SUNOPTA INC (Form: 10-K, Received: 02/27/2006 14:54:50)

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, 2005

Commission File No. 0-9989

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

SUNOPTA INC.

(Exact name of registrant as specified in its charter)

CANADA

(Jurisdiction of Incorporation)

Not Applicable

(I.R.S. Employer Identification No.)

2838 Bovaird Drive West

Brampton, Ontario L7A 0H2, 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: None

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

Common Shares, no Par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes |X| No |_|

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes |_| No |X|

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. |X|

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes |X| No |_|

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes |_| No |X|

At February 17, 2006 the registrant had outstanding 56,671,870 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 $332,303,294. The Company’s common shares traded on Nasdaq Small Cap Market tier of the Nasdaq Stock Market under the symbol STKL and on the Toronto Stock Exchange under the symbol SOY.

Portions of the registrant’s definitive proxy statement for the registrant’s Annual Meeting of Shareholders, scheduled to be held May 17, 2006, have been incorporated by reference into Part III of this Annual Report on Form 10-K.

There are 62 pages in the December 31, 2005 10-K including this page and the index after the cover page.

SunOpta Inc.

December 31, 2005 - 10-K

SUNOPTA INC.

TABLE OF CONTENTS

FORM 10-K

		Page
Currency Presentation		3
Forward-Looking Financial Information		3

PART 1

Item 1.	Business	4
Item 1A.	Risk Factors	24
Item 1B.	Unresolved Staff Comments	29
Item 2.	Properties	30
Item 3.	Legal Proceedings	31
Item 4.	Submission of Matters to a Vote of Security Holders	32

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 8.	Financial Statements and Supplementary Data	57
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	57
Item 9A.	Controls and Procedures	57
Item 9B.	Other Information	57

PART III

Item 10.	Directors and Executive Officers of the Registrant	58
Item 11.	Executive Compensation	59
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	59
Item 13.	Certain Relationships and Related Transactions	59
Item 14.	Principal Accountant Fees and Services	59

PART IV

Item 15.	Exhibits and Financial Statements Schedules	59
	Index to Consolidated Financial Statements	59

SunOpta Inc. ii December 31, 2005 – 10-K

Currency Presentation

All dollar amounts herein are expressed in United States dollars. Amounts expressed in Canadian dollars are preceded by the symbol “Cdn$”. On February 17, 2006, 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$0.8679 for $1.00 Canadian.

The following table sets forth information with respect to the exchange rate of the Canadian dollar into United States currency during 2005. (1) The rate of exchange for the Canadian dollar, expressed in US dollars, in effect at the end of the year (2) the average of exchange rates in effect on the last day of each month during the year and (3) the high and low exchange rates during the year.

RATES	2005
Last Day (1)	$0.8598
Average (2)	$0.8255
High (3)	$0.8751
Low (3)	$0.7853

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.

SunOpta Inc. 3 December 31, 2005 – 10-K

PART I

Item 1. Business

Overview

SunOpta Inc. (“the Company or SunOpta”) operates high-growth ethical businesses, focused on a healthy products portfolio that promotes the health and well-being of its communities and environmental responsibility. The Company has three operating groups, the largest being the SunOpta Food Group, accounting for approximately 91% of 2005 revenues. This group is well positioned in the rapidly growing natural, organic, kosher and specialty foods sectors via its operations throughout North America which utilize a number of vertically integrated business models to bring cost effective and quality products to market. In addition to the SunOpta Food Group, SunOpta owns 70.6% of Opta Minerals Inc., formerly the Opta Minerals Group. This group produces, imports, distributes, and recycles industrial abrasives, specialty minerals and related products. The SunOpta BioProcess Group provides process solutions for the biomass industry from process development and design through the sale of proprietary biomass processing technology.

The Company was incorporated under the laws of Canada on November 13, 1973. The principal executive offices are located at 2838 Bovaird Drive West, Brampton,, Ontario, Canada, L7A 0H2, telephone: (905) 455-1990, fax: (905) 455-2529, e-mail: info@sunopta.com and web site: www.sunopta.com .

The Company makes available, free of charge through its website, its Annual Report, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, registration statements on Form S-3 and any amendments to those reports as soon as practicable after filing or furnishing the material with the Securities and Exchange Commission.

The SunOpta Food Group, operates in the natural, organic, kosher and specialty sectors of the food industry, sectors which management believes offers above average growth opportunities compared to other segments of the food industry. The SunOpta Food Group is comprised of four operating groups, the SunOpta Grains and Foods Group, the SunOpta Ingredients Group, the SunOpta Fruit Group and the SunOpta Canadian Food Distribution Group. These groups utilize a combination of specific and vertically integrated seed to table capabilities to serve the fast growing markets of natural, organic and specialty foods. The SunOpta Food Group utilizes a number of vertically integrated business models, using a “seed to table” strategy. Seed to table refers to the Groups ability to control the entire supply chain from farm gate to finished product, thus maintaining control of certification, quality and margins. The SunOpta Grains and Foods Group is headquartered at 3824 93 ^rd Street SW Hope, Minnesota 56048-0128, telephone: (507) 451-3316, fax: (507) 451-2910. The SunOpta Ingredients Group is headquartered at 25 Wiggins Avenue, Bedford, Massachusetts, 01730, telephone: (781) 276-5100, fax: (781) 276-5101, The SunOpta Fruit Group is headquartered at 5742 Rostrata Avenue, Buena Park, California, 90621, telephone: (714) 521-1002, fax: (741) 522-3694. The Canadian Food Distribution Group is headquartered at 2120 Van Dyke Place, Richmond, British Columbia, V6V 1X9, telephone: (604) 276-2441, fax: (604) 214-2942.

Opta Minerals Inc, representing approximately 8.1% of consolidated sales, processes, sells and distributes silica free abrasives and other specialty industrial minerals to the foundry, steel, roofing shingle 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. In February 2005, approximately 29% of the Opta Minerals Group was sold as part of an initial public offering on the Toronto Stock Exchange, trading under the symbol “OPM”. SunOpta currently owns 70.6% of the outstanding shares of Opta Minerals Inc.. Opta Minerals Inc can be contacted at 407 Parkside Drive, Waterdown, Ontario, L0R 2H0, telephone: (905) 689-6661, fax: (905) 689-0485, e-mail: info@optaminerals.com.

The SunOpta BioProcess Group, (formerly the StakeTech Steam Explosion Group), operates from facilities located on the corporate property of the Company in Brampton, Ontario. The Group provides equipment and process solutions for the biomass industry from process development and design through the sale of proprietary biomass processing technology. The Group offers extensive scientific and engineering expertise in design and development of biomass solutions, and holds numerous patents on its StakeTech steam explosion technology. This technology has wide solutions potential in pulp, biofuel and food ingredients processing and offers significant licensing and applications potential. The StakeTech steam explosion technology uses high temperature and pressure rather than chemicals to process biomass which can then be used to produce various products for further processing. The SunOpta BioProcess Group can be contacted at 2838 Bovaird Drive West, Brampton, Ontario, L7A 0H2, telephone: (905) 455-1990, fax: (905) 455-2529.

SunOpta Inc. 4 December 31, 2005 – 10-K

Segmented Information

The Company operates in three industries:

(1) The SunOpta Food Group (“Food Group”) produces, packages, markets and distributes a wide range of natural, organic, kosher and specialty food products and ingredients with a focus on soy, corn, sunflower, fruit, oat, fiber and other natural and organic food products. There are four segments in the SunOpta Food Group comprising:

	a)	SunOpta Grains and Foods Group (“Grains Group”)
	b)	SunOpta Ingredients Group (“Ingredients Group”)
	c)	SunOpta Fruit Group (“Fruit Group”)
	d)	SunOpta Canadian Food Distribution Group (“Distribution Group”)

(2) Opta Minerals processes, sells and distributes silica free loose abrasives, roofing granules, industrial minerals specialty sands, and recycles inorganic materials for the foundry, steel, roofing shingles and bridge and ship cleaning industries; and

(3) The SunOpta BioProcess Group provides a wide range of research and development and engineering services and owns numerous patents on its proprietary steam explosion technology and designs and subcontracts the manufacture of these systems for processing non-woody fibers for use in the paper, food and biofuel industries.

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

SUNOPTA FOOD GROUP

The SunOpta Food Group has been built over the past six years with the acquisition of twenty-two business operations. These acquisitions include Sunrich in August, 1999, Nordic Aseptic in August, 2000, Northern Food & Dairy in September, 2000 and First Light Foods in February, 2001. During, 2002,the Group launched a line of organic dairy ingredients and completed the acquisitions of Organic Kitchen, Wild West Organic Harvest, Opta Food Ingredients and Simply Organic. In 2003, SunOpta completed the acquisitions of Sigco Sun Products, Dakota Gourmet, Pro Organics and Kettle Valley. In 2004 SunOpta completed the acquisitions of Kofman-Barenholtz, 50.1% of Organic Ingredients, Snapdragon Natural Foods, Supreme Foods, an oat fiber facility from General Mills and Distribue-Vie. During 2005 the Group completed the acquisition of the remaining 49.9% of Organic Ingredients, and acquired the operations of Earthwise Processors, Cleugh’s Frozen Fruit, Pacific Fruit Processors and Hahamovitch Kosher Imports (Les Importations Cacheres Hahamovitch). These acquisitions, coupled with significant internal growth, have established a unique, vertically integrated natural, organic, kosher and specialty foods company, with operations in the United States and Canada, serving both domestic and international markets and, representing approximately 91% of SunOpta’s consolidated revenues. See note 2 of the Consolidated Financial Statements for further details of all acquisitions during 2005.

The SunOpta Food Group is comprised of four operating groups, the SunOpta Grains and Foods Group, the SunOpta Ingredients Group, the SunOpta Fruit Group and the SunOpta Canadian Food Distribution Group. These groups work both individually and cooperatively, utilizing a combination of specific and vertically integrated capabilities to serve fast growing markets. The SunOpta Food Group utilizes a number of vertically integrated business models and has been built to leverage efficiencies and realize cost savings, maximize product and processing capabilities and develop a platform to effectively serve the fast growing natural, organic and specialty foods sectors.

The Food Group’s strategy is to continue to pursue acquisitions that align with its vertically integrated model in the natural, organic, kosher and specialty foods industry. SunOpta believes that these sectors of the food industry are growing at a rate of 10-20% per year and that it is fragmented with numerous players in both Canada and the United States.

Specific growth strategies of the Food Group in the last several years have included the following:

•

Diversify the range of organic and non-GMO grains that SunOpta markets, specifically including businesses that are vertically integrated through ingredients and packaged products.

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•

Develop value added natural and organic food ingredient solutions to meet demands of food manufacturers wanting to improve the healthfulness of their products and/or expand into the natural and organic markets.

•

Expand the Canadian natural and organic produce and grocery distribution businesses to become the leading coast to coast distributor in Canada.

•

Expand the Company’s ability to source organic products worldwide.

•

Invest in healthy convenience food businesses as the Company believes this will continue to be a strong area of growth for natural and organic food products.

•

Expand the number of customer private label programs especially ranging from the soy and rice beverage categories through fruit and healthy convenience foods.

•

Expand the Company’s presence in operations outside of North America.

•

Expand the Company’s presence in the natural and organic fruit business with targeted acquisitions aimed at expanding geographical and product offerings.

MAJOR DEVELOPMENTS DURING 2005 – SUNOPTA FOOD GROUP

The Company has continued to realize on its strategy of becoming a major participant in the natural, organic and specialty sectors of the food industry. This has been accomplished via a combination of continued internal growth and selective acquisition. The Company intends on furthering this strategy as many of the markets within which it competes continue to grow at above average rates. In support of this strategy the Company achieved the following during the year,

•

The operations and management of the Grains and Soy Products Group were consolidated with the Package Products Group and are now known as the SunOpta Grains and Foods Group. This Group is now well positioned to serve growing markets utilizing it’s vertically integrated soy, corn and sunflower models.

•

Diversified the Company’s Grains and Foods Group with the acquisition of Earthwise Processors, a world wide supplier of vertically integrated soy products and other grain products This acquisition further expanded the Groups product line-up and grower base.

•

Continued to increase the Company’s presence in the worldwide food fiber market via the operations of the SunOpta Ingredients Group. During the year the Group launched a new line of organic oat and organic soy fiber, completed development of an innovative process for the production of conventional soy fiber, expanded international operations and entered a number of new markets including pet foods, processed meats and beverages. The Company is confident that fiber enriched foods will continue to be a growth area within the healthy foods category as issues with obesity continue to grow around the world.

•

Completed the development of the SunOpta Fruit Group, now a leading supplier of quality frozen fruit and fruit based products to the private label food service and industrial ingredients markets in North America. This was accomplished via the acquisition of the remaining 49.9% of Organic Ingredients, the acquisitions of Cleugh’s Frozen Fruit and Pacific Fruit Processors and an internal reorganization that transferred the operations of Kettle Valley Dried Fruit into this group.

•

Continued the development of the SunOpta Canadian Food Distribution Group with the acquisition of Hahamovitch Kosher Imports, expanding the Group’s dominant kosher distribution position within Canada and establishing a platform for growth in the natural and organic grocery sector within Quebec. In hand with this, the Group completed a number of cost reduction and integration initiatives including the consolidation of three operating groups into a new state of the art grocery distribution center in Toronto and the rationalization of produce warehousing operations in Western Canada. These initiatives have strengthened SunOpta’s market share in Canada and also expanded the Group’s geographic coverage and positioning as the leading national natural, organic, kosher and specialty food distributor in Canada.

SUNOPTA GRAINS AND FOODS GROUP (“Grain and Foods Group”)

The SunOpta Grains and Foods Group is a combination of the former Grains and Soy Products Group and the aseptic packaging plant and dry roasting and packaging operations within the former Packaged Products Group The new group recognizes the fact that these companies are under common management as well as being focused on the vertically integrated sourcing, processing, packaging and marketing of grains and grain based ingredients and packaged products.

The Grains and Foods Group forms the foundation of the Company’s vertically integrated natural and organic foods business model. This Group specializes in marketing identity preserved, non-genetically modified (non-

SunOpta Inc. 6 December 31, 2005 – 10-K

GMO) and organic crops and related agronomic services with a core focus on soybean, sunflower and corn products. With the acquisition of Earthwise Processors in 2005, this Group has increased its ongoing relationships with Identity Preserved (IP) and organic soy and corn growers to approximately 2,500 throughout Mid North America, whereby seeds and related services are provided and much of the crop is subsequently purchased, genetically tested, processed and sold to domestic and international customers. In addition, specific grains are transferred to the Ingredients Group where they are transformed into value-added specialty food ingredients which are sold by both the Grains and Foods Group and Ingredients Group or transferred back to the Grains and Foods Group for further processing and packaging as consumer packaged products. With the acquisition of Sigco Sun Products in late 2003, the Grains and Foods Group maintains a vertically integrated business model for confection sunflowers similar to what it utilizes for soybean products. Sigco maintains relationships with approximately 500 farmers in the Midwest. All product is non-GMO and sold to domestic and international customers or further processed and packaged into dry roasted food ingredients or healthy convenience foods.

The Grains and Foods Group also markets value-added soymilk and soy ingredients including soy concentrates (liquid soy base) and dried soy powders and organic and natural food ingredients including organic snack coatings, organic dairy powders, grain sweeteners, maltodextrins, dry milled corn, milled soy, various organic vegetable oils, traditional and high oleic sunflower kernel and inshell sunflowers.

The Grains and Foods Group develops, markets and distributes consumer branded natural and organic food products, utilizing integrated inputs and processing expertise to drive low cost, high quality products. Packaged products processed by this Group include an aseptic packaging operation focusing on the packaging of soy and rice beverages in Alexandria Minnesota and one facility focused on the roasting and packaging of healthy convenience foods including soybean, corn and sunflower based snacks. The Group also markets a number of organic consumer products under the brand name Sunrich Naturals including edamame and other frozen soy vegetables. Extended shelf life (ESL) refrigerated soymilk under a number of private labels and store brands for food retailers are produced utilizing internally sourced ingredients & soy concentrates utilizing packaging facilities of third party refrigerated (ESL) co-packers.

The SunOpta Aseptic facility has been significantly upgraded over the past four years as a result of the installation of a new half-gallon filler and the addition of a third one litre filler. Infrastructure improvements include expanded product mix room facilities, upgraded boiler capabilities, a new CIP (clean in place) system, a number of product storage tank additions, enhanced waste treatment processing, addition of robotic palletizing, numerous upgrades and improvements to existing plant support equipment and expansion of the facility’s warehousing capabilities. The Group is in the process of adding additional equipment and upgrades associated with the conversion of the facility from a five to seven day operation including additional raw bulk liquid storage capacity, additional cooling capacity and other upgrades. The Group has agreements with several major food companies to provide aseptic finished products.

The Grains and Foods Group headquartered in Hope, Minnesota operates grain processing facilities in Hope, Minnesota; Cresco, Iowa; Breckenridge, Minnesota; Goodland, Kansas; Edson, Kansas; and Moorhead, Minnesota with sales and marketing offices located in Minneapolis, Minnesota and Snover, Michigan. The Group operates an aseptic packaging facility in Alexandria, Minnesota and a healthy convenience roasting and packaging facility in Wahpeton, North Dakota. A number of products marketed by the Grains and Foods Group are manufactured at facilities organized within the SunOpta Ingredients Group.

The Grains and Foods Group’s major products are as follows:

Grains and Inputs: Included in grain and inputs are organic and IP specialty soybeans, specialty corn, confection & oilseed sunflower and various other grains and grain products such as rice, organic feed ingredients, milled corn, soy and oat flours. IP specialty grains and ingredients are sold to domestic and foreign food processors.

The demand for non-GMO soybeans from foreign customers and the increased demand from domestic soy food manufacturers have continued to fuel an increase in business volume. These trends are expected to continue in the future due to the continued growth of the soy, organic and natural foods markets. The growth of sunflowers can be attributed to international demand as well as increasing domestic consumption prompted by consumer awareness of the healthy benefits of sunflowers and the consumer’s need for alternative foods with the growing incidence of nut allergies.

Soy and Grain Based Organic Ingredients : Soy and grain based ingredients are marketed in Asia, Europe and throughout the United States where the Group has a strong presence. The Grains and Foods Group is continuing to

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develop new ingredient products and customers as the demand for soy-based and organic products continue to grow in domestic and international markets. The Company manufactures a range of grain sweeteners and maltodextrins under the names Maisweet and Arrosweet with sweeteners possessing a higher dextrose equivalent (DE above 10DE) and the products with lower dextrose equivalent classified as maltodextrins. Organic and natural vegetable oils are sold to customers throughout the United States, Hong Kong and Japan. Organic snack coatings and dairy powders have been introduced in response to heavy customer demand.

Aseptic Packaged Products : The Grains and Foods Group processes and packages shelf stable beverage products at its SunOpta Aseptic facility. The Group packages aseptic products for some of the leading consumer branded organic food companies in the United States.

Sunflower, Soybean and Corn Snacks – The Grains and Foods Group dry roasts a number of grain based ingredients and produces natural and organic packaged ready to eat snack products sold under the Dakota Gourmet brand and a number of private label brands.

Sunrich Naturals – The Grains and Foods Group markets North American grown Individually Quick Frozen (IQF) soy vegetables such as podded edamame and shelled edamame.

Competition

The Grains and Foods Group competes with large companies in the U.S. and the international commercial grain procurement market. The Group’s organic specialty grains compete in the smaller niche U.S. commercial organic grains market. Key to competing in these markets is access to transportation, supply and relationships with organic producers.

The soy products business is centered in Hope, Minnesota 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. The facility is centrally located within the heart of soy and corn producers. With the acquisition of Earthwise in 2005, the Group has expanded it growing region and added a second facility for processing in Moorhead, Minnesota. The Group has an established IP grain producer network with approximately 2,500 producers, with many relationships existing for over 20 years. The Group has also been an organic certified handler and processor for a number of years and has ample grain processing and storage facilities to meet the needs of its producers and customers. The sunflower business is centered in Breckenridge, Minnesota, located within the heart of North American sunflower production and close to required transportation sources.

The Group’s aseptic packaged products facility competes with a number of other regional manufacturers of similar size and similar aseptic packaging capabilities

Distribution, Marketing and Sales

The Grains and Foods Group ensures that it provides its customers with the highest quality organic, non-GMO and IP specialty grains and seeds, by serving as a grower’s supplier of seed, purchaser of the grower’s specialty crops and distributor of IP specialty products. The Group’s “full circle” approach allows it 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 product service including grading, formulation, processing, quality control and packaging.

Bulk commodity product revenues are sensitive to distribution costs which can limit their competitiveness in particular markets. Competitive bulk and container freight costs give the Grains and Foods Group access to Japanese and Mexican import markets. Uncompetitive freight costs compared to South American and Eastern Canada limit soybean opportunities in European markets, however Europe is a major market for the Group’s container shipments of inshell and kernel sunflowers.

In 2004, SunOpta entered into an agreement with the former owner of Sigco, whereby both parties will jointly operate a Hungary-based confection sunflower business. The Company has an option to acquire the Hungary based operation up to September 30, 2006. SunOpta entered into the agreement to improve its competitiveness in

SunOpta Inc. 8 December 31, 2005 – 10-K

the European market and to further its relationships and understanding of the European sunflower market. The Company sees this joint venture as a potential first step in pursuing operations outside of North America.

Dakota Gourmet, the Group’s roasting and packaging arm markets their products through natural and mass market grocery retailers, mass merchandising, U.S. School meal programs and other distribution channels. The Group also markets dried fruit snacks to the US school meal program for the SunOpta Fruit Group. The products are sold under the Kettle Valley Real Fruit Snacks, Frunola and Dakota Gourmet Labels as well as by contract under various private label brands.

The Group’s other packaged products are marketed to other food manufacturers under private label brands and direct to grocery, and food specialty stores under the Company’s own brands.

Suppliers

Due to weather conditions and other factors certain grains in North America can be limited. An example includes the shortage of organic soy beans and sunflowers in 2004 as a result of weather patterns and resulting quality issues. The Company is focused on expanding production and sourcing capabilities to other parts of the world in order to ensure supply in years when local production may be below normal levels. The Grains and Foods Group also has the ability to divert available product based on market demand and customer requirements in order to maximize return.

There are very few supply constraints for the production of organic and natural products including organic soy concentrate (supplied internally) and packaged products produced from soybeans, corn and sunflowers (supplied internally).

SUNOPTA INGREDIENTS GROUP (“Ingredients Group”)

The Ingredients Group focuses on transforming both internally and externally sourced raw materials into value-added food ingredient solutions. The Ingredients Group comprises the prior acquisitions of Northern Food & Dairy and Opta Food Ingredients, Inc.. The Group specializes in the technical processing of specialty food ingredients with a focus on non-GMO, natural, functional and organic offerings. The Group works closely with customers to identify product formulation, cost and productivity issues and develops solutions to these problems based on proprietary, value-added, highly functional food ingredients and ingredient systems utilizing the Group’s extensive technical and manufacturing base.

The Ingredients Group is an innovator in the value-added food ingredients market with a technical selling and product applications focus. Based on management’s estimates, the Ingredients Group is one of the largest producers of whole bean soymilk concentrate in the United States and is the world’s largest supplier of oat fiber to the food industry. Through its extensive manufacturing platform, the Group markets the Canadian Harvest ^® Oat Fiber family of insoluble fiber products, a number of value-added starch-based texturizers, resistant starch and proprietary stabilizer blends under the SunOpta Ingredient Systems ^tm umbrella, and a number of custom processed ingredients including soluble fiber, natural preservatives and sweeteners.

The Ingredients Group is headquartered in Bedford, Massachusetts and operates as SunOpta Ingredients, Inc. Processing facilities are located in Alexandria, Bertha, Fosston and Cambridge, Minnesota; Galesburg, Illinois; Afton, Wyoming; Cedar Rapids, Iowa and Louisville, Kentucky.

The Ingredients Group is well positioned to capitalize on the rapid growth of the natural and organic food markets with a clear focus on a wide range of fiber and soy based products.. The Company produces a broad offering of soy-based food products for the U.S. and international markets. The proliferation of great tasting, healthy soy foods has increased the availability of soy products to consumers. The increase in consumer demand has resulted in soy food products experiencing some of the largest growth rates of any category in the food industry. The U.S. Food and Drug Administration (“FDA”) allows soy products containing more than 6.25 grams of soy protein per serving to make the claim of improving the cardiovascular health of consumers. Many of the soy products produced by the Ingredients Group are marketed and sold by the Grains Group.

In publications from both the American Dietetic Association and a Mayo Clinic Health letter it was noted that fiber consumption is below recommended levels in the U.S. The Ingredients Group’s Canadian Harvest line of oat fibers and stabilized brans are used in numerous products such as fiber-enriched breads and other baked goods, breakfast cereals and snack bars as well as a bran-containing yogurt specifically to boost fiber content. These

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products can be used to increase total dietary fiber content of foods while minimizing negative effects on taste, texture and appearance. The Ingredients Group oat fibers which are insoluble fibers enhance overall gastrointestinal health. Oat fiber is a primary ingredient in breads, pastries, muffins, tacos and tortillas as food companies reformulate their products to meet the growing opportunities for fiber-enriched foods. Stabilized oat brans can be used as a source of soluble fiber (beta-glucan) which is beneficial to cardiovascular health. The company has expanded the application and sales of its fiber products into the pet food market. The Groups products are used in pet foods to increase total dietary fiber, reduce breakage and improve dental hygiene.

The Group continues to diversify its unique portfolio of products. Products are organized under two main technology platforms: fiber-based texturizers which include Canadian Harvest ^® Oat Fibers and Stabilized Bran products, and SunOpta ^tm Ingredient Systems which include OptaGrade ^® , OptaMist ^® , OptaFil ^® , CrystaLean ^® , OptaMax ^® , Shimizu Konjac Flour, Blanver’s microcrystalline cellulose (MCC) and a growing portfolio of proprietary stabilizer and dairy powder blends. In 2005, the company launched several new value-added ingredients including organic oat fiber, organic and conventional soy fiber, Grade A acid whey, organic okara from soy, and numerous custom ingredient blends.

The Ingredients Group food ingredients are used by approximately 300 customers in the U.S., Canada, Latin America, Western Europe, the Middle East, Asia and the Pacific Rim, including some of the largest U.S. consumer packaged food companies and quick service restaurant chains. In 2005, the Group took several actions to enhance its international sale capabilities including establishing the new position of Director, International Sales and revamping its European distributor network and adding new distributors in several Latin American countries.

Many of the Ingredients Group starch-based texturizers and ingredient blends were originally developed for and are used in reduced fat versions of a variety of dairy products such as low fat or fat-free cottage cheese, sour cream, cream cheese, or process cheeses. As discussed in a document entitled “Taking the Fat Out of Food” from the FDA, reducing fat intake by consuming reduced fat versions of these products is an element of a healthier diet. Given the increased demand for soy-containing foods, the Group has developed several ingredient blends for use in organic and conventional soy-based dairy alternatives such as soy yogurt, cream cheese, beverages, and frozen desserts.

In addition to helping food manufacturers improve the healthfulness of their food products, the Ingredients Group family of texturizing ingredients can improve the overall quality of food products, reduce formulation costs and meet specific processing requirements. The Company believes that all of its products are GRAS (Generally Regarded As Safe, see Regulation section for a further description) under current FDA regulations.

The Ingredients Group’s major products are as follows:

Fiber-Based Products

Canadian Harvest: Canadian Harvest Oat Fibers are a family of insoluble fiber products derived from oat hulls. Oat Fibers are used commercially to increase yield and enhance texture in ground meat products, to add strength and reduce breakage of taco shells and ice cream cones, and to enhance texture and increase the fiber content of cereals, breads, cookies and crackers. The company also offers Canadian Harvest Stabilized Brans derived from oat, wheat and corn, as well as wheat germ. The Stabilized Brans are heat-treated to extend shelf life and ground to meet customer needs for appropriate particle size. As mentioned previously, the Group has increased its fiber offerings to include organic oat fiber as well as organic and conventional soy fiber.

SunOpta Ingredient Systems

SunOpta Ingredient Systems are proprietary blends of texturizing agents and other ingredients that are primarily developed and sold for use in the dairy, salad dressing and soy-based product categories. Several of the ingredient systems contain one of the Group’s unique and proprietary starch-based texturizers which are described below.

OptaGrade: OptaGrade is a natural, starch-based texturizing agent that is used commercially in a variety of dairy products including natural, imitation and processed cheeses, sour cream, cream cheese and cottage cheese.

OptaMist: OptaMist is also a starch-based texturizing agent that improves the taste, texture and appearance of dairy products, yogurt, natural and processed cheese products, salad dressings and mayonnaise. While the functionality of OptaMist is similar to that of OptaGrade, its unique processing flexibility allows it to be used in food products made within a wide variety of processing systems.

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OptaFil: OptaFil is a starch-based opacifying agent and whitener used in reduced fat or fat free dairy and non-dairy creamers, whipped toppings, puddings, beverages, cheeses and salad dressings.

OptaMax: OptaMax is a starch-based texturizing agent developed to increase yields and improve the texture of reduced fat natural cheese including Mozzarella, Cheddar, Colby, Monterey Jack and Feta.

Grade A Acid Whey: Grade A Acid Whey is a liquid dairy by-product which is dried into powder at one of the Group’s facilities. The dry Grade A Acid Whey is used as a source of protein and other dairy solids as well as a flavoring agent in various applications.

Organic Okara: Okara is a protein and fiber rich by-product of soy milk manufacturing. Over the past year, the Group added the capability to convert the wet okara from soy milk into a dry powder. Previously, the wet okara was disposed of at significant cost to the company. The okara is used to enrich protein and fiber content of animal feed, pet foods and foods for human consumption.

Konjac Flour: Under a distribution agreement with Shimizu Chemical Corporation of Japan, SunOpta Ingredients is the exclusive North American distributor for konjac flour for food ingredient applications. A unique and very versatile texturizing agent obtained from the konjac plant commonly cultivated in East Asia, konjac flour provides excellent heat and freeze thaw stability when used to thicken or gel processed foods. Based upon current sales levels, the Company does not believe the distribution agreement with Shimizu is material.

Microcrystalline Cellulose (MCC): Under a distribution agreement with Blanver Farmoquimica, Ltda. of Brazil, SunOpta Ingredients is the exclusive distributor of MCC for food applications in the United States. MCC, commonly known and labeled as cellulose gel, is a naturally derived stabilizer, texturizing agent and fat replacer. It is used extensively in reduced fat salad dressings, numerous dairy products including cheese, frozen desserts and whipped toppings and bakery products. Based upon current sales levels, the Company does not believe the distribution agreement with Blanver is material.

Custom Ingredients and Services

The Company produces a number of unique functional food ingredients on a contract basis utilizing customers proprietary technology. Products include:

Sunfiber ^® /Benefiber ^® : A soluble guar-based fiber food ingredient, produced under a manufacturing agreement for a Japanese customer, whereby the Japanese based customer has the sole and exclusive rights to the product specifications. Based upon current sales levels, the Company does not believe the manufacturing agreement is material.

Microgard ^tm : A family of natural food preservatives.

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

Dried Honey and Molasses : The Ingredients Group manufactures dried sweeteners such as powdered honey and molasses for specific customers.

Technical Processing and Spray Drying : Technical processing and spray drying is contracted with various customers to produce a variety of food ingredients.

Competition

Food ingredients are considered unique niche items usually developed or processed for specific customers or industry segments. The Ingredients Group competes with other product developers and specialty processors for the specialty ingredient business .

The food ingredients industry is intensely competitive. Competitors include major companies with food ingredient divisions, other food ingredient and sourcing companies, stabilizer companies and those consumer food companies that also engage in the development and sale of food ingredients. Many of these competitors have financial and technical resources as well as production and marketing capabilities that are greater than those of the Company.

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Distribution, Marketing and Sales

Utilizing a technically oriented customer account team, the Ingredients Group believes that the most effective way to solve each customer’s problem is to gain a thorough understanding of the customer at all levels, build solid working relationships throughout the customer’s organization, be knowledgeable of the market segment in which the customer competes, and have a detailed technical understanding of the customer’s problem as well as its preferred solution. The Company takes a multidisciplinary approach in order to achieve this level of customer understanding and service. Members of the Ingredient Group’s direct sales force are teamed up with the appropriate technical personnel to work as “consultants” in defining and developing a range of potential solutions to their formulation and product development problems. In all cases, the Ingredient Group’s strategy is to provide outstanding service and responsiveness, which the Company believes, will lead to additional opportunities with existing and prospective customers.

Suppliers

The Ingredients Group’s raw materials and packaging needs are sourced from various suppliers who provide products that contractually are required to comply with certain 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 customer supply relationships highlighted below.

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.

Oat hulls are primarily sourced from major food companies or their brokers and there is ample supply to meet production requirements.

Sweeteners such as maltodextrin are purchased on contract from several suppliers. There is substantial production capacity among these suppliers for maltodextrin. Organic maltodextrins are produced by the Ingredients Group from organic grains sourced from contract growers.

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

Other raw materials such as guar are supplied by process customers and are not sourced directly from Food Group suppliers.

SUNOPTA FRUIT GROUP (“Fruit Group”)

The SunOpta Fruit Group focuses on providing natural and organic fruits, vegetables and related products to the private label retail, food service and industrial markets. The Fruit Group integrated the 2005 acquisitions of the remaining 49.9% of Organic Ingredients Inc., Cleugh’s Frozen Foods Inc. and Pacific Fruit Processors Inc. with previously acquired Kettle Valley Dried Fruit Inc. The Fruit Group is well positioned to capitalize on the rapid growth of the natural and organic food markets. The Group’s worldwide sourcing capabilities, extensive product development experience and organic certification expertise provide the Group with a strategic advantage in the organic industry in specific commodities.

Based on management’s estimates, the Fruit Group is one of the largest suppliers of organic frozen fruit and organic citrus juices to the private label retail market and one of the largest processors of frozen strawberries in the United States. Through its extensive production platform, the Fruit Group provides customers with a wide range of vertically-integrated solutions including bulk raw materials, value-added ingredients and turn-key retail solutions.

The Group services over 500 customers, including food manufactures, food service distributors, quick-service restaurants and retail companies, located primarily in the United States, Canada and Japan. The Fruit Group is headquartered in Buena Park, California

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The Group’s four divisions operate as follows:

Organic Ingredients Inc.: Organic Ingredients is a broker, trader and leading supplier of over 300 organic commodities that provides organic food solutions to major food manufacturers, distributors and major US supermarket chains with a variety of industrial and private label retail products in the United States. This group sources and produces fruit and vegetable based ingredients, sweeteners, vinegars, and other organic food products from over forty countries worldwide to ensure quality of supply, minimize crop risk and provide contra-seasonal solutions to its customers. In many cases, the company enters into exclusive arrangements with growers and/or processors of key strategic commodities to control the reliability of its supply chain. Utilizing a number of strategic and/or exclusive co-pack relationships and an experienced research and development team, Organic Ingredients provides its retail customers and distributors with organic private label turn-key solutions in a variety of product categories, including frozen fruits and vegetables, juices, tea beverages, canned tomato products and ketchup, pasta sauces, salsas, apple sauces, sparkling sodas and Italian flavored waters. Organic Ingredients operates administrative and research and development offices in Aptos, California.

The organic food industry is intensively competitive due primarily to the limited worldwide supply of organic raw materials. The company’s competitors in the supply of industrial ingredients include domestic and worldwide brokers, traders and food processors. In the private label retail market, competitors include major food manufacturing companies, some of which have production and technical capabilities more extensive than SunOpta’s. A number of the groups competitors are also their customers and/or co-packers.

The groups raw material suppliers include growers, processors and traders of organic fruit and vegetable based ingredients, sweeteners and other food products. Raw materials are sourced from worldwide growing regions, including North America, South America, Central America, Europe and Asia. Organic food suppliers are required to meet stringent organic certification requirements equivalent to the USDA NOP standards. Wherever possible, the company enters into exclusive supply arrangements, and establishes multiple supply chains of key commodities.

Cleugh’s Frozen Foods Inc.: Cleugh’s is a strawberry and vegetable processor, and packer of natural and organic fruits and vegetables for the food service, private label retail and industrial ingredient markets. The company sources strawberries from various growing regions throughout California and processes the fruit into individually quick-frozen (“IQF”), block frozen, sliced and diced strawberry sugar mixes, purees and juice stock to meet the customer’s technical specifications. Cleugh’s supplies frozen strawberry products to the private label retail, food service and industrial markets, including food manufactures and quick service restaurants. The company also processes certain vegetables during the strawberry off-season, including bell peppers. The company’s poly-bag packaging operation in Buena Park, California provides private label retail customers with natural and organic frozen fruits and vegetables, including internally-produced strawberries and including blueberries, raspberries, blackberries, peaches, mangos, tropical fruit and other items, from domestic and worldwide primary processors of these commodities. Cleugh’s operates two processing facilities, one located in Buena Park (near Los Angeles) and the other in Salinas, California and shares offices with the Fruit Group in Buena Park.

The company faces intense competition from California strawberry processors and strawberry imports from Mexico, South America, Europe and Asia. The California competitive landscape includes divisions of companies with financial resources larger than the company’s. In many cases, Mexican, South American, European and Asian competitors are able to achieve cost efficiencies greater than the company’s due to lower relative cost of living in these regions.

Cleugh’s raw materials consist primarily of fresh strawberries sourced from California growers. The company faces competition in securing the grower base required to meet its needs, however, due to the location of the processing facilities, Cleugh’s is able to source raw materials from a number of strawberry growing regions in the West Coast, minimizing the competitive forces. The company also sources other frozen fruits and vegetables from a number of domestic and worldwide growers, processors and traders.

Pacific Fruit Processors Inc.: Pacific is a supplier of natural and organic value-added fruit ingredients to the dairy, beverage and bakery industries. The company offers fruit bases and preps for customers seeking high-quality, custom formulations to meet their unique flavor and texture profiles. Applications include fruit for yogurts, ice creams, cheeses, smoothies, shakes, frozen desserts, bakery fillings, health bars, various beverages, dressings, marinades, dips and sauces. Pacific’s highly experienced research and development team is integral to the company’s reputable product quality and customer service. Manufacturing capabilities include aseptic and

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conventional processing and packaging. Pacific operates a processing facility in South Gate, California (near Los Angeles).

The company faces intense competition from regional and national food manufacturers with similar capabilities. In addition, the company faces research and development competitive forces from flavor companies. A number of these competitors have production capabilities and financial resources that are greater than the companies.

The company’s primary raw materials are sourced from processors and traders of frozen fruits and vegetables including Organic Ingredients and Cleugh’s Frozen Foods, major sweetener producers, and a number of regional and national flavor companies. Availability of supplies is subject to world market conditions, including quantity and quality of supply.

Kettle Valley Dried Fruit Inc.: Kettle Valley is a producer of natural and organic apple-based fruit bars. The company operates three facilities in the apple-rich Okanagan region with a focus on supplying natural and organic fruit bars to the private label Canadian and U.S. retail markets. The company’s primary raw material, apple, is sourced from local growers. Kettle Valley’s production capabilities include a variety of bar sizes and shapes, as well as the ability to add a variety of ingredients including fiber. Kettle Valley also provides dried apple as an ingredient to food manufactures. The company utilizes the Fruit Group’s research and development capabilities to introduce innovative products to the marketplace. Kettle Valley operates two processing facilities in Summerland, British Columbia and one processing facility in Omak, Washington.

The company faces competition from a small number of competitors, all of which have production and technical capabilities and financial resources greater than the company’s. Competitors include independent fruit bar manufacturers and fruit bar divisions of larger food manufacturers.

The company’s raw material suppliers include growers and traders of apples and flavor companies. The company is subjected to the availability of apples based on conditions beyond its control.

SUNOPTA CANADIAN DISTRIBUTION FOOD GROUP (“Distribution Group”)

The SunOpta Canadian Food Distribution Group represents the final layer of the Company’s vertically integrated natural and organic foods business model. SunOpta started to build a Canadian national natural, organic, kosher and specialty food distribution system in late 2002 with the acquisition of Wild West Organic Harvest based in Richmond, British Columbia and Simply Organics based in Toronto, Ontario. In late 2003, SunOpta acquired Pro Organics, an organic fresh foods distributor based in Burnaby, British Columbia with other facilities in Toronto and Montreal. In 2004 the Company completed a series of acquisitions including: Distribue-Vie, another organic fresh foods distributor serving Montreal, Eastern Ontario and the Maritime provinces; Supreme Foods, an organic, natural, kosher and specialty foods grocery distributor located in Toronto, serving Ontario, Quebec and the Maritimes; Snapdragon Foods an organic and natural grocery distributor based in Montreal serving Quebec, Ontario and the Maritimes; and Kofman-Barenholtz a kosher foods distributor based in Toronto serving Ontario, Quebec and Western Canada. In 2005, Hahamovitch Kosher Imports, a Montreal based kosher foods distributor serving Quebec, was acquired and Pro Organics opened a secondary produce outlet at the Ontario Food Terminal to facilitate broader exposure of its organic produce to the conventional produce retail trade. Together these companies form the basis of the national distribution system, handling approximately 12,500 natural, organic, kosher and specialty food products, including the Company’s branded and private label packaged products.

During 2005, the Company completed the consolidation of the operations of Supreme Foods, Snapdragon Foods and Kofman-Barenholtz into a newly constructed 135,000 square foot distribution operation in Toronto, Ontario. The consolidated businesses represent the largest Canadian distribution center dedicated to organic, natural, kosher and specialty foods. The Group has and will continue to achieve operating economies and service improvements through the operational consolidation and implementation of state of the art distribution and warehouse management software. Software implementation is scheduled to be completed by the end of 2006. The Montreal organic produce operations of Distribue Vie and Pro Organics were consolidated into a single distribution centre in 2004. The organic produce category of Richmond based Wild West Organic Harvest was consolidated into the Pro Organics Burnaby warehouse in late 2005, thus allowing Wild West to expand its organic and natural grocery business without expanding its facility. Similarly, the Burnaby Pro Organics operation leveraged its volume throughput of organic produce without additional warehouse space.

The Distribution Group plans to continue expansion through internal growth and through additional strategic acquisitions. The general pace of consolidation in the Canadian natural food distribution segment moderated in

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2005, and this is expected to continue at a moderate pace in 2006. The market grew by double digits in 2005, with growth in 2006 expected to be at a similar level, as end consumers continue to recognize the benefits of a healthier lifestyle and environment through diets that include natural, organic and quality specialty foods.

The Distribution Group’s major products are as follows:

Fresh Organic Produce – The Distribution Group distributes a full line of certified organic fruits, vegetables and bulk foods across Canada through its warehouses in Burnaby, Toronto and Montreal.

Fresh Organic Dairy and Dairy Alternatives – The Distribution Group distributes numerous regional and national brands of organic liquid milk, butter, cheese, yogurt, tofu, soy cheese, soy beverages and other dairy alternatives.

Bulk Foods – The Distribution Group distributes a full range of organic bulk foods including grains, nuts, seeds, dried fruits, legumes, flours and healthy snacks.

Natural and Organic Grocery – The Distribution Group distributes approximately 7,000 natural and organic grocery items including dry, refrigerated and frozen categories from a broad range of North American and international suppliers.

Kosher and Specialty Foods Grocery – The Distribution Group distributes approximately 5,000 kosher and specialty groceries including dry, refrigerated and product offerings.

Organic and kosher products are certified by independent third parties and the warehouse operations of Pro Organics and Wild West Organic Harvest are certified as organic handlers by third party certifiers.

Competition

The Distribution Group competes against much larger conventional produce distributors, however management believes that SunOpta is the largest national organic produce and kosher distributor in Canada. Competition in organic and natural grocery is represented by a number of regional natural and organic food distributors that vary in relative size.

Distribution, Marketing and Sales

The Distribution Group’s primary direct to store distribution coverage includes central, eastern and western Canada. The Company services primarily supermarket chains and independent natural and organic food retailers. The customer mix also includes a lesser component of large mass merchandisers, major drugstore chains and home delivery companies. The Distribution Group’s core competencies include the breadth of its product line, organic market and product knowledge, excellent product quality and consistency, competence in handling refrigerated and frozen products, direct to store service and maintenance of strong relationships with customers, growers, and suppliers. All of the Distribution Group’s organic produce facilities are registered as certified organic food handlers and operate within recognized organic standards to provide traceability and ensure product integrity to customers.

Suppliers

The Distribution Group sources products from over 750 suppliers, from around the world. Overall supply is sufficient, however quality, price and availability can be affected by harsh weather conditions in a growing region. With respect to fresh produce items, supply is controlled through spot pricing, with changes in supply reflected in prices to end customers.

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REGULATION – SUNOPTA FOOD GROUP

The SunOpta Food Group is affected by a wide range governmental agricultural regulations and policies. Local, state and federal fertilizer, pesticide, food processing, grain buying and warehousing, as well as wholesale food regulations are examples that affect this Group. Government-sponsored price supports and acreage set aside programs are two examples of policies that may also have an impact on the Group. In addition, the Food Group’s business activities are subject to a number of environmental regulations.

The Food Group is involved in the sourcing, manufacture, supply, processing, marketing, selling and distribution of organic seed and food products and, as such, is subject to certain organic quality assurance standards. The 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, the Food and Drug Administration (FDA) which oversees food safety and efficacy in the United States and the Canadian Food Inspection Agency (CFIA) which monitors food processing and safety in Canada.

Certain food ingredient products are regulated under the 1958 Food Additive Amendments to the Federal Food, Drug and Cosmetic Act of 1938 (the “Act”) as administered by the FDA. Under the Act, pre-marketing approval by the FDA is required for the sale of a food ingredient which is a food additive unless the substance is Generally Recognized As Safe (GRAS) under the conditions of its intended use by experts qualified by scientific training and experience to evaluate the safety of food ingredients. A food additive is any substance, “the intended use of which results or may reasonably be expected to result, directly or indirectly, in its becoming a component or otherwise affecting the characteristics of any food.” Such pre-marketing approval for ingredients that are not GRAS, which is issued in the form of formal regulation, requires a showing both that the food ingredient is safe under its intended conditions of use and that it achieves the function for which it is intended.

GRAS status can be established through “self-affirmation” in which the producer determines on its own that the ingredient is GRAS, typically with the assistance of a panel of experts. At its option, the producer may also submit a “GRAS Notification” to the FDA. Although the FDA no longer officially recognizes the GRAS status of ingredients through a petition and regulation process, a lack of FDA objection within 90 days to such a GRAS Notification is widely recognized as important evidence of GRAS status.

A food ingredient may be deemed GRAS under the conditions of its intended use based upon its history of common use in food prior to 1958 or based upon scientific procedures which produce the same quantity and quality of scientific evidence as would be required for the FDA to issue a pre-market approval of the sale of a food additive. In either case, in order to establish that a product is GRAS, it must not only actually be safe in its intended use, but it must be generally recognized as such. If a food ingredient is not entitled to GRAS status, pre-market approval must be sought through the filing of a Food Additive Petition.

Many of the Food Group products are being marketed pursuant to GRAS self-affirmation. The Food Group believes that most products for which it has retained commercial rights are GRAS. However, such status cannot be determined until actual formulations and uses are finalized. Thereafter, the group decides whether self-affirmation procedures and a GRAS notification will be appropriate. Certain of the Company’s products may require a Food Additive Petition and in the event that one is required, the Company may elect to sell or license its rights to another party.

Countries other than the U.S. also regulate the sale of food ingredients. Regulations vary substantially from country to country and the Company takes appropriate steps to comply with such regulations as necessary.

The Food Group endeavours to comply in all material respects with applicable environmental regulations. Some of the key regulations include:

Air Quality – regulated by EPA and certain city/state air pollution control groups. Emission reports are filed annually.

Waste Treatment/Disposal – solid waste is either disposed of by a third-party or in some cases the Company has a permit to haul and land apply. Agreements exist with local city sewer districts to treat waste at specified levels of Biological Oxygen Demand (BOD) and Total Suspended Solids (TSS) and other constituents. This can require weekly/monthly reporting as well as annual inspection.

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Sewer – agreements with the local city sewer districts to treat waste at specified limits of BOD and TSS. This requires weekly/monthly reporting as well as annual inspection.

Hazardous Chemicals – various reports are filed with local city/state emergency response agencies to identify potential hazardous chemicals being used in our facilities.

Storm Water – All facilities are inspected annually and must comply with an approved storm water plan to protect water supplies.

Bioterrorism Compliance – We are currently complying with the four recognized and approved sections of the Bioterrorism Preparedness and Response Act of 2002.

All of the Group’s manufacturing facilities and warehouses are registered with the FDA and/or CFIA. All imported materials are shipped in compliance with the notification systems that alert both FDA and customs before the materials enter the country. We have the necessary processes and controls in place that provide for an additional level of traceability of all raw materials from the supplier to the immediate subsequent recipient of the finished products. We also recognize and have the necessary programs that allow the FDA the right to seize any article of food if they have credible evidence that it may be a threat to the health and wellbeing of the intended recipient.

RESEARCH AND DEVELOPMENT – SUNOPTA FOOD GROUP

The Food Group maintains extensive applications and research and development expertise via resources which are organized around three key product categories, these being:

•

Grains and grain based ingredients through finished packaged products:

•

Value-added ingredients, focussed on fiber and starch based applications; and

•

Fruits and fruit based ingredients through finished packaged products.

These groups maintain staffs of highly trained and experienced food scientists and engineers, dedicated to resolving customer formulation, processing and packaging challenges. Applications and technical support provided by each of the groups to its customers include all aspects of product development from concept to commercial launch as well as ongoing manufacturing and processing support.

Ongoing research and development priorities are also a key priority of these groups. R&D initiatives are intended to continually improve existing product portfolios, plus bring new and innovative products to the market, a key requirement in the fast growing natural and organic foods categories.

Over the past year, the Food Group has 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 soy-based foods in consumers’ diets creates numerous opportunities to develop soy ingredients that can be incorporated into food developer’s menu items.

In addition, the Food Group continues to expand its product portfolio via the addition of new fiber offerings, plus brans, wheat germ and other texturizing agents that can be used along with its soy-derived ingredients to improve the nutritional content of a variety of foods. Many of these ingredients can be used in products that help address the industry’s need to respond to the growing epidemic of obesity in North America and elsewhere by replacing fat, sugars and other calorie-dense components of food. These ingredients can also be used in products which qualify for a “whole grain” claim by augmenting the insoluble and soluble fiber content of foods. In 2005, the Food Group developed organic oat fiber, organic soy fiber and organic dried okara offerings plus developed a new and innovative process for the production of conventional soy fiber.

In hand with continued focus on increasing consumption of fruit based products in North America, the Food Group has developed a number of new fruit based beverage and packaged goods applications and continues to be a leader in the development of innovative fruit ingredient systems

INTELLECTUAL PROPERTY – SUNOPTA FOOD GROUP

The nature of a number of the Food Group’s products and processes requires the Company to create and maintain a number of patents and trade secrets. The Group’s policy is to protect its technology by, among other things, filing patent applications for technology relating to the development of its business in the U.S. and in selected

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foreign jurisdictions.

The Group’s success will depend, in part, on its ability to protect its products and technology under U.S. and international patent laws and other intellectual property laws. The Company believes that it owns or has the right to use all proprietary technology necessary to manufacture and market its products. There is always a risk that patent applications relating to the Company’s products or technology will not result in patents being issued or that current or additional patents will afford protection against competitors with similar technology.

The Company also relies on trade secrets and proprietary know-how and confidentiality agreements to protect certain of its technologies and processes. Even with the steps taken, the Company’s outside partners and contract manufacturers could gain access to the Company’s proprietary technology and confidential information. Key employees are required to sign a number of internal policies which are intended to further protect the Group’s technologies, processes and trade secrets.

EMPLOYEES – SUNOPTA FOOD GROUP

The Food Group has approximately 1,230 full-time employees. There are no unions within the Food Group.

PROPERTIES – SUNOPTA FOOD GROUP

The Food Group operates from twenty three processing facilities (15 owned, 8 leased) in eight U.S. states and one Canadian province. The Group also owns and leases a number of office and distribution locations and also leases and utilizes public warehouses to satisfy its storage needs. For more details please see Item 2. - Properties.

OPTA MINERALS INC. (“Opta Minerals” or the “Opta Minerals Group”)

Opta Minerals (currently owned 70.6% by SunOpta) is a vertically integrated producer, manufacturer, distributor and recycler of silica-free loose abrasives and roofing shingle granules, industrial minerals, specialty sands and related products for use primarily in the foundry, steel, marine/bridge cleaning roofing; and municipal water filtration industries. The Opta Minerals Group has experienced solid growth since July 1995, with a compound annual growth rate of 12.54% over that period, via a combination of internal growth and successfully integrated strategic acquisitions. In doing so, Opta Minerals has become one of the dominant regional suppliers of silica-free loose abrasives in a number of select markets on the east coast of North America.

Opta Minerals has grown steadily since 1995 through a combination of internal growth and strategic acquisitions in Eastern and central Canada and the Eastern and Southeastern United States. The Opta Minerals Group has completed a number of acquisitions over the past five years and opened operating facilities in Louisiana, South Carolina, Maryland and Western New York. The Opta Minerals Group has been able to successfully integrate these new businesses into existing operations and financial management systems, creating synergies that have increased revenues and profit margins. The Company has continually invested in improving its plant equipment and infrastructure and has been able to reduce costs while growing its production capabilities. As a result, Opta Minerals is currently well-positioned to expand current operations with modest capital expenditures.

This Group started with the initial acquisition of Barnes Environmental and Industrial in 1995. In 2000, George F. Pettinos (Canada) Limited (PECAL) and Temisca, Inc. were acquired followed by the acquisitions of Virginia Materials and 51% of International Materials in 2001. In late 2002, the 49% minority interest in International Materials was also acquired. In 2004 Opta Minerals purchased Distribution A&L and completed in 2005 the acquisition of certain assets of the abrasive division of Hillcrest Industries Inc. In February 2006 Opta Minerals acquired the outstanding shares of Magnesium Technologies Corporation.

Industry Overview

Opta Minerals competes primarily in the silica-free abrasives and other industrial minerals industry, focusing to date on select markets in Eastern North America. In contrast to the Western European market which has recently experienced a period of significant consolidation, the North American marketplace for abrasives and industrial minerals is characterized by a large number of smaller businesses and no single dominant competitor. For the most part, these companies tend to operate in local markets as opposed to on a large regional or national basis, due in most part to the high costs of freight required to move raw materials and finished products.

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Opta Minerals’ principal product lines include the following: (i) silica-free abrasives and roofing shingle granules; (ii) industrial minerals; and (iii) specialty sands and other products and services.

MAJOR DEVELOPMENTS DURING 2005 – OPTA MINERALS GROUP

Opta Minerals Initial Public Offering

On February 17, 2005, the Company’s subsidiary Opta Minerals Inc. (“Opta Minerals”) completed an initial public offering and raised $14,294,000 (Cdn $17,496,000) in net proceeds, (gross proceeds Cdn $19,800,000) including an over-allotment option granted to the underwriters and exercised on March 16, 2005. The offer was for shares of Opta Minerals Inc. which consisted of the businesses and net assets that form the Opta Minerals Group. Immediately prior to this transaction the net assets and business of this segment were transferred into this wholly owned subsidiary, Opta Minerals Inc.. The Company’s ownership was reduced to 70.4% of the outstanding common shares as a result of this transaction including the effect of gifting shares to certain employees of Opta Minerals Inc. in recognition of their contribution in building the Opta Minerals business. In the first quarter of 2005, the Company recorded a dilution gain of $6,516,000 before transaction costs of $976,000 as a result of the sale of the approximate 29.6% minority interest in Opta Minerals Inc. During the year as a result of acquiring shares on the open market, the Company increased its ownership of Opta Minerals Inc. to 70.6% of the outstanding common shares.

The initial public offering consisted of 4,500,000 units at an initial offering price of Cdn $4.00 per unit. Each unit consisted of one common share and one-half of a common share purchase warrant of Opta Minerals Inc.. The shares and warrants are listed on the Toronto Stock Exchange under the symbols “OPM” and “OPM.WT”, respectively. Opta Minerals Inc. has and continues to use the proceeds for strategic acquisitions of, or investments in new products, technologies, and businesses that expand or complement Opta Minerals Inc.’s business and for general corporate purposes.

Acquisition of Magnesium Technologies Corporation

In February 2006, Opta Minerals acquired Magnesium Technologies Corporation (MagTech) of Richfield, Ohio for $18,000,000. For fiscal 2005, MagTech recorded revenues of approximately $29 million selling its proprietary and patented desulphurizaton system and products which are produced to specific requirements of each customer that it serves within both the Canadian and United States steel industries.

MagTech operates its main production facility in Walkerton, Indiana and maintains a sales and head office in Richfield, Ohio. This profitable company employs approximately 70 people, and is a leader in new product development within its industry. MagTech maintains a very high level of customer specific technical service with its primary customers, through the use of onsite technicians who monitor and manage the use of its products in the desulphurization process. The addition of MagTech substantially increases Opta’s position in the industrial minerals business and further expands its current position as a key service provider to the steel industry.

Acquisition of Certain Assets of Hillcrest Industries

In April 2005, Opta Minerals acquired certain assets of the abrasive division of Hillcrest Industries, located in Attica, New York for the purpose of improving the cost-effective supply of silica-free abrasives and roofing shingle granules to the Western New York, Pennsylvania and Ohio markets. Since the acquisition of these assets, the facility has been upgraded and operations restructured to meet Opta Minerals’ processing standards and has commenced the supply of silica-free abrasives to customers in the servicing area has commenced.

Investment in the Baltimore, Maryland Facility

In June 2005, Opta Minerals completed the upgrade of its processing facility located in Baltimore, Maryland. This facility is strategically located to exploit an exclusive source of quality raw materials located in the area, thus providing a low cost supply to service the roofing granules, marine and bridge cleaning and general abrasives industries.

Products

Silica-Free Abrasives - Opta Minerals abrasive products are primarily sold into the roofing granule, shipbuilding, ship repair and bridge cleaning markets, as well as for many other industrial applications. Significant silica-free

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abrasive products produced by Opta Minerals include Barshot/Crystalgrit, BlackBlast, EconoBlast EbonyGrit, Powerblast, Garnet and other specialty abrasives.

Industrial Minerals - Opta Minerals Group sells industrial mineral products primarily to the foundry and steel industries. Significant industrial minerals products produced by the Group include Chromites and Nozel Sands, Clays, Coated Sands, a wide range of industrial garnets and Foundry Pre-mixes.

Specialty Sands and Other Products and Services - Opta Minerals also generates revenues from the sale of specialty sands and other products and technical services. Opta Minerals specialty sands include silica products which are sourced, processed and packaged from the Group’s quarries located in St. Bruno de Guigues, Québec. The silica sands produced by the Group are not sold for use as an abrasive material. Significant specialty sands and other products and services of Opta Minerals include filtration and industrial sands, construction sands, golf bunker sand, silica (not sold for loose abrasive applications), coloured sand, technical services and recycling of used and spent abrasives

The Group produces, manufactures, distributes and recycles silica-free abrasives and industrial minerals to the foundry, steel, roofing granule, marine/bridge cleaning and municipal water filtration industries and recycles inorganic materials. The patented and sole source abrasives produced by the Group are free of silica, making them a clean, efficient and recyclable alternative to traditional abrasives. Recycling operations are conducted at Waterdown, Ontario and Norfolk, Virginia. This is an important service that the Group provides to its customers which results in the reuse of materials that would otherwise be sent directly to landfills. The Group also continually focuses on new product innovation. Opta Minerals maintains laboratory facilities and works with local universities and research centres to evaluate product quality and develop new products.

Properties

The Group’s operations encompass and service much of the east coast of North America, with production facilities located in Louisiana, South Carolina, Virginia, Maryland, New York, Ontario and Québec, allowing the Group to maintain a strong customer base throughout North America by providing economic supply and timely delivery of the Group’s products and services to its customers. In addition to its manufacturing facilities, Opta Minerals also owns and operates distribution and packaging centres in Brantford, Ontario, Lachine and St-Germain de Grantham, Québec. The Group has built or acquired facilities at locations along the east coast of the United States where major shipbuilding, ship repair, bridge cleaning and roofing shingle production activities are concentrated. The Group’s multiple facilities allow for fast and economic service and have enabled them to broaden its silica-free abrasive and roofing granule product lines to supply wider markets and applications from these facilities.

The Temisca specialty sand operation located in St. Bruno de Guigues, Québec provides the Group with an economic, high-quality source of specialty sands for non-abrasive applications including water filtration applications, golf course bunkers and other commercial applications. Due to an unusual natural deposit of silica sand, strong quality control, extensive research and development and marketing efforts, Opta Minerals has effectively positioned itself in the markets it serves as a high-quality producer of specialty silica sand products.

For more details, please see Item 2-Properties.

Competition

The industry is characterized by a number of small, regionally-based niche companies with limited product lines tending to focus on geographically adjacent markets. Opta Minerals competition varies by product line, customer classification and geographic market.

Opta Minerals conducts business throughout North America with a focus on key regions including the Québec-Detroit corridor, New York, Virginia, Georgia, Florida and the Louisiana Gulf region, all of which are areas of high volume ship repairs and bridge cleaning activities. The Group is competitive in abrasive and value-added products in other areas such as Michigan, New Jersey and Ohio. Opta Minerals also competes against a variety of competitors servicing the foundry, steel, abrasive, roofing granule, water jet and filtration industries. Each of these product categories is normally served by as many as three competitors. Opta Minerals competes through a combination of exceptional product quality and customer service combined with competitive pricing in these markets.

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Suppliers

Opta Minerals purchases raw materials and resale products from approximately 850 suppliers. While the Group has several alternative sources of supply for many of the inputs it requires, it also has several key supplier relationships. Opta Minerals utilizes a number of exclusively sourced raw materials which provide high-quality and highly effective products including specular hematite, clays, beach and rock garnets, chromites and industrial specialty sands. Opta Minerals believes that it maintains good relationships with all of its key suppliers.

Opta Minerals obtains its key abrasive raw materials such as coal slag, copper slag, nickel slag, specular hematite and garnet, primarily from Canadian and U.S. mines and power plants. EbonyGrit, a product produced from copper slag is supplied exclusively by a Canadian mining and refining company. PowerBlast, a product produced from nickel slag is supplied exclusively by a Canadian company. Specular hematite reserves at the current mine supplier are estimated to be sufficient to supply the Group’s needs for many years. BlackBlast, a product produced from coal slag is supplied on an exclusive basis by U.S. power plants and other suppliers where the raw material is acceptable. Opta Minerals produces industrial garnet derived from a waste mining stream at its Keeseville, New York facility. In addition, the Company has an exclusive agreement with a mine in China to market its garnet in North America.

Regulation

Opta Minerals business primarily involves the handling of inorganic and mineral based materials. These types of materials are generally benign and do not give rise to environmental issues. Accordingly, to date there has been low potential for environmental liabilities to arise. Almost all of the Group’s environmental regulation is standard to the industry with the exception of certain permits required in Ontario and Virginia to recycle various types of solid waste. The Ontario Ministry of Environment has the right to inspect the Waterdown, Ontario site and review the results of third party monitoring and perform its own testing. Similar rights of inspection exist at the facility in Norfolk, Virginia. At both locations, Opta Minerals is subject to monthly reporting and periodic audits as well as having a financial bond in place with the respective governments should there be a contamination.

Since the formation of the business in 1995, Opta Minerals has been in material compliance with all applicable environmental legislation and has not been subject to any actions by regulatory authorities. Based on known existing conditions, all of the Group’s facilities are currently in material compliance with all environmental permitting requirements of the local authorities and are reviewed on an annual basis. These permits generally cover air and ground water at those facilities where applicable. Absent any currently unforeseen changes to applicable legislation, Opta Minerals anticipates that future costs relating to environmental compliance will not have a material adverse effect on its financial position.

Employees

The Opta Minerals Group has been successful in identifying, attracting and retaining talented employees with relevant technical and industry expertise. In particular, the Group has assembled an experienced management team with a diverse and complementary set of skills and experience, both within and from outside of the industry.

As of December 31, 2005 the Group had 108 employees including fourteen employees in sales and marketing, eleven in corporate administration and finance, seven in customer service, seven in engineering and plant management, four in research and development and quality control, three in purchasing and the remainder in production. This also includes ten seasonal employees for work related to the quarry operations in St. Bruno de Guigues, Québec.

Opta Minerals is a party to a collective agreement with the Teamsters Local Union No. 879 covering 15 employees in Waterdown, Ontario. The current three-year agreement expires in June 2008. Management of Opta Minerals considers relations with the union to be good. Opta Minerals has never experienced a labour disruption or work stoppage.

SUNOPTA BIOPROCESS GROUP

The Company has developed a steam explosion technology known as the “StakeTech System”, including process engineering and the required hardware.

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The patented SunOpta BioProcess System provides a method for the rapid and continuous auto hydrolysis pre-treatment of biomass under high temperatures and pressure. The suitable raw materials include wood chips, sugarcane bagasse, cereal straws and waste paper, all other agriculture residues and energy crops. In their natural state, these materials are not easily separated into their component parts. By processing with the addition of high-temperature 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.

This technology has been proven via application around the world and is currently focused by management on the treatment for biomass for cellulosic ethanol, food and pulping applications.

The SunOpta BioProcess Group business is not affected by seasonality.

MAJOR DEVELOPMENTS DURING 2005 - SUNOPTA BIOPROCESS GROUP

In August 2005 the SunOpta BioProcess Group signed a contract to supply its patented steam explosion equipment and related technology to Abener Energia S.A. for a plant to be built in Salamanca, Spain. This new facility will convert wheat straw into ethanol and is located adjacent to an existing wheat to ethanol plant.

The awarding of this contract followed an extensive development program carried out over the last eighteen months in SunOpta’s pilot plant and labs under the sponsorship and funding of Abengoa Bioenergy Research and Development, Inc. . The facility is forecast to be operational by November 2006.

The SunOpta BioProcess Group also delivered several Preliminary Engineering contracts for various clients in 2005. Work continues on the development of the SunOpta BioProcess system for food applications both with internal and external clients.

Competition

The Company believes the ability of SunOpta BioProcess Systems to operate continuously at high pressure presents advantages in terms of reducing chemical requirements, improving biomass conversion to fermentable sugars and value added components and providing a significant advantage within the industry that the technology is being marketed.

The Company’s success in marketing to industry will depend on the extent to which the SunOpta BioProcess System can be shown to have advantages over the technology of competing suppliers. These competing suppliers include Ahlstrom, Kvaerner, Metso and Andritz. The Company is aware of other groups that are attempting to develop and market new biomass conversion systems.

It is anticipated that competition from suppliers of alternative systems and equipment in targeted markets will be strong and that the potential advantages for the SunOpta BioProcess system will have to be continually 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 BioProcess business.

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

Regulation

SunOpta BioProcess 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

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or licenses of the Company’s technology will be made where the BioProcess System is but one part of a larger process, as for example in the manufacture of pulp or cellulosic ethanol. 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 SunOpta BioProcess System and/or appropriate the technology. To mitigate this risk, the normal business practice of the 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.

Financial Exposure Related to Bonding and Guarantees

To enter industrial markets, 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 endeavours 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

During 2005, research and development activities were related to client specific investigations and focused on the production of cellulosic ethanol, food applications and pulping applications.

Employees

The SunOpta BioProcess Group has 10 full time employees; 3 engaged in technical support, systems design, 3 in R&D, and 4 engaged in marketing, sales and engineering. Since the division subcontracts out the production of its equipment, it does not anticipate significantly increasing the size of its work force. The Group hired additional people in 2005 related to research, sales and marketing for cellulosic ethanol and food based applications.

CORPORATE SERVICES GROUP

The corporate office of SunOpta is located in owned premises in Brampton, Ontario. Eighteen 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 Opta Minerals property in Waterdown, Ontario.

Employees

As of December 31, 2005 the Company had 1,366 employees broken out by division below:

Divisions	Number of Employees
Food Group	1,230
Opta Minerals	108
SunOpta BioProcess and Corporate Services Group	28
Total	1,366

SunOpta Inc. 23 December 31, 2005 – 10-K

Item 1A. Risk Factors

Risks associated with rapid growth are detailed below.

The Company will continue to devote significant effort to increase returns on capital by improving its investment in working capital and capital projects with increased accountability and measurement.

Risks and Uncertainties

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. These risk factors could materially and adversely affect the Company’s future operating results and could cause actual events to differ materially from those described in forward-looking statements relating to the Company.

We Need Additional Capital to Maintain Current Growth Rates

Over the last seven years the Company has had a compounded annual revenue growth rate of 63%. Our ability to raise capital, through equity and/or debt financing, is directly related to our ability to continue to grow and improve returns from operations. Additional capital through equity financing may also result in additional dilution to our current shareholders and a decrease in our share price if we are unable to realize returns equal to or above our current rate of return. We will not be able to maintain our growth rate and our strategy as a consolidator within the natural and organic food industries without continued access to capital.

Exercise of Warrants and Stock Options, Participation in our Employee Stock Purchase Plan and Issuance of Additional Securities Could Dilute the Value of Our Common Shares

As of December 31, 2005, there are approximately 2,706,400 stock options outstanding to purchase Common Shares, with exercise prices ranging from $1.41 to $9.90 per Common Share. The exercise of these warrants and stock options could result in dilution in the value of our Common Shares and the voting power represented thereby. Furthermore, to the extent the holders of our warrants and stock options exercise such securities and then sell the Common Shares they receive upon exercise or upon the sale of common shares received as part of the employee stock purchase plan or the issuance of additional securities, our share price may decrease due to the additional amount of Common Shares available in the market. The subsequent sales of these shares could encourage short sales by our shareholders and others which could place further downward pressure on our share price. Moreover, the holders of our warrants and stock options may hedge their positions in our Common Shares by short selling our Common Shares, which could further adversely affect our stock price.

Consumer Preferences for Natural and Organic Food Products are Difficult to Predict and May Change

91% of our fiscal 2005 consolidated revenue was derived from the SunOpta Food Group. Our success depends, in part, on our ability to offer products that anticipate the tastes and dietary habits of consumers and appeal to their preferences on a timely and affordable basis. A significant shift in consumer demand away from our products or products that utilize our integrated ingredients, or our failure to maintain our current market position could reduce our sales, which could harm our business. Consumer trends change based on a number of possible factors, including nutritional values, such as a change in preference from fat free to reduced fat to no reduction in fat; and a shift in preference from organic to non-organic and from natural products to non-natural products. These changes could lead to, among other things, reduced demand and price decreases, which could have a material adverse effect on our business.

We Operate in a Highly Competitive Industry

We carry on businesses in highly competitive product and geographic markets in the U.S., Canada and various international markets. The SunOpta Grains and Foods Group, the SunOpta Ingredients Group and the SunOpta Fruit Group compete with large companies in the U.S. and various international commercial grain procurement marketers, major chemical companies with food ingredient divisions, other food ingredient companies, stabilizer companies and consumer food companies that also engage in the development and sale of food ingredients. The SunOpta Canadian Food Distribution Group competes against other organic and natural food distributors and conventional food distributors that provide specialty or high end packaged products. Many of these competitors

SunOpta Inc. 24 December 31, 2005 – 10-K

have financial resources and staff larger than ours and may be able to benefit from economies of scale, pricing advantages and greater resources to launch new products that compete with our offerings. We have little control over and cannot otherwise affect these competitive factors. If we are unable to effectively respond to these competitive factors or if the competition in any of our product markets results in price reductions or decreased demand for our products, our business, results of operations and financial condition will be materially impacted.

We Rely on Our Manufacturing Facilities

We own, manage and operate a number of manufacturing, processing and packaging facilities located throughout the U. S. and Canada. The SunOpta Food Group operates from twenty three processing facilities (fifteen owned, eight leased) in eight U.S. states and one Canadian province. The Opta Minerals Group operates from seven locations (three owned, four leased) located throughout the U. S. and Canada. The SunOpta BioProcess Group operates its facilities at our corporate location in Brampton, Ontario.

An interruption in or the loss of operations at one or more of these facilities, or the failure to maintain our labour force at one or more of these facilities, could delay or postpone production of our products, which could have a material adverse effect on our business, results of operations and financial condition until we could secure an alternate source of supply.

The Loss of Key Management or Our Inability to Attract and Retain Management Talent Could Adversely Affect our Business

Our future prospects depend to a significant extent upon the continued service of our key executives. Furthermore, our continued growth depends on our ability to identify, recruit and retain key management personnel. The competition for such employees is intense. We are also dependent on our ability to continue to attract, retain and motivate our sourcing, production, distribution, sales, marketing and other personnel.

We Rely on Our Ability to Manage Our Supply Chain Efficiently

Our supply chain is complex. We rely on third parties for our raw materials and for the manufacturing, processing and distribution of many of our products. The inability of any of these third parties to deliver or perform for us in a timely or cost-effective manner could cause our operating costs to rise and our margins to fall. Many of our products are perishable and require timely processing and transportation to our customers. Many of our products can only be stored for a limited amount of time before they spoil and cannot be sold. We must continuously monitor our inventory and product mix against forecasted demand, or risk having inadequate supplies to meet consumer demand as well as having too much inventory that may reach its expiration date. If we are unable to manage our supply chain efficiently and ensure that our products are available to meet consumer demand, our operating costs could increase and our margins could fall.

Volatility in the Prices of Raw Materials, Energy and Freight Logistics Could Increase Our Cost of Sales and Reduce Our Gross Margin

Raw materials used in the SunOpta Food Group and the Opta Minerals Group represent a significant portion of our cost of sales. Our cost to purchase these materials and services, such as organic grains and fruit, abrasive industrial minerals and natural gas, from our suppliers can fluctuate depending on many factors, including weather patterns, economic and political conditions and pricing volatility. In addition, we must compete with competitors having greater resources than us for limited supplies of these raw materials and services. If the cost of these materials and services increases due to any of the above factors, we may not be able to pass along the increased costs to our customers.

The SunOpta Food Group enters into exchange-traded commodity futures and options contracts to hedge its exposure to price fluctuations on grain transactions to the extent considered practicable for minimizing risk from market price fluctuations. Futures contracts used for hedging purposes are purchased and sold through regulated commodity exchanges. Inventories, however, may not be completely hedged, due in part to our assessment of our exposure from expected price fluctuations. Exchange purchase and sales contracts may expose us to risk in the event that a counter-party to a transaction is unable to fulfill its contractual obligation. We are unable to hedge 100% of the price risk of each transaction due to timing, availability of hedge contracts and third party credit risk. In addition, we have a risk of loss from hedge activity if a grower does not deliver the grain as scheduled. The Company also monitors the prices of natural gas and will from time to time lock in a percentage of its natural gas needs based on current prices and expected trends.

SunOpta Inc. 25 December 31, 2005 – 10-K

Technological Innovation by Competitors Could Make Our Products Less Competitive

Competitors include major chemical companies, other food ingredient companies and consumer food companies that also engage in the development and sale of food and food ingredients. Many of these companies are engaged in the development of texturizers and other food ingredients and food products and have introduced a number of products into the market. Existing products or products under development by our competitors could prove to be more effective or less costly than any products which have been or are being developed by us.

We Rely on Protection of Our Intellectual Property and Proprietary Rights

We and particularly the SunOpta Food Group and SunOpta BioProcess Group depend, in part, on our ability to protect intellectual property rights. We rely primarily on patent, copyright, trademark and trade secret laws to protect our proprietary technologies. The failure of any patents or other intellectual property rights to provide protection to our technologies would make it easier for our competitors to offer similar products, which could result in lower sales or gross margins.

The SunOpta Food Group has developed a number of new ingredients and alternatives to accommodate new product adaptations of these and other ingredients into various food items. The nature of a number of the SunOpta Food Group’s products and processes requires us to create and maintain a number of patents and trade secrets. The SunOpta Food Group’s policy is to protect its technology by, among other things, filing patent applications for technology relating to the development of its business in the U.S. and in selected foreign jurisdictions.

Our trademarks and brand names are registered in the United States, Canada and other jurisdictions and we intend to keep these filings current and seek protection for new trademarks to the extent consistent with business needs. We rely on trade secrets and proprietary know-how and confidentiality agreements to protect certain of the technologies and processes used by the Food Group.

In addition, the SunOpta BioProcess Group holds a number of patents on its steam explosion process. We recognize that there exists a threat of others attempting to copy our proprietary steam explosion technology. To mitigate this risk, the normal business practice of this group includes the signing of confidentiality agreements with all parties to which confidential information is supplied including all customers and licensees. We also hold several patents on our equipment and process technologies.

We are Subject to Substantial Environmental Regulation and Policies

We are, and expect to continue to be, subject to substantial federal, state, provincial and local environmental regulation. There are specific regulations governing the recycling of solid waste material regulated by the Ontario Ministry of Environment and Energy and the Commonwealth of Virginia, Department of Environment Quality. Some of the key regulations include:

•

Air Quality – regulated by Environmental Protection Agency (EPA) and certain city/state air pollution control groups. Emission reports are filed annually;

•

Waste Treatment/Disposal – solid waste is either disposed of by a third-party or in some cases the Company has a permit to haul and apply the sludge to land. Agreements exist with local city sewer districts to treat waste at specified levels of biochemical oxygen demand (BOD) and total suspended solids (TSS);

•

Sewer – agreements with the local city sewer districts to treat waste as specified limits of BOD and TSS, which requires weekly/monthly reporting as well as annual inspection; and

•

Hazardous Chemicals – various reports are filed with local city/state emergency response agencies to identify potential hazardous toxic chemicals being used, including reports filed with the Department of Public Safety Emergency Response Commission in Minnesota and the Kentucky Emergency Response Commission.

Permits are required from various state, provincial and local authorities related to air quality, storm water discharge, solid waste, land spreading and hazardous waste.

In the event that our safety procedures for handling and disposing of potentially hazardous materials in certain of our businesses were to fail, we could be held liable for any damages that result and any such liability could exceed our resources. We may be required to incur significant costs to comply with environmental laws and regulations in the future. In addition, changes to environmental regulations may require us to modify our existing plant and processing facilities and could significantly increase the cost of those operations.

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The foregoing environmental regulations, as well as others common to the industries in which we participate, can present delays and costs that can adversely affect business development and growth. If we fail to comply with applicable laws and regulations, we may be subject to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on our business, results of operations and financial condition. In addition, any changes to current regulations may impact the development, manufacturing and marketing of our products, and may have a negative impact on our future results.

The SunOpta Food Group Is Subject to Significant Food Regulations

The SunOpta Food Group is affected by state and federal fertilizer, pesticide, food processing, grain buying and warehousing, and wholesale food regulations. Government-sponsored price supports and acreage set aside programs are two examples of policies that may affect the SunOpta Food Group. The SunOpta Food Group is currently in compliance with all state and federal regulations. Because the Food Group is involved in the manufacture, supply, processing and marketing of organic seed and food products, it is voluntarily subject to certain organic quality assurance standards.

Certain food ingredient products are regulated under the 1958 Food Additive Amendments to the Federal Food, Drug and Cosmetic Act of 1938 (FDCA), as administered by the United States Food and Drug Administration (FDA). Under the FDCA, pre-marketing approval by the FDA is required for the sale of a food ingredient which is a food additive unless the substance is Generally Recognized As Safe (GRAS) under the conditions of its intended use by qualified experts in food safety. We believe that most products for which the Food Group has retained commercial rights are GRAS. However, such status cannot be determined until actual formulations and uses are finalized. As a result, the Food Group may be adversely impacted if the FDA determines that our food ingredient products do not meet the criteria for GRAS.

In December 2000, the USDA adopted regulations with respect to a national organic labeling and certification program which became fully effective in October 2002. These regulations, among other things, set forth the minimum standards producers must meet in order to have their products labeled as “certified organic.” We currently manufacture and distribute a number of organic products that are covered by these new regulations. While we believe our products and our supply chain are in compliance with these regulations, changes to food regulations may increase our costs to remain in compliance. In addition, in January 2001, the FDA proposed new policy guidelines regarding the labeling of genetically engineered foods. These guidelines, if adopted, could require us to modify the labeling of our products, which could affect the sales of our products and thus harm our business. We could lose our “organic” certification if a facility becomes contaminated with non-organic materials or if we do not use raw materials that are certified organic. The loss of our “organic” certifications could materially harm our business, results of operations and financial condition.

Product Liability Suits, if Brought, Could Have a Material Adverse Effect on Our Business

As a manufacturer and marketer of natural and organic food products and environmental mineral products, we are subject to the risk of claims for product liability. If a product liability claim exceeding our insurance coverage were to be successfully asserted against us, it could materially harm our business.

Acceptance of StakeTech Steam Explosion Technology

The SunOpta Bioprocess Group’s StakeTech Steam Explosion technology 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 Group will depend upon its ability to promote commercial acceptance of it’s steam explosion technology and related biomass process solutions.

We Are Subject to Financial Exposure Related to Bonding and Guarantees

For the SunOpta BioProcess Group to enter international markets, we expect to have to provide substantial performance guarantees in the form of process guarantees and equipment guarantees. These guarantees will need to be backed by bank guarantees and/or surety bonds. We endeavor to reduce the associated risks, however there will always remain a possibility that our guarantees or bonds could be called, rightfully or wrongfully and/or that the equipment supplied fails to meet the guarantees and warranties provided resulting in potential financial losses.

SunOpta Inc. 27 December 31, 2005 – 10-K

We Are Subject to Dividend Restrictions and Potential Withholding Taxes on Dividends

We have not paid dividends on our Common Shares since our inception and have used available cash resources to fund growth. Moreover, we are precluded under the terms of various agreements with our creditors from paying dividends without approval from certain creditors. It is our intention to retain future earnings to fund growth. We will consider paying dividends on our Common Shares in the future when circumstances permit, having regard to, among other things, our earnings, cash flow and financial requirements, as well as relevant legal and business considerations. Accordingly, investors should not expect to receive a return on investment in our Common Shares through the payment of dividends in the foreseeable future and may not realize a return on investment even if they sell their shares. Any future payment of dividends to holders of our Common Shares will depend on decisions that will be made by the Board of Directors and will depend on then existing conditions, including our financial condition, contractual restrictions, capital requirements and business prospects. Also, if we pay dividends, the receipt of cash dividends by United States shareholders from a Canadian corporation may be subject to a 5% to 15% Canadian withholding tax.

Loss of Our Key Customer Could Materially Reduce Revenues and Earnings

We have no customers that represent over 10% of annualized revenues in 2005. The loss or cancellation of business any of our other larger customers could materially and adversely affect our business, financial condition or results of operations.

Our Operating Results and Share Price are Subject to Significant Volatility

Our net sales and operating results may vary significantly from period to period due to:

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changes in our operating expenses;

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management’s ability to execute our business and growth strategies;

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personnel changes;

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supply shortages;

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general economic conditions;

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changes in customer preferences and demands for natural and organic food products;

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volatility in commodity prices resulting from poor growing conditions, natural disasters or otherwise; and

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future acquisitions, particularly in periods immediately following the consummation of such acquisition transactions while the operations of the acquired businesses are being integrated into our operations.

In addition, our share price is more volatile than other larger public companies.

Announcements regarding:

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fluctuations in financial performance from period to period;

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mergers and acquisitions;

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strategic partnerships or arrangements;

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litigation and governmental inquiries;

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changes in governmental regulation and policy;

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patents or proprietary rights;

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changes in consumer preferences and demand;

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new financings; and

•

general market conditions

may have a significant impact on our share price. Higher volatility increases the chance of larger than normal price swings which reduces predictability in the share value of our stock and could impair investment decisions. In addition, price and volume trading volatility in the U.S. stock markets can have a substantial effect on our share price, frequently for reasons other than our operating performance. These broad market fluctuations could adversely affect the market price of our Common Shares.

SunOpta Inc. 28 December 31, 2005 – 10-K

Fluctuations in Exchange Rates, Interest Rates and Certain Commodities Could Adversely Affect Our Results of Operations Financial Condition and Liquidity

We are exposed to foreign exchange rate fluctuations as the financial results of our Canadian Corporate office and our Canadian subsidiaries are translated into U.S. dollars on consolidation and to interest rate risk as a large percentage of our term debt is at variable rates. See Item 7A for a quantitative and qualitative disclose about these risks.

Debt Financing

The credit facility that the Company has with a syndicate of banks and life insurance companies contain restrictive covenants that limit the discretion of the Company’s management with respect to certain business matters. These covenants place restrictions on, among other things, the ability of the Company to incur additional indebtedness, to create other security interests, to complete a liquidation, dissolution, merger, amalgamation or reorganization, to make certain distributions or make certain payments, investments, loans and guarantees and to sell or otherwise dispose of certain assets.

The credit facility also includes covenants requiring the Company to satisfy certain financial ratios and tests. A failure of the Company to comply with these obligations could result in an event of default which, if not cured or waived, could permit the acceleration of the relevant indebtedness. There can be no assurance that, if any indebtedness under the credit facility were to be accelerated, the Company’s assets would be sufficient to repay in full that indebtedness. Furthermore, prior to the expiry of the credit facility, the Company may be required to refinance its short-term debt. If the Company is required to replace the credit facility with new debt on less favourable terms, or if the Company cannot refinance its short-term debt, the Company may be adversely impacted.

We May Not Be Able to Effectively Manage Our Growth and Integrate Acquired Companies

Our growth strategy inherently assumes that we will be able to identify suitable acquisition candidates on terms acceptable to us and that these acquisitions, if pursued and completed, will be integrated successfully. Our ability to effectively integrate current and future acquisitions, including our ability to realize potentially available marketing opportunities and cost savings in a timely and efficient manner will have a direct impact on our future results. We may encounter problems in connection with the integration of any new businesses, such as:

•

integration of an acquired company’s products into our product mix;

•

amount of cost savings that may be realized as the result of our integration of an acquired product or business;

•

unanticipated quality and production issues with acquired products;

•

adverse effects on business relationships with our suppliers and customers;

•

diversion of management attention;

•

difficulty with personnel and loss of key employees;

•

implementation of an integrated enterprise wide accounting and information system;

•

compatibility of financial control and information systems;

•

exchange rate risk with respect to our acquisitions in Canada.

Item 1B. Unresolved Staff Comments - None

SunOpta Inc. 29 December 31, 2005 – 10-K

Item 2. Properties

The Company with the exception of Opta Minerals, operates from the following locations which are owned unless otherwise noted:

Location	State/Province	Group/Sub Group	Facility Description
Brampton	Ontario	Corporate Head Office/BioProcess	Corporate head office and BioProcess facilities
Minnetonka (Lease) (1)	Minnesota	Corporate Services	IT Corporate
Hope	Minnesota	SunOpta Grains and Foods	Head office and grain processing
Alexandria	Minnesota	SunOpta Grains and Foods	Aseptic packaging
Wahpeton	North Dakota	SunOpta Grains and Foods	Processing, warehouse and distribution
Blooming Prairie	Minnesota	SunOpta Grains and Foods	Grain storage
Snover	Michigan	SunOpta Grains and Foods	Sales office
Cresco	Iowa	SunOpta Grains and Foods	Milling
Breckenridge	Minnesota	SunOpta Grains and Foods	Grain processing and distribution
Goodland	Kansas	SunOpta Grains and Foods	Grain processing and distribution
Edson (Land Lease) (2)	Kansas	SunOpta Grains and Foods	Grain processing and distribution
Moorehead	Minnesota	SunOpta Grains and Foods	Grain processing and distribution
Bedford	Massachusetts	SunOpta Ingredients	Head office and development center
Louisville (Leased) (3)	Kentucky	SunOpta Ingredients	Oat fiber production
Cedar Rapids	Iowa	SunOpta Ingredients	Oat fiber production
Cambridge	Minnesota	SunOpta Ingredients	Oat fiber production
Alexandria	Minnesota	SunOpta Ingredients	Ingredient processing
Bertha	Minnesota	SunOpta Ingredients	Drying and blending
Fosston	Minnesota	SunOpta Ingredients	Processing and drying
Afton	Wyoming	SunOpta Ingredients	Soymilk processing
Galesburg	Illinois	SunOpta Ingredients	Starch based production and ingredients blending
Buena Park (Leased) (4)	California	SunOpta Fruit Group	Processing, warehouse and distribution and Fruit Group head office
Aptos (Leased) (5)	California	SunOpta Fruit Group	Head office Organic Ingredients
Summerland (2 Leased) (6)	British Columbia	SunOpta Fruit Group	Head office and processing facility
Omak (Leased) (7)	Washington	SunOpta Fruit Group	Processing, warehouse and distribution
South Gate (Leased) (8)	California	SunOpta Fruit Group	Processing, warehouse and distribution
Salinas (Leased) (9)	California	SunOpta Fruit Group	Processing, warehouse and distribution
Richmond (Leased) (10)	British Columbia	SunOpta Cdn Food Distribution	Distribution Group head office, distribution and warehousing
Toronto (Leased) (11)	Ontario	SunOpta Cdn Food Distribution	Office, distribution and warehouse
Toronto (Leased) (12)	Ontario	SunOpta Cdn Food Distribution	Office, distribution and warehouse
Burnaby (Leased) (13)	British Columbia	SunOpta Cdn Food Distribution	Office, distribution and warehousing
Leonard (Leased) (14)	Quebec	SunOpta Cdn Food Distribution	Distribution
St. Laurent (Leased) (15)	Quebec	SunOpta Cdn Food Distribution	Distribution

(1) Lease has an expiry date of April 2009.	(2) Lease has an expiry date of December 2006.
(3) Lease has an expiry date of July 2011.	(4) Lease has an expiry date of December 2009.
(5) Lease has an expiry date of December 2006.	(6) Leases have an expiry date of November 2007and September 2016 respectively.
(7) Lease has an expiry date of December 2008.	(8) Lease has an expiry date of December 2016.
(9) Lease has an expiry date of December 2009.	(10) Lease has an expiry date of September 2007.
(11) Lease has an expiry date of January 2010.	(12) Lease has an expiry date of July 2008.
(13) Lease has an expiry date of August 2009.	(14) Lease has an expiry date of December 2006.
(15) Lease has an expiry date of June 2007.

SunOpta Inc. 30 December 31, 2005 – 10-K

Opta Minerals operates from the following major locations which are owned unless otherwise noted:

Location	State/Province	Group	Description
Waterdown	Ontario	Opta Minerals	Group head office, processing and distribution
Brantford (1)	Ontario	Opta Minerals	Distribution and packaging center
Lachine	Quebec	Opta Minerals	Distribution center
Bruno de Guiges	Quebec	Opta Minerals	Specialty sands
New Orleans (Leased) (2)	Louisiana	Opta Minerals	Abrasives processing
Norfolk (Leased) (3)	Virginia	Opta Minerals	Processing and distribution
Keeseville (Leased) (4)	New York	Opta Minerals	Garnet processing and distribution
Baltimore (Leased) (5)	Maryland	Opta Minerals	Abrasives processing
Attica (6)	New York	Opta Minerals	Abrasives processing
West Columbia	South Carolina	Opta Minerals	Abrasives processing
St-Germain de Grantham	Quebec	Opta Minerals	Distribution and packaging center

(1) Lease has an expiry date of April 2010.

(2) Lease has an expiry date of December 2006.

(3) Lease has an expiry date of October 2010 and an option to purchase for $2 million before October 2006.

(4) Lease has an expiry date of September 2010.

(5) Lease has an expiry date of December 2008.

(6) Lease has an expiry date of May 2015.

SunOpta BioProcess Group and Executive Offices

The Company’s Executive Head Office and SunOpta BioProcess Group operations are located at 2838 Bovaird Drive West, Brampton, Ontario, a property owned by the Company.

Item 3. Legal Proceedings

One of the Company’s subsidiaries, SunRich LLC (formerly SunRich Inc.) filed a claim against a supplier for failure to adhere to the terms of a contract. On July 29, 2004 a judgement was awarded in favour of SunRich by a federal court jury in the United States District Court for the District of Oregon. The supplier countersued the Company for breach of contract however, as part of this judgement these counter-claims were dismissed. In the fall of 2005, the Court denied the Company’s application to recover attorney’s fees of approximately $862,000 including costs and awarded a sum of $175,000. During the fourth quarter the Company recorded a charge for the unprovided component of these fees of $400,000. Included within other assets is a receivable of $2,405,000 representing the initial, judgement, and interest and the recovery of legal fees awarded with respect to this suit. The supplier filed an appeal against this judgement which management and legal counsel believe is without merit. The appeal hearing is expected to be held in 2006.

In December 2005, the Company was notified of service of a lawsuit, by an individual farmer in the State of New York, for breach of contract, and other grounds, for an amount of approximately $830,000. While the parties are in the process of considering mediation, management believes that the claim is grossly overstated, and is prepared to defend the lawsuit on various grounds. The Company believes that the outcome of this lawsuit will not materially affect the financial position or the results of the Company.

During the year, the Company was sued by a landlord of one of its leased facilities for non-payment of rent and early lease cancellation. The company has countersued for non-performance by the landlord and damages and believes the ultimate resolution of this matter will not have a material effect on the financial statements.

In addition, various claims and potential claims arising in the normal course of business are pending against the Company. It is the opinion of management that these claims or potential claims are without merit and the amount of potential liability, if any, to the Company is not determinable. Management believes the final determination of these claims or potential claims will not materially affect the financial position or results of the Company.

SunOpta Inc. 31 December 31, 2005 – 10-K

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, 2005.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Equity Securities

The Company’s common shares trade in U.S.$ on The NASDAQ National Market under the symbol STKL, and in Cdn$ under the symbol SOY on the Toronto Stock Exchange. Effective February 8, 2006 SunOpta received approval to move from the NASDAQ Small Cap Market to the NASDAQ National Market. The following table indicates the high and low bid prices for SunOpta’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 (U.S. Dollars)

2005	HIGH	LOW
First Quarter	$7.59	$4.86
Second Quarter	$5.91	$4.27
Third Quarter	$6.67	$4.85
Fourth Quarter	$5.74	$4.43
2004	HIGH	LOW
First Quarter	$11.05	$8.25
Second Quarter	$11.45	$7.08
Third Quarter	$8.85	$5.25
Fourth Quarter	$8.00	$5.85

The following table indicates the high and low bid prices for SunOpta’s common shares for each quarterly period since the company’s listing on the Toronto Stock Exchange.

Trade Prices on TSX (Canadian Dollars)

2005	HIGH	LOW
First Quarter	$9.17	$5.90
Second Quarter	$7.25	$5.33
Third Quarter	$7.99	$5.65
Fourth Quarter	$6.64	$5.21
2004	HIGH	LOW
First Quarter	$14.52	$10.47
Second Quarter	$14.85	$9.52
Third Quarter	$11.88	$6.90
Fourth Quarter	$10.20	$7.00

SunOpta Inc. 32 December 31, 2005 – 10-K

At December 31, 2005, the Company has approximately 619 shareholders of record.

SunOpta 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 SunOpta, may be subject to Canadian withholding tax.

Issuance of securities and use of proceeds

Public and Private Offerings

On August 28, 2003, the Company issued 7,500,000 common shares at a price of $7.00 per common share, as part of a public offering for gross proceeds of $52,500,000. The Company incurred $1,496,000 in share issuance costs, (net of tax) in relation to this offering.

On August 29, 2003, the Company issued 285,714 common shares at a price of $7.00 per common share, pursuant to a private placement with a significant shareholder, for proceeds of $2,000,000.

Options and warrants exercised during the year

During the year ended December 31, 2005, employees and directors exercised 276,640 (2004 - 232,437; 2003 -1,276,705) common share options and an equal number of common shares were issued for net proceeds of $370,576 (2004 - $777,000; 2003 - $2,257,000).

During the year ended December 31, 2005 no warrants (2004 - 3,206,350; 2003 -1,461,750) were exercised and an equal number of common shares were issued for net proceeds of $nil (2004 - $7,907,740; 2003 -$2,622,000).

During the year ended December 31, 2005, 123,819 (2004 - 76,329; 2003 – nil) shares were issued as part of the employee stock purchase plan for net proceeds of $576,013 (2004 - $438,850; 2003 – $nil).

During the year ended December 31, 2005, 832,625 options were granted at exercise prices ranging from $4.52 to $6.81. (2004 – 588,775; $5.96 to $$7.69); (2003 – 1,152,450; $3.72 to $9.90).

In February 2005 the Opta Minerals, Inc., a reporting segment of SunOpta completed an initial public offering with net proceeds of approximately $14,294,000 (Cdn $17,496,000) including the over-allotment option granted to the underwriters that was executed in March 2005.

Repurchase of securities during the year

During the second quarter of 2005, 33,000 shares were bought back from shareholders for a net cost of $156,978.

Use of Proceeds

The funds raised through the exercise of options and warrants were used for general business purposes including working capital, debt repayment and capital expenditures in existing businesses and for the Food Group acquisitions completed in 2005. The funds raised in 2005 by the Opta Minerals IPO were and will continue to be used by Opta Minerals Inc. for strategic acquisition in new products, technologies, and businesses that expand or compliment Opta Minerals business and for general corporate purposes. Opta Minerals also repaid approximately $13,052,000 (Cdn $15,968,000) of intercompany loans to SunOpta.

SunOpta Inc. 33 December 31, 2005 – 10-K

Item 6. Selected Financial Data

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

Summary (expressed in thousands of U.S. dollars, except per share amounts)

United States GAAP

	2005	2004	2003	2002	2001
Revenues	426,101	306,251	199,099	120,898	92,362
Net earnings	13,558	11,016	8,966	3,701	(231)
Total assets	301,482	220,172	173,756	114,929	79,708
Long-term debt (including current portion)	59,056	35,822	25,036	36,656	16,648
Other long-term obligations (including current portion)	1,195	2,780	2,331	5,056	4,487
Basic earnings (loss) per share	$0.24	$0.20	$0.19	$0.09	$(0.01)
Diluted earnings (loss) per share	$0.24	$0.20	$0.18	$0.09	$(0.01)
Cash dividends	-	-	-	-	-

Exchange rates (U.S. GAAP)

Period end	1.1630	1.2020	1.2965	1.5776	1.5490
Average rate	1.2114	1.3013	1.5703	1.5703	1.4852

Canadian GAAP

	2005	2004	2003	2002	2001
Revenues	426,101	306,251	199,099	120,898	89,822
Net earnings	8,077	9,730	8,697	3,766	19
Total assets	301,482	220,172	173,756	115,287	80,061
Long-term debt (including current portion)	59,056	35,822	25,036	36,656	16,648
Other long-term obligations (including current portion)	1,195	2,780	2,331	5,056	4,487
Basic earnings per share	$0.14	$0.18	$0.19	$0.09	$0.00
Diluted earnings per share	$0.14	$0.18	$0.18	$0.09	$0.00
Cash dividends	-	-	-	-	-

Note: The above table for the year 2001 have been converted from Canadian dollars to U.S. dollars at a rate of convenience of $1.00 U.S. to $1.5928 CDN.

SunOpta Inc. 34 December 31, 2005 – 10-K

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

Overview

The Company’s 2005 Consolidated Financial Statements include the results of the organization’s three principal operating groups: the SunOpta Food Group (Food Group) accounting for approximately 91% of 2005 revenues, processes, packages and distributes a wide range of natural, organic and specialty food products via its vertically integrated operations with a focus on soy, oat fiber, sunflower, fruit and natural and organic food products; Opta Minerals Inc. (Opta Minerals) with approximately 8% of 2005 revenues, processes, distributes and recycles silica free loose abrasives, industrial minerals, specialty sands and related products and the SunOpta BioProcess Group (formerly StakeTech Steam Explosion Group) accounting for approximately 1% of 2005 revenues, markets proprietary processing technology with significant licensing and application potential in the pulp, food processing and bio-fuel industries. All operating groups are growth oriented, ethical businesses, focused on environmental responsibility and the health and well being of its communities.

During the year, the Company realigned certain operations and updated the names of two operating groups to better reflect their integration within the SunOpta organization. The SunOpta Grains and Soy and Packaged Products Groups have been consolidated and now operate as the SunOpta Grains and Goods Group. In hand with this change the Company transferred the operations of the Kettle Valley Dried Fruit business to the SunOpta Fruit Group, formed during the third quarter of 2005. In addition, the former StakeTech Steam Explosion Group is now identified as the SunOpta BioProcess Group, reflecting the wide range of applications and markets being served by this Group. This Group will continue to be reported as per current practice.

Within the SunOpta Food Group, the Grains and Foods Group represents the foundation of the group and specializes in bringing a number of identity preserved, non-genetically modified and organic grains and related agronomic services to market with a core focus in soy, sunflower, corn and rice. This Group also includes an aseptic packaged products business focused on the production of soymilk and other beverage products and a healthy convenience business focused on roasting and packaging of soy, corn and sunflower products; SunOpta Ingredients Group (Ingredients Group), specializes in the technical processing of specialty food ingredients, with a focus on non-genetically modified, natural, functional and organic offerings; SunOpta Fruit (Fruit Group) specializes in the supply of frozen organic and natural fruit-based products to the private label, food service and industrial markets, the sourcing and supply of private label organic fruits and vegetables from worldwide growers and a healthy convenience food business specialized in private label and branded apple based fruit bars and leathers: and finally, the Canadian Food Distribution Group (Distribution Group) a Canadian national natural, organic, kosher and specialty food distribution network. The results of operations for the expanded reporting segments have been disclosed for 2005 and 2004, but 2003 results have not been expanded due to reporting constraints.

The Management’s Discussion and Analysis (MD&A), detailed below, is presented in five parts, Critical Accounting Estimates, Results of Operations for 2005 versus 2004 (including supplemental segmented information) and 2004 versus 2003, Recent Accounting Developments, Liquidity and Capital Resources, Business and Financial Outlook and Risks and Uncertainties, and should be read in conjunction with the December 31, 2005 Consolidated Financial Statements and accompanying notes.

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, related revenues and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. The estimates and assumptions made require judgment on the part of management and are based on the Company’s historical experience and various other factors that are believed to be reasonable in the circumstances. Management continually evaluates the information that forms the basis of its estimates and assumptions as the business of the Company and the business environment generally changes. The use of estimates is pervasive throughout the Company’s financial statements. The following are the accounting estimates which management believes to be most important to the business of the Company.

SunOpta Inc. 35 December 31, 2005 – 10-K

Revenue recognition

The Company recognizes revenue at the time of delivery of the product or service and when all of the following have occurred: a sales agreement is in place, price is fixed or determinable, and collection is reasonably assured. Details of specific recognition by group are as follows:

i) SunOpta Food Group

Grain revenues are recorded when title and possession of the product is transferred to the customer. Possession is transferred to the customer at the time of shipment from our facility or at the time of delivery to a specified destination depending on the terms of the sale. Revenues from custom processing services are recorded upon provision of services and completion of quality testing. All other Food Group revenues are recognized when title is transferred upon the shipment of product or at the time the service is provided to the customer.

ii) Opta Minerals Group

Revenues from the sale of silica free loose abrasives, industrial minerals, specialty sands and related products are recognized upon the sale and shipment of the related minerals. Revenues from recycling activities are recognized upon the sale and shipment or the disposal of non-hazardous material received.

iii) SunOpta BioProcess Group

The percentage of completion method is used to account for significant contracts when related costs can be reasonably estimated. The Company uses costs or hours incurred to date as a percentage of total expected costs or hours to measure the extent of progress towards completion. License fees related to the right to sell the Company’s technologies are recorded as revenues over the term of the license, when collectibility is reasonably assured.

Accounts Receivable

The Company’s accounts receivable primarily includes amounts due from its customers. The carrying value of each account is carefully monitored with a view to assessing the likelihood of collection. An allowance for doubtful accounts is provided for as an estimate of losses that could result from customers defaulting on their obligation to the Company. In assessing the amount of reserve required, a number of factors are considered including the age of the account, the credit worthiness of the customer, payment terms, the customer’s historical payment history and general economic conditions. Because the amount of the reserve is an estimate, the actual amount collected could differ from the carrying value of the amount receivable. Note 3 of the 2005 Consolidated Financial Statements provides an analysis of the movements in the allowance for doubtful accounts.

Inventory

Inventory is the Company’s largest current asset. The Company’s inventory consists primarily of raw materials and finished goods held for sale. Inventories are valued at the lower of cost, valued on a first-in, first-out basis, or estimate net realizable value except certain grain inventories that are carried at market value. SunOpta assesses the net realizable value of its inventory on a regular basis by reviewing, on an item-by-item basis, the realizable value of its inventory, net of anticipated selling costs. If it is management’s judgment that the selling price of an item must be lowered below its cost in order for it to be sold, then the carrying value of the related inventory is written down to the net realizable value. A number of factors would be taken into consideration in assessing the net realizable value including the quantity on hand, age and expiration, historical sales, consumer demand and preferences. Depending on market conditions, the actual amount received on sale could differ from management’s estimate.

Impairment of Goodwill & Other Intangible Assets

In accordance with FASB Statement No. 142, Goodwill and Other Intangible Assets (‘FASB 142’), the Company evaluates its goodwill for impairment on an annual basis or whenever indicators of impairment exist. FASB 142 requires that if the carrying value of a reporting unit for which goodwill exists exceeds its fair value, an impairment loss is recognized to the extent that the carrying value of the reporting unit goodwill exceeds the “implied fair value” of reporting unit goodwill.

SunOpta Inc. 36 December 31, 2005 – 10-K

As discussed in the notes to the financial statements, the Company has evaluated its goodwill for impairment and has determined that the fair value of the reporting units exceed their carrying value, and as a result no impairment of goodwill has been recorded. Goodwill of $42,429,000 is recorded in the financial statements as at December 31, 2005.

During the year, the Company impaired goodwill and a trademark in the amount of $185,000 primarily due to the exit of certain businesses.

In 2004 the Company impaired trademarks with a pre-tax value of $2,250,000 relating to the acquisition of First Light Foods in 2001. In the fourth quarter of 2004 the Company made the decision to focus all future soy and rice shelf-stable beverage packaging efforts in supplying existing customers only and to market aseptic packaging capabilities to the rapidly growing private label market. The private label market in North America has grown substantially in recent years as retailers recognize the benefit of generating consumer loyalty with an in-house brand. As a result, the Company has de-emphasized the use of brands in the soy and rice shelf-stable beverage market, and have written-off the value of these trademarks recorded on the balance sheet.

Accrued Expenses and Other Assets

The Company is constantly required to make estimates of future payments that will be made and received which relate to current and future accounting periods. These estimates cover items such as accrued but unpaid wages and bonuses, estimates of capital taxes and estimates of amounts receivable under legal suits. In establishing appropriate accruals and receivable balances, management must make judgements regarding the amount of the disbursement or receipts that will ultimately be incurred or received. In making such assessments, management uses historical experience as well as any other special circumstances surrounding a particular item. The actual amount paid or received could differ from management’s estimate.

Income Taxes

The Company is liable for income taxes in the United States and Canada. In making an estimate of its income tax liability the Company must first make an assessment of which items of income and expense are taxable in a particular jurisdiction. This process involves a determination of the amount of taxes currently payable as well as the assessment of the effect of temporary timing differences resulting from different treatment of items for accounting and tax purposes. These differences in the timing of the recognition of income or the deductibility of expenses result in deferred income tax balances that are recorded as assets or liabilities as the case may be on the Company’s balance sheet. The Company also makes an estimate on the amount of valuation allowance to maintain relating to loss carry forwards and other balances that can be used to reduce future taxes payable. Management assesses the likelihood of the ultimate realization of these tax assets by looking at the relative size of the tax assets in relation to the profitability of the businesses and the jurisdiction to which they can be applied to, the number of years based on management’s estimate it will take to use the tax assets and any other special circumstances. If different judgements had been used, the Company’s income tax liability could have been different from the amount recorded. In addition, the taxing authorities of those jurisdictions upon audit may not agree with the Company’s assessment. Note 12 of the 2005 Consolidated Financial Statements provides an analysis of the movements in the valuation allowance.

Results of Operations

Change to U.S. GAAP

As of January 1, 2004, SunOpta changed the basis of financial statement preparation from generally accepted accounting principles in Canada to those generally accepted in the United States. This change was made as a majority of the Company’s operations and shareholders are located in the U.S. As a result of this change comparative financial statement balances prior to January 1, 2004 and related notes have been amended to reflect the change to U.S. GAAP. Note 17 to the Consolidated Financial Statements reconciles differences between U.S. and Canadian GAAP.

SunOpta Inc. 37 December 31, 2005 – 10-K

2005 Operations Compared With 2004 Operations

Certain prior year figures have been adjusted to conform with the current year presentation and realignment of segmented reporting as noted above.

Consolidated

	Dec 31, 2005	Dec 31, 2004	Change	Change
	$	$	$	%
Revenue
SunOpta Food Group	386,541,000	272,722,000	113,819,000	41.7%
Opta Minerals	34,659,000	32,242,000	2,417,000	7.5%
SunOpta BioProcess & Corporate	4,901,000	1,287,000	3,614,000	280.8%
Total Revenue	426,101,000	306,251,000	119,850,000	39.1%

Operating Income ¹
SunOpta Food Group	16,245,000	14,625,000	1,620,000	11.1%
Opta Minerals	3,808,000	3,957,000	(149,000)	(3.8)%
SunOpta BioProcess & Corporate	(3,505,000)	(2,819,000)	(686,000)	24.3%
Total Operating Income	16,548,000	15,763,000	785,000	5.0%

Interest Expense	3,417,000	1,522,000	1,895,000	124.5%
Other income (expense), net	3,571,000	(12,000)	3,583,000
Provision for income taxes	2,566,000	3,139,000	(573,000)	(18.3%)
Minority Interest	578,000	74,000	504,000	681%
Net earnings	13,558,000	11,016,000	2,542,000	23.1%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

Revenues for the year increased 39.1% to $426,101,000 based on internal growth of 13.5% or $50,673,000 and acquisitions of $69,177,000. Please note that internal growth includes growth on base business plus growth on acquisitions from the date of acquisition over the previous year. Revenue was $122,070,000 in the fourth quarter, representing an increase of 47.7% versus 2004 and the highest quarter in the Company’s history. Internal growth for the fourth quarter was 18.3%.

Operating income increased to $16,548,000, representing an increase of 5.0% versus fiscal 2004. Growth in operating income lagged behind revenue growth due to a number of factors including the downturn in fiber sales due to the dramatic decline in demand for fiber for low-carb diet applications, integration, supply and competitive issues affecting the Canadian Food Distribution Group and increased freight and energy costs across all businesses. Further details on revenue and operating income are provided below by operating group.

Interest expense increased in 2005 due to increased debt including operating lines of approximately $45,000,000, primarily related to acquisitions (including debt assumed) and other growth initiatives and a combination of increased interest rates due to increases in base rates such as LIBOR and increases in the Company’s rate premium over LIBOR with its lenders. The Company’s long term debt to equity ratio is 0.37:1:00, below the Company’s long term target. Bank indebtedness is approximately 15% of eligible accounts receivable and inventory which it finances.

Other income includes the dilution gain related to the initial public offering (IPO) of Opta Minerals Inc. of $5,540,000 offset by write-downs of certain assets and other one time items plus a write-down related to the recovery of the lawsuit awarded in 2004 and additional legal fees incurred during the year related to the lawsuit. Other income in 2004 primarily includes the gain on the previously noted lawsuit of $2,646,000 offset by a number of one time items. The write off in 2004 includes the write-down of a trademark for $2,250,000. For further details see note 19 and note 15 (a) of the consolidated financial statements.

The income tax rate for 2005 is 15.4% recognizing the fact that the dilution gain on the Opta Minerals IPO was not taxable. With the exception of the dilution gain the rate would be approximately 29.2%. The tax rate in 2004 was 22.1%.

SunOpta Inc. 38 December 31, 2005 – 10-K

Minority interest in 2005 is $578,000, reflecting the minority interest component of Opta Minerals of $472,000 as a result of the IPO in February 2005 and $106,000 due to the 49.1% minority interest of Organic Ingredients prior to SunOpta acquiring the balance of this Company in April 2005. Minority interest in 2004 is solely attributable to Organic Ingredients.

Net earnings for the year increased by 23.1% due to the factors noted above, with further details provided below for each operating group. Basic and diluted earnings per share are $0.24 for 2005 compared to $0.20 in 2004, a 20% increase. Basic and diluted earnings per share for the fourth quarter was $0.03 and $0.01 respectively for 2005 and 2004.

Canadian readers should note that due to differences between Canadian and U.S. GAAP, primarily related to the treatment of stock option compensation expenses net earnings for the year ended December 31, 2005 under Canadian GAAP were $8,077,000 or $0.14 per basis and diluted common share versus $9,730,000 or $0.18 per basic and diluted common share in 2004. Note 17 to the 2005 consolidated financial statements itemize these differences.

Segmented Operations Information

SunOpta Food Group for the Year Ended:

	Dec 31, 2005 $	Dec 31, 2004 $	Change $	Change %
SunOpta Food Group Revenue
SunOpta Grains & Foods	148,084,000	120,685,000	27,399,000	22.7%
SunOpta Ingredients	63,953,000	66,301,000	(2,348,000)	(3.5%)
SunOpta Fruit	74,628,000	9,790,000	64,838,000	662%
SunOpta Cdn Food Distribution	99,876,000	75,946,000	23,930,000	31.5%
Total SunOpta Food Group Revenue	386,541,000	272,722,000	113,819,000	41.7%

SunOpta Food Group Operating Income (loss) ¹
SunOpta Grains & Food	8,005,000	4,346,000	3,659,000	84.2%
SunOpta Ingredients	3,784,000	6,585,000	(2,801,000)	(42.5%)
SunOpta Fruit	3,165,000	94,000	3,071,000	3267%
SunOpta Cdn Food Distribution	1,291,000	3,600,000	(2,309,000)	(64.1%)
Total SunOpta Food Group Operating Income (loss)	16,245,000	14,625,000	1,620,000	11.1%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The Food Group contributed $386,541,000 or 90.7% of the Company’s total consolidated 2005 revenues versus $272,722,000 or 89.1% in 2004. Internal growth within the Food Group was 13.2%, calculated on a consistent basis, including revenues of acquired businesses integrated from the date of acquisition compared to the same period in the previous year. Internal growth for the fourth quarter was 17.4%, lead by strong internal growth within the Grains and Foods Group and a return to positive internal growth within the Ingredients Group as oat fiber sales are beginning to increase following the decline in the low-carb market.

Gross profit in the Food Group increased by $12,110,000 in 2005 to $63,114,000 or 16.3% of revenues compared to $51,004,000 or 18.7% of revenues in 2004. The decrease in gross margin rate reflects the impact of product

SunOpta Inc. 39 December 31, 2005 – 10-K

mix due to the growth in the Fruit Group to approximately 19% of Food Group sales, which has a lower inherent margin rate of approximately 14%, a reduction of margin and volumes of oat fiber which in 2004 was one of the Company’s higher margin products and a reduction of margin rate on fresh produce within the Distribution Group due to supply and competitive pressures. Margins for the fourth quarter were 15.6% in 2005 and 17.5% in 2004, lower than the annual average due to the seasonal nature of the Company’s sales and the acquisitions in the Fruit Group which occurred late in the second quarter of 2005.

Selling, general and administrative expenses increased to $36,513,000 or 9.4% of revenues in 2005 from $30,395,000 or 11.1% of revenues in 2004. The decline in rate is due to the change in business mix as a result of acquisitions in both the Fruit Group and Grains and Foods Group which have lower inherent SG&A as a percent of sales and due to certain synergies and cost reduction programs implemented throughout the Food Group including reductions in the Distribution Group due to combining acquired businesses plus the reduced impact of Sarbanes-Oxley compliance costs.

Warehousing and distribution costs increased by $4,643,000 to $10,659,000 in 2005 versus $6,016,000 in 2004. The increase is due to acquisitions completed within the Distribution Group in 2004 and are discussed within the Distribution Group section of this MD&A Warehousing and distribution expenses related to manufacturing operations are included within cost of sales.

Foreign exchange gain for the year was $303,000 compared to $32,000 in 2004.

Resulting operating earnings within the Food Group were $16,245,000 in 2005 compared to $14,625,000 in 2004, an 11.1% increase. For the fourth quarter of 2005 operating earnings were $4,695,000 compared to $2,001,000 in 2004, a 135% increase. With the exception of the Distribution Group, all operating groups improved their operating earnings in the fourth quarter as compared to 2004. Key factors and trends that should continue into 2006 include, strong volume growth in aseptic packaged products which will further increase with the addition of a new customer in early 2006, oat fiber sales which are increasing as the Ingredients Group adds new customers, products and applications, and the benefit of rollover acquisitions and continued internal growth within the Fruit Group. The Distribution Group has also taken steps in the third and fourth quarter of 2005 to reduce warehousing and SG&A costs and focus on targeted revenue growth and this is expected to have a positive impact in 2006. Readers should be advised that internal product transfers between the groups are accounted for at cost. See the individual segments within the Food Group below for further detailed commentary related to 2005 results and 2006 outlook.

SunOpta Grains & Foods Group

	Dec 31, 2005 $	Dec 31, 2004 $	Change $	Change %
Revenue	148,084,000	120,685,000	27,399,000	22.7%
Gross Margin	16,418,000	13,134,000	3,284,000	25.0%
Gross Margin %	11.1%	10.9%	0.2%
Operating Income ¹	8,005,000	4,346,000	3,659,000	84.2%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The Grains and Foods Group contributed $148,084,000 in revenues in 2005 versus $120,685,000 in 2004, a 22.7% increase. Revenues were favourably impacted by the acquisition of Earthwise Processors in the second quarter contributing $5,717,000 in revenues and internal growth including internal growth on the Earthwise acquisition of 19.6%. The Group realized increases of $11,470,000 in aseptic based product sales due to the annualized impact of the Vitasoy contract awarded in August 2004 plus increases in revenues with its other aseptic customers; increases in sunflower product sales of $5,780,000 due to higher prices in the early part of 2005 and additional supply due to additional contracted acreage in Texas; increases in roasted products from the Group’s healthy convenience facility of $2,921,000, and $2,621,000 in additional food ingredient sales, primarily private

SunOpta Inc. 40 December 31, 2005 – 10-K

label ESL soy products. These increases were offset by revenue decreases of $1,110,000 primarily attributable to a reduction of liquid soy base sales, as a major customer continues to increase internal processing capacity.

Gross margin in the Grains and Foods Group increased by $3,284,000 in 2005 to $16,418,000 or 11.1% of revenues, as compared to $13,134,000 or 10.9% of revenues in 2004. Better margin rates were realized on IP Soybeans and soy-based products due to the better 2004 crop year and certain soy-based cancellation fees received which have no inherent costs. Aseptic margins have increased from 9.6% to 11.0% primarily due to margin improvement in the fourth quarter compared to last year due to a combination of increased volumes and the impact of numerous equipment upgrades and cost reduction initiatives. Sunflower margin rates are lower at 10.4% compared to 12.5% in 2004 due to the higher mix of low margin miscellaneous products related to the poor Texas crop that was sold as bird seed in the third and fourth quarters.

The increase in Operating Income of $3,659,000 to $8,005,000 reflects the increase in Gross Margin as noted above, plus an increase in foreign exchange gains of $378,000 reflecting gains realized on Euro contracts entered into to hedge against sales by the Group in Euros. Selling, general and administrative costs remained virtually unchanged at $8,682,000, however as a percent of revenues declined to 5.9% from 7.2% in the previous year, due in most part to synergies realized with the Earthwise acquisition and higher revenues through existing facilities and with existing customers.

Looking forward, 2005’s soy, sunflower and corn crops are in excellent condition, boding well for 2006’s throughput and gross margins, however ample world supply may also mean pricing pressure on certain products such as sunflower bakery kernel and soy beans. The addition of a significant customer at the aseptic facility will increase revenues and margins at this facility and lower overall throughput costs due to the increased production base. Demand continues strong for both the groups ESL soy beverage products and dry roasted ingredients and packaged products.

SunOpta Ingredients Group

	Dec 31, 2005 $	Dec 31, 2004 $	Change $	Change %
Revenue	63,953,000	66,301,000	(2,348,000)	(3.5%)
Gross Margin	11,150,000	14,363,000	(3,213,000)	(22.4%)
Gross Margin %	17.4%	21.7%	(4.3%)
Operating Income ¹	3,784,000	6,585,000	(2,801,000)	(42.5%)

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The Ingredients Group contributed revenues of $63,953,000 in 2005 as compared to $66,301,000 in 2004, a 3.5% decline. The decrease is attributable to the year over year impact of the decline in the low carb market as oat fiber revenues decreased by $2,606,000 compared to 2004. The low carb market began to decline at the beginning of Q4 2004. The Company is encouraged by the fact that for the first time in four quarters, oat fiber revenues in the fourth quarter were higher than the same quarter in the previous year at $7,040,000 versus $6,600,000 respectively. The increase is due to the addition of new accounts, new applications including pet food and line extensions of the existing products. Bran products and the production of guar fiber products have also performed well in the year with increases of $904,000 and $1,209,000 respectively, offsetting declines in revenues of $1,855,000 due to a reduction in certain packaging and technical processing volumes.

Gross margin in the Ingredients Group decreased by $3,213,000 and margin rate declined by 4.3% from 21.7% to 17.4%. The decline can be attributed primarily to the decline in oat fiber volumes and prices. Approximately $2,200,000 can be attributed to reduced margin rates caused by lower pricing and throughputs for oat fiber and $900,000 can be attributed to reduced margin due to lost fiber volumes. The remaining net decline of $113,000 is due to higher energy costs, offset by lower depreciation expense and the impact of cost reduction initiatives.

Selling, general and administrative expenses decreased to $7,377,000 in 2005 versus $7,869,000 in 2004. The decrease is due to reduced bonus expense and improved focus on discretionary spending.

SunOpta Inc. 41 December 31, 2005 – 10-K

The Group had a foreign exchange gain in 2005 of $11,000 compared to a gain in 2004 of $91,000. Previous year gains were due to the St. Thomas Canada facility which was closed in mid 2004.

Operating income of $3,784,000 declined by $2,801,000 due to the factors noted above.

As previously, noted the demand for low-carb products declined in 2005. Many of the Company’s customers reduced their demand for oat fiber utilized in low-carb applications, as they either suspended new low-carb product development or worked through inventories built-up in prior quarters. The Company also experienced significant competitive pricing pressure in this market and has been aggressively defending its market share. These factors had a significant impact on the Company’s fiber facilities and the operating results of the Ingredients Group in 2005. However, fiber enriched foods and many new applications continue to grow and represent a significant opportunity going forward.

In hand with fiber fortification opportunities during 2005 the Company expanded its focus on international markets for oat fiber and added a dedicated international sales resource to drive this business. In addition, the Company continues to assess a number of options to establish oat fiber processing in international markets. During 2005 the Company launched a line of organic oat fiber, organic soy fiber, organic okara and developed a unique process for the production of conventional soy fiber. The Company continues to actively develop its processes and research and development to expand its line of fiber offerings, including the development of both soluble fibers and insoluble fibers derived from sources other than oat, and new applications such as pet food.

The Company is encouraged that fourth quarter 2005 fiber sales were higher than fourth quarter 2004 sales. The Company expects that same quarter sales in each quarter of 2006 will be higher than 2005 as the Group continues to add new customers, products and applications.

SunOpta Fruit Group

	Dec 31, 2005 $	Dec 31, 2004 $	Change $	Change %
Revenue	74,628,000	9,790,000	64,838,000	662%
Gross Margin	10,431,000	2,368,000	8,063,000	341%
Gross Margin $	14.0%	24.2%	(10.2%)
Operating Income ¹	3,165,000	94,000	3,071,000	3267%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

Effective July 1, 2005, the Company expanded its segment reporting within the SunOpta Food Group to include the SunOpta Fruit Group. The SunOpta Fruit Group comprises the 2005 acquisitions of Pacific Fruit Processors and Cleugh’s Frozen Foods as well as the previous acquisitions of Organic Ingredients in 2004 and Kettle Valley Dried Fruit in 2003. Almost all the revenue increase is from acquisitions in 2005 and 2004, however internal growth based on pre and post acquisition revenues is approximately 28%, with Organic Ingredients almost doubling their business from 2004.

The decline in Gross Margin rate from 2004 reflects the lower inherent margin rates in the acquired businesses and reduced margins in Kettle Valley (offsetting reduced SG&A) as the business focus shifts to private label versus branded products.

To improve the Operating Income in future periods, management has implemented a cost reduction / profit improvement plan across the group. The plan is based upon consolidated purchasing reduced workers compensation insurance and employee benefit costs and a number of operating efficiency improvements. Continued internal revenue growth is expected for this Group in 2006 based upon realized or expected to be realized new private label contracts, new product offerings, increased capacity and increased leveraging of the groups world wide supply capabilities.

SunOpta Inc. 42 December 31, 2005 – 10-K

SunOpta Canadian Food Distribution Group

	Dec 31, 2005 $	Dec 31, 2004 $	Change $	Change %
Revenue	99,876,000	75,946,000	23,930,000	31.5%
Gross Margin	25,115,000	21,139,000	3,976,000	18.8%
Gross Margin %	25.1%	27.8%	(2.7%)
Operating Income ¹	1,291,000	3,600,000	(2,309,000)	(64.1%)

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The Distribution Group contributed revenues of $99,876,000 in 2005 versus $75,946,000 in 2004, an increase of $23,930,000 or 31.5%. Internal growth within the Group including growth at acquired companies was 7.3% or $6,777,000. The remaining increase of $17,153,000 was due to acquisitions completed in 2004 of Supreme Foods, Distribue-Vie, Snapdragon and Kofman-Barenholtz. The late acquisition in 2005 of Hahamovitch had no impact on revenues as the company was substantially shut down for the balance of the year after SunOpta’s acquisition.

Gross margin rates decreased in 2005 by 2.7% versus 2004. Margin rates have declined approximately 5% on the fresh produce markets side of the business due to more competitive pricing to maintain market share and supply issues which plagued the first half of the year. Margin rates on grocery products remained consistent year over year.

Warehousing and distribution costs increased to $10,659,000 from $6,016,000 in 2004. Selling, general and administrative expenses increased to $13,216,000 in 2005 versus $11,620,000 in 2004. As a percentage of revenues, warehouse and distribution and SG&A have increased to 23.9% of revenues compared to 23.2% in 2004. The increase reflects the impact of the decrease in sales price noted above, the cost of carrying duplicate warehouses during the bulk of 2005 and integration issues within the Distribution Group. The Company has taken a series of steps to reduce costs and improve profitability including consolidation of central Canadian warehouses, consolidation of its Western Canadian facilities to service all fresh produce and fruit distribution, reduction in SG&A overhead, cost initiatives focused on reduced spoilage and labor costs and targeted new listings and product lines. The acquisition of Hahamovitch will also provide synergies in SG&A costs as well as freight, logistics and purchasing. During the fourth quarter the company realized a rate of 24.1% of revenue for warehouse, distribution and SG&A costs compared to 25.1% for the same period in 2004, reflecting improvement after consideration for seasonality as the fourth quarter is traditionally a lower revenue quarter.

A gain of $51,000 was realized on foreign exchange in the Group compared to $97,000 during 2004.

The decline in operating income is due to the reduction in Gross Margin rate within the fresh produce segment of the business and higher warehouse, distribution and SG&A costs in the first part of the year related to the new warehouse in Toronto, prior to consolidation and integration.

In just over two years the Company has grown its Distribution Group from zero to an exit rate in 2005 of approximately $110,000,000, distributing 7,000 natural and organic products and 5,000 kosher products. During 2005, the Group completed its new state-of-the-art, environmentally friendly, 135,000 square foot warehouse in Toronto and moved the operations of Supreme Foods Limited, Snapdragon Natural Foods and Kofman-Barenholtz into the facility. The Group has also consolidated its fresh produce and fruit warehousing and distribution in Western Canada in the fourth quarter which has reduced spoilage costs and labor and allowed the group to continue to grow its grocery distribution business without an increase in warehouse distribution space. Late in the year the Group acquired Hahamovitch, further expanding its distribution reach in Eastern Canada. The Group will continue with its integration efforts in 2006, including leveraging its national sales and distribution capabilities, freight and logistic synergies, the implementation of a consolidated information system and implementation of warehouse technologies including radio frequency to drive better warehouse practices and cost savings.

SunOpta Inc. 43 December 31, 2005 – 10-K

Opta Minerals

	Dec 31, 2005 $	Dec 31, 2004 $	Change $	Change %
Revenue	34,659,000	32,242,000	2,417,000	7.5%
Gross Margin	7,495,000	7,021,000	474,000	6.8%
Gross Margin %	21.6%	21.8%	(0.2%)
Operating Income ¹	3,808,000	3,957,000	(149,000)	(3.8%)

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

Opta Minerals contributed $34,659,000 or approximately 8.1% of the total Company’s consolidated revenues in the year ended December 31, 2005, compared to $32,242,000 or 10.5% in 2004. Internal growth for the year was 6.4% and 6.0% for the fourth quarter. The increase in revenue from 2005 to 2004 is due to net increases in revenues at certain U.S. abrasive facilities (Virginia Materials, Baltimore and Hardeeville) of $1,856,000 as the Baltimore and Hardeeville facilities became fully commissioned during the year, increases at Canadian based facilities of $678,000, primarily due to appreciation of the Canadian dollar offset by weakness in the foundry and automotive industries for the Group’s products and other increases of $356,000, including the acquisition of abrasive production assets located in Attica, New York. These increases were offset by a decline in revenues from the Louisiana abrasives facility of $473,000 due to the impact of hurricane Katrina.

The increase in gross margin is due to the previously mentioned increase in volumes and margin rates at the U.S. abrasive facilities of approximately $1,061,000. Offsetting the increase are net declines in margins of $587,000 primarily due to higher freight costs that could not be passed through, and reduced margins at Louisiana due to the volume decline.

Selling, general and administrative expenses increased by $896,000 to $3,954,000 or 11.4% of revenues in 2005, compared to $3,058,000, or 9.5% in revenues in 2004. Approximately half the increase is due to the appreciation of the Canadian dollar as most of the SG&A expenses are incurred at the Canadian head office. The remainder is due to increases in head count and costs associated with becoming a public company, as well as increases to the sales force related to the additional facilities.

Opta Minerals realized $269,000 in foreign exchange gains during the year compared to a loss of $6,000 in 2004.

SunOpta BioProcess Group and Corporate Office

	Dec 31, 2005 $	Dec 31, 2004 $	Change $	Change %
Revenue	4,901,000	1,287,000	3,614,000	280.8%
Gross Margin	887,000	414,000	475,000	114.7%
Gross Margin %	18.1%	32.2%	(14.1%)
Operating Income (Loss) ¹	(3,505,000)	(2,819,000)	(686,000)	(24.3%)

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

Revenues of $4,901,000 in 2005 versus $1,287,000 in 2004 were primarily derived from equipment supply, pre-engineering and research and development work with Abengoa Bio Energy on processes to be utilized in the production of cellulosic ethanol. The 2004 revenue relates to pre-engineering and research and development work with Abengoa.

SunOpta Inc. 44 December 31, 2005 – 10-K

Gross margin rate in the BioProcess Group of 18.1% in 2005 compared to 32.2% in 2004 is due to product mix as equipment supply margins are lower than what is realized on pre-engineering and research and development services.

Selling, general and administrative expenses were $5,165,000 in 2005 compared to $3,772,000 in 2004, an increase of $1,393,000. Approximately $850,000 of the increase is due to higher information technology costs including hosting of Oracle, amortization of Oracle related costs and additional personnel and consultants related to the Oracle implementation as well as consolidation and standardization of many IT functions and processes throughout the Company. Approximately $300,000 of the increase is related to translation of Canadian based costs to U.S. dollars as the Canadian dollar average rate for 2005 was 1.21 compared to 1.30 in 2004. The remaining $243,000 is due to general increases related to a growing public Company including increases in personnel and related costs, travel and investor relations.

The Group had a foreign exchange gain of $771,000 in 2005 compared to $539,000 in 2004. $244,000 of the gain in 2005 is due to derivative contracts in place to hedge the Euro denominated Abengoa contract to Canadian dollars. This contract has been marked to market creating a gain as the Canadian dollar has appreciated against the Euro. The remaining gains are from corporate and relate to the appreciation of the Canadian dollar compared to the U.S. dollar.

The BioProcess and Corporate Operating loss in 2005 of $3,505,000 compared to $2,819,000 in 2004 was due to the factors noted above.

The BioProcess Group will continue to work on contracts with Abengoa BioEnergy related to the development and commercialization of processes to be utilized in the production of cellulosic ethanol. Demand for cellulosic ethanol applications from biomass continues to increase as many countries attempt to reduce its dependence on crude oil. The SunOpta BioProcess Group’s continuous biomass pretreatment technology is well suited for the conversion of biomass for subsequent conversion to ethanol. The Group will continue to focus on cellulosic ethanol applications in 2006. Also in 2006, the Group will continue to pursue a number of food based opportunities including the development of this technology in the production of the Company’s own fibers. The Company believes that the potential ethanol, food and pulping applications present significant opportunities for the future of this technology.

Revised Segments for 2005 – Supplemental Segmented Information (unaudited)

With the change in our segments we have recast the segmented information by quarter for 2005.

First Quarter of 2005

	SunOpta Food Group $	Opta Minerals $	SunOpta BioProcess and Corporate $	Consolidated $

Revenues	78,205,000	7,738,000	280,000	86,223,000

Operating income	3,343,000	837,000	(900,000)	3,280,000

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $	SunOpta Fruit Group $	Canadian Food Distribution Group $	SunOpta Food Group $

Revenues	31,180,000	15,153,000	6,390,000	25,482,000	78,205,000
Operating income	1,612,000	676,000	365,000	690,000	3,343,000

SunOpta Inc. 45 December 31, 2005 – 10-K

Second Quarter of 2005

	SunOpta Food Group $	Opta Minerals $	SunOpta BioProcess and Corporate $	Consolidated $

Revenues	92,555,000	9,839,000	464,000	102,858,000

Operating income	5,054,000	1,621,000	(982,000)	5,693,000

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $	SunOpta Fruit Group $	Canadian Food Distribution Group $	SunOpta Food Group $

Revenues	38,956,000	16,647,000	10,230,000	26,722,000	92,555,000
Operating income	2,880,000	1,062,000	500,000	612,000	5,054,000

Third Quarter of 2005

	SunOpta Food Group $	Opta Minerals $	SunOpta BioProcess and Corporate $	Consolidated $

Revenues	104,484,000	8,520,000	1,946,000	114,950,000

Operating income	3,180,000	948,000	(266,000)	3,862,000

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $	SunOpta Fruit Group $	Canadian Food Distribution Group $	SunOpta Food Group $

Revenues	38,106,000	15,841,000	28,217,000	22,321,000	104,484,000
Operating income	1,399,000	929,000	1,068,000	(216,000)	3,180,000

Fourth Quarter of 2005

	SunOpta Food Group $	Opta Minerals $	SunOpta BioProcess and Corporate $	Consolidated $

Revenues	111,296,000	8,562,000	2,212,000	122,070,000

Operating income	4,670,000	402,000	(1,358,000)	3,714,000

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $	SunOpta Fruit Group $	Canadian Food Distribution Group $	SunOpta Food Group $

Revenues	39,842,000	16,311,000	29,792,000	25,351,000	111,296,000
Operating income	2,115,000	1,118,000	1,232,000	205,000	4,670,000

SunOpta Inc. 46 December 31, 2005 – 10-K

Consolidated 2005

	SunOpta Food Group $	Opta Minerals $	SunOpta BioProcess and Corporate $	Consolidated $

Revenues	386,540,000	34,659,000	4,902,000	426,101,000

Operating income	16,247,000	3,808,000	(3,506,000)	16,548,000

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $	SunOpta Fruit Group $	Canadian Food Distribution Group $	SunOpta Food Group $

Revenues	148,084,000	63,952,000	74,629,000	99,876,000	386,540,000
Operating income	8,006,000	3,785,000	3,165,000	1,291,000	16,247,000

(Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

2004 Operations Compared With 2003 Operations

Certain prior year figures have been adjusted to conform to the current year presentation and segmented reporting.

Consolidated

Segmented Operations Information

SunOpta Food Group for the Year Ended:

	Dec 31, 2004	Dec 31, 2003	Change	Change
	$	$	%	%
Revenue
SunOpta Food Group	272,722,000	173,807,000	98,915,000	56.9%
Opta Minerals	32,242,000	24,831,000	7,411,000	29.8%
SunOpta BioProcess & Corporate	1,287,000	461,000	826,000	179.2%
Total Revenue	306,251,000	199,099,000	107,152,000	53.8%

Operating Income ¹
SunOpta Food Group	14,625,000	12,183,000	2,442,000	20.0%
Opta Minerals	3,957,000	2,479,000	1,478,000	59.6%
SunOpta BioProcess & Corporate	(2,819,000)	(3,338,000)	519,000	(15.5%)
Total Operating Income	15,763,000	11,324,000	4,439,000	39.2%

Interest Expense	1,522,000	1,942,000	420,000	21.6%
Other income (expense), net includes write-off	(12,000)	585,000	(597,000)	(102.1%)
Provision for income taxes	3,139,000	1,001,000	2,138,000	213.6%
Minority Interest	74,000	-	74,000	-
Net earnings	11,016,000	8,966,000	2,050,000	22.9%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

Revenues for the year ended December 31, 2004, increased by 53.8% versus 2003. The revenue increase of $107,152,000 was attributable to a $98,915,000 increase in revenue from the Food Group, an increase of $7,411,000 in revenue from Opta Minerals Inc., and an increase in revenue attributable to the SunOpta BioProcess Group of $826,000. Internal growth for the year was approximately 14.5% or $29,152,000 with approximately $78,000,000 of the revenue increase coming from acquisitions completed in 2003 and 2004.

SunOpta Inc. 47 December 31, 2005 – 10-K

Operating income in the year ended December 31, 2004 was $15,763,000, an increase of $4,439,000 or 39.2%. The increase was attributable to both the Food Group and Opta Minerals Inc., which increased by $2,442,000 or 20.0% and $1,478,000 or 59.6% respectively, when compared to 2003. The increase also reflected a reduced net loss from the Corporate and SunOpta BioProcess Group of $519,000. The individual groups are described below within segmented operations information.

Interest expense decreased to $1,522,000 in the year ended December 31, 2004 from $1,942,000 in 2003. The decrease in interest expense was a result of improved interest rates being made available to the Company after the completion of the equity financing in August 2003, partially offset by the increase in the Company’s banking facility in July 2004. Interest expense was also higher in 2003 due to the loss on extinguishment of debt of $183,000 relating to an early redemption of a convertible debenture and the increase in borrowings prior to the equity financing to support acquisitions and internal growth.

The provision for income taxes in 2004 reflected the reversal of valuation allowances against loss carry forwards relating to certain U.S. and Canadian operations as their utilization was considered more likely than not. Without this reversal the tax rate would have been approximately 33.8%. The effective tax rate was 22.1% in 2004 compared to 10.0% in 2003. The 2003 effective tax rate was also impacted by a reduction of valuation allowances, without this reduction the effective tax rate would have been 34.8%..

The Company’s net earnings for the year ended December 31, 2004 were $11,016,000 or $0.20 per basic common share (diluted - $0.20) compared to $8,966,000 or $0.19 per basic common share (diluted - $0.18) in 2003, an increase in net earnings of 22.9%.

Canadian readers should note that due to differences between Canadian and U.S. GAAP, net earnings for the year ended December 31, 2004 under Canadian GAAP were $9,730,000 or $0.18 per basic common share (diluted - $0.18) versus a $8,697,000 or $0.19 per basic common share (diluted - $0.18) in 2003. Note 17 to the 2005 Consolidated Financial Statements itemize these differences.

Segmented Operations Information

SunOpta Food Group for the Twelve Months Ended:

	Dec 31, 2004 $	Dec 31, 2003 $	Change $	Change %
SunOpta Food Group Revenue
SunOpta Grains & Foods	120,685,000	94,986,000	25,699,000	27.1%
SunOpta Ingredients	66,301,000	50,978,000	15,323,000	30.1%
SunOpta Fruit	9,790,000	2,772,000	7,018,000	253.2%
SunOpta Cdn Food Distribution	75,946,000	25,071,000	50,875,000	202.9%
Total SunOpta Food Group Revenue	272,722,000	173,807,000	98,915,000	56.9%

SunOpta Food Group Operating Income (loss) ¹
SunOpta Grains & Foods	4,345,000	6,666,000	(2,321,000)	(34.8%)
SunOpta Ingredients	6,586,000	4,509,000	2,077,000	46.1%
SunOpta Fruit	94,000	130,000	(36,000)	(27.7%)
SunOpta Cdn Food Distribution	3,600,000	878,000	2,722,000	210.0%
Total SunOpta Food Group Operating Income (loss)	14,625,000	12,183,000	2,442,000	20.0%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The SunOpta Food Group contributed $272,722,000 or 89.1% of the Company’s total consolidated 2004 revenues versus 87.3% in 2003. Approximately $86,375,000 of the $98,915,000 increase in revenues was attributable to the acquisitions completed throughout 2003 and 2004. Internal growth within the Food Group was 13.2%, calculated on a consistent basis including revenues of acquired businesses integrated from the date of acquisition as compared to the same period in the previous year. Note 2 of the 2004 Consolidated Financial Statements provides further details of the 2004 acquisitions.

Gross profit in the Food Group increased by $20,918,000 in 2004 to $51,004,000 or 18.7% of revenues as compared to 17.3% of revenues in 2003. The increase in gross profit reflect improved product mix, pricing and

SunOpta Inc. 48 December 31, 2005 – 10-K

cost reduction efforts. Higher margins have been seen particularly in the Distribution Group, which has become a more significant segment within the Food Group.

Resulting operating income in the Food Group was $14,625,000 in 2004, an increase of $2,442,000 or 20.0% compared to 2003. Selling, general and administrative expenses increased to 11.1% of revenues in 2004 from 8.8% of revenues in 2003. The increase was due primarily to acquisitions in the Distribution Group completed in 2003 and 2004 which inherently have higher inherent percentages of SG&A expenses, partially offset by certain synergies and cost reduction programs implemented throughout the Food Group. Warehouse and distribution costs, within the Distribution Group increased by 154.4% in 2004 to $6,016,000, the increase being attributable to the impact of the acquisitions in 2003 and 2004. Warehousing and distribution expenses for all other groups within the Food Group relate to manufacturing operations, and thus are included within cost of sales.

Readers should be advised that internal product transfers between the groups are accounted for at cost. See the individual segments within the Food Group below for more detailed commentary.

SunOpta Grains & Foods Group

	Dec 31, 2004 $	Dec 31, 2003 $	Change $	Change %
Revenue	120,685,000	94,986,000	25,699,000	27.1%
Gross Margin	13,134,000	11,436,000	1,698,000	14.8%
Gross Margin %	10.9%	12.0%	(1.2%)
Operating Income ¹	4,345,000	6,666,000	(2,321,000)	(34.8%)

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The SunOpta Grains & Foods Group revenues in 2004 were $25,699,000 or 27.1% higher than in 2003. Revenues were favourably impacted by the acquisitions of Sigco Sun Products and Dakota Gourmet in late 2003 totalling $31,033,000 (including significant internal growth) plus increases in IP corn sales, organic feed and food ingredient sales. These increases were offset by revenue decreases attributable to the short soybean and commodity corn crop in 2003 caused by draught and insect damage which was reflected in the 2004 revenue. Aseptic packaged and consumer products revenues were negatively affected by the group’s largest customer who changed its ordering patterns and another significant customer whose volumes were lower due to making a decision to concentrate on a private label program during the year.

Gross margin in the Grains & Foods Group increased by $1,698,000 in 2004, however, gross margin as a percentage of sales declined to 10.9% from 12.0% in 2003. The decrease in gross profit margins was primarily related to lower margins on soybean and corn crop revenues due to limited supply causing cost increases especially in the later half of 2004, fixed revenue contracts in organic feed which had a significant impact in the year on margins and decreased revenues of liquid soy base which has an inherently higher margin rate. The decrease was offset by the sunflower product and packaged product lines acquired through the Sigco Sun Products and Dakota Gourmet acquisitions which have higher gross margins than other products noted. Gross margin percentage in aseptic packaged and consumer products declined from 12.7% in 2003 to 9.7% in 2004, due in part to lower margins on rice based products and lost volumes as noted above.

Operating income decreased by $2,321,000 in 2004 versus the prior year, primarily due to the decline in gross margin rates on the base businesses as noted above. In addition, operating income was negatively impacted by foreign exchange losses of $110,000 which were recognized in 2004.

During the year the Company completed an upgrade at the Hope, Minnesota grain processing facility, which expanded both the shipping and grain segregation capabilities. The Company also completed an expansion of the warehouse and processing capabilities at the Breckenridge, Minnesota location. These initiatives upgrade product quality and sorting capabilities and will be extremely important as the Company expands further into international grains markets.

The Company completed the installation and commissioning of a third Tetra Quart filler at its aseptic packaging facility in late 2004, and in January 2005 the Company also completed a 45,000 square foot warehouse expansion and office consolidation at this facility. The expansion included robotic palletizing equipment which is expected to generate operating efficiencies and assist in a further reduction in operating costs. The efforts required to

SunOpta Inc. 49 December 31, 2005 – 10-K

commission these two major capital expansion projects had a negative impact on the operations and margins at this facility in the fourth quarter of 2004.

SunOpta Ingredients Group

	Dec 31, 2004 $	Dec 31, 2003 $	Change $	Change %
Revenue	66,301,000	50,978,000	15,323,000	30.1%
Gross Margin	14,363,000	12,148,000	2,215,000	18.2%
Gross Margin %	21.7%	23.8%	(2.2%)
Operating Income ¹	6,586,000	4,509,000	2,077,000	46.1%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The SunOpta Ingredients Group contributed revenues of $66,301,000 in 2004, a 30.1% increase over the prior year. The increase in revenue was primarily attributable to increased sales of oat fiber, custom blends and technical processing. Oat fiber increases of $8,392,000 resulted from the demand generated by low carb diets and fiber enriched foods and were supported by increased capacity at the Company’s Cambridge facility and the newly acquired facility in Cedar Rapids, Iowa. An increase of $2,230,000 in dairy blends was realized due to increased volumes and pricing compared to the prior year. An increase in technical processing of $2,404,000 was due to capital initiatives completed during the year. The remaining increase of $2,297,000 was spread over a variety of products.

Gross margin in the Ingredients Group increased by $2,215,000 in 2004 to 21.7% of revenue compared to 23.8% of revenue in 2003. Gross margin was positively influenced by increased revenues of key products, offset by reduced margins within oat fiber especially in the latter part of the year, due to lower pricing to maintain market share and the impact of start-up issues related to the new brans and germ facility in Cambridge, Minnesota.

Operating income increased by $2,077,000 or 46.1% versus the prior year. The increase was due primarily to an increase in gross margin dollars (noted above) and a positive foreign exchange variance of $275,000 related to the operation of the groups Canadian based St. Thomas facility. The positive impact from margin and foreign exchange was offset by increased selling, general and administration costs of $1,287,000 to support the increased sales.

As previously, noted the demand for low-carb products began to fall off in late 2004. Many of the Company’s customers reduced their demand for oat fiber utilized in low-carb applications, as they either suspended new low-carb product development or continued to work through inventories built-up in prior quarters. The Company also experienced significant competitive pricing pressure in this market and was aggressively defending its market share. These factors had a significant impact on the Company’s fiber facilities and the operating results of the Ingredients Group in the fourth quarter.

In hand with fiber fortification opportunities the group expanded its focus on international markets for oat fiber, added a dedicated international sales resource to drive this business plus commenced development of a number of pet food applications. In addition, the Company began assessing a number of options to establish oat fiber processing in international markets.

SunOpta Fruit Group

	Dec 31, 2004 $	Dec 31, 2003 $	Change $	Change %
Revenue	9,790,000	2,772,000	7,018,000	253.2%
Gross Margin	2,368,000	1,111,000	1,257,000	113.1%
Gross Margin %	24.2%	40.1%	(15.9%)
Operating Income ¹	94,000	130,000	(36,000)	(27.7%)

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

The SunOpta Fruit Group contributed revenues of $9,790,000 in 2004, a 253.2% increase compared to 2003. The increase in revenues was attributable to the May 2003 acquisition of Kettle Valley Dried Fruit and the September 2004 acquisition of 51.1% of Organic Ingredients, Inc..

SunOpta Inc. 50 December 31, 2005 – 10-K

Gross margin in the SunOpta Fruit Group increased by $1,257,000 in 2004 to 24.2% of revenue as compared to 40.1% of revenue in 2003. The gross margin rate was influenced by the acquisition of Organic Ingredients in the fourth quarter, as Organic Ingredients has inherently lower gross margin rates than Kettle Valley Dried Fruit, plus the decision by Kettle Valley to focus on private label products .

Operating income decreased by $36,000 or 27.7% versus the prior year. The decrease was due to increased selling, general and administrative costs to support expected internal growth within Kettle Valley Dried Fruit and the shift to private label offset by increased operating income related to the acquisition of Organic Ingredients.

The Company’s Kettle Valley fruit bar operations grew significantly in the fourth quarter of 2004 due primarily to private label contracts. Production expansions were required to meet the additional demand from these facilities. The bulk of these improvements were completed in the fourth quarter and the Company was focused on expanding its sales efforts to fill the expanded capacity.

SunOpta Canadian Food Distribution Group

	Dec 31, 2004 $	Dec 31, 2003 $	Change $	Change %
Revenue	75,946,000	25,071,000	50,875,000	202.9%
Gross Margin	21,139,000	5,391,000	15,748,000	292.1%
Gross Margin %	27.8%	21.5%	6.3%
Operating Income ¹	3,600,000	878,000	2,722,000	310.0%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

Revenues for the SunOpta Canadian Food Distribution Group were favourably impacted by the acquisitions completed in 2003 (Pro Organics) and 2004 (Supreme Foods, Distribue-Vie, Snapdragon and Kofman-Barenholtz) and internal growth within the grocery segment.

Gross margin increased by $15,748,000 in 2004 to $21,139,000 as compared to the prior year. The increase in gross profit was attributable to acquisitions and the synergies recognized in the Company’s previously existing and acquired businesses.

Operating income in the Distribution Group was $3,600,000 in 2004, a 210% increase over the prior year. This increase was primarily attributable to the operating income related to the acquisitions completed in 2003 and during 2004.

Opta Minerals Inc.

	Dec 31, 2004 $	Dec 31, 2003 $	Change $	Change %
Revenue	32,242,000	24,831,000	7,411,000	29.8%
Gross Margin	7,021,000	5,132,000	1,889,000	36.8%
Gross Margin %	21.8%	20.7%	1.1%
Operating Income ¹	3,957,000	2,479,000	1,478,000	59.6%

¹ (Operating Income is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

Opta Minerals contributed $32,242,000 or 10.5% of the total Company’s consolidated revenues in the year ended December 31, 2004, compared to 12.5% in 2003. Opta Minerals’ strategy is to become a dominant supplier of silica free abrasives and other industrial minerals with a wide product line and broad geographic distribution. As part of this strategy Opta Minerals acquired Distribution A&L in April 2004, a Company which specializes in the distribution of specialty abrasives. The increase in revenue from 2003 to 2004 was due the following factors; the acquisition of Distribution A&L which accounted for approximately $1,484,000 of the increase, improved abrasive and mineral sales, increased bridge cleaning and foundry revenues at the Waterdown and Lachine locations, the introduction of new product lines and increased ship cleaning and repair activity at the Virginia and Louisiana facilities. Opta Minerals also acquired the assets of an abrasive facility in Hardeeville, South Carolina in the second quarter of 2004 and in the third quarter of 2004 completed initial construction of an additional abrasives facility in Baltimore, Maryland.

SunOpta Inc. 51 December 31, 2005 – 10-K

Opta Minerals gross profit as a percentage of revenues increased to 21.8% for 2004 from 20.7% in 2003. The increase in margin was due primarily to the Distribution A&L acquisition and increased margin rates as a result of increased revenues from U.S. operations.

During the fourth quarter of 2004, the Baltimore and Hardeeville facilities were commissioned. The start-up costs related to these facilities were expensed in 2004 and impacted fourth quarter earnings.

Operating income increased by 59.6% to $3,957,000 in 2004. The increase in operating income was attributable to the increase in gross margins noted above, offset by increases in selling, general and administrative expenses of $453,000 and reduced foreign exchange losses of $42,000. Selling, general and administrative expenses increases related to the acquisition of Distribution A&L, increased headcount as a result of the Baltimore and Hardeeville expansions and additional staff and costs as the Group prepared for the initial public offering competed in February 2005.

SunOpta BioProcess Group and Corporate Office

Dec 31, 2004

Dec 31, 2003

Change

Revenue

1,287,000

461,000

826,000

179.2%

Operating Loss ¹

(2,819,000)

(3,338,000)

519,000

(15.5%)

¹ (Operating loss is defined as earnings before other income (expense), interest expense (net), income taxes and minority interest)

SunOpta BioProcess Group revenues of $1,287,000 in 2004 were primarily derived from pre-engineering and research and development work for Abengoa BioEnergy on processes to be utilized in the production of cellulosic ethanol. The 2003 revenues relate to licence fees that were recognized. There were no license fees recognized in 2004.

Gross margins in the SunOpta BioProcess Group were $414,000 in 2004 versus $460,000 in 2003. As a percentage of revenues, gross margin was 31.9% in 2004 versus 99.8% in 2003. Gross margin recognized in 2003 was attributed to license fees which had no associated service costs.

Selling, general and administrative expenses were $3,772,000 in 2004 compared to $3,479,000 in 2003. These costs relate primarily to corporate and the increase was a result of payroll expenses and increased costs associated with a growing public company including the addition of in-house legal counsel, internal audit functions and compliance costs related to Sarbanes Oxley. In addition, the Company incurred increased personnel and associated costs within the SunOpta BioProcess Group in anticipation of additional cellulosic ethanol opportunities and work related to the use of the group’s steam explosion technology in food applications, offset by increased management fees to the operating groups. In the prior year $1,607,000 of management fees was charged to the operating segments but not allocated to segmented operating income.

Foreign exchange gains declined to $539,000 in 2004 versus $1,288,000 in 2003. These exchange gains were due to the appreciation of the Canadian dollar.

The SunOpta BioProcess Group and Corporate operating loss was $2,819,000 in 2004 versus $3,338,000 in 2003. The change was as a result of the factors noted above.

Recent Accounting Developments

The FASB issued Statement of Financial Accounting Standards (SFAS) Number 123 (revised 2004), Share-Based Payment, which is a revision of SFAS Number 123, Accounting for Stock-Based Compensation , and amends SFAS Number 95, Statement of Cash Flows. SFAS Number 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair value. Effective January 1, 2004, the Company adopted the fair value recognition provisions of SFAS Number 123 which requires the note disclosure of the company’s earnings as if stock options expense was recorded. The adoption of SFAS Number 123(R) on January 1, 2006 will result in the recognition of stock compensation expense within the statement of earnings. The Company expects that the impact of this pronouncement, based on unvested grants up to and including December 31, 2005, will be $223 for the year ended December 31, 2006. An additional expense will also be recognized for the vested portion of new options granted during the coming year, the impact of these grants will be known as they occur.

SunOpta Inc. 52 December 31, 2005 – 10-K

Liquidity and Capital Resources (at December 31, 2005)

The Company obtains its short term financing through a combination of cash generated from operating activities, cash and cash equivalents, and available operating lines of credit. At December 31, 2005, the Company has availability under certain lines of credit of approximately $27,200,000. Revolving acquisition lines are also available for SunOpta and Opta Minerals with maximum draws up to $10,000,000 and Cdn $5,000,000 respectively.

The Company obtains its long term financing through its credit agreement with a syndicate of lenders. The Company may expand this credit agreement, and/or obtain additional long term financing for internal expansion uses, acquisitions or other strategic purposes as required.

The Company has the following sources from which it can fund its operating 2006 cash requirements:

•

Cash and cash equivalents.

•

Available operating lines of credit.

•

Cash flows generated from operating activities.

•

Cash flows generated from receipts of options currently in-the-money and the employee stock purchase plan.

•

Additional long term financing based on securitization of existing assets.

In order to finance significant acquisitions, the Company may need additional sources of cash which could be obtained through a combination of additional bank or subordinated financing, a private or public offering, or the issuance of shares in relation to an acquisition or a divestiture. The Company intends to maintain a target long term debt to equity ratio of approximately 0.60 to 1.00 versus the current position of 0.37 to 1.00.

The Company anticipates being able to obtain long term financing in view of its current financial position and past experience in the capital markets.

New and Amended Banking Agreement and Other Lending Facilities

In February, 2005 the Company amended its credit agreement for the primary purpose of releasing all secured collateral relating to Opta Minerals in anticipation of Opta Minerals Inc.’s initial public offering.

In May, 2005 Opta Minerals entered into an agreement with a Canadian chartered bank that has provided Opta Minerals with a line of credit facility up to Cdn $5,000,000 and a revolving term facility for up to Cdn $7,000,000 to be used to finance future acquisitions and capital expenditures.

In December, 2005 the Company converted $45,000,000 of variable interest debt to fixed rate debt with a five year interest rate of 6.44%, subject to certain debt to EBITDA ratios. The debt is due in a lump sum at the end of the five year term. This debt replaced existing term debt of approximately $40,000,000 and bank indebtedness of approximately $5,000,000.

The Company’s existing bankers will continue as agents for SunOpta’s overall debt syndication structure. Several Life Insurance Companies have been added to the syndication which provided the $45,000,000 in term debt. As part of this transaction the Company has also increased its U.S line of credit facility from $22,500,000 to $25,000,000.

In September 2005, Opta Minerals amended and restated its credit agreement and banking facilities to establish a term loan facility of Cdn $8,000,000. Opta Minerals also increased its line of credit facility from Cdn $5,000,000 to Cdn $7,500,000 and reduced its revolving term facility from Cdn $7,000,000 to Cdn $5,000,000. Opta Minerals used the funds of the term loan to repay SunOpta for certain debt owed by Opta Minerals.

Other debt facilities and promissory notes were entered into during the year including debt issued or assumed in connection with the acquisitions of Cleugh’s, Pacific Fruit and Hahamovitch plus certain capital leases. Included within these facilities is a $20,000,000 line of credit facility, the availability of which is based on the levels of accounts receivable and inventory, specifically for the Cleugh’s operation.

See note 9 of the Consolidated Financial Statements for further details on existing debt facilities .

SunOpta Inc. 53 December 31, 2005 – 10-K

Cash flows – 2005 compared to 2004

Net cash and cash equivalents decreased ($2,626,000) during fiscal 2005 (2004 – $13,909,000) to $5,455,000 as at December 31, 2005 (2004 - $8,081,000).

Cash provided by operations after working capital changes was a deficit of $7,525,000 for the year ended December 31, 2005 (2004 – increase of $10,756,000), including the use of funds for non-cash working capital of $26,006,000 (2004 – $10,170,000). This utilization consists principally of an increase in accounts receivable of $11,184,000 and an increase in inventories of $16,641,000. The increase in accounts receivable is primarily due to the growth in sales in 2005.. Overall accounts receivable as a percentage of revenues has increased from 12.5% to 13.5%. This increase can be attributable to timing of large payments received by the Ingredients Group in early January 2006 and a large receivable balance for the BioProcess Group due to timing of payments related to its current equipment contract.

Inventory has increased from 16.2% to 20.7% as a percentage of revenues. This increase is primarily from the Grains and Foods Group which has increased inventories by approximately $7,000,000 due to the timing of grain deliveries and excellent crops in the fall of 2005 and the impact of frozen fruit inventories as a result of product mix versus 2004.. Opta Minerals has increased by $6,000,000 due to the commissioning of additional facilities and timing of large inventories of materials sourced internationally.

Accounts payable and accrued liabilities increased by $1,141,000 (2004 - $5,962,000), far less than the increase in inventory. After the acquisition of Cleughs approximately $4,000,000 was paid to vendors to bring accounts payable into normal terms. All other working capital changes net to an increase of $678,000 (2004 – decrease of $1,936,000).

Cash used in investment activities of $34,703,000 in 2005 (2004 – $44,039,000), reflects cash used to complete acquisitions, net of cash acquired and payments for contingent consideration, of $20,920,000 (2004 – $27,289,000), net acquisitions of property, plant and equipment of $13,509,000 (2004 – $13,260,000) and an increase in other assets of $274,000 (2004 - $3,495,000).

Cash provided by (used in) financing activities was $39,309,000 in the year ended December 31, 2005 (2004 – $18,828,000), consisting primarily of net proceeds from the issuance of common shares of Opta Minerals of $14,294,000 (2004 - $nil), and a net increase in borrowings under long-term debt of $18,619,000 (2004 – $10,197,000), net increase in operating lines of credit of $7,461,000 (2004 – $nil) proceeds from the issuance of common shares of $946,000 (2004 - $9,125,000) and other payments of $2,011,000 (2004 - $494,000).

Cash flows – 2004 compared to 2003

Net cash and cash equivalents decreased ($13,909,000) during fiscal 2004 (2003 – increase of $14,978,000) to $8,081,000 as at December 31, 2004 (2003 - $21,990,000).

Cash provided by operations after working capital changes was $10,756,000 for the year ended December 31, 2004 (2003 – $1,926,000), including the use of funds for non-cash working capital of ($10,170,000) (2003 – ($11,992,000)). This utilization consisted principally of an increase in accounts receivable of $7,466,000, an increase in inventories of $6,730,000, an increase in prepaid expenses and other current assets of $275,000 and income taxes recoverable of $314,000 and a decrease in customer and other deposits of $1,347,000, offset by a an increase in accounts payable and accrued liabilities of $5,962,000. The usage of cash flows to fund working capital in 2004 reflected the increase in working capital requirements required to fund the rapid growth in operations.

Cash used in investment activities of $44,039,000 in 2004 (2003 – $21,624,000), reflected cash used to complete acquisitions, net of cash acquired, of $27,284,000 (2003 – $17,594,000), net acquisitions of property, plant and equipment of $13,260,000 (2003 – $7,139,000) and an increase in other assets of $3,495,000 (2003 - $nil), offset in the prior year by decreases in short-term investments and payment received on a note receivable totalling $3,109,000 (2004 - $nil).

Cash provided by (used in) financing activities was $18,828,000 in the year ended December 31, 2004 (2003 – $34,187,000), consisted primarily of net proceeds from the issuance of common shares of $9,125,000 (2003 - $56,601,000), from the exercise of stock options and warrants during the year and a net increase in borrowings

SunOpta Inc. 54 December 31, 2005 – 10-K

under long-term debt of $10,197,000 (2003 – net decrease of $15,791,000), net decrease in operating lines of credit of $nil (2003 – $5,531,000), payment of deferred purchase consideration to the former owner of Virginia Materials of $260,000 (2003 – $602,000), and payments under other financing activities of $234,000 (2003 – $490,000).

Business and Financial Outlook

The natural and organic foods industries are fast growing via continued common interest in healthy eating. The North American market for organic foods is currently estimated by Management to be in excess of $15 billion growing at a rate of 10 to 20% annually with the natural market also large and growing. While a large number of companies compete within specific segments of the market, there are relatively few companies as well positioned as SunOpta to take advantage of this rapidly growing market.

Managements strategic objective is to grow the business to an exit rate of $1 billion in revenues by 2007, through a combination of continued internal growth and acquisitions. The Company expects to achieve revenues of $540,000,000 to $550,000,000 in 2006, an increase of 27% to 29% versus 2005. The increase is based on a combination of expected 20% internal growth and the annualized revenues of acquisitions completed in 2005. The Company expects to earn $0.26 - $0.30 diluted earnings per common share in 2006, excluding any special items or acquisitions that may be completed during the year. This guidance assumes an effective tax rate of 31%. In addition, the Company’s business plan includes strategies and initiatives designed to improve the underlying performance of the operations and the quality and predictability of earnings. Specifically, the Company is looking to continue to improve the strategic synergies across its Food operations, vertically integrating wherever possible. Initiatives to improve the productivity of the operations include, plant and warehouse rationalization programs, continued training and development of employees, consolidated procurement, supply chain and internal services programs and consolidated information and accounting systems to provide better analysis and timely decision-making. A more fulsome discussion of key strategies is included within Item 1 of this report.

The Company expects to continue its rapid growth through an effective balance of internal growth and acquisitions, all in support of its vertically integrated field to table strategy. Maintaining liquidity and having available sources of cash will be imperative if the Company is to continue to grow. At December 31, 2005 the Company had $5,455,000 in cash and approximately $27,200,000 in unused bank lines for a total of $32,655,000 in cash and borrowings availability. The Company, including Opta Minerals, also has unused acquisition lines totalling $14,300,000. The Company’s remaining cash and unused lines plus cash generated from operations are sufficient to finance capital maintenance estimated at $4,500,000 - $6,000,000, annual debt service of $3,518,000 and payment of the remaining current portion of long-term payables of $723,000, plus finance targeted internal growth and acquisitions. Additional sources of cash could be obtained through a combination of additional bank or subordinated financing, a private or public offering, or the issuance of shares in relation to an acquisition or a divestiture. The Company intends to maintain a target long term debt to equity ratio of approximately 0.6 to 1 versus the current position of 0.37 to 1.

The table below sets out the Company’s obligation under its long-term debt, long term payables, operating and capital leases at December 31, 2005:

	2006	2007	2008	2009	2010 and thereafter	Total
Long term debt & capital leases	3,518,000	4,096,000	1,738,000	1,568,000	48,136,000	59,056,000
Operating leases	6,473,000	5,277,000	3,718,000	3,035,000	7,629,000	26,132,000
Long-term payables	723,000	402,000	70,000	-	-	1,195,000
	10,714,000	9,775,000	5,526,000	4,603,000	55,765,000	86,383,000

This table does not include certain contingent consideration related to acquisitions that may become payable if predetermined profit target are achieved. The total amount of contingent consideration payable is not determinable as certain agreements have no maximum.

Item 7A – Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk

The primary objective of our 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

SunOpta Inc. 55 December 31, 2005 – 10-K

money market funds. These securities are generally classified as cash and cash equivalents or short-term investments and are recorded on the balance sheet at fair value with unrealized gains or losses reported through profit and loss. As at December 31, 2005 all of SunOpta’s excess funds were held in cash and cash equivalents with a maturity less than 90 days.

Debt in both fixed rate and floating rate interest carry different types of interest rate risk. Fixed rate debt may have their fair market value adversely affected by a decline in interest rates. In general, longer date debts are subject to greater interest rate risk than shorter dated securities. Floating rate term debt gives less predictability to cash flows as interest rates change. As at December 31, 2005, the weighted average interest rate of the fixed rate term debt was 6.4% (2004 – 4.5%) and $50,039,000 (2004 - $2,422,000) of the Company’s outstanding term debt is at fixed interest rates. Variable rate term debt of $19,451,000 (2004 - $33,400,000) at an interest rate of 6.1% (2004 – 3.7%) is partially hedged by variable rate cash equivalent investments. The Company looks at varying factors to determine the percentage of debt to hold at fixed rates including, the interest rate spread between variable and fixed (swap rates), the Company’s view on interest rate trends, the percent of offset to variable rate debt through holding variable rate investments and the companies ability to manage with interest rate volatility and uncertainty. For every 1% increase (decrease) in interest rates the Company’s after tax earnings would (decrease) increase by approximately ($136,000) (2004 – ($200,000)).

Foreign currency risk

All U.S. subsidiaries use the U.S. dollar as their functional currency and the United States dollar is also the Company’s reporting currency. The Company is exposed to foreign exchange rate fluctuations as the financial results of the Company and its Canadian subsidiaries are translated into U.S. dollars on consolidation. Since 2004, the Canadian dollar has appreciated significantly against the U.S. dollar with closing rates moving from Cdn $1.2020 at January 1, 2004 to Cdn $1.1630 at December 31, 2005 for each U.S. dollar. The net effect of this appreciation has been a $1,341,000 (2004 - $565,000) exchange gain and a $3,017,000 (2004 - $4,571,000) increase in net assets. 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 an increase (decrease) in the fair value of the Company’s net assets by $6,495,000 (2004 - $4,808,000).

The functional currency of all operations, located in Canada, is the Canadian dollar. For these operations all transaction gains or losses in relation to the U.S. dollar are recorded as Foreign Exchange gain (loss) in the Consolidated Statement of Earnings while gains (losses) on translation of net assets to U.S. dollars on consolidation are recorded in the Currency Translation Adjustment account within Shareholders’ Equity. The functional currency of the corporate head office is the Canadian dollar. Transaction gains or losses as well as translation gains and losses on monetary assets and liabilities are recorded within Foreign Exchange gains (losses) on the Consolidated Statement of Earnings. U.S. based Food Group operations have limited exposure to other currencies since almost all sales and purchases are made in U.S. dollars. It is the Company’s intention to hold excess 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 U.S. dollars.

Commodity risk

The Food Group enters into exchange-traded commodity futures and options contracts to hedge its exposure to price fluctuations on grain transactions to the extent considered practicable for minimizing risk from market price fluctuations. 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 counter-party 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. At December 31, 2005 the Company owned 672,443 (2004 – 111,885) bushels of corn with a weighted average price of $1.85 (2004 - $2.48) and 235,637 (2004 – 38,361) bushels of soy beans with a weighted average price of $13.63 (2004 - $11.69). The Company has at December 31, 2005 net long positions on soy beans of 79,488 (2004 – 52,954) and a net long/(short) position on corn of 4,286 (2004 –(153,983)) bushels. An increase/decrease in commodity prices of either soy or corn of 10% would not be material

SunOpta Inc. 56 December 31, 2005 – 10-K

to the Company. There are no futures contracts in the other SunOpta Food Group segments, Opta Minerals, the StakeTech Steam Explosion Group or related to Corporate office activities.

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

- None

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(e). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2005. This evaluation excludes the June 20 ^th acquisition of Cleugh’s Frozen Foods, Inc, the July 13 ^th acquisition of Pacific Fruit Processors, Inc. and the December 22, 2005 acquisition of Les Importations Cacheres Hahamovitch Inc. that collectively represent $47,596,000 of consolidated total assets and $742,000 of consolidated net earnings of SunOpta Inc. in its Consolidated Financial Statements as of and for the year ended December 31, 2005.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control Over Financial Reporting

SunOpta’s management, with the participation of SunOpta’s Chief Executive Officer and Chief Financial Officer, has evaluated whether any change in SunOpta’s internal control over financial reporting occurred during the fourth quarter of fiscal 2005. Based on that evaluation, management concluded that there has been no change in SunOpta’s internal control over financial reporting during the fourth quarter of fiscal 2005 that has materially affected or is reasonably likely to materially affect, SunOpta’s internal control over financial reporting.

Item 9B. Other Information - None

SunOpta Inc. 57 December 31, 2005 – 10-K

PART III

Item 10. Directors and Executive Officers of the Registrant

(a)

Directors and Executive Officers

The information with respect to directors required by this item is incorporated herein by reference from the section entitled “Election of Directors” in the Company’s definitive Proxy Statement for its Annual Meeting of Shareholders to be held May 17, 2006 (the “2006 Proxy Statement”), to be filed with the Securities and Exchange Commission not later than April 11, 2006.

(b)

Executive Officers

The following table shows certain information with respect SunOpta’s Executive Officers as of December 31, 2005:

Name	Executive Officers of SunOpta
Jeremy N. Kendall	Chairman of the Board, CEO and Director
Steven R. Bromley	President and Chief Operating Officer
John H. Dietrich	Vice President and Chief Financial Officer
Allan Routh	Director, President, SunOpta Grains and Foods Group
Arthur J. McEvily	President, SunOpta Ingredients Group

Jeremy Kendall has served as a Director of the Company since September 1978. In June 1983, he was appointed Chairman of the Board and Chief Executive Officer of the Company. He is also currently the Chairman of Opta Minerals Inc. a subsidiary of the Company listed on the TSX (“OPM”), and Chairman of Jemtec Inc. (6/91 to present), a distributor of electronic home incarceration equipment listed on the TSX Venture Exchange (the “TSXV”), and Easton Minerals Ltd. (1/95 to present) a mineral exploration company listed on the TSXV. Mr. Kendall has served on the following Boards of Directors: BI Inc. (9/81 to 11/00), a producer of electronic home incarceration equipment listed on Nasdaq; Brigdon Resources Inc. (06/93 to 02/99) an oil and gas exploration company; Redaurum Ltd. (06/95 to 03/02), a provider of wireless electronic equipment and services listed on the TSX; and Wisper Inc. (6/95 to 3/02), a provider of wireless electronic equipment and services listed on the TSXV. Mr. Kendall is also a Director of a number of private and charitable organizations.

Steven Bromley is a Certified General Accountant and joined SunOpta in June 2001 and was appointed President, and Chief Operating Officer in December 2004. Prior to this appointment, Mr. Bromley held various other positions with the Company including Executive Vice President and Chief Operating Officer, Executive Vice President and Chief Financial Officer and Vice President, Finance. Prior to joining the Company, Mr. Bromley was VP, Finance at Bridge2Market Inc. from July 2000 to May 2001. Prior to this, Mr Bromley spent over 13 years in the Canadian dairy industry in a wide range of financial and operational roles with both Natrel Inc. and Ault Foods Limited. From 1997 to 1999 he served on the Board of Directors of Natrel, Inc. Mr. Bromley is a Director of Opta Minerals Inc., a subsidiary of the Company listed on the TSX (“OPM”).

John Dietrich is a Chartered Accountant and Chartered Financial Analyst. He joined the Company in January 2002 as Vice President and Treasurer. The Board of Directors appointed Mr. Dietrich as Vice President and Chief Financial Officer in September, 2003. Prior to joining SunOpta, Mr. Dietrich held finance roles at Natrel Inc., including Director of Business Development. Mr. Dietrich has not served on any reporting issuers Board of Directors.

Allan Routh was elected to the Board of Directors in September 1999. Mr. Routh is President of the Company’s Grains and Soy Products Group and prior to March 2003 was President and Chief Executive Officer of the SunRich Food Group, LLC., a wholly-owned subsidiary of the Company. Mr. Routh has been involved in the soy industry since 1984. 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.

SunOpta Inc. 58 December 31, 2005 – 10-K

Arthur McEvily was appointed President of SunOpta Ingredients Group in April 2003. Mr. McEvily previously held the position of President and Chief Executive Officer of Opta Food Ingredients which he obtained in February 2000. Prior to that, he was named Executive Vice President in January 1999, Senior Vice President, Commercial Development in December 1997 and served as Vice President Applications, Technical Service and New Product Commercialization from August 1996 to December 1997. He served as Vice President Sales and Business Development of Opta from December 1993 to July 1996. Mr. McEvily received a B.Sc. in Biochemistry from Marlboro College, Marlboro, Vermont and a Ph.D. in chemistry at the University of North Carolina at Chapel Hill. He was a postdoctoral fellow at Harvard Medical School.

Item 11. Executive Compensation

The information required under this item is incorporated herein by reference from the section entitled “Executive Compensation” in the 2006 Proxy Statement for the annual meeting of shareholders to be held on May 17, 2006.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by item 403 of Regulation S-K is incorporated herein by reference from the section entitled “Security Ownership of Certain Beneficial Owners and Management” in the 2006 Proxy Statement.

The information required by item 201(d) of Regulation S-K regarding the Company’s equity compensation plans is set out in the table below. All such plans have received shareholder approval.

Number of Securities

to be Issued on

Exercise

Weighted Average Exercise Price of Outstanding Options

Number of Securities Available for Future Issuance

Equity compensation plans approved by shareholders

2,706,440

$5.72

nil

Item 13. Certain Relationships and Related Transactions

SunOpta has completed many acquisitions of privately held companies over the last five years. Many of the former owners continue to be employed by SunOpta and continue to manage the companies which they have sold to us. In certain circumstances there continues to be commercial relationships between the acquired company and the employee or a company controlled by the employee. These relationships include facilities leased by SunOpta and purchases and sales of product. All transactions are at commercial rates and fully described in note 14 related party transactions and balances of the Consolidated Financial Statements.

Item 14 - Principal Accountant Fees and Services

Information with respect to principal accountant fees and services may be found under the caption “Independent Auditor Fees” in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 17, 2006, such information is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules

SUNOPTA INC.

(a) Documents filed as part of this Report

Page

1. Consolidated Financial Statements	F-1

Independent Auditors’ Report	F-2

Consolidated Statements of Earnings and Comprehensive Income
For the Years ended December 31, 2005, 2004 and 2003	F-4

Consolidated Balance Sheets
As at December 31, 2005 and 2004	F-5

SunOpta Inc. 59 December 31, 2005 – 10-K

Consolidated Statements of Shareholders Equity
For the Years ended December 31, 2005, 2004 and 2003	F-6

Consolidated Statements of Cash Flows
For the Years ended December 31, 2005, 2004 and 2003	F-7

Notes to Consolidated Financial Statements
For the Years ended December 31, 2005 and 2004	F-8–F-42

3. Exhibits

2A.	Agreement and Plan of Merger dated as of October 25, 2002 among Opta Food Ingredients, Inc., SunOpta Inc. and Stake Acquisition Corp. (incorporated herein by reference to the Company’s Form 8-K, SEC file No. 0-9989, filed November 6, 2002, Exhibit 2.1).


3i (a)	Amalgamation of Stake Technology Ltd and 3754481 Canada Ltd. (formerly George F. Pettinos (Canada) Limited) (incorporated herein by reference to the Company’s Form 10-KSB, SEC file No. 0-9989, for the year ended December 31, 2000, Exhibit 3.1).


3i (b)	Certificate of Amendment dated October 31, 2003 to change the Company’s name from Stake Technology Ltd. to SunOpta Inc. (incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2004, SEC file No. 0-9989).


3i (c)	Articles of Amalgamation of SunOpta Inc. and Sunrich Valley Inc., Integrated Drying Systems Inc., Kettle Valley Dried Fruits Ltd., Pro Organics Marketing Inc., Pro Organics Marketing (East) Inc., 4157648 Canada Inc. and 4198000 Canada Ltd. dated January 1, 2004. (incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2004, SEC file No. 0-9989).

3i (d)	Articles of Amalgamation of SunOpta Inc. and 6319734 Canada Inc., 4157656 Canada Inc. Kofman-Barenholtz Foods Limited dated January 1, 2005. **

3i (e)	Articles of Amalgamation of SunOpta Inc. and 4307623 Canada Inc. dated January 1, 2006. **

3ii	Bylaw No. 14 approved by shareholders – June 17, 1997 (incorporated herein by
	reference to the Company’s Form 10-KSB for the year ended December 31 1997, SEC file No. 0-9989, Exhibit 3.3)

10A.	1993 Employee/Director Stock Option Plan dated May 19, 1993 (incorporated herein by
	reference to the Company’s Form 10-KSB for the year ended December 31, 1995, SEC file No. 0-9989, Exhibit 10.18).

10B.	1996 Employee/Director Stock Option Plan dated September 27, 1996 (incorporated
	herein by reference to the Company’s Form 10-KSB for the year ended December 31, 1996, SEC file No. 0-9989, Exhibit 10.22).

10C.	1998 Stock Option Plan dated December 12, 1997 (incorporated herein by reference to the Company’s Form 10-KSB for the year ended December 31, 1998, SEC file No. 0-9989, Exhibit 10.16).

10D.	1999 Stock Option Plan dated February 18, 1999 (incorporated herein by reference to the Company’s Form 10-KSB for the year ended December 31, 1999, SEC file No. 0-9989, Exhibit 10.19).

10E.	2001 Stock Option Plan dated March 13, 2001 (incorporated herein by reference to the Company’s Form 10-KSB for the year ended December 31, 2001, SEC file No. 0-9989, Exhibit 10.14).

SunOpta Inc. 60 December 31, 2005 – 10-K

3. Exhibits (continued)

10F.

2002 Stock Option Plan dated March 26, 2002 (previously filed with Form 10-K for the year ended December 31, 2003, SEC file No. 0-9989 filed on March 31, 2003, Exhibit 10.1(f)).

10G.

Employment Agreement dated October 1, 2001 between the Company and Mr. Jeremy Kendall (incorporated by reference to the Company’s Form 10-K/ A-3 for the year ended December 31, 2003, SEC file No. 0-9989, filed on July 2, 2003.

10H.

Employment Agreement dated August 2, 1999 between Sunrich, Inc (a wholly-owned subsidiary of the Company) and Mr. Allan Routh (incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2003, SEC file No. 0-9989, filed on July 2, 2003.

10I.

Employment Agreement dated January 26, 2001 between Opta Food Ingredients, Inc. (now SunOpta Ingredients Inc., a wholly-owned subsidiary of the Company) and Mr. Arthur McEvily (incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2003, SEC file No. 0-9989, filed on July 2, 2003.

10J.

Third Amended and Restated Credit Agreement dated December 9, 2005 among SunOpta Inc. (the “Company”), certain affiliates of the Company, Bank of Montreal, as Agent and Harris Trust and Savings Bank as U.S. Security Agent and other Lenders within the lending group. * / **

10K.

Employee Stock Purchase Plan dated May 7, 2003 for 1,000,000 common shares.

List of subsidiaries - Exhibit 21 **

23.1

Consent of Independent Registered Public Accounting Firm – Exhibit 23.1 **

Powers of Attorney - Exhibit 24 **

31.1

Certification by Jeremy Kendall, Chief Executive Officer pursuant to SEC Release No. 33-8238 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

31.2

Certification by John Dietrich, Chief Financial Officer pursuant to SEC Release No. 33-8238 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

Certification by Jeremy Kendall, Chief Executive Officer and John Dietrich, Chief Financial Officer pursuant to Section 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

This exhibit does not include the Schedules thereto as listed in its table of contents. The Company undertakes to furnish any Schedules to the Securities and Exchange Commission upon its request.

Filed herewith

SunOpta Inc. 61 December 31, 2005 – 10-K

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SUNOPTA INC.

John Dietrich

/s/ John Dietrich

Vice President and Chief Financial Officer

Date: February 17, 2006

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

Signature	Title	Date

*
Jeremy N. Kendall	Chairman, Chief Executive Officer	February 17, 2006
	and Director (Principal Executive Officer)

/s/ John Dietrich
John Dietrich	Vice President and Chief Financial	February 17, 2006
	Officer (Principal Financial and Accounting Officer)

*
Cyril A. Ing	Director	February 17, 2006

*
Joseph Riz	Director	February 17, 2006

*
Jim Rifenbergh	Director	February 17, 2006

*
Allan Routh	Director	February 17, 2006

*
Katrina Houde	Director	February 17, 2006

*
Camillo Lisio		Director	February 17, 2006

*
Stephen Bronfman		Director	February 17, 2006

*
Robert Fetherstonhaugh	Director	February 17, 2006

*
Steven Townsend	Director	February 17, 2006

( By his signature set forth below, John Dietrich, 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.

John Dietrich	/s/ John Dietrich
Vice President and Chief Financial Officer	Attorney -In-Fact

SunOpta Inc. 62 December 31, 2005 – 10-K

SunOpta Inc.

Consolidated Financial Statements
(expressed in U.S. dollars)

- F1 -

Report of Independent Registered Public Accounting Firm

To the Shareholders of SunOpta Inc.

We have completed integrated audits of SunOpta Inc.’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated Financial statements

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings and comprehensive income, of shareholders’ equity and cash flows present fairly, in all material respects, the financial position of SunOpta Inc. at December 31, 2005 and December 31, 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

- F2 -

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Cleugh’s Frozen Foods, Inc., Pacific Fruit Processors, Inc., Les Importations Cacheres Hahamovitch Inc. from its assessment of internal control over financial reporting as of December 31, 2005 as they were acquired by the Company during 2005. We have also excluded these acquisitions from our audit of internal control over financial reporting. These acquisitions collectively represent $48 million of consolidated total assets and $0.7 million of consolidated net earnings of SunOpta Inc. as of and for the year ended December 31, 2005.

(Signed) “PricewaterhouseCoopers LLP”

Mississauga, Ontario
February 15, 2006

- F3 -

SunOpta Inc.

Consolidated Statements of Earnings and Comprehensive Income

For the years ended December 31, 2005, 2004 and 2003

(Expressed in thousands of U.S. dollars, except per share amounts)


	2005		2004		2003
	$		$		$

Revenues	426,101		306,251		199,099

Cost of goods sold	354,603		247,812		163,421


Gross profit	71,498		58,439		35,678

Warehousing and distribution expenses	10,659		6,016		2,365
Selling, general and administrative expenses	45,632		37,225		23,065


Earnings before the following	15,207		15,198		10,248

Interest expense, net	(3,417	)	(1,522	)	(1,942	)
Other income (expense), net (note 19)	3,571		(12	)	585
Foreign exchange	1,341		565		1,076

	1,495		(969	)	(281	)


Earnings before income taxes	16,702		14,229		9,967

Provision for income taxes (note 12)	2,566		3,139		1,001


Net earnings before minority interest	14,136		11,090		8,966

Minority interest	578		74		—


Net earnings for the year	13,558		11,016		8,966


Change in foreign currency translation adjustment	1,644		4,006		3,019


Comprehensive income	15,202		15,022		11,985


Earnings per share for the year (note 11)

Basic	0.24		0.20		0.19


Diluted	0.24		0.20		0.18

(See accompanying notes to consolidated financial statements)

- F4 -

SunOpta Inc.

Consolidated Balance Sheets

As at December 31, 2005 and 2004

(Expressed in thousands of U.S. dollars)


	2005	2004
	$	$
Assets (Note 9)

Current assets
Cash and cash equivalents	5,455	8,081
Accounts receivable (note 3)	57,608	38,446
Inventories (note 4)	88,340	49,537
Prepaid expenses and other current assets (note 5)	4,194	4,472
Current income taxes recoverable	1,847	2,000
Deferred income taxes (note 12)	691	421

	158,135	102,957

Assets held for sale (note 6)	—	208
Property, plant and equipment (note 6)	77,257	62,411
Goodwill and intangibles (note 7)	58,262	43,934
Deferred income taxes (note 12)	4,473	6,831
Other assets (note 15a)	3,355	3,831

	301,482	220,172

Liabilities

Current liabilities
Bank indebtedness (note 9)	20,799	—
Accounts payable and accrued liabilities (note 8)	50,688	35,668
Customer and other deposits	544	431
Current portion of long-term debt (note 9)	3,518	4,819
Current portion of long-term payables	723	1,548

	76,272	42,466

Long-term debt (note 9)	55,538	31,003
Long-term payables	472	1,232

	132,282	74,701


Minority Interest (note 2)	9,116	1,378

Shareholders’ Equity

Capital stock (note 10)	106,678	105,794
Authorized Unlimited common shares without par value
Issued 56,587,671 (December 31, 2004 – 56,220,212) common shares
Contributed surplus	3,235	3,330
Retained earnings	40,379	26,821
Cumulative other comprehensive income	9,792	8,148

	160,084	144,093

	301,482	220,172

Commitments and contingencies (note 15)

(See accompanying notes to consolidated financial statements)

- F5 -

SunOpta Inc.

Consolidated Statements of Shareholders’ Equity

For the years ended December 31, 2005, 2004 and 2003

(Expressed in thousands of U.S. dollars)


	Capital stock		Contributed surplus			Retained earnings		Cumulative other comprehensive income		Total
	$			$			$		$	$

Balance at December 31, 2002	37,966			3,330			6,839		1,123	49,258

Warrants exercised and issued	1,861			—			—		—	1,861
Compensation warrants exercised	761			—			—		—	761
Options exercised	2,257			—			—		—	2,257
Shares issued under equity offerings	53,004			—			—		—	53,004
Shares issued to acquire Kettle Valley	821			—			—		—	821
Net earnings for the year	—			—			8,966		—	8,966
Currency translation adjustment	—			—			—		3,019	3,019


Balance at December 31, 2003	96,670			3,330			15,805		4,142	119,947

Warrants exercised and issued	7,908			—			—		—	7,908
Options exercised	777			—			—		—	777
Employee stock purchase plan	439			—			—		—	439
Net earnings for the year	—			—			11,016		—	11,016
Currency translation adjustment	—			—			—		4,006	4,006


Balance at December 31, 2004	105,794			3,330			26,821		8,148	144,093

Options exercised	370			—			—		—	370
Employee stock purchase plan	576			—			—		—	576
Share purchase buy back	(62	)		(95	)		—		—	(157	)
Net earnings for the year	—			—			13,558		—	13,558
Currency translation adjustment	—			—			—		1,644	1,644


Balance at December 31, 2005	106,678			3,235			40,379		9,792	160,084

(See accompanying notes to consolidated financial statements)

- F6 -

SunOpta Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2005, 2004 and 2003
(Expressed in thousands of U.S. dollars)


	2005		2004		2003
	$		$		$

Cash provided by (used in)

Operating activities
Net earnings for the year	13,558		11,016		8,966
Items not affecting cash;
Amortization	8,141		7,119		5,126
Deferred income taxes	776		900		(475	)
Dilution gain, net (note19(a))	(6,516	)	—		—
Common shares granted to Opta Mineral employees	234		—		—
Write-down of trademarks	185		2,250		—
Minority interest	578		74		—
Other	1,525		(433	)	301
Changes in non-cash working capital, net of businesses acquired (note 13)	(26,006	)	(10,170	)	(11,992	)

	(7,525	)	10,756		1,926


Investing activities
Decrease in short-term investments	—		—		2,038
Acquisition of companies, net of cash acquired	(20,920	)	(27,284	)	(17,594	)
Purchases of property, plant and equipment	(14,165	)	(19,810	)	(7,476	)
Proceeds from sale of property, plant and equipment	656		6,550		337
Proceeds from notes receivable	—		—		1,071
Other	(274	)	(3,495	)	—

	(34,703	)	(44,039	)	(21,624	)


Financing activities
Increase (decrease) in line of credit facilities	7,461		—		(5,531	)
Proceeds from Opta Minerals share issuance (note 19(a))	14,294		—		—
Borrowings under long-term debt and tender facility	25,221		16,705		8,907
Repayment of long-term debt	(6,602	)	(6,508	)	(24,698	)
Repayment of deferred purchase consideration	(1,027	)	(260	)	(602	)
Proceeds from the issuance of common shares, net of issuance costs	946		9,125		56,601
Other	(984	)	(234	)	(490	)

	39,309		18,828		34,187


Foreign exchange gain on cash held in foreign currency	293		546		489


Increase (decrease) in cash and cash equivalents during the year	(2,626	)	(13,909	)	14,978

Cash and cash equivalents - beginning of year	8,081		21,990		7,012


Cash and cash equivalents - end of year	5,455		8,081		21,990

See note 13 for supplemental cash flow information

(See accompanying notes to consolidated financial statements)

- F7 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


1.	Description of business and significant accounting policies

	SunOpta Inc. (the “Company” or “SunOpta”) was incorporated under the laws of Canada on November 13, 1973. Formerly operating as Stake Technology Ltd., the Company changed its name to SunOpta Inc. on October 31, 2003. The new corporate name combines the names of two of the Company’s historical operating food groups, the Sunrich Food Group and Opta Food Ingredients. The change reflects the Company’s commitment to environmental responsibility and to the natural and organic food markets. The Company conducts business in three main industries, the SunOpta Food Group (Food Group) processes, packages and distributes a wide range of natural, organic, kosher and specialty food products via its vertically integrated operations with a focus on soy, oat fiber and other natural and organic food products. Opta Minerals Inc. (Opta Minerals) processes, distributes and recycles silica free loose abrasives, industrial minerals, specialty sands and related products. The SunOpta BioProcess Group (formerly the StakeTech Steam Explosion Group) markets proprietary bio process technology systems for the pulp, bio-fuel and food processing industries. The Company’s assets, operations and employees at December 31, 2005 are located in the United States and Canada.

	As of January 1, 2004, SunOpta Inc. changed the basis of financial statement preparation from generally accepted accounting principles in Canada (Canadian GAAP) to those generally accepted in the United States (U.S. GAAP), including the rules and regulations of the U.S. Securities and Exchange Commission. This change was made as a majority of the Company’s operations and shareholders are located in the U.S. As a result of this change, all comparative financial statement balances and related notes have been amended to reflect the change to U.S. GAAP. The Company’s significant accounting policies are presented below and conform in all material respects to those in Canada, except as indicated in note 17.

	Basis of presentation

	The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned except for Opta Minerals Inc. which is 70.6% owned. All significant intercompany accounts and transactions have been eliminated on consolidation.

	All subsidiaries, except Opta Minerals which is owned 70.6% (see note 19), are 100% owned at December 31, 2005. Organic Ingredients, Inc. was owned 50.1% at December 31, 2004 (refer to note 2(d)) until April 5, 2005, when the remaining 49.9% minority interest was acquired by SunOpta Inc. The investment in Opta Minerals represents control and therefore is recorded using the consolidation method, whereby revenues and expenses are consolidated with the results of the Company as of December 31, 2005. The minority interest balance, on the Consolidated Balance Sheet as at December 31, 2005 represents the non-controlling shareholders’ interest in Opta Minerals Inc. As at December 31, 2004 the minority interest balance included only that of Organic Ingredients, Inc. which as noted above was acquired during the year. Minority interest includes the non-controlling equity component as at the date of the public offering or acquisition and income attributable to the minority interest shareholders since that date.

	Cash and cash equivalents

	Cash and cash equivalents consist of unrestricted cash and short-term deposits with an original maturity of less than 90 days.

	Inventories

	Raw materials and finished goods inventories (excluding commodity grains) are valued at the lower of cost and estimated net realizable value. Cost is determined on a first-in, first-out basis.

	Inventories of commodity grain are valued at market. Changes in market value are included in cost of goods sold. The Food Group generally follows a policy of hedging its grain transactions to protect gains and minimize losses due to market fluctuations. Futures and purchase and sale contracts are adjusted to market price and gains and losses from such transactions are included in cost of goods sold. The Company has a risk of loss from hedge activity if the grower does not deliver the grain as scheduled. The Company also has

- F8 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


	other grain inventories consisting of sunflowers and specialty soy beans which are valued at the lower of cost and estimated net realizable value.

	Property, plant and equipment

	Property, plant and equipment are stated at cost, less accumulated amortization. Amortization is provided on property, plant and equipment using the straight-line basis at rates reflecting the estimated useful lives of the assets. Effective January 1, 2005, the estimated useful lives of all asset categories were revised to standardize and better reflect the estimated useful lives for all wholly owned subsidiaries in the following ranges:


Buildings	20 - 40 years
Machinery & equipment	10 - 20 years
Enterprise software	5 years
Office furniture & equipment	3 - 7 years
Vehicles	5 years


	Amortization is calculated from the time the asset is put into use. Amortization expense would have been approximately $8,041 (actual amortization was $6,801) for the year ended December 31, 2005 if the change to estimated useful lives had not taken place.

	Goodwill and intangibles

	Goodwill represents the excess of the purchase price over the assigned value of net assets acquired. Goodwill is not amortized. The Company has assessed the carrying value of goodwill for possible impairment, and has determined that no such impairment exists as at December 31, 2005. The Company’s finite life intangible assets consist of customer lists, grower relationships, trademarks and distribution agreements and are amortized on a straight line basis over their estimated useful lives, ranging from 2 to 15 years.

	Other assets


	i)	Deferred financing costs

		Costs incurred in connection with obtaining long-term financing are deferred and amortized over the term of the financing agreement.

	ii)	Investments

		The Company has a 32% (2004 – 32%) investment in Easton Minerals Limited (“Easton”). This investment is considered impaired and the carrying value at December 31, 2005 is $nil (2004 - $nil). The investment was accounted for using the equity method of accounting. The Company does not have any guaranteed obligations with respect to Easton or any commitment to provide further financial support, and therefore it is not anticipated that further losses will be recorded on this investment.


	Revenue recognition

	The Company recognizes revenue at the time of delivery of the product or service and when all of the following have occurred: a sales agreement is in place, price is fixed or determinable, and collection is reasonably assured. Details of specific recognition by group are as follows:

	i) SunOpta Food Group

	Grain revenues are recorded when title and possession of the product is transferred to the customer. Possession is transferred to the customer at the time of shipment from the Company’s facility or at the time of delivery to a specified destination depending on the terms of the sale. Revenues from custom processing services are recorded upon provision of services and completion of quality testing. All other Food Group revenues are recognized when title is transferred upon the shipment of product or at the time the service is provided to the customer.

- F9 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


1.	Description of business and significant accounting policies continued

	ii) Opta Minerals

	Revenues from the sale of silica free loose abrasives, industrial minerals, specialty sands and related products are recognized upon the sale and shipment of the related minerals. Revenues from recycling activities are recognized upon the sale and shipment or the disposal of non-hazardous material received.

	iii) SunOpta BioProcess Group

	The percentage of completion method is used to account for significant contracts when related costs can be reasonably estimated. The Company uses costs or hours incurred to date as a percentage of total expected costs or hours to measure the extent of progress towards completion. License fees related to the right to sell the Company’s technologies are recorded as revenues over the term of the license, when collectibility is reasonably assured.

	Foreign currency translation

	The Company’s operations are self-sustaining operations, with the exception of the corporate head office, which is considered to be fully integrated with the Company’s US operations. The assets and liabilities of the self-sustaining operations as well as monetary assets of the corporate head office are translated at exchange rates in effect at the balance sheet date. Non-monetary assets of the corporate head office are translated at their historical rates. Revenues and expenses are translated at average exchange rates prevailing during the period. Unrealized gains or losses resulting from translating self-sustaining operations are accumulated and reported as a currency translation adjustment in Shareholders’ Equity and are disclosed as part of cumulative other comprehensive income. Gains and losses resulting from translating the corporate head office are included in net earnings for the year.

	The functional currency of all operations located in the United States and the corporate head office is the United States dollar. The functional currency of all operations located in Canada is the Canadian dollar.

	Customer and other deposits

	Customer and other deposits at December 31, 2005 principally include prepayments by the Food Group’s customers for merchandise inventory to be purchased during the spring planting season.

	Income taxes

	The Company follows the asset and liability method of accounting for income taxes whereby deferred income tax assets are recognized for deductible temporary differences and operating loss carry-forwards, and deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the amounts of assets and liabilities recorded for income tax and financial reporting purposes.

	Deferred income tax assets are recognized only to the extent that management determines that it is more likely than not that the deferred income tax assets will be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The income tax expense or benefit is the income tax payable or refundable for the year plus or minus the change in deferred income tax assets and liabilities during the year.

	Stock Option Plan

	The Company maintains several stock option plans under which incentive stock options may be granted to employees and non-employee directors. SunOpta accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, because the grant price equals the market price on the date of grant, no compensation expense is recognized by the Company for stock options issued to employees.

- F10 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


1.	Description of business and significant accounting policies continued

	Had compensation costs for the Company’s stock options been recognized based upon the estimated fair value on the grant date under the fair value methodology allowed by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock Based Compensation,” as amended by SFAS No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure,” the Company’s net earnings and earnings per share would have been as follows:

	Pro-forma net earnings reflecting stock compensation expense for 2005, 2004 and 2003 are as follows:


	2005		2004		2003

Number of options granted		832,625		588,775		1,152,450


		$		$		$
Total fair value of options granted		2,266		2,061		3,328


Net earnings for the year as reported		13,558		11,016		8,966

Stock compensation expense:
Options expense from current year grants		2,239		532		664
Options expense from prior years grants, including the accelerated vesting of certain options		3,520		833		241

		5,759		1,365		905


Pro-forma net earnings for the year		7,799		9,651		8,061


Pro-forma net earnings per common share
- Basic		0.14		0.18		0.17

- Diluted		0.14		0.18		0.16


		The fair value of the options granted during the year were estimated using the Black-Scholes option-pricing model with the assumptions of a dividend yield of 0% (2004 – 0%, 2003 – 0%), an expected volatility of 54% (2004 – 54%, 2003 – 55%), a risk-free interest rate of 4% (2004 – 3%, 2003 – 3%), and an expected life of four to six years. These options vest at various dates ranging from the date of the grants to December 8, 2010 and expire four to five years subsequent to the grant date.

	(a)	During the year, the Company modified the terms of all outstanding and unvested options whose exercise prices were greater than $5.00. As a result of the modification, 1,284,972 stock options vested immediately resulting in the disclosure of an additional proforma expense of $3,884 in the year. Under the accounting guidance of APB 25, the accelerated vesting did not result in any compensation to be recognized as these stock options had no intrinsic value. Without this modification, the Company would have incurred $1,735 in additional compensation expense in 2006 that would have been required to be recognized under SFAS 123R, which the Company will implement beginning January 1, 2006.


	Derivative instruments

	The Food Group enters into exchange-traded commodity futures and options contracts to hedge its exposure to price fluctuations on grain transactions to the extent considered practicable for minimizing risk from market price fluctuations. 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 revenue contracts may expose the Company to risk in the event that a counter party to a transaction is unable to fulfill its contractual obligation or if a grower does not deliver the grain as scheduled. The Company manages its risk by entering into purchase contracts with pre-approved growers and revenue contracts are entered into

- F11 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


	with organizations of acceptable creditworthiness, as internally evaluated. All futures and options transactions are marked to market. Gains and losses on these transactions related to grain inventories are included in cost of goods sold.

	The SunOpta Food and SunOpta BioProcess Groups enter into forward foreign exchange contracts to minimize exchange rate fluctuations relating to Euro denominated sales contracts and accounts receivable. All forward exchange contracts are marked to market. Gain and losses on these transactions are included in foreign exchange in the Consolidated Statements of Earnings.

	Financial Instruments

	The Company’s financial instruments recognized in the consolidated balance sheets and included in working capital consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and customer and other deposits. The fair values of these instruments approximate their carrying value due to their short-term maturities. The fair value of long- term debt and long-term payables as at December 31, 2005 is considered to not be materially different from the carrying amount.

	The Company’s financial instruments exposed to credit risk include cash and cash equivalents, and accounts receivable. The Company places its cash and cash equivalents with institutions of high creditworthiness. The Company’s trade accounts receivable are not subject to a high concentration of credit risk. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its accounts receivable credit risk exposure is limited. The Company maintains an allowance for losses based on the expected collectibility of the accounts.

	Earnings per share

	Basic earnings per share is computed by dividing the earnings available for common shareholders by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed using the treasury stock method whereby the weighted average number of common shares used in the basic earnings per share calculation is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued at the beginning of the year.

	Use of estimates

	The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

	New Accounting Pronouncements

	The FASB issued Statement of Financial Accounting Standards (SFAS) Number 123 (revised 2004), Share-Based Payment , which is a revision of SFAS Number 123, Accounting for Stock-Based Compensation , and amends SFAS Number 95, Statement of Cash Flows. SFAS Number 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair value. Effective January 1, 2004, the Company adopted the fair value recognition provisions of SFAS Number 123 which requires the note disclosure of the company’s earnings if stock options expense was recorded. The adoption of SFAS Number 123(R) on January 1, 2006 will result in the recognition of stock compensation expense within the statement of earnings. The Company expects that the impact of this pronouncement, based on grants up to and including December 31, 2005, will be $223 for the year ended December 31, 2006. An additional expense will also be recognized for the vested portion of new options granted during the coming year, the impact of these grants will be known as they occur.

- F12 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


2.	Business acquisitions

	During the year ended December 31, 2005, the Company acquired five businesses and the remaining 49.9% minority interest of Organic Ingredients. In 2004 the Company acquired seven businesses. All of these acquisitions have been accounted for using the purchase method and the consolidated financial statements include the results of operations for these businesses from the date of acquisition less minority interest when the Company owned less than 100% of the acquired company.

	The purchase price allocation of the net assets acquired and consideration given is summarized below:

	2005 Acquisitions


	Pacific Fruit Processors, Inc. (a) $		Cleughs Frozen Foods, Inc. (b) $		Earthwise Processors, LLC (c) $	Other (d) $		Total $

Net assets acquired:
Non-cash working capital	1,030		98		1,148	812		3,088
Property, plant and equipment	1,095		3,764		2,300	252		7,411
Other assets	339		356		—	—		695
Goodwill	4,226		522		—	2,174		6,922
Intangible assets – finite life	4,014		930		525	1,687		7,156
Deferred income tax liability	(1,676	)	—		—	(475	)	(2,151	)
Debt and other liabilities	—		(4,574	)	—	—		(4,574	)
Minority interest	—		—		—	1,482		1,482


	9,028		1,096		3,973	5,932		20,029


Consideration, net of cash acquired	7,928		490		3,973	4,122		16,513
Notes payable	1,100		606		—	1,500		3,206
Contingent consideration	—		—		—	310		310


	9,028		1,096		3,973	5,932		20,029


2.	Business acquisitions continued

(a)	Pacific Fruit Processors, Inc.

	On July 13, 2005, SunOpta acquired 100% of the outstanding shares of Pacific Fruit Processors, Inc. (“Pacific”), for total consideration of $9,028 including acquisition costs and a note payable of $1,100. Additional consideration may be payable based on the achievement of certain pre-determined earnings targets between August 1, 2005 and December 31, 2007. This additional consideration is based on Pacific achieving a predetermined amount of earnings before interest and taxes calculated annually, commencing on August 1, 2005 and ending on December 31, 2007. Any amount paid will be recorded as goodwill when the outcome of the contingency becomes determinable.

	Pacific is a manufacturer of value-added fruit products with a focus on fruit-based ingredients for the dairy, bakery and beverage industries. Pacific operates from a 60,000 square foot facility in California that houses conventional and aseptic processing capabilities, dry and frozen warehousing space and laboratory facilities. The acquisition of Pacific augments SunOpta’s vertically integrated fruit operations by adding further capabilities to the Company’s existing fruit-based operations. This acquisition has been included in the newly formed SunOpta Fruit Group segment within the Food Group.

- F13 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


(b)	Cleugh’s Frozen Foods, Inc.

	On June 20, 2005, SunOpta purchased 100% of the outstanding shares of Cleugh’s Frozen Foods, Inc. (“Cleugh’s”) for $490 in cash consideration including acquisition costs and notes payable of $606 plus the assumption of debt of $4,574. Additional consideration may be payable based on the achievement of pre-determined earnings before interest and taxes between January 1, 2006 and December 31, 2007. The maximum amount of contingent consideration payable is $4,000, which will be recorded as additional goodwill when the amount and outcome of the contingency become determinable.

	Cleugh’s processes natural and organic frozen fruits and vegetables for the retail private label, food service and industrial markets. Cleugh’s operates two processing facilities in Buena Park and Salinas, California, with combined production, packaging and warehousing space of approximately 60,000 square feet. Cleugh’s has been grouped under the newly formed SunOpta Fruit Group segment within the Food Group.

(c)	Earthwise Processors, LLC

	On June 2, 2005, SunOpta purchased the inventory, property, plant and equipment and the business of Earthwise Processors, LLC (“Earthwise”) for $3,973 including acquisition costs. Additional contingent consideration may be payable upon the achievement of certain pre-determined earnings levels between January 1, 2006 and December 31, 2008. The maximum amount of contingent consideration payable is $750, which will be recorded as additional goodwill when the amount and outcome of the contingency becomes determinable.

	Earthwise is located in Moorehead, Minnesota and is a vertically integrated producer of organic and identity preserved non-genetically modified grains, primarily focused on soy. Strategically this acquisition provides SunOpta with an expanded and diversified grower base, expansion of soy product offerings and entrance into other markets such as organic flax and organic wheat, plus ongoing operating synergies. Earthwise has been included in the Grains and Foods Group segment within the Food Group.

(d)	Other Acquisitions:

	Les Importations Cacheres Hahamovitch Inc.

	On December 22, 2005, SunOpta acquired 100% of the outstanding shares of 4307623 Canada Inc. (“Hahamovitch”) consisting of the business, operating assets and liabilities except for the warehouse facility of Les Importations Cacheres Hahamovitch Inc. for $1,303 (Cdn $1,520) in cash consideration including acquisition costs and notes payable of $1,500 (Cdn $1,750). Additional consideration may be payable based on the achievement of pre-determined earnings targets between January 1, 2006 and December 31, 2008. In conjunction with the acquisition the company entered into a long-term operating lease with the vendor for the warehouse facility at market rates for the period ending June 30, 2007.

	Hahamovitch is a Montreal based distributor of kosher and specialty foods. Hahamovitch has been in business for over 50 years. Over this time Hahamovitch has worked closely with organizations that are now key business units of the SunOpta’s Canadian Food Distribution Group. Hahamovitch operates from a 31,000 square foot facility located in Montreal, Quebec. The operations of Hahamovitch will be integrated as part of the SunOpta Canadian Food Distribution Group and will become a platform for the further development of SunOpta's organic, natural and specialty food grocery distribution business in the Province of Quebec.

	Hillcrest Abrasive Production Division

	On May 10, 2005 Opta Minerals Inc. acquired certain assets of the abrasive production division of Hillcrest Industries Inc. (“Hillcrest”) for consideration of $550 including acquisition costs. The newly formed division of Opta Minerals, Opta Minerals (Attica), will process coal-based abrasive products from power generation by-products and serve as a distribution facility for the New York, Pennsylvania and Ohio regions.

- F14 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


2.	Business acquisitions continued

	In conjunction with the asset purchase, Opta Minerals concurrently entered into a long-term lease with Hillcrest for warehouse facilities located in Attica, and entered into a services agreement with Hillcrest for the production of material. Additional consideration may be payable on the occurrence of certain events, which could amount to $344. As at December 31, 2005, contingent consideration of $87 was payable and recorded as additional goodwill.

	Organic Ingredients, Inc.

	On April 5, 2005, SunOpta exercised its option to acquire the remaining 49.9% of the outstanding shares of Organic Ingredients, Inc. (“Organic Ingredients”) for cash consideration of $2,269. As a result the Company recorded an increase in goodwill and intangibles of $1,010 and a decrease in minority interest of $1,483. During the year, contingent consideration of $221 (2004 - $153) was earned and total contingent consideration earned to date is $374. Further additional consideration may be payable based on Organic Ingredients achieving pre-determined earnings targets during the period January 1, 2006 to December 31, 2007.

	2004 Acquisitions


	Kofman- Barenholtz (a) $		Supreme Foods (b) $		General Mills Oat Fiber (c) $		Other Acquisitions (d) $		Total $

Net assets acquired:
Non-cash working capital	1,842		2,801		725		3,262		8,630
Property, plant and equipment	53		174		3,098		299		3,624
Goodwill	1,187		3,225		8,142		1,344		13,898
Intangible assets – finite life	589		3,402		—		1,436		5,427
Deferred income tax liability	(212	)	(1,206	)	—		(320	)	(1,738	)
Debt and other liabilities	—		—		(374	)	(136	)	(510	)
Minority Interest	—		—		—		(1,304	)	(1,304	)


	3,459		8,396		11,591		4,581		28,027


Cash consideration, net of cash acquired	3,459		7,806		11,591		4,428		27,284
Contingent consideration	—		—		—		153		153
Note payable	—		590		—		—		590


	3,459		8,396		11,591		4,581		28,027


	(a)	Kofman-Barenholtz

		On September 2, 2004, SunOpta acquired 100% of the outstanding shares of Kofman-Barenholtz Foods Limited (Kofman-Barenholtz) for cash consideration including acquisition costs of $3,459 (Cdn $4,494). During 2005, the Company recorded contingent consideration of $430 (Cdn $500) in relation to the 2004 acquisition of Kofman-Barenholtz meeting certain defined targets. The additional consideration has been recorded as goodwill. Further contingent consideration of up to $344 (Cdn $400) may be payable in 2006 based upon Kofman-Barenholtz’s ability to maintain certain product line distribution requirements under the agreement, which would also be recorded as goodwill when earned.

		Kofman-Barenholtz, headquartered in Toronto, is an established distributor of kosher and specialty grocery products across Canada, with over 50 years of experience. Kofman-Barenholtz’s focus and strength in the kosher and specialty grocery products market further strengthens SunOpta’s

- F15 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


		Canadian natural, organic, kosher and specialty foods distribution network. Kofman-Barenholtz has been included in the Canadian Food Distribution Group segment within the Food Group.

	(b)	Supreme Foods

		On May 1, 2004, SunOpta acquired 100% of the outstanding shares of Supreme Foods Limited (Supreme) for total consideration of $8,396 (Cdn $11,572) including acquisition costs and assumption of a note payable to shareholders of $590 (Cdn $709, discounted at 5%).

		Supreme is a distributor of certified organic, natural, kosher and specialty grocery products across Canada, with headquarters in Toronto, Ontario. Supreme has a number of exclusive sourcing agreements as well as products marketed under its own trade names.

		Supreme’s focus and strength in grocery products has become the base of SunOpta’s growing natural, organic and specialty foods grocery distribution business. The combination of Supreme’s business with Kofman-Barenholtz in eastern Canada and Wild West Organic Harvest in western Canada creates a national grocery platform for SunOpta and allows for considerable expansion of product lines. Supreme Foods has been included in the Canadian Food Distribution Group segment within the Food Group.

	(c)	General Mills Oat Fiber Facility

		On April 16, 2004, SunOpta acquired a General Mills Bakeries and Food Service oat fiber processing facility for total consideration of $11,591 including acquisition costs. The purchase included land, building, equipment and inventory.

		With the addition of this facility, the Company continued to increase its total annual oat fiber processing capacity. The Company's growth in oat fiber has been driven by the significant increase in consumer demand for healthier food offerings, and the general trend to improve the nutritional content of foods via the addition of fiber.

		SunOpta’s purchase of this facility has generated efficiencies in the Company's oat fiber processing operations enabling the Company to streamline oat fiber production across three facilities, lengthening run times and improving operating efficiencies. The facility is part of the SunOpta Ingredients Group segment within the Food Group.

	(d)	Other acquisitions:

		Organic Ingredients

		On September 10, 2004, SunOpta acquired 50.1% of the outstanding shares of Organic Ingredients, Inc. (Organic Ingredients), headquartered in Aptos, California for consideration of $2,257 including acquisition costs. During 2004, contingent consideration of $153 was earned and has been reflected as goodwill in the balance sheet.

		Organic Ingredients is an established provider of a wide range of certified organic industrial ingredients including processed fruit and vegetable based ingredients, sweeteners, vinegars and others. The company sources and contract manufactures through exclusive arrangements with suppliers located around the world, including North America, South America, Europe and Asia. These exclusive supply arrangements enable the company to maintain a strategic advantage in the organic food ingredient market, in terms of cost and availability of supply, and positions the company to provide value added private label products to key customers. Organic Ingredients has been included within the SunOpta Fruit Group segment within the SunOpta Food Group.

- F16 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


2.	Business acquisitions continued

		Snapdragon Natural Foods

		On June 1, 2004, SunOpta acquired the inventory and the business of Snapdragon Natural Foods Inc. (Snapdragon) for $878 (Cdn $1,190).

		Snapdragon distributed organic groceries and frozen products to both mass market and natural food retailers throughout Canada from warehousing facilities located in Montreal, Quebec, Toronto, Ontario and Calgary, Alberta. Operations of Snapdragon were consolidated into Supreme Foods in January 2005 as part of the opening of the new Toronto based distribution centre. The Snapdragon operation further contributed to the Company’s stated objective of building Canada’s first national natural and organics food distribution network. It has been included under the Canadian Food Distribution Group segment within the Food Group.

		Distribution A & L

		On April 1, 2004, SunOpta acquired the outstanding shares of Distribution A&L for total consideration of $381 (Cdn $500) including acquisition costs. During 2005, the Company recorded contingent consideration of $40 (Cdn $46) which was earned during the twelve month period ending March 31, 2005. Further consideration of $344 (Cdn $400) may be payable based upon Distribution A&L’s ability to meet certain predetermined profit targets between April 1, 2005 and March 31, 2009, with a maximum of $86 (Cdn $100) in each twelve month period. The earned contingent consideration has been recorded to goodwill and any future contingent consideration will be recorded as goodwill when the amount and outcome of the contingency becomes determinable.

		Distribution A&L specializes in the distribution of specialty abrasives and related products. Distribution A&L focuses on smaller markets currently not serviced by Opta Minerals via its network of selling professionals specializing in the industrial, automotive and pool filtration industries. The skills contained within this operation are key as Opta Minerals continues to expand products and revenue capabilities.

		Distribue-Vie

		On March 1, 2004, SunOpta acquired the outstanding shares of Distribue-Vie Fruits & Legumes Biologiques Inc. (Distribue-Vie) for $911 (Cdn $1,217) including acquisition costs.

		Distribue-Vie specializes in the distribution of organic fresh foods with an emphasis on produce. Distribue-Vie is the dominant player in the distribution of organic produce in Quebec and operates from a warehousing facility located in Montreal, servicing the key Quebec market along with geographic reach to Eastern Ontario and the Maritime provinces. An additional $250 (Cdn $300) of contingent consideration may be payable if certain predetermined profit targets are achieved by the acquired business for both of the twelve month period ending March 31, 2006 and will be recorded as goodwill when the amount and outcome of this contingency becomes determinable. No contingent consideration was paid for the twelve month period ending March 31, 2005.

		The addition of Distribue-Vie to the Canadian Food Distribution Group has brought benefits to the customer base in the form of broader product lines and greater support for consumer education of organic foods through marketing and retail merchandising initiatives.

- F17 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


2.	Business acquisitions continued

	(e)	Contingent consideration on companies acquired prior to 2004

		Sigco Sun Products

		During the year, the Company recorded contingent consideration of $155 (2004 - $50) as an increase to goodwill. This amount was recorded in relation to Sigco Sun Products achievement of predetermined earnings targets. Further consideration of $1,217 may be payable between January 1, 2006 and December 31, 2008 based on the terms of the agreement.

		Sonne Labs Inc.

		During the year, the Company recorded contingent consideration, as an increase to goodwill, of $33 (2004 - $30) in relation to the 2003 acquisition of Sonne Labs Inc. Further consideration of $687 may be payable between January 1, 2006 and December 31, 2007 based upon their ability to meet certain predefined earning targets.

3.	Accounts Receivable


	2005		2004
	$		$
Trade receivables	58,870		39,520
Allowance for doubtful accounts	(1,262	)	(1,074	)

	57,608		38,446


	2005		2004
	$		$
Allowance for doubtful accounts

Balance, beginning of year	1,074		1,218
Additions and effects of foreign exchange rate differences	365		196
Accounts receivable written off, net of proceeds	(177	)	(340	)


Balance, end of year	1,262		1,074


4.	Inventories


	2005		2004
	$		$
Raw materials and work in process	35,139		15,791
Finished goods	49,497		32,811
Grain	3,704		935

	88,340		49,537

Grain inventories consist of the following:
Company owned grain	4,260		1,404
Unrealized gain (loss) on
Sale and purchase contracts	(619	)	(687	)
Future contracts	63		218


	3,704		935

- F18 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


5.	Prepaid expenses and other current assets

	In 2004, prepaid expenses and other current assets included approximately $1,314 in deferred transaction and prospectus costs in relation to the initial public offering of the Company’s subsidiary, Opta Minerals Inc. This initial public offering was completed on February 17, 2005 (see note 19). There are no such costs included in the 2005 balance.

6.	Property, plant and equipment


	2005

	Cost $	Accumulated Amortization $	Net $
Land and buildings	36,124	6,181	29,943
Machinery and equipment	63,985	23,127	40,858
Enterprise software	3,361	216	3,145
Office furniture and equipment	4,908	2,983	1,925
Vehicles	2,587	1,201	1,386


	110,965	33,708	77,257


	2004

	Cost $	Accumulated Amortization $	Net $
Land and buildings	29,299	2,215	27,084
Machinery and equipment	50,621	20,237	30,384
Enterprise software	1,797	—	1,797
Office furniture and equipment	3,693	1,816	1,877
Vehicles	1,593	324	1,269


	87,003	24,592	62,411


	Included in machinery and equipment is equipment under capital lease with a cost of $521 (2004 - $327) and net book value of $481 (2004 - $322).

	Assets held for sale in 2004 included the St. Thomas, Ontario facility which had a book value of $171 (2004 - $208). The facility was sold during 2005 for proceeds of $172.

- F19 -

SunOpta Inc.
Notes to Consolidated Financial Statements
(Expressed in thousands of U.S. dollars, except per share amounts)


7.	Goodwill and intangibles


	2005 $	2004 $
Goodwill – at cost, less accumulated amortization of $1,074 (2004 -$985)	42,429	34,050
Trademarks and other intangibles with a finite life – at cost, less accumulated amortization $2,776 (2004 - $1,234)	15,833	9,884


	58,262	43,934


	The following is a summary of changes in goodwill and intangibles:


	Goodwill $		Intangibles $		Total $

Balance as at December 31, 2004	34,050		9,884		43,934

Additions during the year	8,081		7,163		15,244
Amortization	—		(1,338	)	(1,338	)
Write-off of intangible assets and goodwill	(71	)	(114	)	(185	)
Impact of foreign exchange	369		238		607


Balance as at December 31, 2005	42,429		15,833		58,262


	The Company estimates that the aggregate future amortization expense associated with finite life intangibles will be as follows:


	$

2006		1,871
2007		1,744
2008		1,711
2009		1,673
2010		1,630
Thereafter		7,204

		15,833


8.	Accounts payable and accrued liabilities

	Accounts payable and accrued liabilities consist of the following:


	2005 $	2004 $
Accounts payable	39,944	26,610
Payroll and commissions	2,850	2,676
Accrued grain liabilities	4,246	3,371
Other accruals	3,648	3,011


	50,688	35,668

- F20 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


9.	Long-term debt and banking facilities


	2005 $			2004 $
Term loan (a)(i)(iv)		45,000			33,400
Other long-term debt (b)		14,056			2,422

		59,056			35,822
Less: current portion		(3,518	)		(4,819	)


		55,538			31,003


(a)	On December 9, 2005, the Company amended and restated its credit agreement with its lending syndicate as follows:

	i)	Term loan facility:

		The term loan facility was increased to $45,000 from $33,400 as at December 31, 2004. Principal payment as a lump sum is payable on maturity, at the end of five years. The term loan matures on December 20, 2010 and is renewable at the option of the lender and the Company.

		Interest on the term loan is payable at a fixed rate of 6.44% plus a margin of up to 50 basis points based on certain financial ratios of the Company. Interest on the 2004 term loan facility was at variable rates which was 3.7% at December 31, 2004.

	ii)	$12,898 (Cdn $15,000), line of credit facility:

		As at December 31, 2005, $nil (2004 - $nil) of this facility has been utilized except for $472 (2004 - $1,700) committed through letters of credit. Interest on borrowings under this facility 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. The maximum availability of this line is based on the borrowing base which includes certain accounts receivables and inventories as defined in the credit agreement. At December 31, 2005, the line had a maximum borrowing base of $10,882

	iii)	$25,000 ($17,500 at December 31, 2004) line of credit facility:

		As at December 31, 2005, $15,195 (2004 - $nil) of this facility has been utilized. Interest on borrowings under this facility accrues at the borrower’s option based on various reference rates including U.S. bank prime, or U.S. LIBOR, plus a margin based on certain financial ratios. As at December 31, 2005, the Company could borrow the full line of credit based on the borrowing base calculations as noted above.

	iv)	$10,000 revolving acquisition facility:

		The Company has an available facility to finance future acquisitions and capital expenditures. This facility is subject to certain draw restrictions. Principal is payable quarterly equal to the greater of (a) 1/20 of the initial drawdown amount of the facility, or (b) 1/20 of the outstanding principal amount as of the date of the last draw. Any remaining outstanding principal under this facility is due on October 31, 2009.

		Interest on borrowings under this facility is consistent with the term loan described in i) above. This facility was not utilized as at December 31, 2005 or December 31, 2004.

- F21 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


9.	Long-term debt and banking facilities continued


		The Canadian and U.S. line of credit facilities are subject to annual extensions.

		All of the above facilities are collateralized by a first priority security against substantially all of the Company’s assets in both Canada and the United States. In February 2005, the Company amended its credit agreement for the primary purpose of releasing all secured collateral relating to Opta Minerals, as part of the group’s initial public offering (see note 19).


	(b)	Other long-term debt consists of the following:


	2005 $	2004 $
On September 30, 2005, Opta Minerals, Inc. amended and restated its credit agreement and banking facilities to establish a term loan facility of $6,879 (Cdn $8,000) which was fully drawn upon at September 30, 2005. The loan has a term of ten years with quarterly payments of Cdn $200. The principle is payable quarterly based on a ten-year amortization. The facility matures October 31, 2010 and is renewable at the option of the lender and Opta Minerals.	6,879	—

Promissory note of Cdn $1,750 issued to former shareholders of Les Importations Cacheres Hahamovitch Inc., bearing no interest, unsecured and to be repaid on January 2, 2007.	1,500	—

Promissory note of $1,100, issued to former shareholders of Pacific, bearing no interest, unsecured and to be repaid in two instalments of $550 on the sixth and twelfth month anniversary of the acquisition closing date of July 13, 2005.	1,100	—

Promissory note of $700 (originally discounted to $606) issued to certain former shareholders of Cleugh’s to be repaid in equal annual instalments of $140 over five years commencing on the first anniversary of the closing date.	639	—

Promissory notes of $1,370 assumed on acquisition of Cleugh’s at a weighted average interest rate of 6%, unsecured and to be repaid in equal annual instalments of $274.	1,239	—

Term debt secured by Cleugh’s property plant and equipment with various lenders at a weighted average interest rate of 5.75% and amortized over various periods not exceeding five years.	602	—

Promissory note of Cdn $573 (December 31, 2004 – Cdn $832) issued to the former shareholders of Supreme Foods Limited., principal payable in three equal annual instalments, unsecured.	493	692

Promissory note of Cdn $501 (December 31, 2004 - Cdn $701) issued to the former shareholders of Kettle Valley Dried Fruit Ltd. as part of the acquisition in 2003, interest at 5%, interest and principal payable in ten semi-annual instalments, unsecured.	431	583

Capital lease obligations due in monthly payments, with a weighted average interest rate of 8.0% (December 31, 2004 – 7.7%)	1,099	360

Other term debt with a weighted average interest rate of 2.0% (2004– 2.5%), due in varying instalments through July 2009.	74	787


	14,056	2,422

- F22 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


9.	Long-term debt and banking facilities continued


	(c)	The loans and capital leases detailed above require payments as follows:


	$
2006		3,518
2007		4,096
2008		1,738
2009		1,568
2010		46,284
Thereafter		1,852


		59,056


(d)	Interest expense on long-term debt for the year ended December 31, 2005 was $1,991 (December 31, 2004 - $936).

(e)	Included in bank indebtedness on the balance sheet are lines of credit of the Company as noted in 9(a)(ii) and 9(a)(iii) above and lines of credit of its subsidiaries as follows:

	i)	Opta Minerals Inc.:

	In addition to the term loan facility described above, Opta Minerals, Inc. has a line of credit of $6,019 (Cdn $7,500) and a $4,299 (Cdn $5,000) facility to finance future acquisitions and capital expenditures. As of December 31, 2005 no amounts have been drawn on these facilities with the exception of committed letters of credit of $957. These facilities have been collaterized by a priority security interest against substantially all of the Opta Minerals Inc.’s assets.

	ii)	Cleugh’s Frozen Foods, Inc.:

	As part of the Cleughs acquisition, described in note 2 the Company assumed a line of credit facility with a maximum available draw of $20,000, based on and secured by the value of Cleugh’s accounts receivable and inventory. Interest rate is at 7.70% as at December 31, 2005 and fluctuates between LIBOR plus 2% and 2.75% based on certain financial ratios of Cleugh’s, adjusted quarterly. The line of credit has a four year term and expires in June 17, 2010. As of December 31, 2005 $10,433 was drawn on the facility

	Cash on deposit with lending institutions has been netted against borrowings under the lines of credit with the same institution.

- F23 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


10.	Capital stock


	The Company is authorized to issue an unlimited number of common shares without par value and an unlimited number of special shares without par value.

	The following is a summary of changes in the Company’s capital stock:


	Warrants and rights						Common shares						Total

	Number			$			Number			$			$

Balance as at December 31, 2002		4,703,100			2,736			41,984,118			35,230			37,966

Warrants exercised (a)		(1,095,750	)		(438	)		1,095,750			2,299			1,861
Compensation and related warrants exercised (a)		(366,000	)		—			366,000			761			761
Shares issued to acquire Kettle Valley (a)		—			—			196,809			821			821
August 2003 public offering (c)		—			—			7,500,000			51,004			51,004
August 2003 private placement (c)								285,714			2,000			2,000
Options exercised (b)		—			—			1,276,705			2,257			2,257


Balance as at December 31, 2003		3,241,350			2,298			52,705,096			94,372			96,670

Warrants exercised (a)		(3,093,850	)		(2,289	)		3,093,850			9,927			7,638
Compensation and related warrants exercised (a)		(112,500	)		—			112,500			270			270
Options exercised (b)		—			—			232,437			777			777
Employee Stock Purchase Plan		—			—			76,329			439			439


Balance as at December 31, 2004		35,000			9			56,220,212			105,785			105,794

Options exercised (b)		—			—			276,640			370			370
Employee Stock Purchase Plan		—			—			123,819			576			576
Share Purchase buy back		—			—			(33,000	)		(62	)		(62	)


Balance as at December 31, 2005		35,000			9			56,587,671			106,669			106,678


	(a)	Warrants

		During 2005, no warrants were granted or exercised. During 2004, 3,206,350 warrants including 112,500 compensation warrants were exercised for net proceeds of $7,908 (2003 – 1,461,750 warrants, $2,622). These warrants were granted as part of private placements completed in 2001.

		The 35,000 warrants outstanding as at December 31, 2005 are exercisable at $1.70 until February 2006.

		On May 1, 2003, the Company issued 196,809 common shares at a price of $4.17 per common share, in the acquisition of Kettle Valley (note 2).

		In conjunction with the convertible debenture issued in 2002 the Company issued 250,000 warrants with a fair value of $263, an exercise price of $3.25, and an expiry date of November 30, 2004. These warrants were exercised in 2004.

- F24 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


10.	Capital stock continued


	(b)	Employee/director option plans

		Details of changes in employee/director stock options are as follows:


		2005			2004			2003

Outstanding options at beginning of year		2,334,615			2,027,177			2,201,260
Granted		832,625			588,775			1,152,450
Exercised		(276,640	)		(232,437	)		(1,276,705	)
Retracted		(184,160	)		(48,900	)		(49,828	)


Outstanding options at end of year		2,706,440			2,334,615			2,027,177


Exercisable options at year end		2,510,000			1,050,255			787,907


Weighted average fair value of options granted during the year	$	2.72		$	3.50		$	2.89


		The Company grants options to employees and directors from time to time under employee/director stock option plans. The Board of Directors of the Company has authorized and approved 6,650,000 (2004 – 6,650,000) shares to be made available for the stock option plans. As of December 31, 2005, 244,910 remaining to be granted under these plans.

		The following is a summary of options granted during the year.


Grant date	Expiry date	Exercise price		Number of options		Number of options vested at Dec 31, 2005

January 21, 2005	January 21, 2010	$	6.54		125,000		125,000
March 8, 2005	March 8, 2010	$	6.81		34,000		34,000
May 4, 2005	May 4, 2010	$	4.52		17,275		3,455
August 8, 2005	August 8, 2010	$	5.71		269,000		269,000
November 3, 2005	November 3, 2010	$	5.14		94,250		94,250
December 8, 2005	December 8, 2010	$	5.50		293,100		293,100


					832,625		818,805


		Employee/director stock options granted by the Company contain an exercise price, which is equal to the closing market price of the shares on the day prior to the grant date. Any consideration paid by employees on exercise of stock options or purchase of stock is credited to capital stock.

		During the year, the Company granted 832,625 options which vest as follows: 818,805 options vested immediately on granting in 2005, 3,455 vest per annum in 2006 to 2009. During 2005, 276,640 (2004 – 232,437) options were exercised and the equivalent number of common shares were issued for net proceeds of $370 (2004 - $777).

- F25 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


10.	Capital stock continued


	Details of employee/director stock options outstanding as at December 31, 2005 are as follows:


Expiry Date	Exercise Price Range	Vested Outstanding Options	Weighted Average Price		Total Outstanding Options		Weighted Average Price

2006	$1.41 to $2.10	152,600	$	1.78		152,600	$	1.78
2007	$1.80 to $3.07	230,090	$	2.78		286,610	$	2.78
2008	$3.06 to $9.90	746,830	$	7.03		871,330	$	6.55
2009	$5.96 to $7.69	561,675	$	7.01		561,675	$	7.01
2010	$4.52 to $6.81	818,805	$	5.74		832,625	$	5.72



		2,510,000	$	5.90		2,704,840	$	5.72


		The weighted average remaining contractual life for vested outstanding options and total outstanding options is 3.3 and 3.2 years respectively.

	(c)	Equity offerings and private placements

		On August 28, 2003, the Company issued 7,500,000 common shares at a price of $7.00 per common share, as part of a public offering for gross proceeds of $52,500. The Company incurred $1,496 in share issuance costs, (net of tax) in relation to this offering.

		On August 29, 2003, the Company issued 285,714 common shares pursuant to a private placement with a significant shareholder, for proceeds of $2,000.

		In addition, pursuant to 2001 private placement agreements, the Company granted to their agents:


	i)	Compensation warrants exercisable until June 8, 2003 to purchase 144,000 option units at $2.00 per unit. If exercised in full, the Company would issue 144,000 common shares and 72,000 warrants exercisable at $2.40 to acquire 72,000 common shares, with an expiry date of March 31, 2004.

		During 2003, all of the above 144,000 compensation warrants were exercised and 216,000 common shares were issued for net proceeds of $461.

	ii)	Compensation warrants exercisable until September 28, 2003 to purchase 150,000 option units at $2.00 per unit. If exercised in full, the Company would issue 150,000 common shares and 112,500 warrants exercisable at $2.40 to acquire 112,500 common shares, which expired on September 30, 2004.

		During 2003, the above 150,000 compensation warrants were exercised and 150,000 common shares were issued for net proceeds of $300. During 2004, the above 112,500 compensation warrants were exercised and 112,500 common shares were issued for net proceeds of $270.

- F26 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


11.	Earnings per share

	The calculation of basic earnings per share is based on the weighted average number of shares outstanding. Diluted earnings per share reflect the dilutive effect of the potential exercise of warrants and options as disclosed in note 10. The number of shares for the diluted earnings per share was calculated as follows:


	2005	2004	2003
Weighted average number of shares used in basic earnings per share	56,366,852	53,971,986	46,094,627
Dilutive potential of the following
Employee/director stock options	355,957	862,243	840,085
Warrants	24,162	27,572	2,004,201

Weighted average number of shares used in diluted earnings per share	56,746,971	54,861,801	48,938,913

	$	$	$
Net earnings for the year	13,558	11,016	8,966

Earnings per share:
- Basic	0.24	0.20	0.19

- Diluted	0.24	0.20	0.18


	Options to purchase 1,751,355 (2004 - 317,000, 2003 - 573,000) common shares have been excluded from the calculations of diluted earnings per share due to their anti-dilutive effect.

12.	Income taxes

	The Company’s effective income tax rate on consolidated earnings has been determined as follows:


	2005		2004		2003

Canadian statutory income tax rate	36.1	%	36.1	%	36.1	%

Increase (decrease) by the effects of:
Change in valuation allowance	—		(11.2	%)	(24.8	%)
Differences in foreign, capital gains, manufacturing and processing and deferred income tax rates	(1.3	%)	3.6	%	(2.1	%)
Impact of dilution gain	(13.8	%)	—		—
Other	(5.6	%)	(6.4	%)	0.8	%


Effective income tax rate	15.4	%	22.1	%	10.0	%


	$		$		$
Earnings before income taxes	16,702		14,229		9,967


Provision for income taxes	2,566		3,139		1,001

- F27 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


12.	Income taxes continued

The components of the provisions for Canada and U.S. income taxes are shown below:


	2005		2004		2003
	$		$		$
Current expense:
Canada	525		679		370
United States	617		427		433

	1,142		1,106		803

Deferred (benefit) expense:
Canada	(1,489	)	(1,051	)	50
United States	2,913		3,084		148


	1,424		2,033		198


Provision for income taxes	2,566		3,139		1,001

Deferred income taxes of the Company are comprised of the following:


	2005 $		2004 $

Differences in property, plant and equipment and intangible basis	(6,696	)	(3,011	)
Capital and non-capital losses	9,418		8,079
Tax benefit of scientific research expenditures	2,090		2,000
Tax benefit of costs incurred during share issuance (note 10)	994		834
Other	562		554

	6,368		8,456
Valuation allowance	(1,204	)	(1,204	)


	5,164		7,252

The components of the deferred income taxes for Canada and U.S. are shown below:


	2005		2004
	$		$
Canada	5,854		3,596
United States	(690	)	3,656

	5,164		7,252


	2005 $	2004 $		2003 $
Deferred income tax valuation allowance:
Balance, beginning of year	1,204	2,803		5,350
Additions (reductions) to valuation allowance	—	(1,599	)	(2,547	)


Balance, end of year	1,204	1,204		2,803

- F28 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


	The Company has approximately $5,904 and $1,000 (2004 $5,712 and $1,000) in Canadian and U.S. scientific research expenditures respectively, which can be carried forward indefinitely in Canada, and 20 years in the U.S. to reduce future years’ taxable income. The Company also has approximately $402 (2004 - $404) in U.S. state scientific research investment tax credits which will expire in varying amounts up to 2015.

	The Company has Canadian and U.S. non-capital loss carry-forwards of approximately $13,557 and $11,728 respectively, as at December 31, 2005 (2004 - $9,727 and $12,388). The Company also has State loss carry forwards of approximately $2,023 as of December 31, 2005 (2004 - $4.500). The amounts are available to reduce future federal and provincial/state income taxes. Non-capital loss carry-forwards attributable to Canada expire in varying amounts over the next ten years while non-capital loss carry-forwards attributable to the U.S. expire in varying amounts over the next 15 years.

	The Company has Canadian capital losses of approximately $1,962, as at December 31, 2005 (2004 - $1,820). The amounts are available to reduce future capital gains. Capital losses in Canada do not expire.

	A valuation allowance of $1,204 (2004 - $1,204) has been recorded to reduce the net benefit recorded in these consolidated financial statements related to the capital and non-capital loss carry-forwards and scientific research expenditures.

13.	Supplemental cash flow information


	2005 $		2004 $		2003 $
Changes in non-cash working capital, net of businesses acquired:
Accounts receivable	(11,184	)	(7,466	)	(3,484	)
Inventories	(16,641	)	(6,730	)	(4,976	)
Prepaid expenses and other current assets	583		(275	)	(1,187	)
Income taxes recoverable	(18	)	(314	)	(1,543	)
Accounts payable and accrued liabilities	1,141		5,962		(2,159	)
Customer and other deposits	113		(1,347	)	1,357


	(26,006	)	(10,170	)	(11,992	)

Cash paid for:
Interest	3,493		1,373		1,698


Income taxes	2,041		1,800		2,099

- F29 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


14.	Related party transactions and balances

	In addition to transactions disclosed elsewhere in these consolidated financial statements, the Company entered into the following related party transactions:


	(a)	In 2004, SunOpta entered into an agreement with a company owned by the vendor of Sigco who was an employee during 2005 of the SunOpta Grains and Foods Group. As a result of this agreement, the Company has provided a guarantee for a loan in the form of a standby letter of credit to a maximum of $300 (2004 - $850) refer to note 15(d), while the other party provides the operating assets. The term of the agreement is for twelve months with an option to renew for an additional twelve months, whereby both parties operate a Hungary based sunflower business and on each anniversary receive an equal share of the adjusted earnings (loss) of the business.

		The Company holds an exclusive option, exercisable at anytime prior to September 30, 2006, to purchase all of the assets and specific liabilities.

		In the current year, this Hungarian based operation had revenue of $1,097 (2004 - $354), net income of $23 (2004 - $29) and had total assets of $1,295 (2004 - $2,112) as of December 31, 2005.

	(b)	Pursuant to the Pro Organics acquisition the Company leased its Pro Organics Vancouver, British Columbia warehouse and administration facility from the former owners who remain as executive officers of Pro Organics and SunOpta. The lease is at market rates and is for a five year term with two five year renewal periods. The total amount payable during 2005 was $311 (2004 - $282).

	(c)	The President of the Canadian Food Distribution Group sold $969 (2004 - $610) of organic product from his family farming operation, at market rates, to the Canadian Distribution Food Group during 2005 and was owed $97 (2004 – $35) from the Company as at December 31, 2005. The amount payable has been recorded in accounts payable and accrued liabilities.

	(d)	The President of the SunOpta Grains and Foods Group purchased $69 (2004 - $32) of seed, fertilizer and herbicides from the Group during 2005, and had a balance receivable outstanding as at December 31, 2005 of $33 (2004 - $75). In addition, the President of the SunOpta Grains and Foods Group sold through a family farming business $178 (2004 - $224) of soybeans and corn to the SunOpta Grains and Foods Group at market rates. The balance payable by SunOpta as at December 31, 2005 was $nil (2004 - $55).

	(e)	Other amounts due to/from officers/directors of the Company included in other current assets as at December 31, 2005 was $2 (2004 - $nil).

	(f)	Pursuant to the acquisition of Les Importations Cacheres Hahamovitch Inc. the Company has leased Les Importations Cacheres Hahamovitch Montreal, Quebec warehouse and administration facility from the former owner who remains as a senior management of the Canadian Food Distribution Group. The lease is at market rates and is for an eighteen month term. The total amount payable at December 31, 2005 was $nil.

	(g)	Pursuant to the acquisition of Cleugh’s the Company has leased Cleugh’s Buena Park, California production, packaging, warehouse and administration facility from the former owners who still remain as senior management of SunOpta Fruit Group. The lease is at market rates and is for a five year term. The total amount payable during 2005 was $128. The Company has also guaranteed the mortgage relating to this facility for $2,115.

- F30 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


15.	Commitments and contingencies


	(a)	One of the Company’s subsidiaries, SunRich LLC (formerly SunRich Inc.) filed a claim against a supplier for failure to adhere to the terms of a contract. On July 29, 2004 a judgement was awarded in favour of SunRich by a federal court jury in the United States District Court for the District of Oregon. The supplier countersued the Company for breach of contract however, as part of this judgement these counter-claims were dismissed. In the fall of 2005, the Court concluded on the Company’s application to recover attorney’s fees for approximately $862 including costs and awarded a sum of $175. During the fourth quarter the Company recorded a charge for the unprovided component of these fees of $400. Included within other assets is a receivable of $2,405 representing the initial, judgement, and interest and the recovery of legal fees awarded with respect to this suit. The supplier filed an appeal against this judgement which management and legal counsel believe is without merit. The appeal hearing is expected to be held in 2006.

		In December 2005, the Company was notified of service of a lawsuit, by an individual farmer in the State of New York, for breach of contract, and other grounds, for an amount of approximately $830. While the parties are in the process of considering mediation, management believes that the claim is grossly overstated, and is prepared to defend the lawsuit on various grounds. The Company believes that the outcome of this lawsuit will not materially affect the financial position or the results of the Company.

		During the year, the Company was sued by a landlord of one of its leased facilities for non-payment of rent and early lease cancellation. The company has countersued for non-performance by the landlord and damages and believes the ultimate resolution of this matter will not have a material effect on the financial statements.

		In addition, various claims and potential claims arising in the normal course of business are pending against the Company. It is the opinion of management that these claims or potential claims are without merit and the amount of potential liability, if any, to the Company is not determinable. Management believes the final determination of these claims or potential claims will not materially affect the financial position or results of the Company.

	(b)	The Company believes, with respect to both its operations and real property that it is in material compliance with current environmental laws. Based on known existing conditions and the Company’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, the discovery of changed conditions on the Company’s real property or in its operations, or changes in use of such properties and any related site restoration requirements, will not result in the incurrence of significant costs. No provision has been made in these consolidated financial statements for these future costs since such costs, if any, are not determinable at this time.

	(c)	In the normal course of business, the Food Group holds grain for the benefit of others. The Company is liable for any deficiencies of grade or shortage of quantity that may arise in connection with such grain. The Food Group also has commitments to purchase $30,942 of grains in the normal course of business.

	(d)	Letters of credit:

		The Company has outstanding letters of credit at December 31, 2005 totaling $1,429 (see note 9 (a)(ii) and 9(e)(i).

	(e)	Real property lease commitments:

- F31 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


	The Company has entered into various leasing arrangements which have fixed monthly rents that are adjusted annually each year for inflation.

	Commitments under operating leases, principally for distribution centres, warehouse and equipment, are as follows:


				$
	2006			6,473
	2007			5,277
	2008			3,718
	2009			3.035
	2010			2,059
	Thereafter			5,570


				26,132


	In the years 2005, 2004 and 2003, net minimum rents, including immaterial contingent rents and sublease rental income, were $5,890, $3,200 and $1,766 respectively.

	(f)	As a result of acquisitions the company may be committed to pay contingent consideration for fiscal years 2006 to 2009 based on certain earning targets and thresholds. The amount is not determinable as certain agreements have no maximum on the amount which can be earned.


16.	Segmented information

	Industry segments

	The Company operates in three industry segments: (a) the SunOpta Food Group (Food Group) which processes, packages and distributes a wide range of natural, organic and specialty food products via its vertically integrated operations with a focus on soy, oat fiber, fruit and other natural and organic food products; (b) the Opta Minerals Group processes which distributes, and recycles silica free loose abrasives, industrial minerals, specialty sands and related products; and (c) the SunOpta BioProcess Group which markets proprietary bioprocess technology systems for the pulp, food processing and bio-fuel industries. During the year the Company realigned its reporting segment within the Food Group and has further defined this segment into SunOpta Grains and Foods Group, SunOpta Ingredients Group, SunOpta Fruit Group and SunOpta Canadian Food Distribution Group (which combined form the SunOpta Food Group). The SunOpta Grains and Foods Group with the exception of Kettle Valley Dried Fruit is a combination of the former Grains and Soy Products Group and the Packaged Products Group. Both of these previous Groups are under common management. Kettle Valley has been included within the SunOpta Fruit Group. The addition of these segments better reflects how management views and manages the business and is aligned with the Company’s vertically integrated model. The Company’s assets, operations and employees are located in Canada and the United States. The prior year segment has been restated to reflect this realignment.

- F32 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


16.	Segmented information continued

	The Company has also revised the reporting of segment net earnings (loss) before interest, expense (net), income taxes and minority interest to segment net earnings (loss) before other income (expense), interest expense (net), income taxes and minority interest, as this is more aligned with assessing ongoing operating income of each group.


	2005

		SunOpta Food Group $	Opta Minerals $	SunOpta BioProcess and Corporate $		Consolidated $
External revenues by market		240,052	11,131	—		251,183
U.S.		115,970	23,528	—		139,498
Canada		30,519	—	4,901		35,420
Other


Total revenues from external customers		386,541	34,659	4,901		426,101


Segment net earnings (loss) before other income, interest expense (net), income taxes and minority interest		16,245	3,808	(3,505	)	16,548


Other income						3,571

Interest expense, net						3,417

Provision for income taxes						2,566

Minority interest						578

Net earnings						13,558

Identifiable assets		246,122	41,891	13,469		301,482

Amortization		6,466	1,225	450		8,141

Goodwill		35,878	6,551			42,429

Expenditures on property, plant and equipment		9,666	2,404	2,095		14,165

- F33 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)

The SunOpta Food Group has the following segmented reporting:


	2005

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $		SunOpta Fruit Group $		Canadian Food Distribution Group $		SunOpta Food Group $
External revenues by market
U.S.	121,752		52,352		65,675		273	240,052
Canada	5,273		4,058		7,036		99,603	115,970
Other	21,059		7,543		1,917		—	30,519


Total revenues from external customers	148,084		63,953		74,628		99,876	386,541


Segment earnings before other income (expense), interest expense (net), income taxes and minority interest	8,005		3,784		3,165		1,291	16,245


Identifiable assets	79,241		60,783		63,641		42,457	246,122


Amortization	1,978		2,159		1,079		1,250	6,466


Goodwill	2,158		12,031		7,618		14,071	35,878


Expenditures on property, plant and equipment	4,154		3,081		874		1,557	9,666


	2004

	SunOpta Food Group $	Opta Minerals $		SunOpta BioProcess and Corporate $			Consolidated $
External revenues by market
U.S.	166,946		12,878		1,287			181,111
Canada	84,134		19,233		—			103,367
Other	21,642		131		—			21,773


Total revenues from external customers	272,722		32,242		1,287			306,251


Segment net earnings (loss) before other income, interest expense (net), income taxes and minority interest	14,625		3,957		(2,819	)		15,763


Other income (expense)								(12	)


Interest expense, net								1,522


Provision for income taxes								3,139



Minority interest								74


Net earnings								11,016


Identifiable assets	170,110		26,777		23,285			220,172


Amortization	6,014		948		157			7,119


Goodwill	27,717		6,333		—			34,050


Expenditures on property, plant and equipment	16,216		2,137		1,457			19,810

- F34 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)

The SunOpta Food Group has the following segmented reporting:


	2004

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $		SunOpta Fruit Group $		Canadian Food Distribution Group $		SunOpta Food Group $
External revenues by market
U.S.	104,466		56,018		6,054		408	166,946
Canada	1,106		4,180		3,310		75,538	84,134
Other	15,113		6,103		426		—	21,642


Total revenues from external customers	120,685		66,301		9,790		75,946	272,722


Segment earnings before other income, interest expense (net), income taxes and minority interest	4,346		6,585		94		3,600	14,625


Identifiable assets	62,737		58,689		13,370		35,314	170,110


Amortization	2,478		2,227		397		912	6,014


Goodwill	1,940		12,002		2,035		11,740	27,717


Expenditures on property, plant and equipment	6,074		8,705		309		1,128	16,216


	2003

	SunOpta Food Group $	Opta Minerals $		SunOpta BioProcess and Corporate $			Consolidated $
External revenues by market
U.S.	136,298		9,446		461			146,205
Canada	29,260		15,202		—			44,462
Other	8,249		183		—			8,432


Total revenues from external customers	173,807		24,831		461			199,099


Segment net earnings (loss) before other income, interest Expense (net), income taxes and minority interest	12,183		2,479		(3,338	)		11,324


Other income (expense)								585


Interest expense, net								1,942


Provision for income taxes								1,001

Net earnings								8,966

Identifiable assets	117,346		26,363		30,047			173,756

Amortization	3,531		952		643			5,126

Goodwill	12,062		6,120		—			18,182

Expenditures on property, plant and equipment	5,698		796		982			7,476

- F35 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)

The SunOpta Food Group has the following segmented reporting:


	2003

	SunOpta Grains & Foods Group $	SunOpta Ingredients Group $		SunOpta Fruit Group $		Canadian Food Distribution Group $		SunOpta Food Group $
External revenues by market
U.S.	92,163		42,800		1,335		—	136,298
Canada	439		2,473		1,277		25,071	29,260
Other	2,384		5,705		160		—	8,249


Total revenues from external customers	94,986		50,978		2,772		25,071	173,807


Segment earnings before other income, interest expense (net), income taxes and minority interest	6,666		4,509		130		878	12,183


Identifiable assets	52,444		47,201		4,949		12,752	117,346


Amortization	1,314		1,905		166		146	3,531


Goodwill	1,890		3893		1,148		5,131	12,062


Expenditures on property, plant and equipment	1,658		2,884		944		212	5,698


Geographic segments

	2005						2004

	U.S. $		Canada $		Total $		U.S. $		Canada $		Total $
Property, plant and equipment		63,628		13,629		77,257		50,835		11,576		62,411


Goodwill		25,429		17,000		42,429		18,779		15,271		34,050


Total assets		212,825		88,657		301,482		141,998		78,174		220,172


	Customer Concentration

	The Company has no customers in 2005 or 2004 whose purchases exceeded 10% of the Company’s total revenue.

- F36 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


17.	Canadian generally accepted accounting principle differences

	These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) which conform in all material respects applicable to the Company with those in Canada (Canadian GAAP) during the years presented, except with respect to the following items:


	2005 $			2004 $			2003 $

Net earnings for the year - as reported		13,558			11,016			8,966
Pre-operating costs expensed (i)		—			—			(358	)
Stock option compensation expense (ii)		(5,909	)		(1,286	)		—
Release of cumulative translation adjustment – Opta Minerals (iii)		428			—			—
Convertible debenture		—			—			(54	)
Tax effect of above items		—			—			143


Net earnings for the year – Canadian GAAP		8,077			9,730			8,697


Net earnings per share – Canadian GAAP – Basic		0.14			0.18			0.19

Net earnings per share – Canadian GAAP – Diluted		0.14			0.18			0.18


		2005 $		2004 $

Retained earnings - as reported		40,379			26,821
Accretion on convertible debenture		(54	)		(54	)
Stock option compensation expense (ii)		(7,956	)		(2,047	)
Release of cumulative translation adjustment – Opta Minerals (iii)		428			—


Retained earnings – Canadian GAAP		32,797			24,720


	(i)	Under Canadian GAAP, certain costs expensed in prior years under U.S. GAAP would have been deferred and amortized. Net costs incurred in the pre-operating stage of a start-up business can be deferred until the business reaches commercial operation or the passage of a certain period of time as predetermined by management.

		Under Canadian GAAP, the Company would have deferred pre-operating expenses of $276 in 2002 relating to the start up of an organic dairy business in Canada. Amortization of these costs on a straight line basis would have commenced in July 2002 and as at December 31, 2003 these costs would have been fully amortized.

		In 2000, the Company acquired Nordic Aseptic, Inc., (renamed to SunOpta Aseptic Inc.) which under Canadian GAAP would have been considered a start-up business from the date of acquisition to December 31, 2000. Certain operating costs, net of income earned during the pre-operating period totaling $482 would have been deferred. Amortization of these costs would have commenced January 1, 2001 and as of December 31, 2003 these deferred costs would have been fully amortized.

		Amortization of $nil in 2005 (2004 - $nil; 2003 - $358) relating to these pre-operating costs would have been expensed under Canadian GAAP.

	(ii)	Effective January 1, 2004, Canadian GAAP requires the Company to record stock compensation expense on options granted to employees. Under the transitional provisions of this new standard, the Company would record a charge to retained earnings representing the cumulative impact of stock options granted since January 2002 and would record an expense for existing and any new options over the remaining vesting period.

- F37 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


17.	Canadian generally accepted accounting principle differences

		In conjunction with this standard, under Canadian GAAP, the Company would have recorded $5,909 in stock compensation expense (2004 - $1,286; 2003 - $nil). The cumulative impact of this difference is $8,372 (2004 - $2,463). Partially offsetting this balance, are stock option expenses recognized under US GAAP, not recognized under Canadian GAAP, related to a delay between when options were granted to employees and when they were approved by shareholders. An amount of $416 was recorded as an expense prior to 2003 and is a permanent difference between Canadian and US GAAP.

		During 2005, the Company modified the terms of outstanding and unvested options whose exercise prices were greater than $5.00. As a result of the modification, 876,590 stock options immediately vested and resulted in an additional expense for Canadian GAAP purposes of $3,004. The amount is included in the total stock compensation expense of $5,909, noted above.

	(iii)	Under Canadian GAAP, the Company would have recorded the partial release of the cumulative translation account relating to repayment of intercompany loans by Opta Minerals, Inc., resulting in a reduction in the Company’s net investment in Opta Minerals, Inc.. Under U.S. GAAP, no reduction in the Company’s net investment in Opta Minerals has occurred as a result of the repayment of these loans.

18.	Proforma data (unaudited)

	Condensed proforma income statement, as if all acquisitions completed in 2005 and 2004 had occurred at the beginning of 2004, is as follows:


	2005		2004
	$		$

Proforma revenue		474,758		428,091
Proforma net earnings		14,424		11,261
Proforma earnings per share		0.26		0.21
- Basic		0.25		0.21
- Diluted


19.	Other income (expense)


	2005			2004
	$			$

Dilution gain, net of related costs of $976 (a)		5,540			—
Reduction of assets (b)		(986	)		(2,436	)
Lawsuit (note (c) and 15(a))		(1,010	)		2,646
Other		27			(222	)

		3,571			(12	)


	(a)	Opta Minerals Inc. – Initial Public Offering

		On February 17, 2005, the Company’s subsidiary Opta Minerals Inc. completed its previously announced initial public offering and raised $14,294 (Cdn $17,496) in net proceeds, (gross proceeds Cdn $19,800) including an over-allotment option granted to the underwriters and exercised on March 16, 2005. The offer was for shares of Opta Minerals Inc. which consisted of the businesses and net assets that form the Opta Minerals Group segment (note 16). Immediately prior to this transaction the net assets and business of this segment were transferred into this wholly owned subsidiary Opta Minerals Inc.. The Company’s ownership was reduced to 72.6% of the outstanding common shares as a result of this transaction including the effect of gifting shares to certain employees of Opta Minerals

- F38 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)


		Inc. in recognition of their contribution in building the Company. The Company recorded a dilution gain of $6,516 as a result of the sale of the approximate 29.6% minority interest in Opta Minerals Inc.

		The initial public offering consisted of 4,500,000 units at an initial offering price of Cdn $4.00 per unit. Each unit consisted of one common share and one-half of a common share purchase warrant of Opta Minerals Inc.. Each whole warrant entitles the holder to purchase one common share of Opta Minerals at a price of $5.00 anytime on or before February 17, 2007. The shares and warrants are listed on the Toronto Stock Exchange under the symbols “OPM” and “OPM.WT”, respectively.

	(b)	Reduction of assets include the write-down of business, facilities, goodwill and intangibles to net realizable value refer to note 7(a). During 2004 the Company took an impairment charge related to certain intangibles acquired as part of the First Light Foods acquisition in 2001. During 2004, revenues associated with these intangibles, trademarks fell substantially due to the Company’s decision not to pursue a brand strategy and the decision of a major customer to convert to a private label program.

	(c)	In relation to the lawsuit awarded in 2004, a charge was taken during the year for legal fees not awarded net of established provisions (see note 15 (a)) and for additional legal fees incurred during the year in support of the judgement.


20.	Subsequent Events

	On February 15, 2006, SunOpta’s subsidiary Opta Minerals Inc. acquired 100% of the outstanding common shares of Magnesium Technologies Corporation (Magtech) of Richfield, Ohio for consideration of $18,000 in consideration including notes payable of $6,000.

	MagTech operates its main production facility in Walkerton, Indiana and maintains a sales and head office in Richfield, Ohio. This profitable company employs approximately 70 people, and is a leader in new product development within its industry. MagTech maintains a very high level of customer specific technical service with its primary customers, through the use of onsite technicians who monitor and manage the use of its products in the desulphurization process. The addition of MagTech substantially increases Opta’s position in the industrial minerals business and further expands its current position as a key service provider to the steel industry.

- F39 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)

Supplemental Financial Information (Unaudited)


	Quarter ended December 31,						Quarter ended September 30,

	2005			2004			2005			2004
	$			$			$			$
Revenues		122,070			82,663			114,950			80,140

Cost of goods sold		103,011			68,191			96,653			64,700


Gross profit		19,059			14,472			18,297			15,440

Warehousing and distribution expenses		2,811			1,872			2,655			1,546
Selling, general and administrative expenses		13,357			10,971			12,218			9,311


Earnings (loss) before the following		2,891			1,629			3,424			4,583

Interest expense, net		(1,335	)		(409	)		(1,186	)		(668	)
Other income (expense)		(407	)		(2,335	)		146			(146	)
Foreign exchange		823			123			438			194

		(919	)		(2,621	)		(602	)		(620	)


Earnings before income taxes		1,972			(992	)		2,822			3,963

Provision for (recovery of) income taxes		376			(1,412	)		601			1,187


Net earnings before minority interest		1,596			420			2,221			2,776


Minority interest		37			67			133			7


Net earnings for the period		1,559			353			2,088			2,769


Earnings per share for the period
Basic		0.03			0.01			0.04			0.05

Diluted		0.03			0.01			0.04			0.05

- F40 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)

Supplemental Financial Information (Unaudited)


	Quarter ended June 30,						Quarter ended March 31,

	2005			2004			2005			2004
	$			$			$			$
Revenues		102,858			80,946			86,223			62,502

Cost of goods sold		84,352			64,690			70,587			50,231


Gross profit		18,506			16,256			15,636			12,271

Warehousing and distribution expenses		2,589			1,442			2,604			1,156
Selling, general and administrative expenses		10,269			8,964			9,787			7,979


Earnings before the following		5,648			5,850			3,245			3,136

Interest expense, net		(594	)		(152	)		(302	)		(208	)
Other income (expense)		(203	)		2,499			4,035			(115	)
Foreign exchange		45			389			35			(141	)

		(752	)		2,736			3,768			(464	)


Earnings before income taxes		4,896			8,586			7,013			2,672

Provision for income taxes		1,354			2,562			235			802


Net earnings before minority interest		3,542			6,024			6,778			1,870


Minority interest		235			—			173			—


Net earnings for the period		3,307			6,024			6,605			1,870


Earnings per share for the period
Basic		0.06			0.11			0.12			0.04

Diluted		0.06			0.11			0.12			0.03

- F41 -

SunOpta Inc.

Notes to Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except per share amounts)

PART I - FINANCIAL INFORMATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	SUNOPTA INC.

	/s/ John Dietrich
Date: February 17, 2006
	SunOpta Inc.
	By John Dietrich
	Vice President and Chief Financial Officer

- F42 -

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Made as of December 9, 2005

Among

SUNOPTA INC.

SUNOPTA LP

SUNOPTA FOOD GROUP LLC

as Borrowers

and

EACH OF THE FINANCIAL INSTITUTIONS

AND OTHER ENTITIES FROM TIME TO TIME

PARTIES HERETO

as Lenders

and

CERTAIN AFFILIATES OF

THE BORROWERS

as Obligors

and

BANK OF MONTREAL

as Agent

and

HARRIS N.A.

as US Security Agent and

as US Administrative Agent

Table of Contents

SECTION 1 INTERPRETATION		2
1.1	Certain Defined Terms	2
1.2	Business Day	32
1.3	Conflict	32
1.4	Currency	33
1.5	References	33
1.6	Governing Law	34
1.7	Entire Agreement	34
1.8	Severability	34
1.9	Schedules	34


SECTION 2 REPRESENTATIONS AND WARRANTIES		35
2.1	Representations, Warranties and Agreements of the Obligors	35
2.2	Deemed Repetition	42


SECTION 3 THE CREDIT FACILITIES		42
3.1	Establishment of Credit Facilities	42
3.2	Availability of Credit Facilities	43
3.3	Obligations of the Lenders	43
3.4	Revolving Nature of Facility A, Facility B and Facility D	44
3.5	Purpose	44
3.6	Initial and Maximum Utilization	45
3.7	Borrowing Procedures - General	45
3.8	Libor Loans	47
3.9	Bankers’ Acceptances	48
3.10	Letters of Credit and Letters of Guarantee	50
3.11	Hedge Contracts	51
3.12	Prime Loans, USBR Loans, Alternate Base Rate Loans and Overdrafts	52
3.13	Conversion Option	52
3.14	Conversion and Rollover Not Repayment	53
3.15	Mandatory Conversion of Libor Loans and Bankers’ Acceptances	53
3.16	Deposit of Proceeds of Loans and Discount Proceeds	53
3.17	Evidence of Obligations	53


SECTION 4 INTEREST, FEES AND EXPENSES		54
4.1	Interest on Prime Loans and Canadian Overdrafts	54
4.2	Interest on USBR Loans, Alternate Base Rate Loans and US Overdrafts	54
4.3	Interest on Libor Loans	55
4.4	Interest on Treasury Rate Loan	56
4.5	Fees on Bankers' Acceptances	57
4.6	Letters of Credit and Letters of Guarantee	57
4.7	Commitment Fees	57
4.8	Applicable Pricing	58
4.9	Interest on Overdue Amounts	58
4.10	Interest Act	59

- i -


4.11	Limit on Rate of Interest	59
4.12	Substitute Basis of Advance - Libor Loans	60
4.13	Indemnity	60
4.14	Breakage Costs	61
4.15	Change in Circumstances	62
4.16	Payment of Portion	63
4.17	Illegality	63

SECTION 5 REDUCTION AND REPAYMENT		64
5.1	Term and Maturity	64
5.2	Repayment	64
5.3	Mandatory Repayment - Currency Fluctuations	65
5.4	Optional Prepayment - Facility C	66
5.5	Optional Prepayment - Facility D	67

SECTION 6 PAYMENTS AND TAXES		67
6.1	Payments Generally	67
6.2	Taxes	68
6.3	No Set-Off	69
6.4	Application of Payments Before Exercise of Rights	69
6.5	Application of Payments After Exercise of Rights Under Section 10.2	69

SECTION 7 SECURITY DOCUMENTS		70
7.1	Security Documents	70
7.2	Further Assurances	74

SECTION 8 CONDITIONS PRECEDENT		75
8.1	Conditions Precedent to Disbursements of Advances	75
8.2	Conditions Precedent to All Advances	77
8.3	Conditions Precedent to Advances Under Facility D	78
8.4	Waiver of a Condition Precedent	79

SECTION 9 COVENANTS		79
9.1	Affirmative Covenants	79
9.2	Negative Covenants	83
9.3	Financial Covenants of the Borrowers	87
9.4	Accounting, Financial Statements and Other Information	88

SECTION 10 DEFAULT AND ENFORCEMENT		90
10.1	Events of Default	90
10.2	Rights upon Default and Event of Default	94
10.3	Waiver of Default	95

SECTION 11 REMEDIES		95
11.1	Remedies Cumulative	95
11.2	Remedies Not Limited	95
11.3	Set-Off, etc	96

- ii -


11.4	Agent or Lender May Perform Covenants	96

SECTION 12 THE AGENTS AND THE LENDERS		96
12.1	Arrangements for Advances	96
12.2	Payments by Agents	97
12.3	Decision-Making	99
12.4	Security Held by Agent and US Security Agent	101
12.5	Priorities of Security	101
12.6	Appointment of Agents	102
12.7	Protection of Agent	102
12.8	Duties of Agents	103
12.9	Indemnification of Agents	105
12.10	Termination or Resignation of Agents	105
12.11	Rights of Agent as a Lender	105
12.12	Financial Information	106
12.13	Lenders' Independent Investigation	106
12.14	Legal Proceedings by Agents	106
12.15	Lenders’ Obligations Several; No Partnership	106
12.16	Sharing of Information	106
12.17	Acknowledgement by Borrower	107
12.18	Amendments to Section 12	107
12.19	Deliveries, etc	107
12.20	Agency Fee	107
12.21	Adjustments Among Lenders	107
12.22	Agents May Debit Accounts	108

SECTION 13 ASSIGNMENTS		108
13.1	Assignment	108

SECTION 14 MISCELLANEOUS		110
14.1	Amendments	110
14.2	Notice	110
14.3	Disruption of Postal Service	111
14.4	Environmental Indemnity	111
14.5	Further Assurances	111
14.6	Judgment Currency	111
14.7	Waivers	112
14.8	Reimbursement of Expenses	112
14.9	Submission to Jurisdiction	112
14.10	Waiver of Trial by Jury	112
14.11	Counterparts	113
14.12	Excluded Subsidiaries	113
14.13	Acknowledgement	113
14.14	Consent	113

- iii -

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

This third amended and restated credit agreement is made as of December 9, 2005

A M O N G

SUNOPTA INC.

and

SUNOPTA LP

and

SUNOPTA FOOD GROUP LLC

as Borrowers

and

EACH OF THE FINANCIAL INSTITUTIONS AND
OTHER ENTITIES FROM TIME TO TIME
PARTIES TO THIS AGREEMENT

as Lenders

and

CERTAIN AFFILIATES OF THE BORROWERS

as Obligors

and

BANK OF MONTREAL

as Agent

and

HARRIS N.A.

as US Security Agent and

as US Administrative Agent

RECITALS:

Certain of the parties hereto, including without limitation, SunOpta Inc., SunOpta LP, SunOpta Food Group LLC, BMO, Harris, the Agent and the US Security Agent, are parties to a second amended and restated credit agreement dated as of February 17, 2005, as amended by a first amending agreement dated as of July 20, 2005 (collectively, the “ Original Agreement ”).

B.	Canadian Imperial Bank of Commerce, in its capacity as lender under the Original Agreement, will be repaid in full all amounts owing by the Borrowers to Canadian Imperial Bank of Commerce under and in connection with the Original Agreement.

- 2 -

C.	SunOpta Inc. and its various Subsidiaries desire to amend and restate the Original Agreement in its entirety in order to incorporate, among other things, an increase in certain Credit Facilities and certain other provisions set out herein.

D.	The Lenders, the Agent, the US Security Agent, the US Administrative Agent, the Borrowers and the Obligors wish to make amendments to and restate the terms of the Original Agreement in its entirety in accordance with the terms and conditions set forth herein.

FOR VALUE RECEIVED , the parties agree as follows:

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 Facility A Borrower with respect to the acceptance of a Bankers’ Acceptance under this Agreement, as set out in Section 4.5(a).

“ Accounts Receivable ” means all “ accounts ”, as such term is defined in the PPSA, now or hereafter acquired by the relevant Borrowers and Obligors and includes all of the relevant Borrowers’ and Obligors’ accounts, contract rights, instruments, documents, chattel paper, general intangibles relating to accounts, drafts and acceptances, and all other forms of obligations owing to the relevant Borrowers and Obligors 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 Agent , the US Security Agent, or a 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 Agent or the US Security Agent 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 Agent.

“ Advance ” means an extension of credit under any Credit Facility by a Lender to a Borrower by way of: (a) the advance of a Prime Loan, a USBR Loan, an Overdraft, the acceptance of Bankers’ Acceptances or the issuance of a Letter of Credit or a Letter of Guarantee in the case of Facility A; or (b) the advance of an Alternate Base Rate Loan, a Libor Loan, an Overdraft or the issuance of a Letter of Credit in the case of Facility B; or (c) the advance of a Treasury Rate Loan in the case of Facility C; or (d) the advance of an Alternate Base Rate Loan or a Libor Loan in the case of Facility D.

“ Affiliate ” has the meaning given to it in the Business Corporations Act (Ontario), as in effect on the Closing Date.

- 3 -

“ Agent ” means BMO when acting as agent and any successor agent appointed under Section 12.10.

“Agent’s Account for Payments” means (a) for all payments for and by a Borrower under and in connection with Facility A in Canadian Dollars, the following account maintained by the Agent at its Toronto main office, to which payments and transfers are to be offered as follows: 2303-1026-125 or, for either purpose, any other account of the Agent as the Agent may from time to time advise the Borrower and the Lenders in writing; (b) for all payments for and by a Borrower under and in connection with Facility A in US Dollars, the following account maintained by the Agent at its Toronto main office, to which payments and transfers are to be offered as follows: 2303-4601-550 or, for either purpose, any other account of the Agent as the Agent may from time to time advise the Borrower and the Lenders in writing; (c) for all payments for and by a Borrower under and in connection with Facility B in US Dollars, the following account maintained by the US Administrative Agent at its Chicago, Illinois main office, to which payment and transfers are to be offered as follows: 420-981-3 or, for either purpose, any other account of the US Administrative Agent as the US Administrative Agent may from time to time advise the Borrower and the Lenders in writing; and (d) for all payments for and by a Borrower under and in connection with Facility C or Facility D in US Dollars, the following account maintained by the Agent at its Chicago Branch, to which payments and transfers are to be effected as follows: 0002-4680-740 or, for either purpose, any other account of the Agent as the Agent may from time to time advise the Borrowers and the Lenders under Facility C and Facility D in writing.

“ Agent’s Branch of Account ” means the office of the Agent located at 1 First Canadian Place, 100 King Street West, Toronto, Ontario, M5X 1A1 (Fax No.: (416) 360-7168) or such other office or branch of the Agent in Canada as the Agent may from time to time advise the Borrower and the Lenders in writing.

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

“ Alternate Base Rate ” means a fluctuating rate of interest per annum, expressed on the basis of a year of 365 or 366 days, as applicable, which is equal at all times to the greater of (a) the reference rate of interest (however designated) of the Chicago Branch of the Agent for determining interest chargeable by it on United States Dollar commercial loans in the United States and (b) the sum of (i) the Federal Funds Effective Rate and (ii) 100 Basis Points per annum. Any change in the Alternate Base Rate shall be effective on the date the change becomes effective generally.

“ Alternate Base Rate Loan ” means an Advance made by the relevant Lenders under Facility B or Facility D which is denominated in US Dollars and in respect of which a Borrower has elected to pay interest in accordance with Section 4.2.

“ 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 Person, property, transaction or event (whether or not having the force of law with respect to regulatory matters

- 4 -

applicable to the Agent, the US Security Agent or the Lenders) 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.

“ Assignee ” has the meaning given to it in Section 13.1(c)(i).

“ Assigning Lender ” has the meaning given to it in Section 13.1(c)(i).

“ 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 Agent 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), denominated in Canadian Dollars, drawn by a Borrower and accepted by a 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 Borrower, (b) in respect of Facility B, SunOpta Food Group, (c) in respect of Facility C, LP, and (d) in respect of Facility D, LP. 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 Agent’s Branch of Account in respect of Facility A, the US Administrative Agent’s Branch of Account in respect of Facility B, the Agent’s Chicago Branch in respect of Facility C and Facility D, or any other branch of the Agent in Canada or the United States, as applicable, as the Borrowers may from time to time advise the Agent 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 with respect to each Lender, the branch of that Lender at the address set out opposite the Lender’s name on Schedule U or such other branch in Canada or the United States, as applicable, as that Lender may advise the Borrower and the Agent in writing from time to time.

“ BMO ” means Bank of Montreal and its successors and assigns.

“ Business Day ” means a day on which chartered banks are open for over-the-counter business in Toronto, Ontario, New York City, New York 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 C and Chicago, Illinois in respect of Facility B, Facility C and Facility D 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.

- 5 -

“ Business Plan ” means collectively the business plans prepared in form and content satisfactory to the Majority Lenders 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 (including without limitation income statements, balance sheets, cash flows, ratio compliance and Capital Expenditures) 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 unconsolidated basis. For greater certainty, budgets will be prepared for each of the key operating divisions of the consolidated Borrower (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 or any other relevant currency.

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

“ Canadian Overdraft ” means, subject to terms hereof, any draw by the Facility A Borrower by way of overdraft under Facility A on any of its Canadian Dollar current accounts maintained with BMO.

“ 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, for any period, those expenditures made in connection with 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.

“ Cash Equivalents ” means: (a) securities issued or fully guaranteed or insured by the Government of Canada or the Government of a province of Canada or an agency thereof having maturities of not more than six months from the date of acquisition; (b) certificates of deposit, time deposits, repurchase agreements, reverse repurchase agreements, or bankers’ acceptances, having in each case a maturity of not more than six months, issued by any commercial bank organized under the laws of Canada and having combined capital and surplus of not less than $1,000,000,000 and a short term debt rating of at least “A-” or the equivalent; or (c) commercial

- 6 -

paper of an issuer rated at least “A-1” by Standard & Poor’s Corporation or P-1 by Moody’s Investors Services Inc. and in either case having a maturity of not more than three months.

“ 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 BMO 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 BMO as being its reference rate then in effect for determining fees on Canadian Dollar denominated bills of exchange accepted by BMO.

“ 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.

“ CERCLA ” means the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended.

“ Chicago Branch ” means the branch of the Agent 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.

“ Cleugh’s ” means Cleugh’s Frozen Foods Inc., a corporation incorporated under the laws of California, and its successors and permitted assigns.

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

“ Closing Date ” means December 20, 2005.

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ 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 Agent or the US Security Agent, as applicable, on behalf of the Lenders 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 Agent or the US Security Agent, as applicable, on behalf of the Lenders to secure any or all of the Obligations.

“ Commitment ” means with respect to any Lender, its Facility A Commitment, Facility B Commitment, Facility C Commitment or Facility D Commitment, as the case may be.

- 7 -

“ Consolidated Borrower ” means SunOpta 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 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 in accordance with Section 3.7(a) commencing on the Drawdown Date, Issuance Date, Rollover Date or Conversion Date, as applicable, and expiring on a Business Day, 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 and subject to Section 3.8 with respect to Libor Loans, Section 3.9 with respect to Bankers’ Acceptances and Section 3.10 with respect to Letters of Credit or Letters of Guarantee.

“ Controlled Group ” means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control, which together with a Borrower and any of its subsidiaries, are treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

“ Conversion ” means the conversion of an outstanding Advance, or a portion of an outstanding Advance, into an alternative type of Advance under Section 3.13 .

“ 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 B, 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;

- 8 -

(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

(h)

any Capital Lease by which the Person is bound,

but “ Debt ” does not include, in respect of the Consolidated Borrower, deferred Taxes, Subordinated Debt and payment obligations with respect to the Rhodia Price Reduction.

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

“ 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

- 9 -

(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 CDOR Rate.

“ 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 (including without limitation any Hedge Agreement or Hedge Contract) delivered, or to be delivered, to the Agent, the US Security Agent or the Lenders under or in connection with 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.

“ Drive ” means Drive Organics Corporation, a corporation incorporated under the law of British Columbia, and its successors and permitted assigns.

“ 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 Agent, for extraordinary gains or losses, income or expenses or for acquisitions of any other Person) 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 Canada (formerly known as 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 Agent or the US Security Agent on behalf of the Lenders, a certified copy of which such EDC Policy and acknowledgment shall be provided to the Agent or US Security Agent upon issuance.

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“Effective US Treasury Yield” means in connection with any prepayment of the principal amount outstanding under Facility C, the yield, expressed as an annual rate, equal to: (i) the mid-point between the bid side yield and the offer side yield of the Reference US Treasury established on the second Business Day prior to the date of such prepayment where the Reference US Treasury has a term to maturity equal to the Maturity Date in respect of Facility C or (ii) the yield determined by interpolating linearly between the Reference US Treasury securities on the second Business Day prior to the date of such prepayment where the term to maturity does not equal the Maturity Date in respect of Facility C, as determined by the Agent and the Lenders under Facility C on such date. Both the yields used in calculations under (i) and (ii) shall be reported as of 10:00 am Toronto, Ontario time using the display designated as Page PX 1 on the Bloomberg Financial Markets (or such other display as may replace Page PX 1 on the Bloomberg Financial Markets) for actively traded US Treasury securities. If the yields referred to above are not reported as of such time or the yields reported as of such time are not ascertainable from the Bloomberg Financial Markets display (or such other display as may replace Page PX1 on the Bloomberg Financial Markets), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the relevant date in the Federal Reserve Statistical Release H.15(519) (or any comparable successor publication) for actively traded U.S. Treasury securities shall be used. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotation to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the term closest to and greater than the Maturity Date in respect of Facility C and (2) the actively traded U.S. Treasury security with the term closest to and less than the Maturity Date in respect of Facility C.

“ Eligible Accounts Receivable ” shall mean each Account Receivable arising in the ordinary course of the relevant Obligor’s business from the sale of Inventory which meets the requirements of the Agent (in respect of Facility A) and the US Administrative Agent (in respect of Facility B) 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, as applicable, to the Agent’s or the US Security Agent’s perfected, first priority security interest on behalf of the Lenders and no other Liens other than Permitted Liens, and is evidenced by an invoice or other documentary evidence satisfactory to the Agent (in respect of Facility A) and the US Administrative Agent (in respect of Facility B). In addition, and without limiting, as applicable, the Agent’s and the US Administrative Agent’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:

(a)

it arises out of a sale made by the relevant Obligor to an Affiliate of the relevant Obligor or to a Person controlled by an Affiliate of the relevant Obligor;

(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;

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(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 relevant Obligor’s 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 relevant Obligor, 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 (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, as applicable, acceptable to the Agent or the US Administrative Agent 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;

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(i)

the Agent or the US Administrative Agent, as applicable, believes, in its sole 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 Agent on behalf of the Lenders 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 to the Agent on behalf of the Lenders;

(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 Agent or the US Administrative Agent, as applicable, 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) above), defence, Dispute, or counterclaim or if the Account Receivable is contingent in any respect or for any reason;

(p)

the relevant Obligor 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;

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(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 Agent or the US Security Agent, as applicable, on behalf of the Lenders under the Security Documents;

(t)

such Account Receivable is not payable to the applicable Obligor;

(u)

such Account Receivable is not otherwise satisfactory to, as applicable, the Agent or the US Administrative Agent as determined in good faith by the Agent or the US Administrative Agent in the exercise of its reasonable credit judgment upon written notice being provided to the Borrower;

“ Eligible Inventory ” means the aggregate Inventory of the relevant Obligors 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 Agent or the US Security Agent, as applicable, on behalf of the Lenders under the Security Documents;

(d)

Inventory that is not in the possession of the relevant Obligor either on premises owned by the relevant Obligor or in respect of which the Agent or the US Security Agent, as applicable, has not received a waiver of the Landlords’ rights in respect of such Inventory in form and substance satisfactory to the Agent or the US Security Agent, as applicable;

(e)

Inventory located outside Canada or the United States, other than Inventory for which title has passed to the relevant Obligor which is insured to the full value thereof and for which the Agent or the US Security Agent, as applicable, shall have in its possession (i) all negotiable bills of lading properly endorsed in favour of the Agent or the US Security Agent, as applicable, and (ii) all non-negotiable bills of lading issued in the Agent’s name or the US Security Agent’s name;

(f)

any other Inventory deemed ineligible, as applicable, by the Agent or the US Administrative Agent in its sole discretion,

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provided, however , that, as applicable, the Agent or the US Administrative Agent will provide the relevant Obligors with 20 days prior written notice if the Agent or the US Administrative Agent is to change any of the criteria (any such change being consistent with the normal operating procedures of the Agent and the Lenders, as applicable) 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. Notwithstanding the foregoing and for greater certainty with respect to item (d) above, (i) Inventory which has an aggregate value (calculated at the lower of cost and net realizable value) of less than or equal to US$100,000.00 may be located on leased premises in respect of which no waiver of Landlord’s rights has been obtained, and (ii) Inventory which has an aggregate value (calculated at the lower of cost and net realizable value) of greater than US$100,000.00 may be located on leased premises in respect of which no waiver of Landlord’s rights has been obtained provided, however, that an amount equal to three months rent (in respect of the rent for the relevant leased premises) will be deducted from the lending value otherwise attributable to the Inventory located on the relevant leased premises.

“ 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.

“ ERISA ” means the Employee Retirement Income Security Act of 1974 of the United States, together with the regulations thereunder as the same may be amended from time to time. Reference to Sections of ERISA also refer to any successive Sections thereto.

“ ERISA Plan ” means an “employee welfare benefit plan” or “employee pension benefit plan” as such terms are defined in Sections 3(1) and 3(2) of ERISA.

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

“ Excluded Subsidiary ” means any Subsidiary of SunOpta Inc. now or hereafter designated in writing by the Agent and the Lenders to be an Excluded Subsidiary for purposes of this Agreement, and the name of any Excluded Subsidiary shall be set out on Schedule “Y” from time to time.

“ Excluded Taxes ” means, in relation to the Agent or any Lender, any Taxes imposed on the net income or capital of the Agent or any Lender by any Governmental Authority as a result of the Agent or 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

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jurisdiction or any political subdivision thereof, or (c) being or being deemed to be resident in such jurisdiction or political subdivision thereof.

“ EXIM ” means The Export-Import Bank of the United States and its successors and assigns.

“ EXIM 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 EXIM Policy.

“ EXIM Policy ” means, from time to time, one or more EXIM comprehensive insurance policies issued by EXIM in favour of a Borrower which insures the payment of certain Accounts Receivable owing to a Borrower from time to time and wherein EXIM acknowledges that all payments under such EXIM Policy have been assigned to the Agent or the US Security Agent on behalf of the Lenders, a certified copy of which such EXIM Policy and acknowledgment shall be provided to the Agent or US Security Agent upon issuance.

“ Existing Borrowers’ Debt ” means those Debts listed in Schedule R.

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

“ Facility A Borrower ” means SunOpta which may obtain Advances under Facility A.

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

(a)

75% of the value of Eligible Accounts Receivable in respect of SunOpta (and all divisions thereof including Stake Tech Steam Explosion, SunOpta Organics, Wild West Organic Harvest, Pro Organics, Kettle Valley Dried Fruit, Snapdragon Foods, Supreme Foods and Kofman-Barenholtz Foods), Drive and SunOpta Ingredients Canada;

(b)

90% of the value of EDC Insured Accounts Receivable and EXIM Insured Accounts Receivable in respect of SunOpta (and all divisions thereof including Stake Tech Steam Explosion, SunOpta Organics, Wild West Organic Harvest, Pro Organics, Kettle Valley Dried Fruit, Snapdragon Foods, Supreme Foods and Kofman-Barenholtz Foods), Drive and SunOpta Ingredients Canada, less any claims made by the relevant Obligor under and, without duplication, amounts received by the Facility A Borrower or the relevant Obligor pursuant to the EDC Policy or EXIM Policy in any particular calendar year, provided however that the amount available to the Facility A Borrower 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 or EXIM Insured Accounts Receivable in respect of SunOpta (and all divisions thereof including Stake Tech Steam Explosion, SunOpta Organics, Wild West Organic Harvest, Pro Organics, Kettle Valley Dried Fruit, Snapdragon Foods, Supreme Foods and Kofman-Barenholtz Foods), Drive and SunOpta Ingredients Canada insured by the EDC Policy or EXIM Policy;

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(c)

100% of Accounts Receivable in respect of SunOpta (and all divisions thereof including Stake Tech Steam Explosion, SunOpta Organics, Wild West Organic Harvest, Pro Organics, Kettle Valley Dried Fruit, Snapdragon Foods, Supreme Foods and Kofman-Barenholtz Foods), Drive and SunOpta Ingredients Canada arising on sales on letter of credit, guarantees or acceptance terms acceptable to the Agent; and

(d)

50% of the value of Eligible Inventory in respect of SunOpta (and all divisions thereof including Stake Tech Steam Explosion, SunOpta Organics, Wild West Organic Harvest, Pro Organics, Kettle Valley Dried Fruit, Snapdragon Foods, Supreme Foods and Kofman-Barenholtz Foods), Drive and SunOpta Ingredients Canada;

provided, however , (i) that the Agent will provide the Facility A Borrower with 20 days prior written notice if the Agent is to change any of the criteria (other than the margin advance rates described above which may only be changed with the agreement of the Facility A Borrower) 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 and (ii) the lending value under Facility A attributable to Eligible Inventory shall not at any time exceed $7,500,000.

“ Facility A, B and D Pricing Grid ” has the meaning given to in Section 4.8.

“ Facility A Commitment ” means, with respect to any Lender, the principal amount set out beside such Lender’s name in Schedule V with reference to Facility A, as amended from time to time, and to the extent not cancelled or terminated hereunder.

“ Facility A Unutilized Portion ” means, in respect of Facility A, at the date of determination, the maximum principal amount of such Credit Facility expressed in Canadian Dollars at such date, after giving effect to any reductions required by this Agreement, minus the Utilized Portion of such Credit Facility expressed in Canadian Dollars at such date.

“ Facility A Utilized Portion ” means, in respect of Facility A, at the date of determination, the aggregate principal Canadian Dollar Amount of all Advances outstanding under such Credit Facility at such date.

“ Facility B ” has the meaning given to it in Section 3.1(b).

“ Facility B Borrowing Base ” means, as of any date of determination thereof by the US Administrative Agent from time to time, an amount equal to the aggregate at such time of:

(a)

75% of the value of Eligible Accounts Receivable in respect of SunOpta Food Group, Pacific Fruit, Sunrich, SunOpta Aseptic, Northern Food, SunOpta Ingredients, Organic Ingredients and Sonne Labs;

(b)

90% of the value of EDC Insured Accounts Receivable and EXIM Insured Accounts Receivable in respect of SunOpta Food Group, Pacific Fruit, Sunrich, SunOpta Aseptic, Northern Food, SunOpta Ingredients, Organic Ingredients and

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Sonne Labs, less any claims made by the relevant Obligor under and, without duplication, amounts received by SunOpta Food Group or the relevant Obligor pursuant to the EDC Policy or EXIM Policy in any particular calendar year, provided however that the amount available to SunOpta Food Group 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 or EXIM Insured Accounts Receivable in respect of SunOpta Food Group, Pacific Fruit, Sunrich, SunOpta Aseptic, Northern Food, SunOpta Ingredients, Organic Ingredients and Sonne Labs insured by the EDC Policy or EXIM Policy;

(c)

100% of Accounts Receivable in respect of SunOpta Food Group, Pacific Fruit, Sunrich, SunOpta Aseptic, Northern Food, SunOpta Ingredients, Organic Ingredients and Sonne Labs arising on sales on letter of credit, guarantees or acceptance terms acceptable to the US Administrative Agent; and

(d)

50% of the value of Eligible Inventory in respect of SunOpta Food Group, Pacific Fruit, Sunrich, SunOpta Aseptic, Northern Food, SunOpta Ingredients, Organic Ingredients and Sonne Labs, except where the Eligible Inventory is commodity corn, soy beans, sunflowers or any other grain product that is commodity in nature, in which case the margin limit shall be increased from fifty percent (50%) to seventy-five percent (75%) (and for greater certainty, such seventy-five percent (75%) limit shall apply only to Eligible Inventory which is commodity corn and soy beans);

provided however , that (i) the US Administrative Agent will provide SunOpta Food Group with 20 days prior written notice if the US Administrative Agent is to change any of the criteria (other than the margin advance rates described above which may only be changed with the agreement of SunOpta Food Group) relating to the Facility B Borrowing Base, which change shall take effect with the delivery of the Facility B Borrowing Base Certificate immediately following the expiry of such notice; and (ii) the lending value attributable under Facility B to Eligible Inventory shall not at any time exceed US$13,000,000.

“ Facility B Commitment ” with respect to any Lender, the principal amount set out beside such Lender’s name in Schedule V with reference to Facility B, as amended from time to time, and to the extent not cancelled or terminated hereunder.

“ Facility B Unutilized Portion ” means, in respect of Facility B, at the date of determination, the maximum principal amount of such Credit Facility expressed in US Dollars at such date, after giving effect to any reductions required by this Agreement, minus the Utilized Portion of such Credit Facility expressed in US Dollars at such date.

“ Facility B Utilized Portion ” means, in respect of Facility B, at the date of determination, the aggregate principal amount of all Advances outstanding under such Credit Facility in US Dollars at such date.

“ Facility C ” has the meaning given to it in Section 3.1(c).

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“ Facility C Commitment ” means, with respect to any Lender, the principal amount set out beside such Lender’s name in Schedule V with reference to Facility C, as amended from time to time, and to the extent not cancelled or terminated hereunder.

“ Facility C Interest Premium ” has the meaning given to it in Section 4.4(d).

“ Facility D ” has the meaning given to it in Section 3.1(d).

“ Facility D Commitment ” with respect to any Lender, the principal amount set out beside such Lender’s name in Schedule V with reference to Facility D, as amended from time to time, and to the extent not cancelled or terminated hereunder.

“ Facility D Revolving Period Maturity Date ” means October 31, 2006, as such date may be extended for a period of 364 days from time to time in accordance with Section 5.1.

“ Facility D Unutilized Portion ” means, in respect of Facility D, at the date of determination, the maximum principal amount of such Credit Facility expressed in US Dollars at such date, after giving effect to any reductions required by this Agreement, minus the Utilized Portion of such Credit Facility expressed in US Dollars at such date.

“ Facility D Utilized Portion ” means, in respect of Facility D, at the date of determination, the aggregate principal amount of all Advances outstanding under such Credit Facility in US Dollars at such date.

“ 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 Agent from three federal funds brokers of recognized standing selected by the Agent. 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 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 Ratio ” means, with reference to the Consolidated Borrower (a) EBITDA, less cash taxes and sustaining Capital Expenditures (namely up to US$4,500,000 in

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2005 or such other amount as may be mutually agreed upon for years after 2005) divided by (b) Debt Service.

“ Fixed Rate ” has the meaning given to it in Section 4.4(a).

“ 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)

all debts or liabilities (including without limitation any earn-out amount payable by the Consolidated Borrower in connection with any agreement once the quantum of such earn-out payment is determined) 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, as applicable, the Agent, the US Administrative Agent, the US Security Agent, BMO or Harris and the value of all marketable securities acceptable to the Agent or the US Security Agent in its sole discretion and which are subject to Liens in favour of the Agent or the US Security Agent on behalf of the Lenders under the Security Documents but excludes, to the extent included above, Subordinated Debt, accounts payable incurred in the ordinary course of the Borrowers’ business and payment obligations with respect to the Rhodia Price Reduction.

“ 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.

“ GAAP ” means generally accepted accounting principles in effect from time to time in Canada or the United States, as the case may be, applicable to the relevant Person, applied in a consistent manner from period to period.

“ 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.

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“ 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 Obligors or any of their respective property or assets.

“ Hancock ” means John Hancock Life Insurance Company and its successors and assigns.

“Hancock USA” means John Hancock Life Insurance Company (U.S.A.) and its successors and assigns.

“ Harris ” means Harris N.A. and its successors and assigns.

“ 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 3.11(c).

“ Hedge Contract ” means a Swap Transaction for the purchase of Canadian Dollars, US Dollars, or any other currency in which one of the Borrower’s is doing business with US Dollars or Canadian Dollars, as applicable, 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 in respect of Canadian Dollars, US Dollars or any other currency in which one of the Borrower’s is doing business.

“ 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 any Subsidiary of SunOpta, which at any time has assets or revenues of greater than or equal to C$100,000. For greater certainty, the term “ Included Subsidiary ” shall not include any Person which is designated as an Excluded Subsidiary in accordance with the provisions of this Agreement.

“ 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 Agent, the US Security Agent and each Lender from time to time 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

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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 Consolidated Borrower 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, (i) in respect of any of Facility A, Facility B and Facility D, the last Business Day of each month or such other day of each month as the US Administrative Agent (in respect of Facility B), the Agent (in respect of Facility A and Facility D) and the relevant Borrowers may otherwise agree, and (ii) in respect of Facility C, the last Business Day of each third month (commencing for greater certainty, on February 28, 2006) or such other day of each month as the Agent, all of the Lenders under Facility C and the relevant Borrower may agree.

“ Inventory ” means inventory of the relevant Obligors 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 Agent (in respect of Facility A) or the US Administrative Agent (in respect of Facility B) in its sole discretion, in a readily saleable condition.

“ Issuance Date ” means the date on which a Letter of Credit or a Letter of Guarantee is issued by any 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 an Obligor pursuant to a lease agreement between such landlord and an Obligor, whether oral or in writing, in respect of the lease of any property.

“ L/C Agreement ” has the meaning specified in Section 3.10(d).

“ Lenders ” means all of the banks and other financial institutions named on the signature pages of this Agreement and any Assignee and their successors and “ Lender ” means any one or all of them if the context so requires. For greater certainty, without limiting the generality of the foregoing, the term “ Lender ” shall mean, as of the date of this Agreement, (a) BMO in respect of Facility A, (b) each of BMO and Harris in respect of Facility B, (c) each of Hancock, Hancock USA, Manulife and Sun Life in respect of Facility C, and (d) each of BMO and Harris in respect of Facility D.

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“ Letter of Credit ” means a standby documentary credit issued by the Agent on behalf of the Lenders in respect of Facility A or issued by the US Administrative Agent on behalf of the Lenders in respect of Facility B at the request and for the account of a Borrower to beneficiaries resident in Canada or the United States, as applicable.

“ Letter of Guarantee ” means a letter of guarantee issued by the Agent on behalf of the Lenders in respect of Facility A at the request and for the account of a Borrower to beneficiaries resident in Canada or the United States, as applicable.

“ 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 Agent 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 Agent 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 SunOpta 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, an Overdraft, an Alternate Base Rate Loan, a Treasury Rate 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.

“ LP ” means SunOpta LP, a limited partnership formed under the laws of the State of Delaware and its successors and permitted assigns.

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“ Majority Lenders ” means (i) at any time when there exists two (2) or fewer Lenders under this Agreement, all such Lenders, (ii) at any time when there exists three (3) or more Lenders under this Agreement and there exists no Event of Default which is continuing, those Lenders having at least 66.67% of the aggregate Total Commitment at such time, (iii) at any time when there exists three (3) or more Lenders under this Agreement and there exists an Event of Default which is continuing, those Lenders which are owed Obligations under the Credit Facilities aggregating at least 66.67% of the principal amount of the Advances outstanding under the Credit Facilities at such time, and (iv) at any time when there exists two (2) or fewer Lenders under this Agreement and there exists an Event of Default which is continuing, those Lenders which are owed Obligations under the Credit Facilities aggregating 100% of the principal amount of the Advances outstanding under the Credit Facilities at such time.

“ Manulife ” means The Manufacturers Life Insurance Company and its successors and 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 Agent’s, any Lender’s or the US Security Agent’s Liens on the Collateral or the priority of those Liens, or (c) the Agent’s, any Lender’s or the US Security Agent’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 (a) with respect to Facility A, October 31, 2006, as such date may be extended for a period of 364 days from time to time in accordance with Section 5.1, (b) with respect to Facility B, October 31, 2006, as such date may be extended for a period of 364 days from time to time in accordance with Section 5.1, (c) with respect to Facility C, December 20, 2010, and (d) with respect to Facility D, October 31, 2009.

“ 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 by the Borrowers and/or the Obligors to the Agent, the US Security Agent or any Lender, as applicable, 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

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other instrument, owing under any or all of the Documents including all obligations owed by the Borrowers to the Lenders under the Credit Facilities.

“ 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, 1510146 Ontario, Drive, Northern Food, Pacific Fruit, Sunrich, ULC, LLC, SunOpta Holding, SunOpta Financing, SunOpta Aseptic, SunOpta Ingredients, SunOpta Ingredients Canada, Sonne Labs and Organic Ingredients.

“ Organic Ingredients ” means Organic Ingredients Inc., a corporation incorporated under the laws of California.

“ Original Currency ” has the meaning given to it in Section 14.6.

“ Other Currency ” has the meaning given to it in Section 14.6.

“ Overdraft ” means a Canadian Overdraft and/or US Overdraft as the context requires.

“ Pacific Fruit ” means Pacific Fruit Processors Inc., a corporation incorporated under the laws of California, and its successors and permitted assigns.

“ Permitted Investments ” means Investments by any Obligor in Persons or assets principally related to the natural or organic food business, provided that (i) each Investment shall not exceed a maximum amount of US$5,000,000 (which amount shall include any Debt assumed and any projected earn out payments required to be made as a result of such Investment), (ii) the aggregate of all Investments made by all Obligors in any fiscal year of SunOpta shall not exceed an aggregate maximum amount of US$15,000,000, (iii) each Investment in any such Person or assets shall be accretive to the earnings of the relevant Obligor, (iv) each Investment in any such Person shall be consented to by such Person or its shareholders or directors, as applicable, and such Investment shall not be or consist of a hostile takeover, (v) the Obligor shall acquire a 100% ownership interest in the relevant Person if the Investment is effected by way of a share purchase, (vi) all Debt attached to or associated with such Investment (other than in favour of the Lenders hereunder) must be repaid upon the closing of the Investment and all Liens in connection therewith must be discharged. Notwithstanding the foregoing, if the Investment is in a Person that will, as a result of such Investment, become a subsidiary, the Borrower may take up to 30 days after making such Investment to repay all Debt attached to or associated with such Investment (other than in favour of the Lenders hereunder), discharge all Liens and provide the Lenders with such first ranking security as the Lenders may require, and (vii) if the Investment in whole or in part is to be funded by the proceeds of Advances under Facility A or Facility B, then after giving effect to the requested Advance under either Facility A or Facility B, as applicable, there shall remain available for borrowing an amount of at least US$5,000,000 either under Facility A or Facility B. For greater certainty, no separate Investment shall be permitted if such Investment were to cause the foregoing US$15,000,000 aggregate limit to be exceeded or the proposed Investment otherwise contravenes the provisions of this Agreement.

“ Permitted Liens ” means, with respect to any property or asset of any Person:

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(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 Obligors 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;

(v)

Purchase Money Liens securing indebtedness not in excess of $500,000 in the aggregate;

(vi)

Liens arising in respect of indebtedness between any of the Obligors provided that such indebtedness is assigned, as applicable, to the Agent or the US Security Agent on behalf of the Lenders and such Liens are subordinated to Liens arising under the Security Documents;

(vii)

Liens acceptable to the Agent or the US Security Agent, as applicable, in its sole discretion arising in respect of Existing Borrowers’ Debt;

(viii)

any interest or title of a lessor or sublessor under any lease permitted by this Agreement; and

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(ix)

Liens granted by Pacific Fruit in favour of Michael Jacobs, Frank Livoti and Adrienne Livoti Family Trust and Lee and Hope Warner Family Trust pursuant to a Security Agreement dated as of July 13, 2005 in respect of the collateral described therein and securing a collective amount not in excess of US$1,100,000, which such Liens shall and do rank subordinate to those Liens granted by Pacific Fruit in favour of the Agent, the US Security Agent and the Lenders; 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 Agent or the US Security Agent, as applicable, 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 Obligors 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.

“ PPSA ” means the Personal Property Security Act (Ontario).

“ Pricing Grid ” means the Facility A, B and D Pricing Grid.

“ 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).

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“ Prime Rate ” means, with respect to a Prime Loan or a Canadian Overdraft, on any day, the greater of (a) the annual rate of interest announced from time to time by the Agent 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; and (c) with reference to a Letter of Credit or a Letter of Guarantee, the maximum amount payable to the beneficiary thereof.

“ 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.

“ Rateable Portion ” means, with reference to any Lender and any Credit Facility: (a) prior to the Agent making a declaration under Section 10.2, the fraction that Lender’s Commitment under that Credit Facility represents of the Total Commitment under that Credit Facility; and (b) after the Agent makes a declaration under Section 10.2, the fraction that Lender’s Advances under that Credit Facility represents of all Advances under that Credit Facility after the adjustments required under Section 12.21.

“Reference US Treasury” means, in connection with any prepayment of the principal amount outstanding under Facility C, (i) the security determined by the Agent and the Lenders under Facility C to be the most actively-traded issue of non-callable security(ies) issued by the Government of the United States having interest compounded semi-annually and a term to maturity equal to the Maturity Date in respect of Facility C or (ii) if such a Treasury security is not available, then the Treasury securities used in the interpolation shall be (1) the actively traded Treasury security with a term to maturity closest to and greater than the Maturity Date in respect of Facility C and (2) the actively traded Treasury security with a term of maturity closest to and less than the Maturity Date in respect of Facility C.

“ 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 CDOR Page ” means the display designated as page CDOR 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 bid quotations for bankers’ acceptances accepted by leading Canadian banks.

“ 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

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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 Food pursuant to the Rhodia Rider.

“ Rhodia Rider ” means Rider No. 5 to the manufacturing agreement between Rhodia Inc. and Northern Food 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 3.8(c), Section 3.9(h) or Section 3.10(h), respectively.

“ Rollover Date ” means the Business Day on which a Rollover occurs.

“ Scheduled Payments ” means payments made in accordance with Section 5.2 and “Scheduled Payment” means any such payment.

“ Schedules ” means the schedules attached to and forming part of this Agreement, as particularized in Section 1.9.

“ Schedule I Lender ” means any Lender named on Schedule I to the Bank Act (Canada).

“ Schedule II Lender ” means any Lender named on Schedule II to the Bank Act (Canada).

“ Schedule III Lender ” means any Lender named on Schedule III to the Bank Act (Canada).

“ Security ” means all security (including guarantees) held from time to time by or on behalf of the Lenders or the Agent or the US Security Agent by or on behalf of the Lenders, securing or intended to secure directly or indirectly repayment of the Obligations and includes all Security described in Section 7.

“ Security Documents ” means the Documents creating Liens on the assets of the Obligors, in favour of the Agent or the US Security Agent, as applicable, on behalf of the Lenders, and all other instruments, agreements, guarantees and documents which have been or may hereafter from time to time be executed in connection therewith, including without limitation 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.

“ Security Sharing Agreement ” means the security sharing agreement entered into among the Agent, the US Security Agent and the Lenders relating to the Security Documents and the Security delivered in connection with this Agreement.

“ Sonne Labs ” means Sonne Labs, Inc., a corporation incorporated under the laws of North Dakota, 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

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the Obligations and has subordinated any security taken in respect of such Debt to the position of the Agent or the US Security Agent, as applicable, on behalf of the Lenders under the Security Documents, all in form and substance satisfactory to the Agent or the US Security Agent, as applicable, 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 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.

“ Sufficient Copies ” means, in respect of documents required to be delivered under this Agreement, the number of copies of each document equal to the number of Lenders plus the Agent at the time the document is delivered, unless the Borrower is otherwise notified by the Agent.

“ Sun Life ” means Sun Life Assurance Company of Canada and its successors and assigns.

“ SunOpta ” means SunOpta Inc., a corporation amalgamated under the laws of Canada, and its successors and permitted assigns.

“ SunOpta Aseptic ” means SunOpta Aseptic, Inc., a corporation incorporated under the laws of Minnesota, and its successors and permitted assigns.

“ SunOpta Financing ” means SunOpta Financing Inc., a corporation incorporated under the laws of Delaware, and its successors and permitted assigns.

“ SunOpta Food Group ” means SunOpta Food Group LLC, a limited liability company formed under the laws of Delaware, and its successors and permitted assigns.

“ SunOpta Holdings ” means SunOpta Holdings Inc., a corporation incorporated under the laws of Delaware, and its successors and permitted assigns.

“ SunOpta Ingredients ” means SunOpta Ingredients, Inc. the corporation formed under the laws of Delaware resulting and surviving from the merger, effective December 18, 2002 between Stake Acquisition Corp. and Opta Food Ingredients, Inc. and its successors and permitted assigns.

“ SunOpta Ingredients Canada ” means SunOpta Food Ingredients Canada, Ltd., a corporation amalgamated under the laws of Canada, and its successors and permitted assigns.

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“ Sunrich ” means Sunrich LLC, a limited liability company formed under the laws of Minnesota which is the successor entity to Sunrich, Inc. and Sunrich Acquisition Inc., and its successors and permitted assigns.

“ Swap Transaction ” means an agreement which may be entered into between a Lender and a Borrower in connection with the management of foreign exchange risks in all major currencies acceptable to such Lender (provided that the Borrower or relevant Obligor is doing business in such currency and the quantum or amount of any currency being hedged or managed is reasonable in relation to the volume of the Borrower’s or Obligor’s business being conducted in any such currency) and includes (a) foreign currency options, (b) foreign exchange forward contracts, and (c) financial products offered by such Lender to the Borrower in connection with management of interest rate risks including forward rate agreements and interest rate swaps.

“ Tangible 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 and Subordinated Debt, less Accounts Receivable owed by Affiliates to the Obligors, investments in Affiliates, deferred charges, goodwill, organizational expenses, trademarks, tradenames, copyrights, patents, patent applications, licenses, deferred costs and any such other assets as are properly classified as “intangible”.

“ 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.

“ Total Commitment ” means, (a) with respect to Facility A, $15,000,000, (b) with respect to Facility B, US$25,000,000, (c) with respect to Facility C, US$45,000,000, and (d) with respect to Facility D, US$10,000,000, as such amounts may be reduced or cancelled in accordance with this Agreement.

“ Total Liabilities ” means all liabilities of the consolidated Borrower as determined in accordance with GAAP but excludes, however, for purposes of this definition, Funded Debt which constitutes Subordinated Debt.

“ Treasury Constant Maturity Series Yields ” means the yields on Treasury securities at constant fixed maturity as constructed and published by the United States Treasury Department based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market as calculated from composites of quotations obtained by the Federal Reserve Bank of New York.

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“ Treasury Rate ” means, on any date, the then current yield to maturity expressed as a rate per annum, assuming semi-annual compounding, equal to (a) if determined on or before December 14, 2005, the ask yield of the 4 ½% November 15, 2010 US Treasury security, or, (b) if determined on or after December 15, 2005, the ask yield of the then applicable five year benchmark US Treasury security, both as determined by the Agent and the Lenders under Facility C at approximately 10:00 am Toronto, Ontario time on such date using the display designated as Page PX 1 on the Bloomberg Financial Markets (or such other display as may replace Page PX 1 on the Bloomberg Financial Markets) for actively traded US Treasury securities.

“ Treasury Rate Loan ” means an Advance which is denominated in US Dollars and in respect of which the Borrower has elected to pay interest in accordance with Section 4.4.

“ ULC ” means 3060385 Nova Scotia Company, an unlimited liability company formed under the laws of Nova Scotia, and its successors and permitted assigns.

“ Unanimous Lenders ” means (a) all of the Lenders under Facility A, (b) all of the Lenders under Facility B, (c) all of the Lenders under Facility C, and (d) all of the Lenders under Facility D.

“ US Base Rate ” means, with respect to a USBR Loan or a US Overdraft, on any day, the greater of (a) the annual rate of interest announced from time to time by the Agent 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 Borrower 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.

“ US Dollar Amount ” means, for any amount on any particular date, the aggregate of: (a) the portion, if any, of the amount denominated in US Dollars; and (b) the amount in US 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 Canadian Dollars or any other relevant currency.

“ US Overdraft ” means, subject to the terms hereof, any draw by the applicable Borrower by way of overdraft under Facility A or Facility B on any of its US Dollar current accounts maintained with BMO or Harris, as applicable.

“ US Pension Plan ” means a “ pension plan ”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which an Obligor, or any corporation, trade or business that is, along with any other Person, a member of a Controlled Group, may reasonably be expected to have liability, including any liability by reason of having been a substantial employer

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within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

“ US Administrative Agent ” means Harris in its capacity, pursuant to this Agreement, as administrative agent for the Lenders under Facility B.

“ US Security Agent ” means Harris in its capacity, pursuant to the Security Sharing Agreement, as security agent for the Lenders in respect of United States based Obligors that have or will in connection with the transactions contemplated by this Agreement, and as security for their respective Obligations, grant Liens in favour of the Lenders in respect of their United States located property and assets.

“ US Welfare Plan ” means a “welfare plan”, as such term is defined in Section 3(1) of ERISA.

“ Working Capital Ratio ” means, with reference to the Consolidated Borrower, current assets (less receivables from Affiliates) divided by current liabilities (less Subordinated Debt).

“ written ” or “ in writing ” includes printing, typewriting, or any electronic means of communication capable of being legibly reproduced at the point of reception.

“Yield Maintenance Amount” means, in connection with any prepayment of any principal amount outstanding under Facility C, an amount equal to the positive difference, if any, between (i) the sum of the present value of the outstanding principal amount being prepaid under Facility C and all of the remaining scheduled payments of interest in respect of such principal amount outstanding under such Facility C (but for greater certainty, excluding any interest which is accrued and unpaid as at the date of such prepayment), from the date of such prepayment to the Maturity Date in respect of Facility C, determined by discounting such payments at a rate per annum (assuming semi-annual compounding, payable monthly) equal to one-half percent (0.50%) greater than the Effective US Treasury Yield and (ii) the portion of such outstanding principal amount under Facility C immediately prior to the date of prepayment.

“ 1510146 Ontario ” means 1510146 Ontario Inc., a corporation incorporated under the laws of Ontario, and 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

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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.

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 rate then being used for this purpose by the Agent on such date, or, if such date is not a Business Day, on the next Business Day. For the purpose of determining the aggregate US Dollar Amount outstanding on any date of one or more Advances made hereunder, unless otherwise specified, the principal amount of any Loans made in Canadian Dollars and the face amount of any Bankers’ Acceptances, Letters of Credit and Letters of Guarantee denominated in Canadian Dollars or any other relevant currency shall be converted to US Dollars at the rate then being used for this purpose by the Agent on such date, or, if such date is not a Business Day on the next Business Day. In addition to the foregoing, and for greater certainty, for purposes of determining at any time the amount of the Commitments in connection with the definition of Majority Lenders, the term Commitments shall, for such purpose, refer to the US Dollar Amount of such Commitments.

1.5

References.

Time shall be of the essence in all provisions of this Agreement. 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. 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. Unless otherwisespecified, words importing the singular include the plural and vice versa and words importing gender include all genders. Unless otherwise specified, references in this Agreement to Sections and Schedules are to sections of, and schedules to, this Agreement. 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. Unless otherwise specified, references to time of day or date mean the local time or date in the City of Toronto, Ontario.

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1.6

Governing Law.

This Agreement and each of the Documents (unless the particular Document otherwise provides) 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.

1.7

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, submitted to the Borrowers by the Agent and the Lenders.

1.8

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.

1.9

Schedules.

The following Schedules are attached to and form part of this Agreement:

Schedule	Description
A	Additional Obligor Counterpart
B	Borrowers Accounts
C	Business and Operations
D	Governmental Approvals
E	Litigation
F	Unpaid Taxes
G	Subsidiaries and Corporate Chart
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-1	Facility C Repayment Schedule – Sun Life
P-2	Facility C Repayment Schedule – Manulife
P-3	Facility C Repayment Schedule – Hancock
P-4	Facility C Repayment Schedule – Hancock USA
Q	Prepayment Notice
R	Existing Debt
S	Transactions with Affiliates
T	Compliance Certificate

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U	Lenders Branch of Account
V	Commitments
W	Assignment Agreement
X	Q3 2002 Board of Directors Report
Y	Excluded Subsidiaries
Z	Interest Rate Confirmation Certificate

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 Agent, the US Administrative Agent, the US Security Agent and each Lender, all of which shall survive the execution and delivery of this Agreement and acknowledges and confirms that the Agent, the US Administrative Agent, the US Security Agent and each Lender is relying on such representations and warranties in entering into this Agreement, all other Documents 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

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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 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 Lenders for the period ended December 31, 2004 and each subsequent set of audited and internally prepared financial statements submitted to the Lenders 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 December 31, 2004 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

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any basis for the assertion 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 ended December 31, 2004 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. Schedule G also appends a true and complete corporate chart of SunOpta and each 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 of any lease governing any of its

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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 or EXIM, as applicable.

(r)

Intellectual Property. It has no material Intellectual Property other than the Intellectual Property listed in Schedule J.

(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

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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.

(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.

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(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.

(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 Agent or the US Security Agent, as applicable.

(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.

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(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.

(z)

SunOpta Ingredients. SunOpta has previously acquired and indirectly beneficially owns all of the issued and outstanding common stock of SunOpta Ingredients and SunOpta Ingredients is a wholly-owned Subsidiary of SunOpta Food Group.

(aa)

CERCLA. No portion of any Obligor’s property has been listed, designated or identified in the National Priorities List or the CERCLA Information System both as published by the United States Environmental Protection Agency, or any similar list of sites published by any federal, state or local authority proposed for requiring clean up or remedial or corrective action under any requirements of Applicable Laws.

(bb)

ERISA Plans. Each ERISA Plan has been maintained and is in compliance in all material respects with Applicable Laws including, without limitation, all requirements relating to employee participation, investment of funds, benefits and transactions with the Obligors and persons related to them. With respect to ERISA Plans: (a) no condition exists and no event or transaction has occurred with respect to any ERISA Plan that is reasonably likely to result in any Obligor, to the best of its knowledge, incurring any material liability, fine or penalty; and (b) no Obligor has a material contingent liability with respect to any post-retirement benefit under a US Welfare Plan. All contributions (including employee contributions made by authorized payroll deductions or other withholdings) required to be made have been made in all material respects in accordance with all Applicable Laws and the terms of each ERISA Plan. Each of the ERISA Plans that is intended to be “qualified” within the meaning of Section 401(a) of the Code either (a) has received a favourable determination letter from the Internal Revenue Service, (b) is or will be the subject of an application for a favourable determination letter, and no circumstances exist that has resulted or could reasonably be expected to result in the revocation or denial of any such determination letter, or (c) is entitled to rely on an appropriately updated prototype plan document that has received a national office determination letter and has not applied for a favourable determination letter of its own.

(cc)

Not an Investment Company. No Obligor is an “investment company” or a company “controlled” by an “investment company” within the meaning of the United States Investment Company Act of 1940, as amended or a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a holding company, or of a “subsidiary company” of a “holding company”, within the meaning of the United States Public Utility Holding Company Act of 1935, as amended.

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(dd)

No Margin Stock. No Obligor is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock. None of the proceeds of any Advance shall be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System of the United States) or to extend credit to others for the purpose of purchasing or carrying any margin stock.

(ee)

Schedules. The information contained in the Schedules attached hereto is true, correct and complete in all material respects.

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 and, in any event, as of the end of each Fiscal Quarter.

SECTION 3

THE CREDIT FACILITIES

3.1

Establishment of Credit Facilities.

Subject to the terms and conditions of this Agreement, the Lenders under Facility A (in respect of Facility A), the Lenders under Facility B (in respect of Facility B), the Lenders under Facility C (in respect of Facility C) and the Lenders under Facility D (in respect of Facility D), as applicable, hereby establish the following:

(a)

in favour of the Facility A Borrower, an extendable 364 day committed revolving credit facility (“ Facility A ”) in the aggregate principal amount of up to $15,000,000;

(b)

in favour of SunOpta Food Group, an extendable 364 day committed revolving credit facility (“ Facility B ”) in the aggregate principal amount of up to US$25,000,000;

(c)

in favour of LP, a committed non-revolving term credit facility (“ Facility C ”) in the aggregate principal amount of up to US$45,000,000; and

(d)

in favour of LP, an extendable 364 day committed revolving credit facility (“ Facility D ”) in the aggregate principal amount of up to US$10,000,000.

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3.2

Availability of Credit Facilities.

Subject to the provisions of this Agreement:

(a)

Facility A. The Facility A Borrower may borrow, repay and reborrow under Facility A up to the lesser of the Facility A Borrowing Base and a maximum principal amount of $15,000,000.

(b)

Facility B. SunOpta Food Group may borrow, repay and reborrow under Facility B up to the lesser of the Facility B Borrowing Base and a maximum principal amount of US$25,000,000.

(c)

Facility C. LP may, for a period of up to 30 days after the Closing Date, borrow by way of a single drawdown under Facility C a principal amount of US$45,000,000.

(d)

Facility D. LP may borrow, repay and reborrow under Facility D up to a maximum principal amount of US$10,000,000.

(e)

Types of Advances. Subject to the provisions of this Agreement:

(i)

each Lender agrees to severally make its Commitment under Facility A available to the Facility A Borrower by way of Prime Loans, USBR Loans, Bankers’ Acceptance, Letters of Credit or Letters of Guarantee, provided, however, that BMO only may make available to the Facility A Borrower advances by way of Overdraft up to a maximum principal amount of $3,000,000;

(ii)

each Lender agrees to severally make its Commitment under Facility B available to SunOpta Food Group by way of Alternate Base Rate Loans, Libor Loans or Letters of Credit, provided however that Harris only may make available to SunOpta Food Group advances by way of US Overdraft up to a maximum principal amount of US$3,000,000;

(iii)

each Lender agrees to severally make its Commitment under Facility C available to LP by way of a Treasury Rate Loan; and

(iv)

each Lender agrees to severally make its Commitment under Facility D available to LP by way of Alternate Base Rate Loans or Libor Loans.

3.3

Obligations of the Lenders.

(a)

Rateable Portion. Subject to the terms and conditions of this Agreement, each Lender under each relevant Credit Facility agrees to make available its Rateable Portion of each Advance to the Borrower. No Lender shall be responsible for a Commitment of any other Lender. The failure of a Lender to make available an Advance in accordance with its obligations under this Agreement shall not release any other Lender from its obligations. Notwithstanding anything to the contrary

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in this Agreement, no Lender shall be obligated to make Advances available to the Borrower under any Credit Facility in excess of its Commitment under the Credit Facility.

(b)

Separate Obligation. The obligation of each Lender to make its Commitment available to the Borrower is a separate obligation between each Lender and the Borrower, and that obligation is not the several or joint and several obligation of any other Lender.

3.4

Revolving Nature of Facility A, Facility B and Facility D.

Subject to the provisions of this Agreement:

(a)

Facility A. The Facility A Borrower may increase or reduce the amount of Advances outstanding under Facility A by borrowing, repaying and reborrowing Prime Loans, USBR Loans and Overdrafts, 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)

Facility B. SunOpta Food Group may increase or reduce the amount of Advances outstanding under Facility B by borrowing, repaying and reborrowing Alternate Base Rate Loans, Libor Loans and US Overdrafts and by causing the issue and re-issue of Letters of Credit from time to time.

(c)

Facility D. LP may increase or reduce the amount of Advances outstanding under Facility D by borrowing, repaying and reborrowing Alternate Base Rate Loans and Libor Loans.

3.5

Purpose.

(a)

Facility A. The proceeds of Advances made under Facility A shall be used by the Facility A Borrower solely to provide for the ongoing general corporate and working capital purposes of the Facility A Borrower and its Canadian Subsidiaries and divisions.

(b)

Facility B. The proceeds of Advances made under Facility B shall be used by SunOpta Food Group solely to provide for the ongoing general corporate and working capital purposes of SunOpta Food Group and its Subsidiaries and divisions.

(c)

Facility C. The proceeds of the single Advance made by the Lenders under Facility C shall be used by LP primarily to indirectly refinance certain existing term indebtedness of LP (including without limitation the repayment of certain indebtedness owing under Facility D pursuant to the Original Agreement). For greater certainty, (i) an amount of US$4,950,000 of the proceeds of the Advance under Facility C shall be used by the LP to subscribe for an additional equity interest in ULC which in turn will use the proceeds of such equity injection to subscribe for an additional equity interest in LLC which in turn will use the

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proceeds of such equity injection to subscribe for an additional equity interest in LLC which in turn will use the proceeds from such equity injection to make a secured loan to SunOpta Food Group, and (ii) an amount of US$40,050,000 of the proceeds of the Advance under Facility C shall be used by the LP primarily to refinance loans previously made under the Original Agreement to LP which LP previously used to subscribe for a wholly owned equity interest in ULC which in turn previously used the proceeds of such equity injection to subscribe for a wholly owned equity interest in LLC which in turn previously made a secured loan to SunOpta Food Group.

(d)

Facility D. The proceeds of Advances made by the Lenders, through their respective United States branches, under Facility D shall be used by LP to assist with the financing of future acquisitions and capital expenditures by the Borrowers and their Subsidiaries. For greater certainty, the proceeds of the Advances under Facility D shall be used by the LP primarily to subscribe for and/or refinance a wholly-owned equity interest in ULC which in turn will use the proceeds of such equity injection to subscribe for and/or refinance a wholly-owned equity interest in LLC which in turn will use the proceeds from such equity injection to make or refinance a secured loan to the Borrowers for the purpose of financing future acquisitions and capital expenditures.

3.6

Initial and Maximum Utilization.

(a)

Facility A. Advances outstanding under Facility A shall not at any time exceed the Facility A Borrowing Base. SunOpta shall submit monthly to the Agent within 30 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 (the “ Borrowing Base Certificate ”) in form and substance satisfactory to the Agent in its sole discretion.

(b)

Facility B. Advances outstanding under Facility B shall not at any time exceed the Facility B Borrowing Base. SunOpta Food Group shall submit monthly to the US Administrative Agent within 30 days after the last day of the month or, if that day is not a Business Day, the next preceding Business Day, a Borrowing Base Certificate in form and substance satisfactory to the US Administrative Agent in its sole discretion.

(c)

Facility C. Only one Advance is available under Facility C. Any unused portion of the Commitment under Facility C shall be cancelled immediately upon the making of the Advance.

(d)

Facility D. Advances outstanding under Facility D shall not at any time exceed a maximum principal amount of US$10,000,000.

3.7

Borrowing Procedures – General.

(a)

Notice of Borrowing. All Advances, other than Advances by way of Overdraft, require the delivery of prior notice. To request an Advance, the applicable Borrower shall give to the US Administrative Agent in respect of Facility B and to the Agent in respect of Facility A, Facility C and Facility D written notice

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(a)

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:

Type of Advance		Time of Notice

Prime Loans, USBR Loans, Alternate Base Rate Loans and Bankers’ Acceptance less than or equal to $10 million		Before 11:00 a.m. one Business Day prior to the requested Drawdown Date.

Prime Loans, USBR Loans, Alternate Base Rate Loans and Bankers’ Acceptance greater than $10 million		Before 11:00 a.m. two Business Days prior to the requested Drawdown Date.

Libor Loans		Before 11:00 a.m. three Business Days prior to the requested Drawdown Date.

Letters of Credit and Letters of Guarantee		Before 11:00 a.m. five Business Days prior to the requested Drawdown Date

Treasury Rate Loan		Before 11:00 a.m. up to five (or such other number of Business Days as the Agent and the Lenders under Facility C may in their sole discretion agree) Business Days prior to the requested Drawdown Date

Each notice given in respect of an Advance by way of Prime Loan, USBR Loan, Treasury Rate Loan or Alternate Base Rate 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.

(b)

Limits on Advances. Notwithstanding any other term of this Agreement, a Borrower shall not request from BMO, Harris, the US Administrative Agent or

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(b)

the Agent, as applicable, an Advance under any Credit Facility if, on the day notice of the Advance is given pursuant to Section 3.7(a), after giving effect to the Advance, (i) in the case of Facility A, the Canadian Dollar Amount of the principal amount of all Advances outstanding from the Lenders under Facility A would exceed the then current Facility A Borrowing Base, (ii) in the case of Facility B, the US Dollar Amount of the principal amount of all Advances outstanding from the Lenders under Facility B would exceed the then current Facility B Borrowing Base, or (iii) in the case of Facility C and Facility D, the US Dollar amount of the principal amount of all Advances outstanding from any Lender under the Credit Facility would exceed that Lender’s Commitment under the Credit Facility. No Advance under any Credit Facility shall have a Contract Period that extends beyond the Maturity Date of that Credit Facility.

(c)

Lender or Agent Determination. Each determination by the US Administrative Agent for purposes of Facility B and by the Agent for purposes of Facility A, Facility C and Facility D of, as applicable, the Prime Rate, the US Base Rate, the Alternate Base Rate, the Treasury 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 and the Lenders.

3.8

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 one, two, three or six months (each month being a period of 30 days for purposes of this Section), subject to availability. No Contract Period shall extend beyond the Maturity Date.

(c)

Rollover of Libor Loans. At least three Business Days before the expiry of the Contract Period of each Libor Loan, the Borrower shall notify, as applicable, the US Administrative Agent in respect of Facility B or the Agent in respect of Facility D 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 applicable Lender with respect to that maturing Libor Loan shall be funded with an Advance under, as applicable, a USBR Loan or Alternate Base Rate Loan in the amount outstanding under that Libor Loan.

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3.9

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 Agent shall advise the Borrower as to the Agent’s determination of the applicable Discount Rate for the Bankers’ Acceptances which any of the Lenders have 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 Agent’s Account for Payments the Discount Proceeds less the Acceptance Fee payable with respect to that Bankers’ Acceptance.

(e)

Sale. Each 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 a Lender, and from time to time as required, provide to that Lender Bankers’ Acceptances substantially in the form as may be acceptable to that Lender duly executed and endorsed in blank by the Borrower, in quantities sufficient for that Lender to fulfill its obligations under this Agreement or, if so requested by a Lender, provide to that Lender, with a copy to the Agent, a power of attorney substantially in the form of Schedule O executed by the Borrower in favour of that Lender authorizing that Lender to execute drafts in the form attached thereto. If Bankers’ Acceptances have been provided to a Lender duly executed and endorsed in blank by the Borrower, that Lender is hereby authorized to issue Bankers’ Acceptances endorsed in blank in face amounts as may be determined by the Borrower provided that the aggregate amount thereof is equal to the aggregate amount of Bankers’ Acceptances required to be accepted by the Lender. No Lender shall be responsible or liable for its failure to accept a Bankers’ Acceptance as required under this Agreement if the cause of the failure is, in whole or in part, due to the failure of the Borrower to provide to the Lender on a timely basis a sufficient number of duly executed Bankers’ Acceptances or a duly executed power of attorney, as applicable, nor shall any 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.

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(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)

Issuance. The Agent, promptly following receipt of a notice of Advance, Rollover or Conversion by way of Bankers’ Acceptances, shall advise the applicable Lenders of the notice and shall advise each Lender of the face amount of Bankers’ Acceptances to be accepted by it and the applicable Contract Period (which shall be identical for all Lenders). The aggregate face amount of Bankers’ Acceptances to be accepted by a Lender shall be determined by the Agent by reference to that Lender’s Rateable Portion of the issue of Bankers’ Acceptances, except that , if the face amount of a Bankers’ Acceptance which would otherwise be accepted by a Lender would not, subject to Section 3.9(a), be Cdn$100,000 or a whole multiple thereof, the face amount shall be increased or reduced by the Agent in its sole discretion to Cdn$100,000 or the nearest whole multiple of that amount, as appropriate; provided that after such issuance, no Lender shall have aggregate outstanding Advances in excess of its Commitment.

(i)

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 Agent written notice substantially in the form attached as Schedule N if the Borrower 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 Agent on behalf of the Lenders of an amount equal to the aggregate principal amount of the Bankers’ Acceptances 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 funded on the maturity date thereof with an Advance by way of Prime Loan.

(j)

Waiver of Presentment and Other Conditions. The 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.

(k)

Depository Bills and Notes Act. At the option of the Borrower and any Lender, Bankers’ Acceptances under this Agreement to be accepted by that 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).

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All depository bills so issued shall be governed by the provisions of this Section 3.9.

3.10

Letters of Credit and Letters of Guarantee.

(a)

Issue. The Agent will issue all Letters of Credit and Letters of Guarantee under Facility A. Each Lender under Facility A will be responsible for its Rateable Portion of the funding for any drawing under any Letter of Credit or Letter of Guarantee under Section 3.10(g) or otherwise and to purchase its Rateable Portion of any outstanding Letter of Credit or Letter of Guarantee under Section 12.21(a). The US Administrative Agent will issue all Letters of Credit under Facility B. Each Lender under Facility B will be responsible for its Rateable Portion of the funding for any drawing under any Letter of Credit under Section 3.10(g) or otherwise and to purchase the Rateable Portion of any outstanding Letter of Credit under Section 12.21(a).

(b)

Currency. Each Letter of Credit and each Letter of Guarantee shall be issued in Canadian Dollars, US Dollars or such other currency as the Agent, the US Administrative Agent or Lender, as applicable, may agree in its sole discretion and shall mature on a Business Day. Notwithstanding the foregoing and for greater certainty, the US Administrative Agent will only issue Letters of Credit denominated in US Dollars.

(c)

Letter of Credit and Letter of Guarantee Sublimit. The aggregate principal amount of Advances which may be outstanding by way of Letter of Credit and Letter of Guarantee under Facility A shall not exceed $3,000,000. The aggregate principal amount of Advances which may be outstanding by way of Letter of Credit under Facility B shall not exceed US$3,000,000.

(d)

No Guarantees. Other than in respect of a Letter of Credit in the face amount of $200,000.00 issued or to be issued by the Agent under Facility A in favour of Canadian Imperial Bank of Commerce as security for obligations that may now or hereafter be owing by the Borrower to Canadian Imperial Bank of Commerce in connection with Visa corporate credit cards issued by Canadian Imperial Bank of Commerce to the Borrowers, 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”.

(e)

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 issuing Lender acting reasonably (the “ L/C Agreement ”).

(f)

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

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consent of the beneficiary of the instrument has been obtained and the original instrument has been returned to the Lender.

(g)

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 Under Facility A) or by way of a USBR Loan (if drawn in US Dollars or any other currency under Facility A) or by way of an Alternate Base Rate Loan (if drawn in US Dollars or any other currency under Facility B).

(h)

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.

(i)

Rollover. Before the maturity date of any Letter of Credit or Letter of Guarantee the Borrower shall notify the Agent or the Lender, as applicable, at its Branch of Account by notice substantially in the form attached as Schedule N 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.

3.11

Hedge Contracts.

(a)

Term. Each Borrower may only enter into Hedge Contracts with a Lender provided that such Hedge Contracts are only issued in respect of Canadian Dollars, US Dollars or other major currencies acceptable to such Lender for purposes of treasury risk management under and in connection with this Agreement and for no other purposes. 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. For greater certainty, a Borrower may only enter into a Hedge Contract with a Lender provided that, as applicable, (i) the foreign exchange risk being managed relates to the Obligations of the relevant Borrower or Obligor hereunder, (ii) the Hedge Contract being entered into is not for speculation purposes, (iii) the foreign exchange risk being managed is in a currency or currencies in which the Borrower or relevant Obligor does business, and (iv) the quantum or amount of any currency being hedged or managed is reasonable in relation to the volume of the Borrower’s or Obligor’s business being conducted in any such currency.

(b)

Subject to Approval. Each Lender may refuse to issue a Hedge Contract at any time at its sole discretion.

(c)

Other Documentation. The issuance of a Hedge Contract is subject to the execution and delivery of specific agreements as may be required by each Lender on its standard forms and modified by such schedules and addenda as are customarily used by each 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 1.3.

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3.12

Prime Loans, USBR Loans, Alternate Base Rate Loans and Overdrafts.

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 or Alternate Base Rate Loan shall be in a minimum aggregate principal amount of US$100,000 and larger whole multiples of US$100,000. Notwithstanding the foregoing and for greater certainty, each Advance by way of Overdraft may be in amounts of other than, as applicable, $100,000 or US$100,000 and whole multiples thereof.

3.13

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 Treasury Rate Loan) 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 Treasury Rate Loan) upon giving written notice to the US Administrative Agent in respect of Facility B or to the Agent in respect of Facility A and Facility D 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 3.7. Conversions under this Section 3.13 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;

(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 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 4.12 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.

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3.14

Conversion and Rollover Not Repayment.

No Conversion or Rollover shall constitute a repayment of any Advance or a new Advance.

3.15

Mandatory Conversion of Libor Loans and Bankers’ Acceptances.

Notwithstanding Sections 3.9(i), 3.10(i) and 3.11, 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, as applicable, into a USBR Loan or an Alternate Base Rate 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 in an amount equal to the principal amount of the Bankers’ Acceptances on the maturity date.

3.16

Deposit of Proceeds of Loans and Discount Proceeds.

The US Administrative Agent in respect of Facility B and the Agent in respect of Facility A, Facility C and Facility D 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, Alternate Base Rate Loan, Treasury Rate Loan or Libor Loan made, and (b) the Discount Proceeds less the applicable Acceptance Fee with respect to each Bankers’ Acceptance purchased by a Lender on that Drawdown Date. Where a Borrower has made separate arrangements for the purchase of Bankers’ Acceptances issued under this Agreement, the Agent in respect of Facility A 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.

3.17

Evidence of Obligations.

The US Administrative Agent and Harris, as applicable, in respect of Facility B and the Agent and BMO, as applicable, in respect of Facility A, Facility C and Facility D shall open and maintain at its Branch of Account and the Agent’s Branch, as applicable, accounts and records evidencing the Obligations of the Borrowers under this Agreement. The US Administrative Agent and Harris, as applicable, in respect of Facility B and the Agent and BMO, as applicable, in respect of Facility A, Facility C and Facility D 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.

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SECTION 4

INTEREST, FEES AND EXPENSES

4.1

Interest on Prime Loans and Canadian Overdrafts.

(a)

Rate. The Facility A Borrower shall pay to the Agent on behalf of the Lenders interest on Prime Loans outstanding under Facility A at a rate per annum equal to the Prime Rate plus the applicable margin set out in the Pricing Grid. The Facility A Borrower shall pay to BMO interest on Canadian Overdrafts outstanding under Facility A at a rate per annum equal to the Prime Rate plus the applicable margin set out in the Pricing Grid.

(b)

Change in Rate. Each change in the fluctuating interest rate applicable to each Prime Loan and Canadian Overdraft will take place simultaneously with the corresponding change in the Prime Rate without the necessity for any notice to the Facility A Borrower.

(c)

Calculation. Interest on Prime Loans and Canadian Overdrafts 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 and Canadian Overdraft 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 and Canadian Overdrafts shall be paid on every Interest Payment Date and on the Maturity Date, as applicable, by debit to the Borrowers’ Account by the Agent in respect of Prime Loans and by BMO in respect of Canadian Overdrafts.

4.2

Interest on USBR Loans, Alternate Base Rate Loans and US Overdrafts.

(a)

Rate. Each Borrower shall pay to the Administrative Agent (at the Agent’s Account for Payments) on behalf of the Lenders in respect of Facility B and to the Agent (at the Agent’s Account for Payments) on behalf of the Lenders in respect of Facility A and Facility D, as applicable, interest on USBR Loans and Alternate Base Rate Loans outstanding to the Lenders under each Credit Facility at a rate per annum equal to, as applicable, the US Base Rate or the Alternate Base Rate plus the applicable margin set out in the relevant Pricing Grid. The Facility A Borrower shall pay to BMO in respect of Facility A, interest on US Overdrafts outstanding to BMO under Facility A at a rate per annum equal to the US Base Rate plus the applicable margin set out in the relevant Pricing Grid. SunOpta Food Group shall pay to Harris in respect of Facility B, interest on US Overdrafts outstanding to Harris under Facility B at a rate per annum equal to the Alternate Base Rate plus the applicable margin set out in the relevant Pricing Grid.

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(b)

Change in Rate. Each change in the fluctuating interest rate applicable to each USBR Loan, US Overdraft or Alternate Base Rate Loan will take place simultaneously with the corresponding change in the US Base Rate or the Alternate Base Rate without the necessity for any notice to the Borrowers.

(c)

Calculation. Interest on USBR Loans, US Overdrafts and Alternate Base Rate 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, US Overdrafts and Alternate Base Rate Loans 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, US Overdrafts and Alternate Base Rate Loans shall be paid on every Interest Payment Date and on the Maturity Date by debit to the applicable Borrower’s Account by the US Administrative Agent on behalf of the Lenders in respect of Facility B, by the Agent on behalf of the Lenders in respect of Facility A and Facility D, by BMO in respect of US Overdrafts under Facility A and by Harris in respect of US Overdrafts under Facility B.

4.3

Interest on Libor Loans.

(a)

Rate. Each Borrower shall pay to the US Administrative Agent on behalf of the Lenders in respect of Facility B (at the Agent’s Account for Payments) or to the Agent on behalf of the Lenders in respect of Facility D (at the Agent’s Account for Payments) interest on Libor Loans outstanding to the Lenders under each Credit Facility 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 US Administrative Agent on behalf of the Lenders in respect of Facility B and by the Agent on behalf of the Lenders in respect of Facility D (at the Agent’s Account for Payments).

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4.4

Interest on Treasury Rate Loan

(a)

Rate. LP shall pay to the Agent (at the Agent’s Account for Payments) on behalf of the Lenders in respect of Facility C, interest on the Treasury Rate Loan outstanding to the Lenders under Facility C at the rate per annum equal to the Treasury Rate determined up to ten Business Days, but not later than the second Business Day, prior to the date of the Advance under Facility C, plus two percent (2.00%) per annum (such Treasury Rate as determined plus two percent per annum being referred to herein as the “ Fixed Rate ”) plus, if applicable, the Facility C Interest Premium. LP and the Agent on behalf of the Lenders under Facility C agree to execute and deliver to each other a written confirmation of such interest rate in the form of Schedule ”Z” attached hereto, within two Business Days after such interest rate has been established, and the Agent will deliver a copy to each Lender under Facility C.

(b)

Calculation. Interest on the Treasury Rate Loan shall be payable quarterly 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 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 the Treasury Rate 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 the Treasury Rate Loan shall be paid on every Interest Payment Date and on the Maturity Date by debit to the Agent’s Accounts for Payments by the Agent on behalf of the Lenders under Facility C.

(d)

Premium Interest . In this Section, “ Facility C Interest Premium ” means in respect of any Fiscal Quarter (in this Section referred to as the “ Subject Fiscal Quarter ”);

(i)

nil, if the Funded Debt to EBITDA Ratio of the Consolidated Borrower, as calculated below, is less than 3.00:1.00 in respect of the Subject Fiscal Quarter;

(ii)

25 basis points, if the Funded Debt to EBITDA Ratio of the Consolidated Borrower, as calculated below, is greater than or equal to 3.00:1.00 but less than 3.25:1.00 in respect of the Subject Fiscal Quarter; and

(iii)

50 basis points, if the Funded Debt to EBITDA Ratio of the Consolidated Borrower, as calculated below, is greater than or equal to 3.25:1.00 in respect of the Subject Fiscal Quarter.

The Facility C Interest Rate Premium payable by LP, if any, will be established quarterly and will be effective at the beginning of the third month of each Fiscal Quarter of the Borrower and is based upon the attainment by the Consolidated Borrower, 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

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Quarter based on the most recent period of twelve fiscal months completed and ending on or immediately prior to such day.

4.5

Fees on Bankers’ Acceptances.

(a)

Rate. Upon acceptance of a Bankers’ Acceptance by a Lender under Facility A, the Borrower shall pay to the Agent at the Agent’s Account for Payments on behalf of the Lender 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.

(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 the Bankers’ Acceptance and a year of 365 or 366 days, as applicable. Each determination by the Agent of the Acceptance Fee applicable to any Banker’s Acceptance shall, in the absence of manifest error, be final, conclusive and binding upon the Facility A Borrower and the Lenders. Upon determination of the Acceptance Fee applicable to any Banker’s Acceptance, the Agent shall notify the Facility A Borrower and each Lender.

4.6

Letters of Credit and Letters of Guarantee.

Upon the issue of a Letter of Credit or a Letter of Guarantee by the Agent under Facility A or the US Administrative Agent under Facility B, as applicable, the Borrower shall pay to the Agent the US Administrative Agent, as applicable, 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.

4.7

Commitment Fees

SunOpta Food Group shall pay to the US Administrative Agent on behalf of the Lenders in respect of Facility B, quarterly in arrears on the last Business Day of each month which is the quarterly anniversary of the Closing Date, a commitment fee equal to (a) 12.5 Basis Points at all times when the Funded Debt to EBITDA ratio of the Consolidated Borrower is less than 2.0:1 for the last four consecutive Fiscal Quarters, or (b) 25 Basis Points at all times when the Funded Debt to EBITDA ratio of the Consolidated Borrower is equal to or greater than 2.0:1 for the last four consecutive Fiscal Quarters, calculated daily on the Facility B Unutilized Portion and on the basis of a year of 365 or 366 days, as the case may be. Each applicable Borrower shall pay to the Agent at the Agent’s Account for Payments, for the account of the applicable Lenders on a Credit Facility by Credit Facility basis in respect of Credit Facility A and Credit Facility D, quarterly in arrears on the last Business Day of each month which is the quarterly anniversary of the Closing Date, a commitment fee equal to (a) 12.5 Basis Points at all times when the Funded Debt to EBITDA ratio of the Consolidated Borrower is less than 2.0:1 for the last four consecutive Fiscal Quarters, or (b) 25 Basis Points at all times when the Funded Debt to EBITDA ratio of the Consolidated Borrower is equal to or greater than 2.0:1 for the last four consecutive Fiscal Quarters, calculated daily, as applicable, on the Facility A Unutilized Portion and the Facility D

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Unutilized Portion, as applicable, and on the basis of a year of 365 or 366 days, as the case may be.

4.8

Applicable Pricing

The Facility A Borrower shall pay to the Agent on behalf of the Lenders under Facility A, at the Agent’s Account for Payments, interest in respect of Advances obtained by the Facility A Borrower under Facility A, and SunOpta Food Group shall pay to the US Administrative Agent on behalf of the Lenders under Facility B, at the Agent’s Account for payments, interest in respect of Advances obtained by SunOpta Food Group under Facility B and LP shall pay to the Agent on behalf of the Lenders under Facility D, at the Agent’s Account for Payments, interest in respect of Advances obtained by LP under Facility D, in accordance with the pricing grid below (the “ Facility A, B and D Pricing Grid ”). 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 SunOpta, 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.

Pricing Level	Funded Debt/EBITDA	Prime Rate, US Base Rate and Alternate Base Rate Plus	Libor Rate Plus	BA’s/LC’s/LG’s Fee
1.	< 1.0:1.0	0.00%	1.00%	1.00%
2.	> 1.0:1.0	0.25%	1.25%	1.25%
3.	> 1.5:1.0	0.50%	1.50%	1.50%
4.	> 2.0:1.0	0.75%	1.75%	1.75%
5.	> 2.50:1.0	1.00%	2.00%	2.00%
6.	> 3.00:1.0	1.50%	2.50%	2.50%

4.9

Interest on Overdue Amounts.

The Borrowers shall pay to the US Administrative Agent on behalf of the Lenders in respect of Facility B and to the Agent on behalf of the Lenders in respect of Facility A, Facility C and Facility D interest as prescribed in this Agreement both before and after demand, default and judgment. Interest on any overdue amounts hereunder, is payable, (a) 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, (b) for overdue amounts in US Dollars owing to the Lenders under Facility A, at the US Base Rate plus the applicable margin for the then current

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Pricing Level plus 200 Basis Points per annum, (c) for overdue amounts in US Dollars owing to the US Administrative Agent and the Lenders under Facility B or the Agent and the Lenders under Facility D, at the Alternate Base Rate plus the applicable margin as required by the then current Pricing Level plus 200 Basis Points per annum, and (d) for overdue amounts owing in US Dollars to the Agent and the Lenders under Facility C, at the rate per annum equal to the Fixed Rate plus the Facility C Interest Premium plus 200 Basis Points per annum, in each case calculated on a daily basis on the actual number of days elapsed in a 360 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 US Administrative Agent in respect of Facility B and the Agent in respect of Facility A, Facility C and Facility D and shall be compounded on each Interest Payment Date.

4.10

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.

4.11

Limit on Rate of Interest.

(a)

Adjustment. If any provision of this Agreement or any of the other Documents would obligate a Borrower or Obligor to make any payment of interest or other amount payable to any Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by that 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 that 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 affected Lender under this Section 4; and

(ii)

thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the affected Lender which would constitute interest for purposes of the Criminal Code (Canada).

(b)

Reimbursement. Notwithstanding Section 4.11(a), and after giving effect to all adjustments contemplated thereby, if any 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 affected Lender, to obtain reimbursement from that 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 that Lender to the applicable Borrower.

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(c)

Actuarial Principles. Any amount or rate of interest referred to in this Section 4.11 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.

4.12

Substitute Basis of Advance – Libor Loans.

If, at any time during the term of this Agreement, a Lender acting in good faith determines (which determination shall be final, conclusive and binding upon the Borrower) 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 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 Borrower setting forth the basis of that determination and each Borrower hereby instructs the Lender to repay the affected Libor Loan with the proceeds of an Alternate Base Rate 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 4.12 continue.

4.13

Indemnity.

(a)

General. Each Obligor shall, and does hereby, jointly and severally indemnify the Agent, the US Administrative Agent, each Lender and the US Security Agent and their respective 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

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under Environmental Laws (each, a “ Claim ”) that the Agent, the US Administrative Agent, each Lender or the US Security Agent 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 Agent, the US Administrative Agent, each Lender or the US Security Agent in connection with this Agreement, (iii) the Agent, the US Administrative Agent, each Lender or the US Security Agent 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 Agent, the US Administrative Agent, affected Lender or US Security Agent, as applicable, setting out the basis for the determination of the amount necessary to indemnify the relevant Person pursuant to this Section 4.13 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 Agent, the US Administrative Agent, each Lender and the US Security Agent, as applicable, that Sections 3.15, 4.13, 4.14 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, 4.13, 4.14 and 6.2(b) even if the amount of the liability incurred exceeds the amount of the other Obligations. The 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 Agent, the US Administrative Agent, any Lender or the US Security Agent, except in respect of gross negligence or willful misconduct by it. The obligations of each of the Obligors under Sections 3.15, 4.13, 4.14 and 6.2(b) shall survive the repayment of the other Obligations and the termination of the Credit Facilities.

4.14

Breakage Costs

(a)

The Facility A Borrower 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 4.12 and 5.3), by way of Libor Loan, Treasury Rate Loan, Letter of Credit or Letter of Guarantee, the Borrower shall indemnify the applicable Lender for any loss or expense suffered or incurred by that 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 lenders of funds borrowed by the Lender in order to maintain the Advance together with any other charges, costs or expenses incurred by that Lender relative thereto. For greater

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certainty, any repayment, prepayment or cancellation of an Advance by way of Treasury Rate Loan shall be dealt with in accordance with Section 5.4 hereof.

(c)

A certificate of the Agent, the US Administrative Agent or the affected Lender setting out the basis for the determination of the amount necessary to indemnify the Agent, the US Administrative Agent or the affected Lender pursuant to this Section 4.14 shall be conclusive evidence, absent manifest error, of the correctness of that determination.

4.15

Change in Circumstances.

(a)

Reduction in Rate of Return. If at any time any Lender determines, acting reasonably, that any change in any Applicable Law or any interpretation thereof after the date of this Agreement, or compliance by the Lender with any direction, requirement, guidelines or policies or request from any regulatory authority given after the date of this Agreement, whether or not having the force of law, has or would have, as a consequence of a Lender’s obligation under this Agreement, and taking into consideration the Lender’s policies with respect to capital adequacy, the effect of reducing the rate of return on the Lender’s capital (in respect of making, maintaining or funding an Advance hereunder) to a level below that which the Lender would have achieved but for the change or compliance, then from time to time, upon demand of the Lender, the Borrower shall pay the Lender such additional amounts as will compensate the Lender for the reduction.

(b)

Taxes, Reserves, Capital Adequacy, etc. If, after the date of this Agreement, the introduction of any Applicable Law or any change or introduction of a change in any Applicable Law (whether or not having the force of law) or in the interpretation or application thereof by any court or by any Governmental Authority, central bank or other authority or entity charged with the administration thereof, or any change in the compliance of any Lender therewith now or hereafter:

(i)

subjects any Lender to, or causes the withdrawal or termination of a previously granted exemption with respect to, any Tax or changes the basis of taxation, or increases any existing Tax on payments of principal, interest, fees or other amounts payable by the Borrower to the Lender under or by virtue of this Agreement (except for Excluded Taxes); or

(ii)

imposes, modifies or deems applicable any reserve, special deposit, deposit insurance or similar requirement against assets held by, or deposits in or for the account of, or loans by or any other acquisition of funds by, an office of any Lender in respect of any Advance or any other condition with respect to this Agreement;

and the result of any of the foregoing, in the sole determination of the Lender acting reasonably, shall be to increase the cost to, or reduce the amount received or receivable by the Lender or its effective rate of return in respect of making,

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maintaining or funding an Advance hereunder, the Lender shall, acting reasonably, determine that amount of money which shall compensate the Lender for the increase in cost or reduction in income.

(c)

Payment of Additional Compensation. Upon a Lender having determined that it is entitled to compensation in accordance with the provisions of this Section 4.15 (“ Additional Compensation ”), the Lender shall promptly so notify the Borrower and the Agent and shall provide to the Borrower and the Agent a photocopy of the relevant Applicable Law or direction, requirement, guideline, policy or request, as applicable, and a certificate of an officer of the Lender setting forth the Additional Compensation and the basis of calculation thereof, which shall be conclusive evidence of the Additional Compensation in the absence of manifest error. The Borrower shall pay to the Lender within 30 Business Days of the giving of notice the Additional Compensation for the account of the Lender accruing from the date of the notification. The Lender shall be entitled to be paid Additional Compensation from time to time to the extent that the provisions of this Section 4.15 are then applicable notwithstanding that the Lender has previously been paid Additional Compensation.

(d)

Commercially Reasonable. If it is commercially reasonable in the opinion of a Lender receiving Additional Compensation under this Section 4.15, the Lender shall make reasonable efforts to limit the incidence of that Additional Compensation, including seeking recovery for the account of the Borrower following the Borrower’s request and at the Borrower’s expense, if the Lender, in its sole determination, would suffer no appreciable economic, legal, regulatory or other disadvantage as a result.

4.16

Payment of Portion.

Notwithstanding any other term or condition of this Agreement, if a Lender gives the notice provided for in Section 4.15 with respect to any Advance by way of Loan (an “ Affected Borrowing ”), the Borrower may, at its option, upon 60 Business Days notice to that Lender (which notice shall be irrevocable), repay to the Lender in full the Affected Borrowing outstanding together with accrued and unpaid interest on the principal amount so repaid up to the date of repayment and any amounts payable pursuant to Section 4.14, together with such Additional Compensation as may be applicable to the date of payment.

4.17

Illegality.

If any Applicable Law, or any change therein or in the interpretation or application thereof by any court or by any Governmental Authority or central bank or comparable agency or any other entity charged with the interpretation or administration thereof, or compliance by any Lender with any request or direction (whether or not having the force of law) of any Governmental Authority, central bank or comparable agency or other entity, now or hereafter makes it unlawful or impossible for the Lender to make, fund or maintain an Advance or to perform its obligations under or by virtue of this Agreement, the Lender may, by written notice thereof to the Borrower and the Agent, terminate its obligations to make further Advances under this Agreement, and the

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Borrower, if required by the Lender, shall repay forthwith (or at the end of such longer period as the Lender in its discretion has agreed) the principal amount of the Advance together with accrued interest without penalty or bonus (and in the case of Bankers’ Acceptances, the face amount thereof) and such Additional Compensation as may be applicable to the date of payment and all other outstanding Obligations to the Lender. If any change shall only affect a portion of any Lender’s obligations under this Agreement which is, in the opinion of the Lender, severable from the remainder of this Agreement so that the remainder of this Agreement may be continued in full force and effect without otherwise affecting any of the obligations of the Lender or the Borrower under this Agreement, the Lender shall only declare its obligations under that portion so terminated.

SECTION 5

REDUCTION AND REPAYMENT

5.1

Term and Maturity.

The term of each Credit Facility shall commence on the Closing Date and end on the Maturity Date. For greater certainty, all amounts outstanding under each Credit Facility must be repaid and all obligations of each Lender under each Credit Facility must be fully funded or cancelled on the Maturity Date. At least 60 days, but not greater than 90 days, prior to the then current Maturity Date in respect of each of Facility A and Facility B and the then current Facility D Revolving Period Maturity Date, each applicable Borrower may, if it so desires, provide the Agent and/or the US Administrative Agent with written notice of a request to extend the current Maturity Date or the then current Facility D Revolving Period Maturity Date for a further period of 364 days. Each request for the extension of the then current Maturity Date or the then current Facility D Revolving Period Maturity Date by each applicable Borrower shall be subject to the written consent of the applicable Lenders, which consent, if delivered, shall be delivered to each applicable Borrower no later than 30 days prior to the then current Maturity Date or the then current Facility D Revolving Period Maturity Date. If each Lender, acting in its sole discretion, agrees to the applicable Borrower’s request to extend the then current Maturity Date or the then current Facility D Revolving Period Maturity Date, the then current Maturity Date or the then current Facility D Revolving Period Maturity Date, as applicable, shall be extended for a further period of 364 days. If a Lender does not respond to a request for an extension prior to 30 days before the expiry of the then current Maturity Date or the then current Facility D Revolving Period Maturity Date, such Lender will be deemed to have denied the request for an extension of the Maturity Date or the then current Facility D Revolving Period Maturity Date, as applicable.

5.2

Repayment.

LP shall repay the principal amount of the Advance under Facility C, together with interest thereon, by paying the amounts set out in the Facility C Repayment Schedules applicable in respect of each of Sun Life, Manulife, Hancock and Hancock USA attached as Schedule P-1, Schedule P-2, Schedule P-3 and Schedule P-4. For greater certainty, upon the occurrence of any event or circumstance (other than an assignment by a Lender under Facility C in accordance with Section 13.1 hereof) which would cause a recalculation of the amounts payable as set out in any of Schedule P-1, Schedule P-2, Schedule P-3 or Schedule P-4, the Agent will provide to the relevant Lenders under Facility C and the Borrower a revised Schedule P setting out such

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recalculated amounts. Any such revised Schedule P shall not become effective until the relevant Persons, including the Borrower, signify in writing their agreement to such revised Schedule P. LP shall repay the principal amount of the Advances under Facility D quarterly, commencing the first Fiscal Quarter after the initial drawdown under Facility D, in instalments equal to the greater of (i) 1/20 ^th of the initial amount drawn down under Facility D, and (ii) 1/20 ^th of the outstanding principal amount drawn under Facility D as of the date of the last Advance made under Facility D. All remaining principal outstanding under Facility D will be due and payable in full on the Maturity Date in respect of Facility D. 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, in inverse order of maturity, on or before the last Business Day of the Fiscal Quarter immediately following the Fiscal Quarter in which such sale or sale/leaseback occurs, (i) the then outstanding principal amount under Facility D, until Facility D is repaid in full, and (ii) if any relevant Lender under Facility C so requires at that time in its sole discretion, the then outstanding principal amount under Facility C (subject to the make-whole provisions and the requirement to make payment of the Yield Maintenance Amount in respect of Facility C set out in Section 5.4), until Facility C is repaid in full. Notwithstanding the foregoing, to the extent Permitted Proceeds are reinvested by the applicable Obligor, as applicable, in replacement assets 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 D or Facility C as set out herein. For greater certainty, SunOpta will provide such information regarding the permitted sale or sale/leaseback of fixed assets of the Obligors and the use of Permitted Proceeds as is required by the Agent and the Lenders pursuant to Section 9.4 of this Agreement.

5.3

Mandatory Repayment – Currency Fluctuations.

(a)

If, due to exchange rate fluctuations or for any reason whatsoever, in the case of Facility A, the Canadian Dollar Amount of the principal amount of all Advances outstanding under Facility A shall, at any time, exceed, as applicable, the Commitment for Facility A, or the then current Facility A Borrowing Base (the amount of the excess being referred to herein as an “ Excess Amount ”), then within three Business Days of written notice from the Agent, the Facility A Borrower shall, at its option:

(i)

forthwith repay Loans and/or fund any 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 Agent may require in an amount equal to or greater than such Excess Amount which collateral shall remain in the Agent’s possession until the Canadian Dollar Amount of the principal amount of all Advances outstanding under Facility A is equal to or less than, as applicable, the Commitment for Facility A or the then current Facility A Borrowing Base whereupon such collateral shall be released by the Agent to the Facility A Borrower.

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(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 is, as applicable, in excess of the Commitment for Facility A or the then current Facility A Borrowing Base, the Facility A Borrower 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 Facility A Borrower shall, on demand, reimburse each Lender for and hold each 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 lenders of funds borrowed by the Lender in order to maintain the obligations of the Lender under this Agreement.

(d)

The Facility A Borrower 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 the Facility A Borrower is aware that it will require an Excess Amount for a period not longer than three Business Days, the Facility A Borrower may request that such Excess Amount be made available at the rate normally applicable to Facility A for such anticipated short term requirement. Each Lender may refuse such a request in its discretion.

5.4

Optional Prepayment – Facility C

LP may prepay, without penalty, in whole or in part and in a minimum amount of US$1,000,000 or larger whole multiples thereof, the principal amount outstanding under Facility C at any time prior to the Maturity Date provided that all accrued interest with respect to the amount to be prepaid shall have been paid and provided that LP shall also pay at that time to the Agent on behalf of the Lenders under Facility C a fee, as compensation for such prepayment, in an amount equal to the Yield Maintenance Amount. LP shall give thirty days prior written notice to the Agent of its desire to make any prepayment, substantially in the form attached hereto as Schedule Q. Such written notice of prepayment shall also include a sample calculation of the entire amount to be prepaid and LP shall provide (on that day which is three Business Days prior to the proposed prepayment date) to the Agent and the Lenders under Facility C a final calculation of the entire amount to be paid to the Agent and the Lenders under Facility C on the proposed prepayment date. In addition to the foregoing, on the 10 ^th Business Day prior to the prepayment date, the Borrower shall furnish the Agent and Lenders with opinions from two selected Investment Dealers addressed to the Borrower and the Agent and Lenders stating, in the opinion of the respective Investment Dealers, the Effective US Treasury Yield. The Investment Dealers shall be members of the Investment Dealer Association of Canada. Any prepayment

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shall be paid to the Agent at the Agent’s Account for Payments and distributed pro rata among the Lenders under Facility C in accordance with their respective Rateable Portions. No amount permanently prepaid may be reborrowed under this Agreement. Each Lender’s respective Commitment under Facility C will be permanently reduced by the amount of any permanent prepayment made to it under this Section 5 and the Total Commitment under Facility C reduced correspondingly.

5.5

Optional Prepayment – Facility D.

LP may prepay, without penalty, in whole or in part and in a minimum amount of US$500,000 or larger whole multiples thereof, the Advances outstanding under Facility D, at any time prior to the Maturity Date provided that all accrued interest with respect to the amount to be prepaid shall have been paid and provided that LP indemnify the Agent on behalf of the Lenders for any loss or expense suffered or incurred by any Lender, including any breakage costs which a Lender incurs by reason of the liquidation or redeployment of deposits or other funds acquired by it to effect or maintain Facility D, as applicable, 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. LP shall give three Business Days’ notice of its desire to make any prepayment, substantially in the form attached hereto as Schedule Q. Any prepayment shall be paid to the Agent at the Agent’s Account for Payments and distributed pro rata among the Lenders in accordance with their respective Rateable Portions and applied pro rata over the remaining Scheduled Payments under Facility D, as applicable. No amount permanently prepaid may be reborrowed under this Agreement. Each Lender’s respective Commitment under Facility D will be permanently reduced by the amount of any permanent prepayment made to it under this Section 5 and the Total Commitment under Facility D reduced correspondingly.

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 Agent, the US Administrative Agent and each Lender as applicable. Each payment under Facility B shall be made by debit to the applicable Borrower’s Account by the US Administrative Agent at or before 1:00 p.m. on the day that payment is due. SunOpta Food Group hereby authorizes the US Administrative Agent to debit the applicable Borrower’s Account in respect of any and all payments to be made by SunOpta Food Group under this Agreement. Receipt by the US Administrative Agent from the Borrower of funds under this Agreement, as principal, interest, fees or otherwise, shall be deemed to be receipt of these funds by the relevant Lenders. Each payment under or in respect of Facility A, Facility C and Facility D shall be made at the Agent’s Account for Payments at or before 1:00 p.m. on the day payment is due. The Borrowers hereby authorize the Agent in respect of Facility A, Facility C and Facility D to debit the applicable Borrower’s account in respect of any and all payments to be made by such Borrowers under this Agreement. Receipt by the Agent from the Borrower of funds under this Agreement, as

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principal, interest, fees or otherwise, shall be deemed to be receipt of these funds by the relevant Lenders.

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 Agent or any 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 Agent or any Lender, as the case may be, 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 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.

(b)

Indemnity. The Borrowers shall indemnify the Agent, the US Administrative Agent and the Lenders 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 Agent, the US Administrative Agent or any 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 Agent, the US Administrative Agent and the Lenders 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 US Administrative Agent in respect of Facility B or the Agent in respect of Facility A, Facility C or Facility D 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, as applicable, the US Administrative Agent or the Agent 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 Agent and the Lenders 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.

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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, as applicable, (i) to the US Administrative Agent in respect of Facility B, and (ii) to the Agent in respect of Facility A, Facility C and Facility D, and distributed among the Lenders pro rata in accordance with their respective Rateable Portions (or, as the case may be, to or among the Agent, the US Administrative Agent the Lender or the Lenders to whom those payments are owing) in each instance in the following order:

(a)

firstly, in payment of any amounts due and payable as and by way of agency fees owing to the Agent, the US Administrative Agent or the US Security Agent for its services hereunder or in connection herewith;

(b)

secondly, in payment of any amounts due and payable as and by way of recoverable expenses hereunder or in connection herewith;

(c)

thirdly, in payment of any interest, other fees, or default interest then due and payable on or in respect of the Advances;

(d)

fourthly, in repayment of any principal amounts of the Advances; and

(e)

fifthly, 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, subject to the provisions of the Security Sharing Agreement, be paid to and distributed pro rata among, as applicable, (i) the Lenders in accordance with their Rateable Portions, or (ii) as the case may be, to or among the Agent, the US Administrative Agent, the Lender or the Lenders to whom those payments are owing, 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 Agent, the US Administrative Agent or the US Security Agent 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 Agent, the US Administrative Agent or the US Security Agent in connection with the administration and enforcement of this Agreement or the other Documents, to the extent that those funds, costs and

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expenses shall not have been reimbursed to the Agent, the US Administrative Agent or the US Security Agent; and

(b)

thereafter as the Agent and the Lenders may determine in their discretion.

SECTION 7

SECURITY DOCUMENTS

7.1

Security Documents.

The Borrowers shall cause the following documents to be executed and delivered to, as applicable, the Agent or the US Security Agent on behalf of the Lenders to secure the Obligations, those documents to be in form and substance satisfactory to the Agent, the US Security Agent and the Lenders:

(a)

by SunOpta: (i) Ontario law guarantee of the obligations of all Obligors (other than SunOpta) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of SunOpta, including securities (or the equivalent) registered in every location where SunOpta 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 (including a hypothec), over the real property located at 2838 Highway 7, Norval, Ontario, (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 SunOpta; (vii) an offset agreement regarding cash balances; (viii) a securities pledge agreement; (ix) if applicable, an acknowledgment regarding existing security; and (x) an assignment of any security that SunOpta may now or hereafter obtain from Opta Minerals Inc. and the Subsidiaries of Opta Minerals Inc.;

(b)

by 1510146 Ontario: (i) Ontario law guarantee of the obligations of all Obligors (other than 1510146 Ontario) owing to the Lenders; (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) 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 1510146 Ontario; (v) an offset agreement regarding cash balances; and (vi) if applicable, an acknowledgment regarding existing security;

(c)

by LP: (i) Illinois law guarantee of the obligations of all Obligors (other than LP) owing to the Lenders; (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) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of LP, indicating the US Security Agent and/or the Lenders as loss payee; (iv) an offset

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agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

(d)

by ULC: (i) Ontario law guarantee of the obligations of all Obligors (other than ULC) owing to the Lenders; (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; (iv) an offset agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

(e)

by LLC: (i) Illinois law guarantee of the obligations of all Obligors (other than LLC) owing to the Lenders; (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) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of LLC, indicating the US Security Agent and/or the Lenders as loss payee; (iv) an offset agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

(f)

by SunOpta Food Group: (i) Illinois law guarantee of the obligations of all Obligors (other than SunOpta Food Group) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of SunOpta Food Group, including securities (or the equivalent) registered in every location where SunOpta Food Group has assets; (iii) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of SunOpta Food Group, indicating the US Security Agent and/or the Lenders as loss payee; (iv) an offset agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

(g)

by Northern Food: (i) Illinois law guarantee of the obligations of all Obligors (other than Northern Food) owing to the Lenders; (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; (iii) a first collateral charge, by way of debenture or other appropriate security (including a mortgage and security agreement with assignment of rents), over the real property located at: (A) 601 3rd Avenue W, Alexandria, Minnesota, (B) 4601 Co. Road, 13 NE, Alexandria, Minnesota, (C) 3035 Evergreen Lane, Alexandria, Minnesota, (D) 308-2 ^nd Avenue NW, Bertha, Minnesota, (E) 701 W 1st Street, Fosston, Minnesota, and (F) 199 W 2nd Avenue, Afton, Wyoming, (iv) a certificate in respect 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, indicating the US Security Agent and/or the Lenders as loss payee; (v) an offset

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agreement regarding cash balances; and (vi) if applicable, an acknowledgment regarding existing security;

(h)

by SunOpta Aseptic: (i) Illinois law guarantee of the obligations of all Obligors (other than SunOpta Aseptic) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of SunOpta Aseptic, including securities (or the equivalent) registered in every location where SunOpta Aseptic has assets; (iii) a first collateral charge, by way of debenture or other appropriate security (including a mortgage and security agreement with assignment of rents), over the real property located at: 3915 Minnesota Street, Alexandria, Minnesota; (iv) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of SunOpta Aseptic, indicating the US Security Agent and/or the Lenders as loss payee; (v) an offset agreement regarding cash balances; and (vi) if applicable, an acknowledgment regarding existing security;

(i)

by Sunrich: (i) Illinois law guarantee of the obligations of all Obligors (other than Sunrich) owing to the Lenders; (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 first collateral charge, by way of debenture or other appropriate security (including a mortgage and security agreement with assignment of rents), over the real property located at: (A) 3824-93rd Street SW, Hope, Minnesota, and (B) 616-6 ^th Avenue W, Cresco, Iowa and (c) 1971, 354 ^th Street, Breckenridge, Minnesota; (iv) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of Sunrich, indicating the US Security Agent and/or the Lenders as loss payee; (v) an offset agreement regarding cash balances; and (vi) if applicable, an acknowledgment regarding existing security;

(j)

by SunOpta Ingredients Canada: (i) Ontario law guarantee of the obligations of all Obligors (other than SunOpta Ingredients Canada) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of SunOpta Ingredients Canada, including securities (or the equivalent) registered in every location where SunOpta Ingredients Canada 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 2 Barrie Blvd., St. Thomas, Ontario; (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 SunOpta Ingredients Canada; (vi) an offset agreement regarding cash balances; and (vi) if applicable, an acknowledgment regarding existing security;

(k)

by SunOpta Ingredients: (i) Illinois law guarantee of the obligations of all Obligors (other than SunOpta Ingredients) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property,

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assets and undertaking of SunOpta Ingredients, including securities (or the equivalent) registered in every location where SunOpta Ingredients has assets; (iii) a first collateral charge, by way of debenture or other appropriate security (including a mortgage and security agreement with assignment of rents), over the real property located at: (A) 1001 South Cleveland Street, Cambridge, Minnesota, (B) 701 West 6 ^th Street, Galesburg, Illinois and (C) 1050 Wenig Road N.E., Cedar Rapids, Iowa; (iv) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of SunOpta Ingredients, indicating the US Security Agent and/or the Lenders as loss payee; and (v) an offset agreement regarding cash balances; (vi) a patent collateral agreement; (vii) if applicable, an acknowledgment regarding existing security;

(l)

by Drive: (i) Ontario law guarantee of the Obligations of all Obligors (other than Drive) owing to Lender, (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of Drive, including securities (or the equivalent) registered in every location where Drive 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 Drive, (iv) an offset agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

(m)

by Sonne Labs: (i) Illinois law guarantee of the obligations of all Obligors (other than Sonne Labs) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of Sonne Labs, including securities (or the equivalent) registered in every location where Sonne Labs has assets (iii) a first collateral charge by way of debenture or other appropriate security (including a mortgage and security agreement with assignment of rents), over the real property located at : (A) 896 23 ^rd Avenue North, Wahpeton, North Dakota; (iv) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of Sonne Labs, indicating the US Security Agent and/or the Lenders as loss payee; and (v) an offset agreement regarding cash balances;

(n)

by SunOpta Holdings: (i) Illinois law guarantee of the obligations of all Obligors (other than SunOpta Holdings) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of SunOpta Holdings, including securities (or the equivalent) registered in every location where SunOpta Holdings has assets; (iii) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of SunOpta Holdings, indicating the US Security Agent and/or the Lenders as loss payee; (iv) an offset agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

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(o)

by SunOpta Financing: (i) Illinois law guarantee of the obligations of all Obligors (other than SunOpta Financing) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of SunOpta Financing, including securities (or the equivalent) registered in every location where SunOpta Financing has assets; (iii) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of SunOpta Financing, indicating the US Security Agent and/or the Lenders as loss payee; (iv) an offset agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

(p)

by Organic Ingredients: (i) Illinois law guarantee of the obligations of all Obligors (other than Organic Ingredients) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of Organic Ingredients, including securities (or the equivalent) registered in every location where Organic Ingredients has assets; (iii) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of Organic Ingredients, indicating the US Security Agent and/or the Lenders as loss payee; (iv) an offset agreement regarding cash balances; and (v) if applicable, an acknowledgment regarding existing security;

(q)

by Pacific Fruit: (i) Illinois law guarantee of the obligations of all Obligors (other than Pacific Fruit) owing to the Lenders; (ii) a general security agreement creating a security interest in all of the personal property, assets and undertaking of Pacific Fruit, including securities (or the equivalent) registered in every location where Pacific Fruit has assets; (iii) a certificate in respect of all insurance policies, including but not limited to fire and all perils insurance on real property and policies insuring the assets of Pacific Fruit, indicating the US Security Agent and/or Lenders as loss payee; and (iv) an offset agreement regarding cash balances; and

(r)

each relevant Lender’s standard form Bankers’ Acceptances in blank in accordance with Section 3.9(f).

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;

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(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 Agent, the US Security Agent or the Unanimous Lenders may require from time to time;

all immediately upon that Person becoming an Included Subsidiary.

(b)

Further Documents. Upon request of the Agent, the US Security Agent or the Unanimous Lenders, the Obligors or any of them shall execute and deliver, or shall cause to be executed and delivered, to the Agent or US Security Agent, as applicable, 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 Agent or US Security Agent, as applicable, or the Unanimous Lenders in its or their sole and absolute discretion, to secure the Obligations, including, without limitation, executing and delivering or causing to be executed and delivered such further documents or instruments to give the Lenders a first priority security interest in any and all property and assets now or hereafter acquired by any Obligor, subject to any Permitted Liens.

SECTION 8

CONDITIONS PRECEDENT

8.1

Conditions Precedent to Disbursements of Advances.

The obligation of each Lender to make available the first Advance, Rollover or Conversion under each Credit Facility is subject to and conditional upon the satisfaction of the following conditions:

(a)

Delivery of Documents. The Agent or the US Security Agent, as applicable, shall have received Sufficient Copies, in form and substance satisfactory to the Agent or the US Security Agent, as applicable, 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:

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(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)

a satisfactory report from Intech Risk Management Inc. regarding the insurance policies and coverage maintained by the Obligors;

(vi)

opinions of counsel to the Obligors, addressed to the Agent and each Lender and counsel to the Agent with respect to, inter alia , due authorization, execution, delivery and enforceability of the Documents executed by the Obligors;

(vii)

duly executed certificate(s) of insurance evidencing the insurance required under this Agreement and endorsements of those policies each showing loss payable to the Agent or US Security Agent, as applicable;

(viii)

such other documents as the Agent or US Security Agent 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;

(ix)

a duly completed Environmental Checklist in the Agent’s or the US Security Agent’s standard form, or if available, a Phase I environmental report in respect of real property owned by the Obligors;

(x)

landlord waivers satisfactory to the Agent or US Security Agent in respect of real property leased by any Obligor;

(xi)

a copy of all of the relevant Obligor’s agreements relating to the Rhodia Price Reduction;

(xii)

the Security Sharing Agreement; and

(xiii)

if so requested by the Lenders, title insurance satisfactory to the Lenders in favour of the Agent or the US Security Agent shall have been obtained and delivered to the Agent or the US Security Agent in respect of each relevant property owned by an Obligor.

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(b)

Payout and Discharge. All funds owed by the Obligors to those creditors identified (based upon information provided by any Obligor) by the Agent and the US Security Agent, as applicable, shall be repaid in full and all Liens and/or security registrations made in favour of such creditors shall be discharged or the Agent or the US Security Agent, as applicable, shall have received an undertaking from such creditors to discharge all such Liens and/or security registrations in form and substance satisfactory to the Agent or the US Security Agent, as applicable.

(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 Agent or the US Security Agent, as applicable, 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 Agent and the US Security Agent) shall have been paid to the Agent.

(e)

Due Diligence. The Agent and the Lenders shall have completed their business, legal and accounting due diligence with the respect to the Obligors with results satisfactory to them.

(f)

Market Change. No material adverse change or material disruption of the financial, banking or capital markets shall have occurred and be continuing, in each case, determined by the Agent 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 Lenders shall have reviewed the Obligors’ existing Debt obligations, with results satisfactory to the Lenders.

8.2

Conditions Precedent to All Advances.

The obligations of the Lenders to make available any 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, Issuance Date, Rollover Date or Conversion Date:

(a)

No Default. No Default or Event of Default shall exist.

(b)

Representations Correct. The representations and warranties contained in Section 2.1 shall be true and correct on each Drawdown Date, Issuance Date, Rollover Date or Conversion Date as if made on that date.

(c)

Notice of Advance. The Borrowers shall have provided any notice required in respect of an Advance, Rollover or Conversion.

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(d)

Facility A and Facility B Advances. The Facility A Borrower and SunOpta Food Group, as applicable, shall have provided a current certified aged statement of Accounts Receivable and listing of Inventory in accordance with Section 3.6(a) or 3.6(b), as applicable.

(e)

Certain Advances. Each applicable Borrower executing and delivering to the relevant Lender, the Agent or the US Administrative Agent customary documentation required by such Lender or the Agent or the US Administrative Agent, as applicable, from time to time for purposes of extending Advances by way of Letter of Credit, Letter of Guarantee and Bankers’ Acceptance.

8.3

Conditions Precedent to Advances Under Facility D

The obligations of the Lenders to make available any Advance, Rollover or Conversion under Facility D, in addition to being subject to and conditional upon each of the conditions being satisfied in Sections 8.1 and 8.2, are subject to and conditional upon each of the conditions below being satisfied on the applicable Drawdown Date, Issuance Date, Rollover Date or Conversion Date:

(a)

satisfactory completion by the relevant Obligor of the acquisition on terms and conditions satisfactory to the Lenders;

(b)

satisfaction to the Lenders that the acquisition is related to SunOpta’s existing lines of business;

(c)

satisfaction by the Lenders with the ownership and management, organizational and legal structure of the Consolidated Borrower subsequent to the acquisition and the tax and accounting aspects of the acquisition;

(d)

satisfactory due diligence review by the Lenders, including, but not limited to, review of the relevant Person’s existing operations, history of business and financial position. This is to be confirmed by the historical (past three years) audited, consolidated (and non-consolidated if applicable) financial statements, the most recent interim financial statements and two year forecast/budgets of SunOpta and the relevant Person on a combined basis confirming compliance with all financial covenants hereunder;

(e)

repayment of any Debt attached to the acquisition upon closing and discharge of all relevant Liens together with provision of Security Documents creating a first rank of security interest in favour of the Agent, the US Security Agent and the Lenders as applicable;

(f)

receipt of satisfactory environmental review of the assets of the Person being acquired executed by an authorized signing officer of SunOpta;

(g)

no Default or Event of Default shall have occurred and be continuing or be created upon the completion of the relevant acquisition;

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(h)

the amounts available under the Credit Facilities, together with any cash resources of the Obligors, shall be sufficient to complete the acquisition. If additional funds are required to complete the acquisition, then the additional equity or Subordinated Debt may be used to fund the shortfall. Such Subordinated Debt must be on terms and conditions satisfactory to the Lenders, including, without limitation, no acceleration rights in respect of such Subordinated Debt prior to the maturity date of the Credit Facilities; and

(i)

in respect of an Advance for purposes of making a Capital Expenditure that is not budgeted for in the Business Plan or that is more than 10% in excess of that which is budgeted for in the Business Plan, the prior approval of the Unanimous Lenders will be required.

Notwithstanding the foregoing and for greater certainty, if the entire proceeds of an Advance under Facility D are going to be used to effect a Permitted Investment, then the conditions precedent set out in clauses (a) through (d), (f) and (h) of this Section 8.3 need not be complied with by the Obligors.

8.4

Waiver of a Condition Precedent.

The conditions stated in Sections 8.1, 8.2 and 8.3 are inserted for the sole benefit of the Agent, the US Administrative Agent, the US Security Agent and the Lenders and the conditions stated therein may only be waived by the Agent with the consent of the Unanimous Lenders, 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 the Lenders 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 Agent or the Lenders have any obligations under this Agreement or any of the other Documents, each of the Obligors covenants, for itself as applicable, with the Agent, the US Administrative Agent, the US Security Agent and each 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

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copies of those policies to the Agent or the US Security Agent, as applicable, which policies shall be satisfactory to the Agent or the US Security Agent, as applicable. Each insurance policy shall include an endorsement whereby the insurers agree to give the Agent or the US Security Agent, as applicable, on behalf of the Lenders not less than 30 days notice of the cancellation of the policy of insurance and permit the Agent or the US Security Agent, as applicable, on behalf of the Lenders to cure any default which may exist under the policy. It shall name the Agent or the US Security Agent, as applicable, as loss payee or additional insured as its interest may appear in all of its policies of insurance or otherwise assure the Agent or the US Security Agent, as applicable, of the availability of continuing coverage in a manner satisfactory to the Agent or the US Security Agent, as applicable, and all real property policies shall contain such standard mortgage clauses as the Agent or the US Security Agent, as applicable, shall require for the Lenders’ protection. In addition, it shall notify the Agent or the US Security Agent forthwith on the happening of any loss or damage in excess of $150,000 and shall furnish at its expense all necessary proofs and do all necessary acts to enable the Agent or the US Security Agent, as applicable, to obtain payment of the insurance monies in the event that the claim for payment of insurance proceeds is $150,000 or greater.

(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 Agent, it shall deliver to the Agent evidence satisfactory to the Agent 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.

(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.

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(g)

Litigation. It shall (i) promptly give notice to the Agent of any litigation, suit, action, proceeding or dispute, threatened or commenced it, whether before or by any court, governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or before any arbitrator of any kind which either individually or in the aggregate exceed $150,000 in claims, or which otherwise, if adversely determined, could reasonably be expected to have a Material Adverse Effect on it or the other Obligors, (ii) advise the Agent of the extent to which any adverse determination is covered by insurance, (iii) provide all reasonable information requested by the Agent 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 Agent 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 Agent 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 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 Agent 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 Agent such other information or documents (financial or otherwise) as the Agent may reasonably request.

(l)

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 Agent or any Lender to visit and inspect, under guidance of its officers, any of

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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 Agent or any Lender may request.

(m)

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.

(n)

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 Agent 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 and as budgeted for in its Business Plan.

(p)

Annual Meetings with Lenders. On or before April 30th in each Fiscal Year, it shall hold a meeting with the Lenders upon the request of the Agent 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 Agent of a change in its Auditors and the reasons for the change.

(r)

ERISA Matters. It will maintain each ERISA Plan in compliance in all material respects with all requirements of Applicable Law. It will promptly notify the Agent or the US Security Agent, as applicable, on becoming aware of (a) the institution of any steps by any Person to terminate any US Pension Plan, (b) the failure of any Obligor to make a required contribution to any US Pension Plan if such failure is sufficient to give rise to an Encumbrance under Section 302(f) of ERISA, (c) the taking of any action with respect to a US Pension Plan which is reasonably likely to result in the requirement that any Obligor furnish a bond or other security to the US Pension Benefit Guaranty Corporation under ERISA or such US Pension Plan, or (d) the occurrence of any event with respect to any ERISA Plan which is reasonably likely to result in any Obligor incurring any material liability, fine or penalty, and in the notice to the Agent or the US Security Agent, as applicable, thereof, provide copies of all documentation relating thereto.

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9.2

Negative Covenants.

While any amount owing under this Agreement or any of the other Documents remains unpaid, or the Agent, the US Security Agent, the US Administrative Agent or the Lenders have any obligations under this Agreement or any of the other Documents, each Obligor covenants, for itself as applicable, with the Agent, the US Administrative Agent, the US Security Agent and each 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 Agent or US Security Agent on behalf of the Lenders 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. Notwithstanding the foregoing and for greater certainty, SunOpta will not sell, transfer, assign, convey or otherwise dispose of any shares that it owns in the capital of Opta Minerals Inc. without the prior written consent of the Agent and the Unanimous Lenders, such consent not to be unreasonably withheld or delayed by the Agent and the Unanimous Lenders.

(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, 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 (including Subordinated Debt) in excess of US$500,000 in the aggregate during the term of this Agreement, except: (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; (vii) unsecured Debt to Canadian Imperial Bank of Commerce in an amount not in excess of $350,000 in respect of Visa corporate credit cards issued by Canadian Imperial Bank of Commerce to the Obligors; and (viii) Subordinated Debt in an amount of

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up to $1,750,000 owing to the vendor or vendors of shares in the capital of Les Importations Cacheres Hahamovitch Inc.

(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: (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

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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.

(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), 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.

(m)

Limitation on Sale and Leaseback Transactions. Unless in compliance with Section 5.2 hereof, 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)

Loans and Investments. It will not, without the prior written approval of the Agent and the Lenders, other than in respect of the proceeds of the Advances under Facility C and Facility D and the corresponding equity contribution in each of the ULC and the LLC and the subsequent loan to SunOpta Food Group (i) purchase or acquire, or make any commitment to purchase or acquire, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, including, without limitation, the establishment or creation of a Subsidiary, or (ii) make or commit to make any acquisition of all or substantially all of the assets of another Person, or of any business or division of any Person, including without limitation, by way of merger, consolidation, amalgamation or other combination or (iii) make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate or make any payments in respect thereof (the items described in clauses (i), (ii), and (iii) are referred to as “ Investments ”), except for : (A) Investments in cash and Cash Equivalents; (B) extensions of credit by one Obligor to another Obligor (so long as it remains an Obligor), as the case may be and interest and other payments made in connection with such extensions of credit; (C) extensions of credit which constitute trade receivables in the ordinary course of business; (D) except for Permitted Investments; and (E) except for an Investment in Cleugh’s in an amount of up to US$8,000,000.

(o)

Use of Cash . Use any cash on deposit with BMO, Harris, the US Administrative Agent or the Agent which is subject to an offset agreement in breach of any term or covenant contained in this Agreement or any other Document.

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(p)

Location of Assets in Other Jurisdictions. It will not, except for any property being delivered to a customer in the ordinary course of business of such Obligor as part of the performance of its obligations, or the provision of its services, to such customer under a contract entered into with such customer in the ordinary course of business of such Obligor, acquire any property outside of the jurisdictions identified in Schedule I or move any property from one jurisdiction to another jurisdiction where the movement of such property would cause the Security over such property to cease to be perfected under Applicable Law, or knowingly suffer or permit in any other manner any of its property to not be subject to the Security or to be or become located in a jurisdiction as a result of which the Security over such property is not perfected, unless (x) the Obligor has first given 30 days prior written notice thereof to the Agent or the US Security Agent, as applicable, and (y) the applicable Obligor has first executed and delivered to the Agent or the US Security Agent, as applicable, all Security Documents and all financing or registration statements in form and substance satisfactory to the Agent or the US Security Agent, as applicable, which the Agent or the US Security Agent, as applicable, or its counsel, acting reasonably, from time to time deem necessary or advisable to ensure that the Security Documents at all times constitute a perfected first priority Lien (subject only to Permitted Liens) over such property notwithstanding the movement or location of such property as aforesaid together with such supporting certificates, resolutions, opinions and other documents as the Agent or the US Security Agent, as applicable, may deem necessary or desirable in connection with such security and registrations.

(q)

Excluded Subsidiaries. Other than in respect of Opta Minerals Inc. and the Subsidiaries of Opta Minerals Inc. to which this negative covenant will not apply, it will not, without the prior written approval of the Agent and the Lenders, allow or cause any Excluded Subsidiary to (i) incur any Debt, other than Debt secured by or which could be secured by Permitted Liens or Debt for amounts payable to suppliers in the ordinary course of business, (ii) grant, incur or suffer any Lien other than a Permitted Lien, (iii) purchase or acquire, or make any commitment to purchase or acquire, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, including, without limitation, the establishment or creation of a Subsidiary, (iv) make or commit to make any acquisition of all or substantially all of the assets of another Person, or of any business or division of any Person, including without limitation, by way of merger, consolidation, amalgamation or other combination or (v) make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate or make any payments in respect thereof.

(r)

Loans to Excluded Subsidiaries. It will not make loans or advance funds or make or increase, as the case may be, any equity investment in any Excluded Subsidiary including without limitation in any of Opta Minerals Inc., Cleugh’s, Temisca Inc., 9017-0382 Quebec Inc., Opta Minerals (USA) Inc., Virginia Material Inc., International Materials and Supplies Inc. and 1108176 Ontario Limited.

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(s)

Cleugh’s. Notwithstanding Section 9.2(q) and for greater certainty, Cleugh’s may (i) incur operating Debt up to a principal amount of US$30,000,000 in favour of General Electric Capital Corporation, (ii) grant a Lien over all of its assets in favour of General Electric Capital Corporation, (iii) incur Debt up to a collective principal amount of US$4,000,000 in favour of certain equipment financiers, (iv) grant a Lien in favour of each such Person over the specific equipment financed by such Person; (v) incur Debt up to a principal amount of US$1,000,000 in favour of B.H.& C. Properties, LLC; and (vi) incur Debt up to a principal amount of US$370,000 in favour of David Michael Cleugh; provided however, that in all circumstances the Debt incurred by Cleugh’s shall be non-recourse to the Obligors.

9.3

Financial Covenants of the Borrowers.

While any amount owing under this Agreement or any of the other Documents remains unpaid, or the Agent, the US Administrative Agent or the Lenders have any obligations under this Agreement or any of the other Documents, the Borrowers covenant with the Agent, the US Administrative Agent and each Lender as follows:

(a)

Funded Debt to EBITDA Ratio. The Funded Debt to EBITDA Ratio of the Consolidated Borrower shall at all times be less than 3.00:1.00, provided, however, that, notwithstanding the foregoing, the Funded Debt to EBITDA Ratio of the Consolidated Borrower shall at all times be less than 3.50:1.00 for a period of no more than two consecutive Fiscal Quarters in order to accommodate (i) the effect of acquisitions made by any Obligor, or (ii) a variance in business conditions.

(b)

Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio of the Consolidated Borrower shall at all times be greater than or equal to 1.50:1.00.

(c)

Working Capital Ratio. The Working Capital Ratio of the Consolidated Borrower shall not at any time be less than 1.25:1.00.

(d)

Total Liabilities to Tangible Net Worth. The Consolidated Borrower shall, at all times maintain a ratio of Total Liabilities to Tangible Net Worth of not greater than 2.00:1.00.

(e)

Calculation of Ratios, etc. The Funded Debt to EBITDA Ratio, the Fixed Charge Coverage Ratio and the ratio of Total Liabilities to Tangible Net Worth 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.

(f)

Changes to GAAP. Upon the occurrence of any change in GAAP, the Majority Lenders will adjust the ratios set out in this Section 9.3.

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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 Agent, the US Administrative Agent or the Lenders have any obligations under this Agreement or any of the other Documents, each Borrower covenants with the Agent, the US Administrative Agent and the Lenders as follows:

(a)

Quarterly Consolidated Financial Statements. Within 60 days of the end of each Fiscal Quarter, it will deliver to the Agent the unaudited consolidated balance sheet of SunOpta, SunOpta Food Group and the Consolidated Borrower as at the end of such Fiscal Quarter and the related unaudited consolidated statements of income and cash flows (including, without limitation, the monthly internally prepared financial statements in respect of LP), together with schedules prepared in a form satisfactory to the Majority Lenders, 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 (or an acceptable designate) of SunOpta, SunOpta Food Group, LP and the Consolidated Borrower, as applicable, 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 and attaching a true copy of the quarterly report of management to the board of directors of SunOpta, such quarterly report of management to be in a form similar to the “Q3 2002 Board of Directors Report” previously delivered to the Lenders (a copy of which is attached hereto as Schedule X). For greater certainty and with reference to the phrase “subject in the case of interim financial statements to normal year-end adjustments” contained in clause (a) of Schedule T, if any “normal year-end adjustments” are deemed to be material by the Majority Lenders, then a compliance certificate in the form of Schedule T for the fourth Fiscal Quarter of SunOpta shall be restated as applicable to reflect such adjustments and resubmitted by SunOpta to the Agent within 120 days of the end of the relevant Fiscal Year. In addition to the foregoing, the Borrower will also, within 60 days of each Fiscal Quarter, deliver to the Agent a report in the form of Schedule T hereto, regarding any individual sale or sale/leaseback of any fixed assets of the Obligors giving rise to Permitted Proceeds in excess of $100,000 during the previous Fiscal Quarter and the Borrower’s use of such Permitted Proceeds.

(b)

Facility A and Facility B Borrowing Base Statements. Within 30 days of the end of each month, the Facility A Borrower will deliver to the Agent and SunOpta Food Group will deliver to the US Administrative Agent a separate aged Accounts Receivable listing and Inventory listing segregating United States, Canadian and foreign domiciled Accounts Receivable of the Facility A Borrower and SunOpta Food Group, as applicable, and categorizing Inventory as either raw materials, parts or supplies and finished goods of the Facility A Borrower and SunOpta Food Group, as applicable, for such period, all of which shall be certified by the Chief Financial Officer (or an acceptable designate) of SunOpta

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for the Facility A Borrower and the Chief Financial Officer (or an acceptable designate) of SunOpta Food Group for SunOpta Food Group. Accounts Receivable guaranteed by EDC or EXIM or secured by a letter of credit from a financial institution acceptable to the Lenders shall be separately identified.

(c)

SunOpta Annual Audited and Unaudited Financial Statements. Within 120 days of the end of each Fiscal Year, SunOpta will deliver to the Agent (i) the external accountant prepared consolidated balance sheets of SunOpta and the Consolidated Borrower 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 in respect of SunOpta 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, and (ii) the annual unaudited non-consolidated external accountant prepared financial statements of the Consolidated Borrower, all other Obligors and Subsidiaries.

(d)

SunOpta Food Group Annual Unaudited Financial Statements and LP Annual Tax Statement. Within 120 days of the end of each Fiscal Year, (i) SunOpta Food Group will deliver to the Agent the unaudited consolidated balance sheets of SunOpta Food Group 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 (or an acceptable designate) of SunOpta Food Group, and (ii) LP will deliver to the Agent an internally prepared annual tax statement in respect of LP, which such statement shall be certified by the Chief Financial officer (or an acceptable designate) of LP.

(e)

Management Letters. Promptly after the receipt thereof by any Obligor, it will deliver to the Agent, 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, it will deliver to the Agent a Business Plan for SunOpta on a consolidated basis and for each Obligor (other than SunOpta) and Subsidiary on an unconsolidated basis in form satisfactory to the Majority Lenders 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 Agent, the US Administrative Agent or the Majority Lenders may reasonably request, including, without

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limitation, providing prompt written notice to the Agent of the aggregate hedging position of the Obligors if Hedge Contracts are greater than $1,000,000 “out of the money”.

SECTION 10

DEFAULT AND ENFORCEMENT

10.1

Events of Default.

Upon the occurrence of an event described in Section 10.1(i) or 10.1(j), an Event of Default under the Credit Facility shall have occurred, and upon the occurrence of any one or more of the following events, other than an event described in Section 10.1(i) or 10.1(j), Agent may, or, if required by the Majority Lenders, the Agent shall, by written notice to the Borrower, declare that an Event of Default 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(n) 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)

(d)

Cross-Default. With respect to any other Debt of any Obligor or Subsidiary:

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(i)

demand is made of Debt in excess of $1,000,000 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

(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 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

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relevant Obligor or Subsidiary knew or ought to have known the Government Approval was required or withdrawn.

(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 United States Bankruptcy Code , 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), the United States Bankruptcy Code 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), the United States Bankruptcy Code 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), the United States Bankruptcy Code , 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

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(v)

files, institutes or commences any other petition, proceeding or case under any other bankruptcy, insolvency, debt restructuring, 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 lien

(l)

or, 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.

(m)

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.

(n)

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.

(o)

Change of Control Regarding Persons Other Than SunOpta. 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 SunOpta) or any Subsidiary such that SunOpta shall cease to own or control, directly or indirectly, shares or ownership interests of such Obligor or Subsidiary carrying voting rights sufficient to permit SunOpta to elect a majority of the members of the board of directors of such Obligor or Subsidiary.

(p)

Change of Control Regarding SunOpta. There occurs, directly or indirectly, a change in the legal or beneficial ownership of any shares in the capital stock of SunOpta such that a Person or group of Persons acting in concert beneficially owns or controls 51% or more of the shares of SunOpta carrying voting rights.

(q)

Pension Plan. If any of the following events shall occur with respect to any Canadian Pension Plan or US Pension Plan: (i) the institution of any steps by any

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Obligor or any member of its Controlled Group or any applicable regulatory authority to terminate a Canadian Pension Plan or US Pension Plan (wholly or in part) if, as a result of such termination, any Obligor may be required to make an additional contribution to such Canadian Pension Plan or US Pension Plan, or to incur an additional liability or obligation to such Canadian Pension Plan or US Pension Plan, equal to or in excess of $1,000,000 or the equivalent thereof in another currency; or (ii) a contribution failure occurs with respect to any US Pension Plan sufficient to give rise to a lien or charge under Section 302(f) of ERISA or under any applicable pension benefits legislation in any other jurisdiction.

10.2

Rights upon Default and Event of Default.

Upon the occurrence of a Default, the Agent may, and the Agent shall upon the instructions of the Majority Lenders, on notice to the Borrower, declare that the ability of the Borrower to require any further Advances under the Credit Facilities shall be suspended pending the remedying of the Default. Upon the occurrence of an Event of Default pursuant to Sections 10.1(i) or 10.1(j), the Agent shall, and upon the occurrence of any other Event of Default and for so long as the other Event of Default shall continue, the Agent may, and the Agent shall upon the instructions of the Majority Lenders, without notice to the Borrower, do either or both of the following:

(a)

declare that the Total Commitment under each Credit Facility 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 by the Borrower 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, no Lender shall 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 Agent on behalf of the Lenders in respect of Facility A, Facility C and Facility D, and to the US Administrative Agent on behalf of the Lenders in respect of Facility B, as applicable, all amounts outstanding hereunder including, if applicable, the Hedge Contract Exposure owing under each Hedge Contract with a Lender. Without limiting the generality of the foregoing, the Facility A Borrower shall pay to the Agent on behalf of the Lenders the face amount of all Bankers’ Acceptances which have not matured and the maximum amount payable under all outstanding Letters of Credit and Letters of Guarantee, which are unmatured or unexpired, which amounts shall be held by the Agent as collateral security for the Facility A Borrower’s obligations with respect to those Bankers’ Acceptances, Letters of Credit and Letters of Guarantee, as applicable. In addition, SunOpta Food Group shall pay the US Administrative Agent the maximum amount payable under all outstanding Letters of Credit, which are unmatured or unexpired, which amounts shall be held by the US Administrative Agent

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as collateral security for the Borrower’s obligation under Facility B with respect to those Letters of Credit. 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 Agent and the Lenders 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. For greater certainty, a Default or Event of Default declared by the Agent may only be waived by the Majority Lenders. 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 Agent’s, the US Administrative Agent’s, the Lenders’ or the US Security Agent’s rights or remedies under any Document. The Obligors acknowledge and agree that the exercise by the Agent, the US Administrative Agent, the US Security Agent or any 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 Agent 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.

SECTION 11

REMEDIES

11.1

Remedies Cumulative.

For greater certainty, the rights and remedies of the Agent, the US Administrative Agent, the US Security Agent and the Lenders 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 Agent, the US Administrative Agent, the US Security Agent or any 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 Agent, the US Administrative Agent, the US Security Agent or any Lender may be lawfully entitled as a result of the demand, Default or Event of Default, and any waiver by the Agent, the US Administrative Agent, the US Security Agent or any 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.

11.2

Remedies Not Limited.

The Agent, the US Administrative Agent or the US Security Agent, as applicable, on behalf of itself and the Lenders 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.

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11.3

Set-Off, etc.

Upon the occurrence of demand, Default or Event of Default, the Agent, the US Administrative Agent, the US Security Agent and each Lender and each of their 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 Agent, the US Administrative Agent, the US Security Agent or any 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 10.2 has been made and whether or not those Obligations are unmatured or contingent); (b) hold any amounts owing by the Agent, the US Administrative Agent, the US Security Agent or any 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 Agent, the US Administrative Agent, the US Security Agent or any Lender in its sole discretion may elect. For greater certainty, and in addition to the rights, powers and remedies set out above, the Agent, the US Administrative Agent, the US Security Agent, each Lender and each of their respective branches and offices, may exercise at their discretion any and all set-off and other rights and remedies afforded to each of them pursuant to Applicable Law. The amount of any set-off exercised by the Agent, the US Administrative Agent, the US Security Agent or a Lender shall be applied in accordance with the provisions of the Security Sharing Agreement.

11.4

Agent or 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 Agent, the US Administrative Agent, the US Security Agent or any 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

THE AGENTS AND THE LENDERS

12.1

Arrangements for Advances.

The Agent or the US Administrative Agent, as applicable, shall give notice to each Lender under each Credit Facility promptly in writing upon receipt by the Agent or the US Administrative Agent, as applicable, of any notice given under this Agreement which affects such a Lender. The Agent or the US Administrative Agent, as applicable, shall advise each Lender of the amount, date and details of each Advance and of each Lender’s participation in each Advance. At or before 1:00 p.m. on the Drawdown Date, each Lender will make its participation available to the Borrower at the Agent’s Account for Payments. Unless the Agent or the US

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Administrative Agent, as applicable, has actual knowledge that a Lender has not made or will not make available to the Agent or the US Administrative Agent, as applicable, for value on the Drawdown Date requested for an Advance by the Borrower under a Credit Facility such Lender’s Rateable Portion of such Advance requested, the Agent or the US Administrative Agent, as applicable, shall be entitled to assume that such amount has been or will be received from such Lender when so due and the Agent or the US Administrative Agent, as applicable, may (but shall not be obliged to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not in fact received by the Agent or the US Administrative Agent, as applicable, from such Lender on such Drawdown Date and the Agent or the US Administrative Agent, as applicable, has made available a corresponding amount to the Borrower on such Drawdown Date as aforesaid, such Lender shall pay to the Agent or the US Administrative Agent, as applicable, on demand an amount equal to the product of (i) the interest rate per annum applicable to the Advance multiplied by (ii) the amount that should have been paid to the Agent or the US Administrative Agent, as applicable, by such Lender on such Drawdown Date and was not, multiplied by (iii) a fraction, the numerator of which is the number of days that have elapsed from and including such Drawdown Date to but excluding the date on which the amount is received by the Agent or the US Administrative Agent, as applicable, from such Lender and the denominator of which is 365. A certificate of the Agent containing details of the amount owing by a Lender under this Section shall be deemed to be prima facie correct. If any such amount is not in fact received by the Agent or the US Administrative Agent, as applicable, from such Lender on such Drawdown Date, the Agent or the US Administrative Agent, as applicable, shall be entitled to recover from the Borrower, on demand, the related amount made available by the Agent or the US Administrative Agent, as applicable, to the Borrower as aforesaid together with interest thereon at the applicable rate per annum payable by the Borrower hereunder (but for greater certainty, without prejudice to any claim which the Borrower might have against such Lender as a result of such Lender not having made its Rateable Portion of such Advance).

12.2

Payments by Agents

(a)

The following provisions shall apply to any and all payments made or to be made (x) by the Agent to the Lenders under Facility A, Facility C and Facility D, or (y) by the US administrative Agent to the Lenders under Facility B:

(i)

the Agent or the US Administrative Agent, as applicable, shall be under no obligation to make any payment (whether in respect of principal, interest, fees or otherwise) to any Lender until an amount in respect of such payment has been received by the Agent or the US Administrative Agent, as applicable, from the Borrower;

(ii)

if the Agent or the US Administrative Agent, as applicable, receives a payment of principal, interest, fees or other amount owing by the Borrower which is less than the full amount of any such payment due, the Agent or the US Administrative Agent, as applicable, shall have no obligation to remit to each Lender any amount other than such Lender’s Rateable Portion of the amount actually received by the Agent or the US Administrative Agent, as applicable;

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(iii)

if any Lender has advanced more or less than its Rateable Portion of its Commitment, such Lender’s entitlement to such payment shall be increased or reduced, as the case may be, in proportion to the amount actually advanced by such Lender;

(iv)

if a Lender’s Rateable Portion of an Advance has been advanced for less than the full period to which any payment by the Borrower relates, such Lender’s entitlement to receive a portion of any payment of interest or fees shall be reduced in proportion to the length of time such Lender’s Rateable Portion has actually been outstanding (unless such Lender has paid all interest required to have been paid by it to the Agent or the US Administrative Agent, as applicable, pursuant to Section 12.1);

(v)

the Agent acting reasonably and in good faith shall, after consultation with the Lenders in the case of any dispute, determine in all cases the amount of all payments to which each Lender under is entitled and such determination shall be deemed to be prima facie correct;

(vi)

upon request, the Agent or the US Administrative Agent, as applicable, shall deliver a statement detailing any of the payments to the Lenders under the relevant Credit Facility referred to herein;

(vii)

all payments by the Agent or the US Administrative Agent, as applicable, to a Lender hereunder shall be made to such Lender at its address set out herein unless notice to the contrary is received by the Agent or the US Administrative Agent, as applicable, from such Lender; and

(viii)

if the Agent or the US Administrative Agent, as applicable, has received a payment from the Borrower on a Business Day (not later than the time required for the receipt of such payment as set out in this Agreement) and fails to remit such payment to any Lender entitled to receive its Rateable Portion of such payment on such Business Day, the Agent and the US Administrative Agent, as applicable, agrees to pay interest on such late payment at the same rate and in the same manner as set out in section 12.1.

(b)

Unless the Agent or the US Administrative Agent, as applicable, has actual knowledge that the Borrower has not made or will not make a payment to the Agent or the US Administrative Agent in respect of the relevant Credit Facility for value on the date in respect of which the Borrower has notified the Agent or the US Administrative Agent in writing that the payment will be made, the Agent or the US Administrative Agent, as applicable, shall be entitled to assume that such payment has been or will be received from the Borrower when due and the Agent or the US Administrative Agent, as applicable, may (but shall not be obliged to), in reliance upon such assumption, pay to each Lender its Rateable Portion of the payment expected from the Borrower. If the Agent or the US Administrative Agent, as applicable, has made such payments to the Lenders and

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the expected payment from the Borrower is in fact not received by the Agent or the US Administrative on the required date, then each Lender which has received any such payment agrees to refund such payment to the Agent or the US Administrative Agent, as applicable, immediately upon request, and the Borrower shall, without limiting its other obligations under this Agreement, indemnify the Agent or the US Administrative Agent, as applicable, against any and all liabilities, obligations, losses (other than loss of profit), damages, penalties, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on or incurred by the Agent or the US Administrative Agent as a result of having made such payments to the Lenders, except for those arising from the Agent’s or the US Administrative Agent’s negligence or wilful misconduct. A certificate of the Agent or the US Administrative Agent, as applicable, with respect to any amount owing by the Borrower under this section shall be deemed to be prima facie correct.

(c)

The Borrower hereby irrevocably authorizes the Agent and the US Administrative Agent to debit any account maintained by the Borrower with the Agent or the US Administrative Agent, as applicable, in order to make payments to the Lenders as contemplated herein. Each of the Agent and the US Administrative Agent agrees to provide written notice to the Borrower of each such debit in reasonable detail. The Borrower shall be deemed to have agreed to each such debit unless the Borrower objects in writing to such debit within 30 days after receipt of such written notice from the Agent or the US Administrative Agent, as applicable.

12.3

Decision-Making

(a)

Any amendment, waiver, discharge or termination with respect to this Agreement relating to the following matters shall be effective only if agreed between the relevant Borrower and the Unanimous Lenders (such amendment, waiver, discharge or termination, as applicable, having been approved by all of the Lenders pursuant to Section 12.8(j)):

(i)

the amount of any principal or any other amount payable by the Borrower, or an increase in the interest or fee margin set out in the Pricing Grid, or an increase in the Facility C Interest Premium, or any alteration in the currency or mode of calculation or computation of any amount payable hereunder;

(ii)

an increase in the Total Commitment under any Credit Facility or in any Lender’s Commitment;

(iii)

a change in the definition of “Unanimous Lenders”

(iv)

a change in the definition of “Majority Lenders”

(v)

the removal, in respect of Facility A, of the requirement that Advances not exceed the Facility A Borrowing Base as set out in Section 3.2(a) or an

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increase in the frequency that a Borrowing Base Certificate is required to be delivered under Section 3.6(a);

(vi)

the removal, in respect of Facility B, of the requirement that Advances not exceed the Facility B Borrowing Base as set out in Section 3.2(b) or an increase in the frequency that a Borrowing Base Certificate is required to be delivered under Section 3.6(b);

(vii)

a material change in the definition of “Facility A Borrowing Base”, “Facility B Borrowing Base”, “Eligible Accounts Receivable”, “EDC Insured Accounts Receivable”, “EXIM Insured Accounts Receivable”, “Accounts Receivable” or “Eligible Inventory”

(viii)

any change to Section 10.1 or what constitutes an Event of Default;

(ix)

any extension or reduction of the time for any payments required to be made by the Borrower;

(x)

any change in the types of Advances available;

(xi)

any change in any Maturity Date

(xii)

an extension or reduction of the notice period required in connection with any Advance;

(xiii)

an assignment or transfer by the Borrower of any of its rights and obligations under this Agreement;

(xiv)

any material change in the nature and scope of the Security or any release or discharge of any material portion of the Security, except that the Agent or the US Security Agent, as applicable, may from time to time without notice to or the consent of the Lenders execute and deliver partial releases of the Security from time to time in respect of any item of Collateral to the extent expressly permitted in this Agreement, whether or not the Borrower may have an obligation to apply the net proceeds thereof as a repayment hereunder. For purposes of this sub-section (xiv), “ material ” means any change or discharge in respect of Collateral having a value of US$5,000,000 or more; or

(xv)

any provision of this Section 12.3 (a).

(b)

Any decrease in the interest or fee margin set out in the Pricing Grid in respect of any particular Credit Facility or any decrease in the Facility C Interest Premium shall only be effective if agreed between the relevant Borrower and all of the Lenders under the relevant Credit Facility.

(c)

Except for the matters described in paragraphs (a) and (b) above, any amendment, waiver, discharge or termination with respect to this Agreement shall be effective

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only if agreed between the relevant Borrower and the Majority Lenders (such amendment having been approved by the Majority Lenders pursuant to Section 12.8(i)) and any such amendment, waiver, discharge or termination shall be final and binding upon all of the Lenders. For greater certainty, and subject to the matters described in paragraph (a) above, where the terms of the Agreement or any other Document refer to any action to be taken hereunder or thereunder by the Lenders or to any such action that requires the consent or other determination of the Lenders, the action taken by and the consent or other determination given or made by the Majority Lenders shall, except to the extent that this Agreement expressly provides to the contrary, constitute the action or consent or other determination of the Lenders herein or therein referred to, and the Agent or the US Administrative Agent, as applicable, may exercise its powers under Article 12 hereof and the Documents based upon such action, consent or other determination

12.4

Security Held by Agent and US Security Agent

Except to the extent provided in Section 12.5, the Security shall be granted in favour of and held by the Agent or the US Security Agent for and on behalf of the Lenders in accordance with the provisions of this Agreement and the Security Sharing Agreement. The Agent or the US Security Agent shall, in accordance with its usual practices in effect from time to time, take all steps required to perfect and maintain such Security, including: taking possession of the share certificates representing the shares required to be pledged hereunder; filing renewals and change notices in respect of such Security; and ensuring that the name of the Agent or the US Security Agent is noted as loss payee or mortgagee on all property insurance policies covering assets subject to the Security. If the Agent or the US Security Agent becomes aware of any matter concerning the Security which it considers to be material, it shall promptly inform the Lenders. The Agent and the US Security Agent agree to permit each Lender to review and make photocopies of the original documents comprising the Security from time to time upon reasonable notice. Each of the Lenders acknowledges that to the extent permitted by applicable law, the Security and the remedies provided under the Documents to the Lenders are for the benefit of the Lenders collectively and acting together and not severally, and further acknowledges that its rights hereunder and under the Security are to be exercised not severally, but by the Agent or the US Security Agent in accordance with the Security Sharing Agreement. Accordingly, notwithstanding any of the provisions contained herein or in the Security each Lender covenants and agrees that it shall not be entitled to take any action hereunder or thereunder including, without limitation, any declaration of default hereunder or thereunder but that any such action shall be taken only by the Agent or the US Security Agent in accordance with the Security Sharing Agreement.

12.5

Priorities of Security

Notwithstanding any other provision of this Agreement, the proceeds of realization of the Security or any portion thereof shall be distributed in accordance with the provisions of the Security Sharing Agreement.

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12.6

Appointment of Agents

Subject to Section 12.10, each Lender hereby irrevocably appoints the Agent and the US Administrative Agent, as applicable, to act as its agent in connection with this Agreement, and irrevocably authorizes the Agent and the US Administrative Agent, as applicable, to exercise such rights, powers and discretions as are delegated to it pursuant to this Agreement together with all such rights, powers and discretions as are incidental hereto or thereto. Each of the Agent and the US Administrative Agent, as applicable, hereby accept such appointment and agree to be bound by the provisions of this Agreement for so long as it is an Agent or US Administrative Agent hereunder. The Agent and the US Administrative Agent, as applicable, shall have only those duties and responsibilities which are expressly specified in this Agreement, and it may perform such duties by or through its agent or employees. It is expressly agreed that each of the Agent and the US Administrative Agent, as applicable, is not a fiduciary of any Lender nor shall it owe any fiduciary duties to any Lender. Any Person to whom the Agent or the US Administrative Agent, as applicable, may delegate duties or responsibilities as permitted hereunder shall enjoy and be bound by the same benefits, rights, protections and obligations as those provided to the Agent and the US Administrative Agent, as applicable, or to which the Agent or the US Administrative Agent is subject under this Agreement, mutatis mutandis .

12.7

Protection of Agent

(a)

Unless and until instructed by the Majority Lenders, the Agent shall not be bound to inquire as to: (i) whether any representation made by the Borrower in or in connection with any Document is true; (ii) the occurrence or otherwise of any Event of Default or Default; (iii) the performance by the Borrower of its obligations under any Document; (iv) any breach of or default by the Borrower orany Obligor under its obligations under any Document; or (v) the use or application by the Borrower of any of the proceeds of an Advance under the Credit Facilities. The Agent shall report the results of any such enquiry to the Lenders, but shall have no obligation to take any action in connection therewith unless otherwise instructed by the Majority Lenders as provided herein.

(b)

Unless the Agent has actual knowledge or actual notice to the contrary, it may assume that: (i) any representation made by any Obligor in or in connection with any Document is true; (ii) no Event of Default or Default has occurred; and (iii) the Borrower is not in breach of or in default under, its obligations under any Document.

(c)

Unless the Agent has actual knowledge or actual notice to the contrary, it may assume that each Lender’s address is that set out herein until it has received from such Lender a notice designating some other office of such Lender as its address and act upon any such notice until the same is superseded by a further such notice.

(d)

The Agent may engage and pay for the advice or services of any lawyers, accountants or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained.

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(e)

Unless the Agent has actual knowledge or actual notice to the contrary, the Agent may rely as to matters of fact which might reasonably be expected to be within the knowledge of any Obligor upon a statement contained in any Document.

(f)

Unless the Agent has actual knowledge or actual notice to the contrary, the Agent may rely upon any communication or document believed by it to be genuine.

(g)

The Agent may refrain from exercising any right, power or discretion vested in it under this Agreement unless and until instructed by, as applicable, the Majority Lenders or the Unanimous Lenders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised.

(h)

The Agent may refrain from exercising any right, power or discretion vested in it which would or might in its opinion in its sole discretion be contrary to any law of any jurisdiction or any directive or otherwise render it liable to any Person, and may do anything which is in its opinion in its sole discretion necessary to comply with any such law or directive.

(i)

The Agent may delegate to such other Person, such duties and responsibilities of the Agent hereunder as it shall determine to be appropriate in respect of dealings with or relating to the Borrower or any other Person.

(j)

The Agent may refrain from acting in accordance with any instructions of, as applicable, the Majority Lenders or Unanimous Lenders to begin any legal action or proceeding arising out of or in connection with this Agreement or take any steps to enforce or realize upon any Security, until it shall have received such security as it may reasonably require (whether by way of payment in advance or otherwise) against all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instruction.

(k)

The Agent shall not be bound to disclose to any Person any information relating to the Borrower or any Obligor if such disclosure would or might in its opinion in its sole discretion constitute a breach of any law or regulation or be otherwise actionable at the suit of any Person.

(l)

The Agent shall not accept any responsibility for the accuracy and/or completeness of any information supplied in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of any Document and the Agent shall not be under any liability to any Lender as a result of taking or omitting to take any action in relation to any Document save in the case of the Agent’s negligence or wilful misconduct.

12.8

Duties of Agents

The Agent and the US Administrative Agent, as applicable, shall:

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(a)

provide to each Lender copies (including, if available, electronic copies) of all financial information received from the Borrower promptly after receipt thereof, and copies of any notices in respect of a Drawdown, Conversion, Rollover, and other notices received by the Agent or the US Administrative Agent, as applicable, from the Borrower upon request by any Lender;

(b)

promptly advise each Lender thereunder of Advances required to be made by it hereunder and disburse all repayments to the Lenders thereunder in accordance with the terms of this Agreement;

(c)

promptly notify each Lender thereunder of the occurrence of any Event of Default or any Default by the Borrower in the due performance of its obligations under this Agreement or the Security and of which the Agent has actual knowledge or actual notice;

(d)

each time the Borrower requests the prior written consent of the Majority Lenders, use its best efforts to obtain and communicate to the Borrower the response of the Majority Lenders in a reasonably prompt and timely manner having due regard to the nature and circumstances of the request;

(e)

give written notice to the Borrower in respect of any other matter in respect of which notice is required in accordance with or pursuant to this Agreement, promptly or promptly after receiving the consent of the Majority Lenders or the Unanimous Lenders, if required under the terms of this Agreement;

(f)

except as otherwise provided in this Agreement, act in accordance with any instructions given to it by, as applicable, the Majority Lenders or the Unanimous Lenders;

(g)

at the time of engaging any agent, receiver, receiver-manager, consultant, monitor or other party in connection with the Security or the enforcement thereof, obtain the agreement of such party to comply with the applicable terms of this Agreement and the Security Sharing Agreement in carrying out any such enforcement activities and dealing with any proceeds of realization;

(h)

if so instructed by the Majority Lenders or the Unanimous Lenders, as applicable, refrain from exercising any right, power or discretion vested in it under this Agreement or any Document incidental hereto;

(i)

account for any monies received by it in connection with this Agreement, the Security and any other agreement delivered in connection herewith or therewith; and

(j)

call a meeting of the Lenders thereunder at any time not earlier than five (5) days and not later than thirty (30) days after receipt of a written request for a meeting provided by any Lender under any such Credit Facility; provided that the above notice requirements may be waived by the unanimous agreement of the Lenders thereunder; and provided further that any instrument executed by all of the

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Lenders thereunder (which may be in counterparts) shall have the same effect as if passed by the Lenders thereunder at a duly called meeting.

12.9

Indemnification of Agents

Each Lender shall, on demand by the Agent, indemnify the Agent and the US Administrative Agent in accordance with each such Lender’s Rateable Portion, against any and all costs, claims, reasonable expenses (including legal fees) and liabilities which the Agent and/or the US Administrative Agent may incur (and which have not been reimbursed by the Borrower) to the extent required hereunder, otherwise than by reason of its own negligence or wilful misconduct, in acting in its capacity as the Agent or the US Administrative Agent under this Agreement, the Security or any other Document.

12.10

Termination or Resignation of Agents

The Majority Lenders may terminate the Agent’s and/or the US Administrative Agent’s appointment hereunder upon giving the Agent and/or the US Administrative Agent 90 days’ prior written notice to such effect. The Agent and/or the US Administrative Agent may resign its appointment hereunder at any time upon giving 90 days’ prior written notice to each Lender, without giving any reason therefor. In the event of any such termination or resignation, the Majority Lenders shall appoint a successor Agent and/or a successor US Administrative Agent, as applicable, acceptable to the Borrower (whose consent may not be unreasonably withheld). Within a reasonable time after the appointment of the successor Agent, the retiring Agent shall assign the Security to the successor Agent. Upon such assignment and/or upon the US Administrative Agent’s termination or resignation hereunder, the retiring Agent and the retiring US Administrative Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefit of the provisions of this Section 12; and the Agent’s and/or the US Administrative Agent’s successor and each of the other parties hereto shall have the same rights and obligations among themselves as they would have had if such successor originally had been a party hereto as the Agent and/or the US Administrative Agent. If a Person ceases to be the Agent and/or the US Administrative Agent and a successor Agent and/or a successor US Administrative Agent is not appointed within such 90 day period, upon the expiry of such period such Person shall receive no further compensation for acting as Agent and shall be released from all obligations as Agent and/or US Administrative Agent, except that until a successor Agent is appointed such Person shall passively hold the Security as Agent for the Lenders without taking any action to preserve, renew, maintain or enforce the Security; and its sole remaining obligation shall be to assign the Security to its successor if and when a successor Agent is appointed.

12.11

Rights of Agent as a Lender

Each of the Agent and the US Administrative Agent in its capacity as a Lender shall have the same rights and powers under the Documents as any other Lender, and it may exercise such rights and powers as though it were not performing the duties and functions delegated to it as the Agent hereunder. Without limiting the generality of the foregoing, each of the Agent and the US Administrative Agent in its capacity as a Lender may retain for its own benefit any fee or other sum receivable by it for its own account, and may accept deposits from, lend money to, provide

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any advisory or other services to or engage in any kind of banking or other business with any Obligor.

12.12

Financial Information

The Agent shall have no duty or responsibility either initially or on a continuing basis to provide any Lender with any credit or other information with respect to the financial condition and affairs of any Obligor, except to the extent expressly set out herein.

12.13

Lenders’ Independent Investigation

Each of the Lenders represents and warrants to the Agent, the US Administrative Agent, BMO and Harris that it has made its own independent investigation of the financial condition and affairs of the Obligors in connection with the establishment of credit for the Borrower hereunder, and that it has not relied on any information provided to it by the Agent, the US Administrative Agent, BMO or Harris in connection therewith, and each represents and warrants to the Agent that it shall continue to make its own appraisal of the creditworthiness of the Obligor from time to time.

12.14

Legal Proceedings by Agents

The Agent, the US Administrative Agent and/or the US Security Agent, as applicable, shall not be obligated to take any legal proceedings against the Borrower or any other Person for the recovery of any amount due under this Agreement or the Security, unless instructed to do so by, as applicable, the Majority Lenders or the Unanimous Lenders. No Lender shall bring legal proceedings against the Borrower or any other Person hereunder under any Security or under any other Documents or in connection herewith or therewith, or exercise any right arising hereunder or thereunder or in connection herewith or therewith over the property and assets of the Borrower or any other Person, without the prior written consent of the Unanimous Lenders.

12.15

Lenders’ Obligations Several; No Partnership

The obligations of each Lender under this Agreement are several. The failure of any Lender to carry out its obligations hereunder shall not relieve the other Lenders of any of their respective obligations hereunder. No Lender shall be responsible for the obligations of any other Lender hereunder. Neither the entering into of this Agreement nor the completion of any transactions contemplated herein shall constitute the Lenders a partnership.

12.16

Sharing of Information

The Agent, the US Administrative Agent and the Lenders may share among themselves any information they may have from time to time concerning the Obligors whether or not such information is confidential; but shall have no obligation to do so (except for any obligations of the Agent or the US Administrative Agent to provide information as required in this Agreement).

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12.17

Acknowledgement by Borrower

The Borrower hereby acknowledges notice of the terms of the provisions of this Section 12 and agrees to be bound hereby to the extent of its obligations hereunder, and further agrees to not make any payments, take any action or omit to take any action which would result in the non-compliance by any Lender with its obligations hereunder.

12.18

Amendments to Section 12

The Agent, the US Administrative Agent and the Lenders may amend any provision in this Section 12 without prior notice to or the consent of the Borrower, and the Agent shall provide a copy of any such amendment to the Borrower reasonably promptly thereafter; provided however if any such amendment would adversely affect any rights, entitlements, obligations or liabilities of the Borrower (other than in a de minimus manner), such amendment shall not be effective until the Borrower provides its written consent thereto, such consent not to be unreasonably withheld or arbitrarily delayed.

12.19

Deliveries, etc.

As between the Obligors, the Agent, the US Administrative Agent and the Lenders: (a) all statements, certificates, consents and other documents which the Agent or the US Administrative Agent, as applicable, purports to deliver to an Obligor on behalf of the Lenders shall be binding on each of the Lenders, and none of the Obligors shall be required to ascertain or confirm the authority of the Agent or the US Administrative Agent, as applicable, in delivering such documents; (b) all certificates, statements, notices and other documents which are delivered by an Obligor to the Agent or the US Administrative Agent, as applicable, in accordance with this Agreement shall be deemed to have been duly delivered to each of the Lenders; and (c) all payments which are delivered by the Borrower to the Agent or the US Administrative Agent, as applicable, in accordance with this Agreement shall be deemed to have been duly delivered to each of the Lenders, as applicable.

12.20

Agency Fee

The Borrower agrees to pay the Agent an annual agency fee in such amount as may be agreed in writing from time to time between the Borrower and the Agent, payable in advance on March 1 ^st of each calendar during the term of this Agreement.

12.21

Adjustments Among Lenders.

(a)

Adjustment After Exercise of Rights. Each Lender agrees that, after the exercise of any rights pursuant to Section 10.2, it will at any time or from time to time, upon the request of the Agent, as required by any other Lender, purchase portions of the amounts due and owing to the other Lenders and make any other adjustments which may be necessary or appropriate so that the amounts due and owing to each Lender, as adjusted under this Section 12.21, will, as nearly as possible, reflect each Lender’s Rateable Portion determined as at the date of the exercise of any such rights.

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(b)

General Application. For greater certainty, the Lenders acknowledge and agree that, without limiting the generality of the provisions of Section 12.21(a), those provisions will have application if and whenever any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) on account of any money owing or payable by a Borrower to it in excess of the amounts to which it would otherwise be entitled under Section 12.21(a).

(c)

Adjustments to Advances. Notwithstanding anything else herein contained, the Agent and the US Administrative Agent, as applicable, may, when determining amounts payable to or payable by or to be advanced by a Lender under the relevant Credit Facility in connection with Advances, which amounts are determined by or by reference to that Lender’s Rateable Portion, make such adjustments to such amount as it deems appropriate in its sole discretion to account or adjust for any amounts advanced to the Borrower, if any, by way of Letter of Credit and Bankers’ Acceptances.

(d)

Borrower Agreement. The Borrower agrees to be bound by and to do all things necessary or appropriate to give effect to any and all purchases and other adjustments made by and between the Lenders under this Section 12.21 but shall incur no increased liabilities by reason thereof.

12.22

Agents May Debit Accounts.

The Borrower authorizes and directs the Agent and the US Administrative Agent, as applicable, in their discretion, to debit automatically, by mechanical, electronic or manual means, any bank account of a Borrower maintained with BMO or Harris (for so long as BMO is Agent or Harris is US Administrative Agent) for all amounts payable by the Borrower under this Agreement or any other Document, including the repayment of principal and the payment of interest, fees and all charges for the keeping of that bank account. The Agent and the US Administrative Agent, as applicable, shall notify the Borrower as to the particulars of those debits in the normal course.

SECTION 13

ASSIGNMENTS

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)

Borrower. The Borrowers may not assign, delegate or transfer all or any part of their rights or obligations under this Agreement without the prior written consent of the Lenders.

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(c)

Assignment.

(i)

Any Lender (herein sometimes called an “ Assigning Lender ”) may, with the prior written consent of the Borrower (subject to Section 13.1(c)(ii)), and the Agent, which consent may not, in either case, be unreasonably withheld, assign all or any part of its rights to, and may have its obligations in respect of the Credit Facility assumed by, one or more financial institutions or other entities (each an “ Assignee ”); provided, however, that each assignment by a Lender must be in a minimum amount of at least US$5,000,000. Notwithstanding the foregoing, no consent shall be required in respect of any assignment by an Assigning Lender to its Affiliate or another Lender. An assignment shall become effective when the Borrower and the Agent have been notified of it by the Assigning Lender and have received from the Assignee an undertaking (addressed to all the parties to this Agreement) to be bound by this Agreement and to perform the obligations assigned to it, in substantially the form of Schedule W and the Agent has received from the Assignee an assignment fee of Cdn$3,500 or US$3,500, as applicable depending upon the nature of the currency being assigned. Any Assignee shall be treated as a Lender for all purposes of this Agreement, shall be entitled to the full benefit hereof and shall be subject to the obligations of the Assigning Lender to the same extent as if it were an original party in respect of the rights or obligations assigned to it, and the Assigning 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. For greater certainty, if in the event a Lender under Facility C wishes to assign its rights to an Assignee in accordance with this Section 13.1 which would cause a recalculation of the amounts payable as set out in any of Schedule P-1, Schedule P-2, Schedule P-3 or Schedule P-4, the relevant Lender under Facility C will provide to the Agent and the Borrower a revised Schedule P setting out such recalculated amounts. Any such revised Schedule P shall not become effective until the relevant Persons, including the Borrower, signify in writing their agreement to such revised Schedule P.

(ii)

Notwithstanding Section 13.1(c)(i), no Lender under Facility A may assign all or any part of its rights to or have any of its obligations assumed by any financial institution or entity that is a non-resident of Canada for the purposes of the ITA, unless any of the following shall have occurred: (A) the failure by the Borrower to make when due, whether by acceleration or otherwise, any payment of principal required to be made by the Borrower under this Agreement or any other Document, (B) the failure by the Borrower 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, or (C) the exercise of any rights pursuant to Section 10.2.

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(iii)

Notwithstanding anything to the contrary herein contained, where a Default or an Event of Default has occurred, the consent of the Borrower shall not be required with respect to the assignment of all or any part of the rights of a Lender hereunder.

(d)

Limitation. No Lender shall be entitled to make an assignment under Section 13.1(c)(i) or change its Branch of Account if this would, immediately following the assignment, participation or change of Branch of Account, increase the cost of the Credit Facility to the Borrower, except that nothing in this Section 13.1(d) shall prohibit the granting of an assignment by a Schedule I Lender to a Schedule II Lender or a Schedule III Lender notwithstanding that the Discount Rate applicable to Bankers’ Acceptances issued by the Schedule II Lender or Schedule III Lender may be higher than the Discount Rate applicable to Bankers’ Acceptances issued by the Schedule I Lender.

(e)

Borrower Cooperation. The Borrower will, at the Lenders’ expense (exclusive of the fees of legal counsel to the Borrower), execute such further documents and instruments and do such further things as the Agent or Lenders may reasonably request for the purpose of any participation or assignment.

(f)

Disclosure. Each Lender may disclose to any prospective Assignee, on a confidential basis, such information concerning the Borrower as it considers appropriate without incurring any liability for any breach of the duty of banker-customer confidentiality but subject to receiving an undertaking from such prospective Assignee to receive and maintain such information in confidence.

SECTION 14

MISCELLANEOUS

14.1

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.

14.2

Notice.

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 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 14.3, 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, if the

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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. All communication with any Obligor hereunder may be directed through SunOpta. 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 SunOpta.

14.3

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.

14.4

Environmental Indemnity.

Each 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.

14.5

Further Assurances.

The Obligors shall from time to time promptly, upon the request of the Agent, 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.

14.6

Judgment Currency.

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 a Lender, the Agent, the US Administrative Agent or the US Security Agent in respect of any of the Borrowers’ obligations under this Agreement in any currency (the “ Original Currency ”) into another 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, the Agent, the US Administrative Agent or the US Security Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is paid or satisfied. The obligations of the Borrowers in respect of any sum due in the Original Currency from it to any 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

- 112 -

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.

14.7

Waivers.

No failure to exercise, and no delay in exercising, on the part of the Agent, the US Security Agent or any 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.

14.8

Reimbursement of Expenses.

The Obligors jointly and severally agree to: (a) pay or reimburse the Agent, the US Administrative Agent and the US Security Agent, 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, and the Agent, the US Administrative Agent and the US Security Agent 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 14.8 shall survive the repayment of all Advances and the termination of the Credit Facility.

14.9

Submission to Jurisdiction.

Each Borrower and Obligor irrevocably submits to the non-exclusive jurisdiction of the courts of the Province of Ontario and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such court. Each Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defence of an inconvenient forum to the maintenance of such action or proceeding. Each Borrower hereby irrevocably consents to the service of any and all process in such action or proceeding by the delivery of such process to such Borrower at its address provided in accordance with Section 14.2.

14.10

Waiver of Trial by Jury.

The Borrowers and the Obligors hereby knowingly voluntarily and intentionally waive any rights they may have to a trial by jury in respect of any litigation based on, or arising out of, under, or in connection with, this Agreement or any other Document, or any course of conduct, course of dealing, statements (whether oral or written) or actions of the Agent, the US Administrative Agent, the US Security Agent, any Lender or any of the Borrowers or Obligors. The Borrowers and the Obligors acknowledge and agree that they have received full and sufficient consideration for this provision (and each other provision of each other Document to which it is a party) and

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that this provision is a material inducement for the Lenders entering into this Agreement and each other Document.

14.11

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. This Agreement and the Documents may be executed and delivered by facsimile transmission and each of the parties hereto may rely on such facsimile signature as though that facsimile signature were an original hand-written signature.

14.12

Excluded Subsidiaries.

The parties hereto acknowledge and agree that each Excluded Subsidiary is not an Obligor for purposes of this Agreement or any of the Documents. For greater certainty and without limiting the generality of the foregoing, each Excluded Subsidiary and its assets shall not at any time be considered part of the Consolidated Borrower.

14.13

Acknowledgement.

Each Obligor hereby acknowledges, confirms and agrees that all Documents (including without limitation Security Documents) previously, now or hereafter delivered by such Obligor in favour of the Agent, the US Administrative Agent, the US Security Agent or any Lender, as applicable, remains in full force and effect in accordance with its terms, unless any such Document has been otherwise amended by written agreement. For greater certainty, each Obligor that has previously executed and delivered a Security Document hereby acknowledges and confirms that each such Security Document secures the obligations of such Obligor under and in connection with this Agreement and all other relevant Documents.

14.14

Consent

Notwithstanding Section 9.2(c) hereof and for greater certainty, the Agent, the US Administrative Agent and each of the Lenders hereby consent to the proposed merger of (i) Northern Food into SunOpta Ingredients, and (ii) Sonne Labs into SunOpta Aseptic or Sunrich, as applicable. SunOpta will provide the Agent with 3 Business Days prior written notice of the effective merger date in respect of each proposed merger referred to above and will provide to the Agent any other information requested by the Agent in connection therewith.

[SIGNATURE PAGES FOLLOW]

The parties have executed this Agreement as of the day and year first written above.

SUNOPTA INC.

2838 Hwy 7

Norval, Ontario LOP 1KO

Attention: Chief Financial Officer

Fax: (905) 455-2529

By: “John Dietrich”
Name: John Dietrich

Title: Vice President & CFO

SUNOPTA LP

By: 1510146 Ontario Inc., its General Partner

By: “John Dietrich”
Name: John Dietrich

Title: Vice President & CFO

SUNOPTA FOOD GROUP LLC

By: “John Dietrich”
Name: John Dietrich

Title: Vice President & CFO

SUNOPTA FOOD INGREDIENTS CANADA, LTD.

By: “John Dietrich”
Name: John Dietrich

Title: Vice President & CFO

1510146 ONTARIO INC.

By: “John Dietrich”
Name: John Dietrich

Title: Vice President & CFO

3060385 NOVA SCOTIA COMPANY		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO
DRIVE ORGANICS CORPORATION		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

SUNRICH LLC		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO


NORTHERN FOOD AND DAIRY INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

- 2 -


SUNOPTA ASEPTIC, INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO


SUNOPTA LLC		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

ORGANIC INGREDIENTS INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO


SUNOPTA INGREDIENTS, INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

SUNOPTA HOLDINGS INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

SUNOPTA FINANCING INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

SONNE LABS, INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

PACIFIC FRUIT PROCESSORS INC.		By: “John Dietrich” Name: John Dietrich Title: Vice President & CFO

- 3 -

BANK OF MONTREAL

in its capacity as Agent

Global Distribution Services
100 King Street West
19th Floor
Toronto, Ontario
M5X 1A1
Attention: Manager, Global Distribution Services
Fax: (416) 867-5938

By: “Ken Everett”

Name: Ken Everett

Title: Senior Manager Syndications

HARRIS N.A.

in its capacity as US Security Agent

111 West Monroe Street

Chicago, Illinois

60603

Attention: Account Manager

Fax: 312-765-8095

By: “Shane Koonce”
Name: Shane Koonce
Title: Vice President

HARRIS N.A.

in its capacity as US Administrative Agent

111 West Monroe Street

Chicago, Illinois

60603

Attention: Account Manager

Fax: 312-765-8095

By: “Shane Koonce”
Name: Shane Koonce
Title: Vice President

BANK OF MONTREAL

in its capacity as Lender

Corporate Finance
100 King Street West
11th Floor
Toronto, Ontario
M5X 1A1
Attention: Senior Manager
Fax: (416) 360-7168

By: “Gord Card”

Name: Gord Card
Title: Director Corporate Finance

- 4 -

BANK OF MONTREAL

(Chicago Branch)
in its capacity as Lender

12 ^th Floor, West

115 South Lasalle Street

Chicago, Illinois

60603

Attention: Account Manager

Fax: 312-750-6057

By: “Shane Koonce”
Name: Shane Koonce
Title: Vice President

HARRIS N.A.

in its capacity as Lender

111 West Monroe Street

Chicago, Illinois

60603

Attention: Account Manager

Fax: 312-765-8095

By: “Shane Koonce”
Name: Shane Koonce
Title: Vice President

SUN LIFE ASSURANCE COMPANY OF CANADA

in its capacity as Lender

225 King Street West

Toronto, Ontario

M5V 3C5

Attention: Manh Pham

Director, Private Placement

Fax: 416-595-0131

By: “Keith Cressman”

Name: Keith Cressman

Title: Asst. VP, Private Placements

By: “Neil Cameron”

Name: Neil Cameron

Title: Director, Structured Finance

THE MANUFACTURERS LIFE INSURANCE COMPANY

in its capacity as Lender

200 Bloor Street East

Floor NT-4 B-17

Toronto, Ontario

M4W 1E5

Attention: Patrick Chen

Fax: 416-852-6333

By: “Patrick Chen”

Name: Patrick Chen

Title: VP, CDN Private Placement

By: “Robert F. Kilimnik”

Name: Robert F. Kilimnik

Title: VP, CDN Private Placements & Credit

- 5 -

JOHN HANCOCK LIFE INSURANCE COMPANY

in its capacity as Lender

1622 Colonial Parkway

Suite 1A

Iverness, Illinois

60607

Attention: Greg Hennenfent

Fax: 847-776-5835

By: “Greg Hennenfent”

Name: Greg Hennenfent

Title: Regional Director

JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)

in its capacity as Lender

1622 Colonial Parkway

Suite 1A

Iverness, Illinois

60607

Attention: Greg Hennenfent

Fax: 847-776-5835

By: “Greg Hennenfent”

Name: Greg Hennenfent

Title: Authorized Signatory

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 31.1

CEO CERTIFICATIONS

Exhibit 31.2

CFO CERTIFICATIONS

Exhibit 32

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350



	Industry Canada	Industrie Canada

	Corporations Canada	Corporations Canada
	9th floor	9e étage
	Jean Edmonds Towers South	Tour Jean Edmonds sud
	365 Laurier Avenue West	365, avenue Laurier ouest
	Ottawa, Ontario K1A 0C8	Ottawa (Ontario) K1A 0C8


December 31, 2004/le 31 dácembre 2004	Your file-Votre référence
416-361-4790
TANIA ZAMBRANO
WILDEBOER DELLELCE
1 FIRST CANADIAN PLACE	Our file-Notre référence
SUITE 810 P.O. BOX 4	427475-0
TORONTO ONTARIO
(ILLEGIBLE)


Enclosed herewith is the document issued in the above matter.	Vous trouverez ci-inclus le document émis dans raffaire précitée.

A notice of issuance of CBCA documents will be published in the Canada Corporations Bulletin. A notice of issuance of CCA documents will be published in the Canada Corporations Bulletin and the Canada Gazette.	Un avis de l’émission de documents on vertu de la LCSA sera public dams le Bulletin des sociétés canadiennes . Un avis de l’émission de documents en vertu de la LCC sera public dans le Bulletin des sociétés canadiennes cl dans la Gazette du Canada.

IF A NAME OR CHANGE OF NAME IS INVOLVED, THE FOLLOWING CAUTION SHOULD BE OBSERVED:	STL EST QUESTION DUNE DÉNOMINATION SOCIALE OU D’UN CHANGEMENT DE DENOMINATION SOCIALE, L’AVERTISSEMENT SUIVANT DOIT ÉTRE RESPECTÉ:

This name is available for use as a corporate name subject to and conditional upon the applicants assuming full responsibility for any risk of confusion with existing business names and trade marks (including those set out in the relevant NAUNS search report(s)). Acceptance of such responsibility will comprise an obligation to change the name to a dissimilar one in the event that representations are made and established that confusion is likely to occur. The use of any name granted it subject to the laws of the jurisdiction where the company carries on business.	Celle dénonination sociale ext disponible an amant que Ica requérants assument toute responsabilité de risquo de confusion avue louics dénominadons commerciaics et toutes marques de commerce existantes (y compris coller qui sont citeer danile(s) rapport(s) de racherches de NIJAns perrinent(s)). Cette acceptation de responsabilité comprend l’obligation de changer in dénoninatino de in soclétê on ume denomination differento advenant id can on des representations sour failes etablismant qu’ily a ude probabilite de confusion, L’(ILLEGIBLE) de loue nom octroyé ost anjette a loute loi de la juridiction ou Ia societe exploite son enterprise.


Danielle Brazeau

For the Director Général, Corporations Canada	pour le Directour général, Corporations Canada


Certificate of Amalgamation		Certificat de fusion

Canada Business Corporations Act		Loi canadienne sur les sociétés par acltions




SUNOPTA INC.		427475-0


Name of corporation-Dénomination de la société		Corporation number-Numéro de la société

I hereby certify that the above-named corporation resulted from an amalgamation, under section 185 of the Canada Business Corporations Act, of the corporations set out in the attached articles of amalgamation.		Je certifie que la société susmentionnée est issue d’une fusion, en vertu de l’article 185 de la Loi canadienne sur les sociétés par actions , des sociétés dont les dénominations apparaissent dans les statuts de fusion ci-joints.

		January 1, 2005/le 1 janvier 2005

Director-Directeur		Date of Amalgamation - Date de fusion


January 3, 2006 / le 3 Janvier 2006		Your file - Votre référence

LAURA PORTER
WILDEBOER DELLELCE		Our file - Notre référence
1 FIRST CANADIAN PLACE		434283-8
SUITE 810 P.O. BOX 4
TORONTO ONTARIO
M6X 1A9


Enclosed herewith is the document issued in the above matter.		Vous tronverez oi-inclus le document émis dans l’ affaire précitée.

A notice of issuance of CBCA documents will be published in the Canada Corporations Bulletin . A notice of issuance of CCA documents will be published in the Canada Corporations Bulletin and the Canada Gazette .		Un avis de l’émission de documents en vertu de la LCSA sera publié dans le Bulletin des sociétés canadiemes . Un avis de l’émission de documents en vertu de la LCC sera publié dans le Bulletin des sociétés canadiennes et dans la Gazette du Canada .

IF A NAME OR CHANGE OF NAME IS INVOLVED, THE FOLLOWING CAUTION SHOULD BE OBSERVED:		STL EST QUESTION DUNE DÉNOMINATION SOCIALE OU D’UN CHANGEMENT DE DENOMINATION SOCIALE, L’AVERTISSEMENT SUIVANT DOIT ÉTRE RESPECTÉ:

This name is available for use as a corporate name subject to and conditional upon the applicants assuming full responsibility for any risk of confusion with existing business names and trade marks (including those set out in the relevant NUANS search report(s)). Acceptance of such responsibility will comprise an obligation to change the name to a dissimilar one in the event that representations are made and established that confusion is likely to occur. The use of any name granted is subject to the laws of the jurisdiction where the company carries on business.		Cette dénomination sociale est disponible en autant que les reqréments assument route responsabiité de risque de confusion aveo toutes dénomination commerciales er toutes marques de commerce existantes (y compris celles qui soni cités dans le(s) rapport(s) de recherohes de NUANS (ILLEGIBLE)(s))- Cette acceptation de responsabilité comprend I’obligation de changer la dénomination de la société (ILLEGIBLE) dénomination differente advenant 1e (ILLEGIBLE) des représentations (ILLEGIBLE) failer (ILLEGIBLE) probabilite de confusion. L’utilisation de tout nom octroyé est sujettea mute lot de la juridiction of la société exploite son entreprise.

Jacquelina Szwarc

For the Director General, Corporations Canada		pour le Directeur général, Corporations Canada


SUNOPTA INC.		434283-6


Name of corporation-Dénomination de la société		Corporation number-Numéro de la société

I hereby certify that the above-named corporation resulted from an amalgamation, under section 185 of the Canada Business Corporations Act, of the corporations set out in the attached articles of amalgamation.		Je certifie que la société susmentionnée est issue d’une fusion, en vertu de l’article 185 de la Loi canadienne sur les sociétés par actions, des sociétés dont les dénominations apparaissent dans les statuts de fusion ci-joints.

		January 1, 2006 / le 1 janvier 2006

	Richard G. Shaw	Date of Amalgamation - Date de fusion
	Director - Directeur



		Industry Canada	Industrie Canada	FORM 9	FORMULE 9
		Canada Business	Loi canadlenna sur les	ARTICLES OF AMALGAMATION	STATUTS DE FUSION
		Corporations Act	Sociétés par actions	(SECTION 185)	(ARTICLE 185)


1 —	Name of the Amalgamated Corporation			Dénomination société de la société issue de la fusion

	SUNOPTA INC.

2 —	The province or territory in Canada where the registered office is to be situated			La province ou le territoire au Canada où se stuera le siège social

	Ontario

3 —	The classes and any maximum number of shares that the corporation is authorized to issue			Catégories et tout nombre maximal d’actions que la société est autorisée à émettre

	The authorized capital of the corporation shall consist of an unlimited number of common shares and an unlimited number of special shares issuable in series, as more particularly set out in Schedule “A” attached hereto.

4 —	Restrictions, If any, on share transfers			Restrictions sur le transfert des actions, s’il y a lieu

	None

5 —	Number (or minimum and maximum number) of directors			Nombre (ou nombre minimal et maximal) d’administrateurs

	A minimum of five (5) and a maximum of fifteen (15)

6 —	Restrictions, If any, on business the corporation may carry on			Limites imposées à I’activité commercials de la société, s’il y a lieu

	None

7 —	Other provisions, If any			Autres dispositions, s’il y a lieu

	See Schedule “A” attached hereto.

8 —	The amalgamation has been approved pursuant to that section or subsection of the Act which Is Indicated as follows:			La fusion a été approuvée en accord avec l‘article ou le paragraphe de la Loi Indlqué cl-après.

			o	183

			x	184(1)

			o	184(2)



9 —	Name of the amalgamating corporations Dénomination sociale des sociétés fusionnantes	Corporation No. N’ de la société	Signature	Date	Title Titre	Tel. No. N’ de tél.

SUNOPTA INC.		4275543		Jan 1/06	Director

4307623 CANADA INC.		4307623		Jan 1/06	Director









FOR DEPARTMENTAL USE ONLY - A L’ USAGE DU MINISTERE SEULEMENT


(i)	the special shares may from time to time be issued in one or more series and, subject to the following provisions, and subject to the sending of articles of amendment in prescribed form, and the endorsement thereon of a certificate of amendment in respect thereof, the directors may fix from time to time before such issue the number of shares that is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series of special shares including, without limiting the generality of the foregoing, the rate or amount of dividends or the method of calculating dividends, the dates of payment thereof, the redemption, purchase and/or conversion prices and terms and conditions of redemption, purchase and/or conversion, and any sinking fund or other provisions;

(ii)	the special shares of each series shall, with respect to the payment of dividends and the distribution of assets or return of capital in the event of liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or any other return of capital or distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, rank on a parity with the special shares of every other series and be entitled to preference over the common shares and over any other shares of the Corporation ranking junior to the special shares. The special shares of any series may also be given such other preferences, not inconsistent with these articles, over the common shares and any other shares of the Corporation ranking junior to the special shares as may be fixed in accordance with clause (i) herein;

(iii)	if any cumulative dividends or amounts payable on the return of capital in respect of a series of special shares are not paid in full, all series of special shares shall participate ratably in respect of such dividends and return of capital;

(iv)	the special shares of any series may be made convertible into common shares at such rate and upon such basis as the directors in their discretion may determine;

(v)	unless the directors otherwise determine in the articles of amendment designating a series, no holder of special shares shall be entitled to receive notice of, attend, be


	represented at or vote in respect thereof at any annual or special meeting of the Corporation unless the meeting is convened for considering the winding up of the corporation, the amalgamation of the Corporation with another corporation, or corporations or to sanction the sale of all or substantially all of its assets or undertaking or other events specified in the Canada Business Corporations Act., in any of which events each holder of special shares shall have one (1) vote for each such shares held;

(vi)	the holders of special shares shall not be entitled to vote separately as a class or series upon a proposal, and shall not be entitled to dissent pursuant to Section 190 of the Canada Business Corporations Act (or any other Statutory provision of like or similar effect from time to time hi force) in respect to a resolution to amend the Articles of the Corporation to:

	(A)	increase or decrease any maximum number of authorized special shares or any series thereof, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the special shares or any series thereof;

	(B)	effect an exchange, reclassification or cancellation of the special shares or any series thereof; or

	(C)	create a new class or series of shares equal or superior to the special shares or any series thereof;

(vii)	provided that the holders of special shares shall be entitled to receive notice of meetings of common shareholders called for the purpose of authorizing an amendment to the Articles of the Corporation of the nature referred to above.


(a)	borrow money on the credit of the Corporation; or

(b)	issue, sell or pledge debt obligations of the Corporation; or

(c)	charge, mortgage, hypothecate or pledge all or any currently owned or subsequently acquired real or personal, moveable or immoveable property of the Corporation, including book debts, rights, powers, franchises and undertakings to secure any debt obligations or any money borrowed, or other debt or liabilities of the Corporation.


PROVINCE OF ONTARIO	)	IN THE MATTER OF THE
CANADA	)	CANADA BUSINESS CORPORATIONS ACT
	)
	)	AND
	)
	)	IN THE MATTER OF ARTICLES OF
	)	AMALGAMATION FILED PURSUANT
	)	TO SECTION 185 IN THE NAME OF
	)	SUNOPTA INC.


1. I am a director of each of SunOpta Inc. and 4307623 Canada Inc., the amalgamating corporations, and I have personal knowledge of the matters herein deposed to.

2. I am satisfied that there are reasonable grounds for believing that:

	(i)	each amalgamating corporation can and the amalgamated corporation will be able to pay its liabilities as they become due; and

	(ii)	the realizable value of the amalgamated corporation’s assets will not be less than the aggregate of its liabilities and stated capital of all classes; and

	(iii)	there are reasonable grounds for believing that no creditor will be prejudiced by the amalgamation.


DECLARED before me at the City	)
of , in the Province of Ontario	)
this day of December, 2005	)
	)
	) )
	)
Benjamin Chhiba A Commissioner, etc.	)	Jeremy Kendall

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 24

POWER OF ATTORNEY

Exhibit 31.1

CEO CERTIFICATIONS

Exhibit 31.2

CFO CERTIFICATIONS

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350