Teal Jones: the equipment ahead of the shares

On October 26, 2026, Justice G.C. Weatherill amended the reverse vesting order of September 18 to add a sale of equipment ahead of the share sale it approved. Under an eleventh amendment to the share purchase agreement, Gillfor Manufacturing Inc., or an affiliate it designates, will buy listed equipment at the Surrey mill from the Teal entities before closing, for its fair market value "as mutually agreed upon in writing by the Buyer and the Monitor," and that amount comes off the price Gillfor pays for the shares, per the Amending and Supplemental Approval and Reverse Vesting Order, Oct. 26, 2026, pp. 1, 3, paras. 5(c), 6–7. The monitor, Ernst & Young Inc., puts that value at $25,252,900, and says the deduction leaves "no net change to the Purchase Price for the Transactions as a whole," per the Fifth Supplement to the Twenty-Ninth Report, Oct. 22, 2026, para. 12(a)–(b).

The same day the court granted the two orders the monitor had sought in the application reported here on October 21: one authorizing distributions to the interim lenders and the term lenders, and one extending the stay of proceedings to June 30, 2027, per the Distribution Order, Oct. 26, 2026, para. 2 and the Stay Extension Order, Oct. 26, 2026, para. 3.

A measure announced between hearing days

The Government of Canada announced the Productivity Mega Deduction on September 15, "during the inaugural Canada Investment Summit in Toronto," the monitor reports, per the Fifth Supplement, Oct. 22, 2026, para. 5. That fell between the third and fourth days of the hearing, September 8, 9, 10 and 18, at which the reverse vesting order was granted. As Gillfor's application describes it, the measure would permanently provide "immediate expensing, being a full deduction in the year an asset becomes available for use, for most depreciable property acquired on or after September 15, 2026," and the Department of Finance has stated, the application says, that previously used property would qualify only if neither the taxpayer nor a person not dealing at arm's length with it had owned it before, and it had not been transferred on a tax-deferred "rollover" basis, per the Gillfor Notice of Application, Oct. 21, 2026, Part 2, paras. 4, 6–7. "The PMD was not known or contemplated when the SPA was negotiated and executed," the application says, per the Gillfor Notice of Application, Oct. 21, 2026, Part 2, para. 8.

The obstacle was the structure the court had approved. Gillfor is buying shares; the equipment stays with Teal Cedar Products Ltd. and the Teal-Jones Group partnership as retained assets, per Gillfor's affidavit #3, Oct. 21, 2026, para. 5. "Once the Transaction closes, Gillfor and the Teal Entities will not be dealing at arm's length," the application says. "Accordingly, for the equipment to qualify as newly acquired property of Gillfor (or the Designated Affiliate), it must be acquired from the Teal Entities while the parties are still at arm's length, which is before Closing," per the Gillfor Notice of Application, Oct. 21, 2026, Part 2, para. 8. Gillfor's president swore to the same point and added: "That is the sole purpose of the proposed pre-Closing conveyance." Gillfor's counsel raised the idea with the monitor's counsel on October 1, the affidavit says, per the Gillfor affidavit #3, Oct. 21, 2026, paras. 10–12; the amendment and Gillfor's application are both dated October 21, per the Fifth Supplement, Oct. 22, 2026, para. 1 and the amending order, p. 1.

Thirty-five pages of Surrey equipment

What is conveyed is a 35-page list headed "TEALJONES-SURREY, BC": resaws, a chipper line, ten grooving machines, a bandsaw shingle machine, four cinder-block drying kilns, a chip loading system, Caterpillar wheel loaders, Hyster lift trucks, a whole-log chip system and a back-pressure steam generator, among much else, per the Amending and Supplemental Approval and Reverse Vesting Order, Oct. 26, 2026, Sch. "E", pp. 13–15, 48. Gillfor may amend the list up to two business days before the closing date, per the same order, p. 2, para. 5(a). "No land, buildings or Tree Farm Licence 46 will be conveyed," Gillfor's president swore, and the equipment "will not be physically moved, and the business will continue to use it in the same way before and after Closing," per Gillfor's affidavit #3, Oct. 21, 2026, paras. 13, 16.

Under the amended closing sequence, one business day before closing Gillfor pays the conveyed-equipment price into an account the monitor specifies, and the Teal entities convey the equipment, per the Eleventh Amendment, Ex. "B" to Gillfor affidavit #3, Sch. "H", step (a)(ii), p. 22. The share price, built from a base of $115,250,000 with adjustments, gains one more line: "minus an amount equal to the Conveyed Equipment Purchase Price," per the Share Purchase Agreement (redacted, consolidated), s. 2.2 and the Eleventh Amendment, s. 2(d), p. 14. The order makes it a condition of closing that the monitor receive, on the seller's behalf, "the entirety of both the Purchase Price and the Conveyed Equipment Purchase Price." It also approves a new base for the expense reimbursement and break-up fee, which the agreement as consolidated in September set at 2.5% of the purchase price: 2.5% "of the sum of the Purchase Price plus the Conveyed Equipment Purchase Price," per the amending order, p. 3, para. 7 and the Share Purchase Agreement, s. 8.2(d).

What the order adds to September's

Gillfor sought the court's express approval because, in its view, the change went beyond the "minor amendments" the September order let the parties make with the monitor's consent: the amendment "adds a conveyance of equipment, restructures the Purchase Price and the Closing Sequence, and transfers title to assets before the Effective Time," per the Gillfor Notice of Application, Oct. 21, 2026, Part 2, para. 12. The order approves it under s. 36 of the CCAA and the court's inherent jurisdiction, "expressly by this Order and not pursuant to the authority for minor amendments" in the September order, per the amending order, p. 3, para. 6.

At the transfer, the equipment vests in Gillfor or its affiliate free and clear of claims and encumbrances other than permitted ones. The claims stay behind with the Teal entities; at the effective time they pass to ResidualCo, 1602755 B.C. Ltd., as excluded liabilities and are expunged as against the equipment, Gillfor and the affiliate. If the monitor's certificate is not delivered by the earlier of the agreement's termination and three business days after the transfer, or a later date the seller, Gillfor and the monitor agree in writing, the equipment reverts to the Teal entity that conveyed it "in the same state and subject to the same Claims and Encumbrances, with the same priority," and the monitor returns the price "without set-off or deduction," per the amending order, pp. 4–5, para. 9 (new paras. 7B–7D) and the Approval and Reverse Vesting Order, Sept. 18, 2026, para. 7(a). The September order's vesting, discharge, bar-order and validity protections now reach the equipment in Gillfor's or the affiliate's hands, and the conveyance, the payment and any reversion are declared not void or voidable by the petitioners' creditors, nor a reviewable transaction under the CCAA, the BIA or the U.S. Bankruptcy Code, per the amending order, pp. 5–6, paras. 10–11, 15.