ASSET PURCHASE AGREEMENT
Made as of October 31, 2016
Between
LAWSON PRODUCTS, INC. (ONTARIO)
and
MATTIC INDUSTRIES LTD.
and
JOHN MATTHEW

    

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ARTICLE 1 INTERPRETATION     5
1.1 Definitions    5
1.2 Interpretation    12
1.3 Schedules    12
1.4 Currency    13
1.5 Accounting Terms    13
1.6 Knowledge    14
ARTICLE 2 PURCHASE AND SALE OF PURCHASED ASSETS     14
2.1 Purchase and Sale of Purchased Assets    14
2.2 Purchase Price    14
2.3 Payment Purchase Price    14
2.4 Allocation of Purchase Price    14
2.5 Adjustment for Sales Representatives Who Refuse Offers of Employment    15
2.6 Adjustment for Inventory    15
2.7 First Earn Out    15
2.8 Second Earn Out    16
2.9 Goods and Services Tax Exemption    16
2.10 Payment of Taxes    17
2.11 Non-Assignable Contracts    17
2.12 Liabilities    17
ARTICLE 3 REPRESENTATIONS AND WARRANTIES     18
3.1 Representations and Warranties of the Vendor    18
3.2 Representations and Warranties of the Purchaser    27
3.3 Commission    28
3.4 Non-Waiver    28
ARTICLE 4 EMPLOYEES     28
4.1 Employees and Contractor Sales Representatives    28
4.2 Vendor Consulting Agreement    30
ARTICLE 5 COVENANTS     30
5.1 Conduct of Business    30
5.2 Access to Information, Employees and Contractor Sales Representatives    31
5.3 Destruction or Expropriation – Purchased Assets    31
5.4 Actions to Satisfy Closing Conditions    32
5.5 Change of Name    32
5.6 Non-Competition and Non-Solicitation Agreements    32
5.7 Accounts Receivable    32
5.8 Access to Books and Records    32
5.9 Updated Schedules of Contractor Sales Representatives and Employees    32
5.10 Major Customer List    33
ARTICLE 6 SURVIVAL OF REPRESENTATIONS & WARRANTIES AND INDEMNITY     33
6.1 Survival    33
6.2 Indemnification    33
6.3 Right to Set-Off    36
ARTICLE 7 CONDITIONS PRECEDENT     36
7.1 Purchaser’s Conditions    36
7.2 Waiver and Termination by the Purchaser    38
7.3 Vendor’s Conditions    38

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7.4 Waiver and Termination by the Vendor    38
ARTICLE 8 CLOSING ARRANGEMENTS     39
8.1 Time and Place of Closing    39
8.2 Closing Arrangements    39
8.3 Tender    40
9.4 Registration Expense    40
ARTICLE 9 NOTICES     40
9.1 Notice    40
ARTICLE 10 GENERAL     41
10.1 Entire Agreement    41
10.2 Amendment and Waiver    42
10.3 Severability    42
10.4 Expenses    42
10.5 Time    42
10.6 Assignment and Benefit of the Agreement    42
10.7 Further Assurances    42
10.8 Public Notices    42
10.9 Governing Law and Attornment    43
10.10 Counterparts and Electronic Execution    43

SCHEDULES

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Schedule A
-
Tangible Assets

Schedule 2.4
-
Purchase Price Allocation

Schedule 3.1.11
 
Estimated Closing Date Inventories Value

Schedule 3.1.13
-
Licences

Schedule 3.1.14
-
Contracts and Equipment Leases

Schedule 3.1.17
-
Insurance

Schedule 3.1.18
 
Litigation

Schedule 3.1.19(d)
 
Environmental

Schedule 3.1.24
 
Contractor Sales Representatives

Schedule 3.1.25
-
Employees

Schedule 3.1.28
 
Human Rights Claims

Schedule 3.1.31
 
Benefit Plans

Schedule 3.1.35
 
Financial Records

Schedule 4.2
 
Consulting Agreement

Schedule 7.1.11(a)
 
Surrey Lease

Schedule 7.1.11(b)
 
Calgary Lease

Schedule 5.6.1
-
Vendor Non-Competition and Non-Solicitation Covenant

Schedule 5.6.2
 
John Non-Competition and Non-Solicitation Covenant

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ASSET PURCHASE AGREEMENT
THIS AGREEMENT made the 31ST day of October, 2016
BETWEEN
LAWSON PRODUCTS, INC. (ONTARIO), a company incorporated pursuant to the laws of
Ontario and having an office located at 7315 Rapistan Court, Mississauga,
Ontario L5N 5Z4
(the “Purchaser”)
AND
MATTIC INDUSTRIES LTD., a company incorporated pursuant to the laws of British
Columbia and having a registered and records office at 2112 – 179TH Street,
Surrey, British Columbia V3Z 9V6
(the “Vendor”)
AND
JOHN MATTHEW, businessman, of 2112 – 179TH Street, Surrey, British Columbia V3Z
9V6
(“John”)
RECITALS:
A.The Vendor carries on an industrial fastener, MRO equipment and tooling
product distribution business (collectively the “Business”); and
B.    The Purchaser has agreed to purchase, and the Vendor has agreed to sell,
the Vendor’s assets used in the Business, and each has agreed to enter into this
Agreement to provide for the terms and conditions upon which the purchase and
sale will be effected;
NOW THEREFORE, in consideration of the premises and covenants contained in this
Agreement, the Parties agree as follows:

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Article 1
INTERPRETATION

1.1    Definitions
In this Agreement:
“Accounts Receivable” means all accounts receivable and insurance claims
recorded as receivable in the books and records of the Vendor in the Ordinary
Course of Business other than accounts receivable for services not yet provided
by the Vendor; plus (i) any amount due from third parties to the Vendor in
connection with the Business, including any refunds (other than refundable
income taxes of the Vendor) and rebates receivable in connection with the
Business or the Purchased Assets, and (ii) the benefit of all security
(including cash deposits), guarantees and other collateral held by the Vendor in
connection with the Business and Purchased Assets;
“Accounts Payable” means all accounts payable, trade accounts payable,
merchandise payables, and other book payables due or accruing due as shown on
the books of the Vendor as at the Closing Date;
“Affiliate” any entity or person which, directly or indirectly, controls or is
controlled by or is under common control with the first entity or person, and
includes any entity or person in like relation to an Affiliate;
“Agreement” means this Asset Purchase Agreement, including the recitals and
schedules hereto, as the same may be amended or replaced from time to time;
“Applicable Law” means all current constitutions, treaties, laws, statutes,
codes, ordinances, official plans, orders, decrees, rules, regulations, and
by-laws, whether domestic, foreign or international of any Governmental
Authority, and the common law, binding on or affecting any Person, property or
matter referred to in the context in which such word is used;
“Business” has the meaning attributed to that term in Recital A;
“Business Day” means any day other than a day which is a Saturday, Sunday or a
statutory holiday in the Province of British Columbia;
“Closing” means the completion of the purchase and sale of the Purchased Assets
hereunder;
“Closing Date” means November 15, 2016, or such other date to which the Parties
may agree in writing;
“Closing Documents” means the documents referred to in Sections 8.2.1 and 8.2.2;
“Consulting Agreement” has the meaning attributed to that term in Section 4.2;
“Contractor Sales Representatives” means the sales representatives of the
Vendor, who provide services to the Business immediately before the Closing Date
as independent contractors of the Vendor;

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“Contracts” means all contracts, agreements, commitments and entitlements of the
Vendor related to the Business, other than those related to the Excluded Assets,
whether with suppliers, customers or otherwise, including all unfilled orders
from customers, all forward commitments for supplies or materials, all orders
for new machinery and equipment as yet undelivered, all equipment and
construction guarantees and warranties, and all licences for Intellectual
Property;
“Departing Sales Representatives” means the Sales Representatives who fail to
accept employment offers from the Purchaser on or before the Closing Date;
“Departing Sales Representative Customers” means the customers of the Vendor
that the Departing Sales Representatives generated Sales from in the twelve (12)
month period prior to the Closing Date;
“Encumbrance” means title defects, mortgages, charges, pledges, hypothecs,
security interests, deemed trusts, liens, encumbrances, actions, claims, demands
and equities of any nature whatsoever or howsoever arising or any rights or
claims of others of any kind whatsoever and any rights or privileges capable of
becoming any of the foregoing;
“Employee Amounts” has the meaning attributed to that term in Section 4.1(g);
“Employees” means the employees of the Vendor who are employed in the Business
immediately before the Closing Date, including the Employee Sales
Representatives, but excluding John and June Matthew;
“Employee Sales Representatives” means the sales representatives of the Vendor,
who are employed in the Business immediately before the Closing Date as
employees of the Vendor;
“Environmental Claim” means any action or order of any Governmental Authority,
lien, fine, penalty, or, as to each, any settlement or judgment arising
therefrom, by or from any person or entity alleging liability of whatever kind
or nature (including liability or responsibility for the costs of enforcement
proceedings, investigations, cleanup, governmental response, removal or
remediation, natural resources damages, property damages, personal injuries,
medical monitoring, penalties, contribution, indemnification and injunctive
relief) arising out of, based on or resulting from: (a) the presence, Release
of, or exposure to, any Hazardous Materials; or (b) any actual or alleged
non-compliance with any Environmental Law or term or condition of any
environmental permit;
“Environmental Law” means any federal, provincial or local law, statute,
ordinance, code, rule, regulation, order, protocol, standard, judgment, decree,
injunction or legally enforceable requirement of any Governmental Authority, as
in effect now or in the future and including any Licences, principles of common
law and equity and all judicial and administrative law decisions, orders,
decrees that regulate, control or relates to (a) protection, preservation or
restoration of air, soils, surface water, groundwater, surface land, subsurface
land, vapour and natural resources, (b) use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, (c) health and safety of persons (including
employees), (d) emission, release, spilling or leaking of any substance into the
natural environment, or (e) pollution or substances or materials which are
considered to be hazardous or toxic;

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“Environmental Liabilities” means all liabilities and obligations of the Vendor
or any Affiliate of the Vendor with respect to any and all Releases of Hazardous
Substances or violations of Environmental Law to the extent existing prior to
the Closing Date, including without limitation liabilities arising from or
related to, directly or indirectly, the Business, the operations of Vendor or
any of its Affiliates, or the Real Property;
“Equipment Leases” means all equipment leases, conditional sales contracts,
capital leases, title retention agreements and other similar agreements between
the Vendor and third Persons relating to equipment used by the Vendor and
related to the Business;
“Estimated Closing Date Inventory Value” means the estimated value of the
Inventories set out in Schedule 3.1.11;
“Excluded Assets” means:
(a)
the Real Property;

(b)
the Leases, if any;

(a)
all cash, bank balances, moneys in possession of banks and other depositories,
term or time deposits, letters of credit and similar cash items of, owned or
held by, or for the account of, the Vendor or the Business as of the Closing
Date;

(b)
all Accounts Receivable as at the Closing Date;

(c)
all Accounts Payable as at the Closing Date;

(d)
any and all interest bearing debt obligations of the Company;

(e)
the corporate, financial, taxation and other records of the Vendor not related
to the Business or the Purchased Assets;

(f)
all extra-provincial, sales, excise or other licences or registrations issued to
or held by the Vendor and either not related to the Business or not
transferable; and

(g)
all income and corporate tax instalments paid by the Vendor relating to the
Business and the right to all income tax refunds and other income and goods and
services tax refunds receivable by the Vendor relating to the Business as at the
Closing Date;

“Existing Customers” means customers of the Business who purchased products from
the Vendor prior to the Closing Date;
“First Anniversary Date” means the date that is one (1) year after the Closing
Date;
“First Earn Out Period” has the meaning attributed to that term in Section 2.7;
“GAAP” means, at any time, accounting principles generally accepted in Canada
applicable to private enterprises as set out in Part II of the Chartered
Professional Accountants Canada Handbook, at the relevant time, applied on a
consistent basis with past practice;
“Governmental Authority” means any national, multi-national, federal,
provincial, state, municipal, local or other government, and any agency,
authority, instrumentality, regulatory

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body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government;
“GST” means the Goods and Services Tax payable under the Excise Tax Act
(Canada);
“Hazardous Substance” means any contaminant, pollutant or substance which may
cause, immediately, or at some future time, harm or degradation to the
environment or risk to property, human life, animal or plant life, health or
safety, including, without limitation, any pollutant, contaminant, waste,
hazardous waste, toxic substances or dangerous good which is defined, regulated
or identified in any Environmental Law or which is present in the environment in
such quantity or concentration as to be regulated by any Environmental Law, or
is in any way regulated to a maximum allowable concentration in soil, sediment,
vapour, groundwater, surface water or drinking water based upon generic
assessments of risk to human health or the environment;
“Indemnitors” has the meaning attributed to that term in Section 6.2.3(b);
“Intellectual Property” means the rights and interests of the Vendor in and to:
(a)
all trade secrets, research data, designs, proprietary know-how, drawings and
studies, instruction manuals, concepts, methods, procedures, processes,
technical information, specifications and materials, technology or proprietary
information used in or relating to the Business;

(b)
patents, patent applications and registrations, copyrights, copyright
applications and registrations, trade-marks, trade-mark applications and
registrations;

(c)
computer software used in the Business, including all related codes,
specifications, documentation revisions, enhancements and modifications,
websites, domain names, web pages, look and feel, logos, trade-names and
industrial designs,

together with all rights and interests of the Vendor in all other intellectual
property used in or relating to the Business.
“Interim Period” means the period beginning on the date of this Agreement up to
and including the Closing Date;
“Inventories” means all usable and/or saleable stock-in-trade of the Vendor,
wherever situate, relating to the Business, including all stock, raw materials,
materials, parts, manufacturing supplies, packaging and shipping materials,
maintenance goods, work in progress, goods in transit and finished goods;
“Licences” means all licences, registrations, authorizations, registrations,
clearances, certificates, quotas, qualifications, permits, authorizations,
consents, and approvals, together with all applications for the same, and any
other terms and conditions imposed by a Governmental Authority relating to
Applicable Laws or Environmental Law;
“Leases” means all leases and subleases to which the Vendor is a party in
respect of any real property that is leased or subleased by the Vendor;
“Major Customer” has the meaning attributed to that term in Section 3.1.40;

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“Material Adverse Change” means any change in the business, results of
operations, assets, liabilities, prospects or financial condition of the
Business or change in the Purchased Assets or the Real Property or the use
thereof which constitutes, or would reasonably be expected to constitute, a
material adverse change, as determined from the perspective of a reasonable
person in the Purchaser’s position and “Material Adverse Effect” means any
change or effect that constitutes or would reasonably be expected to constitute
a material adverse change or effect, as determined from the perspective of a
reasonable person in the Purchaser’s position;
“New Leases” has the meaning attributed to that term in Section 7.1.11;
“Non-Assignable Contracts” means any Contract, Equipment Lease or Licence:
(a)
which is not assignable without the consent of a third party, if such consent
has not been obtained and an assignment or attempted assignment would constitute
a breach of that Contract, Equipment Lease or Licence; or

(b)
in respect of which the remedies for the enforcement of that Contract, Equipment
Lease or Licence available to the Vendor would not pass to the Purchaser;

“Ordinary Course of Business” means, with respect to any action taken by the
Vendor, that such action is consistent with the past practice and custom of the
Business and is taken in the ordinary course of the normal day-to-day operations
of the Business;
“Parties” or “parties” means the Purchaser, the Vendor and John collectively,
and “Party” or “party” means one of them;
“Personal Information” means the information regulated by Privacy Laws and
collected, used, disclosed or retained by the Vendor;
“Prepaid Expenses” means prepaid expenses related to the Business which can be
utilized by the Purchaser after the Closing including Taxes (other than those
which are personal to the Vendor or not incurred in connection with the
Business), rents and telephone charges, and deposits or other amounts paid by
customers to the Vendor for services that have not been rendered by the Vendor
before the Closing Date;
“Privacy Laws” means all Applicable Law governing the collection, use,
disclosure and retention of information relating to an identifiable individual
including the Personal Information Protection Act (British Columbia) and the
Personal Information Protection Act (Alberta);
“Purchased Assets” means all properties, assets and rights of the Vendor related
to the Business (other than the Excluded Assets) and includes, without
limitation, the following:
(a)
Books and Records – copies of all business books and records related to the
Business, including, without limitation, all books of account, sales and
purchase records, operating, inventory, personnel, payroll (other than payroll
records relating to John or June Matthew), and customer records and all sales
and promotional literature, correspondence and files;

(b)
Contracts and Equipment Leases – the Contracts and Equipment Leases;

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(c)
Goodwill – the goodwill of the Business, together with the exclusive right of
the Purchaser to represent itself as carrying on the Business, in each
jurisdiction in which the Business is or has been conducted, in continuation of
and in succession to the Vendor, including the exclusive right of the Purchaser
to use the name “Mattic Industries” in connection with the Business, and also
including the right to the use of existing telephone numbers, facsimile numbers
and websites used by the Vendor in the Business;

(d)
Intellectual Property – the Intellectual Property;

(e)
Inventories – the Inventories;

(f)
Licences – the Licences, other than those that are not transferable at law;

(g)
Prepaid Expenses – the Prepaid Expenses, and accounts receivable for services
not yet provided;

(h)
Tangible Assets – all vehicles, machinery, furniture, chattels, parts, tools,
manufacturing equipment, shop and office equipment, test equipment, computer
equipment and software and shop supplies including the tangible assets listed in
Schedule A attached hereto;

(i)
Warranties - the full benefit of all warranties and indemnities and warranty and
indemnity rights (expressed and implied) against manufacturers or sellers which
apply to any of the assets or undertaking of the Business;

(j)
Third Party Indemnities - all third party indemnities where the Vendor is an
indemnified party and the proceeds afforded thereby which apply to any of the
assets or undertaking of the Business, other than in relation to the Real
Property;

(k)
Causes of Action - all rights pertaining to causes of action, judgements,
claims, counterclaims, set off or defences that the Vendor may have with respect
to liabilities assumed, any of the Purchased Assets or the conduct of the
Business, other than to the extent relating to liabilities not assumed or to the
Excluded Assets; and

(l)
General – all other rights, properties and assets (other than Excluded Assets)
related to the Business, of any kind, and wherever located;

“Purchaser’s Claim” has the meaning attributed to that term in Section 6.2.1;
“Purchase Price” has the meaning given to that term in Section 2.2;
“Real Property” means the lands and premises located at:
(a)
#101 17670 65A Ave., Surrey, British Columbia, Canada, V3S 5N4;

(b)
#102 17670 65A Ave., Surrey, British Columbia, Canada, V3S 5N4;

(c)
7936 51st Street SE, Calgary, Alberta, Canada, T2C 4R2; and

(d)
7942 51st Street SE, Calgary, Alberta, Canada, T2C 4R2;

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“Release(s)” means any release, or threatened release, spill, escape, emission,
leaking, pumping, pouring, emptying, disposing, dumping, exhausting, injection,
deposit, discharge, leaching, or migration into any media, whether soil, surface
water, ground water, building interior or components, air or any combination of
the foregoing, and the movement of any contamination through any media, and
including the abandonment or discarding of barrels, containers and other closed
receptacles containing any Hazardous Substances;
“Sales” means all revenue from product sales by the Business, less returns, plus
all revenue from services provided by the Business, excluding Taxes or freight
on sales or services;
“Sales Representatives” means the Contractor Sales Representatives and the
Employee Sales Representatives;
“Second Anniversary Date” means the date that is two (2) years after the Closing
Date;
“Second Earn Out Period” has the meaning attributed to that term in Section 2.8;
“Taxes” means all taxes, duties, rates, levies, assessments, reassessments,
withholdings, deductions, fees, dues and other charges, together with all
penalties, interest and fines with respect thereto, payable to any Governmental
Authority, including those referred to as, or with respect to, income, sales,
use, transfer, goods and services, capital, capital gains, value added, real
property, personal property, excise, customs, registration, payroll, employment,
education, business, school, property, and local improvement;
“Third Party Claim” has the meaning attributed to that term in Section 6.2.3;
“Transaction Documents” means all agreements (other than this Agreement),
documents and instruments to be executed and delivered by any Party or Parties
hereto and provided for or contemplated herein and therein;
“Transition Services” has the meaning attributed to that term in Section 4.2;
“Vendor’s Claim” has the meaning attributed to that term in Section 6.2.2.

1.2    Interpretation
In this Agreement:
1.2.1
Unless specified otherwise, reference to a statute includes any regulations
under such statute and refers to that statute and such regulations as they may
be amended or to any successor legislation.

1.2.2
The division into articles, sections, paragraphs and schedules and the insertion
of headings are for convenience of reference only and will not affect the
construction or interpretation of this Agreement. The words “hereto”, “herein”,
“hereof”, “hereunder” and similar expressions refer to this Agreement and not to
any particular portion of it. References to an Article, Section, Paragraph or
Schedule refer to the applicable article, section, paragraph or schedule of this
Agreement.

1.2.3
Words in the singular include the plural and vice versa, words in one gender
include all genders, and the words “including”, “include” and “includes” mean
“including (or include or includes) without limitation”.

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1.2.4
“Person” means an individual, a corporation, a company, a limited liability
company, an unlimited liability company, a partnership, a limited partnership, a
trust, an unincorporated organization, a joint venture, a joint stock company
and any Governmental Authority.

1.2.5
This Agreement is the joint product of the Parties, has been subject to mutual
consultation, negotiation and agreement and will not be construed for or against
any Party.

1.3    Schedules
The following are the Schedules to this Agreement:
Schedule A
-
Tangible Assets

Schedule 2.4
-
Purchase Price Allocation

Schedule 3.1.11
-
Estimated Closing Date Inventories Value

Schedule 3.1.13
-
Licences

Schedule 3.1.14
-
Contracts and Equipment Leases

Schedule 3.1.17
-
Insurance

Schedule 3.1.18
-
Litigation

Schedule 3.1.19(d)
-
Environmental

Schedule 3.1.24
-
Contractor Sales Representatives

Schedule 3.1.25
-
Employees

Schedule 3.1.28
-
Human Rights Claims

Schedule 3.1.31
-
Benefit Plans

Schedule 3.1.35
-
Financial Records

Schedule 4.2
-
Consulting Agreement

Schedule 7.1.11(a)
-
Surrey Lease

Schedule 7.1.11(b)
-
Calgary Lease

Schedule 5.6.1
-
Vendor Non-Competition and Non-Solicitation Covenant

Schedule 5.6.2
-
John Non-Competition and Non-Solicitation Covenant

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1.4    Currency
All references in this Agreement to dollars or to “$” are deemed to be
references to Canadian currency unless otherwise specifically indicated.

1.5    Accounting Terms
All accounting terms not specifically defined in this Agreement, and all
accounting determinations and calculations, are to be interpreted and/or made in
accordance with GAAP.

1.6    Knowledge
Any reference herein to the “knowledge” or the “best knowledge” of a Party means
the actual knowledge of, having made due and careful inquiry, of the following
persons only:
(a)
as to the Vendor, John; and

(b)
as to the Purchaser, Shane McCarthy, on behalf of the Purchaser.

ARTICLE 2    
PURCHASE AND SALE OF PURCHASED ASSETS

2.1    Purchase and Sale of Purchased Assets
At the Closing Date, the Vendor agrees to sell, and the Purchaser agrees to
purchase, the Purchased Assets for the Purchase Price as provided in
Section 2.3.

2.2    Purchase Price
The purchase price for the Purchased Assets is $4,858,000.00 (the “Purchase
Price”).

2.3    Payment Purchase Price
The Purchaser will pay the Purchase Price, subject to adjustments as set out
herein, to the Vendor as follows:
(a)
by paying $4,400,000.00 to the Vendor on the Closing Date;

(b)
by paying $258,000.00, subject to adjustment as set out in Section 2.5, to the
Vendor on or before:

(i)
the fifth Business Day after the Closing Date, if all the Sales Representatives
accept employment offers from the Purchaser on or before the Closing Date; or

(ii)
the date that is 30 days after the First Anniversary Date, if one or more of the
Sales Representatives fail to accept employment offers from the Purchaser on or
before the Closing Date;

(c)
by paying $100,000.00 to the Vendor on or before the date that is thirty (30)
days after the First Anniversary Date; and

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(d)
by paying $100,000.00 to the Vendor on or before the date that is thirty (30)
days after the Second Anniversary Date.

2.4    Allocation of Purchase Price
The parties agree that the Purchase Price shall be allocated amongst the
Purchased Assets in accordance with Schedule 2.4. The parties will file all tax
returns in accordance with such allocation.

2.5    Adjustment for Sales Representatives Who Refuse Offers of Employment
If any of the Sales Representatives fail to accept employment offers from the
Purchaser on or before the Closing Date, then on the First Anniversary Date the
Purchase Price will be reduced by an amount equal to the difference of:
(a)
$258,000

minus
(b)
the product of

(i)
the Sales generated in the Business by the Purchaser in the twelve (12) month
period after the Closing Date from the Departing Sales Representative Customers;

divided by
(ii)
the Sales generated in the Business in the twelve (12) month period prior to the
Closing Date by the Sales Representatives who fail to accept employment offers
from the Purchaser on or before the Closing Date (the “Departing Sales
Representatives”);

multiplied by
(iii)
$258,000.

2.6    Adjustment for Inventory
(a)
Inventories will be counted by representatives of the Vendor and the Purchaser
on or within 2 days after the Closing Date, and the financial books and records
of the Vendor will be adjusted for Inventories quantities as at the Closing
Date. The Inventories will be valued at the lower of cost and the net realizable
value thereof.

(b)
If the value of the Inventories as of the Closing Date differs from Estimated
Closing Date Inventory Value by $50,000 or more, then the Purchase Price will be
adjusted on a dollar-for-dollar basis by the amount equal to the amount by which
Estimated Closing Date Inventory Value differs from the value of the Inventories
as of the Closing Date.

2.7    First Earn Out
If the aggregate Sales generated for the Purchaser by the sales representatives
of the Business in the period between the day after the Closing Date and the
First Anniversary

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Date (the “First Earn Out Period”) exceeds $4,200,000, then within thirty (30)
days of the First Anniversary Date the Purchaser will pay the Vendor an amount
equal to the product of:
(a)
0.40

multiplied by
(b)
the sum of:

(i)
the Sales generated for the Purchaser in the First Earn Out Period by all sales
representatives of the Business;

minus
(ii)
the Sales generated for the Purchaser in the last six month period of the First
Earn Out Period by any new or replacement sales representatives of the Business
from any customers, other than Existing Customers;

minus
(iii)
$4,200,000.

2.8    Second Earn Out
If the aggregate sales generated for the Purchaser by the sales representatives
of the Business in the period between the day after the Closing Date and the
Second Anniversary Date (the “Second Earn Out Period”) exceeds $4,200,000, then
within thirty (30) days of the Second Anniversary Date the Purchaser will pay
the Vendor an amount equal to the product of:
(a)
0.40

multiplied by
(b)
the sum of:

(i)
the Sales generated for the Purchaser in the Second Earn Out Period by all sales
representatives of the Business;

minus
(ii)
the Sales generated for the Purchaser in the Second Earn Out Period by any new
or replacement sales representatives of the Business from any customers, other
than Existing Customers;

minus
(iii)
$4,200,000.

2.9    Goods and Services Tax Exemption
The Vendor and the Purchaser agree as follows:

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(a)
the Purchaser is acquiring ownership, possession or use of all or substantially
all of the property that can reasonably be regarded as being necessary for the
Purchaser to be capable of carrying on the Business; and

(b)
the Vendor and the Purchaser will jointly elect in prescribed form (GST Form
44), and the Purchaser will file within the required time, an election under
Section 167(1) of Part IX of The Excise Tax Act (Canada) that no tax be payable
pursuant to that legislation with respect to the purchase and sale of the
Purchased Assets hereunder.

2.10    Payment of Taxes
The Purchaser will be liable for and will pay all applicable Taxes (other than
any income Taxes of the Vendor) properly payable upon and in connection with the
conveyance and transfer of the Purchased Assets to the Purchaser.

2.11    Non-Assignable Contracts
2.11.1
This Agreement and any Transaction Document will not constitute an assignment or
an attempted assignment of any Non-Assignable Contract.

2.11.2
The Vendor will use commercially reasonable efforts to obtain at the Vendor’s
expense, any consent to assignment which may be required for the assignment to
the Purchaser of any such Non-Assignable Contract. If the Vendor has been unable
to obtain any such consent prior to Closing, such Non-Assignable Contract will
not be assigned and the Vendor will:

(a)
to the extent legally possible, hold their right, title and interest in, to and
under such Non-Assignable Contract for the benefit of the Purchaser until such
consent is obtained;

(b)
use commercially reasonable efforts (without obligation to pay any fee or other
compensation, other than contractual assignment fees) to obtain the consent to
the assignment to the Purchaser of such Non-Assignable Contract;

(c)
take such action in the name of the Vendor or otherwise as the Purchaser may
reasonably require and at the expense of the Purchaser so as to provide the
Purchaser with the benefits of the Non-Assignable Contract; and

(d)
unless prohibited by the terms of the Non-Assignable Contract, authorize the
Purchaser, at the Purchaser's expense, to perform all of the Vendor’s
obligations under such Non-Assignable Contract and constitute the Purchaser the
attorney of the Vendor to act in the name of the Vendor with respect to such
Non-Assignable Contract.

2.12    Liabilities
2.12.1
The Purchaser will assume and be responsible for the commitments or liabilities
of the Vendor arising after the Closing Date from the Licences (other than those
not forming part of the Purchased Assets), Contracts, and Equipment Leases.

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2.12.2
Notwithstanding section 2.12.1 or any other provision in this Agreement to the
contrary, the Purchaser shall not assume and shall not be responsible to pay,
perform or discharge any liabilities of Vendor or any of its Affiliates relating
to any Environmental Liabilities or Environmental Claim, to the extent arising
out of or relating to facts, circumstances or conditions existing on or prior to
the Closing or otherwise to the extent arising out of any actions or omissions
of Vendor.

2.12.3
Subject to Section 2.12.1, the Purchaser will not be responsible for any
liabilities of the Vendor.

ARTICLE 3    
REPRESENTATIONS AND WARRANTIES

3.1    Representations and Warranties of the Vendor
The Vendor represents and warrants to the Purchaser as follows, and acknowledges
that the Purchaser is relying upon the accuracy of each such representation and
warranty, all of which are material to the Purchaser:
3.1.1
Organization and Good Standing – The Vendor is duly incorporated and validly
existing under the laws of the Province of British Columbia, and is
extraprovincally registered under the laws of the Province of Alberta.

3.1.2
Bankruptcy, etc. – No bankruptcy, insolvency or receivership proceedings have
been instituted or are pending, or are, to the best of the Vendor’s knowledge,
threatened, against the Vendor, and the Vendor is able to satisfy its
liabilities as they become due.

3.1.3
Capacity to Carry on Business – The Vendor has the corporate power to own, lease
and operate its properties and assets and to carry on the Business as it is
currently being conducted, and the Vendor is duly qualified as a corporation to
conduct the Business in each jurisdiction where qualification is necessary.

3.1.4
Due Authorization, etc. – The Vendor has the corporate power and authority to
enter into this Agreement and the Transaction Documents and to perform its
obligations hereunder and thereunder; the execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated by this Agreement and the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Vendor and the
Vendor’s shareholders and directors.

3.1.5
No Violation – The execution and delivery by the Vendor of this Agreement and
the Transaction Documents and the consummation of the transactions contemplated
hereunder and thereunder will not result in the breach of any of the provisions
of, or constitute a default under or conflict with or cause the acceleration of
any of the obligations of the Vendor under:

(a)
any Contract included in the Purchased Assets;

(b)
any provisions of the constating documents of the Vendor, or resolutions of the
directors or shareholders of the Vendor or any agreement among shareholders of
the Vendor;

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(c)
any Licence included in the Purchased Assets;

(d)
any Applicable Law;

(e)
any judgment, decree or award of any Governmental Authority or arbitrator so as
to prevent or otherwise affect the transfer of the Purchased Assets to the
Purchaser or the lease of the Real Property to the Purchaser.

3.1.6
Enforceability of Obligations – This Agreement and the Transaction Documents
constitute valid and legally binding obligations of the Vendor enforceable
against it in accordance with their terms, provided that enforcement may be
limited by bankruptcy, insolvency, liquidation, reorganization, and other
similar laws affecting enforceability of creditors’ rights generally, and that
equitable remedies such as specific performance and injunction are in the
discretion of the court from which they are sought.

3.1.7
Title to Assets – The Vendor is the legal and beneficial owner of the Purchased
Assets, with good and marketable title, free and clear of any title defects,
deemed trusts, encumbrances or rights or claims of others of any kind. No other
Person owns any property or assets which are being used in the Business except
for equipment subject to Equipment Leases. None of the Purchased Assets are in
the possession, or under the control, of any Person other than the Vendor.

3.1.8
No Options – No Person has any agreement or option, or any right capable of
becoming an agreement or option, for the purchase or lease from the Vendor of
any of the Business or the Purchased Assets, other than in the Ordinary Course
of Business.

3.1.9
Assets Used in Business – The Purchased Assets, the Accounts Payable, the
Accounts Receivable, any licenses not transferrable at law, together with the
Real Property, comprise all the assets, property and undertaking necessary to
carry on the Business in the same manner and to the same extent as the Business
has been carried on prior to the date hereof. With the exception of the Real
Property, which is owned by Mattic Holdings Inc. and which will be leased to the
Purchaser pursuant to the New Leases, the Accounts Payable, Accounts Receivable,
and any licenses not transferrable at law, there are no assets of the Vendor
which are currently used (or which could reasonably be used) in relation to the
Business and which are not being conveyed, either by sale or lease, by the
Vendor to the Purchaser pursuant to the terms of this Agreement. All Tangible
Assets are in good operating condition and are in a state of good repair and
maintenance, reasonable wear and tear excepted.

3.1.10
Location of Purchased Assets – All the Purchased Assets are located on the Real
Property.

3.1.11
Inventories - The Inventories are current and of good and merchantable quality
and saleable at normal profit margins within a period of time consistent with
the past experiences of the Vendor. The Inventories are carried on the financial
books and records of the Vendor at an amount not in excess of the lower of cost
and net realizable value. Schedule 3.1.11 contains the Vendor’s best estimate of
the aggregate value of the Inventories as of the Closing Date.

3.1.12
Intellectual Property –

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- 19 -

(a)
All Intellectual Property is valid, enforceable and in good standing and all
registrations relating thereto have been kept renewed and are in full force and
effect;

(b)
None of the Intellectual Property:

(i)
infringes or allegedly infringes upon the intellectual property, domestic or
foreign, of any other Person;

(ii)
involves the use of any intellectual property, domestic or foreign, which would
constitute acts of passing-off, unfair competition or infringement; or

(iii)
requires the Vendor to pay any royalties or other fees to any other Person with
respect to the Intellectual Property;

(c)
To the best knowledge of the Vendor, no rights of the Vendor relating to the
Intellectual Property are being infringed by any other Person;

(d)
The documentation relating to the know-how of the Vendor and to each trade
secret, design, product, process or operation of the Vendor relating to the
Business is accurate and in sufficient detail and content to identify and
explain them, allow their full and proper use without reliance on the knowledge
or memory of any individual and enable proper support and maintenance. The
Vendor has taken all reasonable precautions to protect the confidentiality and
value of such trade secrets, and such trade secrets are not part of the public
domain and have not been used by, divulged to, or appropriated by any other
Person to the detriment of the Vendor.

3.1.13
Licences – All Licenses which are necessary for the ownership and operation of
the Business and the Purchased Assets have been obtained by the Vendor, are in
full force and effect, and are set out in Schedule 3.1.13 and true and correct
copies thereof have been provided to the Purchaser. There have been no
violations of the terms of any such Licence, and no proceedings are pending or
threatened to revoke or limit any such Licence.

3.1.14
Contracts and Equipment Leases – All Contracts and Equipment Leases are set out
and described in Schedule 3.1.14, and true and correct copies of all written
Contracts and Equipment Leases have been provided to the Purchaser. Except for
the Licences, Contracts and the Equipment Leases, the Vendor is not a party to
or bound by any material Licence, Contract, Equipment Lease or other commitment
relating to the Business, whether oral or written. The Contracts and Equipment
Leases are in full force and effect, unamended, and no default or breach exists
in respect of any of them, nor, to the best of the Vendor’s knowledge, is any
third party in default under them, and no event has occurred which, after the
giving of notice or the lapse of time or both, would constitute a default under
any of them.

3.1.15
Computer Systems – The computer systems owned or leased by the Vendor, including
hardware, software and firmware, and utilized in the Business, are fully
functional and are, to the knowledge of the Vendor, free from viruses. All
computer software currently being utilized by the Business is properly and
validly licensed for its intended use or owned by the Vendor.

3.1.16
Forward Commitments – All outstanding forward commitments by or on behalf of the
Vendor for the purchase of Inventories may be cancelled prior to fulfillment.
The Vendor

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- 20 -

does not have any minimum or fixed purchase price commitments with any of its
suppliers.
3.1.17
Insurance

(a)
The Vendor maintains all policies of insurance, issued by responsible insurers,
as are appropriate to the Business and the Purchased Assets, in the amounts, and
against the risks, as are customarily carried and insured against by owners of
comparable businesses, properties and assets;

(b)
All such policies of insurance are in full force and effect, and will continue
to be so until the Closing Date;

(c)
There is no default, whether as to the payment of premium or otherwise, under
the terms of any policy, nor has the Vendor failed to give any notice or present
any claim under any insurance policy in due and timely fashion;

(d)
Schedule 3.1.17 sets out all insurance policies, specifying the insurer, amount
and type of insurance, maintained by the Vendor on the Business and the
Purchased Assets, as well as any claims under those policies.

3.1.18
Litigation – Except as set out in Schedule 3.1.18, there are no actions,
investigations or proceedings before any court, arbitrator or Governmental
Authority which, if decided adversely to the Vendor might have a Material
Adverse Effect on the Business, the Purchased Assets or the Real Property, nor,
to the knowledge of the Vendor, are there any such actions, investigations or
proceedings pending or threatened. There is not presently outstanding any
judgment, decree, injunction, rule or order of any Governmental Authority which
may have a Material Adverse Effect on title to the Purchased Assets or the Real
Property, the ability of the Purchaser to carry on the Business, or the ability
of the Vendor to complete the transactions contemplated by this Agreement and
the Transaction Documents.

3.1.19
Environmental Matters – Without limiting the generality of any other
representation or warranty in this Agreement, in connection only with the
Business, the Purchased Assets and the Real Property:

(a)
the Vendor has been and is in compliance with all Environmental Laws;

(b)
no Hazardous Substance is present in, on or under or is migrating to or from,
any of the Real Property;

(c)
the Vendor has not released or emitted into the natural environment or
discharged or disposed of, or arranged for disposal of, at, in, under or
otherwise acquiesced or participated in the discharge or disposal of, at, in or
under the Real Property or any other properties of any Hazardous Substances;

(d)
there are no Hazardous Substances brought in or produced by the Vendor or to the
best of the Vendor’s knowledge at, in, on, under or within the Real Property or
any other properties that causes or may cause any adverse environmental effect,
Environmental Liabilities on or in regard to any properties or the use thereof
including any environmental conditions which may be considered to be hazardous
to the health of any person, including any employees or contractors of the
Vendor, other

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than the list of substances attached hereto as Schedule 3.1.19(d), all of which
have been and are brought, used and stored in accordance with all Environmental
Law;
(e)
neither the Vendor, nor, to the knowledge of the Vendor, any other person or
entity, has used or permitted to be used, except in compliance with all
Environmental Law, any of the Vendor’s property to generate, manufacture,
process, distribute, use, treat, store, dispose of, transport and handle any
Hazardous Substance, nor has it caused or permitted the release of any Hazardous
Substance except in compliance with Environmental Law;

(f)
to the best of the Vendor’s knowledge there are no notices of non‑compliance,
complaints, summons, legal actions, charges, work orders, control orders, stop
orders, directions, warnings, remedial and waste removal or other orders
relating to the environment made against the Vendor under Environmental Laws by
any court, Governmental Authority or third party and there is no judicial,
governmental or third party complaint, action or investigation, and there are no
facts of which the Vendor has notice which could give rise to any such
complaint, action or investigation and the Business, the Real Property and the
operations of the Vendor are not subject to any orders that remain outstanding
under any Environmental Law;

(g)
the Vendor has not assumed by merger, contract, assignment or assumption any
Environmental Liabilities of any other person or entity under Environmental Law,
including any obligation for the cost of investigation, monitoring, studying,
removal or remediation of Hazardous Substances at any property, whether owned or
leased by Vendor or otherwise;

(h)
the Vendor has not used or permitted to be used any of the Business operations,
properties or facilities or any property or facilities that it previously owned
or leased, to generate, manufacture, process, distribute, use, treat, store,
dispose of, transport or handle any Hazardous Substance, except in compliance
with Environmental Laws;

(i)
the Vendor has not received any notice that it is potentially responsible for a
federal, provincial, municipal or local clean-up site or corrective action under
any Environmental Law, and the Vendor has received any request for information
in connection with any federal, provincial, municipal or local inquiries as to
disposal sites with respect to the Business operations, properties or
facilities, whether current or previous;

(j)
the Vendor has provided the Purchaser with all environmental information
respecting the Business operations, properties and facilities, whether current
or previous;

(k)
there are no environmental audits, evaluations, assessments, studies or tests
commissioned by the Vendor respecting the Business operations, properties or
facilities currently underway;

(l)
the Vendor has not received recommendations from any person to investigate,
remediate or remove Hazardous Substances from the Real Property;

(m)
to the best of the Vendor’s knowledge, there are no underground storage tanks
located on the Real Property;

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- 22 -

(n)
all Licences necessary or advisable to permit the Vendor to carry on the
Business have been obtained and are in full force and effect;

(o)
no investigations have or are being conducted or, to the knowledge of the
Vendor, are threatened by any Governmental Entity against the Vendor pursuant to
any Environmental Law.

3.1.20
Health and Safety –

(a)
The business premises located on the Real Property are in compliance with
applicable sanitation, health and safety legislation and regulations and are not
subject to any orders or directions of a sanitation or occupational health and
safety authority or similar Governmental Authority.

(b)
The Vendor is registered with WorkSafeBC, is up to date with respect to filing
its payroll reports with WorkSafeBC, and does not have a balance owing to
WorkSafeBC for unpaid premiums.

(c)
The Vendor is registered with The Workers Compensation Board Alberta, is up to
date with respect to filing its payroll reports with The Workers Compensation
Board Alberta, and does not have a balance owing to The Workers Compensation
Board Alberta for unpaid premiums.

(d)
There have been no administrative penalties, warning letters, variances or
orders issued to the Vendor by WorkSafeBC or the Workers Compensation Board
Alberta in the five year period prior to the date of this Agreement.

3.1.21
Consents – There are no consents, authorizations, licences, franchise
agreements, permits or orders of any Person required to permit the Vendor to
complete the transactions contemplated by this Agreement, except for consents
required for the assignment of any Non-Assignable Contract.

3.1.22
Product Liability – Each product sold by the Vendor prior to the Closing was of
merchantable quality and fit for the purpose for which it was sold. There are no
actions, claims or proceedings pending nor, to the knowledge of the Vendor,
threatened against the Vendor with respect to the products sold or services
provided by the Business or alleging that, for any reason, any products or
services of the Business were:

(a)
defective or deficient or improperly, inadequately or wrongly performed in any
manner;

(b)
contrary to Applicable Law;

(c)
subject to or contained any faulty or improper workmanship, material, latent
defect or inherent vice;

(d)
improperly designed, manufactured or labelled;

(e)
conducted in a manner resulting in harm, or the possibility of harm, to
property, public health or safety; or

(f)
provided in a manner resulting in harm, or the possibility of harm, to the
environment.

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3.1.23
Warranties and Discounts – The Vendor does not manufacture products. The Vendor
has not given any written or oral warranty regarding any of the products sold or
services provided as part of the Business, or incurred any repair or maintenance
obligations in favour of any customers of the Business or entered into any
agreement with any customer which would require the repurchase of goods, price
adjustment, refund, discount or concession to any customer after Closing. No
Person has any valid claim against the Vendor or the Business under Applicable
Law relating to unfair competition, false advertising or other similar claims
arising out of product or service warranties, specifications, manuals, brochures
or other advertising materials relating to the Business.

3.1.24
Contractor Sales Representatives –

(a)
Schedule 3.1.24 contains an accurate list of all Contractor Sales
Representatives, showing each Contractor Sales Representative’s, commission
arrangement, other compensation, start date, age, and details of any other
substantive written or oral arrangements between the Contractor Sales
Representatives and the Vendor.

(b)
No current or former independent contractor of the Vendor could be deemed to be
a misclassified employee.  No independent contractor of the Vendor is eligible
to participate in any employee benefit plan.

(c)
The Vendor has properly reported and withheld, collected and paid all taxes
required to have been withheld, collected and paid in connection with (i)
amounts paid, credited or owing to any employee, independent or dependent
contractor, creditor, shareholder or other third party; and (ii) goods and
services received from or provided to any person.

3.1.25
Details of Employees – Schedule 3.1.25 contains an accurate list of all
Employees showing each Employee’s title, current annual salary or hourly rate of
pay, bonus or commission arrangement, general job description, age, date of hire
and details of any other substantive written or oral employment contract terms
and identifies all Employees, if any, who:

(a)
have been absent continually from work for a period in excess of one month, as
well as the reason for their absence;

(b)
are in receipt of benefits from a short-term or long-term disability program;

(c)
are in receipt of worker's compensation benefits on account of their employment
by the Vendor;

(d)
are on an authorized unpaid leave of absence (including maternity or parental
leave or unpaid sick leave) from the Vendor;

and particulars of the rights and benefits of such individuals in respect
thereof.
3.1.26
Employee Contracts – the Vendor is not a party to any written or oral contracts
of employment with any of the Employees which are not terminable on the giving
of reasonable notice and/or severance pay in accordance with Applicable Law.

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3.1.27
Employment and Contractor Payments by the Vendor to Date of Agreement – The
Vendor has paid, to the date of this Agreement, all amounts payable on account
of wages and other employee benefits and claims, including vacation pay (other
than Employee Amounts which will be reimbursed in accordance with Section
4.1(j)) to, or on behalf of, all Employees and Contractor Sales Representatives
of the Vendor.

3.1.28
Employment Standards and Human Rights – Except as set out in Schedule 3.1.28,
there are no actions, claims or proceedings against the Vendor pursuant to the
Employment Standards Act (British Columbia), the Human Rights Code (British
Columbia), the Employment Standards Code (Alberta) or the Human Rights Act
(Alberta) nor, to the knowledge of the Vendor, are there any such actions,
claims or proceedings pending or threatened.

3.1.29
Labour Matters –

(a)
There is no unfair labour practice complaint under the Labour Relations Act
(British Columbia) or the Employment Standards Code (Alberta) related to the
Business ongoing, or, to the best of the Vendor’s knowledge, pending or
contemplated before any labour tribunal or similar agency;

(b)
There is no labour strike threatened against, or involving, the Business;

(c)
There is no union certification application outstanding respecting the
Employees;

(d)
There are no collective agreements or union certifications respecting the
Employees, the Business or the Plants and Building; and

(e)
There are no ongoing negotiations with respect to any collective agreement.

3.1.30
Pension Plans – There are no pension plans maintained by the Vendor for the
Employees or the Contractor Sales Representatives.

3.1.31
Benefit Plans – Except as set out in Schedule 3.1.31, the Vendor is not a party
to:

(a)
any management agreement, pay equity plan, vacation or vacation pay policy,
employee insurance, hospital or medical expense program or pension, retirement,
profit sharing, bonus, stock option or other employee benefit program or
arrangement; or

(b)
any incentive or other special compensation arrangement; or

(c)
other contracts or agreements;

with or with respect to the Employees or the Contractor Sales Representatives.
3.1.32
Taxes

All Taxes required to be withheld or collected by the Vendor have been duly
withheld, and collected and the Vendor has remitted or will remit such amounts
to the appropriate Governmental Authority within the time prescribed for doing
so under Applicable Law. Without limiting the foregoing:

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- 25 -

(a)
the Vendor has or will have remitted to the proper Governmental Authority within
the time required by Applicable Law, all Canada Pension Plan contributions,
employment insurance premiums, employers' health Taxes and other Taxes payable
by the Vendor in respect of its employees; and

(b)
the Vendor has charged and collected and has remitted or will remit on a timely
basis all Taxes as required by Applicable Law on any sale, supply or delivery
whatsoever made in relation to the Business.

There are no claims for Taxes which might result in an Encumbrance on any of the
Purchased Assets.
3.1.33
Residence – The Vendor is not a non-resident of Canada within the meaning of the
Income Tax Act (Canada).

3.1.34
GST Registration – The Vendor is a registrant for the purposes of GST and its
registration number is 103565057RT0001. The Business is a “commercial activity”
for the purposes of Part IX of the Excise Tax Act (Canada).

3.1.35
Financial Statements and Financial Books and Records – The financial records of
the Vendor for the period l to l attached as Schedule 3.1.35 have been prepared
in accordance with GAAP and present fairly in all material respects:

(a)
the financial position of the Business as of the dates shown in those financial
records; and

(b)
the results of operations of the Business for the periods indicated in those
financial records.

All material financial transactions relating to the Business have been
accurately recorded in the financial records attached as Schedule 3.1.35.
3.1.36
Liabilities – There are no liabilities of the Vendor, whether accrued,
contingent, undisclosed, determined or determinable, in respect of which the
Purchaser may become liable on or after the Closing Date, other than those
described in Section 2.12.1.

3.1.37
Conduct of Business in Ordinary Course – Since November 30, 2015,

(a)
the Business has been operated in the Ordinary Course of Business, consistent
with past practice, and the Vendor has not:

(i)
incurred any obligation, entered into any transaction or acquired or encumbered
or disposed of any property relating to the Business except in the Ordinary
Course of Business; or

(ii)
been made aware of any anticipated loss from any contract which would have a
Material Adverse Effect;

(b)
there has not been any salary increase or bonus made for the benefit of any
Employee, other than annual salary adjustments made in the Ordinary Course of
Business;

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(c)
there has not been a Material Adverse Change in the Business or the Purchased
Assets; and

(d)
there has not been any agreement by the Vendor to do any of the foregoing.

3.1.38
Rights, Privileges etc. – There are no material rights, privileges or advantages
presently enjoyed by the Business which might be lost as a result of the
consummation of the transactions contemplated under this Agreement and the
Transaction Documents.

3.1.39
Compliance With Privacy Laws

(a)
The collection, use and retention of the Personal Information by the Vendor, the
disclosure or transfer of the Personal Information by the Vendor to any third
parties and transfer of the Personal Information by the Vendor to the Purchaser
as part of the Purchaser's due diligence and as contemplated by this Agreement
or any Transaction Document complies with all Privacy Laws.

(b)
There are no restrictions on the collection, use, disclosure and retention of
the Personal Information by the Vendor except as provided by Privacy Laws.

(c)
There are no investigations, actions, claims or demands, whether statutory or
otherwise, pending, or to the knowledge of the Vendor, threatened, with respect
to the collection, use, disclosure or retention of the Personal Information by
the Vendor.

(d)
No judgment or order, whether statutory or otherwise, is pending or has been
made, and no notice has been given pursuant to any Privacy Laws, requiring the
Vendor to take (or to refrain from taking) any action with respect to the
Personal Information.

3.1.40
Customers – Since September 30, 2016 there has not been any change in the
business relationship between any of the 20 customers the Business had the
highest sales to during the period December 1, 2015 to September 30, 2016 (the
“Major Customers”) and the Vendor (including the terms and conditions upon which
any Major Customer purchases products from the Vendor) and the Vendor has not
received any notice (written or otherwise) that, and there have been no threats
or other indications that, any Major Customer intends to change its business
relationship with the Business.

3.1.41
Supplier – Since November 30, 2015 there has not been any change in the business
relationship between any major supplier of the Business and the Vendor
(including the terms and conditions upon which any such supplier sells products
to the Vendor) and the Vendor has not received any notice (written or otherwise)
that, and there have been no threats or other indications that, any major
supplier intends to change its business relationship with the Business. The
Vendor is not a party to any contract with any supplier which is not terminable
on giving notice to the supplier and paying for products already delivered to
the Vendor by the supplier.

3.1.42
Disclosure – None of the foregoing representations, warranties and statements of
fact contains any untrue statement of material fact or omits to state any
material fact necessary to make any such representation, warranty or statement
not misleading to a prospective purchaser of the Purchased Assets seeking full
information concerning the matters which are the subject of those
representations, warranties and statements.

3.2    Representations and Warranties of the Purchaser

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The Purchaser hereby represents and warrants to the Vendor as follows:
3.2.1
Organization and Good Standing – The Purchaser is duly incorporated and validly
existing under the laws of the Province of Ontario.

3.2.2
Bankruptcy, etc. – No bankruptcy, insolvency or receivership proceedings have
been instituted or are pending or are, to the best of the Purchaser’s knowledge,
threatened against the Purchaser, and the Purchaser is able to satisfy its
liabilities as they become due.

3.2.3
Due Authorization, etc. – The Purchaser has the corporate power and authority to
enter into this Agreement and the Transaction Documents and to perform its
obligations hereunder and thereunder; the execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated by this Agreement and the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the Purchaser and
its directors and shareholders.

3.2.4
Absence of Conflicting Agreements – The execution and delivery by the Purchaser
of this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereunder and thereunder will not result in the breach
of any of the provisions of, or constitute a default under or conflict with:

(a)
any agreement to which the Purchaser is a party;

(b)
any provisions of the constating documents of the Purchaser;

(c)
any Applicable Law;

(d)
any judgment, decree or award of any Governmental Authority or arbitrator.

3.2.5
Enforceability of Obligations – This Agreement and the Transaction Documents
constitute valid and legally binding obligations of the Purchaser enforceable
against it in accordance with their terms, provided that enforcement may be
limited by bankruptcy, insolvency, liquidation, reorganization, and other
similar laws affecting enforceability of creditors’ rights generally, and that
equitable remedies such as specific performance and injunction are in the
discretion of the court from which they are sought.

3.2.6
GST Registration – The Purchaser is a registrant for purposes of GST. The
Purchaser’s GST registration number is 103004636RT0001.

3.2.7
Consents – There are no consents, authorizations, licences, franchise
agreements, permits, or orders of any Person required to permit the Purchaser to
complete the transactions contemplated by this Agreement and the Transaction
Documents.

3.3    Commission
Each Party represents and warrants to the other Party that no Person engaged by
it is entitled to a brokerage commission, finder’s fee or other like payment in
connection with the transactions contemplated by this Agreement and the
Transaction Documents.

3.4    Non-Waiver

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No investigations made by or on behalf of either of the Parties will have the
effect of waiving, diminishing the scope of, or otherwise affecting any
representation or warranty made in this Agreement.

ARTICLE 4    
EMPLOYEES

4.1    Employees and Contractor Sales Representatives
(a)
The Purchaser will extend offers of employment to all the Employees effective on
or immediately after the Closing Date, on terms and conditions no less
favourable than those currently offered by the Vendor. The Employees that accept
the Purchaser’s employment on or before the Closing Date shall be deemed, for
legal purposes, to enjoy continuing employment, and there will be no trigger for
severance or other obligations associated with termination of the Employees that
accept the employment offers from the Purchaser.

(b)
The Vendor shall be liable for payment of all legal obligations relating to the
termination of employment of any Employee who does not accept an offer of
employment from the Purchaser pursuant to Section 4.1(a) hereof.

(c)
The Vendor’s liability for payment of legal obligations relating to the
termination of employment of any Employee who does not accept the Purchaser’s
offer of employment in accordance with the foregoing terms of this Section will
extend to all amounts required to be paid either by Applicable Law or by
contract, including payment in lieu of notice, termination pay, severance pay,
vacation pay, legal costs, costs of defence or other proceedings, and all other
outstanding amounts relating to any termination of employment.

(d)
The Purchaser will extend offers of employment to all the Contractor Sales
Representatives effective on or immediately after the Closing Date, with terms
relating to compensation that are no less favourable than those currently
offered by the Vendor, except that the Purchaser’s offer will not be structured
as or in the form of an independent contractor agreement. The Contractor Sales
Representatives that accept the Purchaser’s offer of employment on or before the
Closing Date shall be deemed, for legal purposes, to have commenced employment
with the Purchaser effective on the date upon which they accept employment with
the Purchaser. The Purchaser will not recognize the Contractor Sales
Representatives’ past service with the Vendor for any reason.

(e)
The Vendor shall be liable for payment of all legal obligations relating to the
termination of the Contractor Sales Representatives’ contracts with the Vendor
prior to the Closing Date.

(f)
The Vendor’s liability for payment of legal obligations relating to the
termination of the Contractor Sales Representatives’ contracts with the Vendor
in accordance with the foregoing terms of this Section will extend to all
amounts required to be paid either by Applicable Law or by contract, including
legal costs (on a solicitor and own-client basis), costs of defence or other
proceedings, and if applicable, payment in lieu of notice, termination pay,
severance pay, vacation pay and all other outstanding

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amounts relating to the termination of the Contractor Sales Representatives’
contracts with the Vendor.
(g)
On the Closing Date, the Vendor will determine the outstanding liabilities for
wages, compensation and other employee benefits, including vacation pay, in
respect of the Employees and Contractor Sales Representatives accrued up to the
Closing Date, owing by the Vendor (the “Employee Amounts”).

(h)
The Vendor shall be liable for, and shall pay and discharge, any and all
liability up to the Closing Date for Employee Amounts accrued up to the Closing
Date.

(i)
Within 30 days following the Closing Date the Vendor will deliver to the
Purchaser a statement of the Employee Amounts owing by, and paid by, the Vendor.

(j)
Within 120 days after the Closing Date, the Purchaser will submit to the Vendor
an invoice, payable upon receipt, for any Employee Amounts paid by the Purchaser
relating to the Employees.

4.2    Vendor Consulting Agreement
The Purchaser and the Vendor covenant and agree that they will enter into a
consulting agreement, in the form attached hereto as Schedule 4.2 (the
“Consulting Agreement”), pursuant to which the Vendor agrees to provide
transition services (the “Transition Services”) to the Purchaser for a period of
six months commencing on the later of the Closing Date or the first Business Day
after the Closing Date, for $10,417.00 per month. The Transition Services will
include, without limitation:
(a)
meeting with key customers and employees in order to describe the transition of
the Business to the Purchaser;

(b)
supporting the Purchaser in transitioning customers and products to the
Purchaser’s computer systems;

(c)
assisting the Purchaser in maintaining full order processing and billing of
customers on the Vendor’s existing computer systems during the transition period
as required by the Purchaser;

(d)
assisting the Purchaser in ensuring customer orders are completed by warehouse
personnel; and

(e)
assisting the Purchaser’s management team to formulate a product strategy to
integrate the Vendor’s product offerings into the Purchaser’s product line.

ARTICLE 5    
COVENANTS

5.1    Conduct of Business
The Vendor covenants that during the Interim Period it will:
5.1.1
Conduct Business in Ordinary Course – conduct the Business only in the Ordinary
Course of Business, and maintain:

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(a)
the services of the present Employees and Contractor Sales Representatives; and

(b)
good relations with (and preserve the goodwill of) customers, manufacturers,
suppliers, lessors and all other Persons having business relationships with the
Vendor.

5.1.2
Continue Insurance – continue in force all insurance maintained by it in respect
of the Business.

5.1.3
Compliance with Laws – comply with all Applicable Law of each jurisdiction in
which the Business is carried on.

5.1.4
Material Changes – not take any action which would result in any Material
Adverse Change in or to the Purchased Assets or the Business or sell, transfer,
dispose of or encumber any of the Purchased Assets, other than in the Ordinary
Course of Business.

5.1.5
Wage Increases – not increase the remuneration of any Employee, Contractor Sales
Representative, consultant or agent of the Business, except as regularly
scheduled in amounts which are in accordance with existing policy of the Vendor.

5.1.6
Employee Deductions and Withholding – make all deductions required by Applicable
Law or by contract to be made from amounts paid to employees and remit the
amounts deducted, and all related employer contributions required, to the
Governmental Authority entitled to receive payment of those amounts.

5.2    Access to Information, Employees and Contractor Sales Representatives
5.2.1
During the Interim Period, the Vendor will permit the Purchaser and its
employees, agents, counsel, accountants and other representatives to:

(a)
speak to the Employees and the Contractor Sales Representatives about the
transition of the Business to the Purchaser; and

(b)
have access during normal business hours to the premises of the Vendor, and to
all the books, accounts, records and other data of the Business and the Real
Property and will furnish to the Purchaser any information with respect to the
Business, including copies of pertinent books, records and other documents, as
the Purchaser may from time to time reasonably request to enable it to make a
full and complete investigation of the Business and the Purchased Assets, and
the Vendor will instruct its officers, employees, solicitors, accountants and
other advisors to cooperate fully with and assist the Purchaser in that
investigation.

5.2.2
Without limiting the generality of Section 5.2.1, the Vendor will permit the
Purchaser and its employees, agents, counsel, accountants, and other consultants
or representatives, during the Interim Period, to conduct such environmental and
occupational health and safety review, sampling, or testing as the Purchaser may
reasonably deem to be necessary provided this does not unreasonably disrupt the
ordinary conduct of the Business.

5.3    Destruction or Expropriation – Purchased Assets

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Up to the Closing Date, all risk of loss or damage by fire or other cause or
hazard to the Purchased Assets will remain with the Vendor and the Vendor will
hold all insurance policies and any proceeds of those policies in trust for the
Vendor and the Purchaser. If, prior to the Closing Date, there occurs any
destruction or damage by fire or other cause or hazard to any of the Purchased
Assets, or if the Purchased Assets or any part of them are expropriated or
forcefully taken by any Governmental Authority, or if notice of intention to
expropriate a part of the Purchased Assets has been filed in accordance with
applicable legislation, then:
(a)
where that destruction, damage or expropriation would constitute a Material
Adverse Change, the Purchaser may terminate this Agreement by notice to the
Vendor; or

(b)
where that destruction, damage or expropriation would not constitute a Material
Adverse Change, the Purchaser must complete the purchase and sale of the
Purchased Assets, in which event all insurance proceeds or expropriation
proceeds, as the case may be, will be assigned and/or paid by the Vendor to the
Purchaser.

5.4    Actions to Satisfy Closing Conditions
Each Party agrees to take all possible actions, and to use its best efforts to
cause other actions to be taken, so as to ensure compliance with any conditions
set out in Article 7 which are for the benefit of another Party.

5.5    Change of Name
Within 120 days after the Closing Date the Vendor will change its corporate name
to a name that does not include the words “Mattic Industries”, or any variation
thereof in the new name and will provide the Purchaser with evidence of the
change of name to the satisfaction of the Purchaser, acting reasonably. The
Vendor covenants that after the Closing Date it will not use the name “Mattic
Industries” or hold itself out to be conducting business under the name “Mattic
Industries” except for the purposes of collecting the Accounts Receivable and
fulfilling its obligations under the Consulting Agreement.

5.6    Non-Competition and Non-Solicitation Covenants
5.6.1
The Vendor covenants and agrees that it shall execute and deliver to the
Purchaser on the Closing Date a non-competition and non-solicitation covenant in
the form attached hereto as Schedule 5.6.1.

5.6.2
John covenants and agrees that he shall execute and deliver to the Purchaser on
the Closing Date a non-competition and non-solicitation covenant in the form
attached hereto as Schedule 5.6.2.

5.7    Accounts Receivable
The Purchaser covenants and agrees with the Vendor that it will use its
reasonable efforts to assist the Vendor in collecting the Accounts Receivable,
and that it will:
(a)
hold any payments it receives with respect to Accounts Receivable in trust for
the Vendor; and

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(b)
promptly forward payments it receives with respect to Accounts Receivable to the
Vendor.

5.8    Access to Books and Records
The Purchaser covenants and agrees with the Vendor that from and after the
Closing Date the Purchaser will give the Vendor whatever access to such
documentation and information from the Books and Records which the Vendor may
reasonably require for the purposes of collecting any Accounts Receivable,
defending any claims against the Vendor by third parties, and handling any
assessment or re-assessment of the Vendor by the Canada Revenue Agency.

5.9    Updated Schedules of Contractor Sales Representatives and Employees
On or immediately after the date of this Agreement, the Vendor will provide the
Purchaser with true and correct copies of Schedule 3.1.24 and Schedule 3.1.25,
which have been updated to include the names of each Contractor Sales
Representative and Employee.

5.10    Major Customer List
On the Closing Date the Vendor will provide the Purchaser with a complete and
correct list of the Major Customers, showing the aggregate sales, aggregate
product cost and aggregate product cost margin of each Major Customer during the
period December 1, 2015 to September 30, 2016.

ARTICLE 6    
SURVIVAL OF REPRESENTATIONS & WARRANTIES AND INDEMNITY

6.1    Survival
6.1.1
Survival – All representations and warranties of the Parties contained herein or
in the Transaction Documents will survive the Closing and the execution and
delivery of conveyances provided for herein or in the Transaction Documents for
a period of two (2) years after the Closing Date and will continue during that
period in full force and effect and will not merge thereon or therein.

Notwithstanding the foregoing:
(a)
any claim arising from a representation or warranty contained herein which is
based upon or relates to:

(i)
the provisions of Sections 3.1.1, 3.1.4, 3.1.5, 3.1.6, 3.1.8 and 3.1.19;

(ii)
title to the Purchased Assets;

(iii)
any breach of a representation or warranty involving fraud or fraudulent
misrepresentation or any breach of any representation or warranty involving
Hazardous Substance or Environmental Law; or

(iv)
the provisions of Sections 3.2.1, 3.2.3, 3.2.4 and 3.2.5;

will survive indefinitely and will not merge thereon or therein; and

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(b)
any claim arising from a representation or warranty contained herein which is
based upon or relates to existing or potential liability for Taxes will survive
for a period of one (1) year after expiry of the normal reassessment period
described in Applicable Law in relation to such Taxes and any further time
during which a reassessment may be made on account of neglect, carelessness or
wilful default and will not merge thereon or therein.

6.2    Indemnification
6.2.1
Indemnification by the Vendor

(a)
The Vendor and John jointly and severally agree to indemnify and hold the
Purchaser harmless against and in respect of any loss, damage, claim, cost or
expense whatsoever, including legal fees on a solicitor and own client basis,
consultant expenses or advisor expenses, which the Purchaser may incur or be
required to pay (a “Purchaser’s Claim”), arising in connection with the
following matters:

(i)
any inaccuracy or breach of any representation or warranty of the Vendor
contained in this Agreement or any Transaction Document;

(ii)
any breach or non-performance by the Vendor or John of any covenant or agreement
to be performed by the Vendor or John contained in this Agreement or any
Transaction Document;

(iii)
any bulk sales or similar legislation concerning creditor’s rights pertaining to
or relating to the Purchased Assets and the Business;

(iv)
any and all liability of any nature whatsoever under any Workers’ Compensation
or similar legislation or regulation in any jurisdiction for the period prior to
the Closing Date, including any experience rating assessments, surcharges or
levies based on or related to the Vendor’s record or history of workplace
injuries;

(v)
the Excluded Assets;

(vi)
all liabilities of the Vendor (whether accrued, actual or contingent) or any
loss relating to the Business or the Purchased Assets accruing up to and
including the Closing Date except as assumed by the Purchaser pursuant to this
Agreement;

(vii)
any non-compliance with any Environmental Law relating to or arising from,
directly or indirectly, any past or present activity or operation of the Vendor
up to the Closing Date;

(viii)
any Environmental Claim or Environmental Liabilities to the extent arising out
of or relating to facts, circumstances or conditions existing on or prior to the
Closing or otherwise to the extent arising out of any actions or omissions of
the Vendor;

(ix)
any claims by Employees arising from the operation of the Business on or before
the Closing Date, including, without limitation, any claims for wrongful
dismissal, or any claims pursuant to the Employment Standards Act (British

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Columbia), the Employment Standards Code (Alberta), the Human Rights Code
(British Columbia) or the Human Rights Act (Alberta);
(x)
any and all liability or amounts owing of any nature arising from the Company’s
employment of, engagement of, or relationship with, any current or former
employees or independent contractors, prior to the Closing Date, including,
without limitation, any failure to pay, remit, deduct or withhold any income
tax, GST, Canadian Pension Plan contributions or Employment Insurance premiums;

(xi)
any and all liability or amounts owing of any nature arising from the Company’s
employment of, engagement of, or relationship with, any current or former
employees or independent contractors, prior to the Closing Date, including,
without limitation, damages, payment in lieu of notice, termination pay,
severance pay, vacation pay, legal costs, costs of defense or other proceedings,
and all other outstanding amounts; and

(xii)
any and all claims for brokerage, commissions, finders' fees or similar claims
which the Vendor or John may have committed to pay to third Persons.

(b)
Notwithstanding the provisions of Section 6.2.1(a) above, the Purchaser will be
entitled to be indemnified by the Vendor and John only in the event and to the
extent that the aggregate amount of all Purchaser’s Claims exceeds $50,000,
provided, however, that this threshold amount will not apply in respect of any
Purchaser’s Claim arising from wilful misrepresentation or fraud or any matter
set out in Section 6.1.1(a). The maximum liability of the Vendor and John under
this Section 6.2.1 will be limited to the Purchase Price.

6.2.2
Indemnification by Purchaser

(a)
The Purchaser agrees to indemnify and hold the Vendor and John harmless against
and in respect of any loss, damage, claim, cost or expense whatsoever, including
legal fees on a full indemnity basis and actual accounting, consultant or
advisor expenses, which the Vendor or John may incur or be required to pay (a
“Vendor’s Claim”), arising in connection with the following matters:

(i)
any inaccuracy or breach of any representation or warranty of the Purchaser
contained in this Agreement or any Transaction Document;

(ii)
any breach or non-performance by the Purchaser of any covenant or agreement to
be performed by the Purchaser contained in this Agreement or any Transaction
Document;

(iii)
any claims by Employees arising from the operation of the Business after the
Closing Date;

(iv)
any commitment or liabilities of the Vendor arising after the Closing Date from
the Contracts, Equipment Leases and Licenses (other than those not forming part
of the Purchased Assets); and

(v)
any and all claims for brokerage, commissions, finders' fees or similar claims
which the Purchaser may have committed to pay to third Persons.

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(b)
Notwithstanding the provisions of Section 6.2.2(a) above, the maximum liability
of the Purchaser under this Section 6.2.2 will be limited to the $1,000,000,
except that the liability of the Purchaser to pay the Purchase Price to the
Vendor is not subject to or included in this maximum liability.

6.2.3
Claims by Third Parties

(a)
For the purposes of this Section 6.2.3 “Third Party Claim” means any demand
which has been made by or on behalf of any Person other than a Party and which,
if maintained or enforced, might result in a loss, liability or expense of the
nature described in Subsection 6.2.1.

(b)
Upon notice of any Third Party Claim in respect of which the Purchaser proposes
to demand indemnification from the Vendor and John (each an “Indemnitor” and
collectively the “Indemnitors”), the Purchaser will give notice to that effect
to the Vendors.

(c)
Each Indemnitor will have the right, exercisable by giving notice to the
Purchaser and the other Indemnitor not later than 30 days after receipt of the
notice described in Section 6.2.3(b), to assume the control of the defence,
compromise or settlement of the Third Party Claim, provided that:

(i)
the Indemnitor will first deliver to the Purchaser its written consent to be
joined as a party to any action or proceeding; and

(ii)
the Indemnitor will, at the request of the Purchaser, furnish it with reasonable
security against any costs or other liabilities to which it may be or become
exposed by reason of the Indemnitor’s defence, compromise or settlement.

(d)
Upon the assumption of control by the Indemnitor, the Indemnitor will diligently
proceed with the defence, compromise or settlement of the Third Party Claim at
the Indemnitor’s sole expense, including employment of counsel reasonably
satisfactory to the Purchaser, and the Purchaser will co-operate fully, but at
the expense of the Indemnitor, to make available to the Indemnitor all pertinent
information and witnesses under the Purchaser’s control, and to make any
assignments and take any other steps which, in the opinion of counsel for the
Indemnitor, are necessary to enable the Indemnitor to conduct a defence,
provided that the Purchaser will be entitled to reasonable security from the
Indemnitor for any expense, costs or other liabilities to which it may become
exposed by reason of its co-operation.

(e)
The final determination of any Third Party Claim, including any determination of
related costs and expenses, will be binding and conclusive upon the Parties as
to the validity of that Third Party Claim.

(f)
Should the Indemnitors fail to give notice to the Purchaser as provided in
Section 6.2.3(c), the Purchaser will be entitled to make any settlement of the
Third Party Claim it deems, in its sole discretion, to be advisable, and that
settlement will be binding upon the Indemnitors.

6.3    Right to Set-Off

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The Purchaser will have the right to satisfy any amount from time to time owing
by the Purchaser to the Vendor by way of set-off against any amount from time to
time owing by the Vendor to the Purchaser, including, without limitation, any
amount owing to the Purchaser pursuant to the indemnification obligations of the
Vendor under Section 6.2.1, or pursuant to any reduction to the Purchase Price
pursuant to Sections 2.5 or 2.6.

ARTICLE 7    
CONDITIONS PRECEDENT

7.1    Purchaser’s Conditions
The obligation of the Purchaser to complete the transactions contemplated by
this Agreement will be subject to the satisfaction of, at or before the Closing
Date, each of the following conditions precedent:
7.1.1
Truth and Accuracy of Representations of the Vendor – All representations and
warranties of the Vendor made pursuant to this Agreement will be true and
complete as at the Closing Date and with the same effect as if made as of the
Closing Date, and the Purchaser will have received a certificate to that effect
from a senior officer of the Vendor.

7.1.2
Performance of Obligations – The Vendor and John will have performed or complied
with all their obligations and agreements under this Agreement.

7.1.3
Corporate Approvals – All necessary corporate action will have been taken by the
shareholders and directors of the Vendor to approve the execution and delivery
of this Agreement and the Transaction Documents, and performance by the Vendor
hereunder or thereunder.

7.1.4
Closing Documentation –The Purchaser will have received duly executed copies of
the Closing Documents listed in Section 8.2.1.

7.1.5
Consents to Assignment – All consents from, or notifications to, any Person,
required by any of the Contracts, Equipment Leases and Licences in connection
with the completion of the transactions contemplated by this Agreement will have
been obtained or given.

7.1.6
Consents, Authorizations and Registrations – All consents, orders and
authorizations of Governmental Authority required in connection with the
completion of the transactions contemplated by this Agreement will have been
obtained.

7.1.7
No Actions Taken Restricting Sale – No action or proceeding will be pending or
threatened by any Person to restrict, prohibit or invalidate the transactions
contemplated under this Agreement and the Transaction Documents, or which might
affect the right of the Purchaser to own or control any of the Purchased Assets
or conduct the Business from and after Closing.

7.1.8
Employee and Contractor Sales Representative Obligations – The Purchaser will be
satisfied that the Vendor has paid all amounts specified in Section 4.1(c), if
any, and Section 4.1(h), with respect to the Employees and Contractor Sales
Representatives, accruing to the Closing Date.

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7.1.9
Offers of Employment – The Purchaser, in its sole and arbitrary discretion, will
be satisfied that eight (8) or more of the Sales Representatives, who represent
a minimum of eighty percent (80%) of the aggregate Sales of the Vendor in the
twelve (12) month period immediately before the date of this Agreement, have or
will accept employment with the Purchaser or before the Closing Date.

7.1.10
Discharge of Encumbrances – All Encumbrances affecting the Purchased Assets will
have been discharged.

7.1.11
New Leases – Concurrently with the Closing, the Purchaser and Mattic Holdings
Inc. will enter into:

(a)
a new lease for the properties located at:

(i)
#101 17670 65A Ave., Surrey, British Columbia, Canada, V3S 5N4, in the form
attached hereto as Schedule 7.1.11(a); and

(ii)
#102 17670 65A Ave., Surrey, British Columbia, Canada, V3S 5N4, in the form
attached hereto as Schedule 7.1.11(a);

in the form attached hereto as Schedule 7.1.11(a); and
(b)
a new lease for the properties located at:

(i)
7936 51st Street SE, Calgary, Alberta, Canada, T2C 4R2, in the form attached
hereto as Schedule 7.1.11(b); and

(ii)
7942 51st Street SE, Calgary, Alberta, Canada, T2C 4R2, in the form attached
hereto as Schedule 7.1.11(b);

in the form attached hereto as Schedule 7.1.11(b)
(collectively the “New Leases”).
7.1.12
Updated Schedules – The Purchaser will have received updated copies of Schedule
3.1.24 and Schedule 3.1.25, in accordance with Section 5.9.

7.1.13
Major Customer List - The Purchaser will have received a copy of the list of
Major Customers, in accordance with Section 5.10.

7.2    Waiver and Termination by the Purchaser
The conditions contained in Section 7.1 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 will constitute a waiver only of such
condition or such part of such condition, as the case may be, and will not
constitute a waiver of any covenant, agreement, representation or warranty made
by the Vendor 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 7.1 hereof are not fulfilled or complied with as herein provided, the
Purchaser may, at or prior to the Closing, at the Purchaser's sole option,
rescind this Agreement by notice in writing to the Vendor and, in such event,
the Purchaser will be released from all obligations hereunder. In such event,
the Vendor will also be released from all obligations hereunder.

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7.3    Vendor’s Conditions
The obligation of the Vendor to complete the transactions contemplated by this
Agreement will be subject to the satisfaction of, at or before the Closing Date,
each of the following conditions precedent:
7.3.1
Truth and Accuracy of Representations of the Purchaser – All of the
representations and warranties of the Purchaser made pursuant to this Agreement
will be true and complete as at the Closing Date and with the same effect as if
made as of the Closing and the Vendor will have received a certificate to that
effect from a senior officer of the Purchaser.

7.3.2
Performance of Obligations – The Purchaser will have complied with all its
obligations and agreements under this Agreement.

7.3.3
Corporate Approvals – All necessary corporate action will have been taken by the
directors of the Purchaser to approve the execution and delivery of this
Agreement and the Transaction Documents and performance by the Purchaser
hereunder or thereunder.

7.3.4
Closing Documentation – The Vendor will have received duly executed copies of
all the Closing Documents listed in Section 8.2.2.

7.4    Waiver and Termination by the Vendor
The conditions contained in Section 7.3 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 will constitute a waiver only of such condition or
such part of such condition, as the case may be, and will 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 7.3 hereof are not fulfilled or complied with as herein provided, the
Vendor may, at or prior to the Closing, at the Vendor’s sole option, rescind
this Agreement by notice in writing to the Purchaser and, in such event, the
Vendor will be released from all obligations hereunder. In such event, the
Purchaser will also be released from all obligations hereunder.

ARTICLE 8    
CLOSING ARRANGEMENTS

8.1    Time and Place of Closing
The Closing will take place at 11:00 a.m. on the Closing Date at the Vancouver
offices of Miller Thomson LLP, Barristers and Solicitors, or at any other place
to which the Parties agree in writing.

8.2    Closing Arrangements
At the Closing Date, upon fulfilment of all the conditions under this Agreement
which have not been waived in writing:

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8.2.1
Delivery of Closing Documents by Vendor – The Vendor will deliver to the
Purchaser the following, fully executed where applicable, and in each case, in
form and substance satisfactory to the Purchaser:

(a)
evidence of the discharges of all Encumbrances affecting the Purchased Assets;

(b)
the GST Election referenced in Section 2.9;

(c)
general conveyance agreements and all bills of sale, transfers and other
assignments or conveyances as may be necessary to vest legal and beneficial
ownership to the Purchased Assets in the name of the Purchaser;

(d)
subject to Section 2.11, an assignment of the Contracts, Equipment Leases and
transferable Licences and consents of third parties to such assignments where
necessary pursuant to the terms of such agreements;

(e)
possession of the Purchased Assets;

(f)
the Consulting Agreement in the form attached hereto as Schedule 4.2;

(g)
the New Leases in the forms attached hereto as Schedules 7.1.11(a) and
7.1.11(b), duly executed by Mattic Holdings Inc.;

(h)
a non-competition and non-solicitation covenant in the form attached hereto as
Schedule 5.6.1;

(i)
a non-competition and non-solicitation covenant in the form attached hereto as
Schedule 5.6.2;

(j)
the list of Customers pursuant to Section 5.10;

(k)
copies of the resolutions of the shareholders and directors of the Vendor
authorizing the transactions contemplated in this Agreement and the Transaction
Documents;

(l)
a certificate of a senior officer of the Vendor in accordance with Section
7.1.1; and

(m)
such further documents and assurances as may be reasonably required by the
Purchaser' solicitors in order to complete the sale of the Purchased Assets and
the Business contemplated herein.

8.2.2
Delivery of Closing Documents by Purchaser – The Purchaser will deliver to the
Vendor the following, fully executed where applicable, and in each case, in form
and substance satisfactory to the Vendor:

(a)
payment of the portion of the Purchase Price payable pursuant to Section 2.3(a);

(b)
the GST Election referenced in Section 2.9;

(c)
the Consulting Agreement in the form attached hereto as Schedule 4.2;

(d)
the New Leases in the forms attached hereto as Schedules 7.1.11(a) and
7.1.11(b);

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(e)
copies of the resolutions of the directors of the Purchaser authorizing the
transactions contemplated in this Agreement and the Transaction Documents;

(f)
a certificate of a senior officer of the Purchaser in accordance with Section
7.3.1; and

(g)
such further documents and assurances as may be reasonably required by the
Vendor's solicitors in order to complete the sale of the Purchased Assets and
the Business as contemplated in this Agreement and the Transaction Documents.

8.3    Tender
Any tender of documents or money hereunder may be made upon the Parties or their
respective counsel, and money may be tendered by way of bank draft drawn upon a
Canadian chartered bank, wire transfer, certified cheque, or solicitor’s trust
cheque.

9.4    Registration Expense
The Vendor will be responsible for all fees, charges and expenses of providing
to the Purchaser registrable transfers of all Licenses, Intellectual Property
and other Purchased Assets. The Purchaser will be responsible to pay all fees,
charges and expenses of recording and registering such transfers.

ARTICLE 9    
NOTICES

9.1     Notice
9.1.1
Any notice, direction or other communication required or contemplated by any
provision of this Agreement (a “Notice”) will be in writing and given by
personal delivery, facsimile transmission, electronic means (which shall include
email) or mail to the party concerned to the applicable address as follows:

in the case of a Notice to the Purchaser, at:
C/O Lawson Products, Inc.
8770 W. Bryn Mawr Ave. - Suite 900
Chicago, IL   60631
Attn: General Counsel
with a copy to, for information purposes only:
Miller Thomson LLP
1000-840 Howe Street
Vancouver, BC V6Z 2M1
Attn: Brendan Burns
Email: bburns@millerthomson.com
in the case of a Notice to the Vendor, or John, at:
2112 – 179th Street

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    Surrey, BC V3Z 9V6
with a copy to, for information purposes only:
Kane, Shannon & Weiler
220 – 7565 132nd Street,
Surrey, BC V3W 1K5
Attn: Larry J. Hagan or Peter J. McCrank
or to such other address as the Party to whom such Notice is to be given shall
have last provided to the other parties by notice from time to time.
9.1.2
Notice shall be deemed to have been received:

(a)
if delivered, at the time of delivery;

(b)
if given by facsimile, at the time of transmission;

(c)
if given electronically, at the time of sending the message; and

(d)
if given by mail, on the fifth Business Day after the mailing of the Notice.

If normal facsimile service, courier service, electronic service or mail service
is interrupted by strike, labour slowdown, force majeure or other cause, a
notice sent by the impaired service will not be deemed to be received until
actually received, and the party sending the notice will send it by another
service in order to ensure its prompt receipt.

ARTICLE 10    
GENERAL

10.1    Entire Agreement
This Agreement and the Transaction Documents constitute the entire agreement
between the Parties relating to the subject matter hereof and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written. There are no representations, warranties, conditions, covenants or
other agreements, express or implied, collateral, statutory or otherwise,
between the Parties in connection with the subject matter of this Agreement and
the Transaction Documents, except as specifically set forth herein and therein.

10.2    Amendment and Waiver
This Agreement may only be amended or terminated by written agreement signed by
each Party hereto. Any waiver of any provision of this Agreement will be
effective only if it is in writing and signed by the Party to be bound thereby,
and only in the specific instance and for the specific purpose for which it has
been given. No single or partial exercise of any such right will preclude any
further or other exercise of such right.

10.3    Severability

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If any provision of this Agreement is determined to be invalid, illegal or
unenforceable by an arbitrator or any court of competent jurisdiction, that
provision will be severed from this Agreement, and the remaining provisions will
remain in full force and effect.

10.4    Expenses
Except as otherwise provided in this Agreement, all costs and expenses
(including, without limitation, the fees and disbursements of legal counsel)
incurred in connection with this Agreement and the transactions contemplated by
this Agreement will be paid by the Party incurring those expenses.

10.5    Time
Time is of the essence of this Agreement.

10.6    Assignment and Benefit of the Agreement
Neither this Agreement nor any of the rights or obligations under this Agreement
are assignable by either Party without the prior written consent of the other
Parties. Subject to that condition, this Agreement will enure to the benefit of
and be binding upon the Parties and their respective heirs, personal
representatives, successors and permitted assigns.

10.7    Further Assurances
Each Party agrees that upon the reasonable written request of the other Party,
at any time, it will perform all acts and execute all documents as may be
necessary or desirable to effect the purpose of this Agreement or to better
evidence the transactions contemplated by this Agreement, whether before or
after the Closing.

10.8    Public Notices
No press release, public statement or announcement or other public disclosure
with respect to this Agreement or the transactions contemplated hereby may be
made except with the prior written consent and joint approval of the Parties, or
if required by Applicable Law or a Governmental Authority. Where such disclosure
is required by Applicable Law or a Governmental Authority, the Party required to
make the disclosure will use its best efforts to obtain the approval of the
other Parties as to the form, nature and extent of the disclosure.

10.9    Governing Law and Attornment
This Agreement is governed by and will be construed in accordance with the laws
of the Province of British Columbia and the federal laws of Canada applicable
therein. Each Party irrevocably attorns to the exclusive jurisdiction of the
courts of British Columbia with respect to any matter arising under or relating
to this Agreement.

10.10    Counterparts and Electronic Execution
This Agreement may be executed in any number of counterparts each of which will
be deemed to be an original, and all of which taken together will be deemed to
constitute one and the same instrument. This Agreement may be executed and
delivered by electronic means and each of the Parties may rely on such
electronic execution as though it were an original hand-written signature.

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- EXECUTION PAGE FOLLOWS –

WITNESS WHEREOF the Parties have executed this Agreement as of the date first
written above.
 
)
)
)
)
)
)
)
)
LAWSON PRODUCTS, INC. (ONTARIO)

Per:
 
 
Name:
 
Title:
 
I/We have the authority to bind the corporation

 
)
)
)
)
)
)
)
)
MATTIC INDUSTRIES LTD.
Per:
 
 
Name:
 
Title:
 
I/We have the authority to bind the corporation

WITNESSED 
in the presence of
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
 
Witness
JOHN MATTHEW
 
 
Name
 
 
 
Address
 
 
 
 
 
 
 
Occupation
 

SCHEDULE A
TANGIBLE ASSETS

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SCHEDULE 2.4
PURCHASE PRICE ALLOCATION
Books and Records; Contracts and Equipment Leases; Intellectual Property,
Licences; Prepaid Expenses; Warranties; Third Party Indemnities; Causes of
Action; and Goodwill
$l
Inventory
$l
Tangible Assets – computer, office equipment, warehouse shelving, scales, and
miscellaneous equipment
$l
TOTAL
$l

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SCHEDULE 3.1.11
ESTIMATED CLOSING DATE INVENTORIES VALUE

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SCHEDULE 3.1.13
LICENCES

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SCHEDULE 3.1.14
CONTRACTS AND EQUIPMENT LEASES
Contract / Equipment Lease
Description / Key Terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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SCHEDULE 3.1.16
INSURANCE
Insurer
Policy Number
Amount and Type of Insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

SCHEDULE 3.1.18
LITIGATION

SCHEDULE 3.1.19(d)
ENVIRONMENTAL

SCHEDULE 3.1.24
CONTRACTOR SALES REPRESENTATIVES

 
Name
Commission Arrangement
Other Compensation
Start Date
Age
•
 
 
 
 
 
2.    
 
 
 
 
 
3.    
 
 
 
 
 
4.    
 
 
 
 
 
5.    
 
 
 
 
 
6.    
 
 
 
 
 
7.    
 
 
 
 
 
8.    
 
 
 
 
 
9.    
 
 
 
 
 
10.    
 
 
 
 
 

SCHEDULE 3.1.25
EMPLOYEES

 
Name
Occupation
Age
Length of service
Compensation
1.    
 
 
 
 
 
2.    
 
 
 
 
 
3.    
 
 
 
 
 
4.    
 
 
 
 
 
5.    
 
 
 
 
 
6.    
 
 
 
 
 
7.    
 
 
 
 
 
8.    
 
 
 
 
 
9.    
 
 
 
 
 
10.    
 
 
 
 
 

Details of any employees who have been absent continually from work for a period
in excess of one month, as well as the reason for their absence:
l

Details of any employees who are in receipt of benefits from a short-term or
long-term disability program:
l

Details of any employees who are in receipt of worker's compensation benefits on
account of their employment by the Vendor:
l

Details of any employees who are on an authorized unpaid leave of absence
(including maternity or parental leave or unpaid sick leave) from the Vendor:
l
SCHEDULE 3.1.28
HUMAN RIGHTS CLAIMS

SCHEDULE 3.1.31
BENEFIT PLANS

SCHEDULE 3.1.35
FINANCIAL RECORDS

SCHEDULE 4.2
CONSULTING AGREEMENT
See attached.
 
SCHEDULE 7.1.11(a)
SURREY LEASE
See attached.

SCHEDULE 7.1.11(b)
CALGARY LEASE
See attached.

SCHEDULE 5.6.1
VENDOR NON-COMPETITION AND NON-SOLICITATION AGREEMENT
See attached.

SCHEDULE 5.6.2
JOHN NON-COMPETITION AND NON-SOLICITATION AGREEMENT
See attached.