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West 49 expands retail network by two strategic businesses acquisition

Sep '05
Action sport retailer West 49 Inc announced it has entered into a definitive agreement to purchase a retail chain of 24 Quebec based specialty stores operating under the banners Arsenic, Amnesia, and D-Tox from Modes Freedom Inc.

At the same time, the company announced it has entered into a separate definitive agreement to purchase Board Zone Inc, an on-line action sports retailer operating under the domain name Boardzone.com. Both transactions are expected to close in November 2005.

Sam Baio, President and CEO of West 49 Inc stated that these acquisitions further support our vision to build the dominant Canadian retailer in action sports apparel through the further expansion of our national presence and the establishment of multi-channel distribution.

The addition of 24 recognized retail outlets to their growing chain of specialty stores will provide an expanded platform to truly nationalize their strong brands while providing an entry point into the large Quebec marketplace. The acquisition of Board Zone will expand their distribution to include online sales, a significant channel considering that their target market is spending more time researching and buying product on the internet.

Under the terms of the agreement to acquire the retail assets from Modes Freedom Inc., the Company has agreed to pay $7.5 million in cash and 1.1 million in West 49 common shares vesting over the next 3 years. This represents a total purchase price of approximately $9.37 million. Additionally, the Company intends to invest up to $1.5 million in inventory and working capital. The management of West 49 estimates the 24 store chain to have annualized revenue of $17.5 million and operating income(xx) of $1.7 million.

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