ADENTRA Inc. — Capital/Financing Update 2021

Jul 5, 2021

FORM 51-102F3 Material Change Report

Item 1 – Name and Address of Company

Hardwoods Distribution Inc. (“ HDI ” or the “ Company ”) #306 - 9440 202nd Street Langley, British Columbia V1M 4A6

Item 2 – Date of Material Change

June 23, 2021

Item 3 – News Release

A news release reporting the material change was issued by HDI on June 23, 2021 through the newswire services of Canada NewsWire, a copy of which was subsequently filed under the Company’s profile on SEDAR at www.sedar.com.

Item 4 – Summary of Material Change

On June 23, 2021, the Company, through its subsidiary, Hardwoods Specialty Products US LP, entered into an agreement (the “ Equity Purchase Agreement ”) to purchase Novo Building Products Holdings, LLC (“ Novo ”) from an affiliate of Blue Wolf Capital Partners for a total price of US$303 million (the “ Purchase Price ”), subject to a working capital adjustment (the “ Acquisition ”).

HDI has received a commitment letter from its existing lender, Bank of America, N.A. (the “ Lender ”), for a new senior secured credit facility (the “ New Credit Facility ”) of up to US$525 million. The New Credit Facility will replace the existing credit facility for HDI’s Canadian subsidiary and the existing facility for HDI’s U.S. subsidiary.

The Acquisition will be financed by the New Credit Facility together with, if applicable, other funds available to HDI.

Item 5 – Full Description of Material Change

The Acquisition

On June 23, 2021, the Company, through its subsidiary, Hardwoods Specialty Products US LP, entered into the Equity Purchase Agreement to purchase Novo from an affiliate of Blue Wolf Capital Partners for the Purchase Price, subject to a working capital adjustment. Novo is being acquired on a cash-free and debt-free basis other than Novo’s existing lease obligations of an estimated US$40 million.

Novo is a leading U.S. distributor of architectural grade building products to home centers and to home builder distribution yards across the U.S.. Novo’s product suite includes moulding and millwork, stair systems, decorative boards, and doors. Novo operates out of 14

facilities, primarily in the Eastern and Midwestern U.S., Florida and Texas. Novo’s divisions include Empire Moulding & Millwork, Southwest Moulding & Millwork, Ornamental Decorative Millwork, LJ Smith Stair Systems and Novo Direct.

The obligation of the parties to complete the Acquisition is subject to various conditions typical of those contained in equity purchase agreements negotiated between parties dealing at arm’s length, including that the applicable waiting period relating to the Acquisition under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (including all extensions thereof) has expired or been terminated. The Equity Purchase Agreement contains various termination provisions typical of those contained in equity purchase agreements negotiated between parties dealing at arm’s length, including a provision that either party may terminate the agreement in the event that, subject to certain conditions, the closing of the Acquisition has not occurred by August 23, 2021.

Credit Facility

HDI has received a commitment letter from the Lender for the New Credit Facility of up to US$525 million. The New Credit Facility will replace the existing credit facility for HDI’s Canadian subsidiary and the existing facility for HDI’s U.S. subsidiary (the “ US Borrower ”). The Acquisition will be financed by the New Credit Facility.

The New Credit Facility is expected to consist of (i) a revolving credit facility of US$225 million (the “ Revolving Facility ”) which can be drawn upon in U.S. dollars and Canadian dollars, (ii) a term loan of up to US$225 million (“ Term Loan 1 ”), and (iii) a separate term loan of up to US$75 million (“ Term Loan 2 ” with Term Loan 1, the “ Term Loans ”).

The New Credit Facility is expected to bear interest at a rate equal to LIBOR plus up to 2.25% or the base rate of interest charged by the Lender from time to time (“ Base Rate ”) plus 1.0%. The LIBOR and Base Rate margins for the New Credit Facility are expected to be subject to performance pricing adjustments, from time to time, based on HDI’s then applicable leverage ratio.

The Revolving Facility and Term Loan 1 are expected to have a five-year term to maturity and Term Loan 2 is expected to have an 18-month term to maturity, and it is expected that any termination of the Revolving Facility will require prepayment in full of any amounts outstanding under the two term loans. Term Loan 1 is expected to be subject to quarterly amortization of principal on the last business day of each fiscal quarter of the US Borrower (commencing on the last business day of the first full fiscal quarter of HDI after the fiscal quarter in which the closing date for the New Credit Facility occurs), in an amount equal 1.25% of the initial principal amount of Term Loan 1 advanced on such closing date (with applicable adjustments for voluntary and mandatory prepayments). The Term Loans will be subject to mandatory pre-payments in certain circumstances and are expected to be prepayable voluntarily at any time following the closing date for the New Credit Facility.

The New Credit Facility will be guaranteed by HDI, each existing and future direct and indirect Canadian and U.S. subsidiary of HDI and, to the extent no material adverse tax consequences would result, foreign subsidiaries of HDI organized outside the U.S. or Canada.

The financial covenants under the New Credit Facility are expected to include, among others: (i) a consolidated interest coverage ratio (a ratio of adjusted EBITDA to total interest expense, determined on a consolidated basis of the Company, with the specific definitions to be agreed upon) and (ii) a consolidated leverage ratio (a ratio of total funded debt to adjusted EBITDA, determined on a consolidated basis of the Company, with the specific definitions to be agreed upon).

The commitment letter and advance of the loan facilities are subject to usual conditions including, among others, execution of documents satisfactory to the Lender, completion of the related transactions on terms satisfactory to the Lender, no material adverse change in the business of the Company and its subsidiaries or the sellers of Novo having occurred, delivery of certain interim financial statements, pro forma financial statements and a pro forma compliance certificate confirming compliance with financial covenants and borrowing base on a pro forma basis, receipt of all necessary consents for the Acquisition and completion of the Lender’s due diligence.

Conditions to Complete the Acquisition

Completion of the Acquisition is subject to a number of conditions, including U.S. antitrust approval, as well as other conditions customary for a transaction of this nature. The Acquisition is expected to close in late July or early August 2021.

Forward Looking Statements

Certain statements in this news release may constitute “forward-looking information” within the meaning of applicable securities laws that involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements or industry results expressed or implied by such forward-looking information. Forward-looking information are identified by the use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will”, “would”, and similar terms and phrases, including references to assumptions. Such information may involve, but is not limited to, comments with respect to strategies, expectations, planned operations or future actions. Forward-looking information in this news release includes, without limitation, statements with respect to: the anticipated closing of the Acquisition, the terms thereof and the timing therefor; and, the anticipated entering into of the New Credit Facility and the terms thereof and timing therefor. Actual events or results may differ materially.

The forecasts and projections that make up the forward-looking information and financial outlook in this news release are based on assumptions which include, but are not limited to: the satisfactory timing and receipt of regulatory approval with respect to the Acquisition; the completion of the Acquisition; the Company realizing the expected benefits and synergies of the Acquisition; no undisclosed liabilities associated with the Acquisition; no material adverse changes occur in respect of the acquired assets before the completion of the Acquisition; the Company completes the New Credit Facility in accordance with the terms currently contemplated; the Company can comply with the restrictive conditions required by the New Credit Facility; the financial impact of the Acquisition is as currently expected by

management; the Company and Novo do not lose any key personnel; there are no decreases in the supply of, demand for, or market values of products that harm the Company or Novo’s business; the Company does not incur material losses related to credit provided to its customers; the Company is able to sustain its level of sales and earnings margins; the Company is able to grow its business long term and to manage its growth; the Company is able to integrate acquired businesses, including Novo; there is no new competition in the markets in which the Company operates that lead to reduced sales and profitability; the Company can comply with existing regulations and will not become subject to more stringent regulations; no material product liability claims; importation of products manufactured with hardwood lumber or sheet goods does not increase and replace products manufactured in North America; the Company’s management information systems upon which it is dependent are not impaired; the Company is not adversely impacted by disruptive technologies; an outbreak or escalation of a contagious disease does not adversely affect the Company’s business; and, the Company’s insurance is sufficient to cover losses that may occur as a result of its operations.

The forward-looking information and financial outlook in this news release is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. The factors which could cause results to differ from current expectations include, but are not limited to: failure to close the Acquisition; potential undisclosed liabilities associated with the Acquisition; no control by the Company over Novo until completion of the Acquisition; the Company may not be able to obtain the New Credit Facility on the terms currently expected, or at all; the New Credit Facility will be subject to certain restrictive conditions that limit the discretion of management; exchange rate fluctuations between the Canadian and US dollar could affect the Company’s performance; the Company’s results are dependent upon the general state of the economy; the Company depends on key personnel, the loss of which could harm its business; decreases in the supply of, demand for, or market values of hardwood lumber or sheet goods could harm the Company’s business; the Company may incur losses related to credit provided to the Company’s customers; the Company’s products may be subject to negative trade outcomes; the Company may not be able to sustain its current level of sales or earnings margins; the Company may be unable to grow its business long term or to manage any growth; the Company may be unable to integrate acquired businesses; competition in the Company’s markets may lead to reduced sales and profitability; the Company may fail to comply with existing regulations or become subject to more stringent regulations; product liability claims could affect the Company’s sales, profitability and reputation; importation of products manufactured with hardwood lumber or sheet goods may increase, and replace products manufactured in North America; disruptive technologies could lead to reduced revenues or a change in our business model; the Company is dependent upon its management information systems; the Company’s insurance may be insufficient to cover losses that may occur as a result of the Company’s operations; an outbreak or escalation of a contagious disease may adversely affect the Company’s business; and, the Company’s credit facilities affect its liquidity, contain restrictions on the Company’s ability to borrow funds, and impose restrictions on distributions that can be made by certain subsidiaries of the Company. More information about the risks and uncertainties affecting HDI’s business can be found in the “Risk Factors” section of its Annual Information Form dated March 11, 2021 which is available under the HDI’s profile on SEDAR at www.sedar.com.

To the extent any forward-looking information or statements in this news release constitute a “financial outlook” within the meaning of securities laws, such information is being provided to demonstrate the potential benefits of the Acquisition and management’s estimate of the future financial performance of Novo, and readers are cautioned that this information may not be appropriate for any other purpose and that they should not place undue reliance on such information.

Although HDI has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information or financial outlook in this news release, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of HDI. Accordingly, readers should not place undue reliance on forward-looking statements or information in this news release. The forward looking information is made as of the date of this news release, and HDI assumes no obligation to publicly update or revise such forward-looking information to reflect new information, subsequent or otherwise, except as may be required by applicable securities law. The forwardlooking information contained herein is expressly qualified in its entirety by this cautionary statement.

Item 6 – Reliance on Subsection 7.1(2) of National Instrument 51-102

Not applicable.

Item 7 – Omitted Information

No significant facts otherwise required to be disclosed in this report have been omitted.

Item 8 – Executive Officer

For further information, please contact:

Faiz Karmally, Vice President and Chief Financial Officer Hardwoods Distribution Inc. Phone: (604) 881-1982

Item 9 – Date of Report

July 5, 2021