EXHIBIT 3.94
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Plan of Merger") is entered into
as of July 27th, 2001 by and among API Electronics, Inc., a Delaware corporation
("API"), Green Diamond Corp., a federal Canadian corporation , Technapower
Industries Corporation, a Delaware Corporation , Seloz Gestion & Finance SA, an
entity located in Switzerland, Ming Capital Enterprises Inc., an entity located
in Nassau, Bahamas, Shangri-La Investments Inc., an entity located in Nassau,
Bahamas, Private Investment Company Ltd., an entity located in Turks & Caicos
Islands, B.W.I., Partner Marketing AG, an entity located in Switzerland, CCD
Consulting Commerce Distribution AG, an entity located in Switzerland, HAPI
Handels-und Beteiligungsqesellschaft mbH, an entity located in Vienna, Austria
and Xxxxxx X. Xxxxx (collectively, the "Shareholders"), XxxxxxxxXxxxx.xxx Inc.,
an Ontario corporation ("IC"), and API Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of IC ("IC Sub").
RECITALS:
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A. IC and API desire that API become a wholly-owned subsidiary of IC.
This acquisition shall be effected through the merger of IC Sub, a wholly-owned
subsidiary of IC , with and into API with API as the surviving entity in which
voting shares of API will be exchanged for voting common stock of IC. The
merger will be effected in accordance with this Plan of Merger and the General
Corporation Law of the State of Delaware, as amended (the "Delaware Act"). The
transactions contemplated by and described in this Plan of Merger are referred
to as the "Merger".
B. API has authorized capital consisting of 100,000 shares of Common,
$0.01 par value per share ("API Common Stock"), of which 197 shares are issued
and outstanding and held by the Shareholders.
C. IC has authorized capital consisting of an unlimited number of common
shares ("IC Common Stock") and an unlimited number of special shares ("IC
Special Shares"), of which at the Closing of the Merger [4,393,007] shares of IC
Common Stock and no IC Special Shares will be issued and outstanding.
D. IC Sub is a wholly-owned subsidiary of IC . IC Sub has authorized
capital consisting of 2,000 shares of Common Stock, $0.001 par value ("IC Sub
Common Stock"), of which 100 shares are issued and outstanding and held by IC
and 1,000 shares of Preferred Stock, $0.001 par value of which no shares are
issued and outstanding ("IC Sub Preferred Stock").
E. The respective Boards of Directors of API, IC and IC Sub deem the
Merger advisable and in the best interest of each corporation and its respective
stockholders. By resolutions duly adopted, the respective Boards of Directors
of API, IC and IC Sub have approved, adopted, and authorized the execution,
delivery and performance of this Plan of Merger. The Shareholders have adopted
and approved this Plan of Merger.
Therefore, in consideration of the premises and the representations,
warranties, and covenants contained in this Plan of Merger, the parties agree:
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ARTICLE I
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THE TRANSACTION
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Subject to the terms and conditions of this Plan of Merger, the Merger of
IC Sub into API shall be carried out in the following manner:
1.1 The Closing. The Merger shall be consummated, subject to the terms
and conditions of this Plan of Merger, as promptly as possible after a closing
(the "Closing"), which shall occur on August 31, 2001, or such other date
mutually agreed by the parties. The Closing shall be held at such location as
may be mutually agreed by the parties. In the absence of such agreement, the
Closing shall be held at the offices of Sugar, Friedberg & Felsenthal, 00 X.
XxXxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, at 10:00 a.m., local time.
Scheduling or commencing the Closing shall not, however, constitute a waiver of
the conditions precedent of either IC or API as set forth in Sections 5.1 and
5.2, respectively. At the Closing, API, IC and IC Sub shall, subject to the
terms and conditions of this Plan of Merger, execute and deliver an appropriate
certificate of merger in the form and as required by the Delaware Act
("Certificate of Merger").
1.2 Effective Time of the Merger. Subject to the terms and conditions of
this Plan of Merger, the Merger shall be consummated as promptly as possible
following the Closing by filing the Certificate of Merger in the manner required
by the Delaware Act. The "Effective Time of the Merger" shall be the close of
business on the date of the filing of the Certificate of Merger.
1.3 Merger of IC Sub with and into API. IC Sub shall be merged with and
into API (each sometimes being referred to as a "Constituent Corporation" prior
to the Merger) upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware. At the Effective Time of the Merger, the
Constituent Corporations shall become a single corporation, which shall be API
(the "Surviving Corporation"). The Surviving Corporation shall have all of the
rights, privileges, immunities, and powers, and shall be subject to all of the
duties and liabilities, of a corporation organized under the Delaware Act.
1.4 Effect of the Merger. From and after the Effective Time of the
Merger, the effect of the Merger upon each of the Constituent Corporations and
the Surviving Corporation shall be as provided in Subchapter IX of the Delaware
Act with respect to the merger of two domestic corporations.
1.5 Additional Actions. If, at any time after the Effective Time of the
Merger, the Surviving Corporation shall determine that any further assignments
or assurances or any other acts are necessary or desirable to vest, perfect, or
confirm, of record or otherwise, in the Surviving Corporation its rights, title,
or assets of API or IC Sub acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger, or to otherwise
carry out the purposes of this Plan of Merger, then API and IC Sub and their
respective officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments, and assurances in law and to do all acts
necessary or proper to vest, perfect, or confirm title to and possession of such
rights, properties, or assets in the Surviving Corporation and otherwise carry
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out the purposes of this Plan of Merger. The proper officers and directors of
the Surviving Corporation are fully authorized in the name of API and IC Sub to
take any and all such action as may be contemplated by this Article I.
1.6 Surviving Corporation. Immediately after the Effective Time of the
Merger, the Surviving Corporation shall have the following attributes until they
are subsequently changed in the manner provided by law:
(a) Name. The name of the Surviving Corporation shall be "API
Electronics, Inc."
(b) Articles of Incorporation. The Certificate of Incorporation of
the Surviving Corporation shall be the Certificate of Incorporation of API
as in effect immediately prior to the Effective Time of the Merger.
(c) Bylaws. The Bylaws of the Surviving Corporation shall be the
Bylaws of API as in effect immediately prior to the Effective Time of the
Merger.
(d) Directors. The directors of the Surviving Corporation shall be
the directors of API immediately prior to the Effective Time of the Merger.
(e) Officers. The officers of the Surviving Corporation shall be the
persons who were officers of API immediately prior to the Effective Time of
the Merger.
1.7 Manner and Basis of Converting Shares. At the Effective Time of the
Merger:
(a) IC Sub Common Stock. The shares of IC Sub Common Stock which are
outstanding immediately prior to the Effective Time of the Merger shall be
cancelled and no consideration shall be payable with respect to any such
shares.
(b) Exchange of API Common Stock. Each of the 197 shares of API
Common Stock which is outstanding immediately prior to the Effective Time
of the Merger shall be exchanged with IC for 33,163.27 shares of IC Common
Stock and warrants to purchase 16,581.64 shares of IC Common Stock in the
form attached hereto as Exhibit A ("A Warrants") and warrants to purchase
16,581.64 shares of IC Common Stock in the form attached hereto as Exhibit
B (collectively with the A Warrants, the "Warrants").
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1.8 Cessation of Shareholder Status. As of the Effective Time of the
Merger, record holders of certificates which represented shares of API Common
Stock outstanding immediately prior to the Effective Time of the Merger ("Old
Certificates") shall cease to be stockholders of API and shall have no rights as
API stockholders. Such Old Certificates shall have been exchanged for shares of
IC Common Stock and Warrants as set forth in Section 1.7(b), having all of the
voting and other rights of shares of IC Common Stock.
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1.9 Surrender of Old Certificates and Distribution of IC Common Stock.
Immediately following the Effective Time of the Merger, old certificates
representing shares of API Common stock shall be exchangeable by the holders
thereof for new stock certificates representing the number of shares of IC
Common Stock and for Warrants to which such holders shall be entitled hereunder
as set forth in Section 1.7(b) by assigning such certificates to the Surviving
Corporation and receiving the proper number of shares of IC Common Stock and
Warrants in exchange therefore. IC shall promptly issue and deliver stock
certificates and Warrants in the names and to the addresses as appear on API's
stock records as of the Effective Time of the Merger. On or after the Effective
Time of the Merger, there shall be no transfers on the stock transfer books of
API of the shares of API Common Stock which were issued and outstanding
immediately prior to the Effective Time of the Merger.
1.10 Restrictive Legends. Each of the Shareholders agrees that IC will place
restrictive legends as required on all IC Common Stock issued on Closing to
reflect all resale restrictions imposed by applicable securities laws of Canada,
the United States, and the jurisdiction of the Shareholder.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF IC
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IC hereby represents and warrants to API and the Shareholders as follows
(with the understanding that API and the Shareholders are relying materially on
each such representation and warranty in entering into and performing this Plan
of Merger):
2.1 Capitalization. On the date hereof, the authorized capital stock of
IC consists of unlimited shares of IC Common Stock and unlimited IC Special
Shares of which are reserved as Preference Shares. 13,179,020 shares of Common
Stock are issued and outstanding and no IC Special Shares are issued and
outstanding. At the Effective Time of the Merger [4,393,007] shares of IC
Common Stock as well as the 6,500,000 shares of IC Common Stock to be issued
pursuant to Section 1.7(b) hereof shall be issued and outstanding and no IC
Special Shares or Preference Shares shall be issued and outstanding. The
authorized capital stock of IC Sub consists of 2,000 shares of IC Sub Common
Stock, of which 100 shares are issued and outstanding, and 1,000 shares of IC
Sub Preferred Stock, of which no shares are issued an outstanding. All the
issued shares of IC Sub Common Stock are owned by IC . All such issued and
outstanding shares of IC Common Stock and IC Sub Common Stock are duly
authorized, validly issued, fully paid, and nonassessable. None of the shares
of IC Common Stock were issued in violation of any preemptive or preferential
rights of any person. The shares of IC Common Stock to be issued in the Merger
(the "Exchange Shares") and the Warrants have been duly authorized and, when
issued and delivered in accordance with this Plan of Merger, will be validly
issued, fully paid, non-assessable, and free and clear of any liens,
restrictions, security interests, claims, rights of another, or encumbrances,
and will be free of preemptive or preferential rights. The shares of IC Common
Stock to be issued upon exercise of the Warrants (collectively, the "Warrant
Shares") have been duly reserved for issuance and, upon issuance in accordance
with the terms of the Warrants, will be duly authorized, validly issued, fully
paid, and nonassessable, free of all liens, charges, encumbrances and claims.
The Exchange Shares and the Warrant Shares will be free of restrictions on
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transfer other than restrictions on transfer under applicable Ontario, United
States state and United States federal securities laws, and will be free of
preemptive or preferential rights.
2.2 Subsidiaries. IL Data Canada, Inc., a corporation incorporated under
the laws of the Province of Ontario, Canada ("IL Canada"), is a wholly-owned
subsidiary of IC. IC Sub, a corporation incorporated under the laws of the
State of Delaware, is a wholly-owned subsidiary of IC. IL Data Corporation,
Inc., a Nevada corporation ("IL Nevada" and collectively with IL Canada and IC
Sub the "Subsidiaries"), is a wholly-owned subsidiary of IL Canada. Other than
the Subsidiaries, IC does not directly or indirectly have (or possess any
options or other rights to acquire) any subsidiaries or any direct or indirect
ownership interests in any person, business, corporation, partnership,
associations, joint venture, trust, or other entity, other than its holding of
4,000,000 shares of Xxxxxx Resources.
2.3 Other Rights to Acquire IC Stock. Other than set forth in Schedule
2.3 attached hereto, there are no authorized or outstanding warrants, options,
or rights of any kind to acquire from IC or the Subsidiaries any equity
securities of IC or the Subsidiaries or securities convertible into or
exchangeable for equity or debt securities of IC or the Subsidiaries. On the
date of Closing there shall be no authorized or outstanding warrants, options or
rights of any kind to acquire from IC or the Subsidiaries any equity securities
of IC or the Subsidiaries or securities convertible into or exchangeable for
equity or debt securities of IC or the Subsidiaries, other than as set forth on
Schedule 2.3, the Warrants and the 250,000 warrants issued to the broker
described in Schedule 2.12.
2.4 Due Organization. Each of IC and IL Canada is a corporation duly
organized, validly existing and in good standing under the laws of the Province
of Ontario, Canada and each has full power and authority to own its properties
and to carry on its respective businesses as now conducted. Complete and correct
copies of the Articles and By-laws of IC and the Subsidiaries and all amendments
thereto have been made available to API and the Shareholders. IC Sub is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full power and authority to carry on its
business as now conducted. IL Nevada is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada and has
full power and authority to carry on its business as now conducted. IC Sub has
no employees and since its formation has entered into no agreements other than
this Plan of Merger. IC Sub has no significant assets or liabilities, accrued
or contingent. IC Sub has not conducted any business since its formation other
than to enter into this Plan of Merger.
2.5 Due Authorization. Each of IC and IC Sub has full power and authority
to execute, deliver, and perform this Plan of Merger. This Plan of Merger has
been, and each other document or instrument executed and delivered by IC or IC
Sub in connection with this Plan of Merger will be, duly authorized, executed,
and delivered by such party, and this Plan of Merger constitutes, and each other
such document or instrument when executed and delivered will constitute, a valid
and binding agreement of IC and IC Sub enforceable against such party in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, or other laws affecting the enforcement
of creditors' rights generally. The execution, delivery, and performance of
this Plan of Merger by IC and IC Sub will not (a) violate any law, rule, or
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regulation applicable to IC or IC Sub or their properties, (b) violate or
conflict with, or permit the cancellation of, any agreement to which IC or IC
Sub is a party, or by which IC or IC Sub or any of their properties is bound, or
result in the creation of any lien, security interest, charge, or encumbrance
upon any of such properties, (c) permit the acceleration of the maturity of any
indebtedness of, or indebtedness secured by the property of, IC or IC Sub or (d)
violate or conflict with any provision of the constating documents, articles of
incorporation or by-laws of IC or IC Sub. No action, consent, or approval of,
or filing with, any governmental authority or regulatory body, including without
limitation the NASD OTC Bulletin Board, the Ontario Securities Commission, or
the Securities and Exchange Commission ("SEC"), or by any creditor of IC or IC
Sub is required in connection with the execution, delivery or performance of
this Plan of Merger (or any agreement or other document executed in connection
herewith) by IC or IC Sub. The parties acknowledge the consent of the Canadian
Venture Exchange ("CDNX") is required to complete this Plan of Merger, and the
parties further acknowledge the timing of Closing has made compliance with the
relevant policies for such approval unattainable. IC shall make appropriate
filings with regulatory authorities in Ontario and the United States, both state
and federal, to perfect or comply with the requirements of any applicable
registration or exemption from registration. The issuance of the Exchange
Shares, Warrants and Warrant Stock to the Shareholders will not result in the
loss of any regulatory consent, license, approval, order, authorization or
registration materially benefiting IC, and complies with the Ontario, United
States state and United States federal securities laws, other than the possible
loss of listing on CDNX, for failure to comply with its policies.
2.6 Compliance with Laws. Each of IC and the Subsidiaries has complied in
all material respects, and is in compliance in all material respects, with all
laws, regulations, and orders applicable to it and have filed with the proper
authorities all statements and reports required by the laws, regulations, and
orders to which IC, IC Sub or the Subsidiaries, or any of their respective
properties are subject. No claim has been made by any governmental authority or
regulatory body (and, to the knowledge of IC, no such claim is anticipated) to
the effect that the business conducted by IC, IC Sub or any of the Subsidiaries
fails to comply, in any respect, with any law, rule, regulation, or ordinance.
IC and the Subsidiaries are duly licensed, registered or qualified in each
jurisdiction in which IC or the Subsidiaries, respectively, owns or leases
property or carries on their respective businesses, to enable IC and the
Subsidiaries businesses to be carried on as now conducted and their respective
properties and assets to be owned, leased and operated, and all such licenses,
registrations and qualifications are valid and subsisting and in good standing
and none of the same contains any burdensome term, provision, condition or
limitation which has or may have an adverse effect on the operation of IC's and
the Subsidiaries' businesses.
2.7 Contracts and Agreements. Schedule 2.7 attached hereto sets forth all
material agreements, leases and other arrangements of IC and the Subsidiaries,
whether written or oral, pending and/or executory, to or by which IC is bound or
affected (the "Contracts"). Other than the Contracts, neither IC nor either of
the Subsidiaries is a party to any written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, guarantees, and other evidences of indebtedness) and there are
no other agreements to which IC or the Subsidiaries is a party or by which IC
and the Subsidiaries, or their respective properties are bound (including,
without limitation, all mortgages, deeds of trust, security agreements, pledge
agreements, and similar agreements and instruments and all confidentiality
agreements). IC and the Subsidiaries hold their respective rights under the
Contracts, free and clear of any lien, encumbrance, claim, charge or security
interest.
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2.8 Claims and Proceedings. Except as disclosed on Schedule 2.3 concerning
Stockhouse Media Corporation, there are no claims, actions, suits, proceedings,
and investigations pending or, to the knowledge of IC threatened against or
affecting IC, IC Sub or either of the Subsidiaries or any of their properties or
assets, at law or in equity, or before or by any court, municipal or other
governmental department, commission, board, agency, self regulatory body, or
instrumentality. Neither IC nor any Subsidiary has been, and neither IC nor any
Subsidiary is now, subject to any order, judgment, decree, stipulation, or
consent of any court, governmental body, self-regulatory body, or agency. No
inquiry, action, or proceeding has been asserted, instituted, or, to the
knowledge of IC, threatened to restrain or prohibit the carrying out of the
transactions contemplated by this Plan of Merger or to challenge the validity of
such transactions or any part thereof or seeking damages on account thereof. To
the knowledge of IC, there is no basis for any such valid claim or action.
2.9 Tax Matters.
(a) Each of IC and the Subsidiaries has filed all tax returns required
to be filed by it prior to the date hereof in all applicable jurisdictions
and has paid, collected and remitted all taxes, customs duties, tax
installments, levies, assessments, reassessments, penalties, interest and
fines due and payable, collectible or remittable by it at present. All such
tax returns properly reflect, and do not in any respect understate, the
income, taxable income or the liability for taxes of IC and the
Subsidiaries in the relevant period and the liability of IC and the
Subsidiaries for the collection, payment and remittance of tax under
applicable Tax Laws and Sales Tax Laws. "Tax Laws" shall mean the Tax Act
and any applicable provincial, or foreign income taxation statute(s),
including without limitation the Internal Revenue Code of 1986, as amended,
as from time to time amended, and any successors thereto. "Tax Act" means
the Income Tax Act (Canada), as it may be amended from time to time, and
any successor thereto. Any reference herein to a specific section or
sections of the Tax Act, or regulations promulgated thereunder, shall be
deemed to include a reference to all corresponding provision of future law.
"Sales Tax Laws" means the Excise Tax Act (Canada), any applicable goods
and services, sales or use taxation statute of a province, and any similar
foreign legislation, all as from time to time amended, and any successors
thereto.
(b) Adequate provision has been made in the IC Financial Statements
(as defined in Section 2.13) for all taxes, governmental charges and
assessments, including interest and penalties thereon, payable by IC and
the Subsidiaries for all periods up to the date of the balance sheets
comprising part of the IC Financial Statements.
(c) Neither IC nor any Subsidiary is a party to any tax indemnity,
allocation or sharing agreement for any taxable year or portion thereof.
(d) IC and the Subsidiaries withheld and remitted all amounts required
to be withheld and remitted by them in respect of any taxes, governmental
charges or assessments in respect of any taxable year or portion thereof up
to and including April 30, 2000.
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(e) There are no actions, suits or other proceedings, investigations
or claims in progress or pending and, to the best of IC's belief and
knowledge, there are no actions, suits or other proceedings or
investigations or claims threatened, against IC or the Subsidiaries in
respect of any taxes, governmental charges or assessments. No waivers have
been filed by IC or the Subsidiaries with any taxing authority.
2.10 Agents. IC has not designated or appointed any person or other
entity to act for it or on its behalf pursuant to any power of attorney or any
agency which is presently in effect.
2.11 Financial Records of IC and the Subsidiaries. The books and records
of IC and the Subsidiaries fairly and correctly set out and disclose in all
material respects, the financial position of IC and the Subsidiaries as at the
date thereof and all material financial transactions of the IC and the
Subsidiaries have been accurately recorded in such books and records. IC and
the Subsidiaries maintain their accounting records off site at x/x Xxxxxxxxx
Xxxxxxxx, Xxxxx 000, 000 Xxxxx Xxxxxx Xxxx, Xxxxxxx X0X 0X0.
2.12 Brokers. Except as described on Schedule 2.12, IC has not engaged,
or caused any liability to be incurred to, any finder, broker, or sales agent in
connection with the execution, delivery, or performance of this Plan of Merger
or the transactions contemplated hereby or consummation of the Merger.
2.13 Financial Statements.
(a) IC has delivered to API the following financial statements and
notes (collectively, the "IC Financial Statements"):
(i) The audited consolidated balance sheets of IC and the
Subsidiaries as of April 30, 2000 and 2001, and the related audited
consolidated income statements, statements of shareholders' equity and
statements of cash flows of IC and the Subsidiaries for the years then
ended; and
(ii) The unaudited consolidated balance sheet of IC and the
Subsidiaries as of May 31, 2001 (the "Latest Balance Sheet"), and the
related unaudited consolidated income statement of IC and the
Subsidiaries for the one month then ended.
(b) The IC Financial Statements are complete in all material respects
and present fairly the financial position of IC and the Subsidiaries as of
the respective dates thereof and the results of operations and (in the case
of the financial statements referred to in Section 2.13(a)(i)) cash flows
for the periods covered thereby. The IC Financial Statements have been
prepared in accordance with Canadian generally accepted accounting
principles as approved by the Canadian Institute of Chartered Accountants
applicable as of the date calculated ("CGAAP"), on a consistent basis for
the periods covered (except that the financial statements referred to in
Section 2.13(a)(ii) do not contain footnotes and are subject to normal and
recurring year end audit adjustments, which will not, individually or in
the aggregate, be material in magnitude).
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2.14 Absence of Changes. Except as set forth in Schedule 2.14 attached
hereto and other than the transactions contemplated by this Agreement,
since May 31, 2001:
(a) there has not been any material adverse change in IC or the
Subsidiaries' business, condition, assets, liabilities, operations,
financial performance or prospects, and, to the knowledge of IC, no event
has occurred that will, or could reasonably be expected to, have a material
adverse effect on the business, conditions, assets, liabilities,
operations, financial performance or prospects (a "Material Adverse
Effect") of IC or the Subsidiaries;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of IC or the Subsidiaries'
assets (whether or not covered by insurance);
(c) neither IC nor the Subsidiaries have declared, accrued, set aside
or paid any dividend or made any other distribution in respect of any
shares of capital stock, and have not repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(d) neither IC nor the Subsidiaries have sold, issued or authorized
the issuance of (i) any capital stock or other security, (ii) any option or
right to acquire any capital stock or any other security (except for
options described in Schedule 2.3), or (iii) any instrument convertible
into or exchangeable for any capital stock or other security;
(e) IC and the Subsidiaries have not effected or been a party to any
acquisition transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(f) IC and the Subsidiaries have not formed any subsidiary or acquired
any equity interest or other interest in any other entity;
(g) IC and the Subsidiaries have not (i) entered into or permitted any
of the assets owned or used by them to become bound by any material
contract or other agreement, or (ii) amended or prematurely terminated, or
waived any material right or remedy under any material contract or other
agreement, other than the agreement with Stockhouse Media Corporation
described in Schedule 2.3;
(h) IC and the Subsidiaries have not (i) acquired, leased or licensed
any right or other asset from any other person or entity, (ii) sold or
otherwise disposed of, or leased or licensed, any right or other asset to
any other person or entity, or (iii) waived or relinquished any right,
except for immaterial rights or other immaterial assets acquired, leased,
licensed or disposed of in the ordinary course of business and consistent
with IC or the Subsidiaries' past practices;
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(i) IC and the Subsidiaries have not made any pledge of any of their
assets or otherwise permitted any of their assets to become subject to any
encumbrance, except for pledges of immaterial assets made in the ordinary
course of business and consistent with IC and the Subsidiaries' past
practices;
(j) IC and the Subsidiaries have not (i) lent money to any person or
entity, or (ii) incurred or guaranteed any indebtedness for borrowed money;
(k) IC and the Subsidiaries have not (i) established or adopted any
employee benefit plan, (ii) paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of
its directors, officers or employees, or (iii) hired any new employee;
(l) IC and the Subsidiaries have not changed any of their methods of
accounting or accounting practices in any respect;
(m) IC and the Subsidiaries have not commenced or settled any legal
proceeding;
(n) neither IC nor the Subsidiaries have entered into any material
transaction or taken any other material action outside the ordinary course
of business or inconsistent with their respective past practices.
(o) IC and the Subsidiaries have not agreed to take any of the actions
referred to in clauses (a) though (n) above.
2.15 Bank Accounts. Schedule 2.15 attached hereto provides accurate
information with respect to each account maintained by or for the benefit of IC
or the Subsidiaries at any bank or other financial institution.
2.16 Liabilities. Neither IC nor the Subsidiaries have accrued, contingent
or other liabilities of any nature, either matured or unmatured, and whether due
or to become due, except for: (a) liabilities identified as such in the
liabilities column of the Latest Balance Sheet; (b) accounts payable or accrued
salaries that have been incurred by IC or the Subsidiaries since May 31, 2001 in
the ordinary course of business and consistent with IC and the Subsidiaries'
past practices; and (c) liabilities under the Contracts identified in Schedule
2.7, to the extent the nature and magnitude of such liabilities can be
ascertained by reference to the text of such Contracts.
2.17 Related Party Transactions. Except as set forth in Schedule 2.17
attached hereto: (a) no Related Party has any direct or indirect interest in any
material asset used in or otherwise relating to the business of IC or the
Subsidiaries; (b) no Related Party is indebted to IC or the Subsidiaries and no
indebtedness is owed by IC or the Subsidiaries to a Related Party; (c) no
Related Party has entered into, or has had any direct or indirect financial
interest in, any material Contract, transaction or business dealing involving IC
or the Subsidiaries; (d) no Related Party is competing or has at any time since
June 6, 2000 competed, directly or indirectly, with IC or the Subsidiaries; and
(e) no Related Party has any claim or right against IC or the Subsidiaries.
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(For purposes of this Section 2.17 each of the following shall be deemed to be a
"Related Party": (i) each of the shareholders of IC holding at least 5% of the
issued and outstanding Common Stock of IC; (ii) each individual who is, or who
has at any time since June 6, 2000 been an officer of IC or the Subsidiaries;
(iii) each member of the immediate family of each of the individuals referred to
in clauses (i) and (ii) above; and (iv) any trust or entity (other than IC and
the Subsidiaries) in which any one of the individuals referred to in clauses
(i), (ii), and (iii) above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting proprietary or
equity interest.)
2.18 SEC Filings; Financial Statements.
(a) IC has delivered to API accurate and complete copies of each
report and registration statement filed by IC with the SEC (the "SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superceded by a filing prior to the date of this Agreement, then the date
of such filing): (i) each of the SEC Documents complied in all material
respects with the applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934 (the
"Exchange Act") (as the case may be); and (ii) none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. IC has timely filed all required forms, reports,
statements and documents with the SEC since its formation, all of which
have complied in all material respects with all applicable requirements of
the Exchange Act. IC is and has been subject to the reporting requirements
of the Exchange Act and has timely filed with the SEC all periodic reports
required to be filed by it pursuant thereto and all reports required to be
filed under Sections 13 or 15(d) of the Exchange Act since November 14,
2000.
(b) The consolidated financial statements contained in the SEC
Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with CGAAP, applied on a consistent basis throughout
the periods covered, except as may be indicated in the notes to such
financial statements and (in the case of unaudited statements) as permitted
by Form 6-K or Form 20-F of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year end audit
adjustments; and (iii) fairly present the consolidated financial position
of IC and the Subsidiaries as the respective dates thereof and the
consolidated results of operations of IC and the Subsidiaries for the
periods covered thereby.
2.19 Canadian Filings; Financial Statements.
(a) IC has delivered to API accurate and complete copies of each
report and continuous disclosure documents filed by IC under the Securities
Act (Ontario) (the "Canadian Documents"). As of the time it was filed (or,
if amended or superceded by a filing prior to the date of this Agreement,
then the date of such filing): (i) each of the Canadian Documents complied
in all material respects with the applicable requirements of the Securities
12
Act (Ontario); and (ii) none of the Canadian Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. IC has timely filed all required forms, reports, statements and
documents under the Securities Act (Ontario) since June 6, 2000, all of
which have complied in all material respects with all applicable
requirements of the Securities Act (Ontario). IC is and has been subject to
the reporting requirements of the Securities Act (Ontario) and has timely
filed with the Ontario Securities Commission all periodic reports required
to be filed by it pursuant thereto and all reports required to be filed
under the Securities Act (Ontario) since June 6, 2000.
(b) The consolidated financial statements contained in the Canadian
Documents: (i) complied as to form in all material respects with the
published rules and regulations of the Securities Act (Ontario) applicable
thereto; (ii) were prepared in accordance with CGAAP, applied on a
consistent basis throughout the periods covered, except as may be indicated
in the notes to such financial statements and (in the case of unaudited
statements) as permitted by the Securities Act (Ontario), and except that
unaudited financial statements may not contain footnotes and are subject to
year end audit adjustments; and (iii) fairly present the consolidated
financial position of IC and the Subsidiaries as the respective dates
thereof and the consolidated results of operations of IC and the
Subsidiaries for the periods covered thereby.
2.20 Corporate Records. The corporate records and minute books of IC and
the Subsidiaries as provided to API or its legal counsel contain complete and
accurate copies of minutes of all meetings of corporate actions or written
consents by the directors and shareholders of IC and the Subsidiaries in IC's
possession and control, including, without limitation, all by-laws and
resolutions passed by the board of directors and shareholders of IC and the
Subsidiaries in IC's possession and control, held since the incorporation of IC
and the Subsidiaries, and all such meetings duly called and held. The
shareholders' list maintained by IC's registrar and transfer agent has been
provided for review to API and the Shareholders and is, to the best of IC's
knowledge, complete and accurate in all respects.
2.21 Continuous Disclosure. IC has made all necessary disclosure and
filings in a timely fashion and IC is now a reporting issuer in good standing
under the Securities Act (Ontario), and all other applicable securities
regulations in the Province of Ontario. IC is also a reporting issuer in good
standing with the SEC by virtue of its annual filing of Form 20-F and periodic
filings on Form 6- K. IC will use its best efforts to maintain such reporting
issuer status up to and including the date of Closing.
2.22 Mining Activities. IC has never brought a mining property into
commercial production or carried on an active mining operation pursuant to which
it remains obligated or liable in any manner.
13
2.23 Employees; Employee Plans. No employee has made any claim or, to the
best of IC's knowledge, has any basis for any action or proceeding against IC or
the Subsidiaries, arising out of any statute, ordinance or regulation relating
to discrimination in employment or employment practices, harassment,
occupational health and safety standards or worker's compensation. Neither IC
nor either of the Subsidiaries has made any agreements with any labor union or
employee association or made any commitments to or conducted any negotiations
with any labor union or employee association with respect to any future
agreements. No trade union, council of trade unions, employee bargaining agency
or affiliated bargaining agent holds bargaining rights with respect to any of IC
or the Subsidiaries' employees by way of certification, interim certification,
voluntary recognition, designation or successor rights. Except as set forth on
Schedule 2.22, there are no outstanding written or oral employment contracts,
sales, services, management or consulting agreements, employee benefit or
profit-sharing plans, or any bonus arrangements with any employee of IC or the
Subsidiaries, nor are there any outstanding oral contracts of employment which
are not terminable on the giving of reasonable notice in accordance with
applicable law.
Except as set forth on Schedule 2.22, there are no welfare, pension or
retirement plans established by or for IC or the Subsidiaries for the employees
of IC or the Subsidiaries and neither IC nor any Subsidiary is obligated to
provide any benefit to any employee of IC or the Subsidiaries, including without
limitation, upon the retirement of any employee of IC or the Subsidiaries. IL
Nevada does not have and since its formation has not had any "employee pension
benefit plans" as such term is defined in Section 3(2) of ERISA or "employee
welfare benefit plans" as such term is defined in Section 3(1) of ERISA.
2.24 Insurance. IC does not currently own any material insurable assets and
does not currently maintain any policies of insurance.
2.25 Intellectual Property Rights. Neither IC nor the Subsidiaries are
currently or on Closing will be infringing any patent, trade xxxx, trade name,
copyright, proprietary or similar right, domestic or foreign, of any other
person or entity. Either IC or the Subsidiaries, as the case may be, has the
sole and exclusive right to use all registered service marks, registered
copyrights, trade names, industrial designs, trade marks, and patents, both
domestic and foreign, which are owned or used by IC or the Subsidiaries and the
same are in good standing and duly registered in all appropriate offices to
preserve the right thereof and thereto. There are neither any royalty payments
nor license fees payable to or by IC or the Subsidiaries nor any license,
registered user or other agreements in respect thereof.
2.26 Website. The only business activities of IC and the Subsidiaries is
the operation of the financial website located at xxxxxxxxxxxxx.xxx.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF API
-------------------------------------
API (with respect to itself and its predecessor, a New York Corporation,
hereby represents and warrants to IC as follows (with the understanding that IC
is relying materially on each such representation and warranty in entering into
and performing this Plan of Merger):
14
3.1 Capitalization. The authorized capital stock of API consists of
100,000 shares of API Common Stock, par value $0.01 per share, of which 197
shares are issued and outstanding and held of record by the persons set forth on
Schedule 3.1. All such issued and outstanding shares of API Common Stock are
duly authorized, validly issued, fully paid, and nonassessable. None of such
shares of API Common Stock were issued in violation of any preemptive or
preferential rights of any person.
3.2 Issuance of Shares. There are no authorized or outstanding warrants,
options, or rights of any kind to acquire from API any equity or debt securities
of API or securities convertible into or exchangeable for equity or debt
securities of API.
3.3 Due Organization. API is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has
full power and authority to carry on its business as now conducted. Complete and
correct copies of the certificate of incorporation and by-laws of API and all
amendments thereto have been delivered to IC and have been certified by the
Secretary of API.
3.4 Subsidiaries. API does not directly or indirectly have (or possess any
options or other rights to acquire) any subsidiaries or any direct or indirect
ownership interests in any person, business, corporation, partnership,
associations, joint venture, trust, or other entity.
3.5 Due Authorization. API has the full power and authority to execute,
deliver, and perform this Plan of Merger. This Plan of Merger has been, and each
other document or instrument executed and delivered by API in connection with
this Plan of Merger will be, duly authorized, executed, and delivered by API.
This Plan of Merger constitutes, and each other such document or instrument when
executed and delivered will constitute, a valid and binding agreement of API
enforceable against API in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, or other laws
affecting the enforcement of creditors' rights generally. The execution,
delivery, and performance of this Plan of Merger and the consummation of the
Merger by API will not (a) violate any federal, state, county, or local law,
rule, or regulation applicable to API or its properties, (b) violate or conflict
with, or permit the cancellation of, any agreement to which API is a party, or
by which it or its properties are bound, or result in the creation of any lien,
security interest, charge, or encumbrance upon any of such properties, (c)
permit the acceleration of the maturity of any indebtedness of, or indebtedness
secured by the property of API or (d) violate or conflict with any provision of
the certificate of incorporation or by-laws of API. No action, consent, or
approval of, or filing with, any governmental authority is required in
connection with the execution, delivery, or performance of this Plan of Merger
(or any agreement or other document executed in connection herewith) by API or
consummation of the Merger by API. The issuance by IC of the Exchange Shares,
Warrants and Warrant Stock to the holders of Common Stock of API, will not
result in the loss of any regulatory consent, license, approval, order,
authorization or registration materially benefiting API.
3.6 Compliance with Laws. API has complied in all material respects, and is
in compliance in all material respects, with all laws, regulations, and orders
applicable to it and have filed with the proper authorities all statements and
15
reports required by the laws, regulations, and orders to which API or its
properties are subject. No claim has been made by any governmental authority or
regulatory body (and, to the knowledge of API, no such claim is anticipated) to
the effect that the business conducted by API fails to comply, in any respect,
with any law, rule, regulation, or ordinance. API is duly licensed, registered
or qualified in each jurisdiction in which API owns or leases property or
carries on its business, to enable API's business to be carried on as now
conducted and its property and assets to be owned, leased and operated, and all
such licenses, registrations and qualifications are valid and subsisting and in
good standing and none of the same contains any burdensome term, provision,
condition or limitation which has or may have an adverse effect on the operation
of API's business.
3.7 Contracts and Agreements. Schedule 3.7 attached hereto sets forth all
material agreements, leases and other arrangements of API, whether written or
oral, pending and/or executory, to or by which API is bound or affected (the
"API Contracts"). Other than the API Contracts, API is not a party to any
written or oral contracts, commitments, leases, and other agreements (including,
without limitation, promissory notes, loan agreements, guarantees, and other
evidences of indebtedness) and there are no other agreements to which API is a
party or by which API, or its properties are bound (including, without
limitation, all mortgages, deeds of trust, security agreements, pledge
agreements, and similar agreements and instruments and all confidentiality
agreements). API holds its rights under the API Contracts, free and clear of
any lien, encumbrance, claim, charge or security interest.
3.8 Claims and Proceedings. There are no claims, actions, suits,
proceedings, and investigations pending or, to the knowledge of API threatened,
against or affecting API or any of its properties or assets, at law or in
equity, or before or by any court, municipal or other governmental department,
commission, board, agency, or instrumentality. API has not been, and API is not
now, subject to any order, judgment, decree, stipulation, or consent of any
court, governmental body, or agency. No inquiry, action, or proceeding has been
asserted, instituted, or, to the knowledge of API, threatened to restrain or
prohibit the carrying out of the transactions contemplated by this Plan of
Merger or to challenge the validity of such transactions or any part thereof or
seeking damages on account thereof. To the knowledge of API, there is no basis
for any such valid claim or action.
3.9 Taxes. All returns ("Returns") for federal, foreign, state, county
and local income, gross receipts, excise, property, franchise, license, sales,
use, withholding, and other tax ("Taxes") which were required to be filed by API
on or before the date hereof have been filed within the time and in the manner
provided by law, and all such Returns are true and correct and accurately
reflect the Tax liabilities of API . All Taxes, assessments, penalties, and
interest which have become due pursuant to such Returns have been paid. API has
not executed any presently effective waiver or extension of any statute of
limitations against assessments and collection of Taxes. There are no pending
or threatened claims, assessments, notices, proposals to assess, deficiencies,
or audits (collectively, "API Tax Actions") with respect to any Taxes owed or
allegedly owed by API. To the knowledge of API there is no basis for any API
Tax Actions. API's federal income tax returns have not been audited, and no
Taxes are payable by API. There are no tax liens on any of the assets of API.
API is not a party to any tax sharing agreement with any person.
16
3.10 Agents. API has not designated or appointed any person or other
entity to act for it or on its behalf pursuant to any power of attorney or any
agency which is presently in effect.
3.11 Financial Records of API. The books and records of API fairly and
correctly set out and disclose in all material respects, the financial position
of API as at the date thereof and all material financial transactions of the API
have been accurately recorded in such books and records. API does not have any
of its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of API and, at Closing,
API will have originals or copies of all such records, systems, controls, date
or information in its possession or control.
3.12 Brokers. API has not engaged, or caused any liability to be incurred
to, any finder, broker, or sales agent in connection with the execution,
delivery, or performance of this Plan of Merger or the transactions contemplated
hereby or consummation of the Merger.
3.13 Financial Statements.
(a) API has delivered to IC the following financial statements and
notes (collectively, the "API Financial Statements"):
(i) The audited balance sheets of API as of May 31, 2001 and the
related audited income statements, statements of shareholders' equity
and statements of cash flows of API for the year then ended.
(b) The API Financial Statements are complete in all material respects
and present fairly the financial position of API as of the respective dates
thereof and the results of operations and cash flows for the periods
covered thereby. API Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied for the
periods covered.
3.14 Absence of Changes. Except as set forth in Schedule 3.14 attached
hereto, since May 31, 2001:
(a) there has not been any material adverse change in API's business,
condition, assets, liabilities, operations, financial performance or
prospects, and, to the knowledge of API, no event has occurred that will,
or could reasonably be expected to, have a material adverse effect on the
business, conditions, assets, liabilities, operations, financial
performance or prospects (a "Material Adverse Effect") of API;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of API's assets (whether or
not covered by insurance);
17
(c) API has not declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock, and
has not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities;
(d) API has not sold, issued or authorized the issuance of (i) any
capital stock or other security except for 97 shares of API Common Stock
issued to certain of the persons set forth on Schedule 3.1 pursuant to that
certain Convertible Promissory Note dated April 1, 2001 in the principal
amount of $1,265,492, (ii) any option or right to acquire any capital stock
or any other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(e) other than the transactions contemplated by this Agreement, API
has not effected or been a party to any acquisition transaction,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(f) API has not formed any subsidiary or acquired any equity interest
or other interest in any other entity;
(g) API has not made any capital expenditure which, when added to all
other capital expenditures made on behalf of API since May 31, 2001,
exceeds $25,000;
(h) API has not (i) entered into or permitted any of the assets owned
or used by them to become bound by any contract or other agreement, or (ii)
amended or prematurely terminated, or waived any material right or remedy
under any contract or other agreement;
(i) API has not (i) acquired, leased or licensed any right or other
asset from any other person or entity, (ii) sold or otherwise disposed of,
or leased or licensed, any right or other asset to any other person or
entity, or (iii) waived or relinquished any right, except for immaterial
rights or other immaterial assets acquired, leased, licensed or disposed of
in the ordinary course of business and consistent with API's past
practices;
(j) API has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness in excess of $3,000;
(k) API has not made any pledge of any of their assets or otherwise
permitted any of their assets to become subject to any encumbrance, except
for pledges of immaterial assets made in the ordinary course of business
and consistent with API's past practices;
(l) API has not (i) lent money to any person or entity, or (ii)
incurred or guaranteed any indebtedness for borrowed money;
(m) API has not (i) established or adopted any employee benefit plan,
(ii) paid any bonus or made any profit-sharing or similar payment to, or
increased the amount of wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
18
(n) API has not changed its methods of accounting or accounting
practices in any respect;
(o) API has not commenced or settled any legal proceeding;
(p) API has not entered into any material transaction or taken any
other material action outside the ordinary course of business or
inconsistent with their respective past practices.
(q) API has not agreed to take any of the actions referred to in
clauses (a) though (p) above.
3.15 Bank Accounts; Receivables. Schedule 3.15 attached hereto provides
accurate information with respect to each account maintained by or for the
benefit of API at any bank or other financial institution.
3.16 Liabilities. API has not accrued, contingent or other liabilities of
any nature, either matured or unmatured, and whether due or to become due,
except for: (a) liabilities identified as such in API Financials; (b) accounts
payable or accrued salaries that have been incurred by API since May 31, 2001 in
the ordinary course of business and consistent with API's past practices; and
(c) liabilities under the API Contracts identified in Schedule 3.7, to the
extent the nature and magnitude of such liabilities can be ascertained by
reference to the text of such API Contracts.
3.17 Related Party Transactions. Except as set forth in Schedule 3.17
attached hereto: (a) no Related Party has any direct or indirect interest in any
material asset used in or otherwise relating to the business of API; (b) no
Related Party is indebted to API and no indebtedness is owed by API to a Related
Party; (c) no Related Party has entered into, or has had any direct or indirect
financial interest in, any material contract, transaction or business dealing
involving API; (d) no Related Party is competing or has at any time since June
6, 2000 competed, directly or indirectly, with API; and (e) no Related Party has
any claim or right against API. (For purposes of this Section 3.17 each of the
following shall be deemed to be a "Related Party": (i) each of the Shareholders;
(ii) each individual who is, or who has at any time since June 6, 2000 been an
officer of API; (iii) each member of the immediate family of each of the
individuals referred to in clauses (i) and (ii) above; and (iv) any trust or
entity (other than API) in which any one of the individuals referred to in
clauses (i), (ii), and (iii) above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting
proprietary or equity interest.)
3.18 Corporate Records. The corporate records and minute books of API as
provided to IC or its legal counsel contain the complete and accurate copies of
all meetings of corporate actions or written consents by the directors and
shareholders of API in API's possession or control, including, without
limitation, all by-laws and resolutions passed by the board of directors and
shareholders of API in API's possession or control and API's shareholder list.
19
3.19 Employees. No employee has made any claim or, to the best of API's
knowledge, has any basis for any action or proceeding against API, arising out
of any statute, ordinance or regulation relating to discrimination in employment
or employment practices, harassment, occupational health and safety standards or
worker's compensation. API has not made any agreements with any labor union or
employee association nor made any commitments to or conducted any negotiations
with any labor union or employee association with respect to any future
agreements. No trade union, council of trade unions, employee bargaining agency
or affiliated bargaining agent holds bargaining rights with respect to any of
API's employees by way of certification, interim certification, voluntary
recognition, designation or successor rights. Except as set forth on Schedule
3.19 there are no outstanding written or oral employment contracts, sales,
services, management or consulting agreements, employee benefit or profit-
sharing plans, or any bonus arrangements with any employee of API, nor are there
any outstanding oral contracts of employment which are not terminable on the
giving of reasonable notice in accordance with applicable law.
3.20 Insurance. Set forth in Schedule 3.20 attached hereto is a complete
list of all policies of insurance held by API.
3.21 ERISA Compliance. The "employee pension benefit plans," as such term
is defined in Section 3(2) of ERISA, which API sponsors, or to which it is
obligated to contribute (the "API Pension Plan") consist solely of the API
Electronics 401(k) Plan. Any employer contribution accrued with respect to, or
required to be made to, the API Pension Plan on or before the date hereof has
been made. None of API, any officer of API or any of the employee benefit
plans of API which are subject to ERISA, including the API Pension Plan, or any
trusts created thereunder, or any trustee or administrator thereof, has engaged
in a "prohibited transaction," as such term is defined in Section 4975 of the
Code or Sections 406 or 407 of ERISA, which could subject API, any officer of
API, any of such plans, or any such trusts to any material tax or penalty on
prohibited transactions imposed by such Section 4975 of the Code or which would
have a material adverse effect on API. API is not obligated to provide any
benefit to any retiree from API under any of the "employee welfare benefit
plans," as such term is defined in Section 3(1) of ERISA, which API sponsors, or
to which it is obligated to contribute. API is not and has not been a
contributing employer to any "multi-employer plan", as defined in ERISA.
ARTICLE IV
----------
API, IC AND IC SUB ACTIVITIES
-----------------------------
Between the date hereof and the first to occur of (i) the Effective Time of
the Merger or (ii) the termination of this Agreement, none of API, IC or IC
Sub, or the Subsidiaries shall: (a) amend its articles of incorporation or by-
laws, (b) engage any employees, (c) make or commit itself to make any capital
expenditures, (d) issue any shares of capital stock, other than pursuant to
currently existing options and warrants as set forth on Schedule 2.3, (e) engage
in any business activity of any type, except in the ordinary course of business
consistent with past practices (f) enter into any agreement of any type or
nature, except in the ordinary course of business consistent with past practices
or (g) incur any liabilities, whether fixed or contingent, except in the
ordinary course of business consistent with past practices.
20
ARTICLE V
---------
CONDITIONS TO CLOSING
---------------------
5.1 Conditions to Obligation of IC . The obligations of IC to consummate
the Merger are subject to the fulfillment of each of the following conditions:
(a) The representations and warranties of API contained in this Plan
of Merger shall be true and correct at and as of the Closing with the same
effect as though such representations and warranties had been made at the
time of the Closing; and IC shall have received a certificate, dated as of
the Closing Date, signed by an executive officer of API to the foregoing
effect.
(b) No action or proceeding shall have been instituted or threatened
for the purpose or with the possible effect of enjoining or preventing the
consummation of this Plan of Merger or seeking damages on account thereof.
(c) All consents and approvals required in connection with the
execution, delivery and performance of this Plan of Merger, if any, shall
have been obtained.
(d) All necessary action (corporate or otherwise) shall have been
taken by API and its directors and stockholders to authorize, approve, and
adopt this Plan of Merger and the consummation and performance of the
Merger, and IC shall have received a certificate, dated as of the Closing
Date, of an executive officer of API, to the foregoing effect.
(e) Except for the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, all action will have been
taken, and all necessary third-party consents will have been obtained to
enable API to consummate the Merger.
(f) IC shall have received evidence reasonably satisfactory to IC of
the requisite approval of the stockholders of API of this Plan of Merger
and the Merger.
(g) IC shall have received evidence satisfactory to IC from each of
the Shareholders that each owns their respective shares of API Common Stock
free and clear, and that such shares may be validly and effectively
transferred to IC under the terms of this Agreement.
(h) IC shall have received a certificate signed by the Secretary of
API on behalf of API certifying as to the total number of shares of API
Common Stock issued and outstanding as of the date of the Closing.
(i) API shall deliver to IC at the Closing a favorable opinion of
their attorneys in form satisfactory to the attorneys for API and the
Shareholders, that:
(i) they have acted as counsel to API in connection with this
transaction;
21
(ii) the consummation of the transactions contemplated by this
Agreement will not result in a breach of any term or provision of or
constitute a default under the articles of incorporation or by-laws of
API nor to the best of the knowledge of such attorneys, any indenture,
agreement, instrument, license, or permit to which API is a party or
by which it is bound, nor, to the best of the knowledge of such
counsel, will the consummation of such transactions accelerate any
commitment or obligation of API or result in the creation of any lien
or encumbrance upon any of the assets or property of API;
(iii) to the best of such attorneys' knowledge, API has
outstanding no options, convertible securities, warrants or other
convertible obligations, agreements or other commitments to allot,
reserve, set aside, create, issue or sell any securities or any of its
unissued share capital;
(iv) API has the full power and authority to enter into and
perform its obligations under this Agreement, and all corporate action
necessary to authorize the performance by the Purchaser of its
obligations under this Agreement, has been duly taken, and the
Agreement is a legal, valid and binding obligation of API enforceable
against it in accordance with its terms, subject to usual
qualifications respecting equitable remedies and creditors' rights;
and
(v) such other matters as counsel for API or the Shareholders may
consider advisable, acting reasonably.
5.2 Conditions to Obligations of API. The obligations of API and
Shareholders to consummate the Merger is subject to the fulfillment of the
following conditions:
(a) The representations and warranties of IC contained in this Plan of
Merger shall be true and correct at and as of the Closing with the same
effect as though such representations and warranties had been made at the
time of the Closing and API shall have received a certificate, dated as of
the Closing Date, signed by the Chief Executive Officer of IC to the
foregoing effect.
(b) IC shall have, as of the Closing Date, cash or cash equivalents,
net of all liabilities other than the contingent liability to Stockhouse
Media Corporation described on Schedule 2.3, of at least Cdn. $1,800,000,
except as otherwise agreed by API in writing.
(c) No action or proceeding shall have been instituted or threatened
for the purpose or with the possible effect of enjoining or preventing the
consummation of this Plan of Merger or seeking damages on account thereof.
(d) All consents and approvals required in connection with the
execution, delivery and performance of this Plan of Merger, if any, shall
have been obtained.
22
(e) All necessary action (corporate or otherwise) shall have been
taken by API and its directors and stockholders to authorize, approve, and
adopt this Plan of Merger and the consummation and performance of the
Merger, and IC shall have received a certificate, dated as of the Closing
Date, of an executive officer of API, to the foregoing effect.
(f) Except for filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, all action will have been taken and all
necessary third-party consents will have been obtained, to enable IC to
consummate the Merger.
(g) API shall have received evidence reasonably satisfactory to API of
the requisite approval of the stockholders of IC and IC Sub of this Plan of
Merger and the Merger.
(h) API shall have received a certificate signed by the Secretary of
IC on behalf of IC certifying as to the total number of shares of IC Common
Stock and IC Special Shares and Preferred Shares issued and outstanding and
the number of options, warrants and similar rights to purchase capital
stock of IC outstanding as of the date of the Closing.
(i) IC shall deliver to API and the Shareholders at the Closing a
favorable opinion of their attorneys in form satisfactory to the attorneys
for API and the Shareholders, that:
(i) they have acted as counsel to IC, IC Sub and the Subsidiaries
in connection with this transaction;
(ii) each of IC and IL Canada is a corporation incorporated and
validly subsisting under the laws of the Providence of Ontario, IL
Nevada is a corporation incorporated and validly subsisting under the
laws of the State of Nevada and IL Sub is a corporation incorporated
and validly subsisting under the laws of the State of Delaware;
(iii) all necessary corporate actions and proceedings have been
taken by IC to permit the due and valid issuance by IC of the Exchange
Shares and the Warrants to the Shareholders at the Closing and upon
the completion of the transactions contemplated hereunder, such shares
and Warrants will be issued and outstanding as fully paid and
non-assessable;
(iv) the consummation of the transactions contemplated by this
Agreement will not result in a breach of any term or provision of or
constitute a default under the constating documents, by-laws or
resolutions of IC, IC Sub or the Subsidiaries nor to the best of the
knowledge of such counsel, any indenture, agreement, instrument,
license, permit or understanding to which IC, IC Sub or a Subsidiary
is a party or by which it is bound, nor, to the best of the knowledge
of such counsel, will the consummation of such transactions accelerate
any commitment or obligation of IC, IC Sub or the Subsidiaries or
result in the creation of any lien or encumbrance upon any of the
assets or property of IC, IC Sub or the Subsidiaries;
23
(v) the execution and delivery of this Agreement by IC and IC Sub
has not breached and the consummation of the transactions contemplated
by this Agreement will not cause IC to be in breach of laws of the
Province of Ontario and of Canada applicable therein;
(vi) to the best of its knowledge, except as set forth on the
certificate described in (h) above, IC has outstanding no options,
convertible securities, warrants or other convertible obligations,
agreements or other commitments to allot, reserve, set aside, create,
issue or sell any securities or any of its unissued share capital;
(vii) IC has the full power and authority to enter into and
perform its obligations under this Agreement, and all corporate action
necessary to authorize the performance by the Purchaser of its
obligations under this Agreement, has been duly taken, and the
Agreement is a legal, valid and binding obligation of IC enforceable
against it in accordance with its terms, subject to usual
qualifications respecting equitable remedies and creditors' rights;
(viii) the authorized capital of IC consists of an unlimited
number of common shares and an unlimited number of special shares, of
which immediately prior to the issuance of the Exchange Shares,
4,393,007 common shares, subject to rounding adjustments, and no
special shares or preference shares have been duly issued and are
outstanding as fully paid and non-assessable shares of IC;
(ix) the Exchange Shares and Warrants have been duly issued under
section 72(l)(j) of the Securities Act (Ontario) and the Exchange
Shares are validly issued as fully paid and non-assessable shares in
the capital stock of IC and the Warrants are validly issued in
accordance with the Business Corporations Act (Ontario). The Warrant
Stock issuable upon the exercise of the Warrants has been duly
reserved for issuance upon such exercise, and when issued in
accordance with the terms of the Warrants, will be validly issued,
fully paid and nonassessable;
(x) to the best of its knowledge, IC is a reporting issuer not in
default of any of the requirements of the Securities Act (Ontario), or
the Exchange Act or the Securities Act as at the Closing Date; and
(xi) such other matter as counsel for API or the Shareholders may
consider advisable, acting reasonably.
In rendering such opinion, such counsel may, to the extent that they do not
have knowledge of any facts to the contrary, rely with respect to subclause (ix)
above upon a certified list of the shareholders of IC prepared by IC's transfer
agent, Equity Transfer Services Inc. and upon statutory declarations and
certificates of an officer of IC as may be reasonable in the circumstances.
24
(i) Directors. Upon Closing the Board of Directors of IC shall be
comprised of Xxxxxx X. Xxxxx, Xxxxxxx XxXxxxxx, Xxxxx XxXxxxxx, who
are designees of API, and Xxxxx X. Xxxxxxx and Xxxxxx X. Xxxx, who are
designees of IC.
5.3 Conditions Subsequent to Obligation of IC and API. The obligations,
other than as described in this Section 5.3, of IC and API hereunder shall be of
no force and effect and this Plan of Merger (other than as set forth in this
Section 5.3) shall be of no force and effect if the Merger is not effective by
11:59 p.m., New York City time on December 15, 2001, unless all parties hereto
agree to an extension. In such event, the transactions that have been effected
pursuant to this Plan of Merger shall be unwound and this Plan of Merger shall
be of no force and effect including, without limitation, with respect to all
representations, warranties, covenants, and indemnification provisions.
ARTICLE VI
----------
TERMINATION
-----------
This Plan of Merger may be terminated prior to the Closing by the mutual
consent of IC and API.
ARTICLE VII
-----------
INDEMNIFICATION
---------------
7.1 Indemnification. API agrees to indemnify and hold harmless IC, the
Subsidiaries, and each stockholder, officer, director, employee, and affiliate
of IC and the Subsidiaries (collectively, the "Indemnified IC Parties") from and
against any and all damages, losses, claims, liabilities, demands, charges,
suits, penalties costs, and expenses (including court costs and reasonable
attorneys' fees and expenses incurred in investigating and preparing for any
litigation or proceeding) (collectively, "Indemnified Costs") which any of the
Indemnified IC Parties may sustain, or to which any of the Indemnified IC
Parties may be subjected, arising out of any breach or default by API of or
under any of the representations, warranties, agreements, or other provisions of
this Plan of Merger or any agreement or document executed in connection herewith
(including, without limitation, the certificates to be delivered pursuant to
Sections 5.1(a) and (e) hereof), and IC agrees to indemnify and hold harmless
API and each stockholder, officer, director, employee, and affiliate of API
(collectively, the "Indemnified API Parties", and, together with the Indemnified
IC Parties, the "Indemnified Parties") from and against Indemnified Costs which
any Indemnified API Party may sustain, or to which any of the Indemnified API
Parties may be subjected, arising out of any breach or default by IC of or under
any of the representations, warranties, agreements, or other provisions of this
Plan of Merger or any agreement or document executed in connection herewith
(including, without limitation, the certificates to be delivered pursuant to
Sections 5.2(a) and (c) hereof). The right to indemnification under this
Section VII shall survive the Merger.
7.2 Defense of Third-Party Claims. An Indemnified Party shall give prompt
written notice to API or IC (an "Indemnifying Party"), as the case may be, of
the commencement or assertion of any action, proceeding, demand, or claim by a
third party (collectively, a "third-party action") in respect of which such
25
Indemnified Party shall seek indemnification hereunder. Any failure so to
notify an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have to such Indemnified Party under this Article VII
unless the failure to give such notice materially and adversely prejudices such
Indemnifying Party. The Indemnifying Parties shall have the right to assume
control of the defense of, settle, or otherwise dispose of such third-party
action on such terms as they deem appropriate; provided, however, that:
(a) The Indemnified Party shall be entitled, at its own expense, to
participate in the defense of such third-party action;
(b) The Indemnifying Parties shall obtain the prior written approval
of the Indemnified Party before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of such third-
party action or any liability in respect thereof if, pursuant to or as a
result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the
Indemnified Party, such settlement, compromise, admission, or
acknowledgment could have a material adverse effect on its business or, in
the case of an Indemnified Party who is a natural person, on his or her
assets or interests;
(c) No Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each Indemnified Party
of a release from all liability in respect of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control (but shall
be entitled to participate at its own expense in the defense of such third-
party action), and the Indemnified Party shall be entitled to have control
over its counsel in the defense or settlement of any third-party action
applicable to it (i) as to which the Indemnifying Party fails to assume the
defense within a reasonable length of time or (ii) if the Indemnified
Party and the Indemnified Party have materially different defenses to such
third-party action and a conflict of interest would exist for a single firm
of attorneys to represent both the Indemnified Party and the Indemnifying
Party; provided, however, that the Indemnified Party shall make no
settlement, compromise, admission, or acknowledgment which would give rise
to liability on the part of any Indemnifying Party without the prior
written consent of the Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with
the defense of any third-party action pursuant to this Article VII and, in
connection therewith, shall furnish such records, information, and testimony and
attend such conferences, discovery proceedings, hearings, trials, and appeals as
may be reasonably requested.
7.3 Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 7.2 hereof because no
third-party action is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Indemnified Costs which he, she, or it
claims are subject to indemnification under the terms hereof. The failure of
the Indemnified Party to exercise promptness in such notification shall not
amount to a waiver of such claim unless the resulting delay materially
prejudices the position of the Indemnifying Party with respect to such claim.
26
ARTICLE VIII
------------
MISCELLANEOUS
-------------
8.1 Prior Agreements, Amendments, and Waivers. This Plan of Merger
(together with the documents delivered pursuant hereto) supersedes all prior
documents, understandings, and agreements, oral or written, relating to this
transaction and constitutes the entire understanding among the parties with
respect to the subject matter hereof. Any modification or amendment to, or
waiver of, any provision of this Plan of Merger (or any document delivered
pursuant to this Plan of Merger unless otherwise expressly provided therein) may
be made only by an instrument in writing executed by the party against whom
enforcement thereof is sought.
8.2 Successors and Assigns. None of IC Sub's, IC 's or API's rights or
obligations under this Plan of Merger may be assigned. Any assignment in
violation of the foregoing shall be null and void. Subject to the preceding
sentences of this Section 8.2, the provisions of this Plan of Merger (and,
unless otherwise expressly provided therein, of any document delivered pursuant
to this Plan of Merger) shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors,
and assigns.
8.3 Expenses. IC and IC Sub shall pay all of their costs and expenses
incurred in connection with this Plan of Merger. API shall pay all of its costs
and expenses of API in connection with this Plan of Merger. The Shareholders
shall pay all of their respective costs and expenses in connection with this
Plan of Merger.
8.4 Invalid Provisions. If any provision of this Plan of Merger is held
to be illegal, invalid, or unenforceable under present or future laws, such
provision shall be fully severable, this Plan of Merger shall be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part of this Plan of Merger, and the remaining provisions of this
Plan of Merger shall remain in full force and effect and shall not be affected
by the illegal, invalid, or unenforceable provision or by its severance from
this Plan of Merger.
8.5 Waiver. No failure or delay on the part of any party in exercising
any right, power, or privilege hereunder or under any of the documents delivered
in connection with this Plan of Merger shall operate as a waiver of such right,
power, or privilege; nor shall any single or partial exercise of any such right,
power, nor privilege preclude any other or future exercise thereof or the
exercise of any other right, power, or privilege.
8.6 Notices. Any notices required or permitted to be given under this
Plan of Merger (and, unless otherwise expressly provided therein, under any
document delivered pursuant to this Plan of Merger) shall be given in writing
and shall be deemed received (a) when personally delivered to the relevant party
at its address as set forth below, (b) if sent by nationally recognized
overnight courier service, on the next business day following the date when
timely tendered to such service, delivery prepaid, or (c) if sent by mail, on
27
the third (3rd) business day following the date when deposited in the United
States mail, certified or registered mail, postage prepaid, to the relevant
party at its address indicated below:
API: Xxxxxxx XxXxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
With a copy to: Sugar, Friedberg & Felsenthal
30 X. XxXxxxx St., Ste. 2600
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
IC: XxxxxxxxXxxxx.xxx, Inc.
Xxxxx 000
0 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
With a copy to: Xxxxx Xxxx
Xxxx Xxxxxx XXX
Xxxxx 0000, Xxx Xxxxxxxx Xxxxx
X.X. Xxx 000
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Each party may change its or his address for purposes of this Section 8.6 by
proper notice to the other parties.
8.7 Survival of Representations, Warranties, and Covenants. The
representations, and warranties made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the Closing
for a period of twenty-four (24) months.
8.8 No Third-Party Beneficiaries. Except as otherwise contemplated by
Article VII hereof, no person or entity not a party to this Plan of Merger shall
be deemed to be a third-party beneficiary hereunder or entitled to any rights
hereunder.
8.9 Governing Law. This Plan of Merger shall be governed by and construed
in accordance with the laws of the State of Delaware.
28
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, with the same effect as if all parties hereto had all signed
the same signature page. Any signature page of this Agreement may be detached
from any counterpart of this Agreement without impairing the legal effect of any
signatures thereon and may be attached to another counterpart of this Agreement
identical in form hereto but having attached to it one or more additional
signature pages.
ARTICLE IX
----------
SHAREHOLDER REPRESENTATIONS
---------------------------
Each Shareholder that resides in the United States hereby represents and
warrants, severally and not jointly, that as of the Closing:
9.1 Authorization. Such Shareholder has full power and authority to enter
into this Agreement, which constitutes such Shareholder's valid and legally
binding obligation, enforceable in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws or court decisions of general application affecting enforcement of
creditors rights generally or (ii) as limited by laws or court decisions
relating to the availability of specific performance, injunctive relief or other
equitable remedies or equitable principles of general applicability.
9.2 Purchase Entirely for Own Account. This Agreement is made with each
Shareholder in reliance upon such Shareholder's representation to IC, which by
such Shareholder's execution of this Agreement such Shareholder hereby confirms,
that the Shareholder and the Warrants to be received by such Shareholder and the
Warrant Shares (collectively, the "Securities") will be acquired for investment
for such Shareholder's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that such
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, each
Shareholder further represents that such Shareholder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. In particular, each Shareholder acknowledges that IC is entering
into this Agreement, and will not be registering or qualifying the offer or sale
of the IC Common Stock and Warrants under the Ontario, United States state or
United States federal securities laws, in reliance upon the truth and accuracy
of such Shareholder's representations and warranties in this Article 9.
9.3 Disclosure of Information. Such Shareholder further represents that
he has had an opportunity to ask questions and receive answers from the IC
regarding the terms and conditions of the offering of the IC Common Stock and
Warrants and the business, properties, prospects and financial condition of IC.
The foregoing, however, does not limit or modify the representations and
warranties of IC in Article II of this Agreement or the right of such
Shareholder to rely thereon.
9.4 Investment Experience. Such Shareholder has previously invested in
securities of small businesses and companies in the early stages of development
and acknowledges that he is able to fend for himself, can bear the economic risk
of his investment, and has such knowledge and experience in financial or
business matters that he is capable of evaluating the merits and risks of the
investment in the IC Common Stock and Warrants. Such Shareholder is able to
bear the economic risk of any investment in the IC Common Stock and Warrants for
an indefinite period of time.
29
9.5 Residence. Xxxxxx X. Xxxxx is a New York resident and TIC is a
Delaware Corporation. The other shareholders reside outside of the United
States.
9.6 Restricted Securities. Each Shareholder residing in the United States
understands that the Securities are characterized as "restricted securities"
under the United States federal securities laws inasmuch as the Securities are
being acquired from IC in a transaction not involving registration or a public
offering and that under such laws and applicable regulations such Securities may
be resold in the United States without registration under the Securities Act of
1933, only in certain limited circumstances. In this connection, such
Shareholder represents that he is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Xxx 0000.
* * * * *
IN WITNESS WHEREOF, the parties hereto have duly executed this Plan of
Merger in one or more counterparts (all of which shall constitute one and the
same agreement) as of the day and year first above written.
IC: API:
---- ----
XXXXXXXXXXXXX.XXX INC. API ELECTRONICS, INC
By:_________________________ By:____________________________
Its:_______________________ Its:__________________________
IC SUB:
-------
API ACQUISITION CORP.
By:_________________________
Its:_______________________
SHAREHOLDERS:
-------------
GREEN DIAMOND CORP.
By:_________________________ _______________________________
Xxxxxx X. Xxxxx
Its:_______________________
30
TECHNAPOWER INDUSTRIES SELOZ GESTION & FINANCE SA
CORPORATION
By:_________________________ By:____________________________
Its:_______________________ Its:__________________________
MING CAPITAL ENTERPRISES INC. SHANGRI-LA INVESTMENTS INC.
By:_________________________ By:____________________________
Its:_______________________ Its:__________________________
PRIVATE INVESTMENT COMPANY LTD. PARTNER MARKETING AG
By:_________________________ By:____________________________
Its:_______________________ Its:__________________________
CCD CONSULTING COMMERCE DISTRIBUTION AG
By:_________________________
Its:_______________________
HAPI HANDELS-UND BETEILIGUNGSQESELLSCHAFT MBH
By:_________________________
Its:_______________________
SCHEDULE 1
EXHIBIT "A"
FORM OF WARRANT CERTIFICATE
WA -#.
. A WARRANTS EXERCISABLE FOR COMMON SHARES OF
API Electronics Group Inc.
EXERCISABLE BEFORE 5:00 p.m. (TORONTO TIME) ON THE
28th DAY OF FEBRUARY, 2003, AFTER WHICH TIME THIS
WARRANT CERTIFICATE WILL BE NULL AND VOID
COMMON SHARE PURCHASE WARRANTS TO PURCHASE
COMMON SHARES OF API ELECTRONICS GROUP INC.
(Amalgamated under the Business Corporations Act (Ontario))
THIS IS TO CERTIFY THAT, for value received, ., (the "Holder") is
entitled, subject to adjustment, to purchase at any time before 5:00 p.m.
(Toronto time) on the 28th day of February, 2003 (the "Expiry Time") fully paid
and non-assessable common shares ("Shares") in the capital of API Electronics
Group Inc. (the "Company") as constituted on the date at an exercise price of US
$0.45, on the basis of one (1) Share for each of the . Warrants evidenced
hereby.
The Warrants represented hereby shall be deemed to be so surrendered
only upon receipt thereof by the Company at the office specified below and
shall be surrendered only by personal delivery, courier or prepaid registered
mail.
Shares will not be issued pursuant to any Warrants if the issuance of
such Shares would constitute a violation of the securities laws of any
jurisdiction.
1. After the Expiry Time, all rights under any Warrants evidenced hereby, in
respect of which the right of subscription and purchase herein provided shall
not theretofore have been exercised, shall wholly cease and terminate and such
Warrants shall be void and of no value or effect.
2. The Holder may exercise the right of purchase herein provided for by
surrendering or delivering to the Company prior to the Expiry Time at its
principal office (a) this certificate, with the Subscription duly completed and
executed by the holder or its legal representative or attorney, duly appointed
by an instrument in writing in form and manner satisfactory to the Company, and
(b) either: (1) cash or a certified cheque, money order or bank draft payable to
or to the order of the Company in lawful money of Canada at par in the province
of Ontario, in an amount equal to the Exercise Price multiplied by the number of
Shares for which subscription is being made (the "Aggregate Exercise Price"); or
(2) the surrender to the Company of debt or equity securities of the Company
having a Market Price equal to the Aggregate Exercise Price of the Common Stock
being purchased upon such exercise or (3) a written notice to the Company that
the Purchaser is exercising the Warrant (or a portion thereof) by authorizing
the Company to withhold from issuance a number of shares of Common Stock
2
issuable upon such exercise of the Warrant which when multiplied by the Market
Price of the Common Stock is equal to the Aggregate Exercise Price (and such
withheld shares shall no longer be issuable under this Warrant).
Any warrant certificate, certified cheque, money order or bank draft
referred to in this Section 2 shall be deemed to be surrendered only upon
delivery thereof to the Company at its principal office in the manner provided
in section 14 hereof.
3. Upon such delivery and payment as aforesaid, the Company shall cause to be
issued to the Holder hereof the Shares subscribed for not exceeding those which
such Holder is entitled to purchase pursuant to this certificate and the Holder
hereof shall become a shareholder of the Company in respect of such shares with
effect from the date of such delivery and payment and shall be entitled to
delivery of a certificate or certificates evidencing such shares and the Company
shall cause such certificate or certificates to be mailed to the Holder hereof
at the address or addresses specified in such subscription within five (5)
business days of such delivery and payment.
The issuance of certificates for Shares upon exercise of this Warrant shall
be made without charge to the Holder (or an person having been duly assigned the
Warrant) for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of Shares.
The Company shall take all such actions as are necessary in order to ensure that
each Share issuable upon exercise of this Warrant shall upon payment of the
Exercise Price therefor, be validly issued, fully paid and nonassessable and
free from all liens, charges and encumbrances with respect to the issuance
thereof.
The Company shall not close its books against the transfer of this Warrant
or of any Share issued or issuable upon the exercise of this Warrant in any
manner which interferes with the timely exercise of this Warrant.
The Company shall assist and cooperate with the Holder (or an person having
been duly assigned the Warrant) required to make any governmental filings or
obtain any governmental approval prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company).
4. The Holder may subscribe for and purchase a number of Shares less than the
number it is entitled to purchase pursuant to this certificate. In the event of
any such subscription and purchase prior to the Expiry Time, the Holder shall in
addition be entitled to receive, without charge, a new warrant certificate in
respect of the balance of the Shares of which it was entitled to purchase
pursuant to this certificate and which were then not purchased.
5. Notwithstanding any adjustments provided for in section 8 hereof or
otherwise, the Company shall not be required upon the exercise of any Warrants,
to issue fractional Shares in satisfaction of its obligations hereunder. To the
extent that the Holder would be entitled to purchase a fraction of a Share, such
right may be exercised in respect of such fraction only in combination with
other rights which in the aggregate entitle the Holder to purchase a whole
number of Shares.
3
6. Nothing in this certificate or in the holding of a Warrant evidenced hereby
shall be construed as conferring upon the Holder any right or interest
whatsoever as a shareholder of the Company.
7. The Company covenants and agrees that (a) so long as any Warrants evidenced
hereby remain outstanding, it shall reserve and there shall remain unissued out
of its authorized capital a sufficient number of Shares to satisfy the right of
purchase herein provided for should the Holder determine to exercise its rights
in respect of all the Shares for the time being called for by such outstanding
Warrants, and (b) all Shares which shall be issued upon the exercise of the
right to purchase herein provided for, upon payment thereof of the amount at
which such Shares may at the time be purchased pursuant to the provisions
hereof, shall be issued as fully paid and non-assessable Shares and the holders
thereof shall not be liable to the Company or to its creditors in respect
thereof.
8. The Exercise Price and the number of Shares purchasable upon exercise of the
Warrants evidenced hereby shall be subject to adjustment from time to time in
the events and in the manner provided as follows:
(a) If and whenever at any time prior to the Expiry Time, the Company shall
(i) consolidate the outstanding Shares into a lesser number of Shares or (ii)
subdivide the outstanding Shares into a greater number of Shares, as the case
may be, the Exercise Price shall be adjusted to that amount determined by
multiplying the Exercise Price in effect immediately prior to such date by a
fraction, of which the numerator shall be the number of Shares outstanding on
such date before giving effect to such consolidation or subdivision and of which
the denominator shall be the number of Shares outstanding after giving effect to
such consolidation or subdivision. Such adjustment shall be made successively
whenever any event referred to in this subsection (a) shall occur.
(b) If and whenever at any time prior to the Expiry Time, there is a
reclassification or redesignation of the Shares into other shares or a
reorganization of the Company (other than as described in subsection
8(a)hereof), or an amalgamation, merger or arrangement, which does not result in
reclassification of the outstanding Shares or a change of the Shares into other
shares or a sale or conveyance of the property and assets of the Company as an
entirety or substantially as an entirety to any other body corporate or other
entity, the Holder, if it has not exercised its right of purchase prior to the
effective date of such reclassification, redesignation, change, reorganization,
amalgamation, merger, arrangement, sale or conveyance, upon the exercise of such
right thereafter, shall be entitled to receive and shall accept in lieu of the
number of Shares then subscribed for by it, but for the same aggregate
consideration payable therefor, the number of shares or other securities or
property of the Company or of the body corporate, or such other entity resulting
from such amalgamation, merger or arrangement or to which such sale or
conveyance may be made, as the case may be, that the Holder would have been
entitled to receive on such reclassification, redesignation, change,
reorganization, amalgamation, merger, arrangement, sale or conveyance if, on the
record date or the effective date thereof, as the case may be, it had been the
registered holder of the number of Shares so subscribed for.
(c) If and whenever prior to the Expiry Time, the Shares of the Company
shall be subdivided into a greater or consolidated into a lesser number of
shares, the Holder if it has not exercised its right of purchase on or prior to
the record date or effective date, as the case may be, of such subdivision or
4
consolidation, upon the exercise of such right thereafter, shall be entitled to
receive and shall accept in lieu of the number of Shares of the Company then
subscribed for by it, at the Exercise Price determined in accordance with this
section 8, the aggregate number of Shares of the Company (calculated to the
nearest hundredth) that the Holder would have been entitled to receive as a
result of such subdivision or consolidation if, on such record date, it had been
the registered holder of the number of Shares for which subscription is being
made.
(d) The adjustments provided for in this section 8 in the Exercise Price
and in the number and classes of shares which are to be received on the exercise
of the Warrants, are cumulative and shall, in the case of adjustments to the
Exercise Price, be computed to the nearest one-tenth of one cent. After any
adjustment pursuant to this section 8, the term "Shares" where used in this
certificate shall be interpreted to mean shares of any class or classes which,
as a result of all prior adjustments pursuant to this section 8, the Holder is
entitled to receive upon the full exercise of a Warrant entitling it to purchase
the number of Shares so indicated.
(e) In the event of any question arising with respect to adjustment
provided for in this section 8, such question shall be conclusively determined
by the Company's auditors, or, if they are unable or unwilling to act, by such
other firm of independent chartered accountants as may be selected by the board
of directors of the Company, who shall have access to all necessary records of
the Company, the Holder and all other persons in interest and such determination
shall be binding upon the Company and the Holder.
(f) As a condition precedent to the taking of any action which would
require an adjustment pursuant to this section 8 in any of the subscription
rights pursuant to the Warrants, including the Exercise Price or the number and
classes of shares which are to be received upon the exercise thereof, the
Company shall take any corporate action which may, in the opinion of counsel of
the Company, be necessary in order that the Company has unissued and reserved in
its authorized capital and may validly and legally issue as fully paid and
non-assessable all the shares which the Holder is entitled to receive on the
full exercise hereof in accordance with the provisions hereof.
9. Adjustment of Exercise Price and Number of Shares upon Issuance of Common
Shares.
(i) If and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Section 10 is deemed to have
issued or sold, any Common Shares for a consideration per share ("Issue Price")
less than the Exercise Price in effect immediately prior to such time or that is
less than zero, then immediately upon such issue or sale the Exercise Price
shall be reduced to the Issue Price; provided, however, that in the event the
Issue Price is zero or less than zero, the Exercise Price shall be reduced to
the lower of one-tenth (1/10th) of the Exercise Price in effect immediately
prior to such issuance and the par value of the underlying security. Upon each
such adjustment of the Exercise Price hereunder, the number of Common Shares
acquirable upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of Common Shares acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
5
(ii) Notwithstanding the foregoing, there shall be no adjustment to the
Exercise Price or the number of Common Shares obtainable upon exercise of this
Warrant as a result of any issue or sale (or deemed issue or sale):
(a) upon exercise or conversion of any Options or convertible
securities outstanding as of the issue date of the Warrant;
(b) in connection with stock splits, stock dividends, subdivisions,
combinations, recapitalizations or reclassifications of share for
which adjustments were made pursuant to this Section 8;
(c) in connection with equipment leasing or bank or other commercial
debt financing transactions (i) approved by the Board of Directors of
the Company and (ii) not in excess of five percent (5%) of the
Company's outstanding shares of Common Stock on an "as-if converted"
and fully diluted basis;
(d) in connection with the Company's merger with or acquisition of
another business entity, provided that the Holders of the Warrants
representing a majority of the Shares obtainable upon exercise of all
Warrants then outstanding have approved such transaction; or
(e) In connection with strategic transactions (i) so long as the
exclusion from the adjustment required to be made pursuant to Section
9 (i) is specifically approved by the Holders of the Warrants
representing a majority of the Shares obtainable upon exercise of all
Warrants then outstanding on a case by case basis, and (ii) not in
excess of five percent (5%) of the Company's outstanding Common Shares
on an "as-if converted" and fully diluted basis.
10. Effect on Exercise Price of Certain Events. For purposes of determining
the adjusted Exercise Price under Section 9, the following shall be applicable:
(i) Issuance of Rights or Options. If the Company in any manner grants or
sells any Options and the price per share for which Common Stock is issuable
upon the exercise of such Options, or upon conversion or exchange of any
Convertible Securities issuable upon exercise of such Options, is less than the
Exercise Price in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Options for such
price per share. For purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (A) the total amount,
if any, received or receivable by the Company as consideration for the granting
or sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Options, plus in
the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
6
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Exercise Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange thereof is less than the
Exercise Price in effect immediately prior to the time of such issue or sale,
then the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Exercise Price shall
be made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Exercise Price had been or are to be made pursuant to other provisions of this
Section 2, no further adjustment of the Exercise Price shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Exercise Price in effect at the time of such change
shall be immediately adjusted to the Exercise Price (determined in accordance
with Section 9 above) which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold and the number of shares of Common
Stock issuable hereunder shall be correspondingly adjusted; provided, that if
such adjustment (determined in accordance with Section 9 above) would result in
an increase of the Exercise Price then in effect, no adjustments shall be made.
(iv) Calculation of Consideration Received. If any Common Stock, Option
or Convertible Security is issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Company shall be the Market Price thereof as of
7
the date of receipt. If any Common Stock, Option or Convertible Security is
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Common
Stock, Option or Convertible Security, as the case may be. The fair value of
any consideration other than cash and securities shall be determined jointly by
the Company and the Registered Holders of Warrants representing a majority of
the shares of Common Stock obtainable upon exercise of such Warrants. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly selected by the
Company and the Registered Holders of Warrants representing a majority of the
shares of Common Stock obtainable upon exercise of such Warrants, provided. The
determination of such appraiser shall be final and binding on the Company and
the Registered Holders of the Warrants, and the fees and expenses of such
appraiser shall be borne by the Company.
(v) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Option by the parties thereto, the Option shall be deemed to
have been issued for a consideration of $.01.
(vi) Treasury Shares. The number of Shares outstanding at any given
time shall not include shares owned or held by or for the account of the Company
or any Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Shares.
(vii) Record Date. If the Company takes a record of the holders of
Common Share for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
11. In the case of the consolidation, amalgamation, merger or transfer of the
undertaking or assets of the Company as an entirety or substantially as an
entirety to another corporation, (the "Successor"), the Successor shall
expressly assume, by written agreement in form reasonably satisfactory to the
Holder and executed and delivered to the Holder, the due and punctual
performance and observance of such and every covenant and condition of this
certificate to be performed and observed by the Company.
12. Subject as herein provided, all or any of the rights conferred upon the
Holder may be enforced by the Holder by appropriate legal proceedings. No
recourse under or upon any obligation, covenant or agreement herein contained or
in any of the Warrants issued hereunder shall be had against any shareholder,
officer, or director of the Company, either directly or through the Company, it
being expressly agreed and declared that the obligations under the Warrants
evidenced hereby are solely corporate obligations of the Company and that no
8
personal liability whatsoever shall attach to or be incurred by the
shareholders, officers or directors of the Company or any of them in respect
hereof, any and all rights and claims against every such shareholder, officer or
director being hereby expressly waived as a condition of and as a consideration
for the issue of the Warrants evidenced hereby.
13. If the Warrant certificate evidencing the Warrants issued hereby becomes
stolen, lost, mutilated or destroyed, the Company may, on such terms as it may
in its discretion impose, respectively issue and countersign a new warrant
certificate of like denomination, tenor and date as the certificate so stolen,
lost, mutilated or destroyed.
14. Any notice of delivery or surrender of documents to the Company under the
provisions of this certificate shall be valid and effective if delivered
personally to an officer of the Company or if sent by registered letter, postage
prepaid, addressed to the Company at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxx, X0X 0X0, to the attention of the President and shall be deemed to have
been effectively given, received and made on the date of delivery or on the
fourth business day after the time of mailing or upon actual receipt, whichever
is sooner. The Company may from time to time notify the Holder in writing of a
change of address. In the case of disruption in postal services, any notice, if
mailed, shall not be deemed to have been effectively given until it is
personally delivered.
15. This certificate and the Warrants issued hereunder shall be governed by,
performed, construed and enforced in accordance with the laws of the province of
Ontario and the laws of Canada applicable therein.
16. Time shall be of the essence hereof.
17. This Warrant and the Shares issuable on exercise therof have not been
registered under the Securities Act of 1933, as amended (the "U.S. Securities
Act") or the securities laws of any state of the United States and may not be
offered for sale or sold unless registered under the U.S. Securities Act and the
securities laws of all applicable states of the United States or an exemption
from such registration requirements is available.
IN WITNESS WHEREOF the Company has caused this Warrant certificate to
be signed by its duly authorized officers as of ., 2001.
API ELECTRONICS GROUP INC.
By:__________________________
By:__________________________
9
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
to
________________________________________________________________________________
Address:
________________________________________________________________________________
Telecopier Number:
________________________________________________________________________________
the Warrants represented by the within Warrant certificate and do(es) hereby
irrevocably constitute and appoint
________________________________________________________________________________
________________________________________________________________________________
attorney to transfer the said Warrants represented hereby on the books of the
Company with full power of substitution in the premises.
DATED ____________________________________________________, ________________.
In the presence of
_____________________ __________________________________________________
Signature Guaranteed Signature of Registered Warrantholder*
_______________________________
Print Name in Full
NOTICE: The signature on this assignment must correspond with the name entered
in the registration panel of this certificate. The transferor must
pay to the Company all exigible taxes.
* A guarantee of signature will be required with respect to the execution of the
Subscription Form or a transaction relating to the Warrants represented by this
Warrant certificate which results in a change of registration of this Warrant
certificate or the registration of Common Shares upon the exercise of the
Warrants represented hereby. A guarantee of signature may be given by any
Canadian chartered bank, any trust company which is a member of The Trust
Companies Association of Canada or by a member firm of The Toronto Stock
Exchange.
SUBSCRIPTION FORM
TO: API Electronics Group Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX X0X 0X0
The undersigned holder of the Warrants evidenced by the within Warrant
certificate hereby subscribes for _____________________________________ Common
Shares of API Electronics Group Inc. (or such number of Common Shares or other
securities or property to which such subscription entitles the holder in lieu
thereof or in addition thereto under the provisions mentioned in such Warrant
certificate) pursuant to such Warrants exercisable at an exercise price of US
$0.45 until the Expiry Time (or such other price as is determined pursuant to
this Warrant certificate) on the terms specified in such Warrant certificate,
and encloses herewith a certified cheque, bank draft or money order payable to
the order of the Company in payment therefor.
The undersigned hereby irrevocably directs that the said Common Shares be
issued and delivered as follows:
Taxpayer
Identification
Name(s) in Full Address(es) SIN Number Number(s) of Number (if
(if applicable) Common Shares applicable)
_______________ ___________ ______________ _____________ _______________
_______________ ___________ ______________ _____________ _______________
_______________ ___________ ______________ _____________ _______________
(Page 1 of 2)
(Please print full name in which share certificates are to be issued. If any
shares are to be issued to a person or persons other than the holder, the holder
must pay to the Company all exigible transfer taxes or other government
charges.)
DATED this ________________ day of _________________________, ____________.
____________________________ _________________________
Signature Guaranteed Signature of Subscriber
_________________________
Name of Subscriber
_________________________
Address of Subscriber
_________________________
[ ] Please check if the share certificates are to be delivered at the office
where this Warrant certificate is surrendered, failing which the
certificates will be mailed.
Certificates will be delivered or mailed only after the transfer books of
the Company have been opened for five (5) Business Days after the due
surrender of this Warrant certificate as aforesaid.
(Page 2 of 2)
SCHEDULE 2
EXHIBIT " B"
FORM OF WARRANT CERTIFICATE
WB -#.
. B WARRANTS EXERCISABLE FOR COMMON SHARES OF
API Electronics Group Inc.
EXERCISABLE BEFORE 5:00 p.m. (TORONTO TIME) ON THE
30th DAY OF AUGUST, 2003, AFTER WHICH TIME THIS
WARRANT CERTIFICATE WILL BE NULL AND VOID
COMMON SHARE PURCHASE WARRANTS TO PURCHASE
COMMON SHARES OF API ELECTRONICS GROUP INC.
(Amalgamated under the Business Corporations Act (Ontario))
THIS IS TO CERTIFY THAT, for value received, ., (the "Holder") is
entitled, subject to adjustment, to purchase at any time before 5:00 p.m.
(Toronto time) on the 30th day of August, 2003 (the "Expiry Time") fully paid
and non-assessable common shares ("Shares") in the capital of API Electronics
Group Inc. (the "Company") as constituted on the date at an exercise price of
US $0.75, on the basis of one (1) Share for each of the . Warrants evidenced
hereby.
The Warrants represented hereby shall be deemed to be so surrendered
only upon receipt thereof by the Company at the office specified above and
shall be surrendered only by personal delivery, courier or prepaid registered
mail.
Shares will not be issued pursuant to any Warrants if the issuance of
such Shares would constitute a violation of the securities laws of any
jurisdiction.
1. After the Expiry Time, all rights under any Warrants evidenced hereby, in
respect of which the right of subscription and purchase herein provided shall
not theretofore have been exercised, shall wholly cease and terminate and such
Warrants shall be void and of no value or effect.
2. The Holder may exercise the right of purchase herein provided for by
surrendering or delivering to the Company prior to the Expiry Time at its
principal office (a) this certificate, with the Subscription duly completed and
executed by the holder or its legal representative or attorney, duly appointed
by an instrument in writing in form and manner satisfactory to the Company, and
(b) either: (1) cash or a certified cheque, money order or bank draft payable to
or to the order of the Company in lawful money of Canada at par in the province
of Ontario, in an amount equal to the Exercise Price multiplied by the number of
Shares for which subscription is being made (the "Aggregate Exercise Price"); or
(2) the surrender to the Company of debt or equity securities of the Company
having a Market Price equal to the Aggregate Exercise Price of the Common Stock
being purchased upon such exercise or (3) a written notice to the Company that
the Purchaser is exercising the Warrant (or a portion thereof) by authorizing
2
the Company to withhold from issuance a number of shares of Common Stock
issuable upon such exercise of the Warrant which when multiplied by the Market
Price of the Common Stock is equal to the Aggregate Exercise Price (and such
withheld shares shall no longer be issuable under this Warrant).
Any warrant certificate, certified cheque, money order or bank draft
referred to in this Section 2 shall be deemed to be surrendered only upon
delivery thereof to the Company at its principal office in the manner provided
in section 14 hereof.
3. Upon such delivery and payment as aforesaid, the Company shall cause to be
issued to the Holder hereof the Shares subscribed for not exceeding those which
such Holder is entitled to purchase pursuant to this certificate and the Holder
hereof shall become a shareholder of the Company in respect of such shares with
effect from the date of such delivery and payment and shall be entitled to
delivery of a certificate or certificates evidencing such shares and the Company
shall cause such certificate or certificates to be mailed to the Holder hereof
at the address or addresses specified in such subscription within five (5)
business days of such delivery and payment.
The issuance of certificates for Shares upon exercise of this Warrant shall
be made without charge to the Holder (or an person having been duly assigned the
Warrant) for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of Shares.
The Company shall take all such actions as are necessary in order to ensure that
each Share issuable upon exercise of this Warrant shall upon payment of the
Exercise Price therefor, be validly issued, fully paid and nonassessable and
free from all liens, charges and encumbrances with respect to the issuance
thereof.
The Company shall not close its books against the transfer of this Warrant
or of any Share issued or issuable upon the exercise of this Warrant in any
manner which interferes with the timely exercise of this Warrant.
The Company shall assist and cooperate with the Holder (or an person having
been duly assigned the Warrant) required to make any governmental filings or
obtain any governmental approval prior to or in connection with any exercise of
this Warrant (including, without limitation, making any filings required to be
made by the Company).
4. The Holder may subscribe for and purchase a number of Shares less than the
number it is entitled to purchase pursuant to this certificate. In the event of
any such subscription and purchase prior to the Expiry Time, the Holder shall in
addition be entitled to receive, without charge, a new warrant certificate in
respect of the balance of the Shares of which it was entitled to purchase
pursuant to this certificate and which were then not purchased.
5. Notwithstanding any adjustments provided for in section 8 hereof or
otherwise, the Company shall not be required upon the exercise of any Warrants,
to issue fractional Shares in satisfaction of its obligations hereunder. To the
extent that the Holder would be entitled to purchase a fraction of a Share, such
right may be exercised in respect of such fraction only in combination with
other rights which in the aggregate entitle the Holder to purchase a whole
number of Shares.
3
6. Nothing in this certificate or in the holding of a Warrant evidenced hereby
shall be construed as conferring upon the Holder any right or interest
whatsoever as a shareholder of the Company.
7. The Company covenants and agrees that (a) so long as any Warrants evidenced
hereby remain outstanding, it shall reserve and there shall remain unissued out
of its authorized capital a sufficient number of Shares to satisfy the right of
purchase herein provided for should the Holder determine to exercise its rights
in respect of all the Shares for the time being called for by such outstanding
Warrants, and (b) all Shares which shall be issued upon the exercise of the
right to purchase herein provided for, upon payment thereof of the amount at
which such Shares may at the time be purchased pursuant to the provisions
hereof, shall be issued as fully paid and non-assessable Shares and the holders
thereof shall not be liable to the Company or to its creditors in respect
thereof.
8. The Exercise Price and the number of Shares purchasable upon exercise of the
Warrants evidenced hereby shall be subject to adjustment from time to time in
the events and in the manner provided as follows:
(a) If and whenever at any time prior to the Expiry Time, the
Company shall (i) consolidate the outstanding Shares into a lesser
number of Shares or (ii) subdivide the outstanding Shares into a
greater number of Shares, as the case may be, the Exercise Price shall
be adjusted to that amount determined by multiplying the Exercise
Price in effect immediately prior to such date by a fraction, of which
the numerator shall be the number of Shares outstanding on such date
before giving effect to such consolidation or subdivision and of which
the denominator shall be the number of Shares outstanding after giving
effect to such consolidation or subdivision. Such adjustment shall be
made successively whenever any event referred to in this subsection
(a) shall occur.
(b) If and whenever at any time prior to the Expiry Time, there
is a reclassification or redesignation of the Shares into other shares
or a reorganization of the Company (other than as described in
subsection 8(a)hereof), or an amalgamation, merger or arrangement,
which does not result in reclassification of the outstanding Shares or
a change of the Shares into other shares or a sale or conveyance of
the property and assets of the Company as an entirety or substantially
as an entirety to any other body corporate or other entity, the
Holder, if it has not exercised its right of purchase prior to the
effective date of such reclassification, redesignation, change,
reorganization, amalgamation, merger, arrangement, sale or conveyance,
upon the exercise of such right thereafter, shall be entitled to
receive and shall accept in lieu of the number of Shares then
subscribed for by it, but for the same aggregate consideration payable
therefor, the number of shares or other securities or property of the
Company or of the body corporate, or such other entity resulting from
such amalgamation, merger or arrangement or to which such sale or
conveyance may be made, as the case may be, that the Holder would have
been entitled to receive on such reclassification, redesignation,
change, reorganization, amalgamation, merger, arrangement, sale or
conveyance if, on the record date or the effective date thereof, as
the case may be, it had been the registered holder of the number of
Shares so subscribed for.
3
(c) If and whenever prior to the Expiry Time, the Shares of the
Company shall be subdivided into a greater or consolidated into a
lesser number of shares, the Holder if it has not exercised its right
of purchase on or prior to the record date or effective date, as the
case may be, of such subdivision or consolidation, upon the exercise
of such right thereafter, shall be entitled to receive and shall
accept in lieu of the number of Shares of the Company then subscribed
for by it, at the Exercise Price determined in accordance with this
section 8, the aggregate number of Shares of the Company (calculated
to the nearest hundredth) that the Holder would have been entitled to
receive as a result of such subdivision or consolidation if, on such
record date, it had been the registered holder of the number of Shares
for which subscription is being made.
(d) The adjustments provided for in this section 8 in the
Exercise Price and in the number and classes of shares which are to be
received on the exercise of the Warrants, are cumulative and shall, in
the case of adjustments to the Exercise Price, be computed to the
nearest one-tenth of one cent. After any adjustment pursuant to this
section 8, the term "Shares" where used in this certificate shall be
interpreted to mean shares of any class or classes which, as a result
of all prior adjustments pursuant to this section 8, the Holder is
entitled to receive upon the full exercise of a Warrant entitling it
to purchase the number of Shares so indicated.
(e) In the event of any question arising with respect to
adjustment provided for in this section 8, such question shall be
conclusively determined by the Company's auditors, or, if they are
unable or unwilling to act, by such other firm of independent
chartered accountants as may be selected by the board of directors of
the Company, who shall have access to all necessary records of the
Company, the Holder and all other persons in interest and such
determination shall be binding upon the Company and the Holder.
(f) As a condition precedent to the taking of any action which
would require an adjustment pursuant to this section 8 in any of the
subscription rights pursuant to the Warrants, including the Exercise
Price or the number and classes of shares which are to be received
upon the exercise thereof, the Company shall take any corporate action
which may, in the opinion of counsel of the Company, be necessary in
order that the Company has unissued and reserved in its authorized
capital and may validly and legally issue as fully paid and
non-assessable all the shares which the Holder is entitled to receive
on the full exercise hereof in accordance with the provisions hereof.
9. Adjustment of Exercise Price and Number of Shares upon Issuance of Common
Shares.
(i) If and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Section 10 is deemed to have
issued or sold, any Common Shares for a consideration per share ("Issue Price")
less than the Exercise Price in effect immediately prior to such time or that is
less than zero, then immediately upon such issue or sale the Exercise Price
5
shall be reduced to the Issue Price; provided, however, that in the event the
Issue Price is zero or less than zero, the Exercise Price shall be reduced to
the lower of one-tenth (1/10th) of the Exercise Price in effect immediately
prior to such issuance and the par value of the underlying security. Upon each
such adjustment of the Exercise Price hereunder, the number of Common Shares
acquirable upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of Common Shares acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(ii) Notwithstanding the foregoing, there shall be no adjustment to the
Exercise Price or the number of Common Shares obtainable upon exercise of
this Warrant as a result of any issue or sale (or deemed issue or sale):
(a) upon exercise or conversion of any Options or convertible
securities outstanding as of the issue date of the Warrant;
(b) in connection with stock splits, stock dividends, subdivisions,
combinations, recapitalizations or reclassifications of share for
which adjustments were made pursuant to this Section 8;
(c) in connection with equipment leasing or bank or other commercial
debt financing transactions (i) approved by the Board of Directors of
the Company and (ii) not in excess of five percent (5%) of the
Company's outstanding shares of Common Stock on an "as-if converted"
and fully diluted basis;
(d) in connection with the Company's merger with or acquisition of
another business entity, provided that the Holders of the Warrants
representing a majority of the Shares obtainable upon exercise of all
Warrants then outstanding have approved such transaction; or
(e) In connection with strategic transactions (i) so long as the
exclusion from the adjustment required to be made pursuant to Section
9 (i) is specifically approved by the Holders of the Warrants
representing a majority of the Shares obtainable upon exercise of all
Warrants then outstanding on a case by case basis, and (ii) not in
excess of five percent (5%) of the Company's outstanding Common Shares
on an "as-if converted" and fully diluted basis.
10. Effect on Exercise Price of Certain Events. For purposes of determining
the adjusted Exercise Price under Section 9, the following shall be applicable:
(i) Issuance of Rights or Options. If the Company in any manner grants or
sells any Options and the price per share for which Common Stock is issuable
upon the exercise of such Options, or upon conversion or exchange of any
6
Convertible Securities issuable upon exercise of such Options, is less than the
Exercise Price in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Options for such
price per share. For purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (A) the total amount,
if any, received or receivable by the Company as consideration for the granting
or sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Options, plus in
the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Exercise Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange thereof is less than the
Exercise Price in effect immediately prior to the time of such issue or sale,
then the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the issuance or sale of
such Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Exercise Price shall
be made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Exercise Price had been or are to be made pursuant to other provisions of this
Section 2, no further adjustment of the Exercise Price shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
changes at any time, the Exercise Price in effect at the time of such change
shall be immediately adjusted to the Exercise Price (determined in accordance
with Section 9 above) which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold and the number of shares of Common
7
Stock issuable hereunder shall be correspondingly adjusted; provided, that if
such adjustment (determined in accordance with Section 9 above) would result in
an increase of the Exercise Price then in effect, no adjustments shall be made.
(iv) Calculation of Consideration Received. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor (net of discounts, commissions and
related expenses). If any Common Stock, Option or Convertible Security is issued
or sold for a consideration other than cash, the amount of the consideration
other than cash received by the Company shall be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company shall be the Market
Price thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the fair value of
such portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Option or Convertible Security, as the case
may be. The fair value of any consideration other than cash and securities shall
be determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the shares of Common Stock obtainable upon exercise
of such Warrants. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration shall be
determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Company and the Registered Holders of
Warrants representing a majority of the shares of Common Stock obtainable upon
exercise of such Warrants, provided. The determination of such appraiser shall
be final and binding on the Company and the Registered Holders of the Warrants,
and the fees and expenses of such appraiser shall be borne by the Company.
(v) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Option by the parties thereto, the Option shall be deemed to
have been issued for a consideration of $.01.
(vi) Treasury Shares. The number of Shares outstanding at any given
time shall not include shares owned or held by or for the account of the Company
or any Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Shares.
(vii) Record Date. If the Company takes a record of the holders of
Common Share for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
8
11. In the case of the consolidation, amalgamation, merger or transfer of the
undertaking or assets of the Company as an entirety or substantially as an
entirety to another corporation, (the "Successor"), the Successor shall
expressly assume, by written agreement in form reasonably satisfactory to the
Holder and executed and delivered to the Holder, the due and punctual
performance and observance of such and every covenant and condition of this
certificate to be performed and observed by the Company.
12. Subject as herein provided, all or any of the rights conferred upon the
Holder may be enforced by the Holder by appropriate legal proceedings. No
recourse under or upon any obligation, covenant or agreement herein contained or
in any of the Warrants issued hereunder shall be had against any shareholder,
officer, or director of the Company, either directly or through the Company, it
being expressly agreed and declared that the obligations under the Warrants
evidenced hereby are solely corporate obligations of the Company and that no
personal liability whatsoever shall attach to or be incurred by the
shareholders, officers or directors of the Company or any of them in respect
hereof, any and all rights and claims against every such shareholder, officer or
director being hereby expressly waived as a condition of and as a consideration
for the issue of the Warrants evidenced hereby.
13. If the Warrant certificate evidencing the Warrants issued hereby becomes
stolen, lost, mutilated or destroyed, the Company may, on such terms as it may
in its discretion impose, respectively issue and countersign a new warrant
certificate of like denomination, tenor and date as the certificate so stolen,
lost, mutilated or destroyed.
14. Any notice of delivery or surrender of documents to the Company under the
provisions of this certificate shall be valid and effective if delivered
personally to an officer of the Company or if sent by registered letter, postage
prepaid, addressed to the Company at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxx, X0X 0X0, to the attention of the President and shall be deemed to have
been effectively given, received and made on the date of delivery or on the
fourth business day after the time of mailing or upon actual receipt, whichever
is sooner. The Company may from time to time notify the Holder in writing of a
change of address. In the case of disruption in postal services, any notice, if
mailed, shall not be deemed to have been effectively given until it is
personally delivered.
15. This certificate and the Warrants issued hereunder shall be governed by,
performed, construed and enforced in accordance with the laws of the province of
Ontario and the laws of Canada applicable therein.
16. Time shall be of the essence hereof.
17. This Warrant and the Shares issuable on exercise therof have not been
registered under the Securities Act of 1933, as amended (the "U.S. Securities
Act") or the securities laws of any state of the United States and may not be
offered for sale or sold unless registered under the U.S. Securities Act and the
securities laws of all applicable states of the United States or an exemption
from such registration requirements is available.
IN WITNESS WHEREOF the Company has caused this Warrant certificate to
be signed by its duly authorized officers as of ., 2001.
9
API ELECTRONICS GROUP INC.
By:____________________________
By:____________________________
TRANSFER FORM
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
to
________________________________________________________________________________
Address:
________________________________________________________________________________
Telecopier Number:
________________________________________________________________________________
the Warrants represented by the within Warrant certificate and do(es) hereby
irrevocably constitute and appoint
________________________________________________________________________________
________________________________________________________________________________
attorney to transfer the said Warrants represented hereby on the books of the
Company with full power of substitution in the premises.
DATED ____________________________________________________, ________________.
In the presence of
______________________ __________________________________________________
Signature Guaranteed Signature of Registered Warrantholder*
_________________________________
Print Name in Full
NOTICE: The signature on this assignment must correspond with the name entered
in the registration panel of this certificate. The transferor must
pay to the Company all exigible taxes.
* A guarantee of signature will be required with respect to the execution of the
Subscription Form or a transaction relating to the Warrants represented by this
Warrant certificate which results in a change of registration of this Warrant
certificate or the registration of Common Shares upon the exercise of the
Warrants represented hereby. A guarantee of signature may be given by any
Canadian chartered bank, any trust company which is a member of The Trust
Companies Association of Canada or by a member firm of The Toronto Stock
Exchange.
SUBSCRIPTION FORM
TO: API Electronics Group Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX X0X 0X0
The undersigned holder of the Warrants evidenced by the within Warrant
certificate hereby subscribes for _____________________________________ Common
Shares of API Electronics Group Inc. (or such number of Common Shares or other
securities or property to which such subscription entitles the holder in lieu
thereof or in addition thereto under the provisions mentioned in such Warrant
certificate) pursuant to such Warrants exercisable at an exercise price of US
$0.75 until the Expiry Time (or such other price as is determined pursuant to
this Warrant certificate) on the terms specified in such Warrant certificate,
and encloses herewith a certified cheque, bank draft or money order payable to
the order of the Company in payment therefor.
The undersigned hereby irrevocably directs that the said Common Shares be
issued and delivered as follows:
Taxpayer
Identification
Name(s) in Full Address(es) SIN Number Number(s) of Number (if
(if applicable) Common Shares applicable)
_______________ ___________ _______________ _____________ _______________
_______________ ___________ _______________ _____________ _______________
_______________ ___________ _______________ _____________ _______________
(Page 1 of 2)
(Please print full name in which share certificates are to be issued. If any
shares are to be issued to a person or persons other than the holder, the holder
must pay to the Company all exigible transfer taxes or other government
charges.)
DATED this ________________ day of _________________________, ____________.
____________________________ ______________________________
Signature Guaranteed Signature of Subscriber
______________________________
Name of Subscriber
______________________________
Address of Subscriber
[ ] Please check if the share certificates are to be delivered at the office
where this Warrant certificate is surrendered, failing which the
certificates will be mailed.
Certificates will be delivered or mailed only after the transfer books of
the Company have been opened for five (5) Business Days after the due
surrender of this Warrant certificate as aforesaid.
(Page 2 of 2)
