OPTION AGREEMENT
THIS AGREEMENT made as of the 31st day of October, 0000
X X X X X X X:
PHOTON TECHNOLOGY INTERNATIONAL, INC., a corporation
incorporated under the laws of the State of New Jersey
(the "Corporation")
-and-
C.I. - C.P.A. BUSINESS VENTURES FUND INC., a corporation
incorporated under the laws of Canada
(the "Optionee")
RECITES THAT:
A. The Corporation has agreed to grant to the Optionee certain options to
acquire common shares of the Corporation on the terms and subject to
the conditions of this agreement.
NOW THEREFORE in consideration of the sum of $1.00 now paid by
the Optionee to the Corporation and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the Corporation, the
parties hereto agree as follows:
ARTICLE 1.
INTERPRETATION
1.1. Definitions
In this agreement:
"Adjustment Period" means the period from and including the date hereof
to and including October 31, 1997;
"Business Day" means any day, other than a Saturday, a Sunday and any
other day on which Canadian chartered banks in Toronto are required to
be or may be closed for business;
"Common Shares" means the common shares in the capital of the
Corporation as such shares exist at the date hereof, provided that in
the event of any adjustment of Subscription Rights pursuant to Article
3. "Common Shares" shall thereafter mean the shares or other securities
or property which resulted from the event which caused such adjustment;
"Current Market Price of the Common Shares" at any date means the
simple average of the closing prices (or if there were no sales on any
particular day, the mean between the closing bid and ask quotations on
such day) per Common Share on the principal trading market therefor for
any 20 consecutive trading days selected by the Corporation commencing
not later than 45 trading days before such date, or, if such Common
Shares are not traded on a published market during such 45 day period
for at least 20 consecutive trading days, a price to be established in
good faith by the board of directors of the Corporation;
"Debenture" means the Debenture issued on the date hereof by Photon
Canada to the Optionee evidencing an indebtedness owed by Photon Canada
to the Optionee;
"Dividend Paid in the Ordinary Course" means a dividend paid on the
Common Shares in any financial year of the Corporation whether in (i)
cash; (ii) securities of the Corporation, including rights, options or
warrants (but excluding rights, options or warrants referred to in
Section 3.2.3 and rights, options or warrants referred to in
parentheses in Section 3.2.4(d)); or (iii) property or other assets of
the Corporation, in each case to the extent that the amount or value of
such dividend together with the amount or value of all other such
dividends previously paid during such financial year does not exceed
the greater of:
(a) 125% of the aggregate amount of dividends declared payable by
the Corporation on the Common Shares in the period of 12
consecutive months ended immediately prior to the first day of
such financial year; and
(b) 100% of the consolidated net income of the Corporation before
extraordinary items (but after dividends payable on all shares
ranking prior to or on a parity with the Common Shares with
respect to the payment of dividends) for the period of 12
consecutive months ended immediately prior to the first day of
such financial year, such consolidated net income,
extraordinary items and dividends as shown in the audited
consolidated financial statements of the Corporation for such
period of 12 consecutive months or if there are no audited
consolidated financial statements for such period, computed in
accordance with GAAP, consistent with those applied in the
preparation of the most recent audited consolidated financial
statements of the Corporation;
and, for the purpose of the foregoing (i) where any dividend is paid
otherwise than in cash, any securities, property or other assets so
distributed by way of dividend shall be valued at the fair market value
of such securities, property or other assets, as the case may be, as
determined in good faith by the board of directors of the Corporation,
and (ii) a dividend paid on the Common Shares in Common Shares shall
not be a Dividend Paid in the Ordinary Course where the effect of such
a dividend is substantially the same as a subdivision of the Common
Shares;
"Exercise Funds" has the meaning attributed to that term in Section
2.2.1;
"Exercise Notice" has the meaning attributed to that term in Section
2.2.1;
"First Option" has the meaning attributed to that term in Section
2.1.1;
"First Option Expiry Time" means midnight on October 31, 2000;
"First Option Price" means U.S. $1.25 unless such price shall have been
adjusted in accordance with the provisions of Article 3, in which case
it shall mean the adjusted price then in effect;
"First Option Shares" means 250,000 Common Shares, as the same may be
adjusted from time to time as provided in Article 3;
"First Year Second Option Expiry Time" means midnight on October 31,
1996;
"First Year Second Option Price" means U.S. $2.50;
"GAAP" means generally accepted accounting principles in the United
States of America from time to time;
"Option" means the First Option and/or the Second Option, as the case
may be;
"Option Price" means the First Option Price, the First Year Second
Option Price or the Second Year Second Option Price, as the case may
be;
"Option Shares" means the First Option Shares and/or the Second Option
Shares, as the case may be;
"Person" means any individual, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with or
without share capital, unincorporated association, trust, trustee,
executor, administrator or other legal personal representative,
regulatory body or agency, government or governmental agency, authority
or entity however designated or constituted;
"Photon Canada" means Photon Technology International (Canada) Inc., a
whollyowned subsidiary of the Corporation;
"record date" and "effective date" mean the particular time on the
relevant date;
"Rights Offering" has the meaning attributed to that term in Section
3.2.3;
"Rights Period" has the meaning attributed to that term in Section
3.2.3;
"Second Option" has the meaning attributed to that term in Section
2.1.2;
"Second Option Shares" means 400,000 Common Shares;
"Second Year Second Option Expiry Time" means midnight on October 31,
1997;
"Second Year Second Option Price" means U.S. $3.25;
"securities convertible into Common Shares" includes securities which
are exchangeable into Common Shares, and the terms "conversion price",
"converted" and "convertible" include the terms "exchange price",
"exchanged" and "exchangeable", as the case may be;
"Share Issuance" has the meaning attributed to that term in Section
3.2.1;
"Special Distribution" has the meaning attributed to that term in
Section 3.2.4;
"Subscription Rights" means the relevant Option Price and the number of
Common Shares issuable upon exercise of an Option;
"Time of Expiry" means the First Option Expiry Time, the First Year
Second Option Expiry Time or the Second Year Second Option Expiry Time,
as the case may be; and
"Underlying Share Reorganization" has the meaning attributed to that
term in Section 3.2.2.
1.2. Headings and Table of Contents
The inclusion of headings and a table of contents in this
agreement are for convenience of reference only and shall not affect the
construction or interpretation hereof
1.3. Gender and Number
In this agreement, unless the context otherwise requires,
words importing the singular include the plural and vice versa and words
importing gender include all genders.
1.4. Currency
Unless otherwise specifically stated, all dollar amounts in
this agreement are stated and shall be paid in Canadian currency.
1.5. Invalidity of Provisions
Each of the provisions contained in this agreement is distinct
and severable and a declaration of invalidity or unenforceability of any such
provision by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof.
1.6. Entire Agreement, Waiver. etc.
This agreement constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof. There are no other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth or referred to herein. No amendment, waiver or
termination of this agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any provision of this agreement shall
constitute a waiver of any other provision nor shall any such waiver constitute
a continuing waiver unless otherwise expressly provided.
1.7. Governing Law
This agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
ARTICLE 2.
GRANT OF OPTIONS AND EXERCISE THEREOF
2.1. Grant of Options
Subject to the terms and conditions of this agreement, the
Corporation grants to the Optionee:
2.1.1. an irrevocable, transferable option (the "First Option"),
exercisable in whole or in part at any time or from time to time from
the date hereof up to and including the First Option Expiry Time, to
purchase the First Option Shares at a price per share equal to the
First Option Price; and
2.1.2. an irrevocable, transferable option (the "Second Option"),
exercisable in whole or in part at any time or from time to time from
the date hereof up to and including the First Year Second Option Expiry
Time, to purchase the Second Option Shares at a price per share equal
to the First Year Second Option Price and then thereafter up to and
including the Second Year Second Option Expiry Time, to purchase any
remaining Second Option Shares at a price per share equal to the Second
Year Second Option Price.
2.2. Exercise of Options
2.2.1. The Options shall be exercised in the following manner:
(a) the Optionee shall deliver to the Corporation at its registered
office a notice (the "Exercise Notice") stating that the
Optionee wishes to exercise either the First Option, the Second
Option, or both, as the case maybe, in whole or in part (but not
for aggregate Exercise Funds of less than $100,000 on any one
exercise except on the exercise of all remaining Options), and
stating the number of Common Shares in respect of which the
Optionee wishes to exercise such Option or Options;
(b) the Exercise Notice shall be accompanied by payment by certified
cheque or bank draft payable to the Corporation in an amount
equal to the product obtained when the relevant Option Price is
multiplied by the number of Common Shares to be purchased as
specified in the Exercise Notice (the "Exercise Funds"); and
(c) as soon as practicable and, in any event within two Business
Days after receipt of the Exercise Notice and the Exercise
Funds, the Corporation shall execute and deliver one or more
share certificates registered in the name of the Optionee or its
nominee representing the aggregate number of Common Shares
specified in the Exercise Notice.
2.2.2. If less than all of the First Option Shares or Second Option
Shares, as the case may be, are purchased by the Optionee at any time,
then this agreement shall continue and remain in force as to the
balance of the Option Shares.
2.2.3. Notwithstanding anything herein to the contrary, no rights of
the Optionee to exercise either Option, in whole or in part, shall be
exercisable by C.l.-C.P.A. Business Ventures Fund Inc.
2.3. Optionee as Holder of Record of Common Shares and Delivery of Share
Certificates
2.3.1. Notwithstanding the actual date of issue thereof, the share
certificate or certificates representing Common Shares purchased on the
exercise of an Option at any time shall be deemed to have been issued,
and the Optionee shall be deemed for all purposes to have become the
holder of record of the number of Common Shares specified in the
Exercise Notice relating to such exercise of the Option, as of the date
of receipt by the Corporation of the Exercise Notice and the Exercise
Funds in respect thereof.
2.3.2. The Corporation shall not be required to deliver share
certificates while the transfer registers of the Corporation are closed
prior to any meeting of shareholders or for the payment of dividends or
for any other purpose. In the event of the exercise of an Option during
any such period, delivery of the share certificates may be postponed to
a date not exceeding five Business Days after the date of reopening of
the transfer registers; provided that the period during which the
transfer registers may be closed shall not be unreasonable and provided
further that any such postponement of the delivery of share
certificates shall not detract from the provisions of this Section 2.3.
2.4. No Fractional Shares
The Corporation shall not issue fractional shares upon any
exercise of an Option but in lieu thereof shall, in respect of any fractional
interest resulting from the exercise of the Option, pay a cash adjustment by
cheque. The amount of any cash adjustment shall equal the current market value
of such fractional interest computed on the basis of the last board lot sale
price (or average of the bid and ask prices if there was no sale) per share for
the Common Shares on the principal trading market therefor (or, if such shares
are not then traded on a published market, a price to be established in good
faith by the board of directors of the Corporation) on the Business Day next
preceding the date of exercise of the Option. If a cash adjustment is to be paid
under this Section 2.4, the mailing from the Corporation's registered office or
the principal office of the registrar of the Common Shares to the Optionee shall
be deemed to be payment of the cash adjustment resulting from such fractional
interest unless the cheque is not paid upon due presentation. Cash adjustments
that are represented by a cheque that has not been presented to the
Corporation's bankers for payment or that otherwise remain unclaimed for a
period of six years from the date on which the same became payable will be
forfeited to the Corporation.
2.5. Payment of Taxes
The Corporation shall pay all expenses, taxes (except income
tax or security transfer tax, if any) and other charges payable in connection
with the issuance of Common Shares and the delivery of share certificates
representing the same upon the exercise from time to time of an Option.
ARTICLE 3.
ADJUSTMENT OF SUBSCRIPTION RIGHTS
3.1. Conversion Price
Where an issuance or distribution of rights, options or
warrants to purchase securities convertible into Common Shares or a distribution
of such convertible securities to which Sections 3.2.3 or 3.2.4 apply, then for
the purposes of Sections 3.2.3 or 3.2.4, as the case may be, the "conversion
price" of the convertible security shall be the quotient obtained when the
aggregate of:
3.1.1. the consideration, if any, paid for the issuance or distribution
of the right, option or warrant;
3.1.2. the issue price of the convertible security (or in the case of
rights, options and warrants, the exercise price thereof); and
3.1.3. the price, if any, which must be paid to the Corporation by the
holder of such convertible security to exercise the conversion rights
attaching thereto; is divided by the number of Common Shares into which
each such convertible security is convertible,
3.2. Adjustment of First Option Price
3.2.1. Common Share Issuance
If, during the Adjustment Period, the Corporation issues Common
Shares (other than pursuant to the exercise of rights, options or
warrants to acquire Common Shares outstanding on the date hereof) at a
price per share of less than the greater of (i) the Current Market
Price of the Common Shares immediately prior to such issuance and (ii)
the First Option Price then in effect (such event being called a "Share
Issuance"), then the First Option Price shall be adjusted effective
immediately upon such issuance to a price determined by multiplying the
First Option Price in effect immediately prior to the Share Issuance by
a fraction:
(a) the numerator of which shall be the price per share of the
Common Shares issued pursuant to the Share Issuance, and
(b) the denominator of which shall be the greater of (i) the Current
Market Price of the Common Shares immediately prior to the Share
Issuance and (ii) the First Option Price then in effect,
provided however that no such adjustment shall be made if the result of
such adjustment would be to increase the First Option Price then in
effect.
3.2.2. Underlying Share Reorganization
If, during the Adjustment Period, the Corporation:
(a) changes its outstanding Common Shares into a greater or smaller
number of Common Shares; or
(b) issues Common Shares to the holders of all or substantially all
of the outstanding Common Shares by way of a stock dividend,
other than a Dividend Paid in the Ordinary Course;
(any of such events being called an "Underlying Share Reorganization"), then the
First Option Price shall be adjusted immediately after the effective date, in
the case of a change referred to in (a), or immediately after the record date
for a stock dividend referred to in (b), by multiplying the First Option Price
in effect on such record date or effective date by a fraction:
(i) the numerator of which shall be the number of Common Shares
outstanding on such record date or effective date before
giving effect to the Underlying Share Reorganization; and
(ii) the denominator of which shall be the number of Common
Shares outstanding after giving effect to the Underlying
Share Reorganization.
3.2.3. Rights Offering
If, during the Adjustment Period, the Corporation issues rights,
options or warrants to the holders of all or substantially all of the
outstanding Common Shares under which such holders are entitled, during
a period expiring not more than 45 days after the record date for such
issue (the "Rights Period"), to acquire Common Shares or securities
convertible into Common Shares at a price per share (or having a
conversion price per share) of less than 95% of the greater of (i) the
Current Market Price of the Common Shares on such record date and (ii)
the First Option Price then in effect (any of such events being called
a "Rights Offering"), then the First Option Price shall be adjusted
effective immediately after the end of the Rights Period to a price
determined by multiplying the First Option Price in effect immediately
prior to the end of the Rights Period by a fraction:
(a) the numerator of which shall be the aggregate of:
(i) the number of Common Shares outstanding on the record date
for the Rights Offering, and
(ii) a number determined by dividing (I) either (a) the product
of the number of Common Shares subscribed for during the
Rights Period under the Rights Offering and the price at
which such Common Shares were offered, or, as the case may
be, (b) the product of the conversion price of such
securities offered and the number of Common Shares for or
into which the securities so offered under the Rights
Offering may be converted, by (2) the greater of (i) the
Current Market Price of the Common Shares on the record
date for the Rights Offering and (ii) the First Option
Price then in effect; and
(b) the denominator of which shall be the number of Common Shares
outstanding after giving effect to the Rights Offering and for
this purpose there shall be included, in determining the number
of outstanding Common Shares, Common Shares which, although not
yet issued, have been subscribed for during the Rights Period
under the Rights Offering and in the case of a Rights Offering
of convertible securities, the Common Shares for or into which
the securities issued or, to the extent not issued, subscribed
for under the Rights Offering are convertible.
If the Optionee shall have exercised all or part of the First Option after the
record date for the Rights Offering but before the end of the Rights Period, the
Optionee shall receive from the Corporation, no later than 60 days after the end
of the Rights Period, a cash payment equal to the difference, if any, between
the First Option Price in effect immediately prior to the end of the Rights
Period and the First Option Price as adjusted pursuant to this Section 3.2.3
multiplied by the number of Common Shares purchased upon such exercise during
such period. Such payment shall be made by cheque in Canadian dollars payable to
the Optionee and mailed to the address to which the Common Shares purchased upon
such exercise are to be sent.
3.2.4. Special Distribution
If, during the Adjustment Period, the Corporation issues or
distributes to all or substantially all holders of the Common Shares:
(a) shares of the Corporation of any class;
(b) evidences of indebtedness of the Corporation;
(c) any cash, property or other assets of the Corporation; or
(d) rights, options or warrants to acquire any of the foregoing
(other than rights, options or warrants to purchase Common
Shares or securities convertible into Common Shares at a price
per share (or having a conversion price per share) equal to or
greater than 95% of the greater of (i) the Current Market Price
of the Common Shares on the record date referred to below and
(ii) the First Option Price then in effect);
and if such issuance or distribution does not constitute a Share Issuance, an
Underlying Share Reorganization or a Rights Offering, or to the extent that such
issuance or distribution does not constitute a Dividend Paid in the Ordinary
Course, (any such issuance or distribution being called a "Special
Distribution"), then the First Option Price shall be adjusted effective
immediately after the record date on which the holders of Common Shares are
determined for purposes of the Special Distribution by multiplying the First
Option Price in effect on such record date by a fraction:
(a) the numerator of which shall be the result obtained when:
(i) the fair market value, as determined by the board of
directors of the Corporation (whose determination will be
conclusive), of the shares, evidences of indebtedness,
cash, property or other assets, rights, options or warrants
issued or distributed in the Special Distribution (after
taking into consideration any payment or payments, if any,
to be made to the Corporation by the recipients of the
Special Distribution);
is subtracted from:
(ii) the product of the number of Common Shares outstanding on
such record date and the Current Market Price of the Common
Shares on such record date; and
(b) the denominator of which shall be the number of Common Shares
outstanding on such record date multiplied by the Current Market
Price of the Common Shares on such record date;
provided that no such adjustment shall be made if the result of such adjustment
would be to increase the First Option Price in effect on the record date. To the
extent that such distribution is not so made, the First Option Price will be
readjusted effective immediately to the First Option Price that would be in
effect based upon such shares, evidences of indebtedness, cash, property or
other assets, rights, options or warrants actually distributed.
3.2.5. Readjustment of First Option Price Upon Expiry of Convertible
Securities and of Rights, Options and Warrant Relating Thereto
To the extent that any adjustment in the First Option Price
occurs pursuant to Section 3.2.3 as a result of the fixing by the
Corporation of a record date for a Rights Offering in respect of
securities convertible into Common Shares, pursuant to Section 3.2.4(a)
as a result of a Special Distribution of such convertible securities or
pursuant to Section 3.2.4(d) as a result of a Special Distribution of
rights, options or warrants to purchase such convertible securities,
the First Option Price shall be readjusted:
(a) in the case of the adjustments contemplated by Sections 3.2.3
and 3.2.4(a), upon the expiry of the unexercised conversion
right attaching to the convertible securities actually issued
pursuant to the Rights Offering or the Special Distribution, as
the case may be; and
(b) in the case of the adjustment contemplated by Section 3.2.4.(d),
upon the expiry of:
(i) the unexercised rights, options or warrants; and
(ii) to the extent that such rights, options or warrants have
been exercised and relate to securities convertible into
Common Shares, the unexercised conversion rights attaching
to such convertible securities;
to the First Option Price which would have resulted from an adjustment pursuant
to Sections 3.2.3 or 3.2.4, as the case may be, had such adjustment been based
upon the number of Common Shares actually issued, or the fair market value of
such securities or rights, options or warrants, as the case may be, immediately
after such expiry, and the First Option Price shall be further readjusted from
time to time in such manner upon the expiry of any such further right.
3.3. Adjustment of Subscription Rights Upon a Capital Reorganization
If, during the Adjustment Period, there occurs a
reclassification or redesignation of Common Shares or a change of the Common
Shares into other shares or securities (other than an Underlying Share
Reorganization), or a consolidation, amalgamation or merger of the Corporation
with or into any other corporation or entity (other than a consolidation,
amalgamation or merger which does not result in any reclassification of the
outstanding Common Shares or a change of the Common Shares into other shares or
securities) (any of such events being called a "Capital Reorganization"), and
the Optionee, after the effective date of such Capital Reorganization, exercises
its right to purchase Common Shares pursuant to the exercise of an Option, the
Optionee shall be entitled to receive, and shall accept, in lieu of the number
of Common Shares to which the Optionee was theretofore entitled upon such
exercise, the kind and amount of shares or other securities, property or cash
resulting from the Capital Reorganization which the Optionee would have been
entitled to receive as a result of such Capital Reorganization if, on the
effective date thereof, the Optionee had been the registered holder of the
number of Common Shares to which it was entitled upon such exercise. If
determined appropriate by the board of directors of the Corporation, appropriate
modifications shall be made, as a result of any such Capital Reorganization, to
the provisions of this Article 3 such that such provisions shall thereafter
correspond as nearly as is reasonably possible in relation to any shares or
other securities, property or cash thereafter deliverable upon the exercise of
an Option. Any such modifications shall be made by and set forth in an amendment
hereto.
3.4. Adjustment of Number of Common Shares Issuable Upon Exercise
3.4.1. Upon an Adjustment to the First Option Price
If, during the Adjustment Period, any adjustment in the First
Option Price occurs pursuant to Section 3.2 (other than as a result of
the application of Section 3.2.5), then the number of Common Shares
issuable upon the exercise of the First Option will be adjusted
concurrently with such adjustment of the First Option Price by
multiplying the number of Common Shares issuable on the exercise
thereof immediately prior to such adjustment by a fraction the
numerator of which is the First Option Price in effect immediately
prior to such adjustment and the denominator of which is the First
Option Price resulting from such adjustment.
3.4.2. Upon the Expiry of Conversion Rights of a Convertible Security
If, during the Adjustment Period, any readjustment in the First
Option Price occurs as a result of the application of Section 3.2.5,
then the number of Common Shares issuable upon exercise of the First
Option will be readjusted concurrently with such readjustment of the
First Option Price by multiplying the number of Common Shares issuable
on the exercise thereof immediately prior to such readjustment by a
fraction the numerator of which is the First Option Price in effect
immediately prior to such readjustment and the denominator of which is
the First Option Price resulting from such readjustment.
3.5. Readjustment Upon Change in Conversion Rights of a Convertible Security
If there has been an adjustment to the Subscription Rights as
a result of a Rights Offering or Special Distribution of or relating to
securities convertible into Common Shares, and if, for any reason, the
conversion rights attaching to such a convertible security change, and if such
change does not otherwise result in a readjustment of the Subscription Rights
hereunder, then upon such change becoming effective, the Subscription Rights
shall be readjusted in such manner as the board of directors of the Corporation
determines is appropriate in the circumstances.
3.6. Other Adjustment of Subscription Rights
If the Corporation shall take any action affecting the Common
Shares, other than an action described in Sections 3.2 or 3.3, which in the
opinion of the board of directors of the Corporation would have a material
adverse effect upon the rights of the Optionee, the Subscription Rights shall be
adjusted in such manner and at such time as the board of directors of the
Corporation determines to be equitable in the circumstances. Failure of the
board of directors of the Corporation to take any such action shall be
conclusive evidence that the board of directors has determined that it is
equitable to make no adjustment in the circumstances.
3.7. Special Provision Relating to Adjustment on a Special Distribution
If the Corporation shall take or proposes to take any action
which constitutes or would constitute a Special Distribution under Section 3.2.4
and if, as a result thereof, the adjustment to the First Option Price that is
required pursuant to Section 3.2.4 would be inappropriate in the opinion of the
board of directors of the Corporation acting in good faith, taking into
consideration the fair market value of the Special Distribution, the fair market
value of the Common Shares and the Current Market Price of the Common Shares on
the relevant date, then the adjustment required by Section 3.2.4 as a result of
the Special Distribution shall not be made and, in lieu thereof, the board of
directors of the Corporation shall determine the adjustment to the First Option
Price that is appropriate in all the circumstances and such determination will
be conclusive.
3.8. Miscellaneous Adjustment Rules
The following rules and procedures shall be applicable to
adjustments made pursuant to Article 3:
3.8.1. Adjustments Successive
Subject to the other provisions of this Section 3.8, any
adjustment pursuant to Sections 3.2, 3.3, 3.4 or 3.5 shall be made
successively whenever an event referred to therein shall occur, and
shall be made in respect of all of the First Option then outstanding or
which may be outstanding thereafter.
3.8.2. Minimum Adjustment
No adjustment in the First Option Price shall be required unless
such adjustment would result in a change of at least 1% in the
prevailing First Option Price and no adjustment shall be made in the
number of Common Shares purchasable upon exercise of the First Option
unless it would result in a change of at least one one-hundredth of a
share, provided, however, that any adjustments which, if not for the
provisions of this Section 3.8.2, would otherwise have been required to
be made, shall be carried forward and taken into account in any
subsequent adjustment.
3.8.3. Equal Participation
No adjustment in the Subscription Rights shall be made in
respect of any event described in Section 3.2 (other than the event
referred to in Section 3.2.2(a)), if the Optionee is entitled to
participate in such event on the same terms, mutatis mutandis, as if
the Optionee had exercised the First Option prior to or on the
effective date or record date of such event.
3.8.4. Disputes
If a dispute shall at any time arise with respect to adjustments
or readjustments of Subscription Rights, such dispute shall be
conclusively determined by the auditors of the Corporation 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 Corporation and approved by the Optionee.
3.8.5. Failure to Fix a Record Date
In the absence of a resolution of the board of directors of the
Corporation fixing a record date for a stock dividend or other
distribution comprising an Underlying Share Reorganization, a Rights
Offering or a Special Distribution, the Corporation shall be deemed to
have fixed as the record date therefor the effective date of such
event.
3.8.6. Termination of Adjustment Provisions
Notwithstanding anything herein to the contrary, and for greater
certainty, the adjustment provisions set forth in this Article 3 shall
terminate and be of no further effect at midnight on October 31, 1997.
3.8.7. MLTV Share Issuance
For greater certainty, the issuance to M.L. Technology Ventures,
L.P. ("MLTV") of 1,000,000 Common Shares pursuant to an agreement dated
September 20, 1995 between MLTV and the Corporation shall not give rise
to the application of the adjustment provisions of this Article 3.
3.9. Proceedings Prior to any Action Requiring Adjustment
As a condition precedent to the taking of any action which
would require an adjustment or readjustment pursuant to Sections 3.2, 3.3, 3.4
or 3.5, the Corporation shall take any action which may, in the opinion of
counsel, be necessary in order that the Corporation may validly and legally
issue, as fully paid and non-assessable shares, all the Common Shares which the
Optionee is entitled to receive on the full exercise thereof in accordance with
the provisions hereof
3.10. Notice of Adjustment of First Option Price and Number of Common Shares
Purchasable Upon Exercise
3.10.1. At least 21 days prior to the effective date or record date, as
the case may be, of any event which requires or might require an
adjustment or readjustment to the Subscription Rights, the Corporation
shall give notice to the Optionee of the particulars of such event and,
if determinable, the required adjustment or readjustment.
3.10.2. In case any adjustment for which a notice referred to in
Section 3.10.1 has been given is not then determinable, the Corporation
shall promptly after such adjustment or readjustrnent is determinable
give notice to the Optionee of the adjustment or readjustment.
ARTICLE 4.
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE CORPORATION
4.1. Representations and Warranties
The Corporation represents and warrants to the Optionee as
follows:
4.1.1. the Corporation is incorporated and is an existing corporation
under the laws of the State of New Jersey;
4.1.2. the authorized capital of the Corporation consists of 500 shares
of preferred stock of which no shares are issued or outstanding and
10,000,000 Common Shares of which 2,627,200 Common Shares were, on
October 24, 1995, validly issued and outstanding as fully paid and
non-assessable;
4.1.3. the Corporation has the corporate power and capacity to enter
into, and to perform its obligations under, this agreement and this
agreement has been duly executed and delivered by the Corporation and
is a valid and binding obligation of the Corporation, enforceable in
accordance with its terms;
4.1.4. the issue of the Option Shares upon the exercise of the Options
has been authorized by all necessary corporate action and, upon receipt
of the consideration therefor, the Option Shares issuable upon the
exercise of such Options shall be issued as fully paid and
non-assessable shares in the capital of the Corporation;
4.1.5. neither the entering into of this agreement, nor the performance
by the Corporation of any of its obligations under this agreement will
contravene, breach or result in any default under the articles,
by-laws, constating documents or other organizational documents of the
Corporation or under any mortgage, lease, agreement, other legally
binding instrument, licence, permit, statute, regulation, order,
judgment, decree or law to which it is a party or by which it may be
bound; and
4.1.6. no authorization, consent or approval of, or filing with or
notice to, any governmental agency, regulatory body, court or other
Person is required in connection with the execution, delivery or
performance of this agreement by the Corporation or the issue of any of
the Option Shares, other than the approval of the securities exchanges
and/or markets on which the Option Shares are to be listed and the
filing of a registration statement or similar document required for the
purposes of making the Option Shares freely tradeable securities in the
United States of America.
4.2. Covenants
The Corporation covenants with the Optionee that so long as
any part of either of the Options remains outstanding:
4.2.1. it shall reserve and keep available out of its authorized Common
Shares a sufficient number of Common Shares for the purpose of enabling
it to satisfy its obligation to issue Common Shares upon the exercise
of the Options;
4.2.2. it shall. upon the one time demand of the Optionee and in any
event prior to the Time of Expiry of the Options, take all actions
which may be necessary so that the Option Shares issuable upon the
exercise of the Options will be registered for trading under the
securities laws of the United States of America;
4.2.3. it shall from time to time take all action which may be
necessary so that the Option Shares issuable upon the exercise of the
Options will, immediately upon their issuance, be listed on the
principal securities exchanges and/or markets within the United States
of America and Canada, if any, on which the Common Shares are then
listed;
4.2.4. it shall use its best efforts to maintain its corporate
existence; and
4.2.5. it shall not, by closing its transfer registers or taking any
other action, deprive the Optionee of the ability to exercise an Option
during the period of 14 days after the giving of the notice required by
Section 3.10.
ARTICLE 5.
TRANSFER OF RIGHTS TO EXERCISE OPTIONS
5.1. Transfer of Rights to Exercise All or Part of Options Permitted
5.1.1. The Optionee shall be entitled at any time and from time to time
to transfer or assign to any Person in accordance with the provisions
of applicable securities legislation, the right to exercise all or any
part of either of the Options and to acquire the Option Shares relating
thereto.
5.1.2. Upon any transfer of rights referred to in Section 5.1.1, the
Corporation shall enter into an acknowledgement in form satisfactory to
the Optionee and the Person to whom the rights are being transferred,
acknowledging the number of First Options and/or Second Options, as the
case may be, the rights relating to which are being transferred and the
number of First Options and/or Second Options, as the case may be, if
any, the rights relating to which are being retained by the Optionee.
The Corporation shall also acknowledge the right of the transferee to
acquire the relevant number of Option Shares upon the due exercise of
the rights so transferred.
5.1.3. Upon any transfer of rights in accordance with the provisions of
this Article 5, all of the provisions of this agreement shall apply to
the Options the rights relating to which were transferred, and shall
continue to apply to the balance of the Options the rights relating to
which were retained.
ARTICLE 6.
GENERAL
6.1. Filing of Agreement and Notice to Registrar
A copy of this agreement shall be filed in the minute book of
the Corporation and the Corporation shall give notice of this agreement to the
registrar, if any, of the Common Shares.
6.2. Optionee not a Shareholder
The holding of the Options shall not, in itself, constitute
the Optionee a shareholder of the Corporation nor entitle it to any right or
interest except as expressly provided in this agreement.
6.3. Submission to Jurisdiction
The Corporation agrees that any suit, action or proceeding
arising out of or relating to this agreement against it or any of its assets may
be brought in any court of the Province of Ontario or Canada (or, at the option
of the Optionee in the Federal Court of Canada, if within that court's
jurisdiction) and the Corporation hereby irrevocably and unconditionally attorns
and submits to the jurisdiction of such courts over the subject matter of any
such suit, action or proceeding. The Corporation irrevocably waives and agrees
not to raise any objection it might now or hereafter have to any such suit,
action or proceeding in any such court including, without limitation, any
objection that the place where such court is located is an inconvenient forum or
that there is any other suit, action or proceeding in any other place relating
in whole or in part to the same subject matter. The Corporation agrees that any
judgment or order in any such suit, action or proceeding brought in such a court
shall be conclusive and binding upon it and consents to any such judgment or
order being recognized and enforced in the courts of its jurisdiction of
incorporation or any other courts, by registration or homologation of such
judgment or order, by a suit, action or proceeding upon such judgment or order,
or any other means available for enforcement of judgments or orders, at the
option of the Optionee, provided that service of any required process is
effected upon it in the manner specified in Section 6.4 or as otherwise
permitted by law. Nothing in this Section 6.3 shall restrict the bringing of any
such suit, action or proceeding in the courts of any other jurisdiction.
6.4. Attorney for Service
The Corporation irrevocably appoints Photon Technology
International (Canada) Inc., at the following address: 000 Xxxxxxxxxx Xxxxx,
Xxxxxx, Xxxxxxx, X0X 0X0 its authorized attorney and agent to accept and
acknowledge, for and on behalf of the Corporation, service of any and all
process in the Province of Ontario, Canada in any suit, action or proceeding
arising out of or relating to this agreement. The Corporation agrees that
service of process upon such attorney and agent by delivering a copy thereof,
addressed to Xx. Xxxxxxx Xxxxxxxx, in care of such attorney and agent, at the
above address, shall be conclusively deemed to have come to the notice of the
Corporation at the time of such delivery and shall constitute in every respect
valid and effective personal service upon the Corporation at the time of such
delivery, and that failure by such attorney and agent to give notice of such
service to the Corporation shall not affect the validity or effect of such
service or any judgment or order based thereon or arising therefrom. The
Corporation irrevocably authorizes and directs such attorney and agent to accept
service on its behalf and agrees to appear in such suit, action or proceeding.
The Corporation further agrees to take all action as may be necessary to confirm
and continue in full force and effect the appointment of such attorney and agent
so that until the expiry of all rights and remedies associated with either of
the Options, or both, the Corporation shall have an attorney and agent for
service of process in the Province of Ontario, Canada.
6.5. Notices
Any notice or other communication required or permitted to be
given or delivered hereunder shall be in writing and shall be given by prepaid
first-class mail, by facsimile or other means of electronic communication or by
hand-delivery as hereafter provided. Any such notice or other communication, if
mailed by prepaid first-class mail at any time other than during or within three
Business Days prior to a general discontinuance of postal service due to strike,
lockout or otherwise, shall be deemed to have been received on the fourth
Business Day after the post-marked date thereof, or if sent by facsimile or
other means of electronic communication, shall be deemed to have been received
on the Business Day of sending, or if delivered by hand shall be deemed to have
been received at the time it is delivered to the applicable address noted below
either to the individual designated below or to an individual at such address
having apparent authority to accept deliveries on behalf of the addressee.
Notice of change of address shall also be governed by this Section. In the event
of a general discontinuance of postal service due to strike, lock-out or
otherwise, notices or other communications shall be delivered by hand or sent by
facsimile or other means of electronic communication and shall be deemed to have
been received in accordance with this Section. Notices and other communications
shall be addressed as follows:
(a) if to the Optionee:
C.I.-C.P.A. Business Ventures Fund Inc.
Xxxxx Xxxxx, Xxxxx 0000
X.X. Xxx 000
Xxxxxxx-Xxxxxxxx Centre
Toronto, Ontario
M5K IN2
Attention: Mr. M. Xxxxx Xxxxx
Telecopier number: (000) 000-0000
(b) if to the Corporation:
Photon Technology International, Inc.
0 Xxxxxxxx Xxxxx
Xxxxx X
Xxxxx Xxxxxxxxx
Xxx Xxxxxx 00000
Attention: Xx. Xxxxxxx Xxxxxxxx
Telecopier number: (000) 000-0000
6.6. Time of Essence
Time is of the essence of this agreement.
6.7. Enurement
This agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
6.8. Counterparts
This agreement may be signed in counterparts and each of such
counterparts shall constitute an original document and such counterparts, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this agreement.
PHOTON TECHNOLOGY INTERNATIONAL, INC.
By: /s/ Xxxxxxx Xxxxxxxx
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C.I. - C.P.A. BUSINESS VENTURES FUND INC.
By: /s/Xxxxxx Xxxxx
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