Purchase Price Allocation (PPA) · America, Europe and the Asia-Pacific collectively account for...

Albaad Massuot Yitzhak Ltd.

Purchase Price Allocation (PPA)

June 2012

June 24, 2012 To: Albaad Massuot Yitzhak Ltd. Attn: Mr. Eyal Shechter, CFO Re: Purchase Price Allocation

Opinion

Scope of Analysis

We at Eshed Rozin - Tesuot Consultants1 ("Eshed Rozin") were requested by Albaad

Massuot Yitzhak Ltd. (hereinafter: “Albaad”), to perform this analysis, estimating the

fair value of certain assets acquired by Albaad USA, Inc. (hereinafter: “Albaad, USA”)

from Tranzonic Companies, namely it's Personal Care Division (hereinafter:

“Hospeco”), as of June 1, 2012 (the “valuation date”). The purpose of this analysis is

to assist Albaad Inc. in establishing the fair value2 of the acquired intangible assets,

including Goodwill, pursuant to International Reporting Standard (IFRS) No.3 for

financial reporting purposes.

Limiting Conditions

The information and the analysis provided to you are intended for management’s

internal use only, for the purpose of assisting in the purchase price allocation of the

assets being acquired. The report will be used to assist Albaad USA in establishing

its opening balance sheet upon completion of its acquisition of Hospeco assets. The

report can be used only in its entirety and should not be distributed or used for any

other purpose without the prior written authorization of Eshed Rozin. While Eshed

Rozin was provided with certain forecasted financial information by management, we

give no assurance that Hospeco will realize these financial projections. Eshed Rozin

1 "Eshed Rozin – Tesuot Consultants" is an independent consulting firm specializing in 'going concern'

valuations and fair value valuations pursuant to International Reporting Standard (IFRS).

2 Fair value is defined as the “price that would be received to sell an asset or paid to transfer a liability in

an orderly transaction between market participants at the measurement date.

will not give any opinion, representation or warranty as to the accuracy,

completeness or achievability of any projected financial information that is provided

to us. We did not, as part of this analysis, perform attest functions to verify the

historical financial results, or subject any forecasted financial results to procedures

which would enable us to form an opinion concerning their achievability. The forecast

information is based on the Hospeco budget for 2012 and Albaad consultants'

assessments for future years. Management has informed us that they consider the

forecasted data used to be both reasonable and accurate, and to their knowledge

none of this information conflicts with the data or its resulting use of such data in this

valuation. Furthermore, due to unexpected circumstances and events, it is likely that

there will be differences between prospective financial information and the actual

results, and these differences may be significant. Accordingly, to the extent that any

of the aforementioned information requires adjustment, the resulting fair value may

vary.

Eshed Rozin worked closely with the senior management of Albaad to complete this

analysis. In regards to rendering this opinion, we did not conduct due diligence but

were not limited to:

1) Interviewing Albaad management regarding the intangible assets acquired

and their competitive position in the industry;

2) Discussing the negotiations and business rationale for the acquisition with the

management;

3) Analyzing certain historical financial information, the majority of which was

based on internal information presented to Albaad management during the

due diligence performed by EY;

4) Analyzing certain financial forecasts and other data provided to us by

management, reviewing assumptions, including growth rates and operating

margins and discussing the rationale of these assumptions with management;

5) Performing such studies, analyses and investigations as we considered

appropriate to enable us to render our opinion.

Results Summary

Based on the working capital acquired, including inventory market price adjustment,

tangible property valuation executed by other appraisals, and our valuation of

intangible assets, we came to the conclusion that the assets purchased are as

follows:

USD thousands Books Fair Value(*) Useful Life

Y

Real estate 1,154 5,800

Machinery & Equipment 522 5,231

Tools & Dies 274

1,950 11,031

Working Capital 6,357 6,817

Tranzonic Agreement 1,093 6

Brands 145 5

Customer List 2,232 8

Intangible Assets 3,470

Total Purchased assets 8,307 21,318

Purchase Price (14,900) (14,900)

(*) Deferred taxes were not calculated.

The accompanying report summarizes the principles and procedures that were

applied in this study as well as its findings.

Respectfully submitted,

Eshed Rozin Tesuot Consultants

Albaad Hospeco PPA

[5]

Table of Contents

Opinion ..................................................................................................................... 2

Transaction Summary ............................................................................................. 6

HOSPECO Personal Care Activity ........................................................................ 6

Purchase Price Allocation (PPA) - Methodology ................................................ 11

Financial Results ................................................................................................... 15

Intangible Assets ................................................................................................... 17

Attachment A – Real property (land and buildings) .......................................... 24

Attachment B – Machinery and Equipment......................................................... 24

Attachment C – Working Capital as of June 1, 2012 ......................................... 24

Financial Schedules .............................................................................................. 25

Schedule No. 1 - Discount rate ............................................................................ 25

Schedule No. 2 – Customer Relationship Tranzonic ......................................... 27

Schedule No. 3 – Brand Names .......................................................................... 28

Schedule No. 4 – Customer List .......................................................................... 29

Schedule No. 4 – Customer List .......................................................................... 29

Schedule No. 5 – Contributing Assets ................................................................. 30

Albaad Hospeco PPA

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Transaction Summary3 An agreement was signed on May 9, 2012, between Albaad USA and Tranzonic Companies

(hereinafter: “Tranzonic”), for the acquisition of Tranzonic’s assets and activities in the field of

Healthcare, which are manufactured and distributed by the HOSPECO Personal Care division of

the Tranzonic group (hereinafter: “HOSPECO”). The acquisition of the Activity was made through

Albaad USA, which is a wholly owned subsidiary of Albaad. The purchased Activity shall form a

sector under the management of Albaad USA.

HOSPECO Personal Care Activity The HOSPECO Personal Care Activity includes feminine hygiene products for external use

(pads), constituting approximately 45% of the revenue as well as absorbent products for use by

the adult population, which constitute approximately 40% of the revenue. In addition, and as part

of the acquired Activity, internal feminine hygiene products (tampons), maternity pads and wet

wipes are being distributed, which combined constitute the balance of the revenue.

The Activity includes the manufacturing of products at a factory located in Kentucky, USA, which

shall be purchased as part of the acquisition of the assets, as well as manufacturing through

subcontractors (which includes, inter alia, Albaad, in the manufacturing of tampons). The

marketing of the products is made through retail networks (constituting approximately 55% of the

sales), marketing directly to institutions – old age homes, hospitals, etc. (approximately 37% of

the sales volume) and sales through distributors specializing in marketing for the “away from

home” market (approximately 7% of the sales volume).

The Activity is synergetic to the activities of the Company in the field of feminine hygiene and

hygienic products in general, broadens the Company’s relations with retail networks (a marketing

sector in which, at the time of engaging in the transaction, the Company’s activity is limited) and

in the field of institutions (hospitals, old age homes) in which the Company is active in the

categorical field of wet wipes. The acquisition of this Activity is a continuation of the strategy of

expanding the Company’s operation through the acquisition of existing activities in fields that are

related and complementary to the Company’s field of activities, and in particular in continuation of

Rostam which was completed in 2010.

The Agreement is an agreement for the acquisition of activities and assets, including rights

deriving from the activities and the assets, contractual obligations to suppliers / marketers if any,

3 Albaad announcement to the Israeli stock exchange

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absorption of Tranzonic employees engaged in the Activity (approximately 130 employees,

most of them long-serving employees with seniority of about 20 years in the field of the Activity),

the acquisition of the structures and land (a plot of an area of approximately 55 dunams, having

structures of a built area of about 20,000 square meters) and the production lines used for the

Activity.

Completion of the transaction was made on June 1, 2012 and the Seller has undertaken to

indemnify the Purchaser for any discrepancies in the representation as customary in similar

agreements. In the period immediately following completion, Albaad USA shall receive

administrative assistance from Tranzonic with respect to administrative services, back office, etc.

(such services were provided by Tranzonic for the Activity prior to the sale) until management of

the Activity under Albaad USA. Albaad shall pay for those services as agreed.

The consideration was determined to be the sum of US $14.9 Million.

The production lines operating at the Kentucky site operate in a scope of approximately 45% on

average and, therefore, expansion of the production does not entail additional investments. The

production lines includes: Eleven External Feminine Hygiene lines, 9 Adult Incontinence Products

lines, 3 OB Special (for women giving birth) lines and one special line aimed for vending machine

products.

In addition to the main Asset Purchase Agreement, two additional agreements were signed:

a. Transition Service Agreement which includes: General management assistant (free of

charge), Purchasing, Human Resources, Marketing and Logistics for the first three months.

Most of these services are not effective other than for the purpose of coordinating the

transaction. In addition, accounting and IT services are provided free of charge for the first

three months, and at market price until 31 March, 2013.

b. Supply Agreement, which Albaad took on a cost + basis for a period of six years; this, in order

to supply Tranzonic with products to be sold through Tranzonic’s vending machine products

service.

Market

The global feminine care market amounts to about US$12.85 billion and is growing by

approximately 3% annually. The European market accounts for about 25% and is growing by 1%

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annually. In Europe, the market is dominated by pads, representing 50%, while panty liners and

tampons each account for 25%.4

According to New Report by Global Industry Analysts, Inc5, the global market for feminine hygiene

products and is projected to reach US$15.2 billion by 2017. According to the report, the global

market for Feminine Hygiene Products represents one of the most rapidly growing segments in

the FMCG category. Growth is mainly fueled by intense competition, product innovations and

rising health and hygiene awareness among women.

America, Europe and the Asia-Pacific collectively account for over 80% of the feminine hygiene

products market. The Asia-Pacific market with its vast population is one of the fastest growing

regions for feminine care products. Technology innovations and better user safety is driving the

sanitary pads segment as a popular feminine care product worldwide.

There are two main segments in the market: External, including pads and liners which include

approximately 80%-85% of the market and growing at an annual rate of 6%-7% in 2008 and 11%

in 20096 and Internal (Tampons).

The global feminine hygiene market is highly consolidated with major players enjoying sizeable

market shares. Industry bigwigs such as Procter & Gamble, Kimberly-Clark and Johnson &

Johnson dominate the international market. Other noteworthy players include SCA Hygiene

Products, Uni-Charm Corporation, Lil-lets Group Limited, Playtex Products Inc., and Kao

Corporation among others (see table next page).

4 http://www.sca.com/en/about_sca/scas-business-and-operations-worldwide/personal_care/market-sca-feminine-care/

5http://www.prweb.com/releases/feminine_hygiene_products/sanitary_pads_towels/prweb9233581.htm

6 Report: Trigger Foresight – source Euromonitor International

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Private Label consists of 6% in the market, with a considerably larger portion in Europe (25%),

mid-size in North America (11%) and almost none in the rest of the world.

Source: Euromonitor Research – Trigger Foresight


12%

9%

6%

4%

39%

3%

27%

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In the USA, the Private Label share in the Liners and Pads market (the main activity purchased)

is growing rapidly at an 8% CAGR over the last six years.

Players by Market Share - Pads & Liners & PL Market share


Albaad Hospeco PPA

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Purchase Price Allocation (PPA) - Methodology

A Purchase Price Allocation (PPA) study is carried out in accordance to International Accounting

Standards (IFRS) No. 3 "Business Combinations".

IFRS 3 - Business Combination The objective of this IFRS is to specify the financial reporting by an entity when it undertakes a

business combination7. A business combination is the bringing together of separate entities or

businesses into one reporting entity. The result of nearly all business combinations is that one

entity, the acquirer, obtains control of one or more other businesses.

The standard:

(a) Requires all business combinations within its scope to be accounted for by applying the

purchase method.

(b) Requires an acquirer to be identified for every business combination within its scope. The

acquirer is the combining entity that obtains control of the other combining entities or

businesses.

(c) Requires an acquirer to measure the cost of a business combination as the aggregate of: the

fair values at the date of exchange, of assets given, liabilities incurred or assumed, and equity

instruments issued by the acquirer, in exchange for control of the acquiree; plus any costs

directly attributable to the combination.

(d) Requires an acquirer to recognize separately, at the acquisition date, the acquiree’s

identifiable assets, liabilities and contingent liabilities that satisfy the following recognition

criteria at that date, regardless of whether they had been previously recognized in the

acquiree’s financial statements:

(i) In the case of an asset other than an intangible asset, it is probable that any associated

future economic benefits will flow to the acquirer, and its fair value can be measured

reliably;

(ii) in the case of a liability other than a contingent liability, it is probable that an outflow of

resources embodying economic benefits will be required to settle the obligation, and its

fair value can be measured reliably; and

(iii) In the case of an intangible asset or a contingent liability, its fair value can be measured

reliably.

7 http://www.iasb.org/NR/rdonlyres/73E562FE-F581-4DD4-8365-B17E228955C9/0/IFRS3.pdf

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(e) Requires the identifiable assets, liabilities and contingent liabilities that satisfy the above

recognition criteria to be measured initially by the acquirer at their fair values at the acquisition

date, irrespective of the extent of any minority interest.

(f) Requires goodwill acquired in a business combination to be recognized by the acquirer as an

asset from the acquisition date, initially measured as the excess of the cost of the business

combination over the acquirer’s interest in the net fair value of the acquirer’s identifiable

assets, liabilities and contingent liabilities recognized in accordance with (d) above.

(g) Prohibits the amortization of goodwill acquired in a business combination and instead requires

the goodwill to be tested for impairment annually, or more frequently if events or changes in

circumstances indicate that the asset might be impaired, in accordance with IAS 36

Impairment of Assets.

A PPA study when performed calculates:

a. The purchase price - minus

b. The acquired tangible assets - minus

c. The acquired intangible assets (see IAS 38 below)

d. Recognize the excess of the purchase cost over the acquired assets as Goodwill.

IAS 38 - "Intangible Assets"

The objective of IAS 38 "Intangible Assets"8 is to prescribe the accounting treatment for intangible

assets that are not dealt with specifically in another Standard. This Standard requires an entity to

recognize an intangible asset if, and only if, specified criteria are met. The Standard also specifies

how to measure the carrying amount of intangible assets and requires specified disclosures about

intangible assets.

An intangible asset is an identifiable non-monetary asset without physical substance.

An asset meets the identifiable criterion in the definition of an intangible asset when it:

(a) is separable, or is capable of being separated or divided from the entity and sold, transferred,

licensed, rented or exchanged, either individually or together with a related contract, asset or

liability; or

(b) Arises from contractual or other legal rights, regardless of whether those rights are

transferable or separable from the entity or from other rights and obligations.

An intangible asset shall be recognized if, and only if:

6BABEB783D90/0/ias38sum.pdf-976D-4E8F-6967-http://www.iasb.org/NR/rdonlyres/149D67E2 8

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(a) It is probable that the expected future economic benefits that are attributable to the asset will

flow to the entity; and

(b) The cost of the asset can be measured reliably.

In accordance with IFRS 3 Business Combinations, if an intangible asset is acquired in a

business combination, the cost of that intangible asset is its fair value at the acquisition date.

Useful life

An entity shall assess whether the useful life of an intangible asset is finite or indefinite and, if

finite, the length of, or number of production or similar units constituting, that useful life. An

intangible asset shall be regarded by the entity as having an indefinite useful life when, based on

an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the

asset is expected to generate net cash inflows for the entity. Useful life is: (a) The period over

which an asset is expected to be available for use by an entity; or (b) The number of production or

similar units expected to be obtained from the asset by an entity.

Following are some categories for Intangible assets:

1. Marketing Assets - Trademarks, trade names, service marks, collective marks and certification

marks, internet domain name, Non-Competition Agreements

2. Customer Related - Customer lists, firmed orders or production backlog, customer contracts &

related customer relations, non-contractual customers.

3. Contractual Assets - Franchise agreements, licensing and royalties.

4. Technological Assets – Patents and know how.

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Valuation Methodologies

There are three traditional approaches to estimating the fair value of an intangible asset: The

Income Approach, the Market Approach and the Cost Approach. Each of these approaches may

be used to estimate the value of the certain assets. However, the appropriateness of each

approach varies with the type of asset being valued.

The Income Approach

The Income Approach values an asset based on the earnings capacity of the asset. This

approach values an asset based on the future cash flows that could potentially be generated by

the asset over its estimated remaining life. The future cash flows are discounted to their present

value utilizing a discount rate which would provide sufficient return to a potential investor to

estimate the value of the subject asset. The present value of the cash flows over the life of the

asset is summed to equal the estimated value of the asset. The Income Approach was used to

value identifiable intangible assets.

The Market Approach

A Market Approach leads to an estimate of value based on what other purchasers and sellers in

the market have paid for assets comparable to those being appraised. This approach is based on

the principle of substitution. This principle states that the limit of prices, rents and rates tends to

be set by prevailing prices, rents and rates for equally desirable substitutes. When this approach

to value is used, data is collected on the prices paid for assets reasonably comparable to the one

being valued. Adjustments are made to the comparable assets to compensate for differences

between them and the asset being valued. Use of the Market Approach results in an indication of

value based on an estimate of the price(s) one may reasonably expect to realize on the sale of

the subject asset(s). Since intangible assets are generally transferred within the context of a sale

of all the assets and operations of a going business, and market data on the separate sale of

highly specialized technology is not readily available, a Market Approach was not utilized.

The Cost Approach

The Cost Approach is based on the theory that a prudent investor would pay no more than the

cost of constructing a similar asset of like utility at prices applicable at the time of the appraisal.

However, the Cost Approach may not capture the full value of an income-producing asset, and

since value is driven by the income generating ability of the technology employed, the Cost

Approach was not utilized.

Albaad Hospeco PPA

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Financial Results

The acquired segment "Hospeco" did not have audited separate financial reports. The information

provided in this section is based on the Balance Sheet and P&L presented in the financial due

diligence.

12 months ended 29 February

2011 2012 (USD )Thousands

53,598 51,890 Revenues

34,386 64.2% 34,967 67.4% Material

9,152 17.1% 8,372 16.1% Salary & Manufacturing Expenses

3,549 %6.6 3,426 %6.6 Transport

47,087 87.9%

46,765 90.1% Cogs

6,511 12.1%

5,125 9.9% Gross Profit

1,705 3.2%

1,649 3.2%

Salaries

588 %1.1 205 %0.4 Other

2,293 4.3%

1,854 3.6%

Sales & Manufacturing + General & Administrative

4,218 7.9% 3,271 6.3% Operating Profit

4,964 9.3%

4,027 7.8% EBITDA

We received revenue information for the period beginning March 1st and ending May 31st; this is

considered when evaluating future cash flows.

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Hospeco Division Balance Sheet

31 May, 2012 (USD 000)

Assets

Accounts Receivable 4,542

Inventory 6,029

Prepaid Expenses / Other Assets 13

Total Current Assets 10,584

Fixed Assets (*) 1,950

Total Assets 12,534

Liabilities

Accounts Payable 3,405

Accrued expenses 822

Total Operating Liabilities 4,227

Net Assets 8,307

(*) Fixed assets were valued at 11,030 K USD.

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Purchase Price Allocation

Purchase Price - Fourteen million, nine hundred thousand dollars - the purchase price of

$14,900 K, plus or minus any differences of more than $150 K in the working capital target, which

is $6,500 K. According to the Working Capital Closing Certificate, the working capital is $6,357 K

and there is no change in the final purchase price. Part of the payment is to be deposited in an

escrow (in the amount of $1,000 K) for a period of 18 months from the closing date, with the

remainder to be paid on the closing day.

Valuation of Assets Acquired

Tangible Assets –

Fair value of Real Property located at 500 Memorial Drive, Nicholasville, Kentucky 40356, and the

buildings and fixtures located thereupon; appraised at $5,800 K (see Attachment A).

Fair value of Tangible Personal Property - The machinery, equipment, tools, dies, furniture,

fixtures, vehicles, personal computer hardware and software, and other items of tangible personal

property located at the Real Property, in the amount of $5,231 K USD (see Attachment B).

Working Capital in market price in the amount of 6,817 K USD (see Attachment C).

Final working capital was computed by seller and is subject to buyer inspection within a month.

We adjusted the inventory value to fair value, less marketing expenses, based on management

gross margin assumptions as presented below.

All other working capital components such as accounts receivables, account payables and

acquired expenses were examined and assumed to be at fair value.

Intangible Assets We discussed with management, company advisors and sales representatives how to define the

intangible assets to be recognized. After examining all intangible assets acquired and the

liabilities assumed under the asset purchase agreement, such as contracts, licenses and permits,

intellectual property, trade names, warranties, and backlog, we came to the conclusion that the

intangible assets to be recognized are as follows:

a. Tranzonic Supply Agreement

b. Brand names

c. Customer relationship

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We used the income approach to evaluate the intangible assets. The Excess Earning Model was

used to evaluate the supply agreement and the customer relationship while the Relief from

Royalty Method was used to evaluate the brand named fair value.

In order to evaluate the specific cash flow for each of the above mentioned intangible assets we

used Albaad forecasts which were adjusted on the purchase day to represent the fair market

valuation of real property (building and equipment) and their influence on the operating profit

before and after tax, and the forecasted decline in sales.

In USD K

2017 2016 2015 2014 2013 2012 Year

51,286 49,792 48,816 47,858 46,920 46,000 Revenue

3% 2% 2% 2% 2% Growth

48,214 46,755 45,762 44,773 43,903 44,306 Operating Expenses

589 589 589 589 589 589 Depreciation

48,803 47,343 46,351 45,362 44,492 44,895 Total Expenses

2,483 2,449 2,465 2,497 2,428 1,105 Operational Profit

4.8% 4.9% 5.0% 5.2% 5.2% 2.4% Operational Profit %

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VALUATION OF CUSTOMER AGREEMENT WITH TRANZONIC

As of the valuation date, it was assumed that there was value attributable to the Tranzonic Supply

agreement, based on the agreement terms as follows:

1. Agreement period – 6 years.

2. Operational Margin over direct costs according the agreement.

3. Direct Costs – material cost + direct labor.

4. Prices are quoted EX- Factory Kentucky site and each pick up will be a full load truck.

5. Tranzonic will provide a three month rolling forecast and the first month forecast will be

binding.

6. Payments within 30 days of each invoice.

We valued the supply contract using the Excess Earning Income Approach, following these

steps:

1. The Company’s estimated future revenues from the contract based on last years'

experience, on average approximately 3 million. Based on past revenues of 4 Million $,

less 25% for products that Tranzonic would prefer buying directly.

2. The margin attributable to the supply contract was then estimated, based on contract

terms (direct costs as defined above).

3. Other production overhead expenses (not including marketing and freight) were calculated

at 4%, and actual depreciation based on machinery value of 270 K USD depreciated over

six years was added to COGS in the P&L. The economic useful life of the equipment is

estimated at 15 years, a period longer than the period in the contract terms. In the below

forecasted cash flow (according to the contract terms) the accounting depreciation minus

the economic depreciation was added to the cash flow.

4. A 40% tax (34% federal tax & 6% state tax) was deducted from the operational profit

before tax.

5. Additional working capital – until now there was no need for WC with other units of

Tranzonic. Starting with the purchase, new WC needs are required to finance the

Tranzonic agreement. Payments under the contract are 30 days from invoice; therefore,

the WC needed is 1/24 of revenues. The additional working capital deduction was

included in the contributing assets and returned at the end of the final year.

6. Contributing Assets – the resulting tax affected cash flow is reduced further by

contributory charges to support the asset’s projected sales, such as working capital, fixed

assets, assembled workforce, and brand name (see Schedule No. 5).

7. The net cash flows were then calculated by subtracting the net contributory assets

charges of tax from net income, then adding the depreciation and working capital needs.

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The working capital needs are new needs; prior to the acquisition, Tranzonic sales were

intercompany sales.

8. The resulting net cash flows are discounted at a rate commensurate with their risk. A

discount rate equal to 15.1% was utilized for the supply contract which is the WACC of the

business + 2% special risk factor.

9. The discounted cash flows were summed to estimate their fair values.

10. The estimated tax benefits associated with the intangible asset was calculated and this

benefit was included in the value of the supply agreement.

Based on the above, the estimated value of the Supply Agreement equals 1,093 K USD,

rounded, as of 1 June, 2012 (Schedule No. 2 details the fair value of the supply

contract).

VALUATION OF BRAND NAMES

As of the valuation date, it was assumed that there was attributable value to the Company’s

Brand names such as At Ease® ,Maxithins® ,Safe & Soft ® and Precious®, consisting of on

average approximately 20.3% of the company sales, including sales to Tranzonic under the

Supply Agreement (see table below).

Revenues from Branded product sales in K USD

Jan- May 2012 2011 2010 2009 Brands

3,570 9,238 11,637 14,081 Total Brands

17,211 49,703 53,620 50,804 Total

20.7% 18.6% 21.7% 27.7% %

In estimating the value of the brand name, the Relief from Royalty methodology and a four-step

approach was utilized.

1. The Company’s overall revenue projections through 2017 were used. This revenue stream

was then adjusted to reflect the estimated portion of revenue related to brand names

(namely 20.3%) and assumes that the brand names lose their value within five years

unless it is continually supported by promotional activity.

2. An appropriate royalty rate was applied to the forecasted revenue to estimate the pre-tax

income associated with the asset. For this analysis, a royalty rate of 0.5% was then

applied for the use of the brand names, which was based on our discussions with

management, as well as our experience in other analyses. The selected royalty rate is on

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the lower end of the market range, due to the fact that Tranzonic didn’t invest in

maintaining the brand names and the publicity of the brand was made by small retailers

who treated the branded products as their own private label.

3. Relief from Royalty revenue was projected. The pre-tax income was then tax-affected

assuming a 40% tax rate to estimate the after-tax net income associated with the asset.

4. The after tax net income was discounted to the present value using an appropriate rate of

return that considers both the risk of the asset and the associated cash flow estimates. A

15.1% discount rate was utilized to reflect the inherent risk associated with the revenue

stream of the brand name.

5. The discounted cash flows from the projection period were summed to estimate the fair

value. The tax benefit associated with amortizing the intangible asset was calculated and

this benefit was added to the total value of the brand name.

Based on the above analysis, the fair value of the “trade name” was estimated at 145 K

USD as of June 1, 2012 (Schedule No. 3 details the fair value of the brand names).

VALUATION OF CUSTOMER RELATIONSHIPS

As of the valuation date, it was assumed that there was value attributable to Hospeco’s existing

customer relationships, which is comprised from several significant clients, including major health

care companies (Institutional) and retail chains. The customer relationship valuation does not

include the value of the Tranzonic agreement.

Major clients, both retail and institutional, consist of approximately 62% of total revenues on

average (see ‘Attachment D’ for information on major clients).

Based on our discussions with management, the existing customer relationships were estimated

to have a remaining average economic life of approximately 8 years, with a decline of 12.5% each

year.

We valued the Company’s customer relationships using the excess earning Income Approach as

follows:

1. The Company’s overall revenue projections for five years were used, which was then

extrapolated to reflect the economic life. The revenue attributable to the existing

customers was then estimated based on a decline linear line of 12.5% per year starting on

the second year (first year projections include a huge deduction concerning known

abandonment of customers).

Albaad Hospeco PPA

[22]

2. The operational profit of the business was used for each period in which revenue was

projected in order to evaluate the contribution customer relationships provide to the

operating income.

Adjusted operational profit takes into consideration profits related to the supply agreement

with Tranzonic and is therefore lower than the operational profit presented on page 18.

3. The resulting cash flow is tax affected and reduced further by contributory charges to

support the asset’s projected sales, such as working capital, fixed assets, assembled

workforce, and brand name (see Schedule No.5). The net cash flows were then calculated

by subtracting the contributory assets charges (net of tax) from net income.

4. The resulting net cash flows are discounted at a rate commensurate with their risk. A

discount rate equal to 15.1% was utilized for the customer relationships, which is the

WACC of the business + 2% special risk factor.

5. The discounted cash flows were summed to estimate their fair values. The estimated tax

benefits associated with the intangible asset was calculated and this benefit was included

in the value of the customer relationships.

Based on the above, the estimated fair value of the customer relationships equaled $2,232

K USD, rounded, as of June 1, 2012 (Schedule No. 4 details the fair value of the Company’s

customer relationships).

Albaad Hospeco PPA

[23]

FINAL CONCLUSION

Based upon the working capital acquired, including inventory market price adjustment, other

tangible property valuation executed by other appraisals, and valuation of intangible assets, we

came to the conclusion that the assets purchased are as follows:

USD thousands Books Fair Value(*) Useful Life

Y

Real estate 1,154 5,800

Machinery & Equipment 522 5,231

Tools & Dies 274

1,950 11,031

Working Capital 6,357 6,817

Tranzonic Agreement 1,093 6

Brands 145 5

Customer List 2,232 8

Intangible Assets 3,470

Total Purchased assets 8,307 21,318

Purchase Price (14,900) (14,900)

(*) Deferred taxes were not calculated.

Albaad Hospeco PPA

[24]

Attachment A – Real Property (land and buildings)

Attachment B – Machinery and Equipment

Attachment C – Working Capital as of June 1, 2012 (K USD)

Current Assets Market Price Final WC

Net Accounts Receivable 4,542 4,542

Inventory (*) 6,489 6,029

Prepaid Expenses / Other Assets 13 13

Total Current Assets 11,044 10,584

Operating Liabilities

Total Accounts Payable 3,405 3,405

Accrued Expenses 822 822

Total Operating Liabilities 4,227 4,227

Closing Working Capital 6,817 6,357

(*) Inventory value at market price see table next page

Albaad Hospeco PPA

[25]

Financial Schedules

Schedule No. 1 - Discount rate In completing our valuation of identified intangible assets, we applied discount factors to each of

the projected cash flows of the intangible assets in order to determine their respective present

value, based upon discount rates commensurate with the inherent risk and the expected growth

of the subject intangible asset as well as the projected financial results. In determining an

appropriate overall discount rate, the weighted average cost of capital (“WACC”) was calculated

to equal 13.1%, rounded, by selecting market rates at the valuation date for debt and equity that

are reflective of the risks associated with an investment in the subject industry.

Based on the WACC calculation, a discount rate of 15.1% was used for the intangible assets

adding a 2% special risk to the WACC. The risk adjustment is added to the intangible assets to

reflect the assumption that different assets in the company value have a different return on

investment rate. And the total average return on assets is equal to the WACC of the company. In

the asset risk hierarchy the intangible assets usually bare a discount rate higher than the WACC.

Determination of the Discount Rate

Based on our analysis, the following calculation supports the discount rate applicable to Hospeco

as of the June 1, 2012, the valuation date.

The discount rate is estimated by calculating the weighted average cost of capital (“WACC”) of

companies comparable to Hospeco. The WACC is estimated based on the following three-step

procedure:

1. Calculation of required rate of return on debt.

2. Calculation of required return on equity capital.

3. Calculation of WACC.

Each of these steps is discussed in the subsequent sections.

A.1 Required Return on Debt

Albaad is using short term debts to finance investments. Management provided us with the

following information concerning quotes they received from banks:

Short term Libor based + 2%-3%.

Albaad Hospeco PPA

[26]

Long term Libor based 3%-4% (1 year Libor = 1.07%)

We assumed that the long term fixed Libor rate would be higher (at the rate of 5.6%).

A.2 Required Return on Equity Capital

The return on equity required of a company represents the total rate of return investors expect to

earn, through a combination of dividends and capital appreciation, as a reward for risk taking. The

Capital Asset Pricing Model (“CAPM”) is used to calculate the required rate of return on equity

investment by using publicly-traded companies. The CAPM equation is often modified to reflect

the additional risk, and hence higher required returns, associated with small capitalization stocks.

The modified CAPM equation is the following:

Re = Rf + β (Rm) = 18.3%

Where:

Re = Required rate of return on equity;

Rf = Risk-free rate of return- ten & twenty years9 US Treasury Bonds. 2.25%;

β = Beta of company. Unleveraged Market beta "Toilet" sector 1.1210, Leveraged β for the

company (D/E = 55%) 1.48;

Rm = Market Risk premium 11 – 6.54%;

Rs = Small stock risk premium12 - 6.36%

A.3 Company WACC-

WACC = Rf (1-T) * D/V + Re * E/V = 13.1%

T=40%

E=65%

D=35%

9 http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=longtermrateYear&year=2012

10

Damodaran 11

Damodaran 01/06/2012. 12 Ibbotson

Albaad Hospeco PPA

[27]

Schedule No. 2 – Customer Relationship - Tranzonic (in USD thousands)

Transzonic Contract

23.0%23.0%22.0%22.0%21.0%21.0%Customer relationship Tranzonic

654321Year

3,000 3,000 3,000 3,000 3,000 3,000 Revenues

396 396 376 376 356 356 Operating Profit

158 158 150 150 142 142 Tax

238 238 226 226 213 213

27 27 27 27 27 27 Depreciation- Capex

265 265 253 253 240 240 Free Cash Flow

-60 65 65 65 65 190 Total Contributing Assets

-86 39 39 39 39 164 Contributing Assets Net of Tax

351 226 214 214 202 77 Net Cash-Flow

5.50 4.50 3.50 2.50 1.50 0.50

162 120 131 150 163 71 PV of Cash-Flow

798 Cash-flow PV

295 Tax amortisation benefit

1,093 Total Tranzonic Contract Value

Tranzonic Contract

Albaad Hospeco PPA

[28]

Schedule No. 3 – Brand Names (in USD thousands)

Brands

54321Year

9,900 9,900 9,706 9,516 9,329 Branded Product Revenue

50 50 49 48 47 Operating Profit

20 20 19 19 19 Tax

30 30 29 29 28

4.50 3.50 2.50 1.50 0.50

16 18 20 23 26

104 Cash-flow PV


145 Total Brands Value

Albaad Hospeco PPA

[29]

Schedule No. 4 – Customer List (in USD thousands)

Customer List

87654321Year

12.5%25.0%37.5%50.0%62.5%75.0%87.5%100.0%Amortization Factor

5,375 10,750 16,125 21,500 26,875 32,250 37,625 43,000 Revenues

232 465 697 943 1,225 1,525 1,775 1,475 Operating Profit

93 186 279 377 490 610 710 590 Tax

139 279 418 566 735 915 1,065 885

Contributing Assets

116 231 347 462 578 693 809 925 Total Contributing Assets

69 139 208 277 347 416 485 555 Contributing Assets Net of Tax

70 140 210 289 388 499 580 330 Net Cash-Flow7.50 6.50 5.50 4.50 3.50 2.50 1.50 0.50

24 56 97 153 237 351 470 308

1,696 Cash-flow PV


2,232 Customer list

Albaad Hospeco PPA

[30]

Schedule No. 5 – Contributing Assets

Working Capital –

Working capital needs are assumed to be 12% of total revenue based on historic activity (see

table below). The working capital needs are charged with 4.5% interest rate based on Albaad’s

marginal short term credit expenses.

28/02/2010 28/02/2011 28/02/2012 USD 000

5,625 6,275 6,633 WC

55,065 51,890 53,598 Revenue

10.2% 12.1% 12.4% %

Assembled Manpower –

Most of Hospeco employees are easy to recruit and train. According to management they

represent approximately 1.5% of total company revenues. The relative manpower expense was

charged at the company WACC.

Equipment and Fixed Property –

Total machinery and equipment, are valued by an independent appraiser at approximately $5.2

Million.

Land and buildings were also valued by an independent appraiser at $5.8 Million ($1 Million for

the land and $4.8 Million for the buildings).

We charged equipment and machinery, land and buildings according their proportional share from

revenues (23.4%) at an interest rate of 5.6% representing long term debt of the company.

Brand Name –

Approximately 20% of company sales are branded products. The relative revenue related to

branded products was charged with the royalty rate of the Brand, 0.5%.

9905 Hofelich Lane

Louisville, Kentucky 40291

e-mail: [email protected]

Jesse Lyninger/President – Cell: 502-523-4151

J.P. Lyninger III – Cell: 502-314-7390

August 8, 2012

Hospeco

c/o Mr. Stephen Ruschell

Stites & Harbison

250 West Main Street, Suite 2300

Lexington, KY 40507

MACHINERY & EQUIPMENT APPRAISAL

As requested, the undersigned observed, listed and valued all machinery and equipment of

Hospeco, 500 Memorial Drive, Nicholasville, Kentucky, on May 24 and 25, and June 1, 2012.

This appraisal is exclusively for the use of Albaad USA, Inc. for financial reporting purposes

and for purchase allocation as required under the IFRS3 summary for business combinations

only. Not included are work in progress/process, patents, patented processes, finished products,

inventory, supplies, small desktop items, tools, replacement/repair parts, nor perishable tooling.

It is assumed that all assets made a part of this appraisal report are owned by and belong to

Hospeco, unless otherwise stated. However, no investigation has been made to verify that

ownership nor has such verification been requested by Albaad USA, Inc.

The opinions contained in this report reflect certain significant assumptions and assessments.

These include assessments of the machinery and equipment's normal useful life, physical

deterioration rate, and the soft costs of acquisition such as taxes, freight and installation. They

also include adjustments made to market comparables for age, condition, and capacity. In the

case of the normal useful life, this varies based on the asset category, but for the major

equipment described in this appraisal the normal useful life was assessed at 40 years with a

physical deterioration rate commensurate with this expected life. Taxes were assessed based on

the machinery and equipment's location in the state of Kentucky and assigned at 6%. Freight and

installation were assessed based on research with various third party service providers. The

adjustments made to the market comparables in order to reflect differences with the subject

equipment was also handled on a per-case basis, with an emphasis on selecting comparables that

best matched each subject to ensure minimal adjustment. Value differences based on age were

calculated based on our assessment of average useful life and value differences based on capacity

were calculated based on the cost to capacity model promoted by the ASA. These calculations

were performed using an accelerated depreciation method based upon the age and condition of

the item with an emphasis to loss of value early in a machine's life/deterioration.

2

The purpose of this appraisal project was for Tritech Appraisals, Inc. to determine a conclusion

of Fair Market Value - In Continued Use of the Subject assets as of the effective date.

However, Tritech Appraisals, Inc. did not reach a conclusion as to the value of all items sold to

one entity or a "turnkey" value. Subsequently, the indicated value conclusion represents an

"aggregate" value based upon all items contained herein but does not intimate that there could

not be any future fluctuation of the value conclusion set forth in this appraisal report as there

could be many factors to change, alter and/or affect this conclusion.

The fee for this appraisal report is for Tritech Appraisals, Inc. expressed value opinion as of the

indicated effective date, and carries with it no warranties or guarantees as to the outcome. This

report sets forth our findings and conclusions based upon an investigation of conditions affecting

value under the Fair Market Value - In Continued Use concept, and is subject to the Statement

of Limiting Conditions, Definitions and Valuation Methodology contained in the body of this

appraisal report. Without reading and understanding these sections, this appraisal report could be

erroneously interpreted.

This appraisal report is delivered via a Summary Format, which is in compliance with the current

Uniform Standards of Professional Appraisal Practice (USPAP), as promulgated by The

Appraisal Foundation and required by The American Society of Appraisers (ASA).

Thank you for the opportunity to be of service in this matter. If there are any questions regarding

the method of appraisal, value concept or indicated values, contact me at (502) 314-7390.

TRITECH APPRAISALS, INC.

JP Lyninger III Jesse P. Lyninger

Lead Appraiser President/Appraiser

3

Appraisers Commentary

Report Formats

Complete & Limited Scope Appraisals are available in three formats, which is

dependant upon your individual appraisal needs. As discussed within Tritech's original

proposal, the type of appraisal report requested and provided herein has been identified as

a Complete Appraisal, delivered via a Summary Format, which is in compliance with

the current Uniform Standards of Professional Appraisal Practice (USPAP), as

promulgated by The Appraisal Foundation and required by The American Society of

Appraisers (ASA). Accordingly, the following provides a list and explanation of the

various types of appraisal reports and formats.

APPRAISAL TYPE:

COMPLETE APPRAISAL: An estimate of value performed represents an

assignment whereby the appraiser estimates the value of the Subject without any

atypical assumptions or conditions and "certifies" without reservations.

A Complete Appraisal in Summary Format is the industry norm representing an

unbiased third-party opinion of value, which can be fully supported via

documentation contained in the project file.

LIMITED APPRAISAL: An estimate of value resulting from invoking the

Departure Provision of USPAP - Represents an assignment whereby the appraiser

estimates the value of Subject considering any assumptions or conditions that

would otherwise be atypical, and "certifies" with reservations.

Limited appraisals often do not withstand scrutiny under examination. The

definition implies that it is "something less than a complete appraisal" and,

therefore, has not been documented thoroughly.

An example of a Limited Appraisal is where the appraiser cannot or does not

personally observe the Subject items. This can only be accomplished if the

appraiser is provided adequate information.

APPRAISAL FORMAT:

SUMMARY FORMAT: This format covers all aspects relative to a Complete or

Limited Scope Appraisal. However, the presentation of information is more

concise, all data references are considered and only results of any analyses are

provided. Most appraisals are provided in this format.

4


Report Formats (Continued)

RESTRICTED FORMAT: This format offers a minimum presentation of

information. Its use is restricted to Albaad USA, Inc. and only for the specific

purpose for which it is requested.

SELF-CONTAINED FORMAT: This format provides the most comprehensive

and detailed information available and the most complete analysis as it relates to

the valuation of the assets in review. This format is seldom used.

Scope & Complexity

Specifically regarding the value analysis for the Machinery & Equipment referenced

herein, please note the following:

1. The Subject Machinery & Equipment is utilized within the production of

padded hygiene and incontinence products industry. Hospeco is privately

held and operates in Nicholasville, Kentucky.

2. All assets appeared to be in good working condition, unless otherwise

noted. It is not always possible to observe all items while in operation.

3. Regarding the scope and complexity of this appraisal project, we have

personally observed assets located at the subject facility, unless otherwise

noted. Each major asset has been itemized within the attached listing.

Minor assets have been included when physically attached to, or when

appropriate to be listed with, a major asset within one lot. The following is

a brief description of the majority of assets as contained within this

appraisal report:

Office Furniture and Equipment, Quality Control Equipment,

Machine Shop Equipment, Air Compressors, Production

Equipment, Material Handling, plus all ancillary equipment.

4. Maintenance is performed on an as needed basis. Major overhauls or

rebuilds extend the life of various Machinery & Equipment. That

information is located in the project file and was taken into consideration

when calculating the value. Normal maintenance is assumed throughout the

life of a machine.

5


Application of Fair Market Value - In Continued Use

The purpose of this report requires one type of value estimate: Fair Market Value - In

Continued Use, defined as follows:

"The estimated amount expressed in terms of money that may

reasonably be expected for property in exchange between a willing

buyer and seller with equity to both, neither under compulsion to

buy nor sell and both fully aware of all relevant facts and including

installation and assuming that the earnings support the value

reported."

Source of Definition: American Society of Appraisers.

This value definition attempts to recapture all costs incurred to make the equipment a

producing asset. The concept implies a purchaser will incur all of these costs to replicate

the existing operation, including soft costs. Specifically, Fair Market Value - In Continued

Use represents the “tangible” value of a producing asset. Goodwill and other intangible

values have not been considered, nor are they included within. Estimated values are

based on a marketing period of six to twelve months within the continental United

States.

Specifically, installation costs (soft costs) include engineering and design fees,

procurement costs, transportation, site improvements, millwright and rigging fees,

electrical connections and power feed wiring, compressed air / water / oil / gas process

piping, start-up costs, permits and license fees, quality assurance certifications,

maintenance certifications, and any other cost necessary for the machine to function

properly.

Each category of cost has been included within each machine’s value, rather than via

category.

1. Engineering / Design Fees such as production flow and plant layout.

2. Procurement Costs such as labor and travel.

3. Transportation such as from the manufacturer, distributor, or supplier to

the facility.

4. Site Improvements, which would be anything necessary for equipment to

operate such as reinforced foundations, pits, drainage ponds, and

transformer pads.

5. Millwright Fees / Rigging such as labor, equipment rental to move

equipment from lading dock into position within facility.

6


Application of Fair Market Value - In Continued Use

(Continued)

6. Plant Process Piping, which includes things such as labor and material for

iron pipe, schedule 80 PVC schedule 40 PVC, schedule 35 PVC, and

copper pipe that services:

• Gas

• Water

• Air

• Steam

7. Electrical power feed panels and wiring from sub-station into and

throughout plant, which would include things such as pads, buss duct, conduit, wire transformers, panels, fuses, and disconnects.

8. Start-Up costs, which would include things such as technician and

operator training, de-bugging of equipment, and overhead during down-time.

9. Permits / Licenses / EPA Regulatory Compliance, which would include

things such as fees, consultants, and training.

10. Quality Assurance Programs, which would include things such as certification, labor, fees, travel, and training.

11. Maintenance, which would include things such as classes, certifications,

labor, fees, and travel.

12. Sales Tax.

7


Research Data

Data includes information necessary for the appraiser to consider both the Cost and

Market approaches to estimating value. New/replacement costs, depreciation rates,

remaining useful life, observed obsolescence, current listings, verified sales, auction

results, and various installation and transportation costs have been considered. Sources

included new and used machinery dealers and distributors, manufacturers, used

equipment brokers, and auction companies. This information was conveyed either by

direct contact, i.e., telephone conversation, published periodicals or via the Internet.

These include, but are not limited to, the manufacturers of the equipment; second party

dealers, brokers and market places such as Wotol, ex-Factory, Machinery Trader, Negia, ,

Bohemia-Grafia, Richer Investments, and ebay.

Transaction

The appraisers will attempt to identify "Arms Length" transactions representative of the

market. Estimated values are based on a marketing period of six to twelve months

within the continental United States. However, valuations reported herein are as of

the effective date of appraisal. Most values change over time.

Value Analysis All three approaches to value, Cost, Market and Income, have been considered. The Cost

approach is often a reliable indication of value for those items less than five years old, or

less than 25% depreciated, due to the lack of sales data. The Cost Approach becomes

more unrealistic as the item incurs more depreciation due to age and use. The Market

Approach is generally considered to be the most reliable/accurate indication of used

value. However, each comparable sale must be analyzed. Also, market sales activity can

be quite difficult to measure within some industries. The Income Approach was

considered but not used because it would be nearly impossible to determine the value

added to earnings for each item as a result of the use of this equipment on a piecemeal

basis.

8


Industry Review

The Midwest may be as stable as any area in the U.S., as of June 2012. The estimated

values herein reflect the current market conditions as of June 2012. Several economic

indicators reveal the economy to be in a state of flux. Indeed, our commercial banking

contacts have reported they are beginning to loosen credit after the recent real estate

debacle.

Regarding older equipment, please note several observations, each contributing to a

depressed market:

1. An abundance of equipment on the market;

2. obsolete controls; and

3. aggressive pricing from manufacturers for new equipment.

Upon these conditions, and those previously mentioned, we expect the used machinery

market also be in a state of flux due to marketability. Used equipment less than ten years

old should continue to sell well with obvious exceptions such as computers, and related

services are realizing a slower market.

All value analyses, research documentation, original notes, observed obsolescence, and

data received from Hospeco are contained within the Project File.

9

$5,231,390.00

Five Million, Two Hundred Thirty-One

Thousand, Three Hundred Ninety Dollars

Recapitulation

"Fair Market Value - In Continued Use"

Hospeco

Nicholasville, Kentucky

Effective Date: June 1, 2012

Total Appraised Value

For values to continue to have meaning, periodic updating must be performed due to changing

conditions, which includes, but is not limited to: Physical Deterioration, Functional

Obsolescence, Economic Obsolescence and the General Economy. The accuracy of our opinion

could be altered significantly by any change in these assessments or conditions.

10

Assumptions & Statements

of Limiting Conditions

1. The delivery and acceptance of this appraisal report constitutes fulfillment of the

contract between the field appraisers, any employees, officers or authorized

agents of Tritech Appraisals, Inc. and the entity requesting said appraisal, Albaad

USA, Inc.

2. The field appraisers, nor any employees, officers or authorized agents of Tritech

Appraisals, Inc. do not accept responsibility for reporting on any possible E.P.A.

and/or O.S.H.A. violations, and are not qualified to render such evaluations. The

appraisers have not been requested nor have they performed an environmental

audit on the Subject addressed within. Neither the appraisers nor anyone

representing Tritech Appraisals, Inc. has yielded an opinion of any kind or nature

regarding the possible existence of piping systems and/or chemicals, solutions and

raw materials. If a question arises regarding potential hazards or contaminates,

pertaining to either substance used on-site, the appraisers recommend that the

reader contact an independent professional environmental engineering and/or

consulting firm to perform an analysis.

3. Not included are work in progress/process, patents, patented processes, finished

products, inventory, supplies, small desktop items, tools, replacement/repair parts,

nor perishable tooling.

4. No investigation of legal fee, legal description or title to the Subject Machinery &

Equipment has been made by the field appraisers, any employees, officers or

authorized agents of Tritech Appraisals, Inc. Therefore, any claims by Hospeco

regarding legal fee, legal description or title to the Subject Machinery &

Equipment is assumed to be valid and marketable unless otherwise indicated.

5. The Subject assets have been personally observed unless otherwise noted.

6. In most instances, equipment is itemized though in certain cases are listed in a

group estimate. In such cases, the listings are shown in a quantity called a "Lot."

This is usually done in value areas that require general descriptions for

applications elsewhere, or in areas where difficulty of access for total description

would have required additional time not justified by the items being valued. Also,

certain instances not only justify, but also actually mandate, items being grouped

when it would be illogical to list them separately.

11



7. Description of items made a part of this report are believed correct to the best

ability of the appraisers. Any errors or omissions were unintentional and should

not affect the value assignment. Descriptions are made with the attempt of

allowing reasonable identification though it may not allow specific item

identification in all cases. Examples of this would be in such areas as cabinets,

tables, chairs, shelving, racking, hand tools and equipment unserialized, located

such that they could not be viewed, or without justification for a serial number

search due to associated value and/or time considerations. In some cases,

identification numbers could not be located or were not visible.

8. The valuation concept used in this report is one chosen by Albaad USA, Inc. and

should not be considered a recommendation by any employee, officer or

authorized agent of Tritech Appraisals, Inc. as to what might result in any later

application of the concept. Concept probability and/or feasibility of occurrence

are beyond the scope of the appraisal. The user of the report is to determine the

probability of occurrence. The appraisal is purchased in order to allow an opinion

of value under an assumed set of circumstances, as requested and mutually agreed

upon by Albaad USA, Inc. and Tritech Appraisals, Inc.

9. Neither the field appraisers nor any employees, authorized agents or officers of

Tritech Appraisals, Inc. has any financial interest in the Subject Machinery &

Equipment appraised.

10. The field appraisers and any other employees, officers or authorized agents of

Tritech Appraisals, Inc. reserve the right to recall all copies of this appraisal

report to correct any omission or error.

11. This appraisal report is in compliance with the strictest interpretation of Standard

8 of The Uniform Standards of Professional Appraisal Practice as well as the

Code of Ethics of The Equipment Appraisers Association of North America and

The American Society of Appraisers. Under this standard, this appraisal report is

submitted as a Summary Format, which covers all aspects relative to a Complete

or Limited Appraisal. However, the presentation of information with a Summary

Format is more concise, all data references are considered and only results of any

analyses are provided.

12



12. This valuation study has been made by Tritech Appraisals, Inc. and will be held

confidential. It has been prepared by experienced appraisers in accordance with

accepted appraisal practices and reflects the best judgment of the appraisers.

When appropriate, manufacturers, new, and used dealers have been consulted for

comparable prices. Also, catalogs, trade publications and results of sale

comparables have been utilized. For all areas of this study, the assigned values

represent the amount a reputable and qualified appraiser, unaffected by personal

interest, bias or prejudice would recommend to a prospective purchaser as a

proper price or cost within the value concept and in light of prevailing conditions.

13. An appraisal is an opinion of value and opinions may vary due to differences in

perception and to quality, condition, etc. Therefore, an appraisal is not a guarantee

of value and should not be perceived as such. This appraisal was made under the

conditions which existed at the time this data was gathered. Change in economic

conditions locally and nationally, changes in condition of items appraised,

changes in technology, functional and economic obsolescence are but a few items

which could substantially alter future value. Since conclusions by the appraiser

are based upon judgments, isolation of any single element as the sole basis of

comparison of the whole appraisal may be inaccurate.

14. The fee for this appraisal report is not contingent upon the values reported. There

have been no guarantees associated with this fee and no liability can be intimated

or assumed in any manner by the field appraisers, any employees, authorized

agents or officers of Tritech Appraisals, Inc.

15. As this appraisal report has been purchased by the addressee, Tritech Appraisals,

Inc. assumes it is to be used by the addressee in determination of value as of the

effective date of this appraisal report. Use of this appraisal report by others should

be done so with the understanding that no risk or guarantees have been purchased

by the owner of this report nor through the fee paid to the field appraisers,

employees, authorized agents or officers of Tritech Appraisals, Inc.

16. The physical condition of the Subject Machinery & Equipment described herein

was based upon visual inspection by the field appraisers. No responsibility is

assumed for latent defects of any nature that may affect its value, nor for any

expertise required to disclose such conditions.

13



17. All opinions regarding the value conclusions are the appraiser's considered

opinion based upon the facts and data set forth in this appraisal report.

18. This appraisal report is based upon Fair Market Value - In Continued Use

defined as follows:

"The estimated amount expressed in terms of

money that may reasonably be expected for

property in exchange between a willing buyer and

seller with equity to both, neither under compulsion

to buy nor sell and both fully aware of all relevant

facts and including installation and assuming that

the earnings support the value reported."

Source of Definition: American Society of Appraisers

19. All field notes and relevant documents pertaining to this appraisal report utilized

by the field appraisers, any employees, officers or authorized agents of Tritech

Appraisals, Inc. are secured in our master files for five years.

20. No additional values or appraisals have been made regarding intangibles such as

patents, rights to manufacture, trademark, goodwill and customer lists.

21. Tritech Appraisals, Inc. reserves the right to include your company/firm name in

our client list, and will maintain confidentiality of all conversations and

documents provided to us, as well as the contents of this appraisal report.

However, these conditions are subject to any legal or administrative process or

proceedings, and can only be modified by written documents executed by both

parties.

22. This appraisal report has been prepared in conformity with and is subject to the

requirements of The Principles of Appraisal Practice and Code of Ethics of The

American Society of Appraisers and the Uniform Standards of Professional

Appraisal Practice.

14



23. Any information furnished by others regarding the Subject Machinery &

Equipment to the field appraisers, any employees, officers or authorized agents of

Tritech Appraisals, Inc. is believed to be reliable, accurately represented and

reasonably correct. However, the field appraisers, nor any employees, officers or

authorized agents of Tritech Appraisals, Inc. issues any warranty or other form of

assurance regarding its accuracy.

24. The field appraisers, as well as any employees, officers or authorized agents of

Tritech Appraisals, Inc. assumes there to be responsible ownership and

competent management with respect to the Subject Machinery & Equipment.

25. The field appraisers, as well as any employees, officers or authorized agents of

Tritech Appraisals, Inc. assumes there is full compliance with all applicable

federal, state and local regulations and laws unless the lack of compliance is

stated, defined and considered in this appraisal report.

26. The contents of this appraisal report shall not be disseminated to the public

through advertising, public relations, news, sales or other media without prior

written consent and approval by Tritech Appraisals, Inc.

27. Possession of this appraisal report does not carry with it the right of publication

and may not be used for any purpose by any person or entity other than the person

or entity to whom it is addressed without the written consent of Tritech

Appraisals, Inc. Further, if written consent is obtained from Tritech Appraisals,

Inc., use of this appraisal report may only be done so with proper written

qualifications and only in its entirety. This appraisal report is only valid as of the

effective date(s) and purposes specified herein.

28. By reason of this value opinion, the field appraisers nor any employees, officers

or authorized agents of Tritech Appraisals, Inc. are not required to give testimony

or to be in attendance in court with reference to the Subject Machinery &

Equipment unless arrangements have been previously made. Should these

services be required or requested of the field appraisers, any employees, officers

or authorized agents of Tritech Appraisals, Inc. with regard to testimony or court

appearances, appropriate fee and expenses would apply as these services are in

addition to the original scope of this appraisal report.

15



29. The field appraisers, nor any employees, officers or authorized agents of Tritech

Appraisals, Inc. do not assume responsibility for any financial reporting

judgments that are those of management. Further, management of Hospeco

accepts the responsibility for any related financial reporting with respect to the

Subject Machinery & Equipment encompassed by this appraisal report.

30. Neither the appraisal assignment nor the amount of the fee is contingent upon

developing or reporting a predetermined value, requested minimum value, a

direction in the value that favors the cause of Albaad USA, Inc., a specific

valuation, the approval of a loan, the amount of the value estimates or attainment

of a stipulated result. Nor is the compensation of any appraiser, officers or

authorized agent of Tritech Appraisals, Inc. contingent upon an action or event

resulting from the analyses, opinions or conclusions in, or the use of, this

appraisal report, or the occurrence of a subsequent event directly related to the

intended use of this appraisal report.

31. The maximum liability of Tritech Appraisals, Inc. for the breach of any

obligation in connection with this appraisal assignment or appraisal report, and for

any and all damages of any type or nature, whether in a contract or in a tort and

whether compensatory, consequential or punitive in nature, sustained or claimed

by Hospeco or any other person or entity in connection with this appraisal

assignment or appraisal report, shall be limited to the fee actually paid to and

received by Tritech Appraisals, Inc. In no event or circumstance shall Tritech

Appraisals, Inc. have any liability to Albaad USA, Inc. or any other person or

entity in excess of the fee actually paid to and received by Tritech Appraisals,

Inc.

32. The summary value indicated in this report represents an "aggregate" value based

upon all items noted herein. For this reason, isolation of any single element as a

sole basis of comparison may be inaccurate and subsequent isolation of any single

item appraised, or group of items appraised, could result in a variance from the

values reported.

33. If any other limitations apply to this appraisal report, they will be clearly defined

and individually set out at that point in which it would be relative to the Subject

Machinery & Equipment.

16



34. The opinions contained in this report reflect certain significant assumptions and

assessments. These include assessments of the machinery and equipment's normal

useful life, physical deterioration rate, and the soft costs of acquisition such as

taxes, freight and installation. They also include adjustments made to market

comparables for age, condition, and capacity. In the case of the normal useful life,

this varies based on the asset category, but for the major equipment described in

this appraisal the normal useful life was assessed at 40 years with a physical

deterioration rate commensurate with this expected life. Taxes were assessed

based on the machinery and equipment's location in the state of Kentucky and

assigned at 6%. Freight and installation were assessed based on research with

various third party service providers. The adjustments made to the market

comparables in order to reflect differences with the subject equipment was also

handled on a per-case basis, with an emphasis on selecting comparables that best

matched each subject to ensure minimal adjustment. Value differences based on

age were calculated based on our assessment of average useful life and value

differences based on capacity were calculated based on the cost to capacity model

promoted by the ASA. These calculations were performed using an accelerated

depreciation method based upon the age and condition of the item with an

emphasis to loss of value early in a machine's life/deterioration.

Sensitivity Analysis, Physical Condition/ Freight & Installation of Diaper & Sanitary Napkin Lines

Freight & Installation Assessment Adjustment

20% Decrease F&I No Change

20% Increase F&I

-$23,100.00 $0.00 $30,150.00

Ph

ysic

al C

on

dit

ion

Ad

just

me

nt

-10% $4,193,715.00 $4,216,815.00 $4,246,965.00

-5% $4,427,982.50 $4,451,082.50 $4,481,232.50

No Change $4,662,250.00 $4,685,350.00 $4,715,500.00

5% $4,896,517.50 $4,919,617.50 $4,949,767.50

10% $5,130,785.00 $5,153,885.00 $5,184,035.00

17

General Information & Definition Inspection Review

EFFECTIVE DATE: June 1, 2012

INSPECTION DATE(S): May 24 and 25, and June 1, 2012

REPORT DATE: August 8, 2012

LOCATION(S) INSPECTED: 500 Memorial Drive, Nicholasville, Kentucky

Inspection of the Machinery & Equipment for Hospeco located in Nicholasville,

Kentucky was performed by the signing appraiser(s) for the purpose of ascertaining the

Fair Market Value - In Continued Use of those assets as of the effective date of this

appraisal report.

Purpose of Appraisal

The purpose of this appraisal is to estimate the Fair Market Value - In Continued Use of

the Subject Machinery & Equipment. Tritech Appraisals, Inc. did conduct an audit, a

cursory physical inspection and/or a review of information as supplied by Hospeco of the

Subject Machinery & Equipment, contained in this appraisal report, was conducted by

our field appraisers to assist them in estimating the value opinion set forth in this

appraisal report.

Function of Appraisal

The property interest (rights) appraised is that of ownership in fee simple. The Subject

Machinery & Equipment is appraised as if free and clear, without liens or encumbrances

unless otherwise indicated.

There are proper uses for various concepts of value. However, Albaad USA, Inc. may

determine that the concept of value this appraisal report is based upon fits a particular

need for them and, therefore, could misconstrue or misrepresent the contents of this

appraisal report. As there are generally accepted standard definitions for value concepts,

each value concept, as specifically defined, indicates a conclusion of value that would be

ascertained by Tritech Appraisals, Inc., regardless of Albaad USA, Inc. or their intended

use. Subsequently, it is inherently the responsibility of Albaad USA, Inc. to determine if

the concept of value chosen is proper for its intended use.

18

General Information & Definition

Function of Appraisal (Continued) Additionally, Albaad USA, Inc. is not prohibited from investigating value concepts to

determine their typical and known common uses. They are also not prohibited, after their

investigations, from choosing to adapt any concept of value to a use that may be

considered reasonable by their own internal standards. Therefore, the function of this

appraisal report is the use of the report by Albaad USA, Inc., with their knowledge of the

defined circumstances regarding value concepts, typical uses or intended use.

Highest & Best Use Highest and best use is defined as the reasonably probable and legal use of personal

property, which is physically possible, appropriately supported, financially feasible and

results in the highest value in the appropriate marketplace within the defined value

concept, consistent with the purpose of this appraisal report. As generally understood, the

highest and best use of the Subject is that for which it was designed.

Highest and best use has been considered for the Subject Machinery & Equipment

contained in this appraisal, which is in accordance with Standard 7, Subsection 3(a) of the

Uniform Standards of Professional Appraisal Practice (USPAP).

CLIENT: Albaad USA, Inc.

SUBJECT: Hospeco

USER: Albaad USA, Inc.

INTENDED USE: Financial reporting purposes and for purchase allocation as

required under the IFRS3 summary for business combinations

DEPRECIATION / OBSOLESCENCE

CONSIDERATIONS:

PHYSICAL DETERIORATION:

Loss in value or usefulness attributable solely to physical causes such as wear and

tear and exposure to the elements.

19


Highest & Best Use (Continued)

FUNCTIONAL OBSOLESCENCE:

Loss in value due to factors inherent in the property itself, which would result in

inadequacy, overcapacity, excess construction, lack of functional utility and excess

operating costs or costs of maintaining utility beyond the Reproduction Cost of an asset,

such as a software platform upon which the current economy may provide an advantage

that outweighs the current operation of older platforms.

Additionally, Albaad USA, Inc. is not prohibited from investigating value concepts to

determine their typical and known common uses. They are also not prohibited, after their

investigations, from choosing to adapt any concept of value to a use that may be

considered reasonable by their own internal standards. Therefore, the function of this

appraisal report is the use of the report by Albaad USA, Inc., with their knowledge of the

defined circumstances regarding value concepts, typical uses or intended use.

.

ECONOMIC OBSOLESCENCE:

ITEM SPECIFIC - Loss in value caused by unfavorable external conditions as a direct

result of factors related to the item.

INDUSTRY SPECIFIC - Loss in value caused by unfavorable external conditions as a direct

result of factors related to the industry.

BUSINESS SPECIFIC - Loss in value caused by unfavorable external conditions as a direct

result of factors related to the business.

INTEREST

APPRAISED: Fee Simple

Approaches to Value

Values reflected in this appraisal report are primarily based on one or a combination of

the approaches to value below.

20


Approaches to Value (Continued)

COST APPROACH:

This approach is based on the proposition that an informed purchaser would pay no more

for a property than the cost of producing a substitute property with the same utility as the

Subject property. It considers that the maximum value of a property to a knowledgeable

buyer would be the amount currently required to construct or purchase a new asset of

equal utility. When the Subject asset is not new, the current cost new for the Subject must

be adjusted for all forms of depreciation and obsolescence as of the date of the appraisal.

SALES COMPARISON APPROACH:

This approach, also known as the “Market Comparison,” involves the comparison of

comparable recent sales (or offerings) of similar assets to the Subject. If the comparable

sales are not exactly like the Subject, adjustments must be made to the price of the

comparable sales (or offerings.) The adjustments may be either up or down in order to

estimate what the comparable would have sold for if it had the same characteristics as the

Subject. This approach leads to an indication of the most probable selling price for the

assets being appraised.

INCOME APPROACH:

This approach considers value in relation to the present worth of future benefit derived

from ownership and is usually measured through the capitalization of a specific level of

income. This approach is rarely utilized in the valuation of personal property.

Explanation of Approaches Not Used

The Income Approach was not used because it would be nearly impossible to determine

the value added to earnings as a result of the use of this equipment for several reasons.

These include, but are not limited to, a difficulty in assigning value to individual

production assets based on income information which is not parceled out according to

individual production assets; difficulty in assigning value to machinery and equipment as

a category separate from other assets, services and liabilities; and the inability to assess

the value provided by support equipment versus production equipment.

21


Valuation Methodology

The Subject Machinery & Equipment has been described and valued as if installed and

currently operating. In some instances, an entire line of related machinery is designed or

has been modified to perform a particular function as an integral unit and should justify

greater value application as a unit rather than if it were separated out.

Information provided by Hospeco was utilized as an aid by Tritech's field appraisers in

determining how the Subject Personal Property has been maintained. This is an important

issue as there must be an understanding of factors such as:

1. What portion of the Subject Machinery & Equipment is used or new,

where applicable;

2. the general physical condition; and

3. specific obsolescence, where identified.

The balance of forces, which affects value for particular types of machinery or pieces of

equipment, is analyzed by the appraisers and the final value assignment on each item is,

in part, a reflection of this analysis. Therefore, The Fair Market Value - In Continued

Use concept of value requires not only the judgment and ability of the appraisers to

evaluate a specific piece of equipment, but also the experience to anticipate what could

happen under a given set of circumstances based upon actual sales of like or similar

assets, with adjustments made for:

1. conditions at time of observation;

2. quantities and desirability;

3. location;

4. general appearance;

5. psychological appeal;

6. cost of similar or like used and new equipment;

22

General Information & Definition Valuation Methodology (Continued)

7. and degree of specialization or modification.

The reported values are also adjusted for installation considerations such as:

1. transportation;

2. wiring;

3. special foundations, walls, pits;

4. difficulty of installation;

5. adaptions; and

6. plumbing.

The value opinion reflected in this appraisal report was based primarily upon one or a

combination of the preceding Approaches of Value, with heavier emphasis on the Sales

Comparison Approach, when sufficient data was available. In certain instances, as in the

case of custom Machinery & Equipment, a market analysis may be undertaken to

ascertain current demand, marketability, and subsequent value. Market analysis may also

be undertaken if functional or economic obsolescence is a key factor in a major machine

tool or piece of equipment. Additionally, certain categories of Machinery & Equipment

are subject to routine loss in value as a result of physical deterioration. In other instances,

functional obsolescence is determined through a comparison with other items that may

operate more efficiently and cost effectively.

It should be understood that the indicated value in this appraisal report does not consider

an item's replacement in like kind and utility but rather what the specific equipment

observed is worth under the scenario as defined. With all things equal, it is possible that

an exact piece of equipment, if found, could be obtained for the value indicated under the

applied concept of value. Comparisons would have to take into account adjustments for

exacts such as location, installation, condition, industry, locational economics and

possible draw through all "causes and effects" associated with the concept. Realistically,

exact comparables are not always possible; therefore, the only use of this appraisal report

can be applied to the specific equipment at its location. It is not to be used nor is it to be

represented as a valuation as would be applied to replacement or depreciated replacement

for insurance purposes. However, the item description, in most cases, contains specifics

23

General Information & Definition Valuation Methodology (Continued)

that would be needed for determining replacement in like kind and utility, though values

may be different than those indicated by this study. It is not probable that if all equipment

were to be replaced within a plant, that every item would be found; therefore, some items

would be replaced at used prices higher or lower than the indicated value, whereas others

would have a requirement for replacement or reproduction cost new due to the inability to

locate this item in the new or used market.

Definition

Consideration of Hospeco Machinery & Equipment is made under the Fair Market

Value - In Continued Use concept as defined below.

"The estimated amount expressed in terms of money that may

reasonably be expected for property in exchange between a willing

buyer and seller with equity to both, neither under compulsion to

buy nor sell and both fully aware of all relevant facts and including

installation and assuming that the earnings support the value

reported."

Source of Definition: American Society of Appraisers

This concept assumes the premise of continued use, which assumes the equipment or

assets will continue to be used for the purpose for which it was designed and built or to

which it is currently adapted. The premise implies that the property will be retained at its

present location for continued operation. It also implies that the equipment or assets are

installed, operating, and an integral part of the entity in which they are employed and

fulfills an economic demand and benefit.

This concept of value takes into consideration any inflationary or depreciable conditions,

which could affect sales such as physical location, difficulty of removal, adaptability of

specialization, marketability, physical condition, overall appearance and psychological

appeal. Further, it considers the ability to draw interested buyers. However, it does not

consider any additional value because of product line or other elements of value under

Fair Market Value - In Continued Use conditions that may be obtained, but could not be

foreseen. It also presupposes the continued utilization of each asset in conjunction with

all other installed assets. As particularly applied to Machinery & Equipment, Fair

Market Value - In Continued Use is the value of a piece of equipment installed, in place,

for continued operation, as utilized as of the effective date stated herein. Therefore, any

24


Definition (Continued)

deletions or additions to the Machinery & Equipment made a part of this appraisal report

could alter the psychological and / or overall appeal necessary to obtain the expressed

value opinion of the signing appraisers. Meaning, any changes could significantly affect

Tritech Appraisals, Inc.'s current value opinion as of the effective date of this appraisal

report.

The assignment for any Fair Market Value In - Continued Use appraisal does not

necessarily indicate the concept as a proper method of disposal if market testing should

be required at a future date. These value concepts and their inherent assumptions are

requested for various uses or guidelines by the addressee shown on the letter of

transmittal. The assumed set of circumstances may not allow the concept to be

recommended when and if sales of assets should be desired or required.

This value concept has been requested by Albaad USA, Inc. and should not be

considered as a recommendation by the field appraisers or any other employees, officers

or authorized agents of Tritech Appraisals, Inc. The applied value concept is considered

fair and reasonable under the assumptions made, but could contain risks due to changing

conditions and the assumed resale of all Machinery & Equipment considered part of this

appraisal report. The overall indicator is the appraiser's value opinion as to the result of a

Fair Market Value - In Continued Use sale of the Subject Machinery & Equipment,

which is based upon averaging.

25

Condition Symbols & Depreciation Codes

The following symbols are used to indicate overall estimated condition & depreciation:

N - New, not used before. No loss in value due to physical deterioration.

E - Excellent, near new condition. Very little use, recently purchased.

VG - Very good condition, with no requirement for repairs and usually

considered above average for an item of like age utility.

G - Good condition, usually considered average to that which would be

expected for an item of like age and utility; would require standard

continued maintenance.

F - Fair condition, generally considered below average but operable; could

use repairs or improvement; questionable continued or extended use.

P - Poor condition, may or may not work and in all likelihood required

maintenance for even the most limited use; needs immediate attention.

SL - Salvage condition, not worth the cost or repair, but item components of

individual value may be stripped from the whole property which would

result in value greater than scrap only.

SP - Scrap condition, generally considered for material content only; 100%

depreciated by physical condition and/or some form of obsolescence.

26

Qualifications & Experience

JP Lyninger III Appraiser, Tritech Appraisals 2005 - Present

Auctioneer, Tritech Auctions 2005 - Present

Clerk, Tritech Auctions 2002 - 2005

Seven years experience in the appraisal industry with specific experience in commercial and industrial

areas, with supporting experience in auctions of the same since 2002. Mr. Lyninger has completed four of

the five major accreditation tests with the American Society of Appraisers, including all 4 foundation

courses in Machinery and Equipment and the test on the Uniform Standards of Professional Appraisal

Practice.

EDUCATION

Mr. Lyninger earned his Bachelor of Arts from the University of Louisville (2008) and has also

completed the basic foundation courses offered by the American Society of Appraisers for the specialists

in the field of personal property valuation for commercial and industrial pursuits.

APPRAISAL ASSIGNMENTS

Aggregate/Quarry, Asphalt & Concrete Plants, Automated Manufacturing, Building/Plant, Maintenance,

Chemical Processing, Compressors/ Air & Gas, Construction/ Earth Moving, Electrical/Power,

Electronics, Food Processing, Forestry/Logging/Lumber, Laboratory, Material Handling, Metalworking,

Office Equipment/Furniture, Painting Systems, Plastic/Rubber/Paper, Plant Process Piping, Printing,

Pumps, Recycling/Scrap/Waste, Refrigeration/Air conditioning, Restaurants/Bakeries/Supermarkets,

Sewing/Monogramming/ Embroidery, Surplus Materials, Telecommunications, Testing/Inspection,

Textile, Trucks/Buses/Rolling Stock, Woodworking Machinery, etc.

CONCEPTS OF VALUE EXPERIENCE

Fair Market Value – Intrinsic Fair Market Value – In Continued Use

Fair Market Value – Installed Fair Market Value – Removed

Liquidation Value – In Place Orderly Liquidation Value

Forced Liquidation Value Salvage Value

Scrap Value Replacement Cost

27

Qualifications & Experience

Jesse P. Lyninger, Jr., Appraiser

With eight years of experience working with Michael J. Waltrip, ASA,

Jesse has passed the ASA ethics exam, the Uniform Standards of

Professional Appraisal Practice and Appraisal Course 201, 202, and 203

in Machinery & Technical Specialties. Mr. Lyninger brings

professionalism, and a wide spectrum of useful knowledge to Tritech

Appraisals, Inc. and we are proud of his affiliation with our firm.

President, Tritech Appraisals, Inc.

Mr. Lyninger became President of Tritech Appraisals, Inc. on April 30, 2012. He is responsible

for the day to day operations, office management and all financial dealings of the corporation.

He has worked on over two hundred appraisal assignments including Aggregate / Quarry,

Asphalt & Concrete Plants, Manufacturing, Commercial Vehicles, Construction / Earth Moving

Equipment, Farm Machinery, Food Processing Equipment, Laundry & Dry Cleaning, Material

Handling, Medical, Metalworking, Mining, Office Equipment/Furniture, Packaging, Injection

Molding Machinery, Printing, Restaurants, Bakeries, Supermarkets, Sewing, Embroidery,

Screen Printing, Woodworking Machinery, etc.

President, Tritech Auctions, Inc.

Tritech Auctions, Inc. was incorporated on February 21, 2002 for the purpose of selling

commercial and industrial equipment at auction. Mr. Lyninger is responsible for the day to day

operations, office management and all financial dealings of the corporation. He is a licensed

Principal Auctioneer in both Kentucky (P2468) and Indiana (AU10700067).

Owner, Jessco Equipment and Machinery Movers

Mr. Lyninger started Jessco as a sole proprietorship in November 1995 and operated it until May

2004. As the name implies, Jessco provided equipment and machinery moving and rigging

services to a wide variety of companies in the Louisville area. Jessco was also regularly engaged

in the business of buying, refurbishing and reselling used industrial equipment.

Electronics Industry

Mr. Lyninger has over 20 years experience as a Printed Circuit Designer/Electronics Technician.

designing complex, single, double sided, and multi-layer printed circuit boards for both through

hole and surface mount applications. He has acted as the liaison between engineering and other

departments to ensure the timely completion of many projects from design through production.

28

Certificate of Appraiser I hereby certify that:

1. On May 24 and 25, and June 1, 2012 I personally examined the Subject

Machinery & Equipment appraised, unless otherwise indicated;

2. The statements of fact contained in this report are true and correct;

3. The field appraisers, employees, authorized agents or officers of Tritech

Appraisals, Inc. have no bias with respect to the property that is the Subject of

this appraisal report or to the parties involved with this assignment;

4. Tritech Appraisals, Inc.'s engagement in this assignment was not contingent

upon developing or reporting predetermined results;

5. The reported analyses, opinions and conclusions are limited only by the reported

assumptions and limiting conditions, and are the field appraiser’s personal,

impartial and unbiased professional analyses, opinions and conclusions. Tritech

Appraisals, Inc. has no present or prospective interest in the Subject Machinery &

Equipment contained in this appraisal report and no personal interest with respect

to any parties involved.

6. Tritech Appraisals, Inc.'s compensation for completing this assignment is not

contingent upon the development or reporting of predetermined value or direction

in value that favors the cause of Albaad USA, Inc., the amount of the value

opinion, the attainment of a stipulated result or the occurrence of a subsequent

event directly related to the intended use of this appraisal;

7. Tritech Appraisals, Inc.'s analyses, opinion, and conclusions were developed and

have been prepared in conformity with the Uniform Standards of Professional

Appraisal Practice;

8. Significant assistance was provided by other appraisers. Jesse P. Lyninger gave

significant assistance to list and value certain items. Items appraised by those

rendering significant assistance is documented in the project work file. Also, see

Qualifications and Experience.

Signed this 8th

day of August 2012.


JP Lyninger III

Lead Appraiser

29

Certificate of Appraiser I hereby certify that:

1. On May 24 and 25, and June 1, 2012 I personally examined the Subject

Machinery & Equipment appraised, unless otherwise indicated;

2. The statements of fact contained in this report are true and correct;

3. The field appraisers, employees, authorized agents or officers of Tritech

Appraisals, Inc. have no bias with respect to the property that is the Subject of

this appraisal report or to the parties involved with this assignment;

4. Tritech Appraisals, Inc.'s engagement in this assignment was not contingent

upon developing or reporting predetermined results;

5. The reported analyses, opinions and conclusions are limited only by the reported

assumptions and limiting conditions, and are the field appraiser’s personal,

impartial and unbiased professional analyses, opinions and conclusions. Tritech

Appraisals, Inc. has no present or prospective interest in the Subject Machinery &

Equipment contained in this appraisal report and no personal interest with respect

to any parties involved.

6. Tritech Appraisals, Inc.'s compensation for completing this assignment is not

contingent upon the development or reporting of predetermined value or direction

in value that favors the cause of Albaad USA, Inc., the amount of the value

opinion, the attainment of a stipulated result or the occurrence of a subsequent

event directly related to the intended use of this appraisal;

7. Tritech Appraisals, Inc.'s analyses, opinion, and conclusions were developed and

have been prepared in conformity with the Uniform Standards of Professional

Appraisal Practice;

8. Significant assistance was provided by other appraisers. JP Lyninger III gave

significant assistance to list and value certain items. Items appraised by those

rendering significant assistance is documented in the project work file. Also, see

Qualifications and Experience.

Signed this 8th

day of August 2012.


Jesse P. Lyninger

Appraiser

30

Scope of Work

To better understand the Scope of Work, the Appraisers Commentary, Statement of Limiting

Conditions and General Information sections must be read in addition to this section.

Appraisers Commentary – Lists appraisal types, type chosen, format types, format chosen,

valuation method, valuation definition, research data, value analysis, industry review and other

information.

Statement of Limiting Conditions – To understand the presentment of this appraisal, this

section must be read thoroughly.

General Information and Definition – Lists the Effective Date of Appraisal, Inspection

Date(s), Report Date, Location(s) Inspected, Purpose of Appraisal, Function of Appraisal, Client,

Subject Being Appraised, Intended User, Intended Use, Highest and Best Use, Approaches to

Value, Approach(es) Not Used, Valuation Methodology, Valuation Method/Valuation Definition

and the Source of Definition.

Assignment – This section hereby completes the issue of Scope of Work by summarizing what

we were to appraise, what we were not to appraise and who, if anyone, contributed significant

assistance to the appraisal process.

We have been requested to inventory and value all machinery and equipment belonging to

Hospeco using the Fair Market Value In Continued Use method. It is our mission in all

appraisals to attempt to correctly list all observed machinery and equipment and through research

to approximate their value under the valuation method chosen.

Our scope of work does not include work in progress/process, patents, patented processes,

finished products, inventory, supplies, small desktop items, tools, replacement/repair parts, nor

perishable tooling. Unless otherwise requested we do not list non-owned/personal or leased items

(except where noted). We always inquire whether items are leased or not owned. We must be

able to rely on the information provided. Items not observed and/or remotely located are duly

noted within the listing (when appropriate). The descriptions and values assigned are dependent

on the information provided by owner personnel.

Whenever a listing is attempted during business operations, it is possible, even likely, that

several lesser items may be duplicated or missed. This is due to their mobility during normal

operations. It is not always practical nor possible to list when operations are idle. However, this

should not significantly affect the overall evaluation. Most valuations are more accurate when

the appraiser can observe machinery and equipment in operation. This description of the Scope

of Work together with the information provided by in the Appraisers Commentary should enable

the client requesting and using this appraisal to better understand its presentation. It is for the

exclusive use of the entity addressed herein and for none other.

The intended use for this appraisal is financial reporting purposes and for purchase allocation

as required under the IFRS3 summary for business combinations only. Said appraisal is for

the sole use only of Albaad USA, Inc.

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