Plaintree Systems Inc. Announces Intention to Acquire Specialty Manufacturer of Home Appliances

ARNPRIOR, ON / ACCESSWIRE / March 29, 2022 / Plaintree Systems Inc. (CSE:NPT) ("Plaintree" or the "Company").

Share Purchase Agreement to Purchase Shares of Elmira Stove Works

Plaintree today also announced that it has finalized the terms of a share purchase agreement with Tom Hendrick, Brian Hendrick and Jane Hendrick, the shareholders of Hendrick Energy Systems Inc. ("HES") and Elmira Direct Limited ("Elmira" and collectively with HES, "Elmira Stove Works"), pursuant to which 9366920 Canada Inc. ("9366920"), a wholly-owned subsidiary of Plaintree, will purchase all of the shares of Elmira Stove Works (the "Transaction"). The share purchase agreement, which will be signed by the parties on the closing, which is expected to be March 30, 2022, completes the negotiations process commenced by the signing of a non-binding letter of intent in December 2021. Elmira Stove Works, Ontario private companies operating in Elmira, Ontario, are in the business of manufacturing and selling of high-end antique and retro styled home kitchen appliances as well as wood burning cookstoves with sales in both Canada and the United States.

Following the closing, the Elmira Stove Works business will be moved to the Company's Arnprior, Ontario facilities to continue its operation from there. Shortly following the closing, Elmira Stove Works and 9366920 will complete a short-form amalgamation and the amalgamated company will continue the Elmira Stove Works business under the corporate name Elmira Stove Works Inc. Elmira Stove Works Inc. will continue to be a wholly-owned subsidiary of Plaintree following the amalgamation.

The Transaction will be completed on a share purchase basis with an all cash purchase price. Elmira Stove Works will be acquired on a debt free cash free basis. The purchase price for Elmira Works is estimated to be $3.1 million and is comprised of: (i) three cash payments of $500,000 due on each of the closing date, and 6 and 12 months thereafter; (ii) an earnout equal to 8% of net sales of the Elmira Stove Works business during the 12 months period commencing 60 days following the closing date (up to a maximum of $500,000); and (iii) the value of inventory on hand on closing payable over a 24 month period following the closing date as and when the inventory is sold (estimated to be $1.1 million). The Transaction will be financed by an increase of $1.5 million in the Company's banking facilities with a portion of the purchase price based on the value of the inventory on hand at HES and Elmira on closing to be paid over a 24 month period following closing as inventory is used in the business with the balance of funds expected to come from the resources of the acquired business. The bank facility involves a term loan with a term of five (5) years with the loan to be advanced in three tranches of $500,000 on the closing of the transaction and each of 6 months and 12 months after the closing. The interest rate will be a floating rate equal to the bank's prime rate plus 1%. The term loan will be repayable through monthly principal payments and a lump sum due on the maturity date of accrued interest and any principal then outstanding. The term loan will be secured by the Company's existing security with the bank as well as a pledge over the Elmira Stove Works shares being acquired. In addition to the bank's security, the vendors of Elmira Stove Works has also been granted a security interest over the assets of Elmira Stove Works to support the post-closing payments and this security interest is being subordinated to the security of the bank.