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ASSET PURCHASE AGREEMENT

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AMONG

1137925 B.C. LTD.

AND

HORIZON PLASTICS INTERNATIONAL INC.

AND

1541689 ONTARIO INC.

AND

2551024 ONTARIO INC.

AND

HORIZON PLASTICS DE MÉXICO, S.A. DE C.V.

AND

BRIAN READ

    

MADE AS OF

January 16, 2018

Dentons Canada LLP

TABLE OF CONTENTS

(hereinafter referred to as “ Horizon International ”)

(hereinafter referred to as “ EquipCo ”)

    

WHEREAS Horizon International, EquipCo, 2551 and Horizon Mexico (collectively the “ Vendors ” and individually a “ Vendor ”) carry on the Business;

AND WHEREAS the Canadian Vendors and Horizon Mexico have agreed to sell to the Purchaser, and the Purchaser has agreed to purchase, the Canadian Purchased Assets and the Mexican Purchased Assets, respectively, upon and subject to the terms and conditions hereinafter set forth;

AND WHEREAS the Vendors and the Shareholder (collectively, the “ Seller Parties ”) will receive financial benefits from the closing of the transactions set forth in this Agreement.

NOW THEREFORE , in consideration of the premises and the covenants and agreements herein contained, the Parties agree as follows:

ARTICLE 1
INTERPRETATION

In this Agreement, unless something in the subject matter or context is inconsistent therewith:

“ Accounts Receivable ” means all accounts receivable, trade accounts, notes receivable, book debts and other debts due or accruing due to the Vendors and the benefit of all security for such accounts, notes and debts, including all accounts receivable, trade accounts, notes receivable, book debts and other debts due or accruing due to the Vendors from Main Access LLC, an Ohio limited liability company.

“ Actual Closing Payroll ” means the actual unpaid Wages for all of the Employees earned or accrued up to the Time of Closing.

“ Affiliate ” has the meaning ascribed thereto in the Business Corporations Act (Ontario), provided that Main Access LLC shall not be deemed to be an Affiliate of any of the Vendors under this Agreement.

“ Agreement ” means this agreement, including the recitals and the Disclosure Letter, as amended from time to time.

“ Applicable Environmental Law ” means any federal, provincial (including the common law) or municipal law, statute, ordinance, code, regulation, rule, order or permit and all guidelines, directives, policies and bulletins, in each case to the extent they impose mandatory requirements having the force of law, and now in effect in each jurisdiction in which the Business is carried on relating to pollution or protection of the environment, or relating to waste disposal or to emissions, discharges, releases or threatened releases of a Hazardous Substance or other environmental matters and human health and safety.

“ Applicable Law ” means all applicable laws, rules and regulations, including any statute, code, ordinance, decree or municipal by-law of each jurisdiction in which the Business is carried on including all Applicable Environmental Law.

“ Assumed Contracts ” means those contracts, agreements, commitments, entitlements, engagements, options, open purchase orders and instruments (written and oral) of the Vendors in connection with the Business (other than the Excluded Contracts), which are described on Section 1.1A of the Disclosure Letter.

“ Assumed Liabilities ” means accounts payable (other than inter-company accounts payable which, for greater certainty, include amounts owing by the Vendors to their Affiliates) and accrued current liabilities of the Business incurred in the Ordinary Course of the Business and existing as of the Closing Date, including the obligations and liabilities of the Vendors relating to unfilled orders and forward commitments to purchase materials, parts and supplies for delivery on or after the Closing Date, each of the Vendors’ Liabilities arising from and after the Closing Date under and pursuant to the Assumed Contracts, the Leases, the Equipment Leases, and each obligation with respect to the Employees assumed by the Purchaser pursuant to Section 4.3 hereof, to the extent that each of the foregoing does not relate to any failure to perform, improper performance, warranty or other breach, default or violation by the Vendors on or prior to the Closing Date .

“ Auditor ” has the meaning ascribed thereto in Section 2.11(b).

“ Benefit Plans ” means all employee benefit plans, agreements and arrangements maintained for, available to or otherwise relating to any Employees, former employees, independent contractors or consultants or their dependants or beneficiaries, in respect of which the Vendors are obligated to contribute or in any way liable, whether or not insured and whether or not subject to the Collective Agreement or any Applicable Law, including bonus, deferred compensation, incentive compensation, severance and termination pay, hospitalization, health and other medical benefits, life and other insurance, dental, vision, legal, long-term and short-term disability, salary continuation, vacation, supplemental unemployment benefits, education assistance, profit-sharing, mortgage assistance, employee loan, employee assistance and pension, retirement and supplemental retirement plans, programs and agreements (including any defined contribution Pension Plan and any group registered retirement savings plan), except that the term “ Benefit Plans ” shall not include any statutory plans with which the Vendors are required to comply, including the Canada/Quebec Pension Plan and plans administered pursuant to applicable federal or provincial health Tax, workers’ compensation and workers’ safety and employment insurance legislation.

“ Books and Records ” means books and records of the Vendors, or any of them, as applicable, or any of their respective Affiliates, relating to the Business or the Purchased Assets, including financial, corporate, operations and sales books, records, books of account, sales and purchase records, lists of suppliers and customers, formulae, business reports, plans and projections and all other documents, surveys, plans, files, records, assessments, correspondence, and other data and information, financial or otherwise including all data, information and databases stored on computer-related or other electronic media.

“ Brownlee Retention Bonus ” the “Retention Bonus” to which Ken Brownlee may be entitled pursuant to and as defined in Section 4(e) of the Brownlee employment letter between the Purchaser and Ken Brownlee executed and delivered in connection with Closing.

“ Business ” means the business of developing, testing, producing, manufacturing, moulding, distributing, marketing and selling Products for regional, national and international customers in a variety of sectors from the Facilities as now carried on by the Vendors.

“ Business Day ” means a day other than a Saturday or Sunday or a statutory holiday in the Province of Ontario or in the State of Ohio.

“ Canadian Purchased Assets ” means the Purchased Assets owned prior to Closing by the Canadian Vendors.

“ Canadian Vendors ” means Horizon International, EquipCo and 2551.

“ Claims ” means all Liabilities, claims, actions, suits, inquiries, audits, notices of violation, demands, grievances, arbitration, counter-claims, cross-claims, proceedings, litigation, injunctions, judgments, orders, degrees, rulings, causes of action, summons, subpoenas or investigations of any nature or kind, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity .

“ Closing Date ” means January 16, 2018, or such other date as may be agreed to in writing between the Vendors and the Purchaser.

“ Closing Date Balance Sheet ” means the unaudited consolidated balance sheet of the Vendors as at the Closing Date.

“ Closing Date Working Capital Adjustment ” means the positive or negative amount, Canadian dollars, obtained by subtracting the Working Capital Target from the value of the Working Capital as set forth on the Estimated Closing Statement.

“ Closing Payroll Adjustment ” means the positive or negative amount, in Canadian dollars, obtained by subtracting the Actual Closing Payroll from the Estimated Closing Payroll determined as at the Closing Date.

“ CMT Mexican Subsidiary ” means CC HPM, S. de R.L. de C.V., a wholly owned subsidiary of the Purchaser.

“ Cobourg Facility ” means the operating facility of Horizon International located at 3 West Street, Cobourg, Ontario, K9A 1A1 .

“ Collective Agreement ” means any collective agreement, letter of understanding, letter of intent or other written communication with any trade union or association which may qualify as a trade union, which covers, or in the case of any such which is not yet in effect, would cover any of the Employees, including the UFCW Collective Agreement and the Horizon Mexico Collective Agreement.

“ Current Employees ” means those individuals who are employed by the Vendors in the Business on the date hereof (including for greater certainty employees who are absent from work by reason of short or long term disability or authorized leave of absence; and including any Union Employee who is laid off on the date hereof but retains seniority rights under the Collective Agreement).

“Customer Deposits” all cash, monies or other assets, net of tooling costs incurred, held by or for the account of the Vendors as are related to customer prepayments and deposits for which the contracted services or products remain for delivery following the Closing Date, which are described on Section 1.1B of the Disclosure Letter.

“ Direct Claim ” has the meaning ascribed thereto in Section 8.3.

“ Disclosure Letter ” means the Vendors’ disclosure letter, dated as of the date of this Agreement, delivered by the Vendors to the Purchaser contemporaneously with the execution and delivery of this Agreement.

“ Documentation ” means all engineering designs, design information and data in the possession or control of the Vendors and relating to the Business including specifications, schematics, diagrams, blueprints, manuals, program files, data files, computer related data, field and data definitions and relationships, data definitions and specifications, data models, program and system logic, interfaces, program modules, routines, sub-routines, algorithms, program architecture, design concepts, system designs, program structure, sequence and organization, screen displays and report layouts and all other information relating to the Products and their manufacturing but excluding the Licensed Rights.

“ Employee List ” means the information related to Employees and set forth in the Disclosure Letter.

“ Employer Substitution Agreement ” means the employer substitution agreement between CMT Mexican Subsidiary and Horizon Mexico in respect of the Union Employees subject to Mexican law , to be executed and delivered at the Closing in the form attached hereto as Exhibit A .

“ Encumbrance ” means mortgages, charges, pledges, security interests, liens or encumbrances of any nature whatsoever or howsoever arising and any rights or privileges capable of becoming any of the foregoing.

“ Environmental Report ” means that certain phase I environmental site assessment to be prepared by Pinchin Ltd. with respect to the Cobourg Facility at the Purchaser’s expense.

“ Equipment Leases ” means those operating leases pursuant to which the Vendors lease any equipment or vehicles used in or relating to the Business described on Section 1.1C of the Disclosure Letter.

“ Escrow Agent ” means TSX Trust .

“ Escrow Agreement ” means the escrow agreement among the Purchaser, Horizon International and the Escrow Agent, to be executed and delivered at the Closing in the form attached hereto as Exhibit B .

“ Escrow Amount ” means $4,881,879.

“ Estimated Closing Balance Sheet ” has the meaning ascribed thereto in Section 2.7(a).

“ Estimated Closing Payroll ” has the meaning ascribed thereto in Section 2.7(a).

“ Estimated Closing Statement ” has the meaning ascribed thereto in Section 2.7(a).

“ ETA ” means the Excise Tax Act (Canada), 1985 R.S.C., c. E-15.

“ Excluded Assets ” means all assets of the Vendors that are not Purchased Assets, including the following assets:

“ Excluded Contracts ” means all contracts and commitments that are not Assumed Contracts.

“ Excluded Liabilities ” means any Liability that is not an Assumed Liability, including all of the following Liabilities of the Vendors (or any shareholder or Affiliate of the Vendors):

or portion thereof that ends on or before the Closing Date, including any Liabilities of GST; or (ii) other Taxes of the Vendors (or any shareholder or Affiliate of the Vendors) of any kind or description (including any Liability for Taxes of the Vendors (or any shareholder or Affiliate of the Vendors) that becomes a Liability of Purchaser under any common law doctrine of de facto merger or transferee or successor liability or otherwise by operation of contract or Applicable Law);

Date; (ii) did not arise in the Ordinary Course of the Business; or (iii) are not validly and effectively assigned to Purchaser or held in trust pursuant to this Agreement;

“ Facilities ” means the Cobourg Facility and the Nuevo León Facility .

“ Financial Statements ” means the consolidated unaudited financial statements of the Vendors for the fiscal years ending on August 31, 2016 and August 31, 2017, including the income statement, balance sheet, statement of cash flows and statement of retained earnings, all of which are prepared in accordance with GAAP and attached to Section 1.1D of the Disclosure Letter.

“ Formal Notice ” has the meaning ascribed thereto in Section 8.5(a)(ii).

“ Funds Flow Statement ” has the meaning ascribed thereto in Section 2.6.

“ GAAP ” means the generally accepted accounting principles in effect in Canada.

“ Grantor ” has the meaning ascribed thereto in Section 2.9(c).

“ Governmental Authority ” means any federal, provincial, territorial, local, regional or municipal government or regulatory body, or any department, agency or authority thereof.

“ GST ” means the Tax imposed pursuant to Part IX of the ETA, including the provincial component of harmonized sales tax.

“ Hazardous Substance ” means any hazardous, dangerous or toxic substance, material or waste that is regulated under any Applicable Environmental Law including petroleum hydrocarbons, volatile organic compounds, polyaromatic hydrocarbons, PCBs, UFFI, lead-based materials and asbestos containing materials.

“ Hire Date ” means the date as of which any Non-Active Non-Union Employee accepts the Purchaser’s offer of employment, as set out in Section 4.3(b)(iii).

“ Horizon Mexico Collective Agreement ” means the Collective Agreement between Sindicato de Trabajadores de la Industria Metálica y del Comercio del Estado de Nuevo León “Presidente Benito Juárez García” C.T.M. and Horizon Mexico dated effective February 18, 2014 and any amendment or renewal of such agreement.

“ Indemnitee ” has the meaning ascribed thereto in Section 8.3.

“ Indemnitor ” has the meaning ascribed thereto in Section 8.3.

“ Intellectual Property ” means:

“ Inventories ” means all inventory of finished Product and all raw materials, components, packaging materials and work in progress used in the production of the Products.

“ Lakewood Facility ” means the storage facility of Horizon International located at 9726 47 ^th Avenue S.W., Building #14, Lakewood, WA 98499.

“ Leasehold Improvements ” means the leasehold improvements and fixtures owned by the Vendors and located at the Facilities.

“ Leases ” means the leases, subleases, licenses, agreements to lease or sublease, agreements to license, tenancy agreements or any other agreements under which the Vendors lease, license or otherwise use or occupy the Facilities, the Lakewood Facility, the St. Louis Facility and the Wesleyville Facility , including all amendments, extensions, renewals, guaranties and supplements thereto, as listed in Section 1.1E of the Disclosure Letter.

“ Liability ” means and includes any direct or indirect indebtedness, guarantee, endorsement, claim, loss, damage, deficiency, cost, expense, obligation, commitment, or responsibility of any nature whatsoever, whether fixed or unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated, secured or unsecured.

“ Licensed Rights ” means the Vendors’ rights to utilize proprietary software, firmware and hardware or copyrights owned by Third Parties that are licensed to the Vendors, including generally available computer programs owned by Third Parties that are resident on the workstations and servers included in the Machinery and Equipment.

“ Machinery and Equipment ” means all machinery, equipment (including office equipment, computer equipment, telecommunications and copier equipment), low pressure injection moulding machines, moulds, silos and equipment relating to silos (including piping, vacuum systems and pumps), conveyors, forklifts, boom trucks, transformers, and other miscellaneous tools and other equipment used in or relating to the Business and including all those listed in Section 1.1F of the Disclosure Letter.

“ Material Adverse Effect ” means any event, change, effect, occurrence, condition, state of facts or development that (a) is, or is reasonably likely to be, materially adverse to the Business, its assets, its financial condition, its results of operations or the value of the Purchased Assets, or (b) prevents, or would reasonably be likely to prevent, consummation of the transaction of purchase and sale provided for hereunder provided that in no event shall any event or change resulting from or arising in connection with any of the following constitute a Material Adverse Effect: (i) any change in GAAP; (ii) the adoption, proposal, implementation or change in Applicable Law or any interpretation thereof; (iii) any change in global, national or regional political conditions (including the outbreak of war or acts of terrorism) or in general economic, business, regulatory, political or market conditions or in national, regional or global financial or capital markets and which does not have a materially disproportionate effect on the Business; (iv) any change affecting any of the industries in which the Vendors operate which does not have a materially disproportionate effect on the Business; (v) any natural disaster which does not have a materially disproportionate effect on the Business; (vi) the execution, announcement or performance of this Agreement or consummation of the transactions contemplated hereby; (vii) any actions taken (or omitted to be taken) at the specific written request of the Purchaser; or (ix) any action taken by the Vendors in accordance with the express terms of this Agreement and the ancillary documents delivered in connection herewith.

“ Material Contracts ” has the meaning ascribed thereto in Section 3.1(d)(ii).

“ Mexican Purchased Assets ” means the Purchased Assets owned prior to Closing by Horizon Mexico.

“ Non-Active Non-Union Employees ” means Non-Union Employees who are absent from work on the Closing Date by reason of short or long term disability or by reason of authorized leave of absence but for greater certainty does not include Employees who are absent from work on the Closing Date by reason of holiday, parental leave, pregnancy leave or any other leave to which the employee is entitled pursuant to the Employment Standards Act (Ontario), or scheduled day off.

“ Non-Union Employee ” means an Employee who is not represented by the Unions.

“ Nuevo León Facility ” means the operating facility of Horizon Mexico located at Avenida Internacional #220, Parque Industrial VYNMSA Escobedo, C.P. 66053, Escobedo, Nuevo León, México.

“ Objection Notice ” has the meaning ascribed thereto in Section 2.11(a).

“ Occupational Health and Safety Acts ” means the Occupational Health and Safety Act (Ontario) and all other legislation of any applicable jurisdiction dealing with any of the subject matter of that Act or with any aspect of the health or safety of employees.

“ Ordinary Course ” means, with respect to an action taken by a person, that such action is consistent with the past practices of the person and is taken in the ordinary course of the normal day-to-day operations of the person.

“ Outside Date ” means January 19, 2018.

“ Parties ” refers to the Purchaser, Horizon International, EquipCo, 2551 and Horizon Mexico and “ Party ” means the applicable one of them.

“ Pension Plan ” means each of the Benefit Plans that is a “registered pension plan” as that term is defined in subsection 248(1) of the Tax Act.

 

“ Permits ” means all permits, consents, waivers, certificates, approvals, authorizations, registrations, rights, privileges and exemptions, or any item with a similar effect, issued or granted by any Governmental Authority, and all pending applications therefor, relating to the Business or the Purchased Assets.

“ Permitted Encumbrances ” means:

“ person ” means any individual, partnership, firm, corporation, association, joint, venture, limited liability company, trust or other entity, or any Governmental Authority.

“ Personal Information ” means information in the possession of or under control of the Vendors, or any of them, about an identifiable individual (other than their business contact information when used or disclosed only for the purposes of contacting such individual in that individual’s business capacity and for no other purpose), to be disclosed or conveyed to the Purchaser or any of its representatives or agents by or on behalf of the Vendors, or any of them, as a result of or in conjunction with the transactions contemplated herein, and includes all such personal information disclosed to the Purchaser prior to the execution of this Agreement in connection with the foregoing.

“ Post-Closing Working Capital Adjustment ” means the positive or negative amount, in Canadian dollars, obtained by subtracting the Working Capital Target from the value of the Working Capital as at the Closing Date.

“ Product Liabilities ” means any product liability claim for injury to person(s) or property caused by the Products, regardless of when made or asserted, excluding, for greater certainty, Product Warranty Claims.

“ Product Liability Claim ” means Claims in respect of Product Liabilities relating to finished Products manufactured or sold by the Vendors prior to the Closing Date.

“ Products ” means custom structural foam products and related technologies manufactured and designed by the Vendors and any other products developed or under development by or on behalf of the Vendors.

“ Product Warranties ” has the meaning ascribed thereto in Section 3.1(o).

“ Product Warranty Claim ” means any claim brought by a customer of the Vendors for the failure of any Product manufactured or sold by the Vendors prior to the Closing Date to conform with the Product Warranties excluding, for greater certainty, any Product Liability Claim.

“ Purchase Price ” has the meaning ascribed thereto in Section 2.4.

“ Purchased Assets ” has the meaning ascribed thereto in Section 2.1.

“ Purchaser Indemnified Parties ” has the meaning ascribed thereto in Section 8.1.

“ Purchaser’s Accountants ” has the meaning ascribed thereto in Section 2.10.

“ Records ” has the meaning ascribed thereto in Section 6.2(a).

“ Representative ” means, with respect to any person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such person.

“ Restricted Period ” has the meaning set forth in Section 4.1(d)(i).

“ Seller Parties ” has the meaning set forth in the recitals hereto.

“ Shareholder ” has the meaning set forth in the recitals hereto.

“ Software ” means all computer software and programs owned by the Vendors, expressly excluding the Licensed Rights but including data and related documentation and object and source codes, including all computer programs having or supporting industrial automation application functionality.

“ St. Louis Facility ” means the storage facility of Horizon International located at 1017 Olive Street, Suite 1000 C, St. Louis, MO 63101.

“ Subsidiary ” has the meaning ascribed thereto in the Business Corporations Act (Ontario).

“ Tax ” or “ Taxes ” means any federal, provincial, local, foreign and other net income, gross income, gross receipts, sales, use, goods and services tax, harmonized sales tax, value added tax, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatever in the nature of tax, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto , and any liability for the payment of any of the foregoing amounts as a result of any obligation to indemnify any other Person or as a result of being a transferee, and including any liability for Taxes of a predecessor entity.

“ Tax Act ” means the Income Tax Act , R.S.C. 1985 (5th Supp.) c.1.

“ Tax Returns ” means any and all returns, reports, declarations, elections, notices, forms, designations, filings and statements (including estimated tax returns and reports, withholding tax returns and reports and information returns and reports) filed or required to be filed in respect of Taxes.

“ Territory ” means the United States of America, Canada and Mexico.

“ Third Party ” means a person that is not a party to this Agreement.

“ Third Party Claim ” has the meaning ascribed thereto in Section 8.3.

“ Time of Closing ” means 10:00 a.m. (Toronto Time) on the Closing Date, or such other time on the Closing Date as may be agreed to between Horizon International and the Purchaser.

“ Trade Names ” means all of the corporate names and service marks, corporate logos, registered copyrights, trade names and registered and unregistered trade-marks owned by or licensed to the Vendors as at the Closing Date.

“ UFCW Collective Agreement ” means the Collective Agreement between United Food & Commercial Workers Canada, Local 175 and Horizon International having a term from November 2, 2017 to November 1, 2021 and any renewal of such agreement.

“ UFP Inventory ” means the Inventories sold to Universal Forest Products (“ UFP ”) that are in the possession of the Vendors pending final shipping instructions from UFP, which Inventories the Vendors and UFP agree are held by the Vendors for the benefit of UFP and which all risk of ownership has transferred to UFP.

“ Unions ” means the United Food & Commercial Workers Canada, Local 175 and Sindicato de Trabajadores de la Industria Metálica y del Comercio del Estado de Nuevo León “Presidente Benito Juárez García” C.T.M.

“ Union Employee ” means an Employee who is represented by one of the Unions.

“ Vehicles ” means all trucks, cars and other vehicles owned by the Vendors, including those described on Section 1.1H of the Disclosure Letter.

“ Vendors Indemnified Parties ” has the meaning ascribed thereto in Section 8.2.

“ Vendors’ Accountants ” shall have the meaning ascribed thereto in Section 2.11(a).

“ Virtual Data Room ” means the electronic data room maintained by the Vendors and made available to the Purchaser and to its representatives in connection with the sale and purchase of the Purchased Assets.

“ Wages ” shall have the meaning ascribed thereto in Section 4.3(c).

“ Wesleyville Facility ” means the storage facility of Horizon International located at 2655 Lakeshore Road, Port Hope, Ontario L1A 3V7.

“ Working Capital ” means, at the Closing Date, the aggregate of the Accounts Receivable (including any Taxes collectable thereon), the Inventories (net of allowance for obsolete inventory) and the prepaid expenses (excluding prepaid insurance) other than prepaid expenses that are Excluded Assets related to the Business less the accounts payable (excluding inter-company accounts payable which, for greater certainty include amounts owing by the Vendors to their Affiliates) and accrued liabilities (which for certainty shall not include shall not include any amounts in respect of obligations related to Customer Deposits), determined on a combined basis consistent with the Financial Statements and reflected in the Estimated Closing Statement or the Closing Date Balance Sheet, as applicable. For the avoidance of doubt, the calculation of Working Capital shall not include any items that are Excluded Assets or Excluded Liabilities.

“ Working Capital Statement ” means the statement of Working Capital prepared using the form attached hereto as Exhibit C .

“ Working Capital Target ” means: (i) CND$13,589,000 , for the purposes of determining the Closing Date Working Capital Adjustment in Section 2.7(b); and (ii) CND$13,589,000 , plus or minus (as applicable) the Closing Date Working Capital Adjustment, for the purposes of determining the Post-Closing Working Capital Adjustment in Section 2.7(c).

Any reference to “the knowledge of the Vendors” or any other similar knowledge qualification means the actual knowledge, after reasonable inquiry, of Brian Read, Ken Brownlee, Adam Gabriele, Ivan Gissing, Dominic Barrese, or Chris Long.

The division of this Agreement into Articles and Sections and the insertion of a table of contents and headings are for convenience of reference only and do not affect the construction or interpretation of this Agreement. The terms “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles, Sections and Schedules are to Articles and Sections of and Schedules to this Agreement.

In this Agreement words importing the singular number only include the plural and vice versa and words importing any gender include all genders. The term “including” means “including without limiting the generality of the foregoing”.

In this Agreement, unless something in the subject matter or context is inconsistent therewith or unless otherwise herein provided, a reference to any statute is to that statute as now enacted or as the same may be amended, re-enacted or replaced at any time prior to the Time of Closing and includes any regulations made thereunder.

All references to currency herein are to lawful money of the United States except as specifically set forth herein.

Wherever in this Agreement reference is made to a calculation to be made or an action to be taken in accordance with GAAP, such reference will be deemed to be to the generally accepted accounting principles in effect in Canada at the date of determination as recommended in Part II – “Accounting Standards for Private Enterprises” of the Handbook of Chartered Professional Accountants of Canada, consistently applied.

The Disclosure Letter is incorporated into and forms an integral part of this Agreement. All information included or referred to in the Disclosure Letter shall be deemed to qualify each representation and warranty made herein by the Vendors to the extent that the applicability of such information to each such representation and warranty is readily apparent on its face.

ARTICLE 2     
SALE AND PURCHASE

Upon and subject to the terms and conditions hereof, the Vendors shall sell, assign, convey or otherwise transfer to the Purchaser and the Purchaser shall purchase from the Vendors, as of and with effect from the opening of business on the Closing Date, all right, title, benefit and interest of the Vendors in and to the assets, properties, goodwill and rights of the Vendors of every nature, kind and description, tangible and intangible, wherever located, whether or not carried on the books of the Vendors or otherwise required to be reflected on a balance sheet prepared in accordance with GAAP, relating to the Business but excluding the Excluded Assets (the “ Purchased Assets ”), and including all of the Vendors’ right, title, benefit and interest in and to the following assets, properties, claims, rights or interests, in each case free of any Encumbrances other than the Permitted Encumbrances:

From and after the Closing Date, the Purchaser shall pay, honour, perform and discharge when due and payable, the Assumed Liabilities.

Notwithstanding anything in this Agreement to the contrary:

The aggregate purchase price (the “ Purchase Price ”) payable by the Purchaser to Horizon International, on behalf of the Vendors, for the Purchased Assets is: (a) an amount equal to the Assumed Liabilities; and (b) $63,000,000, subject to the adjustments set out in Section 2.7. The Purchase Price is exclusive of any sales and transfer Taxes that may become payable as a result of the transactions completed hereunder.

The Vendors and Purchaser agree to allocate the Purchase Price among the Purchased Assets, and between the Canadian Purchased Assets and the Mexican Purchased Assets, in accordance with Schedule 2.5 and to report the sale and purchase of the Purchased Assets for Tax purposes in a manner consistent with such allocation, and shall not dispute such allocation in connection with any audit or other proceeding. Further, in accordance with Mexican law, Horizon Mexico shall issue an invoice complying with all requirements of Tax laws in Mexico, evidencing the sale of the Mexican Purchased Assets, as applicable, with a detailed break out of the assets being acquired and the corresponding prices, including without limitation a description of the tangible personal property and the intangibles, if any.  

The Purchase Price will be payable as follows:

The foregoing wires and transfers will be made according to the Funds Flow Statement attached hereto as Exhibit D (the “ Funds Flow Statement ”).

Capital Adjustment shall be calculated in Canadian dollars consistent with the Closing Date Balance Sheet and any payment under this Section 2.7(c) shall be made in Canadian dollars.

The Vendors shall execute and deliver to the Purchaser or, as directed by Purchaser, to any Affiliate of Purchaser all such bills of sale, assignments, instruments of transfer, deeds, assurances, Third Party consents that have been received and other documents as shall be necessary to effectively transfer to the Purchaser all the Vendors’ right, title and interest in, to and under, or in respect of, the Purchased Assets, and shall deliver possession of the Purchased Assets, free and clear of all Encumbrances, other than the Permitted Encumbrances. All the transfer documents referred to in this section shall be in form as may be required by Applicable Law for the Purchaser to properly record the transfer of ownership to the Purchaser of the Purchased Assets.

As soon as practicable, but in any event within ninety (90) days after the Closing Date, the Purchaser and its independent accountants (“ Purchaser’s Accountants ”) shall prepare and deliver to the Vendors the Closing Date Balance Sheet and the Purchaser’s determination of the Actual Closing Payroll. The Closing Date Balance Sheet shall be prepared in Canadian dollars in accordance with GAAP and on a basis consistent with the preparation of the Financial Statements and shall set forth the amount of the Working Capital, in accordance with the Working Capital Statement, and the amount of any adjustment to the Purchase Price to be paid, and by whom, pursuant to Section 2.7(c)(i). The Actual Closing Payroll shall be determined as of the Closing Date and shall set forth the amount of any adjustment to be paid, and by whom, pursuant to Section 2.7(c)(ii).

the Closing Date Balance Sheet and the determination of the Actual Closing Payroll. The Purchaser shall provide to the Vendors access to all information and records required by the Vendors to review and assess the accuracy and completeness of the Closing Date Balance Sheet and the Actual Closing Payroll. If, in the Vendors’ reasonable judgment, either the Closing Date Balance Sheet or the Actual Closing Payroll was not prepared or determined in accordance with Section 2.10, the Vendors or their independent accountants (“ Vendors’ Accountants ”) shall have the right to object to the Closing Date Balance Sheet and/or the Actual Closing Payroll, as applicable, within such thirty (30) day period. Any such objection (the “ Objection Notice ”) shall be made in writing to the Purchaser and shall set forth in reasonable detail those items or amounts as to which the Vendors disagree. If the Vendors do not deliver the applicable Objection Notice prior to the end of such thirty (30) day period, (i) Working Capital shall equal the Working Capital figure set forth in the Closing Date Balance Sheet delivered to the Vendors by the Purchaser, and (ii) the Actual Closing Payroll shall equal the amount determined by the Purchaser.

The Vendors shall be entitled to have the Vendors’ Accountants present to observe the taking of any physical inventory count in connection with the preparation of the Closing Date Balance Sheet.

The Parties acknowledge and agree that the Purchaser shall be entitled to make a claim against and withdraw from the Escrow Amount, the amount necessary to pay the Brownlee Retention Bonus, if any, in accordance with the provisions of the Brownlee letter agreement executed in connection with Closing.

ARTICLE 3     
REPRESENTATIONS AND WARRANTIES

Except as set forth in the Disclosure Letter, each of the Vendors jointly and severally represents and warrants to and in favour of the Purchaser as follows and acknowledges that the Purchaser is relying upon such representations and warranties in connection with the matters contemplated by this Agreement:

ancillary documents entered into in connection herewith, since August 31, 2017. No other person owns any property and assets which are being used in the Business except for the Facilities, the personal property leased by the Vendors pursuant to the Material Contracts, the Intellectual Property licensed to the Vendors and disclosed in Section 3.1(f)(i) of the Disclosure Letter and certain tools and molds owned by the Vendors’ customers and used by the Vendors to manufacture goods specifically for each such customer. Notwithstanding the foregoing, Section 3.1(c)(i) of the Disclosure Letter sets forth each tool and mold legally and equitably owned by the Vendors;

the operation, conduct and maintenance of the Business as such Business is currently operated, conducted or maintained;

sponsored, administered, invested and communicated all Benefit Plans in material compliance with their terms, the terms of the Collective Agreements and Applicable Laws. The Vendors have not made any promise, proposal or commitment, whether legally binding or not, to create any additional Benefit Plan or to modify or change any existing Benefit Plan that would affect any Employee, except as set out in a Collective Agreement;

knowledge of the Vendors ,has been threatened in respect of any Taxes which, if adversely determined, would result in any such Encumbrance; and