ASSET PURCHASE AGREEMENT
 
THIS AGREEMENT made as of the 28th day of May, 2008.

BETWEEN:
 
Carleton International, Ltd., a Corporation created under the laws of the
Province of New Brunswick (the “Purchaser”)
and
 
Thomas Equipment, Inc. (formerly known as Thomas Equipment 2004, Inc.), a
Corporation incorporated under the laws of the Province of New Brunswick (the
“Vendor”)

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements herein contained and the sum of $1.00 of lawful money
of Canada and other good and valuable consideration paid by each of the parties
hereto to each of the other parties hereto (the receipt and sufficiency of which
are hereby acknowledged), it is agreed among the parties hereto as follows:

ARTICLE 1 – INTERPRETATION

1.1
Defined Terms.

In this agreement and in the schedules hereto, unless there is something in the
subject matter or context inconsistent therewith, the following terms and
expressions will have the following meanings:

(a) “Affiliate” of any person means any corporation which, directly or
indirectly, is controlled by, controls or is under direct or indirect common
control with such person;

(b)  “arm’s length” will have the meaning ascribed to such term under the Income
Tax Act, S.C. 1970-71-72, c.63 (Canada)

(c)  “Assumed Contracts” means all contracts, agreements, orders, commitments
and other engagements by or with third parties relating to the business which
are included in the Purchased Assets, if any;

(d) “Assumed Liabilities” means the liabilities of the Vendor which are to be
assumed by the Purchaser pursuant to section 2.4 thereof;

(e) “Business Day” means any day other than a day which is a Saturday, a Sunday
or a statutory holiday in New Brunswick;   

(f) “Closing Date” means May 31, 2008, or such other date as the Vendor and
Purchaser may agree upon;

(g) “Closing Time” means the time on the Closing date as the parties hereto may
agree upon;

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(h) “Control” means with respect to any corporation, the ownership of more than
50% of the voting shares of that corporation, including any shares which are
voting only upon the occurrence of a contingency where such contingency has
occurred and is continuing;
 
(i) “Encumbrances” means mortgages, charges, pledges, security interests, and
liens;

(j) “Excluded Assets” means any assets listed in Schedule A hereto;

(k) “Interim Period” means the period from and including the date of this
Agreement to and including the Closing Date;
 
(l) “Leases” means the leases and the agreements to lease under which the Vendor
leases any of the Purchased Assets, as listed in Schedule I attached hereto;

(m) “License Rights” means all license and distribution rights relating to the
Purchased Assets described in Schedule L attached hereto;

(n) “Person” means and includes any individual, corporation, partnership, firm,
joint venture, syndicate, association, trust, government, governmental agency or
board or commission or authority, and any other form of entity or organization;

(o) “Purchase Price” means the amount set forth in section 2.5 hereof;

(p) “Purchased Assets” means the assets which are to be sold by the Vendor to
the Purchaser pursuant to section 2.1 hereof;

(q) “Warranty Claim” means a claim made by either the Purchaser or the Vendor
based on or with respect to the inaccuracy or non-performance or non-fulfillment
or breach of any representation or warranty made by either party contained in
the Agreement or contained in any document or certificate given in order to
carry out transactions contemplated hereby.

1.2
Best of Knowledge.

Any reference herein to “the best of the knowledge of the Vendor” shall mean the
actual knowledge of the Vendor’s officers.

1.3
Schedules.

The schedules which are attached to this agreement are incorporated into this
Agreement by reference and are deemed to be part hereof.

1.4
Currency.

Unless otherwise indicated, all dollar amounts referred to in this Agreement are
in lawful money of the United States of America.

1.5
Choice of Law and Attornment.

This agreement shall be governed by and construed in accordance with the laws of
the Province of New Brunswick and the laws of Canada applicable therein.
 
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1.6
Interpretation Not Affected by Headings or Party Drafting.

The division of this Agreement into articles, sections, paragraphs,
subparagraphs and clauses and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of the
Agreement. The Term “this Agreement”, “hereof”, “herein”, “hereunder” and
similar expressions refer to this Agreement and the schedules hereto and not to
the particular article, section, paragraph, subparagraph, clause or other
portion hereof and include any agreement or instrument supplementary or
ancillary hereto. Each party hereto acknowledges that it and its legal counsel
have reviewed and participated in settling the terms of this Agreement, and the
parties hereby agree that any rule of construction to the effect that any
ambiguity is to be resolved against the drafting party shall not be applicable
in the interpretation of this Agreement.

1.7
Number and Gender.

In this Agreement, unless there is something in the subject matter or context
inconsistent therewith:

 
(a)
words in the singular number include the plural and such words shall be
construed as if the plural had been used;

 
(b)
words in the plural include the singular and such words shall be construed as if
the singular had been used; and

 
(c)
words importing the use of any gender shall include all genders where the
context or party referred to so requires, and the rest of the sentence shall be
construed as if the necessary grammatical and terminological changes had been
made.

ARTICLE 2 – PURCHASE, ASSIGNMENTS, TRANSFERS, AND APPOINTMENTS

2.1
Purchased Assets.

On the terms and subject to the fulfillment of the conditions hereof, Vendor
hereby agrees to sell, transfer and assign to Purchaser, and Purchaser hereby
agrees to purchase and accept from Vendor, all assets owned or leased by Vendor,
including but not limited to machinery, equipment, furniture and leasehold
improvements, except the Excluded Assets listed on Schedule A.

2.2
Unassignable Contracts.

If any rights, benefits or remedies (hereinafter, in this section, collectively
called the “Rights”) under any Assumed Contracts are not assignable by the
Vendor to the Purchaser without the consent of the other party hereto
(hereinafter, in this section, called the “Third Party”) and such consent is not
obtained, then, unless the Purchaser exercises its right under section 6.2
hereof:

 
(a)
The Vendor will hold the right for the benefit of the Purchaser;

 
(b)
The Vendor will, at the request and expense and under the direction of the
Purchaser, in the name of the Vendor or otherwise as the Purchaser shall
specify, take all such actions and do all such things as shall, in the opinion
of the Purchaser, be necessary or desirable in order that the obligations of the
Vendor under such Assumed Contracts may be performed in a manner such that the
value of the Rights shall be preserved and shall enure to the benefit of the
Purchaser and such that all moneys payable under the Assumed Contracts may be
paid by the Purchaser.

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(c)
The Purchaser will promptly pay over to the Vendor all such moneys paid by the
Vendor in respect of such Assumed Contracts; and

 
(d)
To the extent permitted by the Third Party and provided, in the Purchaser’s
opinion, it would not be prejudicial to the Purchaser’s rights to do so, the
Purchaser will perform the obligations under such Assumed Contracts on behalf of
the Vendor, and will indemnify the Vendor against all liabilities, costs and
expenses incurred by the Vendor in performing such obligations.

2.3
Assumed Liabilities.

On the terms and subject to the conditions herein contained, at the Closing Time
Purchaser will assume and thereafter pay, perform, discharge and satisfy the
following liabilities of the Vendor relating to the Purchased Assets, and will
indemnify the Vendor against such liabilities:

 
(a)
all liabilities and obligations of the Vendor accruing on and after the Closing
Date under the Assumed Contracts; and

 
(b)
all liabilities listed on Schedule C.

2.4
Retained Liabilities and Indemnity.

The Purchaser will not assume and will not be liable for, and the Vendor will
indemnify Purchaser from and against, all obligations, commitments and
liabilities of and claims against the Vendor (whether absolute, accrued or
contingent) relating to the Purchased Assets, except for the Assumed
Liabilities. Without limiting the generality of the foregoing, it is agreed that
the Purchaser will have no liability for any of the following obligations or
liabilities:

(a)
all liabilities in respect of all indebtedness of the Vendor to all persons
(other than the Assumed Liabilities referred to in paragraph 2.3 hereof);

(b)
all product liability claims and liabilities for warranty or product return
claims relating to any product or service produced, sold, performed or delivered
by Vendor prior to the Closing Date;

(c)
all liabilities for all taxes, duties, levies, assessments and other such
charges, including any penalties, interest and fines with respect thereto,
payable by the Vendor to any federal, provincial, municipal or other government
or governmental agency, authority, board, bureau or commission, domestic or
foreign, including, without limitation, any taxes in respect of or measured by
the sale, consumption or performance by the Vendor of any product or service
prior to the Closing Date;

(d)
all liabilities for salary, bonus, and other compensation and all liabilities
under employee benefits plans of the Vendor relating to employment of all
persons in the business prior to the Closing Date.

2.5
Purchase Price.

The Purchase Price payable by the Purchaser to the Vendor for the Purchased
Assets will be US$ one million, five hundred thousand dollars ($1,500,000.00).

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2.6
Payment of Purchase Price.

At Closing Time, the Purchaser will pay by bank wire transfer the Sum of
US$1,000,000 (One Million Dollars). Also at Closing time, the Purchaser will
issue to Vendor a junior note for the sum of US$500,000 (Five Hundred Thousand
Dollars). Such note shall have a maturity date equal to the earlier of 1) The
Purchaser’s closing on funding associated with the New Brunswick loan guarantee;
or, 2) a term of six (6) months. At the maturity date or payment date, whichever
is earlier, the note and accrued interest at a rate of ten percent (10%) per
annum shall be payable in full.

Payment shall be made directly to the following:

Bank:
Capital One Bank, NA
 
404 Fifth Ave, Suite 1
 
New York, NY 10017
Account No.:
270-406-0132
ABA No.:
021407912
Account Name: 
LV Administrative Services

 

2.7
Allocation of Purchase Price.

The Purchase Price shall be allocated among the Purchased Assets in the manner
mutually agreed upon by Vendor and Purchaser. The Vendor and the Purchaser shall
file their respective tax returns prepared in accordance with such allocation.

2.8
Payment of Taxes.

The Purchaser shall be liable for and shall pay all applicable federal and
provincial sales taxes, land transfer taxes, goods and services taxes, excise
taxes and all other taxes (other than income taxes of the Vendor), duties and
other like charges property payable upon and in connection with the conveyance
and transfer of the Purchased Assets to the Purchaser. The Vendor will do and
cause to be done such things as are reasonably requested to enable the Purchaser
to comply with such obligations in an efficient manner.

Under no circumstances shall the Purchaser be responsible for any taxes, fees or
other obligations associated with the tax period(s) prior to the Closing Date.

2.9
Goods and Services Tax Exemption.

(a) The Vendor hereby represents and warrants to the Purchaser that the Vendor
is registered for purposes of Part IX of the Excise Tax Act, R.S.C. 1985, c.
E-13 (Canada) (hereinafter, in this section, called the “GST Legislation”);

(b) The Purchaser hereby represents and warrants to the Vendor that the
Purchaser is registered for the purposes of GST Legislation;

(c) If applicable, the Vendor and the Purchaser will jointly execute in
prescribed form, and the Vendor will file within the required time, an election
under s. 167(1) of the Excise Tax Act (Canada) that no tax be payable pursuant
to the GST Legislation with respect to the purchase and sale of the Purchased
Assets hereunder; and,

(d) The Purchaser will indemnify the Vendor against any tax, interest or
penalties arising from a determination that the conditions for filing the
election pursuant to s. 167(1) of the Excise tax Act (Canada) have not been
satisfied for any reason other than the inaccuracy of any of the representations
and warranties made by the Vendor pursuant to paragraph (a) of this section.

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2.10
Transfer of Employees.

Vendor will transfer to Purchaser certain of its employees (hereinafter to
referred to as “the Transferring Employees”) listed on Schedule B attached
hereto. Purchaser will employ the Transferring Employees in their current
capacities or in promoted capacities with remuneration and benefits equal to or
greater than their employment position with Vendor at Closing Time. All accrued
benefits related to past service of the Transferring Employees will be assumed
by Purchaser. Purchaser understands that Vendor cannot force any individual
Transferring Employee to accept their respective employment transfer to
Purchaser. In the event any individual Transferring Employee chooses not to be
transferred to Purchaser, then Purchaser will not be obligated to employ such
Transferring Employee and will not be responsible for any remuneration,
severance pay, or benefits to such Transferring Employee. Schedule B also sets
forth the names of all Transferring Employees who are now on disability,
maternity or other authorized leave or who are receiving workers’ compensation
or short-term or long-term disability benefits.

2.11
Agreements Regarding Intellectual Property.

Vendor will provide Purchaser the ability to utilize the Thomas Equipment
trademarks and tradenames on an exclusive basis for Purchaser’s agricultural and
screener product lines. The exclusive rights will be subject to proper use and
other provisions as to be described and mutually agreed upon in a separate
license agreement to be completed within thirty days after the Closing Date of
this Agreement. Purchaser will also be provided exclusive rights to all of
Vendor’s trade secrets, industrial designs and product specifications related to
the agricultural and screener product lines. The trademarks, tradenames, trade
secrets, industrial designs and product specifications are hereinafter referred
to in this Agreement as “the Intellectual Property”.

2.12
Agreements Regarding Activities During Interim Period.

On or about the date of this Agreement and prior to Closing Time, Vendor will
stop production of products for sale and will conduct a physical inventory count
of all inventory items and other physical assets and will segregate them between
what is or will be owned by Vendor and Purchaser. Labor and other related costs
to conduct the inventory and segregation activities during the Interim Period
will be split equally between Vendor and Purchaser.

2.13
Agreements Regarding Appointment of Purchase as Dealer.

Upon the Closing Date or within a reasonable timeframe thereafter, Vendor will
appoint Purchaser as a dealer of Vendor’s skidsteer products in those markets
including Grand Falls NB, Florenceville NB, Prince Edward Island, and Presque
Isle Maine under Vendor’s standard dealer terms and conditions; however,
appointment of Purchaser as a dealer in Presque Isle is conditioned upon
successful termination/resignation of our Vendor’s current dealer for that
region with Maine Potato Growers (“MPG”). Vendor will apply it best efforts to
affect such termination/resignation of MPG. Upon mutual agreement Vendor may
also appoint additional dealerships in other territories for Vendor so long as
such dealership appointments are not in direct competition with Vendor’s other
existing dealerships in those territories. The Vendor and Purchaser will enter
into separate dealership agreements which will set forth all related terms and
conditions.

2.14
Agreements Regarding Post Closing Services.

Vendor and Purchaser acknowledge that for a period of time subsequent to Closing
that access to each other’s employees, computer systems, phone systems, office
equipment, furniture and leaseholds will be necessary for transition purposes.
Vendor and Purchaser will enter into a separate services agreement which will
set forth all related terms and conditions for the sharing of employees,
computer systems, office equipment, furniture, leaseholds and facilities. Vendor
will also be permitted to use a portion of the facility in Centereville to
continue its operations as outlined in a sublease between Vendor and Purchaser
dated as of January 1, 2008.

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2.15
Agreements Regarding Outsourcing Production.

Subsequent to the Closing Date Vendor desires to have Purchaser manufacture
skidsteers for Vendor on a nonexclusive basis. Vendor and Purchaser will enter
into a separate outsourcing agreement which will set forth all related terms and
conditions for the manufacture of skidsteers for Vendor.

ARTICLE 3 – REPRESENTATIONS AND WARRANTIES

3.1
Representations and Warranties by the Vendor.

The Vendor hereby represents and warrants to the Purchaser as follows, and
confirms that the Purchaser is relying upon the accuracy of each and every such
representation and warranty in connection with the purchase of the Purchased
Assets and the completion of the other transactions hereunder:

(a) Corporate Authority and Binding Obligation. The Vendor has good right, full
corporate power and absolute authority to enter into this Agreement and to sell,
assign and transfer the Purchased Assets to the Purchaser in the manner
contemplated herein and to perform all of the Vendor’s obligations under this
Agreement. The Vendor and its board of directors have taken all necessary or
desirable actions, steps and corporate and other proceedings to approve or
authorize, validly and effectively, the entering into, and the execution,
delivery and performance of this agreement and the sale and transfer of the
Purchased Assets by the Vendor to the Purchaser. This Agreement is a legal,
valid and binding obligation of the Vendor, enforceable against the Vendor in
accordance with its terms subject to (i) bankruptcy, insolvency, moratorium,
reorganization and other laws relating to or affecting the enforcement of
creditors’ rights generally, and (ii) the fact that equitable remedies,
including the remedies of specific performance and injunction, may only be
granted in the discretion of a court.

(b) No other Purchase Agreements. No person has any agreement, option,
understanding or commitment, or any right or privilege (whether by law,
preemptive or contractual) capable of becoming an agreement, option or
commitment, for the purchase or other acquisition from the Vendor of any of the
Purchased Assets, or any rights or interest therein, other than in the ordinary
course of business.

(c) Contractual and Regulatory Approvals. Except as specified in Schedule D
attached hereto, the Vendor is not under any obligation, contractual or
otherwise, to request or obtain the consent of any person and no permits,
licenses, certifications, authorizations or approvals of, or notifications to,
any federal, provincial, municipal or local government or governmental agency,
board, commission or authority are required to be obtained by the Vendor in
connection with the execution, delivery or performance by the Vendor of the
Agreement or the completion of any of the transactions contemplated herein;

(d) Not used.

(e) Status and Governmental Licenses.

(i) The Vendor is a corporation duly incorporated and validly subsisting in all
respects under the laws of its jurisdiction of incorporation. The Vendor has all
necessary corporate power to own its property and to carry on its business as it
is now being conducted.

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(ii)  The Vendor holds all necessary licenses, registrations and qualifications
in each jurisdiction in which it owns or leases any of the Purchased Assets.
 
(f) Compliance with Constating Documents, Agreements and Laws. The execution,
delivery and performance of this Agreement and each of the other agreements
contemplated or referred to herein by the Vendor, and the completion of the
transaction contemplated hereby, will not constitute or result in a violation,
breach or default, or cause the acceleration of any obligation which are
included in the Assumed Liabilities, under:

(i) any term or provision of any of the articles, by-laws or other constating
document of the Vendor;

(ii) subject to obtaining the contractual consents referred to on schedule D
hereof, the terms of any indenture, agreement (written or oral), instrument or
understanding or other obligation or restriction to which the Vendor is a party
or by which it is bound, including, without limitation, any of the Assumed
Contracts; or

(iii) subject to obtaining the regulatory consents referred to in Schedule D
hereof, any term or provision of any of the Licenses or any order of the Court,
governmental authority or regulatory body or any law or regulation of any
jurisdiction in which the Purchased Assets are located.

(g) Liabilities. There are no liabilities (contingent or otherwise) of the
Vendor of any kind whatsoever in respect of which the Purchaser may become
liable on or after the consummation of the transactions contemplated by the
Agreements, except the Assumed Liabilities.
 
(h) Tax Matters.

     

(i) For purposes of the Agreement, the term “Governmental Charges” means and
includes all taxes, customs duties, rates, levies, assessments, reassessments
and other charges, together with all penalties, interest and fines with respect
thereto, payable to any federal, provincial, municipal, local or other
government or governmental agency, authority, board, bureau or commission,
domestic or foreign.

     

(ii) Except as set forth in Schedule E, (i) the Vendor has paid all Governmental
Charges with respect to the Purchased Assets which are due and payable by it on
or before the date thereof; (ii) there are no actions, suits, proceedings,
investigations, inquiries or claims now pending or made or, to the best of
Vendor’s knowledge, threatened against the Vendor in respect of Governmental
Charges with respect to the Purchased Assets; and (iii) the Vendor has withheld
from each amount paid or credited to any person the amount of Governmental
Charges related to the transfer of the Purchased Assets to the proper tax or
other receiving authorities within the time required under applicable
legislation.

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(i)  Litigation.

Except for the matters herein referred to in Schedule F attached hereto, there
are no actions, suits or proceedings, judicial or administrative (whether or not
purportedly on behalf of the Vendor) pending or, to the best of the knowledge of
the Vendor, threatened, by or against or affecting the Vendor which relate to
Purchased Assets, at law or in equity, or before or by any court or any federal,
provincial, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. Except for the matters
referred to in Schedule F there are no grounds on which any such action, suit or
proceeding might be commenced with any reasonable likelihood of success.
 
(j) Environmental Matters.

(i) For the purposes of this Agreement, the following terms and expressions
shall have the following meanings:

(1) “Environmental Laws” means all applicable statutes, regulations, ordinances,
by-laws and codes and all international treaties and agreements, now or
hereafter in existence in Canada (whether federal, provincial or municipal) and
in the United States (whether federal, state or local) relating to the
protection and preservation of the environment, occupational health and safety,
product safety, product liability or Hazardous Substances, including, without
limitation, the Canadian Environmental Protection Act,1999 R. S. C. 1985 c.16
(4th Supp.), as amended from time to time (“the CEPA”).

(2) “Environmental Permits” includes all orders, permits, certificates,
approvals, consents, registrations, and licenses issued by any authority of
competent jurisdiction under Environmental Laws.

(3) “Hazardous Substances” means collectively, any contaminant (as defined in
the CEPA), toxic substances (as defined in the CEPA), dangerous goods (as
defined in the Transportation of Dangerous Goods Act, R.S.C. 1985, c. T-17
(Canada), as amended from time to time) or pollutant or any other substance
which when released to the natural environment is likely to cause, at some
immediate or future time, material harm or degradation to the natural
environment or material risk to human health.  

(4) “Release” means any release, spill leak, emission, discharge, leach,
dumping, escape or other disposal which is or has been made in contravention of
any Environmental Laws.

(ii) To the best of Vendor’s knowledge, except as disclosed in Schedule G
attached hereto, the Purchased Assets, and the use, maintenance and operation
thereof have been and are in compliance with all Environmental Laws. The Vendor
has complied with all reporting and monitoring requirements under all
Environmental Laws. The Vendor has not received any notice of any non-compliance
with any Environmental Laws, and the Vendor has never been convicted an offence
for non-compliance with any Environmental Laws or been fined or otherwise
sentenced or settled such prosecution short of conviction.

(iii) To the best of Vendor’s knowledge, except as disclosed in Schedule G,
there are no Hazardous Substances located in or on any of the Purchased Assets,
and no Release of any Hazardous Substances has occurred in or from the Purchased
Assets.

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(iv) Without limiting the generality of the foregoing,  to the best of Vendor’s
knowledge, the Vendor has obtained all Environmental Permits necessary to own,
use and operate the Purchased Assets. To the best of Vendor’s knowledge all
Environmental Permits may be validly transferred and will be transferred, to the
Purchaser, at Purchaser’s sole expense, at the closing. No such permits shall
become void or voidable as a result of the consummation of the transaction
contemplated hereby; and no consent to such transaction is required to maintain
said Environmental Permits in full force and effect.

(v) The Vendor agrees to assist the Purchaser with filing all necessary
applications and transferring or obtaining all necessary Environmental Permits
at Purchaser’s sole expense.

(vi) To the best of Vendor’s knowledge, except as disclosed in Schedule G, there
are no underground or surface storage tanks or urea formaldehyde foam
insulation, asbestos, polychlorinated biphenyls (PCBs) or radioactive substances
located in or on any of the Purchased Assets. To the best of Vendor’s knowledge,
the Vendor is not responsible for any clean-up or corrective action under any
Environmental Laws related to the Purchased Assets. To the best of Vendor’s
knowledge there has never been conducted or caused to be conducted an
environmental audit, assessment or study of any of the Purchased Assets.

(k) Titles to assets. The Vendor is the owner of and has good and marketable
title to all of the Purchased Assets, except for the encumbrances described in
Schedule H, attached hereto, all of which will be discharged prior to the
conveyance of the Purchased Assets to the Purchaser at the Closing Time.

(l) Work Orders and deficiencies. There are no outstanding work orders,
non-compliance orders, deficiency notices or other such notices relative to the
Purchased Assets which have been issued by any regulatory authority, police or
fire department, sanitation, environment, labour, health or other environmental
authorities or agencies. There are no matters under discussion with any such
department or authority relating to work orders, non-compliance orders,
deficiency notices or other such notices. The Purchased Assets are not being
used or operated in a manner which is in contravention of any statute,
regulation, rule, code, standard or policy.

(m) Leases of Personal Property. Schedule I attached hereto describes all leases
of the Purchased Assets. Complete and correct copies of those leases have been
made available to the Purchaser. The Vendor is entitled to all rights and
benefits as lessee under those leases, and the Vendor has not sublet, assigned,
licensed or otherwise conveyed any rights in the leases or in the property
leased thereunder to any other person. All payments and other obligations
required to be paid and performed by the Vendor under those leases have been
duly paid and performed. The Vendor is not in material default in any of its
obligations under those leases; and, to the best of the knowledge of the Vendor,
none of the lessors or any other parties to those leases are in material default
of any of their obligations under those leases. The Vendor is entitled to assign
all of its rights and interest under those leases and in and to the property
leased thereunder to the Purchaser subject to obtaining the consents referred to
in Schedule I attached hereto. Subject to obtaining such consents, the terms and
conditions of those leases will not be affected by, nor will any of those leases
be in default of, the completion of the transaction contemplated hereunder.

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(n) Intellectual Property.

(i)  The Vendor has good and valid title to all of the Intellectual Property,
free and clear of any and all encumbrances, except in the case of any
Intellectual Property licensed to the Vendor as disclosed in Schedule J.
Complete and correct copies of all agreements whereby any rights in any of the
Intellectual Property have been granted or licensed to the Vendor have been made
available to the Purchaser. No royalty or other fee is required to be paid by
the Vendor to any other person in respect of the use of any of the Intellectual
Property except as provided in such agreements included in schedule J. The
Vendor has protected its rights in the Intellectual Property in the manner and
the extent described in Schedule J. Except as indicated in Schedule J, the
Vendor has the right to use all of the Intellectual Property. Complete and
correct copies of all agreements whereby any rights in any of the Intellectual
Property have been granted or licensed by the Vendor to any other person has
been made available to the Purchaser. The Vendor is entitled to assign any or
all of its rights and interest in and to the Intellectual Property to the
Purchaser subject to obtaining any applicable third party consents.

(iii) Subject to obtaining the aforesaid consents, and except as disclosed in
Schedule J there are no restrictions in the ability of the Vendor or any
successor to or assignee for the Vendor to use and exploit all rights in the
Intellectual Property. All statements contained in all applications for
registration of the Intellectual Property, if any, were true and correct as of
the date of such applications.

(iv) To the best of Vendor’s knowledge, the use of the Intellectual Property
does not infringe, and the Vendor has not received a notice, complaint, threat
or claim alleging infringement of, any patent, trademark, trade name, copyright,
industrial design, trade secret or other intellectual property or proprietary
right of any other person, and the use of the Intellectual Property does not
include any activity which may constitute passing off.

(o) Affiliates. No part of the Purchased Assets are owned or operated by an
Affiliate of the Vendor.

(p) Warranties and Discounts. Except as described in Schedule K attached hereto,
there are no obligations under warranty or discount arrangements for which the
Purchaser may become liable, except those included in the Assumed Liabilities.

(q) Licenses, Agency and Distributorship Agreements.

Schedule L attached hereto lists all agreements to which the Vendor is a party
or by which it is bound under which the right to manufacture, use or market any
product, service, technology, information, data, computer hardware or software
or other property included in the Purchased Assets has been granted, licensed or
otherwise provided to the Vendor or by the Vendor to any other person or under
which the Vendor has been appointed or any person has been appointed by the
Vendor as an agent, distributor, licensee or franchisee for any of the
foregoing. Complete and correct copies of all of the agreements relating to the
License Rights have been made available to the Purchaser. The Vendor is entitled
to assign all of its interest in the License Rights to the Purchaser subject to
obtaining any applicable third party consents. None of the agreements relating
to the License Rights grant to any person any authority to incur any liability
or obligation or to enter into any agreement on behalf of the Vendor.

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(r)  Outstanding Agreements.

The Vendor is not a party to or bound by any outstanding or executory agreement,
contract or commitment, whether written or oral, relating to the Purchased
Assets, except for:

 
(i)
any contract, lease or agreement described or referred to in this Agreement or
in the schedules hereto; and,

 
(ii)
any contract, lease or agreement made in the ordinary course of the routine
daily affairs under which the Vendor has a financial obligation of less than
$10,000 per annum and which can be terminated by the Vendor without payment of
any damages, penalty or other amount by giving not more than 180 days notice.

Complete and correct copies of each of the contract, leases and agreements have
been made available to the Purchaser.

(s) Good Standing of Agreements.

To the best of Vendor’s knowledge, the Vendor is not materially in default or
breach of any of its obligations under any one or more contracts, agreements
(written or oral), commitments, indentures or other instruments to which it is a
party or by which it is bound relating to the Purchased Assets, and there exists
no state of facts which, after notice or lapse of time or both, would constitute
such a material default or breach. All such contracts, agreements, commitments,
indentures and other instruments are now in good standing and in full force and
effect, the Vendor is entitled to all benefits thereunder and, to the best of
the knowledge of the Vendor, the other parties to such contracts, agreements,
commitments, indentures and other instruments are not in material default or
breach of any of their obligations thereunder. There are no contracts,
agreements, commitments, indentures or other instruments relating to the
Purchased Assets under which the Vendor’s rights or the performance of its
obligations are dependent upon or supported by the guarantee of or any security
provided by any other person.

(t) (not used)
 
(u) Employment Agreements.

The Vendor is not a party to any written or oral employment, service or
consulting agreement relating to any one or more of the Transferring Employees,
except for oral employment agreements which are of indefinite term and without
any special arrangements or commitments with respect to the continuation of
employment or payment of any particular amount upon termination of employment.
There are no Transferring Employees of the Vendor who cannot be dismissed upon
such period of notice as is required by law in respect of a contract of hire for
an indefinite term.

(v) Labour Matters and Employment Standards.
 
(i) The Vendor is not subject to any agreement with any labour union or employee
association and has not made any commitment to or conducted negotiations with
any labour union or employee association with respect to any future agreement
and, to the best of the knowledge of the Vendor, there is no current attempt to
organize, certify or establish any labour union or employee association, in
relation to any of the Transferring Employees.

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(ii) There are no existing or, to the best of the knowledge of the Vendor,
threatened, labour strikes or labour disputes, grievances, controversies or
other labour troubles affecting the Transferring Employees.

(iii) The Vendor has complied with all applicable laws, rules, regulations and
orders relating to employment of the Transferring Employees including those
relating to wages, hours, collective bargaining, occupational health and safety,
workers’ hazardous materials, employment standards, pay equity and workers’
compensation. There are no outstanding charges or complaints against the Vendor
relating to unfair labour practices or discrimination or under any legislation
relating to Transferring Employees.

(w) Employee Benefit and Pension Plans.

(i)  Except as listed in Schedule M attached hereto, the Vendor does not have,
and is not subject to any present or future obligation or liability under, any
pension plan, deferred compensation plan, retirement income plan, stock option
or stock purchase plan, profit sharing plan, bonus plan or policy, employee
group insurance plan, hospitalization plan, disability plan, or other employee
benefit plan, program, policy or practice, formal or informal, with respect to
any of the Transferring Employees, other than the Canada Pension Plan R.S.C.
1985, c. C-8, and other similar health plans. Vendor has made available to
Purchaser general policies, procedures and work-related rules in effect with
respect to Transferring Employees, whether written or oral, including but not
limited to policies regarding holidays, sick leave, vacation, disability and
death benefits, termination and severance pay, automobile allowances and rights
to company-provided automobiles and expense reimbursements. (The plans,
programs, policies, practices and procedures are hereinafter collectively called
the “Benefit Plans”). Complete and correct copies of all documentation
establishing or relating to the Benefit Plans or, where such Benefit Plans are
oral commitments, written summaries of the terms thereof, and the most recent
financial statements and actuarial reports related thereto and all reports and
returns in respect thereof filed with any regulatory agency within three years
prior to the date hereof have been made available to the Purchaser.

(ii) The pension plans included in the Benefit Plans, if any, are registered
under and are in compliance with all applicable federal and provincial
legislation and all reports, returns and filings required to be made thereunder
have been made. Such pension plans have been administered in accordance with
their terms and the provisions of applicable law. Each pension plan is a defined
contribution plan and has been funded in accordance with the requirements of
such plans.

(iii) There are no pending claims by any Transferring Employee covered under the
Benefit Plans or by any other person which allege a breach of fiduciary duties
or violation of governing law or which may result in liability to the Vendor
and, to the best of the knowledge of the Vendor, there is no basis for such a
claim. There are no Transferring Employees who are receiving from the Vendor any
pension or retirement payments or who are entitled to receive any such payments
not covered by a pension plan to which the Vendor is a party.

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(x)Insurance.

Vendor currently maintains insurance on the Purchased Assets. Complete and
correct copies of all such insurance policies have been made available to
Purchaser. Such insurance policies are in full force and effect and Vendor is
not in default with respect to the payment of any premium or compliance with any
of the provisions contained in any such insurance policy. To the best of the
knowledge of the Vendor, there are no circumstances under which the Vendor would
be required to or, in order to maintain its coverage, should give any notice to
the insurers under any such insurance policies which has not been given. The
Vendor has not received notice from any of the insurers regarding cancellation
of such insurance policies. The Vendor has not failed to give any notice of or
to present any claim under any such insurance policy in due and timely fashion.
The Vendor has not received notice from any of the insurers denying any claim.

(y)Non-Arm’s Length Matters.

With respect to the Purchased Assets, the Vendor is not a party to or bound by
any agreement with, is not indebted to, and no amount is owing to the Vendor by,
any of the Affiliates of the Vendor.

(z)Government Assistance.

Schedule N attached hereto describes all agreements, loans, other funding
arrangements and assistance programs (collectively called “Government Assistance
Programs”) which have been provided to the Vendor related to the Purchased
Assets from any federal, provincial, municipal or other government or
governmental agency, board, commission or authority, domestic or foreign
(collectively called “Government Agencies”). Complete and correct copies of all
documents relating to the Government Assistance Programs have been made
available to the Purchaser. The Vendor has performed all of its obligations
under the Governmental Assistance Programs, and no basis exists for any
Government Agencies to seek payment or repayment of any amount or benefit
provided under any of the Government Assistance Programs, except as indicated on
Schedule N.
 
(aa) Compliance with Laws.

In relation to the Purchased Assets, the Vendor is not in violation of any
federal, provincial or other law, regulation or order of any government or
governmental or regulatory authority, domestic or foreign.

(bb)Vendor’s Residency.

The Vendor is not a non-resident of Canada within the meaning of the Income tax
Act, S.C. 1970-71-72, c.63 (Canada).

(cc)Copies of Documents.

Complete and correct copies (including all amendments) of all contracts, leases
and other documents referred to in this Agreement or any schedule hereto have
been made available to the Purchaser.

(dd)Disclosure.

No representation or warranty contained in this section 3.1, and no statement
contained in any schedule, certificate, list, summary or other disclosure
document provided or to be provided to the Purchaser pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or, to the best of Vendor’s knowledge,
omits or will omit to state any material fact which is necessary in order to
make the statements contained therein not misleading.

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3.2
Representations and Warranties by the Purchaser.

The Purchaser hereby represents and warrants to the Vendor as follows, and
confirms that the Vendor is relying upon the accuracy of each of such
representations and warranties in connection with the sale of the Purchased
Assets and the completion of the other transactions hereunder:
 
(a) Corporate Authority and Binding Obligation.

The Purchaser is a corporation duly incorporated and validly subsisting in all
respects under the laws of its jurisdiction of incorporation. The Purchaser has
good right, full corporate power and absolute authority to enter into this
agreement and to purchase the Purchased Assets from the Vendor in the manner
contemplated herein and to perform all the Purchaser’s obligations under this
Agreement. The Purchaser and its shareholders and board of directors have taken
all necessary or desirable actions, steps and corporate and other proceedings to
approve or authorize, validity and effectively, the entering into of, and the
execution, delivery and performance of, this Agreement and the purchase of the
Purchased Assets by the Purchaser from the Vendor. This agreement is a legal,
valid and binding obligation of the Purchaser, enforceable against it in
accordance with its terms subject to bankruptcy, insolvency, moratorium,
reorganization and other laws relating to or affecting the enforcement of
creditors’ rights generally and the fact that equitable remedies, including the
remedies of specific performance and injunction, may only be granted in the
discretion of a court.

(b) Contractual and Regulatory Approvals.

Purchaser is not under any obligation, contractual or otherwise to request or
obtain the consent of any person, and no permits, licenses, certifications,
authorizations or approvals of, or notification to, any federal, provincial,
municipal or local government or governmental agency, board, commission or
authority are required to be obtained by the Purchaser in connection with the
execution, delivery or performance by the Purchaser of this Agreement or the
completion of any of the transactions contemplated herein. Complete and correct
copies of any agreements under which the Purchaser is obligated to request or
obtain any such consent have been provided to the Vendor.

(c) Compliance with Constating Documents, Agreements and Laws.

The execution, delivery and performance of this Agreement and each of the other
agreements contemplated or referred to herein by the Purchaser, and the
completion of the transaction contemplated hereby, will not constitute or result
in a violation or breach of or default under any term or provision of any of the
articles, by-laws or other constating documents of the Purchaser, the terms of
any indenture, agreement (written or oral), instrument or understanding or other
obligation or restriction to which the Purchaser is a party or by which it is
bound, or subject to obtaining the regulatory consents, any term or provision of
any licences, registrations or qualification of the Purchaser or any order of
any Court, governmental authority or regulatory body or any applicable law or
regulation of any jurisdiction.

(d) Copies of Documents.

Complete and correct copies (including all amendments) of all Vendor contracts,
leases and other documents referred to in this Agreement or any schedule hereto
have been made available to the Purchaser by the Vendor.

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ARTICLE 4 – SURVIVAL AND LIMITATIONS OF REPRESENTATIONS AND WARRANTIES

4.1
Survival of Warranties by the Vendor.

The representations and warranties made by the Vendor and contained in this
Agreement, or contained in any document or certificate given in order to carry
out the transactions contemplated hereby, will survive the closing of the
purchase of the Purchased Assets provided for herein and, notwithstanding such
closing or any investigation made by or on behalf of the Purchaser or any other
person or any knowledge of the Purchaser or any other person, shall continue in
full force and effect for the benefit of the Purchaser, subject to the following
provisions of this section. No Warranty Claim may be brought by the Purchaser
after the date which is 360 days following the Closing Date.

After the expiration of the period of time aforesaid, the Vendor will be
released from all obligations and liabilities in respect of the representations
an warranties made by the Vendor and contained in this Agreement or in any
document or certificate given in order to carry out the transaction contemplated
hereby except with respect to any claims made by the Purchaser in writing prior
to the expiration of such period and subject to the rights of the Purchaser to
make any claim permitted by paragraph (b) of this section.

4.2
Survival of Warranties by Purchaser.

The representations and warranties made by the Purchaser and contained in this
Agreement or contained in any document or certificate given in order to carry
out the transactions contemplated hereby will survive the closing of the
purchase and sale of the Purchased Assets provided for herein and,
notwithstanding such closing or any investigation made by or on behalf of the
Vendor or the Shareholder or any other person or any knowledge of the Vendor or
the Shareholder or any other person, shall continue in full force and effect for
the benefit of the Vendor provided that no Warranty Claim may be brought by the
Vendor after the date which is 360 days following the Closing Date.

4.3
Limitations on Warranty Claims.

(a) The Purchaser shall not be entitled to make a Warranty Claim if the
Purchaser has knowledge prior to the Closing Time of the inaccuracy,
non-performance, non-fulfillment or breach which is the basis for such Warranty
Claim and the Purchaser competes the transactions hereunder notwithstanding such
inaccuracy, non-performance, non-fulfillment or breach.

(b) The amount of any damages which may be claimed by the Purchaser pursuant to
a Warranty Claim shall be calculated to be the cost or loss to the Purchaser
after giving effect to:

(i) any insurance proceeds available to the Purchaser in relation to the matter
which is the subject of the Warranty Claim, and

(ii) the value of any related, determinable tax benefit realized, or to be
realized within 5 years following the date of incurring such cost or loss, by
the Purchaser in relation to the matter which is the subject of the Warranty
Claim.

(c)  The Purchaser shall not be entitled to make any Warranty Claim until the
aggregate amount of all damages, losses, liabilities and expenses incurred by
the Purchaser as a result of all misrepresentations and breaches of warranties
contained in this Agreement or contained in any document or certificate given in
order to carry out the transactions contemplated hereby, after taking into
account paragraph (b) of this section is equal to $250,000. After the aggregate
amount of such damages, losses, liabilities and expense incurred by the
Purchaser exceeds $250,000 the Purchaser shall only be entitled to make Warranty
Claims to the extent that such aggregate amount, after taking into account the
provisions of paragraph (b) of this section, exceeds $250,000.

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(d)  Notwithstanding any other provisions of this Agreement or of any agreement,
certificate or other document made in order to carry out the transactions
contemplated hereby, the maximum aggregate liability of the Vendor together in
respect of all Warranty Claims by the Purchaser will be limited to the Purchase
Price.

ARTICLE 5 – COVENANTS

5.1
Covenants by the Vendor.

(a) Transfer of Purchased Assets.

At or before the Closing Time, the Vendor will cause all necessary steps and
corporate proceedings to be taken in order to permit the Purchased Assets to be
duly and regularly transferred to the Purchaser.

(b) General Conveyance.

At the Closing Time, the Vendor will deliver to the Purchaser good and
marketable title to and exclusive possession of the Purchased Assets, free and
clear of any and all Encumbrances. At the Closing Time, the Vendor will execute
and deliver to the Purchaser one or more forms of general conveyance or bills of
sale in respect of the assignment, conveyance, transfer and delivery of the
Purchased Assets to the Purchaser in form acceptable to the Purchaser.
 
(c)Transfer of Assumed Contracts.

Within 30 days after the Closing Time, the Vendor will deliver to the Purchaser:

(i)  an executed original of each of the Assumed Contracts which it has in its
possession;

(ii) one or more forms of assignment of the Assumed Contracts in form acceptable
to the Purchaser, and

(iii) consents to the assignment of all of the Assumed Contracts under which
consent is required executed by all persons whose consent is required in form
acceptable to the Purchaser.

(d)Post-Closing Access.

After the Closing Date, upon reasonable notice, the Vendor shall give to the
representatives, employees, counsel and accountants of the Purchaser, access,
during normal business hours, to the business records which relate to periods
prior to the Closing Date and will permit such persons to examine and copy such
records to the extent reasonably requested by the Purchaser in connection with
the preparation of tax and financial reporting matters, audits, legal
proceedings, governmental investigations and other business purposes. However,
the Vendor shall not be obliged to take any action pursuant to this subsection
that would unreasonably disrupt the normal course of its business, violate the
terms of any contract to which it is a party or to which the Vendor or any of
its assets is subject or to grant access to any of its proprietary, confidential
or classified information.

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5.2
Covenants by the Purchaser.

The Purchaser covenants to the Vendor that it will do or cause to be done the
following:

(a)Confidentiality.

Prior to the Closing Time and, if the transaction contemplated hereby is not
completed, at all times after the Closing Time, the Purchaser will keep
confidential all information obtained by it relating to the business, except
such information which:

(i) Prior to the date hereof was already in the possession of the Purchaser, as
demonstrated by written records;

(ii) Is generally available to the public, other than as a result of a
disclosure by the Purchaser, or

(iii) Is made available to the Purchaser on a non-confidential basis from a
source other than the Vendor or its representatives.

The Purchaser further agrees that such information will be disclosed only to
those of its employees and representatives of its advisors who need to know such
information for the purposes of evaluating and implementing the transaction
contemplated hereby. Notwithstanding the foregoing provisions of this paragraph,
the obligation to maintain the confidentiality of such information will not
apply to the extent that disclosure of such information is required in
connection with governmental or other applicable filings relating to the
transactions hereunder, provided that in such case, unless the Vendor otherwise
agrees, the Purchaser will, if possible, request confidentiality in respect of
such governmental or other filings. If the transactions contemplated hereby are
not consummated for any reason the Purchaser will return forthwith, without
retaining any copies thereof, all information and documents obtained from the
Vendor.

(b)Transferring Employees.

(i) At or before the Closing Time, the Purchaser will offer transfer of
employment to the Transferring Employees of the Vendor included on Schedule B on
terms not less favourable than those provided to and on which such employees
were employed by the Vendor on the date hereof. Employees who do not accept such
transfer of employment shall be referred to herein as “Refusing Employees”.

(ii) The Vendor will remain responsible and liable for all amounts which have
accrued to all employees of the Vendor prior to the Closing Date who are not
Transferring Employees or who are Refusing Employees including, without
limitation, all salary, bonus, employee benefits and vacation pay. In addition,
the Vendor will be liable for all severance payments, damages for wrongful
dismissal and all related costs payable in respect of the termination by the
Vendor of the employment of the employees of the Vendor prior to the Closing
Time. Purchaser shall become responsible after Closing for any amount due to any
Transferring Employee who shall accept Purchaser’s offer of transfer of
employment.

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(iii) Post-Closing Access. After the Closing Date, upon reasonable notice, the
Purchaser shall give to the representatives, employees, counsel and accountants
of the Vendor, access, during normal business hours, to the business records
which relate to periods prior to the Closing Date and will permit such persons
to examine and copy such records to the extent reasonably requested by the
Vendor in connection with the preparation of tax and financial reporting
matters, audits, legal proceedings, governmental investigations and other
business purposes. However, the Purchaser shall not be obliged to take any
action pursuant to this subsection that would unreasonably disrupt the normal
course of its business, violate the terms of any contract to which it is a party
or to which the Purchaser or any of its assets is subject or to grant access to
any of its proprietary, confidential or classified information.

5.3
Agreements Regarding Retirement Plans.

Effective as of the Closing Date, the Vendor will assign to the Purchaser, and
the Purchaser will adopt and assume and will thereafter be entitled to and bound
by, all of the Vendor’s rights, duties, liabilities and obligations under all
retirement plans for Transferring Employees of the Vendor listed in Schedule O
and under all agreements and documents constituting or relating to such plans.
The parties will cooperate in preparing and filing all documents and in
obtaining all approvals of all governmental authorities required to give effect
to the foregoing as soon as possible.

ARTICLE 6 - CONDITIONS

6.1
Conditions to the Obligations of the Purchaser.

Notwithstanding anything herein contained the obligation of the Purchaser to
complete the transactions provided for herein will be subject to the fulfillment
of the following conditions at or prior to the Closing Time, and the Vendor
covenants to use its best efforts to ensure that such conditions are fulfilled.

(a)Accuracy of Representations and Warranties and Performance of Covenants.

The representations and warranties of the Vendor contained in this Agreement or
in any documents delivered in order to carry out the transactions contemplated
hereby shall be true and accurate on the date hereof and at the Closing Time
with the same force and effect as though such representations and warranties had
been made as of the Closing Time (regardless of the date as of which the
information in this Agreement or in any schedule or other document made pursuant
hereto is given). In addition, the Vendor shall have substantially complied with
all covenants and agreements herein agreed to be performed or caused to be
performed by it at or prior to the Closing Time.

(b)Material Adverse Changes.

During the Interim Period there will have been no change in the condition of the
Purchased Assets, however arising, except changes which have occurred in the
ordinary course of business and which, individually or in the aggregate, have
not affected and may not affect the condition of the Purchased Assets in any
material adverse respect. Without limiting the generality of the foregoing,
during the Interim Period, no damage to or destruction of any material part of
the Purchased Assets shall have occurred, whether or not covered by insurance.

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(c)No Restraining Proceedings.

No order, decision or ruling of any court, tribunal or regulatory authority
having jurisdiction shall have been made, and no action or proceeding shall be
pending or threatened which, in the opinion of counsel to the Purchaser, is
likely to result in an order, decision or ruling to disallow, enjoin, prohibit
or impose any limitations or conditions on the purchase and sale of the
Purchased Asset contemplated hereby or the right of the purchaser to own the
Purchased Assets.

(d)Consents.

All consents required to be obtained in order to carry out the transactions
contemplated hereby in compliance with all laws and agreements binding upon the
parties hereto shall have been obtained.

6.2
Waiver or Termination by Purchaser.

The conditions contained in section 6.1 hereof are inserted for the exclusive
benefit of the Purchaser and may be waived in whole or in part by the Purchaser
at any time. The Vendor acknowledges that the waiver by the Purchaser of any
condition or any part of any condition shall constitute a waiver only of such
condition or such part of such condition, as the case may be, and shall not
constitute a waiver of any covenant, agreement, representation or warranty made
by the Vendor herein that corresponds or is related to such condition or such
part of such condition, as the case may be. If any of the conditions contained
in section 6.1 hereof are not fulfilled or complied with as herein provided, the
Purchaser may, at or prior to the Closing Time at its option, rescind this
Agreement by notice in writing to the Vendor and in such event the Purchaser
shall be released from all obligations hereunder and, unless the condition or
conditions which have not been fulfilled are reasonably capable of being
fulfilled or caused to be fulfilled by the Vendor, then the Vendor shall also be
released from all obligations hereunder.

6.3
Conditions to the Obligations of the Vendor.

Notwithstanding anything herein contained, the obligations of the Vendor to
complete the transactions provided for herein will be subject to the fulfillment
of the following conditions at or prior to the Closing Time, and the Purchaser
will use its best efforts to ensure that such conditions are fulfilled.

(a) Accuracy of Representations and Warranties and Performance of Covenants. The
representations and warranties of the Purchaser contained in this Agreement or
in any document delivered in order to carry out the transactions contemplated
hereby will be true and accurate on the date hereof and at the Closing Time with
the same force and effect as though such representations and warranties had been
made as of the Closing Time (regardless of the date as of which the information
in this Agreement or any such schedule or other document made pursuant hereto is
given). In addition, the Purchaser shall have complied with all covenants and
agreements herein agreed to be performed or caused to be performed by it at or
prior to the Closing Time.

(b) No Restraining Proceedings. No order, decision or ruling of any court,
tribunal or regulatory authority having jurisdiction shall have been made, and
no action or proceeding shall be pending or threatened which, in the opinion of
counsel to the Vendor , is likely to result in an order, decision or ruling, to
disallow, enjoin or prohibit the purchase and sale of the Purchased Assets
contemplated hereby.

(c) Consents. All consents required to be obtained in order to carry out the
transactions contemplated hereby in compliance with all laws and agreements
binding upon the parties hereto shall have been obtained.

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6.4
Waiver or Termination by Vendor.

The conditions contained in section 6.3 hereof are inserted for the exclusive
benefit of the Vendor and may be waived in whole or in part by the Vendor at any
time. The Purchaser acknowledges that the waiver by the Vendor of any condition
or any part of any condition shall constitute a waiver only of such condition or
such part of such condition, as the case may be, and shall not constitute a
waiver of any covenant, agreement, representation or warranty made by the
Purchaser herein that corresponds or is related to such condition or such part
of such condition, as the case may be. If any of the conditions contained in
section 6.3 hereto are not fulfilled or complied with as herein provided, the
Vendor may, at or prior to the Closing Time at its option, rescind this
Agreement by notice in writing to the Purchaser and in such event the Vendor
shall be released from all obligations hereunder and, unless the condition or
conditions which have not been fulfilled are reasonably capable of being
fulfilled or caused to be fulfilled by the Purchaser, then the Purchaser shall
also be released from all obligations hereunder.

ARTICLE 7 - CLOSING

7.1
Closing Arrangements.

Subject to the terms and conditions hereof, the transactions contemplated herein
shall be closed at the Closing Time at the offices of McInnes Cooper located at
Barker House, Suite 600, 570 Queen Street, Fredericton NB or at such other place
or places as may be mutually agreed upon by the Vendor and the Purchaser.

7.2
Documents to be Delivered.

At or before the Closing Time, the Vendor shall execute or cause to be executed,
and shall deliver, or cause to be delivered, to the Purchaser all documents,
instruments and things which are to be delivered by the Vendor pursuant to the
provisions of this Agreement, and the Purchaser shall execute, or cause to be
executed, and shall deliver or cause to be delivered, to the Vendor all cheques
or bank drafts and all documents, instruments and things which the Purchaser is
to deliver or to cause to be delivered pursuant to the provisions of this
Agreement.

ARTICLE 8 - INDEMNIFICATION

8.1
Indemnity by the Vendor.

(a) The Vendor hereby agrees to indemnify and save the Purchaser harmless from
and against any claims, demands, actions, causes of action, damages, loss,
deficiency, cost, liability and expense which may be made or brought against the
Purchaser or which the Purchaser may suffer or incur as a result of, in respect
of or arising out of:

(i) any non-performance or non-fulfillment of any covenant or agreement on the
part of the Vendor contained in this Agreement or in any document given in order
to carry out the transactions contemplated hereby;

(ii) any misrepresentation, inaccuracy, incorrectness or breach of any
representation or warranty made by the Vendor contained in this Agreement or
contained in any document or certificate given in order to carry out the
transactions contemplated hereby; and

(iii) all costs and expenses including, without limitation, legal fees on a
solicitor and client basis, incidental to or in respect of the foregoing.

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(b)
The obligations of indemnification by the Vendor pursuant to this section 8 will
be:

(i) subject to the limitations refereed to in section 4.1 hereof with respect to
the survival of the representations and warranties by the Vendor;

(ii) subject to the limitations referred to in section 4.3 hereof, and

(iii) subject to the provisions of section 8.2 hereof.

8.2
Provisions Relating to Indemnity Claims.

The following provisions will apply to any claim by the Purchaser for
indemnification by the Vendor pursuant to section 8.1 hereof (hereinafter, in
this section, called an “Indemnity Claim”).

(a) Promptly after becoming aware of any matter that may give rise to an
Indemnity Claim, the Purchaser will provide to the Vendor written notice of the
Indemnity Claim specifying (to the extent that information is available) the
factual basis for the Indemnity Claim and the amount of the Indemnity Claim or,
if an amount is not then determinable, an estimate of the amount of the
Indemnity Claim, if any estimate is feasible in the circumstances.

(b) If an Indemnity Claim relates to an alleged liability to any other person
(hereinafter, in this section, called a “Third Party Liability”), including
without limitation any governmental or regulatory body or any taxing authority,
which is of a nature such that the Purchaser is required by applicable law to
make a payment to a third party before the relevant procedure for challenging
the existence or quantum of the alleged liability can be implemented or
completed, then the Purchaser may, notwithstanding the provisions of paragraph
(3) and (4) of this section, make such payment and forthwith demand
reimbursement for such payment from the Vendor in accordance with this
Agreement; provided that, if the alleged liability to the third party as finally
determined upon completion of settlement negotiations or related legal
proceedings is less that the amount which is paid by the Vendor in respect of
the related Indemnity Claim, then the Purchaser shall forthwith following the
final determination pay to the Vendor the amount by which the amount of the
liability as finally determined is less than the amount which is so paid by the
Vendor.

(c) The Purchaser shall not negotiate, settle, compromise or pay (except in the
case of payment of a judgment) any Third Party Liability as to which it proposes
to assert an Indemnity Claim, except with the prior consent of the Vendor (which
consent shall not be unreasonably withheld or delayed), unless there is a
reasonable possibility that such Third Party Liability may materially and
adversely affect the condition of the business of the Purchaser, in which case
the Purchaser shall have the right, after notifying the Vendor, to negotiate,
settle, compromise or pay such Third Party Liability without prejudice to its
rights of indemnification hereunder.

(d)  With respect to any Third Party Liability, provided the Vendor first admits
the Purchaser’s right to indemnification for the amount of such Third Party
Liability which may be determined or settled, then in any legal, administrative
or other proceedings in connection with the matters forming the basis of the
Third Party Liability, the following procedures will apply:

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(i) except as contemplated by subparagraph (c) below, the Vendor will have the
right to assume carriage of the compromise or settlement of the Third Party
Liability and the conduct of any related legal, administrative or other
proceedings, but the Purchaser shall have the right and shall be given the
opportunity to participate in the defense of the Third Party Liability, to
consult with the Vendor in the settlement of the Third Party Liability and the
conduct of related legal, administrative and other proceedings (including
consultation with counsel) and to disagree on reasonable grounds with the
selection and retention of counsel, in which case counsel satisfactory to the
Vendor and the Purchaser shall be retained by the Vendor;

(ii) the Vendor will co-operate with the Purchaser in relation to the Third
Party Liability, will keep it fully advised with respect thereto, will provide
it with copies of all relevant documentation as it becomes available, will
provide it with access to all records and files relating to the defense of the
Third Party Liability and will meet with representatives of the Purchaser at all
reasonable times to discuss the Third Party Liability; and

(iii) notwithstanding subparagraphs (a) and (b), the Vendor will not settle the
Third Party Liability or conduct any legal, administrative or other proceedings
in any manner which would, in the reasonable opinion of the Purchaser, have a
material adverse affect on the condition of the business or the Purchaser,
except with the prior written consent of the Purchaser.

(e) If, with respect to any Third Party Liability, the Vendor does not admit the
Purchaser’s right to indemnification or declines to assume carriage of the
settlement or of any legal, administrative or other proceedings relating to the
Third Party Liability, the following provisions with apply:

(i) the Purchaser, at its discretion, may assume carriage of the settlement or
of any legal, administrative or other proceedings relating to the Third Party
Liability and may defend or settle the Third Party Liability on such terms as
the Purchaser, acting in good faith, considers advisable; and

(ii) any cost, lost, damage or expense incurred or suffered by the Purchaser in
the settlement of such Third Party Liability or the conduct of any legal,
administrative or other proceedings shall be added to the amount of the
Indemnity Claim.
 
ARTICLE 9 - GENERAL PROVISIONS

9.1
Further Assurances.

Each of the Vendor and the Purchaser hereby covenants and agrees that at any
time from time to time after the Closing Date it will, upon the request of the
other, do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further, acts, deeds, assignments,
transfers, conveyances and assurances as may be required for the better carrying
out and performance of all the terms of this Agreement.

9.2
Remedies Cumulative.

The rights and remedies of the parties under this Agreement are cumulative and
in addition to and not in substitution for any rights or remedies provided by
law. Any single or partial exercise by any party hereto of any right or remedy
for default or breach of any term, covenant or condition of this Agreement does
not waive, alter, affect or prejudice any other right or remedy to which such
party may be lawfully entitled for the same default or breach.

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9.3
Notices.

(a) Any notice, designation, communication, request, demand or other document,
required or permitted to be given or sent or delivered hereunder to any party
hereto shall be in writing and shall be sufficiently given or sent or delivered
if it is:
 
(i) delivered personally to an officer or director of such party;
 
(ii) sent to the party entitled to receive it by prepaid courier service; or
 
(iii) sent by facsimile machine.

(b) Notice shall be sent to the following addresses or facsimile number:
 

(i)
in the case of the Vendor to:

Thomas Equipment, Inc.
   
Attention:
 
Facsimile:
 

 
(ii)
in the case of Purchaser to:

Carleton International, Ltd.
   
Attention:
 
Facsimile:
 

or to such other address or facsimile number as the party entitled to or
receiving such notice, designation, communication, request, demand or other
document shall, by a notice given in accordance with this section, have
communicated to the party giving or sending or delivering such notice,
designation, communication, request, demand or other document.

(c) Any notice, designation, communication, request, demand or other document
given or sent or delivered as aforesaid shall:

(i) if delivered personally or by courier as aforesaid, be deemed to have been
given sent, delivered and received on the date of delivery; and

(ii) if sent by facsimile machine, be deemed to have been given, sent, delivered
and received on the date the sender receives the telecopy answer back confirming
receipt by the recipient.

9.4
Counterparts.

This Agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts together shall
constitute but one and the same instrument.

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9.5
Expenses of Parties.

Each of the parties hereto shall bear all expenses incurred by it in connection
with this Agreement including, without limitation, the charges of their
respective counsel, accountants, financial advisors and finders.

9.6
Announcements.

No announcement with respect to this Agreement will be made by any party hereto
without the prior approval of the other party. The foregoing will not apply to
any announcement by any party required in order to comply with laws pertaining
to timely disclosure, provided that such party consults with the other parties
before making any such announcement.

9.7
Assignment.

The rights of the Vendor hereunder shall not be assignable without the written
consent of the Purchaser. The rights of the Purchaser hereunder shall not be
assignable without the written consent of the Vendor.

9.8
Successors and Assigns.

This Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective successors and permitted assigns. Nothing herein,
express or implied, is intended to confer upon any person, other than the
parties hereto and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.

9.9
Entire Agreement.

This Agreement and the schedules referred to herein constitute the entire
agreement between the parties hereto and supersede all prior agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof. None of the parties hereto shall be bound by or charged
with any oral or written agreements, representations, warranties, statements,
promises, information, arrangements or understandings not specifically set fort
in this Agreement or in the schedules, documents and instruments to be delivered
on or before the Closing Date pursuant to this Agreement. The parties hereto
further acknowledge and agree that, in entering into this Agreement and in
delivering the schedules, documents and instruments to be delivered on or before
the Closing Date, they have not in any way relied, and will not in any way rely,
upon any oral or written agreements, representations, warranties, statement,
promises, information, arrangements or understandings, express or implied, not
specifically set forth in this Agreement or in such schedules documents or
instruments.

9.10
Waiver

Any party hereto which is entitled to the benefits of this Agreement may, and
has the right to, waive any term or condition hereof at any time on or prior to
the Closing Time; provided, however, that such waiver shall be evidenced by
written instrument duly executed on behalf of such party.

9.11
Amendments.

No modification or amendment to this Agreement may be made unless agreed to by
the parties hereto in writing.

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IN WITNESS WHEREOF the parties hereto have duly executed this agreement under
seal as of the day and year first above written.

Carleton International, Ltd.
 
/s/ Michael Luther
 
Its Executive Vice President
 
816552418RT0001
GST Registration Number
   
Thomas Equipment, Inc.
 
/s/Petter Etholm
 
Its Chief Executive Officer
 
848171948RT0001
GST Registration Number

 
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