EXHIBIT 4.138
API ELECTRONICS GROUP INC.
SUBSCRIPTION AGREEMENT
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API ELECTRONICS GROUP INC.
SUBSCRIPTION AGREEMENT
DATED the 6th day of February, 2003.
TO: API ELECTRONICS GROUP INC. (the "Corporation")
RE: Subscription for and Purchase of Units of the Corporation
References below to "this Subscription Agreement" are to be read as
references to the agreement resulting from the Corporation's acceptance of your
offer. All dollar amounts referred to herein are in United States dollars.
The Purchased Securities (as hereinafter defined) may be subject to
statutory hold periods during which they may not be resold, as well as certain
other statutory restrictions on resale. Subscribers are advised to consult their
own legal advisers in connection with any applicable resale restrictions.
1. Definitions
In this Subscription Agreement:
(a) "Closing" has the meaning ascribed in Section 6 of this Subscription
Agreement;
(b) "Closing Date" means February 6, 2003, or such earlier or later date
as the Corporation and Subscriber shall mutually agree;
(c) "Closing Time" means 2:00 p.m. on the Closing Date, or such earlier or
later time as the Corporation and Subscriber shall mutually agree;
(d) "Common Shares" means common shares in the capital stock of the
Corporation;
(e) "Corporation" means API Electronics Group Inc.;
(f) "Purchased Securities" means the Common Shares and Warrants comprising
the Purchased Units and the Common Shares issuable upon the exercise
of such Warrants;
(g) "Purchased Units" means 100,000 Units in the capital stock of the
Corporation;
(h) "Subscriber" means 1057111 Ontario Ltd.;
(i) "Subscription Price" means US$0.40 per Unit;
(j) "Total Subscription Price" means US$40,000 (100,000 Units x US$0.40
per Unit);
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(k) "Unit" means one (1) Common Share issued for US$0.40 and one-half
(1/2) Warrant; and
(l) "Warrant" means a purchase warrant granting the right to purchase one
Common Share at a purchase price of US$0.60 per Common Share
exercisable for a period of two (2) years after Closing, all as more
particularly set out in and in substantially the form attached hereto
as Exhibit "B".
2. Purchase of Units
The undersigned (the "Subscriber") hereby irrevocably subscribes for and
agrees to purchase from the Corporation, subject to the terms and conditions set
forth herein, the Purchased Units in consideration of payment of the Total
Subscription Price.
3. Acknowledgements of the Subscriber
Subscriber acknowledges and agrees that:
(a) It has not received an offering memorandum or similar document and
that its decision to enter into this Subscription Agreement and to
purchase the Purchased Units has not been made upon any verbal or
written representation as to fact or otherwise made by the Corporation
or any other person associated therewith and that its decision is
based entirely upon publicly available information concerning the
Corporation and the representations of the Corporation contained
herein, including the documents delivered in connection herewith.
(b) The distribution of the Purchased Units is being made on a private
placement basis and has not been qualified pursuant to the securities
laws of any province or territory of Canada, and any transaction
involving the Purchased Units in any province or territory of Canada
may constitute a violation of applicable Canadian provincial
securities legislation unless carried out pursuant to an applicable
exemption therefrom.
(c) It has been independently advised or is otherwise aware that any
resale of the Purchased Securities is subject to certain resale
restrictions provided for in certain securities legislation of the
provinces and territories of Canada. The Purchased Securities are
subject to statutory "hold periods" during which they may not be
resold, except pursuant to a further statutory exemption from the
applicable prospectus and distribution requirements under securities
legislation, or unless an appropriate discretionary order is obtained
pursuant to applicable security laws. It has been advised and afforded
the full opportunity to consult with its own legal and other
professional advisors in connection with any applicable resale
restrictions.
(d) It has been independently advised that the Purchased Units are being
offered for sale only on a "private placement" basis and that the sale
and delivery of the Purchased Securities underlying the Purchased
Units to the Subscriber is
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conditional upon such sale being exempt from the requirement to file a
prospectus under any applicable law governing the sale of such
securities or upon the issuance of such orders, consents or approvals
as may be required to permit such sale without the requirement of
filing a prospectus.
(e) It has further been independently advised as to applicable resale
restrictions in the jurisdiction in which it resides, confirms that no
representation has been made to it by or on behalf of the Corporation
with respect thereto, acknowledges that it is aware of the
characteristics of the Purchased Securities underlying the Purchased
Units, the risks relating to an investment therein and of the fact
that it may not be able to resell the Purchased Securities underlying
the Purchased Units except in accordance with exemptions under
applicable securities legislation and regulatory policy.
(f) The Subscriber acknowledges that the Purchased Units are subject to
the terms, conditions and provisions of this Subscription Agreement.
(g) A prospectus will not be filed by the Corporation to qualify the
Purchased Securities or any of them.
(h) The Purchased Securities shall be subject to a forty-one (41) day hold
period in the U.S., pursuant to "Category 2" of Regulation S under the
U.S. Securities Act of 1933, as amended, which period shall commence
from the date of issuance, and the certificates representing the same
shall be engrossed with the following legend, which shall be the only
legend engrossed on such certificates relating to resale in the U.S.:
"The securities represented by this certificate may not be sold, transferred,
hypothecated or otherwise traded until , 2003, pursuant to "Category
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2" of Regulation S under the U.S. Securities Act of 1933, as amended."
4. Closing
Delivery and payment for the Purchased Units (the "Closing") will be
completed at the offices of the Corporation's legal counsel, Messrs. WeirFoulds
LLP, The Exchange Tower, Suite 1600, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ at the Closing Time on the Closing Date.
The Subscriber acknowledges that certificates representing the Purchased
Securities comprising the Purchased Units will be available for delivery as soon
as practicable after the Closing Date.
5. Payment
Payment for the Purchased Units shall be made at the Closing Time on the
Closing Date and shall be made in United States currency by certified cheque or
bank draft drawn on a US
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bank and payable to the Corporation's solicitors, WeirFoulds LLP, in Trust or by
direct wire into the trust account maintained by WeirFoulds LLP.
6. Delivery and Payment
The parties agree that the following shall be delivered to WeirFoulds LLP
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, The Exchange Tower, Toronto, Ontario, M5X
1J5, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, not later than 12:00 noon (Toronto time) on the
Closing Date or such other time, date and/or place as the Corporation may
advise:
(a) a completed and duly signed copy of this Subscription Agreement,
including, as to the Subscriber only, Exhibit "A" attached hereto
(being a direction with respect to registration and delivery
instructions);
(b) as to the Corporation only, the Purchased Units; and
(c) as to the Subscriber only, a certified cheque or bank draft made
payable to WeirFoulds LLP, In Trust, in same day freely transferable
US funds at par in Toronto, or wired directly into the trust account
maintained by WeirFoulds LLP, representing payment of the Total
Subscription Price for the Purchased Units, net of any other amounts
to be paid otherwise upon written instructions from the Corporation.
7. Conditions of Closing
The Subscriber acknowledges and agrees that as the sale of the Purchased
Units will not be qualified by a prospectus, such sale is subject to the
condition that the Subscriber execute and return to the Corporation all relevant
documentation required by applicable securities legislation, regulations and
policies. Accordingly, the Subscriber agrees to:
(a) provide the Corporation with such information and documents, including
certificates, statutory declarations and undertakings, as the
Corporation may reasonably require from time to time to comply with
any filing or other requirements under applicable provincial
securities legislation and policies; and
(b) comply with the provisions of any applicable securities legislation
and policies with respect thereto concerning any resale of the
Purchased Securities.
8. Prospectus Exemptions
The Subscriber acknowledges and agrees that the sale and delivery of the
Purchased Securities comprising the Purchased Units to the Subscriber are
conditional upon such sale being exempt from the requirements as to the filing
of a prospectus and as to the delivery of an offering memorandum as defined in
the applicable securities legislation or upon the issuance of such rulings,
orders, consents or approvals as may be required to permit such sale without the
requirement of filing a prospectus or delivering an offering memorandum.
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In this regard, the Subscriber acknowledges and agrees that: (a) it was not
provided with, has not requested, and does not need to receive, a prospectus or
an offering memorandum as defined in the applicable securities legislation or
similar document; (b) its decision to execute this Subscription Agreement and to
purchase the Purchased Units has not been based upon any verbal or written
representations as to fact or otherwise made by or on behalf of the Corporation
and that, other than the representations of the Corporation contained herein,
including the documents delivered in connection herewith, its decision is based
entirely upon publicly available information concerning the Corporation; (c) the
sale of the Purchased Units was not accompanied by any advertisement in printed
media of general and regular paid circulation, radio or television; (d) it has
been advised and has been afforded full opportunity to consult its own legal and
other professional advisors with respect to all applicable resale restrictions
relating to the Purchased Securities and it is solely responsible (and the
Corporation is not in any way responsible) for compliance with any and all
applicable resale restrictions.
9. Representations, Warranties and Covenants of the Subscriber
The Subscriber hereby represents and warrants to and covenants with the
Corporation, acknowledging that the Corporation is relying upon such
representations, warranties and covenants in making its decision to enter into
this Subscription Agreement that:
(a) if the Subscriber sells the Purchased Securities, it will comply with
the securities legislation of the jurisdiction in which said
Subscriber resides;
(b) the purchase of the Purchased Units by the Subscriber does not
contravene any of the applicable securities legislation in the
jurisdiction in which it is resident and does not trigger (i) any
obligation to prepare and file a prospectus or similar document, or
any other report with respect to such purchase, and (ii) any
registration or other obligation on the part of the Corporation;
(c) the Subscriber is incorporated under the laws of, or is a resident of,
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(and, without limiting the -- generality of the foregoing, is not a
"U.S. Person" (as defined in Rule 902(o) of Regulation S ("Regulation
S") promulgated by the United States Securities and Exchange
Commission and meaning, generally, any natural person resident in the
United States, any corporation or partnership incorporated or
organized under the laws of the United States, or any estate or trust
of which any executor, administrator or trustee is a U.S. Person), and
the Subscriber is not purchasing the Purchased Units for the account
or benefit of any U.S. Person or for offering, resale or delivery for
the account or benefit of any U.S. Person or for the account of any
person in any jurisdiction other than the jurisdiction set out in the
name and address of the Subscriber below and the Subscriber does not
have any agreement or understanding (either written or oral) with any
U.S. Person or a person in the jurisdiction referenced above in this
Section 9(c):
(i) the transfer or assignment of any rights or interest in any of
the Purchased Securities underlying the Purchased Units; or
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(ii) the division of profits, losses, fees, commissions, or any
financial stake in connection with this subscription;
(d) no offer of Purchased Units was made to the Subscriber in the "United
States" (as defined in Regulation S under the U.S. Securities Act) and
the Subscriber did not execute this Subscription Agreement in the
United States;
(e) the activities of the Subscriber contemplated hereunder are not a
scheme to avoid the registration requirements of the U.S. Securities
Act;
(f) the Subscriber has no intention to distribute, and shall not transfer,
either directly or indirectly, until after 41 days from the Closing
Date, any of the Purchased Securities to any person within the United
States or to "U.S. Persons" (as defined in Regulation S under the U.S.
Securities Act);
(g) the Subscriber is at arm's length to and is not an "insider" (as such
term is defined by the Securities Act (Ontario)) of the Corporation;
(h) the Subscriber is duly incorporated, organized and validly subsisting
under the laws of the jurisdiction of its incorporation;
(i) this Subscription Agreement has been duly authorized, executed and
delivered by, and constitutes a legal, valid, binding and enforceable
obligation of, the Subscriber or the beneficial subscriber for whom
the Subscriber is purchasing;
(j) the Subscriber is capable of assessing the proposed investment
contemplated herein as a result of the Subscriber's experience and
financial and business acumen or as a result of advice received from a
registered person other than the Corporation or any affiliates
thereof, and is capable of evaluating the merits and risks of its
investment herein and is able to bear the economic risk of loss of its
entire investment; and
(k) the entering into of this Subscription Agreement and the completion of
the transaction contemplated hereby will not result in the violation
of any of the terms and provisions of any law applicable to, or the
constating documents of the Subscriber or of any agreement, written or
oral, to which the Subscriber is a party or by which the Subscriber is
bound.
10. Representations and Warranties and Covenants of the Corporation
The Corporation represents and warrants to and covenants with the
Subscriber, acknowledging that the Subscriber is relying upon such
representations, warranties and covenants in making its decision to enter into
this Subscription Agreement, as follows:
(a) it is a company duly amalgamated and organized under the laws of the
Province of Ontario and is presently in good standing thereunder;
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(b) the Corporation has full power and authority to enter into this
Subscription Agreement and to perform the same and do all other acts
which may be necessary to consummate the transaction contemplated
hereby;
(c) the Common Shares to be issued to the Subscriber hereunder on the
Closing Date and upon exercise of the Warrants comprising the
Purchased Units shall be at the time of issuance by the Corporation
validly issued and outstanding as fully paid and non-assessable Common
Shares;
(d) this Subscription Agreement has been duly executed and delivered by
the Corporation and is a valid agreement enforceable in accordance
with its terms;
(e) the Corporation is a reporting issuer in good standing under the
securities laws of the Province of Ontario and its Common Shares are
listed on the OTC Bulletin Board;
(f) the entering into of this Subscription Agreement and the completion of
the transaction contemplated hereby will not result in the violation
of any of the terms and provisions of any law applicable to, or the
constating documents of the Corporation or of any agreement, written
or oral, to which the Corporation is a party or by which the
Corporation is bound
(g) the Corporation has publicly disclosed all material changes in its
affairs and since its last public announcement, there has not been a
material adverse change in the affairs or business of the Corporation;
(h) the activities of the Corporation contemplated hereunder are not a
scheme to avoid the registration requirements of the U.S. Securities
Act;
(i) the Corporation will use its best efforts to cause its Common Shares
to continue to be registered under Section 12(b) or (g) of the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act"), will
use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange
Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under
the Exchange Act until 270 calendar days after the Closing; and
(j) the Corporation hereby agrees to use its best efforts to either
maintain the listing of the Common Shares on the OTC Bulletin Board or
complete application and listing on another U.S. market or exchange
until 270 days after the Closing. The Corporation further agrees, if
the Corporation applies to have the Common shares traded on any other
U.S. market, it will include in such application the Purchased
Securities, if possible to do so, as promptly as possible.
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11. Resale Restrictions and Compliance with Securities Legislation
The Subscriber acknowledges that the Purchased Securities of the
Corporation are being issued pursuant to prospectus and registration exemptions
and, accordingly, are subject to certain resale restrictions as provided in such
securities legislation; provided, however, there shall be no restriction on
resale in the U.S. by the Subscriber beginning 41 days after the Closing Date.
The Corporation and Subscriber each agree to make such filings and to do all
such things necessary to comply with any applicable requirements in relation to
the issuance of Purchased Securities of the Corporation hereunder.
12. Costs
The parties acknowledge and agree that each party shall pay its own costs
and expenses (including any fees and disbursements of professionals or any
special counsel retained by such party) relating to the purchase of the
Purchased Units.
13. Further Assurances
The parties hereto covenant and agree to execute and deliver such further
agreements, documents and writings and provide such further assurances as may be
required by the parties to give effect to this Subscription Agreement and, in
particular, to do all acts and things to execute and deliver all documents,
agreements and writings and provide such assurances, undertakings, information
and investment letters, as may be required from time to time by all regulatory
or governmental bodies or stock exchanges having jurisdiction over the
Corporation's affairs.
14. Public Disclosures
The Corporation will not issue any public announcement, press release or
public document or otherwise concerning the Subscriber and its purchase of the
Purchased Units hereunder without having provided Subscriber with a copy of such
disclosure before release, and incorporating all reasonable comments of
Subscriber into such disclosure, subject to the Corporation taking all necessary
steps which in the opinion of its counsel are necessary to fulfill the
Corporation's obligations to issue timely and complete disclosure of all
material changes in its affairs.
15. Notices
Any notice to be given by either party to the other will be deemed to be
given when in writing and delivered by hand or communicated by telecopier on any
business day to the address for notice of the intended recipient. The address
for notice of each of the parties will, until changed, be as set forth in this
Subscription Agreement. A party may give notice to the other party of a change
of its address for notice to some other address and will so change its address
for notice whenever the existing address for notice ceased to be adequate for
delivery by hand or communication by telecopier.
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16. References
In this Subscription Agreement a reference to:
(a) a statute or code includes every regulation made thereunder from time
to time, all amendments to the statute, code or to any such regulation
in force from time to time, and any statute, code or regulation which
supplements or supersedes such statute, code or any such regulation;
and
(b) any entity includes any entity that is a successor or permitted
assignee to such entity.
17. Number and Gender
Wherever the singular and the neuter are used throughout this Subscription
Agreement, the same shall be construed as meaning the plural or the feminine or
masculine or a body corporate where the context or the parties so require.
18. Governing Law
This Subscription Agreement is governed by the laws of the Province of
Ontario and the federal laws of Canada applicable therein. The Subscriber, in
its personal or corporate capacity and, if applicable, on behalf of each
beneficial subscriber for whom it is acting, irrevocably attorns to the
jurisdiction of the courts of the Province of Ontario.
19. Assignment
The obligations under this Subscription Agreement are not transferable or
assignable by the parties hereto. The benefits under this Subscription Agreement
are transferable and assignable by the parties hereto, subject to applicable law
and the prior written consent of the other parties.
20. Entire Subscription Agreement
This Subscription Agreement contains the entire agreement of the parties
hereto relating to the subject matter hereof and there are no representations,
covenants or other agreements relating to the subject matter hereof except as
stated or referred to herein.
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21. Facsimile Deliveries
The parties shall be entitled to rely on delivery of a facsimile
transmission of an executed copy of this Subscription Agreement, including the
completed Schedules hereto, and such facsimile copies shall be legally effective
to create a valid and binding agreement between the Subscriber and the
Corporation in accordance with the terms hereof. This Subscription Agreement may
be executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument.
22. Successors and Assigns
Except as otherwise expressly provided herein, this Subscription Agreement
shall enure to the benefit of and shall be binding upon each of the parties
hereto and their respective successors and permitted assigns, if any, and the
heirs, executors, administrators and permitted assigns of natural persons who
are or become a party hereto.
23. Survival
This Subscription Agreement, including, without limitation, the
representations, warranties and covenants contained herein, shall survive and
continue in full force and effect and be binding upon the parties
notwithstanding the completion of the purchase of the Purchased Units and any
subsequent disposition by the Subscriber of the Purchased Securities.
24. Amendments
The provisions of this Subscription Agreement may be amended in writing
upon the written consent of each of the parties hereto.
25. Language
The parties hereto confirm their express wish that this Subscription
Agreement and all documents, agreements and notices directly or indirectly
relating thereto be drawn up in the English language.
Les parties confirment leur volonte expresse que la presente convention
ainsi que tous les documents, contrats et avis s'y rattachant directement ou
indirectement soient rediges en anglais.
26. Time of the Essence
Time shall be of the essence in this Subscription Agreement and each and
every part hereof.
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NUMBER OF UNITS TO BE PURCHASED
AT US$0.40 EACH:
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TOTAL SUBSCRIPTION PRICE:
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Social Insurance Number or (Name of Subscriber - please type or
Corporation Tax Account Number print)
(as appropriate)
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(Signature and, if applicable, Office of
Subscriber)
Address of Subscriber:
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Telephone and Facsimile Number of
Subscriber:
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(Telephone Number of Subscriber)
(Fax)
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(Facsimile Number of Subscriber)
A C C E P T A N C E
The above-mentioned Subscription Agreement is hereby accepted and agreed to
by the Corporation.
DATED at ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, the day of , 2003.
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API ELECTRONICS GROUP INC.
Per:
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Name:
Title:
EXHIBIT "A"
API ELECTRONICS GROUP INC.
Subscription Agreement
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API ELECTRONICS GROUP INC.
Dear Sirs:
Re: API Electronics Group Inc. -
Private Placement of Units of the Corporation comprised of one (1)
Common Share and one-half (1/2) Warrant
1. Delivery - Please deliver the Common Share and Warrant certificates
to:
Address:
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Fax:
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2. Registration - Registration of the single certificate which is to be
delivered at closing should be made out as follows:
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(Name)
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(Address)
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(Telephone Number) (Facsimile Number)
DATED the day of , 2003.
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(Name of Subscriber)
Per:
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(signature)
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(office or position of person
signing, if applicable)
EXHIBIT "B"
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO REGULATION S AND
SUCH OTHER SECURITIES LAWS. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF
ANY U.S. PERSON, AS SUCH TERM IS DEFINED IN RULE 902 OF REGULATION S OF THE
SECURITIES ACT, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE
UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE LAWS INCLUDING
REGULATIONS.
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
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API ELECTRONICS GROUP INC.
THIS CERTIFIES that, for value received,
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(the "Holder"), is entitled, upon the terms and subject
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to the limitations on exercise and the conditions hereinafter set forth, at any
time on or after , 2003 (the "Initial Exercise
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Date") and on or prior to the close of business on the final calendar day of the
24th month after the Initial Exercise Date (the "Termination Date") but not
thereafter, to subscribe for and purchase from API Electronics Group Inc., a
corporation incorporated under the laws of Ontario, Canada (the "Company"), up
to common shares (the "Warrant Shares"), no par value per
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share, of the Company (the "Common Stock"). The purchase price of one share of
Common Stock (the "Exercise Price") under this Warrant shall be US$0.60. The
Exercise Price and the number of Warrant Shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the "Purchase Agreement"), dated
, 2003, between the Company and the Holder.
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1. Title to Warrant. Prior to the Termination Date and subject to compliance
with applicable laws, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the Holder in person
or by duly authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all Warrant Shares which
may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant.
(a) Except as provided in Section 4 herein, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by the surrender of
this Warrant and the Notice of Exercise Form annexed hereto duly executed, at
the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of
such Holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased by wire transfer or cashier's
check drawn on a United States bank, or by means of a cashless exercise, the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder within three (3) Trading Days after the date on which
this Warrant shall have been exercised as aforesaid. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the Warrant has been exercised by payment to
the Company of the Exercise Price and all taxes required to be paid by the
Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have
been paid.
(b) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.
(c) Notwithstanding anything herein to the contrary, in no event shall the
Holder be permitted to exercise this Warrant for Warrant Shares to the extent
that (i) the number of shares of Common Stock owned by such Holder (other than
Warrant Shares issuable upon exercise of this Warrant) plus (ii) the number of
Warrant Shares issuable upon exercise of this Warrant, would be equal to or
exceed 4.999% of the number of shares of Common Stock then issued and
outstanding, including shares issuable upon exercise of this Warrant held by
such Holder after application of this Section 3(c). As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act. To the extent that the limitation contained in this Section 3(c) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which a portion of this Warrant is
exercisable
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shall be in the sole discretion of such Holder, and the submission of a Notice
of Exercise shall be deemed to be such Holder's determination of whether this
Warrant is exercisable (in relation to other securities owned by such Holder)
and of which portion of this Warrant is exercisable, in each case subject to
such aggregate percentage limitation, and the Company shall have no obligation
to verify or confirm the accuracy of such determination. Nothing contained
herein shall be deemed to restrict the right of a Holder to exercise this
Warrant into Warrant Shares at such time as such exercise will not violate the
provisions of this Section 3(c). The provisions of this Section 3(c) may be
waived by the Holder upon, at the election of the Holder, not less than 61 days'
prior notice to the Company, and the provisions of this Section 3(c) shall
continue to apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver). No exercise of this
Warrant in violation of this Section 3(c) but otherwise in accordance with this
Warrant shall affect the status of the Warrant Shares as validly issued,
fully-paid and nonassessable.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its stockholder books or records
in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. In the event that the
Holder wishes to transfer a portion of this Warrant, the Holder shall transfer
at least shares underlying this Warrant to any such
------------------
transferee. Upon such surrender and, if required, such payment, the Company
shall execute and deliver a new Warrant or Warrants in the name of the assignee
or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned,
3
may be exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued. Notwithstanding the above, the Holder shall not
transfer this Warrant or any rights hereunder to any person or entity which is
then engaged in a business that is in the reasonable judgement of the Company is
in direct competition with the Company.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for the
registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price or by means of a cashless exercise, the Warrant
Shares so purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of the date
of such surrender or payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or
stock certificate, if mutilated, the Company will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. Adjustments of Exercise Price and Number of Warrant Shares/Stock Splits,
etc. The number and kind of securities purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to time
upon the happening of any of the following. In case the Company shall (i) pay a
dividend in shares of Common Stock or make a distribution in shares of Common
Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock, then the
4
number of Warrant Shares purchasable upon exercise of this Warrant immediately
prior thereto shall be adjusted so that the Holder shall be entitled to receive
the kind and number of Warrant Shares or other securities of the Company which
it would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
12. Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Company shall reorganize its capital, reclassify its capital
stock, consolidate or merge with or into another corporation (where the Company
is not the surviving corporation or where there is a change in or distribution
with respect to the Common Stock of the Company), or sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of assets, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of the Company, then the Holder
shall have the right thereafter to receive, at their option, (a) upon exercise
of this Warrant, the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event, or (b) cash equal to the value of this Warrant
as determined in accordance with the Black-Sholes option pricing formula. In
case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the
Company) shall expressly assume the due and punctual observance and performance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined in
good faith by resolution of the Board of Directors of the Company) in order to
provide for adjustments of Warrant Shares for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 12. For purposes of this Section 12, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 12 shall
5
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time during the
term of this Warrant reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the Board of Directors of the
Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
Holder notice of such adjustment or adjustments setting forth the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such notice, in the absence of manifest error,
shall be conclusive evidence of the correctness of such adjustment.
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other distribution, or
any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to
6
Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17(d).
16. Authorized Shares. The Company covenants that during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the principal market upon which the Common
Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall constitute a contract under the laws
of Ontario, without regard to its conflict of law, principles or rules, and be
subject to arbitration pursuant to the terms set forth in the Purchase
Agreement.
(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on
7
the Termination Date. If the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material damages to the
Holder, the Company shall pay to Holder such amounts as shall be sufficient to
cover any costs and expenses including, but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its
rights, powers or remedies hereunder.
(d) Notices. Any notice, request or other document required or permitted to
be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of Holder, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.
(h) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
(i) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
(j) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
*********************
8
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: , 2003
-----------------------
API ELECTRONICS GROUP INC.
By:
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman
9
NOTICE OF EXERCISE
To: API Electronics Group Inc.
(1) The undersigned hereby elects to purchase Warrant Shares (the
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"Common Stock"), of API Electronics Group Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:
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The Warrant Shares shall be delivered to the following:
-------------------------------
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-------------------------------
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(Name of Subscriber - please type or print)
By:
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Name:
Title:
Dated:
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
whose address is
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.
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Dated: ,
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Holder's Signature:
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Holder's Address:
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Signature Guaranteed:
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NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.