附录

Alternative 1: New Term Loan — Bank of Quebec — The Bank of Quebec has indicated that it could issue a new term loan of up to $11 million, repayable in 60 monthly instalments to July 2031. The interest on this loan will be 7% annualized, payable monthly. The loan will be secured by the land, building, and equipment of the RAM mill. In addition, a new covenant will be required whereby total debt to total assets cannot exceed 60%.

Alternative 2: Chanda Shahid's Proposal — Chanda's mother recently died and left her $10 million with the stipulation that it be used for investing. Chanda has proposed that she will initially invest $8.5 million in STC as a loan to be used solely for investment in the RAM mill's R&D venture. Interest on the loan will be equal to 20% of the RAM mill's operating profit each year. Chanda must be appointed a director of STC as soon as the loan is advanced. As a condition of the loan, Chanda may purchase shares in STC in the future, at a share price that will be set by Chanda and STC now.

The production of the recycled textile will require upgrades in the Quebec mill's equipment. In particular, the spinning process will have to be automated. The new spinning equipment will cost $1,500,000 (Class 43), with delivery costs of $80,000 and installation costs of $310,000. The old spinning machine can be sold for net proceeds of $140,000. Christine requires that any textile producer become certified under GRS. For this certification, STC will have to install new automated quality control equipment costing $1,000,000 (Class 43). It will initially cost STC $40,000 to become certified in 2027, and then the annual recertification will cost $10,000. Employee training on the new machinery will be $25,000 immediately after installation. TVI will sell and deliver the new fabric, charging a rate equal to 18% of revenues.

All equipment will be purchased and installed in October 2026, with training and testing occurring for the next few months. Production will commence January 1, 2027. The equipment is expected to be able to be sold for $560,000 at the end of the five years. With the new automated equipment, 10 employees will be terminated effective January 1, 2027. At the time of termination, these employees will be earning an average of $40,700 in annual wages and benefits at 12%. The severance package will be one year's wages. Some direct labour is still required to complete the whole process, and the cost of this is 11% of revenues. Wages are expected to increase 2% annually.

Three experienced R&D employees will be hired starting as soon as July 2026, for a total annual salary expense of $350,000 and benefits equal to 22% of annual salaries. After the product is initially developed, the R&D employees will focus on product improvements, and their salaries will increase annually starting in 2028 by 2%. New lab equipment at the RAM mill will be required immediately at a cost of $650,000 (Class 8, four-year useful life, no salvage value). During 2027, it will cost $500,000 for operating the new machines to test the various prototypes and $80,000 each year for lab supplies. New spinning and weaving equipment for production will cost $7,000,000 (Class 43), to be purchased in 2027; it will be state-of-the-art, customized for STC, and will also track data analytics. The new equipment is expected to last eight years and will have no residual value.

Revenue and sales terms: The geotextile will be sold exclusively to CSS at a price equal to 95% of its fair market price for the first three years of production. After this period, CSS will pay the fair market price, and STC will be free to sell the product to other customers. CSS will agree to use STC as its exclusive supplier for the first five years. CSS agrees to pay its invoices within 60 days of shipment, and STC will be required to hold 60 days of finished goods on hand at all times.

The projections assume that STC will phase out linen products and move to only producing certified organic cotton products by 2029, with in-conversion cotton used during the transition period (2026–2028). Linen product sales were $5 million in 2025, forecasted to decline to $4 million in 2026, $3 million in 2027, and $2 million in 2028, which will be the last year of linen production. The contribution margin on linen sales is 12.4%. The existing production equipment can produce up to 7.5 million kilograms annually; once this capacity is reached, new equipment costing $12 million will be required with a useful life of eight years. The forgivable loan program provides a maximum of $450,000, with $150,000 paid at the beginning of each year starting in 2027, subject to conditions: at least $1,000,000 annually in revenues from the sale of Indigenous products; at least $300,000 annually to market and promote the Indigenous products in the United States; a minimum of 5% Indigenous workforce by the end of the three-year agreement (at least 8 employees self-identifying as Indigenous; 3 currently do, so 5 additional must be hired); fairly pay the Indigenous artist/community for the licensing of their IP; demonstrate integration of Indigenous collaboration and consultation; the loan will be forgiven at the end of the three-year period following an audit by an independent auditor that demonstrates reasonable assurance of meeting the conditions.

All new capital investments will be made in July 2026: Renovations to the building to reduce the warehouse size and build a new R&D laboratory for $4 million (Class 1, 6% declining balance; the renovations will extend the useful life of the building, and the cost will be amortized for 30 years); new lab equipment costing $3 million (Class 8, 20% declining balance, five-year useful life); new computer equipment costing $1.5 million (Class 50, 55% declining balance, five-year useful life).

R&D team: five senior scientists at $150,000 each; five junior scientists at $90,000 each; eight lab technicians at $65,000 each. Benefits will be 22% of gross annual salaries, expected to increase at 3% annually commencing in 2028. Staff will be hired in July 2026; Chanda will be one of the senior scientists. Sales from current RAM mill customers are forecasted to decline: $30,000,000 (2026), $20,000,000 (2027), $15,000,000 (2028), $10,000,000 (2029). Raw materials and supplies and production wages and benefits for this current customer production will be 59% of revenues.

Three sources of new revenue: Fixed-price lab contracts ($2M in 2026, $6M in 2027, $10M in 2028, $12M in 2029, $14M in 2030); Lab contracts with upfront payments ($1M in 2026, $2M in 2027, $4M in 2028, $5M in 2029, $6M in 2030); Licensing arrangements (minimum $610,000 annually each for at least five years; expected new arrangements: one in 2028, two in 2029, three in 2030, four in 2031, annual licence fee paid at the beginning of each year).