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DEMAND CONVERTIBLE PROMISSORY NOTE

 

 

From:

CRAILAR TECHNOLOGIES INC.

 

To:

ROBERT EDMUNDS

 

 

Crailar Technologies Inc.
Suite 305, 4420 Chatterton Way, Victoria, British Columbia, Canada, V8X 5J2
__________

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DEMAND CONVERTIBLE PROMISSORY NOTE

Principal Sum of CAD$500,000.00

Principal: CAD$500,000.00. Made at Victoria, B.C., Canada.       Interest: 20%
per annum.         Maturing: On demand.  

                        THIS PROMISSORY NOTE is provided, dated and made
effective as of the 11th day of October, 2013 (the “Effective Date”).

FROM:

> > CRAILAR TECHNOLOGIES INC., a company incorporated under the laws of the
> > Province of British Columbia, Canada, and having an address for notice and
> > delivery and executive offices located at Suite 305, 4420 Chatterton Way,
> > Victoria, British Columbia, Canada, V8X 5J2
> > 
> > (the “Borrower”);

     OF THE FIRST PART

TO:

> > ROBERT EDMUNDS, businessperson, having an address for notice and delivery
> > located at 23 Cambridge Road NW, Calgary, Alberta, Canada, T2K 1R1
> > 
> > (the “Lender”);

OF THE SECOND PART

> > (and the Borrower and the Lender being hereinafter singularly also referred
> > to as a “Party” and collectively referred to as the “Parties” as the context
> > so requires).

Principal and Interest of the Loan

                        FOR VALUABLE CONSIDERATION, receipt whereof is hereby
acknowledged, the undersigned, Borrower, hereby promises to pay to the Lender,
or the holder of this promissory note (the “Promissory Note”), in accordance
with the terms and conditions referenced herein, the aggregate principal sum of
five hundred thousand dollars (CAD$500,000.00) in lawful money of Canada
(hereinafter referred to as the “Principal Sum”) together with simple interest
accruing on the Principal Sum and commencing on the above-referenced Effective
Date of this Promissory Note at the rate of twenty percent (20%) per annum, and
not in advance, both before and after default, maturity and judgment (herein the
“Interest”); with any such outstanding Interest to be payable in full to the
Lender on repayment of the Principal Sum in the manner as set forth immediately
hereinbelow (and with the totality of the within Principal Sum advance by the
Lender to the Borrower being the “Loan” hereunder).

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Repayment of the Loan

                        The Principal Sum of this Loan, together with all
outstanding Interest accrued thereon as specified hereinabove (the “Loan Amount”
from time to time), is hereby irrevocably and unconditionally due and payable by
the Borrower to the order and direction of the Lender in Calgary, Alberta,
Canada, at or before 5:00 p.m. (Calgary, Alberta, Canada, time) on the second
business day after the Lender provides the Borrower with written notice
demanding the repayment thereof (such date being the “Final Principal Sum
Payment Date”).

                        Subject at all times to the Lender’s Right of Election
for Conversion as set forth hereinbelow, the Borrower may prepay and redeem any
portion of the Principal Sum portion of the Loan, and its then related Interest,
in whole or in part at any time prior to the Final Principal Sum Payment Date
(the “Right of Redemption”) and in the manner as set forth immediately
hereinbelow by providing the Lender with no less than five calendar days’ prior
written notice (the “Redemption Notice”) of its Right of Redemption intention to
redeem and repay all or any portion of the Loan Amount which would be due and
owing by the Borrower to the Lender at the end of such five-day period
(collectively, the “Redemption Amount”) (such day at the end of such five-day
period being the “Redemption Date” and, for clarity, such Redemption Date would
be the date to which such Principal Sum and Interest would be calculated and due
and payable to the Lender at the close of business, in Calgary, Alberta, Canada,
on such Redemption Date).

                        In order to provide such Redemption Notice the Borrower
will be required, at the date of its delivery to the Lender of the Redemption
Notice, to provide to the Lender, a certified cheque or bank draft representing
the entire Redemption Amount and made payable to the Lender in Canadian funds,
or funds by way of wire transfer to such designation as may be directed by the
Lender in its sole and absolute discretion, in the amount of any such Redemption
Amount. Thereupon, and should the proposed Redemption Amount in fact represent
all of the Loan Amount which would be due and owing by the Borrower to the
Lender under this Promissory Note at the Redemption Date, then the Lender will
be required to immediately provide to the Borrower all such registerable
discharges as may be necessary to relieve the Borrower of any obligation to the
Lender under this Promissory Note

Right of Conversion into Financing at any time

                        Notwithstanding any other provision of this Promissory
Note and including, without limitation, the Borrower’s Right of Redemption as
set forth hereinabove, at any time prior to any Principal Sum Loan’s requisite
Final Principal Sum Payment Date or Redemption Date, as the case may (each such
period in time for each portion of the Principal Sum Loan being a “Conversion
Term” herein), the Lender will have, in addition to all of the rights
specifically provided for in this Promissory Note, the sole and exclusive right
and option, in its sole and absolute discretion, to elect (the “Right of
Election”) to convert any portion of the then Principal Sum Loan and Interest
outstanding hereunder into such identical securities as the Borrower may in the
future determine to issue by way of any equity and/or debt private placement or
financing (each being a “Financing”) while any portion of the Loan is
outstanding under this Promissory Note (in each instance being a “Conversion”
herein)

                        In this regard, and for greater certainty, it is hereby
acknowledged and agreed by the Parties that the Right of Election will be
exercisable by the Lender at any time during the existence of any Principal Sum
which may be outstanding under this Promissory Note and, furthermore, whether
the Company exercises its Right of Redemption to prepay and redeem all or any
portion of the Principal Sum portion of the Loan at any time prior to the Final
Principal Sum Payment Date hereunder. In other words, and for even greater
certainty, the Lender’s entire Right of Election to convert any remaining
Principal Sum outstanding hereunder pursuant to a Conversion will continue to
exist if any portion of the Principal Sum Loan and Interest is outstanding at
any such time during the particular Conversion Term.

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Conditions precedent to the within Loan

                        The Parties acknowledge and agree that the following
represent the conditions precedent to the proposed advancement of the Principal
Sum Loan monies hereunder:

  (a)

the Borrower will use the proceeds of any future completed Financing to pay the
entire Loan Amount outstanding at that time;

        (b)

the Borrower will establish, as soon as reasonably practicable after the
completion of the next and all future Financings thereafter, an interest reserve
account for the next scheduled interest payment on all of the Borrower’s current
secured debenture instruments;

        (c)

until the next scheduled interest payment on all of the Borrower’s current
secured debenture instruments the Borrower will provide the Lender with
bi-monthly status updates on the Borrower’s current financial position;

        (d)

until such time as the within Loan Amount is fully repaid the Borrower must
maintain its current and minimum contractual/financial commitments as they
become due;

        (e)

the Borrower will do all that is necessary to appoint Lesley Hayes to the Board
of Directors of the Borrower immediately following the Borrower’s upcoming
annual general meeting for 2013;

        (f)

once the Borrower has fully paid for, owns and has delivered into its possession
(which is expected this December) that certain Wilson Knowles decortication line
(reference #EN12074-6) which is currently being manufactured for the Borrower in
England (the “Collateral”), the Borrower shall immediately provide the Lender
with a registered fixed charge on such Collateral which will remain in effect
and not be discharged until such time as the entire Loan Amount hereunder is
repaid; and

        (g)

until such time as the within Loan Amount is fully repaid, and save and except
for any other loans made to the Borrower contemporaneously with the within Loan
which are being made for the purpose of assisting the Borrower in making its
presently scheduled interest payment on its current secured debenture
instruments; the Borrower will not enter any other debt instruments or
obligations respecting the within Collateral without the Borrower’s prior
written consent.

General provisions

                        The holder of this Promissory Note may, from time to
time, grant written indulgences with respect to certain payment amounts or
periods but such indulgences will not in any way affect the undersigned’s
liability upon this Promissory Note nor will such indulgences vary any other
term to which indulgence has not specifically been granted. No indulgence will
be enforceable against the holder unless granted in writing.

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                        If any provision of this Promissory Note is held to be
invalid, illegal or unenforceable, then such will not affect or impair the
validity, legality or enforceability of the remaining provisions.

                        WITNESS the hand of the authorized representative of the
undersigned Borrower given under seal as of the Effective Date determined
hereinabove.

The COMMON SEAL of )   CRAILAR TECHNOLOGIES INC., )   the Borrower herein, )  
was hereunto affixed in the presence of: ) (C/S)   )     )   /s/ Jason Finnis )
  Authorized Signatory )  

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