ASSET PURCHASE AGREEMENT

EXHIBIT 2.1

 

ASSET PURCHASE AGREEMENT

BY AND BETWEEN

VERI-TEK INTERNATIONAL CORP.

(Buyer),

-AND-

LIFTKING INDUSTRIES, INC.

(Seller)

-AND-

LIFTKING INCORPORATED

(Seller’s Parent)

-AND-

LOUIS ALDROVANDI

(Louis)

-AND-

MARK ALDROVANDI

(Mark)

October 19, 2006

 

ASSET PURCHASE AGREEMENT

TABLE OF CONTENTS

 

 

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Disclosure Schedule

 

Exhibits

 

 

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ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT (this “Agreement” ) dated October 19, 2006, by and among Veri-Tek International Corp., a Michigan corporation ( “Buyer” ), Liftking Industries Inc. an Ontario corporation ( “Seller” ), Liftking Incorporated, an Ontario corporation, (“ Seller’s Parent ”), Mark Aldrovandi, (“ Mark ”), and Louis Aldrovandi, (“ Louis ”).

RECITALS

A. Whereas, Seller designs, manufactures, repairs and markets heavy terrain forklifts and other material handling units (the “Business” ). Seller’s Parent owns all of the issued and outstanding shares of the Seller.

B. Whereas, Seller’s facilities consist of one location at 7135 Islington Avenue, Woodbridge, Ontario L4L 1V9 (the “Facilities” ) for servicing, repairing, storing and delivering the products utilized in connection with the Business.

C. Buyer desires to purchase from Seller, Seller desires to sell to Buyer, the Business and substantially all of the property and assets of Seller.

NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows.

1. PURCHASE AND SALE OF ASSETS

1.1. Assets to be Transferred . Subject to the terms and conditions of this Agreement, on the Closing Date (as hereinafter defined) Seller shall sell, transfer, convey, assign, and deliver to Buyer and Buyer shall purchase and accept all of the business, rights, claims and assets (of every kind, nature, character and description, whether real, personal or mixed, whether tangible or intangible, whether accrued, contingent or otherwise, and wherever situated) of Seller, together with all rights and privileges of Seller associated with such assets and with the Business of Seller, other than the Excluded Assets (as hereinafter defined) (collectively the “Purchased Assets” ). The Purchased Assets shall include, but not be limited to, the following:

1.1.(a) Leased Real Property . All of the leases of real property with respect to real property leased by Seller, including the leases (the “Real Property Leases” ) described on Schedule 1.1.(a) with respect to the real property described thereon (the “Leased Real Property” ).

1.1.(b) Personal Property . All machinery, equipment, vehicles, tools, supplies, spare parts, furniture, trade fixtures and all other personal property (other than personal property leased pursuant to Personal Property Leases as hereinafter defined) owned, utilized or held by Seller in connection with the Business.

 

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1.1.(c) Inventory . All inventories of raw materials, work-in-process and finished goods (including all such in transit), and service and repair parts, supplies and components held for resale by Seller on the Closing Date, together with related packaging materials (collectively the “Inventory” ).

1.1.(d) Personal Property Leases . All leases of machinery, equipment, vehicles, furniture and other personal property leased by Seller, including all such leases (the “Personal Property Leases” ) described in Schedule 1.1.(d) .

1.1.(e) Intellectual Property . All of Seller’s interest in any Intellectual Property. As used herein, the term “Intellectual Property” shall mean and include: (i) all trademark rights, business identifiers, trade dress, service marks, trade names, and brand names; (ii) all copyrights and all other rights associated therewith and the underlying works of authorship; (iii) all patents and all proprietary rights associated therewith; (iv) all contracts or agreements granting any right, title, license or privilege under the intellectual property rights of any third party; (v) all inventions, mask works and mask work registrations, know-how, discoveries, improvements, designs, trade secrets, shop and royalty rights, employee covenants and agreements respecting intellectual property and non-competition and all other types of intellectual property; and (vi) all registrations of any of the foregoing, all applications therefore, and all claims for infringement or breach thereof.

1.1.(f) Contracts . Except as set forth in Section 2.3 , all Seller’s rights in, to and under all contracts, purchase orders and sales orders (hereinafter “Contracts” ) of Seller, including without limitation the Contracts described on Schedule 1.1.(f) .

1.1.(g) Computer Software . All computer source codes, programs and other software owned by Seller, including all machine readable code, printed listings of code, documentation and related property and information of Seller.

1.1.(h) Literature . All sales literature, promotional literature, catalogs and similar or related materials of Seller.

1.1.(i) Records and Files . All records and files of Seller of every kind (other than those required by Applicable Law to be retained by Seller, copies of which will be made available to Buyer) including, without limitation, invoices, customer and vendor lists (and other related information), blueprints, specifications, designs, drawings, and operating and marketing plans, and all other documents, tapes, discs, programs or other embodiments of information of Seller.

1.1.(j) Notes and Accounts Receivable . All promissory notes to, and drafts and accounts receivable of Seller, except for those described in Section 1.2.(d) hereof.

1.1.(k) Licenses; Permits . All licenses, permits, approvals, certifications and listings of Seller.

1.1.(l) Corporate Name . All of Seller’s right in the name “Liftking” and associated style and the domain name “liftking.com”.

 

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1.1.(m) General Intangibles . All advance payments, prepaid items and expenses, all rights of offset and credits in respect of any of the Assumed Liabilities, all causes of action, claims, demands, rights and privileges against third parties (including manufacturer and seller warranties of any goods or services provided to Seller) in respect of any of the Assumed Liabilities, all attorney-client privileges and rights related thereto to the extent they may be assigned in law and all other intangible rights and assets, including all goodwill associated with the Business and the Purchased Assets.

1.2. Excluded Assets . The provisions of Section 1.1 notwithstanding, Seller shall not sell, transfer, assign, convey or deliver to Buyer, and Buyer will not purchase or accept any of the assets listed on Schedule 1.2 attached hereto (collectively the “Excluded Assets” ).

2. ASSUMPTION OF LIABILITIES

2.1. Liabilities to be Assumed . As used in this Agreement, the term “Liability” shall mean and include any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated, secured or unsecured. Subject to the terms and conditions of this Agreement, on the Closing Date, Buyer shall assume, pay, satisfy, discharge, perform and fulfill the following Liabilities existing at the Closing Date:

2.1.(a) normal and customary accounts and trade payables;

2.1.(b) accrued expenses related to unfulfilled orders and Liabilities relating to customer deposits;

2.1.(c) warranty claims in respect of normal contract warranties issued to customers of Seller who purchased, leased or rented products from Seller on or prior to the Closing Date; and

2.1.(d) those product liability claims listed in Schedule 2.1(d) ;

and Buyer shall assume, pay, satisfy, discharge, perform and fulfill the Liabilities of the Seller arising in respect of any time or period beginning on the Closing Date under the Real Property Leases, the Personal Property Leases, the Contracts, and the Plans which are assumed by Buyer hereunder.

The foregoing Liabilities are herein collectively called the “Assumed Liabilities” .

2.2. Liabilities Not to be Assumed . Except as and to the extent specifically set forth in Section 2.1 , Buyer is not assuming any Liabilities of Seller and all such Liabilities shall be and remain the responsibility of Seller (the “Excluded Liabilities” ). Specifically, and not by way of limiting the foregoing, Buyer is not assuming any Liability of Seller arising out of or in any way relating to or resulting from:

2.2.(a) the Real Property Leases, the Personal Property Leases, the Contracts, and the Plans in respect of any time or period ending prior to the Closing Date;

 

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2.2.(b) claims arising in respect of any product assembled or sold prior to the Closing Date or in any way relating to or resulting from leases to customers of the Business during any lease period prior to the Closing (including any Liability of Seller for claims made for injury to person, damage to property or other damage, whether made in product liability, tort, breach of warranty or otherwise), other than those warranty claims contemplated in Section 2.1(c) or those product liability claims listed in Schedule 2.1(d) ; or

2.2.(c) any outstanding loan payables or inter-company or related party debt.

Seller shall pay, perform and discharge, as and when due, all of the Excluded Liabilities.

2.3. Nonassignable Contracts and Rights . To the extent that any Contract, right, property or other asset for which assignment to Buyer is provided herein is not assignable without the consent of another party, this Agreement shall not constitute an assignment or an attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof. Each of Seller and Buyer agree to use its reasonable best efforts (without any requirement on the part of Buyer to pay any money or agree to any change in the terms of any such Contract, right, property or other asset) to obtain the consent of such other party to the assignment of any such Contract, right, property or other asset to Buyer in all cases in which such consent is or may be required for such assignment. If any such consent shall not be obtained, Seller agrees to cooperate with Buyer in any reasonable arrangement designed to provide for Buyer the benefits intended to be assigned to Buyer under the relevant Contract, right, property or other asset, including enforcement at the cost and for the account of Buyer of any and all rights of Seller against the other party thereto arising out of the breach or cancellation thereof by such other party or otherwise. If and to the extent that such arrangement cannot be made, Buyer, upon notice to Seller, shall have no obligation pursuant to Section 2.1 or otherwise with respect to any such Contract, right, property or other asset and any such Contract, right, property or other asset shall not be deemed to be a Purchased Asset hereunder.

3. PURCHASE PRICE - PAYMENT

3.1. Purchase Price . The purchase price (the “Purchase Price” ) for the Purchased Assets shall be CDN$8,000,000 plus the amount of the Assumed Liabilities listed in Schedule 3.1 .

3.2. Closing Net Working Capital . For the purposes of this Agreement, “ Closing Net Working Capital ” means Seller’s inventory (including without limitation work in progress) plus its accounts receivable plus its prepaid expenses as at the Closing less Seller’s accounts payable at the Closing. At least 3

 

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Business Days prior to the Closing Date, Seller shall deliver to Buyer a projected balance sheet (“ Projected Balance Sheet ”) for the Seller as at the Closing and prepared in accordance with Canadian generally accepted accounting principles applied on a basis consistent with past periods together with a calculation of the Closing Net Working Capital using the appropriate data in the Projected Balance Sheet. Buyer shall have the right at any time thereafter and on or prior to the day which is 60 days after the Closing Date to confer with the Seller and its auditor on the data set out in the Projected Balance Sheet and the said calculation of the Closing Net Working Capital. Without limiting the foregoing, the Buyer may at any time during such 60 day period require Seller’s auditor to audit the Projected Balance Sheet and the determine the Closing Net Working Capital. Any changes thereto as determined by Seller’s auditor shall be final and binding on Buyer and Seller for the purposes of this Agreement and the Closing Net Working Capital as so determined by Seller’s auditor shall be the Closing Net Working Capital for all purposes of this Agreement, including for the purposes of the adjustment to the Note contemplated in Section 3.3(d).

3.3. Payment of Purchase Price . The Purchase Price shall be paid by Buyer as follows:

3.3.(a) Exchangeable Shares of Canadian Subsidiary to Seller. At the Closing, Buyer shall deliver to Seller or as it may direct stock certificates representing exchangeable shares of the Canadian Subsidiary (“ Exchangeable Shares ”) which are exchangeable into 266,000 shares of common stock of Buyer (the “ Buyer’s Common Shares ”). Seller acknowledges that all common stock of Buyer issued to Seller upon the exchange by Seller of one or more Exchangeable Shares will be subject to certain resale restrictions under Rule 145 promulgated under the Securities Act of 1933, as amended (the “Securities Act” ), and all certificates representing such shares shall bear an appropriate restrictive legend.

3.3.(b) Assumption of Liabilities . At the Closing, Buyer shall deliver to Seller such documents and instruments as are reasonably required to evidence the assumption of the Assumed Liabilities.

3.3.(c) Cash to Seller at Closing . At the Closing, Buyer shall deliver to Seller the sum of (i) Three Million Seven Hundred Thirty-Six Thousand and 00/100 Dollars (CDN $3,736,000), (ii) minus the aggregate of the consideration attributed in Schedule 7.3(b) to the non-competition covenants of each of Seller, Seller’s Parent, Mark and Louis, (iii) minus the amount by which the Closing Net Working Capital is less than zero (the “ Seller Cash Consideration ”). At the Closing, Buyer shall deliver to each of Seller’s Parent, Mark and Louis a sum equal to the consideration attributed in Schedule 7.3(b) to their respective Non-Competition Agreements. In the event that the ten day trailing average closing price of the Buyer’s Common Shares is less than $4.00 per share, Buyer shall increase the Seller Cash Consideration payable by Buyer to Seller at Closing by an amount equal to the product of 266,000 multiplied by a dollar amount which is $4.00 less the said ten day average closing price. Provided, however, if the said ten day average closing price is higher than $4.00, there shall be no adjustment in the Seller Cash Consideration.

 

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3.3.(d) Note to Seller . At the Closing, Buyer shall deliver to Seller a secured subordinated note in favor of Seller in the amount of Three Million Two Hundred Thousand Dollars (CDN$3,200,000) substantially in the form attached hereto as Exhibit A (the “Note” ). The Note shall provide for interest at one percent (1%) over the prime rate of interest charged by Comerica Bank, calculated from the Closing date and payable quarterly in arrears commencing April 1, 2007, and for principal payments of Two Hundred Thousand Dollars (CDN$200,000) quarterly commencing April 1, 2007, with the final instalment of principal and interest thereon due December 31, 2007. The Note shall be secured by a general security agreement granting Seller a security interest over all of the Purchased Assets, which agreement is to be substantially in the form annexed hereto as Exhibit B (“ General Security Agreement ”) and is to be delivered by Buyer to Seller at Closing. Seller’s security interest shall be subordinated to the interest of Buyer’s senior secured credit facility but shall otherwise rank ahead of Seller’s other secured creditors. Notwithstanding the foregoing and any other provision of this Agreement, if the Closing Net Working Capital is less than $5,000,000, such shortfall shall cause a dollar for dollar reduction in the amount of the Note and the Purchase Price, and if the Closing Net Working Capital is more than $7,500,000, such excess shall cause a dollar for dollar increase in the amount of the Note and the Purchase Price.

3.3.(e) Method of Payment All payments under this Section 3.3 shall be made by wire transfer of immediately available funds to an account designated by the recipient.

3.4. Allocation of Purchase Price . The aggregate Purchase Price (including the assumption by Buyer of the Assumed Liabilities) shall be allocated among the Purchased Assets (other than goodwill and intellectual property) for tax purposes in accordance with their respective costs for tax purposes as at Closing, as confirmed by Seller’s auditor if required by Buyer, and in the case of goodwill and intellectual property as Buyer and Seller shall agree. Seller shall record and append such tax costs and Buyer and Seller shall record any such agreement with respect to intellectual property and goodwill and append such to this Agreement as Schedule 3.4 . Seller and Buyer will follow and use such allocation in all tax returns, filings or other related reports made by them to any governmental agencies. In the event Seller and Buyer are unable to agree on the allocation to intellectual property and goodwill not less than 2 days prior to the Closing Date, they shall seek the assistance of RSM Richter in arriving at such agreement. To the extent that disclosures of this allocation are required to be made by the parties to the Internal Revenue Service ( “IRS” ) under the provisions of Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code” ) or any regulations there under, Buyer and Seller will disclose such reports to the other prior to filing with the IRS. Notwithstanding the foregoing, Buyer and Seller shall jointly elect under the Income Tax Act (Canada).

3.5. Piggyback Registration. If, at any time following the Closing Date and after the exchange by Seller of one or more of its Exchangeable Shares into Buyer’s Common Shares, Buyer proposes to prepare and file one or more registration statements or post-effective amendments thereto covering equity or debt securities of Buyer, or any such securities of Buyer held by its shareholders (in any such case, other than in connection with a merger, acquisition or pursuant to Form S-8 or successor form) (collectively, a “ Registration Statement ”), it will give

 

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written notice of its intention to do so to Seller at least thirty (30) business days prior to the filing of each such Registration Statement. Upon the written request of Seller made within twenty (20) business days after receipt of the Notice, that Buyer include any of Buyer’s Common Shares held by the Seller in the proposed Registration Statement, Buyer shall use its best efforts to effect the registration under the Securities Act of the Buyer’s Common Shares held by the Seller which it has been so requested to register (“ Piggyback Registration ”) at Buyer’s sole cost and expense and at no cost or expense to the Seller; provided, however, that if, in the written opinion of Buyer’s managing underwriter, if any, for such offering, the inclusion of all or a portion of the Buyer’s Common Shares held by the Seller requested to be registered, when added to the securities being registered by Buyer or the selling shareholder(s), will exceed the maximum amount of Buyer’s securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without otherwise materially adversely affecting the entire offering, then Buyer may exclude from such offering all or a portion of Buyer’s Common Shares held by the Seller which it has been requested to register.

3.6. Transfer Taxes

Buyer shall be liable for and shall pay, either to Seller at Closing or directly to the applicable governmental authority, as required, all transfer, land transfer, value added, ad-valorem, exercise, sales, use, consumption, goods or services, harmonized sales, retail sales, social services or other similar taxes on duties payable under any Applicable Law (other than income taxes) (collectively, “ Transfer Taxes ”) properly payable upon and in connection with the transfer of the Business and the Purchased Assets to Buyer. Seller and Buyer shall jointly elect under Section 167(1) of the Excise Tax Act (Canada) (“ ETA ”), following the prescribed form and including the prescribed information, with respect to the purchase and sale of the Purchased Assets pursuant to the provisions of this Agreement. Seller shall file the joint election with the return required to be filed by Seller under the ETA for Seller’s reporting period in which the sale was made, in compliance with the requirements of the ETA. “ Applicable Law ” in respect of any person, property, transaction or event, means all present and future laws, statutes, regulations, treaties, judgments and decrees applicable to that person, property, transaction or event and, whether or not having the force of law, all applicable official directives, rules, consents, approvals, authorizations, guidelines, orders and policies of any Government Entity having or purporting to have authority over that Person, property, transaction or event. “ Government Entity ” means the government of any nation, province, municipality, state or other political subdivision of any nation, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing.

3.7. Obligations to National Bank

Seller shall at the Closing pay all amounts owing by it to National Bank of Canada (“ National Bank ”), such amounts so owing at Closing by Seller to National Bank herein collectively called the “ National Bank Closing Balance ”, and shall obtain at Closing from National Bank a discharge of all Encumbrances which National Bank may have in any of the Purchased Assets. Notwithstanding any other provision of this Agreement, if the National Bank Closing Balance is more than Two Million Dollars (CDN$2,000,000) on the Closing Date, Seller may in its sole discretion and on written notice to Buyer on or prior to the Closing

 

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Date postpone the Closing Date to a date which is not more than 30 days after November 15, 2006, in which case the Closing Date shall thereafter and for all purposes of this Agreement be deemed to be such later date identified in Seller’s said notice. Following the delivery of any such notice, Buyer and Seller may by written agreement agree to close sooner and identify additional receivables as Excluded Assets to accommodate such earlier closing.

3.8. Tax Matters .

Seller and Buyer will on Closing jointly execute, and Buyer will file promptly following the Closing Date, an election under subsection 85(1) of the Income Tax Act (Canada) (“ ITA ”) with respect to that portion of Seller’s intellectual property and goodwill forming part of the Purchased Assets which portion has a purchase price equal to CDN$1,064,000 and for which Exchangeable Shares will be issued as consideration pursuant to Section 3.3(a) . Such election will designate that the proceeds of disposition to Seller for the relevant Purchased Assets and the cost of acquisition to Buyer for such Purchased Assets shall be that portion of the Purchase Price so allocated to each Purchased Asset as set out in Schedule 3.8 hereto (the elected amount in respect of each such Purchase Asset called such Purchased Asset’s “ Elected Amount ”).

3.9. Stated Capital Account .

In accordance with the provisions of subsection 24(2) of the Business Corporations Act (Ontario) , Buyer hereby agrees that it shall be add to the stated capital account maintained by the Canadian Subsidiary for its Exchangeable Shares in respect of the Exchangeable Shares to be issued by the Canadian Subsidiary pursuant to Section 3.3(a) hereof the tax cost of the assets received by the Canadian Subsidiary as consideration therefor.

3.10. Adjustment of Elected Amounts .

If Canada Revenue Agency disputes the Elected Amount of any Purchased Asset, the parties hereby agree to amend the ITA elections referred to in Section 3.8 hereof in accordance with the provisions of the ITA and regulations thereunder so that the Elected Amount for such Purchased Asset shall be the amount finally determined as such Elected Amount, whether by agreement among Canada Revenue Agency, Buyer and Seller, by judicial determination beyond any right of further appeal (provided, however, that Buyer shall have been entitled to fully participate in any such judicial determination and/or appeal) or by the expiry or waiver of the right to appeal any determination by Canada Revenue Agency of the Elected Amount (provided, however, that Buyer shall have been afforded full and timely ability to participate in any such appeal).

3.11. Provincial Tax Legislation .

For the purposes of this Agreement, where the context so permits, any reference to the ITA includes a reference to any analogous provincial legislation, any reference to any provision of the ITA includes a reference to the corresponding provision of any such analogous provincial legislation, any reference to Canada Revenue Agency includes a reference to any relevant provincial taxation authority and any reference to a filing or similar requirement imposed under the ITA includes a reference to any corresponding filing or requirement imposed under any such analogous provincial legislation.

 

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3.12. Seller Retention of Closing Receivables

Seller and Buyer shall prior to the Closing Date and by written agreement between them identify receivables of Seller in the amount of the National Bank Closing Balance outstanding on the Closing Date (to a maximum of CDN$1,200,000) which shall be Excluded Assets for all purposes of this Agreement. If such results in part of a receivable being identified as an Excluded Asset, Buyer and Seller shall cooperate with each other in collecting the receivable and allocating its proceeds as between Seller and Buyer in accordance with their respective interest in such receivable.

4. REPRESENTATIONS AND WARRANTIES OF SELLER.

Seller makes the following representations and warranties to Buyer, each of which shall remain unaffected by any investigation heretofore or hereafter made by Buyer, or any knowledge of Buyer other than as specifically disclosed in the Disclosure Schedules delivered to Buyer at the time of the execution of this Agreement as such may be amended prior to Closing, and shall survive the Closing of the transactions provided for herein as herein set out. As used herein, “Knowledge of Seller,” “Seller’s Knowledge” or correlative terms mean, as to a particular matter, the actual knowledge, with inquiry, of the following persons: Mark and Louis. As used herein, “Actual Knowledge of Seller,” “Seller’s Actual Knowledge” or correlative terms mean, as to a particular matter, the actual knowledge, without inquiry, of the following persons: Mark and Louis.

4.1. Corporate .

4.1.(a) Organization . Seller is a corporation duly organized, validly existing and in good standing under the laws of the Province of Ontario.

4.1.(b) Corporate Power . Seller has all requisite power and authority to own, operate and lease its properties, to carry on its business as and where such is now being conducted, to enter into this Agreement and the other documents and instruments to be executed and delivered by Seller pursuant hereto and to carry out the transactions contemplated hereby and thereby.

4.1.(c) Qualification . To the best of Seller’s Knowledge, Seller is duly licensed or qualified to do business, and is in good standing, in each jurisdiction wherein the character of the properties owned or leased by it, or the nature of its business, makes such licensing or qualification necessary. The states in which Seller is licensed or qualified to do business are listed in Schedule 4.1.(c) .

4.1.(d) No Subsidiaries . Except as set forth on Schedule 4.1(d) , no Seller owns any interest in any corporation, partnership or other entity.

4.1.(e) Liftking Incorporated

Seller’s Parent owns all of the issued and outstanding shares of Seller. Louis, Mark, Grace Aldrovandi and the Aldrovandi Family Trust own all of the issued and outstanding shares of Seller’s Parent.

 

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4.2. Authority . The execution and delivery of this Agreement and the other documents and instruments to be executed and delivered by Seller pursuant hereto and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on Seller’s part. No other or further corporate act or proceeding on the part of Seller is necessary to authorize this Agreement or the other documents and instruments to be executed and delivered by a Seller pursuant hereto or the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, the other documents and instruments to be executed and delivered by Seller pursuant hereto will constitute, valid binding agreements of Seller, enforceable in accordance with their respective terms, except as such may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally, and by general equitable principles.

4.3. No Violation . To the best of Seller’s Knowledge, and except as set forth on Schedule 4.3 , neither the execution and delivery of this Agreement or the other documents and instruments to be executed and delivered by Seller pursuant hereto, nor the consummation by Seller of the transactions contemplated hereby and thereby (a) will violate any Applicable Law or Order, (b) will require any authorization, consent, approval, exemption or other action by or notice to any Government Entity (including, without limitation, under any “plant-closing” or similar law), or (c) subject to obtaining the consents referred to in Schedule 4.3 , will violate or conflict with, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, or result in the creation of any Lien (as defined in Section 4.12.(a) ) upon any of the assets of Seller under, any term or provision of the Articles of Incorporation or of any contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which Seller is a party or by which Seller or any of its assets or properties may be bound or affected. For the purposes of this Agreement, “ Order ” means in respect of any person, any order, notice or similar requirement relating to the person issued by any Government Entity.

4.4. Financial Statements . Included as Schedule 4.4 are true and complete copies of the financial statements of Seller consisting of (i) balance sheets of Seller as of December 31, 2003, 2004, and 2005, and the related statements of income and cash flows for the years then ended (including the notes contained therein or annexed thereto), which financial statements have been reported on, and are accompanied by, the signed, unqualified opinions of Seller’s auditor for such years, and (ii) an unaudited balance sheet of Seller as of July 31, 2006 (the “Recent Balance Sheet” ), and the related unaudited statements of income for the 12 months then ended (including the notes and schedules contained therein or annexed thereto). All of such financial statements (including all notes and schedules contained therein or annexed thereto) are true, complete and accurate, have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) (except, in the case of unaudited statements, for the absence of footnote disclosure) applied on a consistent basis, have been prepared in accordance with the books and records of Seller, and fairly present, in accordance with Canadian GAAP, the assets, liabilities and financial position, the results of operations and cash flows of Seller as of the dates and for the years and periods indicated.

 

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4.5. Tax Matters .

4.5.(a) Provision For Taxes . The provision made for taxes on the Recent Balance Sheet is sufficient for the payment of all federal, provincial, foreign, county, local and other income, excise, profits, franchise, occupation, property, payroll, sales, use, gross receipts and other taxes (and any interest and penalties) and assessments, whether or not disputed at the date of the Recent Balance Sheet, and for all years and periods prior thereto. Since the date of the Recent Balance Sheet, Seller has not incurred any taxes other than taxes incurred in the ordinary course of business consistent in type and amount with past practices of Seller.

4.5.(b) Tax Returns Filed . Except as set forth on Schedule 4.5(b) , all federal, provincial, foreign, county, local and other tax returns required to be filed by or on behalf of Seller has been timely filed and when filed were true and correct in all material respects, and the taxes shown as due thereon were paid or adequately accrued. Seller has duly withheld and paid all taxes which it is required to withhold and pay relating to salaries and other compensation heretofore paid to the employees of Seller.

4.5.(c) Tax Assessments . The federal and Provincial income tax returns of Seller has been assessed by Canada Revenue Agency and appropriate Provincial taxing authorities for the periods up to and including July 31, 2005, and Seller has not received from Canada Revenue Agency or from tax authorities of any Provincial, county, local or other jurisdiction any notice of underpayment of taxes or other deficiency which has not been paid or objected to by Seller. There are outstanding no agreements or waivers extending the statutory period of limitations applicable to any tax return of Seller.

4.5.(d) Consolidated Group . Seller has not been a shareholder of an affiliated group of companies that was required to file a consolidated tax return.

4.6. Accounts Receivable . All accounts receivable of Seller reflected on the Recent Balance Sheet, and as incurred in the normal course of business since the date thereof, represent arm’s length sales actually made in the ordinary course of business; are collectible (net of the reserves shown on the Recent Balance Sheet for doubtful accounts in the ordinary course of business without the necessity of commencing legal proceedings; are subject to no counterclaim or setoff; and are not in dispute. Schedule 4.6 contains an aged schedule of accounts receivable included in the Recent Balance Sheet.

 

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4.7. Inventory . All inventory of Seller reflected on the Recent Balance Sheet consists of a quality and quantity usable and saleable in the ordinary course of business (other than inventory which has been written down to nil value in the Recent Balance Sheet), had a commercial value at least equal to the value shown on such balance sheet and is valued in accordance with Canadian GAAP, at the lower of cost (on a LIFO basis) or market. All inventory purchased since the date of such balance sheet consists of a quality and quantity usable and saleable in the ordinary course of business. All inventory of Seller is located on premises owned or leased by Seller as reflected in this Agreement.

4.8. Absence of Certain Changes . Except as and to the extent set forth in Schedule 4.8 , since July 31, 2006, there has not been:

4.8.(a) No Adverse Change . Any material adverse change in the financial condition, assets, Liabilities, business, prospects or operations of Seller;

4.8.(b) No Damage . Any material loss, damage or destruction, whether covered by insurance or not, affecting Seller’s business or properties, other than in the ordinary course of business;

4.8.(c) No Increase in Compensation . Other than as specified in any collective bargaining agreement as which a Seller is a party or in the ordinary course of business consistent with past practice, any increase in the compensation, salaries or wages payable or to become payable to any employee or agent of a Seller (including, without limitation, any increase or change pursuant to any bonus, pension, profit sharing, retirement or other plan or commitment), or any bonus or other employee benefit granted, made or accrued;

4.8.(d) No Labor Disputes . To the Seller’s Knowledge, any labor dispute or disturbance, other than routine individual grievances which are not material to the business, financial condition or results of operations of Seller;

4.8.(e) No Commitments . Any commitment or transaction by Seller (including, without limitation, any borrowing or capital expenditure) other than in the ordinary course of business consistent with past practice;

4.8.(f) No Dividends . Any declaration, setting aside, or payment of any dividend or any other distribution by Seller; any redemption, purchase or other acquisition by Seller of any shares of Seller, or any security relating thereto; or any other payment to any shareholder of Seller;

4.8.(g) No Disposition of Property . Any sale, lease or other transfer or disposition of any properties or assets of Seller, except for the sale, lease, or other transfer or disposition of inventory or rental equipment items in the ordinary course of business;

4.8.(h) No Indebtedness . Except as and to the extent set forth in Schedule 4.8(h) , any new or additional indebtedness for borrowed money incurred, assumed or guaranteed by Seller;

 

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4.8.(i) No Liens . Except as and to the extent set forth in Schedule 4.8(i) , any Lien made or created on any of the properties or assets of Seller;

4.8.(j) No Amendment of Contracts . Any entering into, amendment or termination by Seller of any contract, or any waiver of material rights there under, other than in the ordinary course of business;

4.8.(k) Loans and Advances . Any loan or advance (other than advances to employees in the ordinary course of business for travel and entertainment in accordance with past practice) to any person including, but not limited to, any officer, director or employee of Seller or any of its Affiliates;

4.8.(l) Credit . To the Seller’s Knowledge, any grant of credit to any customer or distributor on terms or in amounts materially more favorable than those which have been extended to such customer or distributor in the past, any other material change in the terms of any credit heretofore extended, or any other material change of Seller’s policies or practices with respect to the granting of credit; or

4.8.(m) No Unusual Events . To the Seller’s Knowledge, any other event or condition not in the ordinary course of business of the Seller.

4.8.(n) Permitted Schedule 4.8 items.

Notwithstanding anything to the contrary in this Agreement, including the representations and warranties contained in this Section 4.8 and elsewhere, the parties acknowledge and agree that Seller is permitted to utilize its working capital in the ordinary course of business.

4.9. Absence of Undisclosed Liabilities . Except as and to the extent specifically disclosed in the Recent Balance Sheet, or in Schedule 4.9 , Seller does not have any Liabilities other than commercial liabilities and obligations incurred since the date of the Recent Balance Sheet in the ordinary course of business. Except as and to the extent described in the Recent Balance Sheet or in Schedule 4.9 , Seller has no Knowledge of any basis for the assertion against Seller of any Liability other than the foregoing described Liabilities, and to Seller’s Actual Knowledge there are no circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may give rise to Liabilities other than the foregoing described Liabilities.

4.10. No Litigation . To the Seller’s Knowledge, except as set forth in Schedule 4.10 there is no Litigation pending, against Seller, its directors (in such capacity), its business or any of its assets, nor has Seller received any oral or written threat of any such Litigation, nor does Seller have any Actual Knowledge of any basis for any Litigation not set forth in Schedule 4.10 . Schedule 4.10 also identifies all Litigation to which Seller has been a party since December 31, 2004. Except as set forth in Schedule 4.10 , neither Seller nor any of Seller’s business or assets is subject to any Order. “ Litigation ” means, in respect of any person, any action, suit or proceeding by or against the person (whether or not purportedly on behalf of the person).

 

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4.11. Compliance With Laws and Orders .

4.11.(a) Compliance . Except as set forth in Schedule 4.11.(a) , to the Seller’s Knowledge, Seller (including each and all of its operations, practices, properties and assets) is in compliance with all Applicable Laws and Orders, including, without limitation, those applicable to discrimination in employment, occupational safety and health, trade practices, competition and pricing, product warranties, zoning, building and sanitation, employment, retirement and labor relations, product advertising and the Environmental Laws as hereinafter defined. Except as set forth in Schedule 4.11.(a) , to the Seller’s Knowledge, Seller has not received notice of any violation or alleged violation of, and is subject to no Liability for past or continuing violation of, any Laws or Orders. All reports and returns required to be filed by Seller with any Government Entity have been filed, and were accurate and complete when filed. Without limiting the generality of the foregoing, to the Seller’s Knowledge:

(i) The operation of Seller’s business as it is now conducted does not, nor does any condition existing at any of the Facilities, in any manner constitute a nuisance or other tortuous interference with the rights of any person or persons in such a manner as to give rise to or constitute the grounds for a suit, action, claim or demand by any such person or persons seeking compensation or damages or seeking to restrain, enjoin or otherwise prohibit any aspect of the conduct of such business or the manner in which it is now conducted.

(ii) Seller has made all required withholdings of amounts in respect of employment insurance and remitted same to the appropriate governmental departments of the jurisdictions where it is required to remit same.

4.11.(b) Licenses and Permits . To the Seller’s Knowledge, Seller has all licenses, permits, approvals, authorizations and consents of all Government Entities and all certification organizations required for the conduct of the business (as presently conducted) and operation of the Facilities. All such licenses, permits, approvals, authorizations and consents are described in Schedule 4.11.(b) , are in full force and effect and are assignable to Buyer in accordance with the terms hereof. Except as set forth in Schedule 4.11.(b) , to the Seller’s Knowledge Seller (including its operations, properties and assets) is and has been within the last 3 years in compliance with all such permits and licenses, approvals, authorizations and consents.

4.11.(c) Environmental Matters . “Environmental Laws” means those Laws applicable to Seller, its business or assets, which Laws relate to pollution or protection of the environment, including Laws relating to emissions, discharges, generation, storage, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic, hazardous or petroleum or petroleum-based substances or wastes ( “Waste” ) into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment , storage, disposal, transport or handling of Waste. Without limiting the generality of the foregoing provisions of this Section 4.11 , to the Seller’s Knowledge Seller is in full compliance with all limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws or contained in any regulations, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved under any such applicable Environmental Laws. Except as set forth in Schedule 4.11.(c) , to the Seller’s Knowledge there is no Litigation nor any demand, claim, hearing or

 

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notice of violation pending against Seller relating in any way to the Environmental Laws or any Order issued, entered, promulgated or approved thereunder, nor has Seller received any oral or written threat of any such Litigation, demand, claim, hearing, or notice. Except as set forth in Schedule 4.11.(c) , to the Seller’s Knowledge, there are no past or present events, conditions, circumstances, activities, practices, incidents, actions, omissions or plans which may interfere with or prevent Seller’s compliance or continued compliance with the Environmental Laws or with any Order issued, entered, promulgated or approved thereunder.

4.12. Title to and Condition of Properties .

4.12.(a) Marketable Title . Seller has good and marketable title to all the Purchased Assets, free and clear of all mortgages, liens (statutory or otherwise), security interests, claims, pledges, licenses, equities, options, conditional sales contracts, assessments, levies, easements, covenants, reservations, restrictions, rights-of-way, exceptions, limitations, charges or encumbrances of any nature whatsoever (collectively, “Liens” ) except those described in Schedule 4.12.(a)(i) . None of the Purchased Assets are subject to any restrictions with respect to the transferability thereof. Seller has complete and unrestricted power and right to sell, assign, convey and deliver the Purchased Assets to Buyer as contemplated hereby. At Closing, Buyer will receive good and marketable title to all the Purchased Assets, free and clear of all Liens of any nature whatsoever except those described in Schedule 4.12.(a)(ii) (w