Entrec -- summary under Convertible Debentures

General

Offering by ENTREC of $22 million of 7.00% convertible unsecured subordinated debentures at their principal amount ($1,000 per debenture), and with a maturity date of October 31, 2017. The interest is payable semi-annually in arrears.

Repayment/Conversion

ENTREC has the option, upon conversion of the debentures, to pay in cash based on the 10-day VWAP of the ENTREC common shares on the TSX-V commencing on the third day following the conversion date. The debentures are optionally redeemable by the Corporation during the year following October 31, 2015 if the market price of the common shares (as defined) exceeds 125% of the conversion price - or earlier, on a change of control. Thereafter, they may be redeemed at par.

On redemption or maturity, ENTREC may repay the principal amount by delivering common shares whose number is based on a 5% discount to the shares' market price, as computed.

Change of control

In the event of a Change of Control (as defined and including a sale of substantially all the assets), the debenture holders may elect to have their debentures paid in cash at 101% of the principal amount or (at their option) may convert using a discounted conversion price based on prorating a conversion premium of 35% for the number of days from issue to that event (so that, for example, if the Change of Control occurred 1/7 (or 6/7) of the way through the term, the conversion price of $2.60 would be divided by 130% (or 105%).)

Business/pro forma capitalization

ENTREC is an Alberta corporation specializing in the lifting, transportation and off-loading of oversized cargoes for the oil and gas, construction, mining and power generation industiries. It has debt of $65.5 million (including convertible debentures of $18.9 million) and shareholders' equity of $82.0 million.

Canadian tax consequences

The tax disclosure states that an arm's length non-resident generally will not be subject to withholding tax on interest. However, the Risk Factors contain a detailed discussion of the possibility that the debentures may not be excluded obligations and that the possibility of conversion may cause all interest to be considered to be participating interest.