAPTION>
         ------------------------------------------------------------------------------
           Pricing              Senior                US Base           Libor Rate
            Level            Debt/EBITDA             Rate Plus             Plus
         ------------------------------------------------------------------------------
         <S>                  <C>                      <C>                 <C>
              1.              < 1.5:1.0                0.15%               1.15%
         ------------------------------------------------------------------------------
              2.              > 1.5:1.0                0.40%               1.40%
                              -
         ------------------------------------------------------------------------------
              3.              > 2.0:1.0                0.65%               1.65%
                              -
         ------------------------------------------------------------------------------
              4.              > 2.5:1.0                0.90%               1.90%
                              -
         ------------------------------------------------------------------------------
</TABLE>


4.8 Interest on Overdue Amounts.

The Borrowers shall pay to the Lender interest as prescribed in this Agreement
both before and after demand, default and judgment. Interest on any overdue
amounts hereunder, is payable, for overdue amounts in Canadian Dollars, at the
Prime Rate plus the applicable margin as required by the then current Pricing
Level plus 200 Basis Points per annum and, for overdue amounts in US Dollars, at
the US Base Rate plus the applicable margin for the then current Pricing Level
plus 200 Basis Points per annum, in each case calculated on a daily basis on the
actual number of days elapsed in a 365 or 366 day year, as applicable, computed
from the date the amount becomes due for so long as the amount remains overdue.
Interest on overdue amounts shall be payable upon demand by the Lender and shall
be compounded on each Interest Payment Date.

4.9 Interest Act.

For purposes of the Interest Act (Canada), where in this Agreement a rate of
interest is to be calculated on the basis of a year of 360, 365, or 366 days,
the yearly rate of interest to which the rate is equivalent is that rate
multiplied by the number of days in the calendar year for which the calculation
is made and divided by 360, 365, or 366, as applicable.

4.10 Limit on Rate of Interest.

      (a)   Adjustment. If any provision of this Agreement or any of the other
            Documents would obligate a Borrower to make any payment of interest
            or other amount payable to the Lender in an amount or calculated at
            a rate


<PAGE>
                                      -47-


            which would be prohibited by law or would result in a receipt by the
            Lender of interest at a criminal rate (as construed under the
            Criminal Code (Canada)), then notwithstanding that provision, that
            amount or rate shall be deemed to have been adjusted with
            retroactive effect to the maximum amount or rate of interest, as the
            case may be, as would not be so prohibited by law or result in a
            receipt by the Lender of interest at a criminal rate, the adjustment
            to be effected, to the extent necessary, as follows:

            (i)   first, by reducing the amount or rate of interest required to
                  be paid to the Lender under this Section 4; and

            (ii)  thereafter, by reducing any fees, commissions, premiums and
                  other amounts required to be paid to the Lender which would
                  constitute interest for purposes of the Criminal Code
                  (Canada).

      (b)   Reimbursement. Notwithstanding Section 4.10(a), and after giving
            effect to all adjustments contemplated thereby, if the Lender shall
            have received an amount in excess of the maximum permitted by the
            Criminal Code (Canada), then the applicable Borrower shall be
            entitled, by notice in writing to the Lender, to obtain
            reimbursement from the Lender in an amount equal to the excess, and
            pending reimbursement, the amount of the excess shall be deemed to
            be an amount payable by the Lender to the applicable Borrower.

      (c)   Actuarial Principles. Any amount or rate of interest referred to in
            this Section 4.10 shall be determined in accordance with generally
            accepted actuarial practices and principles as an effective annual
            rate of interest over the term that any Advance remains outstanding
            on the assumption that any charges, fees or expenses that fall
            within the meaning of "interest" (as defined in the Criminal Code
            (Canada)) shall, if they relate to a specific period of time, be
            pro-rated over that period of time and otherwise be pro-rated over
            the period from the earlier of the date of advance and the Closing
            Date to the relevant Maturity Date and, in the event of a dispute, a
            certificate of a Fellow of the Canadian Institute of Actuaries
            appointed by the Lender shall be conclusive for the purposes of that
            determination.

4.11 Substitute Basis of Advance - Libor Loans.

If, at any time during the term of this Agreement, the Lender acting in good
faith determines (which determination shall be final, conclusive and binding
upon the Borrowers) that:

      (a)   adequate and fair means do not exist for ascertaining the rate of
            interest on a Libor Loan;

      (b)   LIBOR does not accurately reflect the effective cost to the Lender
            of making, funding or maintaining a Libor Loan and the costs to the
            Lender


<PAGE>
                                      -48-


            are increased or the income receivable by the Lender is reduced in
            respect of a Libor Loan;

      (c)   the making, funding or maintaining of a Libor Loan or a portion
            thereof by the Lender has become impracticable by reason of
            circumstances which materially and adversely affect the London
            interbank market; or

      (d)   deposits in US Dollars are not available to the Lender in the London
            interbank market in sufficient amounts in the ordinary course of
            business for the applicable Contract Period to make, fund or
            maintain a Libor Loan during the Contract Period;

the Lender shall promptly notify the Borrowers setting forth the basis of that
determination and each Borrower hereby instructs the Lender to repay the
affected Libor Loan with the proceeds of a USBR Loan in the amount of the Libor
Loan, to be drawn down on the last day of the then current Contract Period. The
Lender shall not be required to make any further Libor Loans available under
this Agreement so long as any of the circumstances referred to in this Section
4.11 continue.

4.12 Indemnity.

      (a)   General. Each Obligor shall, and does hereby, jointly and severally
            indemnify the Lender and its directors, officers, employees,
            attorneys and agents (each, an "Indemnified Person") against all
            suits, actions, proceedings, claims, losses (other than loss of
            profits), expenses (including reasonable fees, charges and
            disbursements of counsel), damages and liabilities including
            liabilities arising under Environmental Laws (each, a "Claim") that
            the Lender may sustain or incur as a consequence of (i) any default
            under this Agreement or any other Document, (ii) any
            misrepresentation contained in any writing delivered to the Lender
            in connection with this Agreement, (iii) the Lender entering into
            this Agreement, (iv) the use of proceeds of the Credit Facilities,
            or (v) the operations of any of the Obligors or any Affiliate of any
            of the Obligors, except that no Indemnified Person will be
            indemnified for any Claim resulting from its own gross negligence or
            willful misconduct.

      (b)   Certificate. A certificate of the Lender setting out the basis for
            the determination of the amount necessary to indemnify the Lender
            pursuant to this Section 4.12 shall be conclusive evidence, absent
            manifest error, of the correctness of that determination.

      (c)   Survival. It is the intention of each of the Obligors and the Lender
            that Sections 3.15, 4.12, 4.13 and 6.2(b) shall supersede any other
            provisions in this Agreement which in any way limit the liability of
            any of the Obligors and that each of the Obligors shall be liable
            for any obligations arising under Sections 3.15, 4.12, 4.13 and
            6.2(b) even if the amount of the liability incurred exceeds the
            amount of the other Obligations. The


<PAGE>
                                      -49-


            obligations of the Obligors under these Sections are joint and
            several and absolute and unconditional and shall not be affected by
            any act, omission or circumstance whatsoever, whether or not
            occasioned by the fault of the Lender, except in respect of the
            Lender's gross negligence or willful misconduct. The obligations of
            each of the Obligors under Sections 3.15, 4.12, 4.13 and 6.2(b)
            shall survive the repayment of the other Obligations and the
            termination of the Credit Facilities.

4.13 Breakage Costs

      (a)   The Borrowers may not repay, prepay or cancel an Advance by way of
            Bankers' Acceptances prior to the expiry of the Contract Period
            relating thereto.

      (b)   If a Borrower repays, prepays or cancels an Advance (including
            repayment pursuant to Sections 4.11 and 5.3), by way of Libor Loan,
            Letter of Credit, Letter of Guarantee or Hedge Contract, the
            Borrower shall indemnify the Lender for any loss or expense suffered
            or incurred by the Lender including any loss of profit or expenses
            which the Lender incurs by reason of the liquidation or redeployment
            of deposits or other funds acquired by it to effect or maintain the
            Advance or any interest or other charges payable to Lender of funds
            borrowed by the Lender in order to maintain the Advance together
            with any other charges, costs or expenses incurred by the Lender
            relative thereto.

      (c)   A certificate of the Lender setting out the basis for the
            determination of the amount necessary to indemnify the Lender
            pursuant to this Section 4.13 shall be conclusive evidence, absent
            manifest error, of the correctness of that determination.

4.14 Change in Circumstances.

If at any time the Lender determines in good faith (which determination shall be
conclusive) and notifies (a "Change of Circumstance Notice") the Borrowers that
any present or future law, regulation, order, treaty, official directive or
guideline (relating to capital adequacy or otherwise and whether or not having
the force of law), or any change therein or in the interpretation or application
thereof by any authority charged with the administration thereof, including the
Superintendent of Financial Institutions for Canada, or by any court or any
compliance by the Lender with any request, directive or guidelines of any
applicable monetary, fiscal or other governmental agency or authority, including
the Superintendent of Financial Institutions for Canada, (whether or not having
the force of law), has the effect in respect of any Advance of:

      (a)   increasing the cost to the Lender of making, maintaining or funding
            such Advance;

      (b)   reducing the amount of principal, interest, fees or other amounts
            received or receivable by the Lender hereunder or its effective
            return hereunder; or


<PAGE>
                                      -50-


      (c)   causing the Lender to make any payment, or to forego any interest or
            other return on or calculated by reference to, any sum received or
            receivable by it hereunder;

then in any such case, upon demand being made from time to time to the Borrowers
by the Lender, the Borrowers shall forthwith pay to the Lender such as amount as
shall compensate the Lender for such additional cost, reduction, payment,
foregone interest or other return; provided, however, that the Borrowers shall
not be required to compensate the Lender for (a) any amounts in respect of
capital taxes, income taxes and other similar taxes imposed on the Lender by any
Governmental Authority and (b) any amounts relating to costs, reductions,
payments, foregone interest or other returns incurred, suffered, or lost by the
Bank on or after receipt of the Change of Circumstance Notice by the Borrowers.

                                   SECTION 5
                             REDUCTION AND REPAYMENT

5.1 Payment on Demand.

Each Credit Facility is payable by the Borrowers immediately on demand by the
Lender at its option at any time and from time to time without any other or
further notice notwithstanding the conformity or not of the Obligors to the
terms and conditions of this Agreement or any other Documents and whether or not
a Default or an Event of Default has occurred and is continuing or has been
waived.

5.2 Repayment.

Without prejudice to the Lender's right to demand payment at its option at any
time and from time to time, LP shall repay the principal amount of the Advances
under Facility C quarterly, commencing the first fiscal quarter after the
Closing Date, by paying the amounts set out in the amortization schedule
attached as Schedule P. In addition, 100% of the net cash proceeds from the
permitted sale or sale/leaseback of any fixed assets of the Obligors
(collectively, the "Permitted Proceeds") shall be applied to repay, on or before
the last Business Day of the Fiscal Quarter immediately following the Fiscal
Quarter in which such sale or sale/leaseback occurs, the then outstanding
principal amount under Facility C, until Facility C is repaid in full.
Notwithstanding the foregoing, to the extent Permitted Proceeds are reinvested
by the applicable Obligor, as applicable, in existing lines of business by the
end of the Fiscal Quarter immediately following the Fiscal Quarter in which such
permitted sale or sale/leaseback of assets takes place, then the Permitted
Proceeds need not be applied to the outstanding principal amount under Facility
C as set out herein.

5.3 Mandatory Repayment - Currency Fluctuations.

      (a)   If, due to exchange rate fluctuations or for any reason whatsoever,
            in the case of Facility A or Facility D, the Canadian Dollar Amount
            of the principal amount of all Advances outstanding under such
            Credit Facility shall, at any time, exceed the Commitment for such
            Credit Facility (the


<PAGE>
                                      -51-


            amount of the excess being referred to herein as an "Excess
            Amount"), then within three Business Days of written notice from the
            Lender, the Borrowers shall, at their option:

            (i)   forthwith repay Loans and/or fund the Lender's obligations
                  with respect to outstanding Bankers' Acceptances, Letters of
                  Credit or Letters of Guarantee in an amount equal to or
                  greater than such Excess Amount; or

            (ii)  provide cash collateral or such other security as the Lender
                  may require in an amount equal to or greater than such Excess
                  Amount which collateral shall remain in the Lender's
                  possession until the Canadian Dollar Amount of the principal
                  amount of all Advances outstanding under such Credit Facility
                  is equal to or less than the Commitment for such Credit
                  Facility whereupon such collateral shall be released by the
                  Lender to the Borrowers.

      (b)   Notwithstanding any other provision of this Agreement, including any
            provision contemplating a Rollover or Conversion, whenever the
            Canadian Dollar Amount of the principal amount of all Advances
            outstanding under Facility A or Facility D is in excess of the
            Commitment for such Credit Facility, the Borrowers shall (i) repay
            any USBR Loan or (ii) upon the maturity of any Banker's Acceptance,
            repay the Banker's Acceptance, or (iii) upon the last day of the
            Contract Period in respect of a Libor Loan, repay the Libor Loan,
            and any repayments under clauses (i), (ii) and (iii) shall be
            applied in reduction of such Excess Amount.

      (c)   The Borrowers shall, on demand, reimburse the Lender for and hold
            the Lender harmless against any loss, cost or expense suffered or
            incurred by the Lender by virtue of the necessity to resort to this
            Section 5.3 including any loss of profit or expenses which the
            Lender incurs by reason of the liquidation or re-deployment of
            deposits or other funds acquired by the Lender to maintain its
            obligations under this Agreement and any interest or other charges
            payable to the Lender of funds borrowed by the Lender in order to
            maintain the obligations of the Lender under this Agreement.

      (d)   The Borrowers shall pay interest on any Excess Amount at a rate of
            Prime Rate plus 5% per annum, calculated on a daily basis on the
            actual number of days elapsed in a 365 day year, computed from the
            date an Excess Amount arises to, but excluding, the date on which
            the Excess Amount is repaid. Notwithstanding the foregoing, if a
            Borrower is aware that it will require an Excess Amount for a period
            not longer than three Business Days, such Borrower may request that
            such Excess Amount be made available at the rate normally applicable
            to the relevant Credit Facility for such anticipated short term
            requirement. The Lender may refuse such a request in its discretion.


<PAGE>
                                      -52-


5.4 Optional Prepayment.

LP may prepay, without penalty, in whole or in part and in a minimum amount of
$100,000, the Advances outstanding under Facility C, other than Advances by way
of Libor Loans which Advances may not be prepaid prior to the end of the
relevant Contract Period, at any time provided that all accrued interest with
respect to the amount to be prepaid shall have been paid and provided that LP
indemnify the Lender for any loss or expense suffered or incurred by the Lender,
including any breakage costs which the Lender incurs by reason of the
liquidation or redeployment of deposits or other funds acquired by it to effect
or maintain Facility C or any interest or charges payable to the Lender of funds
borrowed by the Lender and any other charges, costs or expenses incurred by the
Lender relative thereto. A certificate of the Lender setting out the basis for
the determination of the amount necessary to indemnify the Lender pursuant to
this Section 5.4 shall be conclusive evidence, absent manifest error, of the
correctness of that determination. LP shall give three Business Days' notice of
its desire to make any prepayment, substantially in the form attached hereto as
Schedule Q.

                                   SECTION 6
                               PAYMENTS AND TAXES

6.1 Payments Generally.

All amounts owing in respect of a Credit Facility, whether on account of
principal, interest or fees or otherwise, shall be paid in the currency in which
the Advance is outstanding. Each payment under this Agreement shall be made for
value on the day the payment is due. All interest and other fees shall continue
to accrue until payment has been received by the Lender. Each payment shall be
made by debit to the applicable Borrower's Account by the Lender at or before
1:00 p.m. on the day the payment is due. Each Borrower hereby authorizes the
Lender to debit the applicable Borrower's Account in respect of any and all
payments to be made by each Borrower under this Agreement.

6.2 Taxes.

      (a)   Payments. All payments to be made by or on behalf of the Borrowers
            under or with respect to this Agreement are to be made free and
            clear of and without deduction or withholding for, or on account of,
            any present or future Taxes, unless such deduction or withholding is
            required by Applicable Law. If a Borrower is required to deduct or
            withhold any Taxes from any amount payable to the Lender (i) the
            amount payable shall be increased as may be necessary so that after
            making all required deductions or withholdings (including deductions
            and withholdings applicable to, and taking into account all Taxes
            on, or arising by reason of the payment of, additional amounts under
            this Section 6.2), the Lender receives and retains an amount equal
            to the amount that it would have received had no such deductions or
            withholdings been required, (ii) the Borrowers shall make such
            deductions or withholdings, and (iii) the Borrowers shall remit the
            full amount deducted or withheld to the relevant


<PAGE>
                                      -53-


            taxing authority in accordance with Applicable Laws. Notwithstanding
            the foregoing, the Borrowers shall not be required to pay additional
            amounts in respect of Excluded Taxes.

      (d)   Indemnity. The Borrowers shall indemnify the Lender for the full
            amount of any Taxes (other than Excluded Taxes) imposed by any
            jurisdiction on amounts payable by the Borrowers under this
            Agreement and paid by the Lender and any liability (including
            penalties, interest and reasonable expenses) arising therefrom or
            with respect thereto, whether or not such Taxes were correctly or
            legally asserted, and any Taxes levied or imposed with respect to
            any indemnity payment made under this Section 6.2. The Borrowers
            shall also indemnify the Lender for any Taxes (other than Excluded
            Taxes) that may arise as a consequence of the execution, sale,
            transfer, delivery or registration of, or otherwise with respect to
            this Agreement or any other Document. The indemnifications contained
            in this Section 6.2(b) shall be made within 30 days after the date
            the Lender makes written demand therefor.

      (c)   Evidence of Payment. Within 30 days after the date of any payment of
            Taxes by the Borrowers, the Borrowers shall furnish to the Lender
            the original or a certified copy of a receipt evidencing payment by
            the Borrowers of any Taxes with respect to any amount payable to the
            Lender hereunder.

      (d)   Survival. The Borrowers' obligations under this Section 6.2 shall
            survive the termination of this Agreement and the payment of all
            amounts payable under or with respect to this Agreement.

6.3 No Set-Off.

All payments to be made by the Borrowers shall be made without set-off or
counterclaim and without any deduction of any kind.

6.4 Application of Payments Before Exercise of Rights.

Subject to the provisions of this Agreement, all payments made by or on behalf
of the Borrowers before the exercise of any rights arising under Section 10.2,
or otherwise, shall be paid to the Lender in each instance in the following
order:

      (a)   firstly, in payment of any amounts due and payable as and by way of
            recoverable expenses hereunder;

      (b)   secondly, in payment of any interest, other fees, or default
            interest then due and payable on or in respect of the Advances;

      (c)   thirdly, in repayment of any principal amounts of the Advances; and


<PAGE>
                                      -54-


      (d)   fourthly, in payment of any other amounts then due and payable by
            the Borrowers hereunder or in connection herewith.

6.5 Application of Payments After Exercise of Rights Under Section 10.2.

All payments made by or on behalf of the Obligors after the exercise of any
rights arising under Section 10.2 shall be paid to the Lender in each instance
in the following order:

      (a)   firstly, in payment of agency fees, if any, and the reasonable costs
            and expenses of any realization against the Obligors and any and all
            other sureties and guarantors or of its or their respective property
            and assets, including the out-of-pocket expenses of the Lender and
            the reasonable fees and out-of-pocket expenses of counsel,
            consultants and other advisers employed in connection therewith and
            in payment of all costs and expenses incurred by the Lender in
            connection with the administration and enforcement of this Agreement
            or the other Documents, to the extent that those funds, costs and
            expenses shall not have been reimbursed to the Lender; and

      (b)   thereafter as the Lender may determine in its discretion.

                                   SECTION 7
                               SECURITY DOCUMENTS

7.1 Security Documents.

The Borrowers shall cause the following documents to be executed and delivered
to the Lender to secure the Obligations, those documents to be in form and
substance satisfactory to the Lender:

      (a)   in respect of Stake:

            (i)   separate guarantees of the obligations of each of Temisca,
                  558497 Ontario, 1510146 Ontario and LP owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of Stake,
                  including securities (or the equivalent) registered in every
                  location where Stake has assets;

            (iii) security under 427 of the Bank Act (Canada);

            (iv)  a general assignment of book debts;

            (v)   a first collateral charge, by way of debenture or other
                  appropriate security, over the real property located at: (A)
                  2838 Highway 7, Norval, Ontario, (B) 407 Parkside Drive,
                  Waterdown, Ontario, (C)


<PAGE>
                                      -55-


                  70 Brant Street, Hamilton, Ontario, and (D) 2270-43rd Avenue,
                  Lachine, Quebec;

            (vi)  an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of Stake; and

            (vii) an offset agreement regarding cash balances;

      (b)   in respect of Temisca:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a movable and immovable hypothec creating a hypothec in all of
                  the real and personal personal property, assets and
                  undertaking of Temisca, including securities (or the
                  equivalent) registered in every location where Temisca has
                  assets including over the real property located at: 1299 Rang,
                  P.O. Box 34, St. Bruno de Gigues, Quebec;

            (iii) security under 427 of the Bank Act (Canada);

            (iv)  an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of Temisca; and

            (v)   an offset agreement regarding cash balances.

      (c)   in respect of 558497 Ontario:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of 558497
                  Ontario, including securities (or the equivalent) registered
                  in every location where 558497 Ontario has assets;

            (iii) security under 427 of the Bank Act (Canada);

            (iv)  a general assignment of book debts;

            (v)   an offset agreement regarding cash balances; and

            (vi)  an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of 558497 Ontario;


<PAGE>
                                      -56-


      (d)   in respect of 1510146 Ontario:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of
                  1510146 Ontario, including securities (or the equivalent)
                  registered in every location where 1510146 Ontario has assets;

            (iii) security under 427 of the Bank Act (Canada);

            (iv)  a general assignment of book debts;

            (v)   an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of 1510146 Ontario; and

            (vi)  an offset agreement regarding cash balances;

      (e)   in respect of LP:

            (i)   a guarantee of the obligations of Stake owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of LP,
                  including securities (or the equivalent) registered in every
                  location where LP has assets;

            (iii) an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of LP; and

            (iv)  an offset agreement regarding cash balances;

      (f)   in respect of the ULC:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of ULC,
                  including securities (or the equivalent) registered in every
                  location where ULC has assets;

            (iii) an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of ULC; and


<PAGE>
                                      -57-


            (iv)  an offset agreement regarding cash balances;

      (g)   in respect of LLC:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of LLC,
                  including securities (or the equivalent) registered in every
                  location where LLC has assets;

            (iii) an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of LLC;

            (iv)  an offset agreement regarding cash balances; and

            (v)   assignment of debt owing by Sunrich Food and related security;

      (h)   in respect of Sunrich Food:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of
                  Sunrich Food, including securities (or the equivalent)
                  registered in every location where Sunrich Food has assets;

            (iii) a general assignment of book debts;

            (iv)  an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of Sunrich Food; and

            (v)   an offset agreement regarding cash balances;

      (i)   in respect of Northern Food:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of
                  Northern Food, including securities (or the equivalent)
                  registered in every location where Northern Food has assets;

            (iv)  a general assignment of book debts;


<PAGE>
                                      -58-


            (iv)  a first collateral charge, by way of debenture or other
                  appropriate security, over the real property located at: (A)
                  2214 Geneva Road NE, Alexandria, Minnesota, (B) 601 3rd Avenue
                  W, Alexandria, Minnesota, (C) 4601 Co. Road, 13 NE,
                  Alexandria, Minnesota, (D) 3035 Evergreen Lane, Alexandria,
                  Minnesota, (E) 308-2nd Avenue NW, Bertha, Minnesota, (F) 701 W
                  1st Street, Fosston, Minnesota, (G) 199 W 2nd Avenue, Afton,
                  Wyoming, and (H) 2442 Cty Road 120 NE, Alexandria, Minnesota;

            (v)   an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of Northern Food; and

            (vi)  an offset agreement regarding cash balances;

      (j)   in respect of Nordic:

            (i)   separate guarantees of the obligations of each of Stake and
                  LP;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of
                  Nordic, including securities (or the equivalent) registered in
                  every location where Nordic has assets;

            (iii) a general assignment of book debts;

            (iv)  a first collateral charge, by way of debenture or other
                  appropriate security, over the real property located at: 3915
                  Minnesota Street, Alexandria, Minnesota;

            (v)   an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of Nordic; and

            (vi)  an offset agreement regarding cash balances;

      (k)   in respect of Sunrich:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of
                  Sunrich, including securities (or the equivalent) registered
                  in every location where Sunrich has assets;

            (iii)  a general assignment of book debts;

<PAGE>
                                      -59-


            (iv)  a first collateral charge, by way of debenture or other
                  appropriate security, over the real property located at: (A)
                  3824-93rd Street SW, Hope, Minnesota, and (B) 616-6th Avenue
                  W, Cresco, Iowa;

            (v)   an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of Sunrich; and

            (vi)  an offset agreement regarding cash balances;

      (l)   in respect of Stake USA:

            (i)   separate guarantees of the obligations of each of Stake and
                  the LP owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of Stake
                  USA, including securities (or the equivalent) registered in
                  every location where Stake USA has assets;

            (iii) a general assignment of book debts; and

            (iv)  an assignment of all insurance policies, including but not
                  limited to fire and all perils insurance on real property and
                  policies insuring the assets of Stake USA;

            (v)   an offset agreement regarding cash balances;

      (m)   in respect of Virginia Materials:

            (i)   separate guarantees of the obligations of each of Stake and LP
                  owing to the Lender;

            (ii)  a general security agreement creating a security interest in
                  all of the personal property, assets and undertaking of
                  Virginia Materials, including securities (or the equivalent)
                  registered in every location where Virginia Materials has
                  assets;

            (iii) a general assignment of book debts; and

            (iv)  an offset agreement regarding cash balances;

      (n)   a subordination agreement from each of the shareholders of each of
            the Obligors subordinating any interest of each such shareholder in
            the property, assets or undertaking of the applicable Obligor
            securing payment of shareholder loans by or to the Obligors, as
            applicable;

      (o)   the Lender's standard form LIBOR agreements;


<PAGE>
                                      -60-


      (p)   the Lender's standard form Bankers' Acceptances in blank in
            accordance with Section 3.8(f); and

      (q)   such other additional or substitute security as the Lender may
            require from time to time.

7.2 Further Assurances.

      (a)   Additional Obligors. The Borrowers shall cause any Included
            Subsidiary to sign an Additional Obligor Counterpart and execute and
            deliver a guarantee unlimited as to amount, substantially similar to
            the guarantees executed by the Obligors, supported by:

            (i)   a general security agreement or the equivalent, substantially
                  similar to the general security agreements executed by the
                  Obligors, creating a security interest in all its personal
                  property, assets and undertaking, including securities
                  registered in every location where such Included Subsidiary
                  has assets;

            (ii)  a charge (or the equivalent) of such Included Subsidiary
                  creating a fixed charge on all such Included Subsidiary's real
                  property registered against title to such property;

            (iii) an assignment of all insurance policies held by the Included
                  Subsidiary insuring the real property or assets of the
                  Included Subsidiary; and

            (iv)  such other additional or substitute security as the Lender may
                  require from time to time;

            all immediately upon that Person becoming an Included Subsidiary.

      (b)   Further Documents. Upon request of the Lender, the Obligors or any
            of them shall execute and deliver, or shall cause to be executed and
            delivered, to the Lender such further documents or instruments and
            shall do or cause to be done such further acts as may be necessary
            or proper in the reasonable opinion of the Lender, in its sole
            discretion, to secure the Obligations, including executing and
            delivering or causing to be executed and delivered such further
            documents or instruments to give the Lender a first priority
            security interest in any and all property and assets acquired,
            subject to any Permitted Liens ranking prior to the Lender's Liens.


<PAGE>
                                      -61-


                                   SECTION 8
                              CONDITIONS PRECEDENT

8.1 Conditions Precedent to Disbursements of Advances.

The obligation of the Lender to make available the first Advance, Rollover or
Conversion under this Agreement is subject to and conditional upon the
satisfaction of the following conditions:

      (a)   Delivery of Documents. The Lender shall have received sufficient
            copies, in form and substance satisfactory to the Lender, of the
            following:

            (i)   this Agreement duly executed by all the parties hereto;

            (ii)  each Security Document and all other Documents duly executed
                  by all the parties thereto;

            (iii) timely notice as may be required by any term of this Agreement
                  in connection with any action to be taken thereunder;

            (iv)  a Certificate of each Obligor dated the Closing Date
                  certifying:

                  A.    that its constating documents and the by-laws, which
                        shall be attached thereto, are complete and correct
                        copies and are in full force and effect;

                  B.    all resolutions and all other authorizations necessary
                        to authorize the execution and delivery of and the
                        performance by it of its obligations under this
                        Agreement, the Security Documents and the other
                        Documents to which it is a party and all the
                        transactions contemplated thereby; and

                  C.    all representations and warranties contained in this
                        Agreement are true and correct as if made on the date of
                        the Certificate.

            (v)   financial statements for the nine month period ended September
                  30, 2001 and draft financial statements for the 12 month
                  period ended December 31, 2001;

            (vi)  opinions of counsel to the Obligors, addressed to the Lender
                  and counsel to the Lender with respect to, inter alia, due
                  authorization, execution, delivery and enforceability of the
                  Documents executed by the Obligors;


<PAGE>
                                      -62-


            (vii)  opinions of Donahue LLP, counsel to the Lender, and local
                   agents in all relevant jurisdictions regarding registration
                   of the Security Documents addressed to the Lender;

            (viii) duly executed certificate(s) of insurance evidencing the
                   insurance required under this Agreement and endorsements of
                   those policies each showing loss payable to the Lender;

            (ix)   such other documents as the Lender may reasonably request
                   including (A) the documents listed in Section 7.1 hereof, and
                   (B) standard documentation used by the Lender in connection
                   with the issuance of Letters of Credit and Letters of
                   Guarantee, prior to any Advance by way of any such method;

            (x)    a duly completed Environmental Checklist in the Lender's
                   standard form, or if available, a Phase I environmental
                   report in respect of real property owned by the Obligors;

            (xi)   landlord waivers satisfactory to the Lender in respect of
                   real property leased by any Obligor; and

            (xii)  a copy of all of the relevant Obligor's agreements relating
                   to the Rhodia Note Payable and the Rhodia Note Receivable.

      (b)   Payout and Discharge. All funds owed by the Obligors to those
            creditors identified by the Lender shall be repaid in full and all
            security registrations made in favour of such creditors shall be
            discharged or the Lender shall have received an undertaking from
            such creditors to discharge all such security registrations in form
            and substance satisfactory to the Lender.

      (c)   Registration of Security Documents. All registrations, recordings
            and filings of or with respect to the Security Documents which in
            the opinion of counsel to the Lender are necessary to render
            effective the Lien intended to be created thereby shall have been
            completed.

      (d)   Fees. All fees payable in accordance with this Agreement on or
            before the Closing Date (including legal fees and expenses of the
            Lender) shall have been paid to the Lender.

      (e)   Due Diligence. The Lender shall have completed its business, legal
            and accounting due diligence (including receipt of environmental
            checklists from the Obligors, a list of the contents of the
            inventory of each of the Steam Explosion Technology Group and
            BEI/PECAL divisions of Stake and a listing of Stake's fixed assets
            and assessments and real estate appraisals) with results
            satisfactory to the Lender.

      (f)   Market Change. No material adverse change or material disruption of
            the financial, banking or capital markets shall have occurred and be


<PAGE>
                                      -63-


            continuing, in each case, determined by the Lender in its sole and
            absolute discretion.

      (g)   Material Adverse Change. No Material Adverse Change shall have
            occurred with respect to the Obligors.

      (h)   Existing Debt. The Lender shall have reviewed the Obligors' existing
            Debt obligations, with results satisfactory to the Lender.

      (i)   Harris. Sunrich Food shall have entered into a credit agreement with
            Harris on terms acceptable to the Lender (the "Harris Loan
            Agreement").

      (j)   Security Sharing. The Lender and Harris shall have entered into a
            mutually acceptable security sharing agreement.

8.2 Conditions Precedent to All Advances.

The obligations of the Lender to make available any subsequent Advance, Rollover
or Conversion, after the conditions in Section 8.1 being satisfied, are subject
to and conditional upon each of the conditions below being satisfied on the
applicable Drawdown Date, Rollover Date or Conversion Date:

      (a)   No Default. No Default or Event of Default shall exist.

      (b)   No Demand. No demand for repayment of any Credit Facility shall have
            been made.

      (c)   Representations Correct. The representations and warranties
            contained in Section 2.1 shall be true and correct on each Drawdown
            Date, Rollover Date or Conversion Date as if made on that date.

      (d)   Notice of Advance. The Borrowers shall have provided any notice
            required in respect of an Advance, Rollover or Conversion.

      (e)   Facility A Advances. The Facility A Borrowers shall have provided a
            current certified aged statement of Accounts Receivable and listing
            of Inventory in accordance with Section 3.5(a).

      (f)   Certain Advances. Each applicable Borrower executing and delivering
            to the Lender customary documentation required by the Lender from
            time to time for purposes of extending Advances by way of Letter of
            Credit, Letter of Guarantee, Bankers' Acceptance and Hedge Contract.

8.3 Waiver of a Condition Precedent.

The conditions stated in Sections 8.1 and 8.2 are inserted for the sole benefit
of the Lender and may be waived by the Lender, in whole or in part, with or
without terms or conditions, in respect of all or any portion of the Advances,
without affecting the right of


<PAGE>
                                      -64-


the Lender to assert terms and conditions in whole or in part in respect of any
other Advance.

                                    SECTION 9
                                    COVENANTS

9.1 Affirmative Covenants.

While any amount owing under this Agreement or any of the other Documents
remains unpaid, or the Lender has any obligations under this Agreement or any of
the other Documents, each of the Obligors covenants, for itself, with the Lender
as follows:

      (a)   Corporate Existence. It shall do or cause to be done all things
            necessary to keep in full force and effect its corporate existence
            and all rights, trade-marks, licenses and qualifications required
            for it to carry on its businesses and own, lease or operate its
            properties in each jurisdiction in which it carries on business or
            owns, leases or operates property or assets from time to time.

      (b)   Insurance. It shall maintain insurance on its properties and assets
            and for the operation of its businesses in such amounts and against
            such risks as would be customarily obtained and maintained by a
            prudent owner of similar properties and assets operating a similar
            business, including appropriate liability insurance, business
            interruption insurance and third party liability insurance. It shall
            provide copies of those policies to the Lender, which policies shall
            be satisfactory to the Lender. Each insurance policy shall include
            an endorsement whereby the insurers agree to give the Lender not
            less than 30 days notice of the cancellation of the policy of
            insurance and permit the Lender to cure any default which may exist
            under the policy. It shall name the Lender as loss payee or
            additional insured as the Lender's interest may appear in all of its
            policies of insurance or otherwise assure the Lender of the
            availability of continuing coverage in a manner satisfactory to the
            Lender.

      (c)   Compliance with Laws, etc. It shall comply with all Applicable Laws
            and all Government Approvals required in respect of its businesses,
            properties, the Collateral, or any activities or operations carried
            out thereon including health, safety and employment standards,
            labour codes and Environmental Laws. If required by the Lender, it
            shall deliver to the Lender evidence satisfactory to the Lender
            concerning such compliance with all Applicable Laws and Government
            Approvals.

      (d)   Government Approvals. It shall obtain (to the extent not in
            existence on the date of this Agreement) and maintain, by the
            observance and performance of all obligations thereunder and
            conditions thereof, all Government Approvals required for it to
            carry on its businesses.


<PAGE>
                                      -65-


      (e)   Conduct of Business. It shall:

            (i)   conduct its business and the operation of its property in a
                  proper and efficient manner and keep proper books of account
                  and records with respect to the operation of its business and
                  the operation of its property;

            (ii)  diligently maintain, repair, use and operate its property and
                  premises in a proper and efficient manner;

            (iii) maintain its physical assets in good condition so that each
                  asset may be used at all times for the purpose for which it
                  was intended; and

            (iv)  perform all of its obligations under the terms of each
                  mortgage, indenture, security agreement and other debt
                  instrument by which it is bound.

      (f)   Payment. It shall duly and punctually pay or cause to be paid all
            sums of money due and payable by it under this Agreement and the
            other Documents on the dates, at the places and in the currency and
            the manner set forth herein and therein.

      (g)   Litigation. It shall (i) promptly give notice to the Lender of any
            litigation, proceeding or dispute, threatened or commenced, if the
            litigation, proceeding or dispute, if adversely determined, could
            reasonably be expected to have a Material Adverse Effect on it or
            the other Obligors, (ii) advise the Lender of the extent to which
            any adverse determination is covered by insurance, (iii) provide all
            reasonable information requested by the Lender concerning the status
            of any litigation, proceeding or dispute, and (iv) use reasonable
            efforts to bring about a reasonable, favourable and speedy
            resolution or disposition of the litigation, proceeding or dispute.

      (h)   Pay Claims and Taxes. It shall promptly pay and discharge, when due,
            all Taxes charged to or payable by it and all obligations which may
            result in Liens (other than Permitted Liens) on its properties or
            assets unless the relevant Tax or obligation is being actively and
            diligently contested in good faith by appropriate proceedings and is
            adequately reserved against in accordance with GAAP. It shall notify
            the Lender of each contest promptly upon forming the intention to
            contest the relevant payment, Tax or obligation.

      (i)   Notice of Default or Material Adverse Change. It shall, upon
            obtaining knowledge thereof, provide to the Lender as soon as
            practicable, and in any event within one Business Day after
            obtaining that knowledge, notice of any Material Adverse Change,
            Default or Event of Default, together with an officer's certificate
            setting forth the details of any such Material

<PAGE>
                                      -66-


            Adverse Change, Default or Event of Default and the action taken or
            to be taken to remedy it.

      (j)   Other Reports and Filings. Promptly upon transmission thereof it
            shall deliver to the Lender copies of all financial information,
            statutory audits, proxy materials and other information and reports,
            if any, which it (i) has filed with the Securities and Exchange
            Commission or any governmental agencies substituted therefor or with
            the Ontario Securities Commission or any securities regulatory
            authority or any other equivalent governmental agencies in any
            state, province or territory of Canada or the United States of
            America, (ii) has delivered to holders of, or any agent or trustee
            with respect to, its Debt in their capacity as such a holder, agent
            or trustee, or (iii) has delivered to any shareholder in its
            capacity as a shareholder.

      (k)   Other Information. From time to time, it shall deliver to the Lender
            such other information or documents (financial or otherwise) as the
            Lender may reasonably request.

      (m)   Books, Records and Inspections. It will keep proper books of record
            and account in which full, true and correct entries in conformity
            with GAAP and all requirements of law shall be made of all dealings
            and transactions in relation to its business and activities. It will
            permit officers and designated representatives of the Lender to
            visit and inspect, under guidance of its officers, any of its
            properties and to examine its books of account and discuss its
            affairs, finances and accounts, and be advised as to the same by,
            its officers, all at such reasonable times and intervals and to such
            reasonable extent as the Lender may request.

      (n)   First Priority. It will take all actions, sign all documents, effect
            all registrations and otherwise act so as to carry out the intent of
            this Agreement which is that the Liens created by the Security
            Documents are to rank first against all of its undertaking, property
            and assets subject only to Permitted Liens.

      (o)   Environmental Compliance. It will carry on all activities in
            compliance with all Environmental Laws. It will not cause or permit
            the Release or storage of a Hazardous Substance in or under its
            properties except in compliance with all Environmental Laws. If it
            comes to its attention that it is not in material compliance with
            all applicable Environmental Laws, it will remedy that
            non-compliance immediately. If immediate remedy is not possible, it
            will notify the Lender immediately of the problem and describe in
            detail the action it intends to take to return to compliance with
            this Section 9.1(n).

      (o)   Capital Expenditures. It will make, subject to a permitted 10%
            variance above the budgeted amount, Capital Expenditures only in
            accordance with


<PAGE>
                                      -67-


            and as budgeted for in its Business Plan, unless otherwise approved
            in writing by the Lender.

      (p)   Annual Meetings with Lender. On or before April 30th in each Fiscal
            Year, it shall hold a meeting with the Lender upon the request of
            the Lender at which meeting shall be reviewed the financial results
            of the previous fiscal year and the financial condition of the
            Obligors and the Business Plan.

      (q)   Auditors. It shall promptly give notice to the Lender of a change in
            its Auditors and the reasons for the change.

9.2 Negative Covenants.

While any amount owing under this Agreement or any of the other Documents
remains unpaid, or the Lender has any obligations under this Agreement or any of
the other Documents, each Obligor covenants, for itself, with the Lender as
follows:

      (a)   Limitation on Liens. It shall not directly or indirectly, make,
            create, incur, assume or suffer to exist any Lien upon or with
            respect to any material part of its property or assets, whether now
            owned or hereafter acquired, other than Permitted Liens. The ability
            of the Obligors to incur or suffer to exist Permitted Liens is not
            to be construed as a subordination, constructive or otherwise, of
            the Liens granted to the Lender to such Permitted Liens.

      (b)   Disposition of Assets. It shall not sell, lease, transfer, assign,
            convey or otherwise dispose of any of its properties or assets
            except in the ordinary course of business and in accordance with the
            terms of the Security Documents unless the Permitted Proceeds of
            such sale are applied as set out in Section 5.2.

      (c)   Consolidations and Mergers. It shall not merge, consolidate,
            amalgamate with or into, or convey, transfer, lease or otherwise
            dispose of (whether in one transaction or in a series of
            transactions) all or substantially all of its assets (whether now
            owned or hereafter acquired) to or in favour of any Person without
            the Lender's prior written approval which may be withheld at the
            Lender's sole discretion, except that any Obligor may merge,
            amalgamate with, or dissolve or liquidate into, any other Obligor
            (so long as it remains an Obligor), provided that in any such
            transaction, other than an amalgamation, the Obligor shall be the
            continuing or surviving corporation.

      (d)   Limitation on Debt. It shall not create, incur, assume, suffer to
            exist, or otherwise become or remain directly or indirectly liable
            with respect to, any Debt in excess of $500,000 in the aggregate
            during the term of this Agreement, except:


<PAGE>
                                      -68-


            (i)   Debt incurred pursuant to this Agreement;

            (ii)  Debt consisting of Contingent Obligations described in clause
                  (b) of the definition thereof and permitted pursuant to
                  Section 9.2(g);

            (iii) Debt existing on the date of the Closing Date as set forth in
                  Schedule R;

            (iv)  Debt secured by or which could be secured by Permitted Liens;

            (v)   Debt for amounts payable to suppliers in the ordinary course
                  of business;

            (vi)  unsecured Debt to an Obligor; and

            (vii) Debt of Temisca in respect of the Class H Shares in the
                  capital of Temisca in the maximum aggregate amount of
                  $109,000.

      (e)   Transactions with Affiliates or Associates. It shall not enter into
            any transactions with any Affiliate or Associate of it, except:

            (i)   as expressly permitted by this Agreement or listed on Schedule
                  S hereto; or

            (ii)  in the ordinary course of business and pursuant to the
                  reasonable requirements of its business;

            and, in the case of clause (ii), upon fair and reasonable terms no
            less favourable to it than would obtain in a comparable arm's-length
            transaction with a Person which is not its Affiliate or Associate.

      (f)   Management Fees and Compensation. It shall not pay any management,
            consulting or similar fees to any Affiliate or to any officer,
            director or employee of it or any Affiliate except (i) payment of
            reasonable compensation and expense reimbursement to officers and
            employees for actual services rendered to, and expenses incurred
            for, it in the ordinary course of business, and (ii) payment of
            directors' fees and reimbursement of actual out-of-pocket expenses
            incurred in connection with attending board of director meetings not
            to exceed in the aggregate for the Obligors with respect to all such
            items $150,000 in any Fiscal Year provided that no such payment
            shall be made if a Default or an Event of Default is outstanding or
            if the making of such payment will result in a Default or an Event
            of Default.

      (g)   Contingent Obligations. It shall not create, incur, assume or suffer
            to exist any Contingent Obligations, other than in respect of the
            Obligations except:


<PAGE>
                                      -69-


            (i)   endorsements for collection or deposit in the ordinary course
                  of business;

            (ii)  Contingent Obligations incurred in the ordinary course of
                  business with respect to surety and appeal bonds, performance
                  bonds and other similar obligations; and

            (iii) Contingent Obligations arising with respect to customary
                  indemnification obligations in favour of purchasers in
                  connection with dispositions permitted under Section 9.2(b).

            The foregoing permission to incur Contingent Obligations is not
            consent for any Obligor to honour those Contingent Obligations if
            otherwise restricted or prohibited by this Agreement.

      (h)   Restricted Payments. It shall not (i) declare or make any payment or
            other distribution of assets, properties, cash, rights, obligations
            or securities on account of any of its capital stock, partnership
            interests, membership interests or other equity securities (except
            that any Obligor may declare and pay dividends to another Obligor
            (so long as it remains an Obligor)), or (ii) purchase, redeem or
            otherwise acquire for value any of its, or any of its Affiliates',
            shares of capital stock, partnership interests, membership interests
            or other equity securities or any warrants, rights or options to
            acquire such interests or securities now or hereafter outstanding.

      (i)   Change in Business. It shall not engage in any material line of
            business substantially different from those lines of business
            carried on by it on the date hereof and it shall not change the
            location from which such line of business is carried on by it, all
            as described in Schedule C, without the Lender's prior written
            consent.

      (j)   Change in Structure. It shall not make any changes in its equity
            capital structure (including a change in the terms of its
            outstanding equity securities), or amend its constating documents
            (including any shareholder agreement) without the Lender's prior
            written consent, except as necessary to effect transactions
            permitted under Section 9.2(c).

      (k)   Accounting Changes. It shall not make any significant change in
            accounting treatment or reporting practices, except as required by
            GAAP, or change its Fiscal Year.

      (l)   Material Contracts. It shall not (i) cancel or terminate any
            Material Contract; (ii) waive any default or breach under any
            Material Contract; (iii) amend or otherwise modify any Material
            Contract; or (iv) take any other action in connection with any
            Material Contract, that would, in each case, have a Material Adverse
            Effect.


<PAGE>
                                      -70-


      (m)   Limitation on Sale and Leaseback Transactions. It will not, directly
            or indirectly, enter into any sale and leaseback transaction with
            respect to any property or assets (whether now owned or hereafter
            acquired).

      (n)   Investments. It will not, other than in respect of the proceeds of
            the Advance under Facility C and the corresponding equity
            contribution in each of the ULC and the LLC make or commit to make
            any capital contributions to, or any purchase of any shares of, or
            any other equity investment in, or any acquisition of all or any
            substantial part of, the assets, rights and properties of, any
            Person without the Lender's prior written approval.

      (o)   Use of Cash. Use any cash on deposit with the Lender which is
            subject to an offset agreement in breach of any term or covenant
            contained in this Agreement.

      (p)   Loans of 1108176 Ontario. It will not make loans or advance funds or
            make or increase, as the case may be, any equity investment in
            1108176 Ontario without the prior written consent of the Lender.

9.3 Financial Covenants of the Borrowers.

While any amount owing under this Agreement or any of the other Documents
remains unpaid, or the Lender has any obligations under this Agreement or any of
the other Documents, the Borrowers covenant with the Lender as follows:

      (a)   Funded Debt to EBITDA Ratio. The Funded Debt to EBITDA Ratio of the
            Consolidated Borrower shall at all times prior to September 30, 2002
            be less than 3.00 : 1.00, shall at all times from September 30, 2002
            to August 31, 2003 be less than 2.75 : 1.00 and shall at all times
            thereafter be less than 2.50 : 1.00.

      (b)   Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio of the
            Consolidated Borrower shall at all times up to and including June
            30, 2002 be greater than or equal to 1.25 : 1.00 and thereafter
            shall at all times be greater than or equal to 1.5 : 1.00.

      (c)   Debt to New Worth Ratio. The Debt to Net Worth Ratio of the
            Consolidated Borrower shall at all times be 2.5 : 1.00.

      (d)   Working Capital Ratio. The Working Capital Ratio of the Consolidated
            Borrower shall not at any time be less than 1.25 : 1.00.

      (e)   Net Worth. The Consolidated Borrower shall maintain a Net Worth of
            not less than $30,000,000 at all times plus 75% of cumulative net
            income plus the stated capital amount of any share issuance.


<PAGE>
                                      -71-


      (f)   Calculation of Ratios, etc. The Funded Debt to EBITDA Ratio, the
            Fixed Charge Coverage Ratio and the Debt to Net Worth Ratio shall
            each be calculated quarterly on any day based on the most recent
            period of twelve fiscal months completed and ending on or
            immediately prior to such day. The initial Fixed Charge Coverage
            Ratio shall be based upon the first six months of the calendar year
            2001 on an annualized basis. The initial Funded Debt to EBITDA
            Ratio, Fixed Charge Coverage Ratio and Debt to Net Worth Ratio shall
            be calculated based upon the first nine months of the calendar year
            2001 on an annualized basis with the balance sheet further adjusted
            to include the results of the private placement of 3,400,000 common
            shares at an issue price of C$3.30 per share and 850,000 common
            shares at an issue price of US$2.10 in the capital of Stake. On an
            ongoing basis EBITDA shall be adjusted to include the results of any
            business acquisition on an annualized basis.

      (g)   Changes to GAAP. Upon the occurrence of any change in GAAP, the
            Lender will adjust the ratios set out in this Section 9.3.

9.4 Accounting, Financial Statements and Other Information.

While any amount owing under this Agreement or any of the other Documents
remains unpaid, or the Lender has any obligations under this Agreement or any of
the other Documents, each Borrower covenants with the Lender as follows:

      (a)   Quarterly Consolidated Financial Statements. Within 60 days of the
            end of each Fiscal Quarter, it will deliver to the Lender the
            consolidated balance sheet of Stake as at the end of such Fiscal
            Quarter and the related consolidated statements of income and cash
            flows, together with schedules prepared in a manner satisfactory to
            the Lender, presenting the balance sheet of the Obligors as at the
            end of such Fiscal Quarter and the related consolidating
            spreadsheets (including balance sheets and income statements) in
            respect of each Obligor of income and cash flows, (and showing all
            adjustments made to prepare such balance sheet and statement) all of
            which shall be certified by the chief financial officer of Stake
            together with a certificate of such officer relating to the
            compliance or non-compliance with this Agreement in the form
            attached hereto as Schedule T.

      (b)   Facility A Borrowing Base Statements. Within 30 days of the end of
            each fiscal month, the Facility A Borrowers will deliver to the
            Lender an aged Accounts Receivable listing and Inventory listing
            segregating United States, Canadian and foreign domiciled Accounts
            Receivable of the Facility A Borrowers and categorizing Inventory as
            either raw materials, parts or supplies and finished goods of the
            Facility A Borrowers for such period all of which shall be certified
            by the chief financial officer of Stake. Accounts Receivable
            guaranteed by EDC or secured by a letter of credit


<PAGE>
                                      -72-


            from a financial institution acceptable to the Lender shall be
            separately identified.

      (c)   Annual Audited Financial Statements. Within 120 days of the end of
            each Fiscal Year, Stake will deliver to the Lender the consolidated
            balance sheets of Stake as at the end of such Fiscal Year and the
            related consolidated statements of income, retained earnings and
            statements of cash flows for such Fiscal Year, certified by the
            Auditors, together with a signed opinion of the Auditors (which
            opinion shall not be qualified in any respect) on the consolidated
            financial statements.

      (d)   Annual Unaudited Financial Statements. Within 120 days of the end of
            each Fiscal Year, Stake will cause Sunrich Food to, and Sunrich Food
            will, deliver to the Lender the unaudited consolidated balance
            sheets of Sunrich Food and its Subsidiaries as at the end of such
            Fiscal Year and the related consolidated statements of income,
            retained earnings and statements of cash flows for such Fiscal Year,
            all of which shall be certified by the chief financial officer of
            Sunrich Food.

      (e)   Management Letters. Promptly after the receipt thereof by any
            Obligor, a copy of any "management letter" received by any Obligor
            from the Auditors.

      (f)   Annual Business Plan. Not later than one day prior to the first day
            of each Fiscal Year, a Business Plan for Stake on a consolidated
            basis and for each Obligor (other than Stake) and Subsidiary on an
            unconsolidated basis in form satisfactory to the Lender and
            consistent with past practice (including financial projections,
            Capital Expenditure budgets, budgeted statements of income and
            sources and uses of cash and balance sheets) prepared for (i) each
            calendar month of such fiscal year, and (ii) the Fiscal Year
            immediately following such Fiscal Year, in each case, prepared in
            reasonable detail with appropriate presentation and discussion of
            the principal assumptions upon which such projections and budgets
            are based, accompanied by the statement of the chief financial
            officer of each Obligor and Subsidiary to the effect that, to the
            best of his or her knowledge, the projections and budget are a
            reasonable estimate for the period covered thereby.

      (g)   Other Information. Such other information as the Lender may
            reasonably request.

                                   SECTION 10
                             DEFAULT AND ENFORCEMENT

10.1 Events of Default.

Without in any way limiting the demand nature of the Credit Facilities and the
right of the Lender to demand payment under any or all Credit Facilities at any
time and from


<PAGE>
                                      -73-


time to time notwithstanding the compliance or non-compliance by the Obligors or
any of them with any or all of the terms and conditions of the Documents, upon
the occurrence of any one or more of the following events the Lender may by
written notice to the Borrowers, declare that an Event of Default under the
Credit Facilities has occurred:

      (a)   Non-payment of Principal. Any Borrower fails to make when due,
            whether by acceleration or otherwise, any payment of principal
            required to be made under this Agreement or any other Document.

      (b)   Non-payment of Interest, Fees or Other Amounts. Any Obligor fails to
            make when due, whether by acceleration or otherwise, any payment of
            interest, fees, costs or any other payment under this Agreement or
            any other Document and that failure continues for three Business
            Days after the due date.

      (c)   Breach of Covenants, etc. Any Obligor:

            (i)   fails to perform or observe any term, condition, covenant or
                  undertaking contained in Sections 7.2, 9.1, 9.2, 9.3 and 9.4
                  and that failure, if capable of being remedied, is not
                  remedied within 20 days of its occurrence;

            (ii)  fails to bring any of its real property into material
                  compliance with applicable Environmental Laws as contemplated
                  by Section 9.1(o) within a reasonable period which, in no
                  event, shall exceed six months from the date hereof;

            (iii) fails to observe or perform any other term, condition,
                  covenant or undertaking contained in any Document which is not
                  otherwise specifically addressed in this Section 10.1(c) and
                  which failure cannot be remedied; or

            (iv)  fails to observe of perform any other term, condition,
                  covenant or undertaking contained in any Document which is not
                  otherwise specifically addressed in this Section 10.1(c) and
                  that failure, if capable of being remedied, is not remedied
                  within 20 days of its occurrence.

      (d)   Cross-Default. With respect to any other Debt of any Obligor or
            Subsidiary:

            (i)   demand is made of Debt in excess of $500,000 payable on demand
                  or default occurs in the payment thereof when due, whether by
                  virtue acceleration or otherwise;

            (ii)  default occurs in the performance or observance of any
                  obligation or condition with respect thereto and that default
                  remains unremedied after any remedial period with respect
                  thereto; or


<PAGE>
                                      -74-


            (iii) any other event occurs with respect thereto;

            and the effect of that default or other event is to accelerate the
            maturity of that Debt or to permit the holder or holders thereof, or
            any trustee or agent for the holder or holders, to cause the Debt to
            become due and payable prior to its expressed maturity and/or to
            realize on any security that may be held for such Debt.

      (e)   Representations and Warranties. Any representation, warranty or
            statement which is made by any Obligor in any Document or which is
            contained in any certificate, written statement or written notice
            provided under or in connection with any Document or which is deemed
            to have been made is untrue or incorrect when made in any material
            respect.

      (f)   Execution. Judgments are made against a the Obligors or any
            Subsidiary or any one of them in excess of $500,000 by any court of
            competent jurisdiction and either (i) a writ, execution or
            attachment or similar process is levied against the property of any
            of them in respect of such judgment, or (ii) the judgment is not
            actively and diligently appealed and execution thereof stayed
            pending appeal within 30 days of the rendering of the judgment, or
            (iii) the judgment is not paid or otherwise satisfied within 30 days
            of the rendering of the judgment.

      (g)   Invalidity and Contest. This Agreement or any of the other
            Documents, or any provision hereof or thereof, shall at any time
            after execution and delivery hereof or thereof, for any reason,
            cease to be a legal, valid and binding obligation of any Obligor, as
            applicable, or any other party thereto or cease to be enforceable
            against any Obligor, as applicable, or any party thereto in
            accordance with its terms or shall be declared to be null and void,
            or the legality, validity, binding nature or enforceability of this
            Agreement or any other Document, or any provision hereof or thereof,
            shall be contested by any of the Obligors, as applicable, or any
            other party thereto or any of the Obligors, as applicable, or any
            party thereto shall deny that it has any further liabilities or
            obligations hereunder or thereunder.

      (h)   Government Approval. Any Government Approval required to enable any
            of the Obligors and/or the Subsidiaries to conduct its business
            substantially as presently conducted or to perform its obligations
            under any Document is not obtained or is withdrawn or ceases to be
            in full force and effect and that required Government Approval
            cannot be acquired or reinstated within 30 days of the date on which
            the relevant Obligor or Subsidiary knew or ought to have known the
            Government Approval was required or withdrawn.


<PAGE>
                                      -75-


      (i)   Voluntary Proceedings. Any Obligor:

            (i)   institutes proceedings for substantive relief in any
                  bankruptcy, insolvency, debt restructuring, reorganization,
                  readjustment of debt, dissolution, liquidation, winding-up or
                  other similar proceedings (including proceedings under the
                  Bankruptcy and Insolvency Act (Canada), the Winding-up and
                  Restructuring Act (Canada), the Companies' Creditors
                  Arrangement Act (Canada), the incorporating statute of the
                  relevant corporation or other similar legislation), including
                  proceedings for the appointment of a trustee, interim
                  receiver, receiver, receiver and manager, administrative
                  receiver, custodian, liquidator, provisional liquidator,
                  administrator, sequestrator or other like official with
                  respect to the relevant corporation or all or any material
                  part of its property or assets;

            (ii)  makes an assignment for the benefit of creditors;

            (iii) is unable or admits in writing its inability to pay its debts
                  as they become due or otherwise acknowledges its insolvency or
                  commits any other act of bankruptcy or is taken to be
                  insolvent under any applicable legislation;

            (iv)  voluntarily suspends the conduct of its business or
                  operations;

            or acquiesces to, or takes any action in furtherance of, any of the
            foregoing.

      (j)   Involuntary Proceedings. If any third party in respect of any
            Obligor:

            (i)   makes any application under the Companies' Creditors
                  Arrangement Act (Canada) or similar legislation in Canada or
                  the United States of America;

            (ii)  files a proposal or notice of intention to file a proposal
                  under the Bankruptcy and Insolvency Act (Canada) or similar
                  legislation in Canada or the United States of America;

            (iii) institutes a winding-up proceeding under the Winding-up and
                  Restructuring Act (Canada), any relevant incorporating statute
                  or any similar legislation in Canada or the United States of
                  America;

            (iv)  presents a petition in bankruptcy under the Bankruptcy and
                  Insolvency Act (Canada) or any similar legislation in Canada
                  or the United States of America; or

            (v)   files, institutes or commences any other petition, proceeding
                  or case under any other bankruptcy, insolvency, debt
                  restructuring,


<PAGE>
                                      -76-


                  reorganization, incorporation, readjustment of debt,
                  dissolution, liquidation, winding-up or similar law now or
                  hereafter in effect, seeking bankruptcy, liquidation,
                  reorganization, dissolution, winding-up, composition or
                  readjustment of debt of any of them, the appointment of a
                  trustee, interim receiver, receiver, receiver and manager,
                  administrative receiver, custodian, liquidator, provisional
                  liquidator, administrator, sequestrator or other like official
                  for any of them, or any material part of any of their
                  respective assets or any similar relief in Canada or the
                  United States of America;

            and if the application, filing, proceeding, petition or case is not
            contested by bona fide action on the part of the relevant Obligor or
            Subsidiary and is not dismissed, stayed or withdrawn within 30 days
            of commencement thereof or if relief is granted against the relevant
            Obligor or Subsidiary.

      (k)   Creditor Action. Any secured creditor, encumbrancer or lienor, or
            any trustee, interim receiver, receiver, receiver and manager,
            administrative receiver, agent, bailiff or other similar official
            appointed by any secured creditor, encumbrancer or lienor, takes
            possession of, forecloses, seizes, retains, sells or otherwise
            disposes of, or otherwise proceeds to enforce security over, all or
            a substantial part of the assets of any Obligor or gives notice of
            its intention to do any of the foregoing.

      (l)   Material Adverse Effect. At any time there occurs an event or
            circumstance which in the view of the Lender has or could have a
            Material Adverse Effect on any Obligor.

      (m)   Material Contracts. Any Obligor defaults in any material respect
            under any Material Contract and all applicable notice or cure
            periods under the Material Contract have expired and the default has
            not been cured or waived.

      (n)   Change of Control Regarding Persons Other Than Stake. There occurs,
            directly or indirectly, a change in the legal or beneficial
            ownership of any shares in the capital stock of any Obligor (other
            than Stake) or any Subsidiary such that Stake shall cease to own or
            control, directly or indirectly, shares or ownership interests of
            such Obligor or Subsidiary carrying voting rights sufficient to
            permit Stake to elect a majority of the members of the board of
            directors of such Obligor or Subsidiary.

      (o)   Change of Control Regarding Stake. There occurs, directly or
            indirectly, a change in the legal or beneficial ownership of any
            shares in the capital stock of Stake such that a Person or group of
            Persons acting in concert beneficially owns or controls 51% or more
            of the shares of the Borrower carrying voting rights.


<PAGE>
                                      -77-


      (p)   Harris Default. A default or event of default occurs under the
            Harris Loan Agreement.

10.2 Rights upon Default and Event of Default.

Upon demand for payment or occurrence of a Default, the Lender may, on notice to
the Borrowers, declare that the ability of the Borrowers to make request for
further Advances under any Credit Facility shall be suspended pending the
remedying of the Default. Upon the occurrence of an Event of Default the Lender
may do either or both of the following:

      (a)   declare that the Commitment under any or all Credit Facilities has
            expired and that the Lender's obligations to make Advances have
            terminated; and

      (b)   declare the entire principal amount of all Advances outstanding, all
            unpaid accrued interest and all fees and other amounts required to
            be paid hereunder to be immediately due and payable without the
            necessity of presentment for payment, notice of non-payment and of
            protest (all of which are hereby expressly waived) and proceed to
            exercise any and all rights and remedies hereunder and under any
            other Document.

From and after the issuance of any declaration referred to in this Section 10.2,
the Lender shall not be required to honour any cheque or other instrument
presented to it by any Borrower regardless of the date of issue or presentation.
Immediately upon receipt of a declaration under Section 10.2(b), the Borrowers
shall pay to the Lender all amounts outstanding hereunder including the Hedge
Contract Exposure owing under each Hedge Contract. Without limiting the
generality of the foregoing, the Borrowers shall pay the Lender the principal
amount of all Bankers' Acceptances which have not matured and the principal
amount payable under all outstanding Letters of Credit, which are unmatured or
unexpired, which amounts shall be held by the Lender as collateral security for
the Borrowers' obligations with respect to those Bankers' Acceptances and
Letters of Credit, as applicable. The Hedge Contract Exposure under any Hedge
Contract shall be determined in accordance with the applicable Hedge Agreement.

10.3 Waiver of Default.

No express or implied waiver by the Lender of any demand, Default or Event of
Default shall in any way be or be construed to be a waiver of any future or
subsequent Default or Event of Default. To the extent permitted by Applicable
Law, the Obligors hereby waive any rights now or thereafter conferred by statute
or otherwise which may limit or modify any of the Lender's rights or remedies
under any Document. The Obligors acknowledge and agree that the exercise by the
Lender of any rights or remedies under any Document without having declared an
acceleration shall not in any way alter, affect or prejudice the right of the
Lender to make a declaration pursuant to Section 10.2 at any time and, without
limiting the foregoing, shall not be construed as or deemed to constitute a
waiver of any rights under Section 10.2.


<PAGE>
                                      -78-


                                   SECTION 11
                                    REMEDIES

11.1 Remedies Cumulative.

For greater certainty, the rights and remedies of the Lender under this
Agreement and the other Documents are cumulative and are in addition to and not
in substitution for any rights or remedies provided by law. Any single or
partial exercise by the Lender of any right or remedy upon the occurrence of a
demand, Default or Event of Default shall not be deemed to be a waiver of, or to
alter, affect or prejudice any other right or remedy to which the Lender may be
lawfully entitled as a result of the demand, Default or Event of Default, and
any waiver by the Lender of the strict observance of, performance of or
compliance with any term, covenant, condition or agreement herein contained, and
any indulgence granted thereby, shall be deemed not to be a waiver of any
subsequent demand, Default or Event of Default or of the right of the Lender to
demand payment under the Credit Facilities at any time and from time to time.

11.2 Remedies Not Limited.

The Lender may, to the extent permitted by Applicable Law, bring suit at law, in
equity or otherwise, for any available relief or purpose including, but not
limited to: (a) the specific performance of any covenant or agreement contained
in this Agreement or in any other Document; (b) an injunction against a
violation of any of the terms of this Agreement or any other Document; (c) in
aid of the exercise of any power granted by this Agreement or any other Document
or by law; or (d) the recovery of any judgment for any and all amounts due in
respect of the Obligations.

11.3 Set-Off, etc.

Upon the occurrence of demand, Default or Event of Default, the Lender and each
of its respective branches and offices are hereby authorized by each Obligor
from time to time, without notice to: (a) set off and apply any and all amounts
owing by the Lender or any of its branches or offices to any Obligor (whether
payable in Canadian Dollars or any other currency and any amounts so owing in
any other currency may be converted into one or more currencies in which the
Obligations are denominated at such rate or rates as the party may be able to
obtain, acting reasonably - whether matured or unmatured, and in the case of
deposits, whether general or special, time or demand and however evidenced)
against and on account of the Obligations (whether or not any declaration under
Section 11.2 has been made and whether or not those Obligations are unmatured or
contingent); (b) hold any amounts owing by the Lender as collateral to secure
payment of the Obligations owing to it to the extent that those amounts may be
required to satisfy any contingent or unmatured Obligations owing to it; and (c)
return as unpaid for insufficient funds any and all cheques and other items
drawn against any deposits so held as the Lender in its sole discretion may
elect.


<PAGE>
                                      -79-


11.4 Lender May Perform Covenants.

If any Obligor fails to perform any of its obligations under any covenant
contained in this Agreement or any other Document, the Lender may (but has no
obligation to), upon notice to the Borrowers, perform any covenant capable of
being performed by it and, if the covenant requires the payment or expenditure
of money, it may make an Advance to fund that requirement, which Advance shall
be repaid by the Borrowers on demand. That Advance shall bear interest at a rate
calculated and paid in accordance with Section 4.

                                   SECTION 12
                                      FEES

12.1 Arrangement Fee.

The Borrowers shall pay to the Lender on or before the Closing Date an
arrangement fee (the "Arrangement Fee") of C$150,000. The Lender acknowledges
having received a deposit of C$37,500 toward the payment of the Arrangement Fee.
The Borrowers acknowledge to the Lender that:

      (a)   the C$37,500 deposit has been fully earned by the Lender and is
            non-refundable to the Borrowers;

      (b)   the remaining balance of such Arrangement Fee shall be fully earned
            by the Lender on Closing and is non-refundable to the Borrowers; and

      (c)   the Arrangement Fee compensates the Lender for the time and expense
            incurred by the Lender in evaluating, reviewing, approving,
            authorizing and arranging the Credit Facilities.

                                   SECTION 13
                                  MISCELLANEOUS

13.1 Assignment.

      (a)   Benefit and Burden of this Agreement. This Agreement shall enure to
            the benefit of and be binding on the parties hereto, their
            respective successors and any permitted assignees.

      (b)   Participation. The Lender may, with the prior written consent of the
            Borrowers, which consent may not be unreasonably withheld, grant a
            participation in any Credit Facility to one or more financial
            institutions or other entities (the "Participant"). If a
            participation is granted, (a) the Lender shall remain fully liable
            for all of its obligations and responsibilities under this Agreement
            to the same extent as if the participation had not been granted and
            (b) the Lender shall administer the participation of the
            Participant. Neither the Participant nor the Borrowers shall have
            any rights against or obligations to one another, nor shall any of


<PAGE>
                                      -80-


            them be required to deal directly with one another in respect of the
            participation by a Participant.

      (c)   Assignment. The Lender may, with the prior written consent of the
            Borrowers, which consent may not be unreasonably withheld, assign
            all or any part of its rights to and may have its obligations in
            respect of any Credit Facility assumed by one or more financial
            institutions or other entities (each an "Assignee"). Notwithstanding
            the foregoing, no consent shall be required in respect of any
            assignment by the Lender to its Affiliate. An assignment shall
            become effective when the Borrowers have been notified by the Lender
            and have received from the Assignee an undertaking to be bound by
            this Agreement and to perform the obligations assigned to it. The
            Assignee shall be treated as a Lender for all purposes of the
            Agreement, shall be entitled to the full benefit hereof and shall be
            subject to the obligations of the Lender to the same extent as if it
            were an original party in respect of the rights or obligations
            assigned to it, and the Lender shall be released and discharged
            accordingly and to the same extent and such Schedules as applicable
            shall be amended accordingly from time to time without further
            notice or other requirement.

      (d)   Expenses. Any expenses incurred by the Lender in connection with a
            Participation or Assignment including any subsequent amendments of
            this Agreement or any other Document, including the reasonable fees
            and disbursements of counsel to the Lender shall be paid or
            reimbursed, on demand, by the Borrowers.

      (e)   Obligors. The Obligors may not assign, delegate or transfer all or
            any part of their respective rights or obligations under this
            Agreement or any other Document without the prior written consent of
            the Lender.

13.2 Amendments.

No amendment or waiver of any provision of this Agreement or consent to any
departure by a party from any provision of this Agreement will be effective
unless it is in writing, and then the amendment, modification, waiver or consent
will be effective only in the specific instance, for the specific purpose and
for the specific length of time for which it is given.

13.3 Notice.

      (a)   Unless otherwise specified, any notice or other communication
            required or permitted to be given to a party under this Agreement
            shall be in writing and may be delivered personally or sent by
            prepaid registered mail or by facsimile, to the address or facsimile
            number of the party set out beside its name at the foot of this
            Agreement to the attention of the Person there indicated or to such
            other address, facsimile number or other Person's attention as the
            party may have specified by notice in writing given under


<PAGE>
                                      -81-


            this Section. Any notice or other communication shall be deemed to
            have been given (i) if delivered personally, when received; (ii) if
            mailed, subject to Section 13.4, on the fifth Business Day following
            the date of mailing; (iii) if sent by facsimile, on the Business Day
            when the appropriate confirmation of receipt has been received if
            the confirmation of receipt has been received before 3:00 p.m. on
            that Business Day or, if the confirmation of receipt has been
            received after 3:00 p.m. on that Business Day, on the next
            succeeding Business Day; and (iv) if sent by facsimile on a day
            which is not a Business Day, on the next succeeding Business Day on
            which confirmation of receipt has been received.

      (b)   All communication with any Obligor hereunder may be directed through
            Stake. For greater certainty, any notice or other document or
            instrument which is required to be given or delivered to any Obligor
            hereunder shall be deemed to have been given to and received by such
            Obligor if given to Stake.

13.4 Disruption of Postal Service.

If a notice has been sent by prepaid registered mail and before the fifth
Business Day after the mailing there is a discontinuance or interruption of
regular postal service so that the notice cannot reasonably be expected to be
delivered within five Business Days after the mailing, the notice will be deemed
to have been given when it is actually received.

13.5 Environmental Indemnity.

Each of the Obligor shall, and does hereby, indemnify and hold each Indemnified
Person harmless from and against any and all Claims and Losses incurred or
suffered by, or asserted against, the Indemnified Person, with respect to or as
a direct or indirect result of, (a) the presence on or under, or any Release or
likely Release of any Hazardous Substance from any of the Collateral comprising
real property or any other real properties owned or used by any of the Obligors
or any Subsidiary or any of their successors and assigns; or (b) the breach of
any Applicable Laws by any mortgagor, owner, lessee or occupant of such
properties.

13.6 Further Assurances.

The Obligors shall from time to time promptly, upon the request of the Lender,
take or cause to take such action, and execute and deliver such further
documents as may be reasonably necessary or appropriate to give effect to the
provisions and intent of this Agreement and the Documents.

13.7 Judgment Currency.

      (a)   If for the purpose of obtaining judgment in any court it is
            necessary to convert all or any part of the liabilities or any other
            amount due to the Lender in respect of any of the Borrowers'
            obligations under this Agreement in any currency (the "Original
            Currency") into another


<PAGE>
                                      -82-


            currency (the "Other Currency"), each Borrower, to the fullest
            extent that it may effectively do so, agrees that the rate of
            exchange used shall be that at which, in accordance with normal
            banking procedures, the Lender could purchase the Original Currency
            with the Other Currency on the Business Day preceding that on which
            final judgment is paid or satisfied.

      (b)   The obligations of the Borrowers in respect of any sum due in the
            Original Currency from it to the Lender shall, notwithstanding any
            judgment in any Other Currency, be discharged only to the extent
            that on the Business Day following receipt by the Lender of any sum
            adjudged to be so due in such Other Currency the Lender may, in
            accordance with its normal banking procedures, purchase the Original
            Currency with such Other Currency. If the amount of the Original
            Currency so purchased is less than the sum originally due to the
            Lender in the Original Currency, the Borrowers agree, as a separate
            obligation and notwithstanding any such judgment, to indemnify the
            Lender against such loss, and if the amount of the Original Currency
            so purchased exceeds the sum originally due to the Lender in the
            Original Currency, the Lender agrees to remit such excess to the
            Borrowers.

13.8 Waivers.

No failure to exercise, and no delay in exercising, on the part of the Lender,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, remedy, power or privilege
shall preclude the exercise of any other right, remedy, power or privilege.

13.9 Reimbursement of Expenses.

The Obligors jointly and severally agree to: (a) pay or reimburse the Lender, on
demand, for all of its reasonable out-of-pocket costs and expenses (including
legal fees) incurred in connection with the preparation, negotiation and
execution of this Agreement and the other Documents including any subsequent
amendments of this Agreement or any other Document, and the consummation and the
administration of the transactions contemplated hereby including the reasonable
fees and disbursements of counsel to the Lender; and (b) pay or reimburse, on
demand, the Lender for all its costs and expenses (including legal fees)
incurred in connection with the determination, preservation and enforcement of
any responsibilities, rights and remedies under this Agreement and the other
Documents, including the reasonable fees and disbursements of its counsel. The
obligations of the Obligors under this Section 13.9 shall survive the repayment
of all Advances and the termination of the Credit Facility.

13.10 Submission to Jurisdiction.

Each of the parties irrevocably submits to the non-exclusive jurisdiction of the
courts of the Province of Ontario.


<PAGE>
                                      -83-


13.11 Counterparts.

This Agreement and the Documents may be executed and delivered in any number of
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument.

The parties have executed this Agreement.

STAKE TECHNOLOGY LTD.                               By: "Jeremy Kendall"
2838 Hwy 7                                             --------------------
Norval, Ontario LOP 1KO                             Name: Jeremy Kendall
Attention: Chief Financial Officer                  Title:
Fax: (905) 455-2529


STAKE TECH LP                                       By: "Steven Bromley"
By: 1510146 Ontario Inc., its General Partner          --------------------
                                                    Name: Steven Bromley
                                                    Title:


TEMISCA, INC.                                       By: "JeremyKendall"
                                                       --------------------
                                                    Name: Jeremy Kendall
                                                    Title:


558497 ONTARIO LIMITED                              By: "Jeremy Kendall"
                                                       -----------------
                                                    Name:  Jeremy Kendall
                                                    Title:


1510146 ONTARIO INC.                                By: "Steven Bromley"
                                                       --------------------
                                                    Name:  Steven Bromley
                                                    Title:


SUNRICH FOOD GROUP, INC.                            By:   "Steven Bromley"
                                                       --------------------
                                                    Name:  Steven Bromley
                                                    Title:


3060385 NOVA SCOTIA COMPANY                         By: "Jeremy Kendall"
                                                       --------------------
                                                    Name: Jeremy Kendall
                                                    Title:


<PAGE>
                                      -84-


STAKE TECHNOLOGY LLC                                By:  "Jeremy Kendall"
                                                       --------------------
                                                    Name: Jeremy Kendall
                                                              Title:


SUNRICH, INC.                                       By:  "Jeremy Kendall"
                                                       --------------------
                                                    Name:  Jeremy Kendall
                                                              Title:


NORTHERN FOOD AND DAIRY INC.                        By:   "Jeremy Kendall"
                                                       --------------------
                                                    Name: Jeremy Kendall
                                                              Title:


NORDIC ASEPTIC, INC.                                By:  "Jeremy Kendall"
                                                       --------------------
                                                    Name:  Jeremy Kendall
                                                              Title:


STAKE TECHNOLOGY (USA), INC.                        By:  "Jeremy Kendall"
                                                       --------------------
                                                    Name: Jeremy Kendall
                                                              Title:


VIRIGINIA MATERIALS INC.                            By:  "Steven Bromley"
                                                       --------------------
                                                    Name: Steven Bromley
                                                              Title:


BANK OF MONTREAL                                    By:  "G.J.  Card"
Corporate Finance                                      --------------------
100 King Street West                                Name:  Gordon J. Card
11th Floor                                          Title:
Toronto, Ontario
M5X 1A1
Attention: Senior Manager
Fax: (416) 360-7168




                                  EXHIBIT 10.13

     (Note Schedules to this Exhibit have not been filed due to their size,
     but are available on request for inspection at the Company's offices)


<PAGE>

                                                                   EXHIBIT 10.13

                     FACILITY B LOAN AUTHORIZATION AGREEMENT

The Customer referred to below has applied for, and Harris Trust and Savings
Bank, Chicago, Illinois ("Bank"), has approved the establishment of, a loan
authorization account ("Loan Account") from which the Customer may from time to
time request loans and letters of credit in the aggregate amount of credit shown
below (the "Maximum Credit"). The Loan Account shall be secured as described in
this Agreement. Interest on such loans shall be computed at a variable rate
which may change daily based upon changes in the Bank's Prime Rate or at short
term fixed rates based upon LIBOR. The Customer may make principal payments at
any time and in any amount, subject to payment of the funding indemnity more
fully provided in paragraph no. 2 below. The request by the Customer for, and
the making by the Bank of, any loan or letter of credit against the Loan Account
shall constitute an agreement between the Customer and the Bank as follows:

Name of Customer: SunRich Food Group, Inc., a Minnesota corporation

Address: 3824 93rd Street

         Hope, Minnesota  56046

Type of Loan Account: Revolving, which means as principal is repaid, the
                      Customer may reborrow subject to this Agreement.

Amount of Maximum Credit: $5,000,000

Each Loan Requested Shall Be At Least: $100,000 in the case of Loans bearing
                                       interest with reference to the Bank's
                                       Prime Rate or such greater amount which
                                       is an integral multiple of $100,000; and
                                       $1,000,000 in the case of Loans bearing
                                       interest with reference to LIBOR or such
                                       greater amount which is an integral
                                       multiple of $100,000.

Interest Rate: The Loans will bear interest as set forth in paragraph no. 2
               below.

Maturity Date: The Loan Account terminates, and Loans are payable, ON DEMAND.

Periodic Statement reflecting accrued interest will be sent and interest will be
payable monthly.

Payments shall be due at the Bank's principal office in Chicago, Illinois, paid
to the order of the Bank, and made by debit to Harris Account #420-981-3.

1.    Using the Account. (a) All loans and advances from the Loan Account are
      referred to in this Agreement as "Loans." Loan requests shall be sent to
      the Customer's Harris Account Officer and may be made by writing or by
      telephone. Loan proceeds shall be credited to the Customer's deposit
      account at the Bank unless the Bank is otherwise directed by special
      written directions from the Customer. The amount of each Loan requested
      shall be at least the minimum amount shown above, and the Bank shall have
      the right to refuse to honor any Loan requested by the Customer which is
      less than that minimum amount, even if the Bank has previously honored a
      Loan request for less than the minimum amount. Each Loan shall initially
      constitute part of the Prime Rate Portion (as described in paragraph no.
      2(a) below) except to the extent the Customer has otherwise timely elected
      that such Loan, or any part thereof, constitutes part of a LIBOR

<PAGE>

      Portion as provided in paragraph 2 below. The Customer shall not request
      any Loan which, when taken together with Loans and Letters of Credit then
      outstanding, would exceed the Maximum Credit. If Loans are secured
      directly or indirectly by securities traded on a national exchange or by
      other "margin stock" (as defined by the Federal Reserve Board in
      Regulation U), then the Customer promises to furnish the Bank a duly
      executed and completed Form U-1 statement and agrees that the proceeds of
      Loans from the Loan Account will not be used to purchase or carry stock,
      convertible bonds or warrants unless the Customer has obtained the prior
      written consent of the Bank.

      Loans will be made available from the Loan Account subject to the Bank's
      approval on a loan-by-loan basis as and when Loans are requested by the
      Customer. None of the proceeds of the Loans shall be loaned to or
      otherwise utilized by or for the benefit of Virginia Materials, Inc. or
      International Materials & Supplies, Inc.

      All Loans shall be made against and evidenced by the Customer's promissory
      note payable to the order of the Bank in the principal amount of
      $5,000,000, such note to be in the form of Exhibit A attached hereto (the
      "Note"). The Bank agrees that notwithstanding the fact that the Note is in
      the principal amount of $5,000,000, it shall evidence only the actual
      unpaid principal balance of Loans made under the Loan Account. The Bank
      agrees that if it transfers or assigns the Note, the Bank will stamp
      thereon a statement of the actual principal amount evidenced thereby at
      the time of transfer. The Customer agrees that in any action or proceeding
      instituted to collect or enforce collection of the Note, the amount shown
      as owing the Bank on its records shall be prima facie evidence of the
      unpaid balance of principal and interest on the Note.

            (b) Letters of Credit. Subject to the terms and conditions hereof,
      the Loan Amount may be availed of by the Customer in the form of
      commercial letters of credit issued by the Bank for the account of the
      Customer (individually a "Letter of Credit" and collectively the "Letters
      of Credit"), provided that the aggregate amount of Letters of Credit
      issued and outstanding hereunder shall not at any one time exceed
      $1,500,000. For purposes of this Agreement, a Letter of Credit shall be
      deemed outstanding as of any time in an amount equal to the maximum amount
      which could be drawn thereunder under any circumstances and over any
      period of time plus any unreimbursed drawings then outstanding with
      respect thereto. If and to the extent any Letter of Credit expires or
      otherwise terminates without having been drawn upon, the availability
      shall to such extent be reinstated. Each Letter of Credit issued hereunder
      shall expire not later than twelve (12) months from the date of issuance.
      Each Letter of Credit issued hereunder shall be payable in U.S. Dollars,
      conform to the general requirements of the Bank for the issuance of a
      commercial letter of credit, as to form and substance, and be a letter of
      credit which the Bank may lawfully issue. At the time the Customer
      requests each Letter of Credit to be issued, the Customer shall execute
      and deliver to the Bank an application for such Letter of Credit in the
      form then customarily prescribed by the Bank (individually an
      "Application" and collectively the "Applications"). Subject to the other
      provisions of this subsection, the obligation of the Customer to reimburse
      the Bank for drawings under a Letter of Credit shall be governed by the
      Application for such Letter of Credit. Anything contained in the
      Applications to the contrary notwithstanding, (i) in the event the Bank is
      not reimbursed by the Customer for the amount the Bank pays on any draft
      drawn under a Letter of Credit issued hereunder by 11:00 a.m. (Chicago
      time) on the date when such drawing is paid, the obligation of the
      Customer to reimburse the Bank for the amount of such draft paid shall
      bear interest (which the Customer hereby promises to pay on demand) from
      and after the date the draft is paid until payment in full thereof at the
      fluctuating rate per annum determined by adding 3% to the sum of the
      Applicable Margin plus the Prime Rate as from time to time in effect
      (computed on the basis of a


                                      -2-

<PAGE>

      year of 360 days for the actual number of days elapsed), (ii) the Customer
      shall pay fees in connection with each Letter of Credit as set forth in
      Section 3 hereof, and (iii) the Customer shall, upon demand of the Bank,
      immediately pay to the Bank the full amount of each Letter of Credit then
      outstanding, the Customer agreeing to immediately make such payment and
      acknowledging and agreeing that the Bank would not have an adequate remedy
      at law for failure of the Customer to honor any such demand and that the
      Bank shall have the right to require the Customer to specifically perform
      such undertaking whether or not any draws have been made under any such
      Letters of Credit.

2.    Interest Rate Options.

      (a)   Subject to the terms and conditions hereof, portions of the
            principal of the Loans (all of the principal of the Loans bearing
            interest at the same rate for the same period of time being
            hereinafter referred to as a "Portion") may, at the Customer's
            option, bear interest with reference to the Prime Rate (the "Prime
            Rate Portion") or with reference to an Adjusted LIBOR ("LIBOR
            Portions"). Subject to the terms and conditions hereof, Portions may
            be converted from time to time from one basis to another. All
            principal of the Loans which is not part of a LIBOR Rate Portion
            shall constitute a single Prime Rate Portion. All principal of the
            Loans which bears interest with reference to a particular Adjusted
            LIBOR for a particular Interest Period shall constitute a single
            LIBOR Portion. There shall not be more than four (4) LIBOR Portions
            outstanding at any one time. Anything contained herein to the
            contrary notwithstanding, no LIBOR Portion shall be created,
            continued or effected by conversion after any demand for payment of
            the Loans or any non-compliance by the Customer with any of the
            terms or conditions of this Agreement. The Customer hereby promises
            to pay interest on each Portion at the rates and times specified
            herein. The interest rate payable under this Agreement shall be
            subject, however, to the limitation that such interest rate shall
            never exceed the highest rate which the Customer may contract to pay
            under applicable law.

      (b)   Prime Rate Portion. The Prime Rate Portion shall bear interest at
            the rate per annum determined by adding the Applicable Margin to the
            Prime Rate as in effect from time to time, provided that if the
            Prime Rate Portion or any part thereof is not paid when due (whether
            by demand or otherwise), such Portion shall bear interest, whether
            before or after judgment, until payment in full thereof at the rate
            per annum determined by adding 3% to the sum of the Applicable
            Margin plus the Prime Rate as from time to time in effect. Interest
            on the Prime Rate Portion shall be payable monthly in arrears on the
            last day of each calendar month in each year; and interest shall
            also be due and payable upon demand. Any change in the interest rate
            on the Prime Rate Portion resulting from a change in the Prime Rate
            shall be effective on the date of the relevant change in the Prime
            Rate.

      (c)   LIBOR Portions. Each LIBOR Portion shall bear interest for each
            Interest Period selected therefor at a rate per annum determined by
            adding the Applicable Margin to the Adjusted LIBOR for such Interest
            Period, provided that if any LIBOR Portion is not paid when due
            (whether by demand or otherwise), such Portion shall bear interest,
            whether before or after judgment, until payment in full thereof
            through the end of the Interest Period then applicable thereto at
            the rate per annum determined by adding 3% to the interest rate
            which would otherwise be applicable thereto, and effective at the
            end of such Interest Period such LIBOR Portion shall automatically
            be converted into and added to the Prime Rate Portion and shall
            thereafter bear interest at the interest rate applicable to the
            Prime Rate Portion after default. Interest on each LIBOR Portion
            shall be due


                                      -3-

<PAGE>

            and payable on the last day of each Interest Period applicable
            thereto and, with respect to any Interest Period applicable to a
            LIBOR Portion in excess of 3 months, on the date occurring every 3
            months after the date such Interest Period began and at the end of
            such Interest Period; and interest shall also be due and payable
            upon demand. The Customer shall notify the Bank on or before 11:00
            a.m. (Chicago time) on the third Business Day preceding the end of
            an Interest Period applicable to a LIBOR Portion whether such LIBOR
            Portion is to continue as a LIBOR Portion, in which event the
            Customer shall notify the Bank of the new Interest Period selected
            therefor; and in the event the Customer shall fail to so notify the
            Bank, such LIBOR Portion shall automatically be converted into and
            added to the Prime Rate Portion as of and on the last day of such
            Interest Period.

      (d)   Computation of Interest. All interest on the Loans shall be computed
            on the basis of a year of 360 days for the actual number of days
            elapsed.

      (e)   Manner of Rate Selection.

            (i)   LIBOR Portions. The Customer shall notify the Bank by 11:00
                  a.m. (Chicago time) at least 3 Business Days prior to the date
                  upon which the Customer requests that any LIBOR Portion be
                  created or that any part of the Prime Rate Portion be
                  converted into a LIBOR Portion (each such notice to specify in
                  each instance the amount thereof and the Interest Period
                  selected therefor). If any request is made to convert a LIBOR
                  Portion into another type of Portion available hereunder, such
                  conversion shall only be made so as to become effective as of
                  the last day of the Interest Period applicable thereto.

            (ii)  Interest Rate Selections. All requests for the creation,
                  continuance and conversion of LIBOR Portions under this
                  Agreement shall be irrevocable. Such requests may be written
                  or oral and the Bank is hereby authorized to honor telephonic
                  requests for creations, continuances and conversions received
                  by it from any person the Bank in good faith believes to be
                  the Customer, or its designated representative, without the
                  need of independent investigation, the Customer hereby
                  indemnifying the Bank from any liability or loss ensuing from
                  so acting.

      (f)   Change of Law. Notwithstanding any other provisions hereof, if at
            any time the Bank shall determine that any change in applicable
            laws, treaties or regulations or in the interpretation thereof makes
            it unlawful for the Bank to create or continue to maintain any LIBOR
            Portion, it shall promptly so notify the Customer and at the Bank's
            option make demand repayment of the Loans or only the affected LIBOR
            Portion and, even absent such demand, no LIBOR Portion shall be
            created, continued or maintained after the date of such
            determination until it is no longer unlawful for the Bank to create,
            continue or maintain such LIBOR Portion. Upon such a demand by the
            Bank for payment, the Customer shall thereupon prepay the
            outstanding principal amount of the Loans so demanded, together with
            all interest accrued thereon and all other amounts payable to the
            Bank with respect thereto under this Agreement (including without
            limitation any amount due the Bank under the funding indemnity
            paragraph below); provided, however, that unless the Bank makes
            demand for repayment of the Loans in full, the Customer may elect to
            convert the principal amount of the affected LIBOR Portion into the
            Prime Rate Portion, subject to the terms and


                                      -4-

<PAGE>

            conditions hereof (including, without limitation, the payment of
            such interest and other amounts so payable to the Bank hereunder).

      (g)   Unavailability of Deposits or Inability to Ascertain Adjusted LIBOR.
            Notwithstanding any other provision hereof, if the Bank shall
            determine prior to the commencement of any Interest Period that
            deposits in the amount of any LIBOR Portion scheduled to be
            outstanding during such Interest Period are not readily available to
            the Bank in the relevant market or, by reason of circumstances
            affecting the relevant market, adequate and reasonable means do not
            exist for ascertaining Adjusted LIBOR, then the Bank shall promptly
            give notice thereof to the Customer and at the Bank's option make
            demand for repayment of the Loans and, even absent such demand, no
            LIBOR Portion shall be created, continued or effected by conversion,
            as the case may be, in such amount and for such Interest Period
            until deposits in such amount and for the Interest Period selected
            by the Customer shall again be readily available to the Bank in the
            relevant market and adequate and reasonable means exist for
            ascertaining Adjusted LIBOR.

      (h)   Taxes and Increased Costs. With respect to any LIBOR Portion, if the
            Bank shall determine that any change in any applicable law, treaty,
            regulation or guideline (including, without limitation, Regulation D
            of the Board of Governors of the Federal Reserve System) or any new
            law, treaty, regulation or guideline, or any interpretation of any
            of the foregoing by any governmental authority charged with the
            administration thereof or any central bank or other fiscal, monetary
            or other authority having jurisdiction over the Bank or its lending
            branch or the LIBOR Portions contemplated hereby (whether or not
            having the force of law), shall: (i) impose, increase, or deem
            applicable any reserve, special deposit or similar requirement
            against assets held by, or deposits in or for the account of, or
            loans by, or any other acquisition of funds or disbursements by, the
            Bank which is not in any instance already accounted for in computing
            the interest rate applicable to such LIBOR Portion; (ii) subject the
            Bank, this Agreement or any LIBOR Portion to any tax (including,
            without limitation, any United States interest equalization tax or
            similar tax however named applicable to the acquisition or holding
            of debt obligations and any interest or penalties with respect
            thereto), duty, charge, stamp tax, fee, deduction or withholding in
            respect of this Agreement or any LIBOR Portion, except such taxes as
            may be measured by the overall net income or gross receipts of the
            Bank or its lending branches and imposed by the jurisdiction, or any
            political subdivision or taxing authority thereof, in which the
            Bank's principal executive office or its lending branch is located;
            (iii) change the basis of taxation of payments of principal and
            interest due from the Customer to the Bank hereunder (other than by
            a change in taxation of the overall net income or gross receipts of
            the Bank); or (iv) impose on the Bank any penalty with respect to
            the foregoing or any other condition regarding this Agreement or any
            LIBOR Portion, and the Bank shall determine that the result of any
            of the foregoing is to increase the cost (whether by incurring a
            cost or adding to a cost) to the Bank of creating or maintaining any
            LIBOR Portion hereunder or to reduce the amount of principal or
            interest received or receivable by the Bank (without benefit of, or
            credit for, any prorations, exemption, credits or other offsets
            available under any such laws, treaties, regulations, guidelines or
            interpretations thereof), then the Customer shall pay on demand
            (which need not but may at the Bank's option be combined with a
            demand for repayment of the Loans) to the Bank from time to time as
            specified by the Bank such additional amounts as the Bank shall
            reasonably determine are sufficient to compensate and indemnify it
            for such increased cost or reduced amount. If the Bank makes such a
            claim for compensation, it shall provide to the Customer a
            certificate setting forth the computation of the increased cost or
            reduced


                                      -5-

<PAGE>

            amount as a result of any event mentioned herein in reasonable
            detail and such certificate shall be conclusive if reasonably
            determined.

      (i)   Funding Indemnity. In the event the Bank shall incur any loss, cost
            or expense (including, without limitation, any loss (including loss
            of profit), cost or expense incurred by reason of the liquidation or
            reemployment of deposits or other funds acquired or contracted to be
            acquired by the Bank to fund or maintain any LIBOR Portion or the
            relending or reinvesting of such deposits or other funds or amounts
            paid or prepaid to the Bank) as a result of:

            (x)   any payment of a LIBOR Portion on a date other than the last
                  day of the then applicable Interest Period for any reason,
                  whether before or after default, and whether or not such
                  payment is required by any provisions of this Agreement; or

            (y)   any failure by the Customer to create, borrow, continue or
                  effect by conversion a LIBOR Portion on the date specified in
                  a notice given pursuant to this Agreement;

            then the Customer shall pay to the Bank upon its demand (which need
            not but may at the Bank's option be combined with a demand for
            repayment of the Loans) such amount as will reimburse the Bank for
            such loss, cost or expense. If the Bank requests compensation under
            this paragraph, it shall provide to the Customer a certificate
            setting forth the computation of the loss, cost or expense giving
            rise to the request for compensation in reasonable detail and such
            certificate shall be conclusive if reasonably determined.

      (j)   Lending Branch; Discretion of Bank as to Manner of Funding. The Bank
            may, at its option, elect to make, fund or maintain Portions of the
            Loans hereunder at such of its branches or offices as the Bank may
            from time to time elect. Notwithstanding any provision of this
            Agreement to the contrary, the Bank shall be entitled to fund and
            maintain its funding of all or any part of the Loans in any manner
            it sees fit, it being understood, however, that for the purposes of
            this Agreement all determinations hereunder with respect to LIBOR
            Portions shall be made as if the Bank had actually funded and
            maintained each LIBOR Portion during each Interest Period applicable
            thereto through the purchase of deposits in the relevant market in
            the amount of such LIBOR Portion, having a maturity corresponding to
            such Interest Period, and bearing an interest rate equal to the
            LIBOR for such Interest Period.

      (k)   Notations. The status of all amounts evidenced by the Note as
            constituting part of the Prime Rate Portion or a LIBOR Portion, and,
            in the case of any LIBOR Portion, the rates of interest and Interest
            Periods applicable to such Portions shall be recorded by the Bank on
            its books and records or, at its option in any instance, endorsed on
            a schedule hereto and the unpaid principal balance and status, rates
            and Interest Periods so recorded or endorsed by the Bank shall be
            prima facie evidence in any court or other proceeding brought to
            enforce this Agreement of the principal amount remaining unpaid
            thereon, the status of the Loans evidenced by the Note, and the
            interest rates and Interest Periods applicable thereto; provided
            that the failure of the Bank to record any of the foregoing shall
            not limit or otherwise affect the obligation of the Customer to
            repay the principal balance of the Loan Account together with
            accrued interest thereon. Prior to any negotiation of the Note, the
            Bank shall record on a schedule hereto the status of all amounts


                                      -6-

<PAGE>

            evidenced thereby as constituting part of the Prime Rate Portion or
            a LIBOR Portion and, in the case of any LIBOR Portion, the rates of
            interest and the Interest Periods applicable thereto.

      (l)   Definitions. For purposes of this Agreement, the following terms
            shall have the following meanings:

            "Adjusted LIBOR" means a rate per annum determined by the Bank in
            accordance with the following formula:

                 Adjusted LIBOR =             LIBOR
                                      -----------------------
                                      100%-Reserve Percentage

            "Reserve Percentage" means, for the purpose of computing Adjusted
            LIBOR, the maximum rate of all reserve requirements (including,
            without limitation, any marginal, emergency, supplemental or other
            special reserves) imposed by the Board of Governors of the Federal
            Reserve System (or any successor) under Regulation D on Eurocurrency
            liabilities (as such term is defined in Regulation D) for the
            applicable Interest Period as of the first day of such Interest
            Period, but subject to any amendments to such reserve requirement by
            such Board or its successor, and taking into account any
            transitional adjustments thereto becoming effective during such
            Interest Period. For purposes of this definition, LIBOR Portions
            shall be deemed to be Eurocurrency liabilities as defined in
            Regulation D without benefit of or credit for prorations, exemptions
            or offsets under Regulation D. "LIBOR" means, for each Interest
            Period, (a) the LIBOR Index Rate for such Interest Period, if such
            rate is available, and (b) if the LIBOR Index Rate cannot be
            determined, the arithmetic average of the rates of interest per
            annum (rounded upward, if necessary, to the nearest 1/100th of 1%)
            at which deposits in U.S. Dollars in immediately available funds are
            offered to the Bank at 11:00 a.m. (London, England time) 2 Business
            Days before the beginning of such Interest Period by 3 or more major
            banks in the interbank eurodollar market selected by the Bank for a
            period equal to such Interest Period and in an amount equal or
            comparable to the applicable LIBOR Portion scheduled to be
            outstanding from the Bank during such Interest Period. "LIBOR Index
            Rate" means, for any Interest Period, the rate per annum (rounded
            upwards, if necessary, to the next higher one hundred-thousandth of
            a percentage point) for deposits in U.S. Dollars for a period equal
            to such Interest Period, which appears on the Telerate Page 3750 as
            of 11:00 a.m. (London, England time) on the day 2 Business Days
            before the commencement of such Interest Period. "Telerate Page
            3750" means the display designated as "Page 3750" on the Telerate
            Service (or such other page as may replace Page 3750 on that service
            or such other service as may be nominated by the British Bankers'
            Association as the information vendor for the purpose of displaying
            British Bankers' Association Interest Settlement Rates for U.S.
            Dollar deposits). Each determination of LIBOR made by the Bank shall
            be conclusive and binding absent manifest error.


                                      -7-

<PAGE>

            "Applicable Margin" means, with respect to Loans and Letters of
            Credit, initially the following:

            Applicable Margin for Prime Rate Portion of Loans:             0.15%

            Applicable Margin for LIBOR Portions of Loans and Letters of   1.15%
               Credit:

            ; provided, however, that the Applicable Margin with respect to the
            Loans and Letters of Credit shall be subject to quarterly
            adjustments (commencing with an adjustment with respect to the
            fiscal quarter ending on March 31, 2002) as follows:


<TABLE>
<CAPTION>
                    IF AS OF THE LAST DAY
                     OF THE MOST RECENTLY                                             APPLICABLE MARGIN
                   COMPLETED FISCAL QUARTER               APPLICABLE MARGIN           FOR LIBOR PORTIONS
                  THE SENIOR FUNDED DEBT TO            FOR PRIME RATE PORTION      OF LOANS AND LETTERS OF
                       EBITDA RATIO IS                       OF LOANS IS                  CREDIT IS
<S>                                                             <C>                         <C>
                  below 1.50 to 1.0                                0%                       0.90%

                  at or above 1.50 to 1.0 but                   0.15%                       1.15%
                      below 2.0 to 1.0

                  at or above 2.0 to 1.0 but                    0.40%                       1.40%
                      below 2.5 to 1.0

                  at or above 2.5 to 1.0                        0.65%                       1.65%
</TABLE>


            After the close of each quarterly fiscal period of the Customer (the
            close of such quarterly fiscal period being hereinafter referred to
            as the "Margin Testing Time"), the Bank shall, within five days
            after receipt of the Customer's covenant compliance certificate
            delivered pursuant to Section 6 hereof, (i) confirm that the
            financial statements theretofore furnished to it indicate compliance
            with the Senior Funded Debt to EBITDA Ratio required in the chart
            above as of the Margin Testing Time and (ii) notify the Customer of
            such determination and of any change in the Applicable Margin
            resulting therefrom. Any change in the Applicable Margin shall be
            effective on the 5th Business Day immediately following the Bank's
            receipt of the Customer's most recent financial statement for the
            most recent completed fiscal quarter delivered pursuant to Section 6
            and with such new Applicable Margin to continue in effect until the
            effectiveness of the next redetermination thereof. Any determination
            by the Bank of the Senior Funded Debt to EBITDA Ratio shall be
            conclusive and binding upon the Customer provided that it has been
            made in good faith.

            "BMO" means Bank of Montreal and its successors and assigns.

            "Business Day" means any day other than a Saturday or Sunday on
            which the Bank is not authorized or required to close in Chicago,
            Illinois and, when used with respect to LIBOR Portions, a day on
            which the Bank is also dealing in United States Dollar deposits in
            London, England.


                                      -8-

<PAGE>

            "Capital Lease" means, with respect to a Person, any lease or other
            arrangement relating to property or assets which would be required
            to be accounted for as a capital lease on a balance sheet of that
            Person in accordance with generally accepted accounting principles.
            The amount of any Capital Lease at any date shall be the amount of
            the obligation in respect thereof which would be included on the
            balance sheet.

            "Consolidated Borrower" means Stake and all Included Subsidiaries on
            a consolidated basis.

            "EBITDA" means, with respect to any fiscal period of the
            Consolidated Borrower, the net income of the Consolidated Borrower
            (adjusted from time to time, with the prior written consent of the
            Bank, for extraordinary gains or losses, income or expenses) for
            that period, plus, to the extent deducted in determining the net
            income, interest and income taxes accrued during that period, and
            eliminating any non-cash items deducted or added in determining that
            net income, including depreciation, depletion and amortization
            expenses and unrealized foreign exchange losses or gains.

            "Funded Debt" means, with reference to the Consolidated Borrower, at
            any time and without duplication:

                  (a)   all debts and liabilities for borrowed money including,
                        without limitation, the obligations;

                  (b)   other than the deferred net profit interest payable to
                        Jack Burns by Virginia Materials, Inc., all debts or
                        liabilities representing the deferred acquisition cost
                        of property or assets created or arising under any
                        conditional sale agreement or other title retention
                        agreement even though the rights and remedies of the
                        seller under that agreement in the event of default are
                        limited to repossession or sale of property or assets
                        covered thereby;

                  (c)   all liabilities, contingent, unmatured or other, under
                        indemnities given in respect of any bankers' acceptance,
                        letter of credit or letter of guarantee;

                  (d)   all operating leases under which a residual value
                        guarantee or the equivalent has been furnished.

                  (e)   all Capital Leases; and

                  (f)   all liabilities under Swap Transactions determined on a
                        "mark to market" basis;

            after deducting all cash on deposit with BMO and the value of all
            marketable securities acceptable to Bank in its sole discretion and
            which are subject to Liens in favour of the Bank under the
            Collateral Documents but excludes, to the extent included above,
            Subordinated Debt, accounts payable incurred in the ordinary course
            of the Stake's and its subsidiaries' business payment obligations
            with respect to the Rhodia Price Reduction and the amount of the
            Rhodia Receivable; provided, however, that all payments under the
            Rhodia Receivable are current.


                                      -9-

<PAGE>

            "Included Subsidiary" means (a) any Subsidiary of Stake, other than
            1108176 Ontario, which, at any time has assets or revenues of
            greater than or equal to $100,000, and (b) 1108176 Ontario if (i)
            1108176 Ontario becomes a direct or indirect wholly-owned subsidiary
            of Stake, or (ii) the consent of Bentonite of Canada Inc. is
            obtained to the grant of a security interest in favour of the
            Lender, (A) by 1108176 Ontario in the real property located at 411
            Parkside Drive, Waterdown, Ontario and (B) by Stake in the common
            shares of 1108176 Ontario owned by Stake.

            "Interest Period" means, with respect to any LIBOR Portion, the
            period commencing on, as the case may be, the creation, continuation
            or conversion date with respect to such LIBOR Portion and ending 1,
            2, 3 or 6 months thereafter as selected by the Customer in its
            notice as provided herein; provided that all of the foregoing
            provisions relating to Interest Periods are subject to the
            following:

                  (i)   if any Interest Period would otherwise end on a day
                        which is not a Business Day, that Interest Period shall
                        be extended to the next succeeding Business Day, unless
                        the result of such extension would be to carry such
                        Interest Period into another calendar month in which
                        event such Interest Period shall end on the immediately
                        preceding Business Day; and

                  (ii)  the interest rate to be applicable to each LIBOR Portion
                        for each Interest Period shall apply from and including
                        the first day of such Interest Period to but excluding
                        the last day thereof.

            For purposes of determining an Interest Period, a month means a
            period starting on one day in a calendar month and ending on a
            numerically corresponding day in the next calendar month, provided,
            however, if an Interest Period begins on the last day of a month or
            if there is no numerically corresponding day in the month in which
            an Interest Period is to end, then such Interest Period shall end on
            the last Business Day of such month.

            "NFD" means Northern Food and Dairy, Inc., a Minnesota corporation.

            "Prime Rate" means, for any day, the greater of (i) the rate of
            interest announced by the Bank from time to time as its prime
            commercial rate, as in effect on such day (it being understood and
            agreed that such rate may not be the Bank's best or lowest rate);
            and (ii) the sum of (x) the rate determined by the Bank to be the
            average (rounded upwards, if necessary, to the next higher 1/100 of
            1%) of the rates per annum quoted to the Bank at approximately 10:00
            a.m. (Chicago time) (or as soon thereafter as is practicable) on
            such day (or, if such day is not a Business Day, on the immediately
            preceding Business Day) by two or more Federal funds brokers
            selected by the Bank for the sale to the Bank at face value of
            Federal funds in an amount equal or comparable to the principal
            amount owed to the Bank for which such rate is being determined,
            plus (y) 1%.

            "Rhodia Price Reduction" means amounts due to Rhodia Inc. by NFD
            pursuant to the Rhodia Rider.

            "Rhodia Receivable" means the amount due to NFD by Rhodia Inc.
            pursuant to the Rhodia Rider.


                                      -10-

<PAGE>

            "Rhodia Rider" means Rider No. 5 to the manufacturing agreement
            between Rhodia Inc. and NFD dated September 1, 1999 attached to the
            Stake Credit Agreement as Exhibit A to Schedule L.

            "Senior Funded Debt to EBITDA Ratio" means Funded Debt of the
            Consolidated Borrower divided by the EBITDA of the Consolidated
            Borrower.

            "Stake" means Stake Technology Ltd., a corporation organized under
            the laws of Canada.

            "Stake Credit Agreement" means that certain Credit Agreement dated
            as of ________________, 2002 among Stake and certain subsidiaries
            thereof, as borrowers, Bank of Montreal, as lender, and certain
            affiliates of the borrowers, as obligors, as the same may be
            amended, modified or restated from time to time.

            "Swap Transaction" means an agreement which may be entered into
            between the Bank or Bank of Montreal and Stake or any subsidiary
            thereof in connection with the management of foreign exchange risks
            in all major currencies acceptable to the Bank or Bank of Montreal
            and includes foreign currency options and foreign exchange forward
            contracts and includes financial products offered by the Bank or
            Bank of Montreal to Stake or any subsidiary thereof in connection
            with management of interest rate risks including forward rate
            agreements and interest rate swaps.

            "1108176 Ontario" means 1108176 Ontario Limited, a corporation
            incorporated under the laws of Ontario, and its successors and
            permitted assigns.

3.    Fees. (a) Commitment Fee. Since this is an uncommitted credit arrangement,
      no commitment or similar fee will be charged.

      (b) Letter of Credit Fees. On the date of issuance of each Letter of
      Credit, and as a condition thereto, and annually thereafter, the Customer
      shall pay to the Bank a letter of credit fee computed at the rate per
      annum equal to the Applicable Margin in effect during the applicable
      period (computed on the basis of a year of 360 days for the actual number
      of days elapsed) on the maximum amount of the related Letter of Credit
      which is scheduled to be outstanding during the immediately succeeding
      twelve (12) months. In addition to the letter of credit fee called for
      above, the Customer further agrees to pay to the Bank such issuance and
      drawing fees with respect to commercial Letters of Credit and such other
      processing and transaction fees and charges with respect to any Letter of
      Credit, in each case as the Bank from time to time customarily imposes in
      connection with any issuance, amendment, cancellation, negotiation and/or
      payment of letters of credit and drafts drawn thereunder.

4.    Maturity Date; Payments. The Customer shall pay to the Bank the principal
      balance of outstanding Loans together with any accrued interest ON DEMAND.
      Payments received by the Bank shall be applied first to accrued interest
      and then to the principal balance of outstanding Loans unless otherwise
      directed, provided that after demand all payments received shall be
      applied in such order and manner as the Bank shall determine. The Customer
      may make principal prepayments at any time and in any amount, subject to
      payment of the relevant funding indemnity more fully provided for in
      paragraph 2(j) above. Unless the Customer otherwise directs, principal
      payments shall be first applied to the Prime Rate Portion until payment in
      full thereof, with any balance applied to the LIBOR Portions in the order
      in which their Interest


                                      -11-

<PAGE>

      Periods expire. If any payment from the Customer under this Agreement
      becomes due on a day which is not a Business Day, such payment shall be
      made on the next Business Day and any such extension shall be included in
      computing interest under this Agreement.

5.    Periodic Statements. The Bank will furnish the Customer with a statement
      for each billing period (either monthly or quarterly as shown on the front
      of this Agreement) which has any transaction or balance.

6.    Customer Financial Statements. The Customer agrees to furnish financial
      information to the Bank upon request of the Bank from time to time and
      without request, the Customer shall furnish or cause to be furnished all
      of the financial information furnished to the Lender pursuant to Section
      9.4 of the Stake Credit Agreement. Such information shall be furnished as
      soon as reasonably possible, but in any event within 30 days after request
      by the Bank.

7.    Representation and Warranties. In consideration of establishing and
      maintaining the Loan Account, the Customer hereby represents and warrants
      to the Bank that: (a) the Customer is a corporation duly organized,
      validly existing, and in good standing under the laws of its state of
      organization; (b) the execution, delivery, and performance by the Customer
      of this Agreement and the Note are within its corporate powers, have been
      duly authorized by all necessary corporate action, and do not contravene
      the Customer's charter, articles of incorporation or by-laws or any law or
      contractual restriction binding on or affecting the Customer; (c) no
      authorization or approval or other action by, and no notice to or filing
      with, any governmental authority or regulatory body is required for the
      Customer's due execution, deliver, and performance of this Agreement or
      the Note; (d) this Agreement is, and the Note when executed and delivered
      by the Customer will be, the Customer's legal, valid, and binding
      obligation enforceable against the Customer in accordance with its terms;
      (e) the Customer is not engaged in the business of extending credit for
      the purpose of purchasing or carrying margin stock (within the meaning of
      Regulation U issued by the Board of Governors of the Federal Reserve
      System), and no proceeds of the Loans will be used to purchase or carry
      any margin stock or to extend credit to others for the purpose of
      purchasing or carrying any margin stock; (f) the Customer's balance sheet
      as of December 31, 2000, and the Customer's related statements of income
      and retained earnings for the fiscal year then ended, copies of which have
      been furnished to the Bank, fairly present Customer's financial condition
      as at such date and result of the operations for the period ending on such
      date, all in accordance with generally accepted accounting principles
      consistently applied, and since December 31, 2000, there has been no
      material adverse change in the Customer's condition or operations; and (g)
      there is no pending or threatened action or proceeding affecting the
      Customer before any court, governmental agency or arbitrator, which may
      materially adversely affect the Customer's financial condition or
      operations or which purports to affect the legality, validity, or
      enforceability of this Agreement or the Note.

8.    Security; Guaranties. The Loans (both for principal and interest) shall be
      secured by the property described in a Security Agreement from the
      Customer and each of the Customer's subsidiaries and from certain other
      parties and by various mortgages and deeds of trust executed by the
      Customer and each of its subsidiaries (all of such documents, as the same
      may be amended, supplemented or restated from time to time being
      hereinafter referred to as the "Collateral Documents"). In addition, the
      Loans may also be secured by collateral which secures other indebtedness
      which the Customer may have outstanding from the Bank at the present time
      or in the future. The Bank shall have the right to call for additional
      security satisfactory to the Bank should the value of the collateral
      decline or be deemed by the Bank inadequate or unsatisfactory.


                                      -12-

<PAGE>

      The Loans shall at all times be guarantied by each subsidiary of the
      Customer and by various other entities pursuant to various guaranties
      satisfactory to the Bank.

9.    DEMAND OBLIGATION; ENFORCEMENT. THE LOANS ARE EXPRESSED TO BE PAYABLE "ON
      DEMAND." ACCORDINGLY, THE BANK CAN DEMAND PAYMENT IN FULL OF THE LOANS AT
      ANY TIME IN ITS SOLE DISCRETION EVEN IF THE CUSTOMER HAS COMPLIED WITH ALL
      OF THE TERMS OF THIS AGREEMENT.

      No delay by the Bank in the exercise of any right or remedy shall operate
      as a waiver thereof, and no single or partial exercise by the Bank of any
      right or remedy shall preclude any other or further exercise thereof or
      the exercise of any other right or remedy. The Customer agrees to pay to
      the Bank all expenses incurred or paid by the Bank in connection with the
      establishment and maintenance of the Loan Account and the collection of
      the Loans and any other amounts due under this Agreement and the
      enforcement of rights to any collateral security therefor, including,
      without limitation, attorneys' fees and court costs. The Bank shall have
      the right at any time to set-off the balance of any deposit account that
      the Customer may at any time maintain with the Bank against any amounts at
      any time owing under this Agreement, whether or not the balance of Loans
      under this Agreement is then due.

10.   Termination. The availability of additional Loans under this Agreement
      will automatically terminate ON DEMAND. The Bank reserves the right at any
      time without notice to terminate the Loan Account, suspend the Customer's
      borrowing privileges or refuse any Loan request or any request for a LIBOR
      Portion even though the Customer has complied with all of the terms of
      this Agreement. The Customer may terminate this Agreement at any time
      effective upon receipt by the Bank of at least 5 Business Days prior
      written notice. No termination under this paragraph shall affect the
      Bank's rights or the Customer's obligations regarding payment or default
      under this Agreement. Such termination shall not affect the Customer's
      obligation to pay all Loans and the interest accrued through the date of
      final payment. The Bank may also elect to honor Loan requests after
      termination of this Agreement, and the Customer agrees that any such
      payment by the Bank shall constitute a Loan to Customer under this
      Agreement.

11.   Notices. The Bank may rely on instructions from the Customer with respect
      to any matters relating to this Agreement or the Loan Account, including
      telephone loan requests which are made by a person whom the Bank believes
      to be the Customer or its designated representative. All notices and
      statements to be furnished by the Bank shall be sufficient if delivered to
      any such person at the billing address for the Loan Account shown on the
      records of the Bank. All notices from the Customer shall be sent to the
      Bank at 111 West Monroe Street, Chicago, Illinois 60603, Attention:
      Michael Laurie, Account Officer. The Customer waives presentment and
      notice of dishonor. This Agreement constitutes the entire understanding of
      the parties with respect to the subject matter hereof and any prior
      agreements, whether written or oral, with respect thereto are superseded
      hereby. No amendment or waiver of any provision of this Agreement or the
      Note, nor consent to any departure by the Customer therefrom, shall in any
      event be effective unless the same shall be in writing and signed by the
      Bank. If any part of this Agreement is unenforceable, that will not make
      any other part unenforceable. This Agreement shall be governed by the laws
      of the State of Illinois.

12.   Consent to Jurisdiction. THE CUSTOMER SUBMITS TO THE NON-EXCLUSIVE
      JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT
      OF ILLINOIS AND OF ANY


                                      -13-

<PAGE>

      ILLINOIS STATE COURT SITTING IN COOK COUNTY, ILLINOIS, FOR PURPOSES OF ALL
      LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
      TRANSACTIONS CONTEMPLATED HEREBY.

13.   Jury Trial Waiver. THE CUSTOMER AND THE BANK WAIVE ANY AND ALL RIGHT TO
      TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
      AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

THE CUSTOMER AGREES TO THE TERMS SET FORTH ABOVE.

      Signed by Customer on March 15, 2002.


                                             SUNRICH FOOD GROUP, INC.


                                             By: "Steven Bromley"
                                                --------------------------------
                                                Name: Steven Bromley
                                                Title: Chief Financial Officer

      Accepted and agreed to this 15th day of March, 2002.


                                             HARRIS TRUST AND SAVINGS BANK


                                             By: "Shane Koonce"
                                                --------------------------------
                                                Name: Shane Koonce
                                                Title: Vice President


                                      -14-

<PAGE>

                                    EXHIBIT A

                                   DEMAND NOTE

$5,000,000                                           ____________________, 2002

      ON DEMAND, for value received, the undersigned, SunRich Food Group, Inc.,
a Minnesota corporation, promises to pay to the order of HARRIS TRUST AND
SAVINGS BANK (the "Bank") at its offices at 111 West Monroe Street, Chicago,
Illinois, the principal sum of Five Million and 00/100 Dollars ($5,000,000) or,
if less, the amount outstanding under the Facility B Loan Authorization
Agreement referred to below together with interest payable at the times and at
the rates and in the manner set forth in the Facility B Loan Authorization
Agreement referred to below.

      This Note evidences borrowings by the undersigned under that certain
Facility B Loan Authorization Agreement dated as of ___________, 2002, between
the undersigned and the Bank and is secured by various liens and security
interests granted or to be granted to the Bank from time to time; and this Note
and the holder hereof are entitled to all the benefits provided for under the
Facility B Loan Authorization Agreement, to which reference is hereby made for a
statement thereof. The undersigned hereby waives presentment and notice of
dishonor. The undersigned agrees to pay to the holder hereof all expenses
incurred or paid by such holder, including attorneys' fees and court costs, in
connection with the collection of this Note. It is agreed that this Note and the
rights and remedies of the holder hereof shall be construed in accordance with
and governed by the laws of the State of Illinois.

                                       SUNRICH FOOD GROUP, INC.


                                       By ______________________________________
                                          Name__________________________________
                                          Title_________________________________




                                                                   EXHIBIT 10.14

                              STAKE TECHNOLOGY LTD.

                             2001 STOCK OPTION PLAN

The purpose of the Stake Technology Ltd. 2001 Stock Option Plan (the "Plan") is
to have options available to grant to the employees, directors and consultants
of Stake Technology Ltd. and its subsidiaries. Such a Plan is vital to ensure
the long-term retention of employees, directors and consultants. Stock option
plans develop the interest and incentive of employees of the companies that
Stake Technology Ltd. (Stake) and its subsidiaries may acquire by providing them
with an opportunity to purchase common shares of the Company, thereby advancing
the interests of the Company and its shareholders.

Subject to shareholder approval, the 2001 Stock Option Plan was approved by the
Board of Directors (Board) of the Company, on March 13, 2001 at which time up to
1,000,000 Common Shares of the Company were reserved for the Plan.

                                    The Plan

1.    Purpose of the Plan

      An option granted under the Plan provides an employee, director or
      consultant of Stake with the opportunity to purchase common shares of the
      Company.

2.    Definitions

      In this Plan:

      "Date of Exercise" means the date upon which an Eligible Employee returns
      a completed Option purchase form to the Company together with
 payment in
      full for the number of Optioned Shares such employee, director or
      consultant is purchasing pursuant to such form;

      "Eligible Person" means an employee, director or consultant of Stake or
      its subsidiaries at the time of the grant of an option;

      "Option" means the right granted under this Plan to an eligible employee
      to purchase a specified number of common shares of the Company pursuant to
      the provisions of the Plan;

      "Option Committee" means the committee chosen by the Board of the Company
      to administer the Plan;

      "Optionee" means a eligible employee of the Company who has been granted
      an Option pursuant to the Plan;

      "Option Period" means, unless otherwise provided by the Board of Directors
      of the Company, that period during which an Optionee granted an Option may
      purchase Optioned Shares commencing on the date approved by Shareholders
      and ending March 13, 2011.

      "Option Price" means the price per share at which an Optionee may purchase
      Optioned Shares; and,

      "Optioned Shares" means those Common Shares in respect of which an Option
      is granted to an Optionee under this Plan.

3.    Eligibility

      The eligibility to participate in the Plan is at the discretion of the
      Board of the Company.

4.    The Number of Shares an Optionee is Entitled to Under the Plan 

      The Option Committee shall determine the number of Optioned Shares in
      respect of which an Option is granted at the time of the grant of the
      Option.


<PAGE>

5.    Purchase Price for Optioned Shares

      The purchase price of Optioned Shares comprised in an Option granted under
      the Plan shall be equal to 100% of the fair market of the common shares of
      the Company based on the closing price on the previous trading day of the
      grant date as determined by the Board of the Company at the time of the
      grant of the Option in accordance with the policies of any applicable
      regulatory authority.

6.    Exercise of Option

      Each Option granted under the Plan shall vest at such time or times as may
      be determined by the Board or the Option Committee and no rights under the
      Plan or any Option shall accrue to any Optionee in any Optioned Shares
      forming the subject matter of an Option prior to the vesting date of such
      Shares.

      The Option Committee will decide the vesting date of the Options granted
      to the Optionee under the Plan at the time of grant pursuant to Article 12
      hereof.

      The right of exercise shall be cumulative and any Optionee, if still an
      Employee of an eligible company, may exercise the Option in respect of any
      Optioned Shares, which have vested at any time during the Option Period
      subject to the provisions of Articles 10 and 11 hereof.

      In order to purchase Optioned Shares under the Plan, an Optionee shall
      complete and execute an Option Exercise Form in the form of Schedule 1
      attached hereto and deliver it to the Company together with a certified
      cheque for the full purchase price of the Optioned Shares being acquired.

      Subject to the prior vesting of Optioned Shares and of restriction on
      purchase dates or as otherwise determined by the Option Committee, an
      Optionee can exercise all or any part of the Option at any time.

7.    Optionee Commitment

      An Optionee has no obligation to purchase any or all of the Optioned
      Shares at any time but, to the extent an Optionee exercises the Option,
      the full purchase price of the Optioned Shares purchased pursuant to such
      exercise must be paid in full as set out under "Exercise of Option" above.

8.    Share Certificates

      The Company will deliver a share certificate representing the Optioned
      Shares purchased pursuant to exercise of an Option as soon as reasonably
      possible after the exercise thereof.


                                       2

<PAGE>

9.    Transfer and Assignment

      No Option or any of the rights thereunder is assignable or transferable by
      an Optionee at any time during the Optionee's lifetime. Upon the exercise
      of an Option, the Optionee may sell or otherwise dispose of such shares in
      any manner that the Optionee wishes in any jurisdiction in which the same
      are qualified for sale and subject to any regulatory authority having
      jurisdiction over such sale.

10.   Termination for any Reason other than Death

      If an Optionee is terminated, resigns, or otherwise severs his or her
      relationship with the Company at any time before the end of the Option
      Period for any reason other than the death of such Optionee, such Optionee
      may, at any time during the 30 day period immediately next following the
      date of termination of employment, excluding the date of termination,
      purchase all or any part of the Optioned Shares which have vested in him
      or her and which he or she is entitled to purchase under the Option in the
      manner provided in the Plan. At 5:00 o'clock in the afternoon, local time,
      on such 30th day, if such day be a business day, such Option shall fully
      cease and determine and all rights of such Optionee thereunder shall
      cease, or, if such day shall not be a business day at 5:00 o'clock in the
      afternoon, local time, on the business day next following.

      If through the operation of Article 6 hereof, none of the Optioned Shares
      shall have vested in such Optionee, the provisions of Article 6 hereof
      shall prevail and such Optionee shall not be entitled to purchase any
      Optioned Shares notwithstanding the provisions of this Article.

      Transfer by the Optionee to a subsidiary of the Company or any other
      Company affiliated with it or from such subsidiary or affiliate to the
      Company shall be deemed not to be a termination of employment under this
      Article and all rights of the Optionee under such Option shall continue in
      full force and effect after such transfer.

11.   Termination by Reason of Death

      If any Optionee shall die at any time prior to the end of the Option
      Period and before such Optionee has purchased all of the Optioned Shares
      optioned to him or her, the exercise date with respect to any unexercised
      portion of an Option provided in Article 6 hereof will be accelerated and
      such Optionee's personal representatives may purchase all or any portion
      of the Optioned Shares of such deceased Optionee as provided in this Plan
      at any time during the shorter of the period of the Option Period or 180
      days immediately next following the death of the Optionee excluding the
      date of death if such day be a business day or, if such day shall not be a
      business day, on the business day next following.

12.   Administration of the Plan

      An Option Committee shall administer the Plan. The Option Committee has
      been delegated the authority by the Board of the Company to designate
      those employees, consultants and directors of Sunrich or future business
      interest that Stake may acquire in the near term who are to be granted
      Options in the Plan, the number of Optioned Shares to be granted to each
      such Optionee and otherwise to administer and interpret the Plan and the
      Options granted thereunder. The Board may amend, modify or terminate the
      Plan or any Option granted thereunder in respect of any Optioned Shares
      which shall not have become vested in an Optionee pursuant to the
      provisions of the Plan at any time without notice, but no such amendment,
      modification or termination shall divest any rights under any Option which
      shall have become vested in any Optionee.

      Any determination of the Option Committee shall be final and conclusive,
      unless the Board of the Company overrules any such determination, in which
      case the decision of the Board shall be final, conclusive and binding. The
      members of the Option Committee at the date hereof are as follows: Jeremy
      N. Kendall, Cyril Ing and Tim Bergqvist.

      The Option Committee may delegate the day to day administration of the
      Plan to an officer of the Company.

13.   Changes Affecting Optioned Shares

      In the case of any reorganization or recapitalization of the Company (by
      reclassification of its outstanding capital stock), or its consolidation
      or merger with or into another corporation, or the sale, conveyance, lease
      or other transfer by the 


                                       3

<PAGE>

      Company of all or substantially all of its property, pursuant to any of
      which events the then outstanding shares of the Company's capital are
      consolidated or subdivided, or are changed into or become exchangeable for
      other shares or stock, the Optionee, upon exercise of his or her Option,
      shall be entitled to receive in lieu of the Optioned Shares which he or
      she would otherwise have been entitled to receive upon such exercise and
      without any payment in addition to the Option Price therefor, the shares
      of stock which the Optionee would have received upon such reorganization,
      recapitalization, consolidation, subdivision, merger, sale or other
      transfer, if immediately prior thereto he or she had owned the Optioned
      Shares to which such exercise of the Option relates and had exchanged such
      Optioned Shares in accordance with the terms of such reorganization,
      recapitalization, consolidation, subdivision, merger, sale or other
      transfer.

      Notwithstanding the foregoing provisions of this Article 13, no adjustment
      provided for herein shall require the Company to deliver a fractional
      share under the Option.

14.   Employment

      The granting of an Option to any person under the Plan shall not confer
      any rights upon such Optionee other than those provided in the Plan and,
      without limiting the generality of the foregoing, shall not confer or be
      deemed to confer upon any such Optionee any right to continue as an
      employee, director or consultant of the Company, or any subsidiary or
      affiliate thereof.

15.   No Shareholder Right

      The granting of an Option pursuant to the Plan shall not confer any rights
      upon any Optionee as a shareholder of the Company, nor the right to
      receive notice of, attend nor vote at any meeting of shareholders of the
      Company until the exercise of an Option and such rights shall extend only
      to those number of Optioned Shares in respect of which the Option was
      exercised.

16.   Governing Law

      The Plan is established under the laws of the Province of Ontario and the
      rights of all parties and the construction and effect of each provision of
      the Plan shall be governed by the laws of the Province of Ontario; except
      in respect to any sale of any of the Common Shares in respect of which an
      Option has been exercised which shall be governed by the laws of the
      jurisdiction in which an Optionee proposes to sell such shares.

17.   Termination of the Plan

      The Plan will terminate on March 13, 2011 unless otherwise determined by
      the Option Committee unless all of the Options granted under the Plan are
      exercised, in which case the Plan will terminate on the date all of the
      Options granted under the Plan have been exercised.

IN WITNESS WHEREOF, subject to shareholder approval, the Company has executed
this Plan as of March 13, 2001.

STAKE TECHNOLOGY LTD.


J. N. Kendall, Chairman and CEO           Leslie N. Markow, CAO and Assistant 
                                          Corporate Secretary


                                       4

<PAGE>

                                   SCHEDULE 1

                          To the STAKE TECHNOLOGY LTD.

                             2001 Stock Option Plan

To:      Stake Technology Ltd.

And to:  American Stock Transfer and Trust Company

                              OPTION EXERCISE FORM

The undersigned hereby subscribes for _____________ Common Shares of Stake
Technology Ltd. (the "Company") that the undersigned is entitled to pursuant to
the provisions of the Stake Technology Ltd. 2001 Stock Option Plan.

I attach my cheque payable to the Company in the sum of $______________________,
representing the purchase price of the said Shares.

Dated at _________________________, this __________ day of ____________________,
20___.

Name:     __________________________            SIN:__________________________

Address:  __________________________            or

          __________________________            S.S.:_________________________

          __________________________            
                                                Signature:____________________

Please call Leslie Markow - CAO at (905) 455-1990 x 109 if you wish to exercise
any of your options.


                                       5



                                                                      Exhibit 21

                              LIST OF SUBSIDIARIES
                                       OF
                              STAKE TECHNOLOGY LTD.

--------------------------------------------------------------------------------
             Name of Company                      Jurisdiction of Incorporation
--------------------------------------------------------------------------------
          Stake Technology Ltd.                          Federal Canada
--------------------------------------------------------------------------------
         1108176 Ontario Limited                             Ontario
--------------------------------------------------------------------------------
              Temisca, Inc.                                  Quebec
--------------------------------------------------------------------------------
          558497 Ontario Limited                             Ontario
--------------------------------------------------------------------------------
           1510146 Ontario Inc.                              Ontario
--------------------------------------------------------------------------------
              Stake Tech LP                                 Delaware
--------------------------------------------------------------------------------
       3060385 Nova Scotia Company                         Nova Scotia
--------------------------------------------------------------------------------
           Stake Technology LLC                             Delaware
--------------------------------------------------------------------------------
       Stake Technology (USA) Inc.                          Delaware
--------------------------------------------------------------------------------
         SunRich Food Group, Inc.                           Minnesota
--------------------------------------------------------------------------------
       Northern Food & Dairy, Inc.                          Minnesota
--------------------------------------------------------------------------------
           Nordic Aseptic, Inc.                             Minnesota
--------------------------------------------------------------------------------
              Sunrich, Inc.                                 Minnesota
--------------------------------------------------------------------------------
         Virginia Materials, Inc.                           Virginia
--------------------------------------------------------------------------------
 International Materials & Supplies, Inc.                   New York
--------------------------------------------------------------------------------





                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001                  "Dennis Anderson"
                                            --------------------------
                                            Dennis Anderson - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln
 and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Larry Anderson"
                                        --------------------------------
                                        Larry (Andy) Anderson - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Tim Bergqvist"
                                        ------------------------
                                        Tim Bergqvist - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001                   "Michael Boyd"
                                             -----------------------
                                             Michael Boyd - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Stephen Bronfman"
                                        ---------------------------
                                        Stephen Bronfman - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001               "Rob Fetherstonhaugh"
                                         ------------------------------
                                         Rob Fetherstonhaugh - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Katrina Houde"
                                        ------------------------
                                        Katrina Houde - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001                  "Cyril Ing"
                                            --------------------
                                            Cyril Ing - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Jeremy Kendall"
                                        -------------------------
                                        Jeremy Kendall - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Camillo Lisio"
                                        ------------------------
                                        Camillo Lisio - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Jim Rifenbergh"
                                        -------------------------
                                        Jim Rifenbergh - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001                  "Joe Riz"
                                            ------------------
                                            Joe Riz - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "Allan Routh"
                                        ----------------------
                                        Allan Routh - Director


<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or Officer of
STAKE TECHNOLOGY LTD., a Canada corporation, (the "Corporation"), hereby
appoints Steven Bromley and/or Jeremy N. Kendall and Robert T. Lincoln and each
of them, his attorneys and agents to execute on his behalf and in his name and
in capacity set forth below, an Annual Report of the Corporation for the fiscal
year ended December 31, 2001 on Form 10K and any amendment thereto, for filing
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), and to do or cause to be done such other
acts and to execute such other documents which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the Act and
any rules, regulations or requirements of the Securities and Exchange Commission
in respect thereof.


Dated as of March 26, 2001              "John Taylor"
                                        ----------------------
                                        John Taylor - Director