**Exhibit
2.8**
 
 **ACQUISITION
AGREEMENT**
 
 
 MEMORANDUM
OF AGREEMENT made as of January 25, 2005.
 
 
 BETWEEN:
 
 **APPLIED
DIGITAL SOLUTIONS, INC.** , a
Missouri corporation
 
 (“ADSX”)
 
 AND
 
 **EXI
WIRELESS INC.** , a
Canadian corporation
 
 (the
“Corporation”)
 
 THIS
AGREEMENT WITNESSES THAT in consideration of the respective agreements herein
contained, the parties hereto agree as follows:
 
 **Article
I — Interpretation**
 
 **1.1** **Definitions**
 
 In this
Agreement the following terms shall have the following meanings
respectively:
 
 **“1933 Act”** has the
meaning ascribed thereto in section 2.5(b);
 
 **“Acquisition
Proposal”** means
any merger, amalgamation, take-over bid, sale of material assets (or any lease,
long-term supply agreement or other arrangement having the same economic effect
as a sale), any material sale of shares or rights or interests therein or
thereto or similar transactions involving the Corporation or any Subsidiary, or
a proposal to do so, excluding the Arrangement;
 
 **“Adjustment
Exchange Ratio”** has the
meaning ascribed thereto in the Plan of Arrangement;
 
 **“ADSX
Common Shares”** means
the shares of common stock in the capital of ADSX;
 
 **“ADSX
Average Trading Volume”** means
the daily average trading volume of ADSX Common Shares during a period of 10
consecutive trading days ending three trading days before the Effective
Date on the
NASDAQ Small Cap Market, or, if the ADSX Common Shares are not then quoted on
the NASDAQ Small Cap Market, on such other stock exchange or automated quotation
system on which the ADSX Common Shares are listed or quoted, as the case may be,
as may be selected by the Board of Directors of ADSX for such
purpose;
 
 **“Affiliate”** has the
meaning that would be ascribed thereto in the CBCA if the reference therein to
“affiliated body corporate” were to “Person” as defined in this
Agreement;
 
 
 
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2
 
 **“Arrangement”** means an
arrangement under section 192 of the CBCA on the terms and subject to the
conditions set out in the Plan of Arrangement, subject to any amendments or
variations thereto made in accordance with section 7.1 hereof or Article 6 of
the Plan of Arrangement or made at the direction of the Court in the Final
Order;
 
 **“Arrangement
Resolution”** means
the special resolution of the holders of Common Shares, to be substantially in
the form and content of Exhibit II annexed hereto;
 
 **“Articles
of Arrangement”** means
the articles of arrangement of the Corporation in respect of the Arrangement,
required by the CBCA to be sent to the Director after the Final Order is
made;
 
 **“Business
Day”** means
any day on which commercial banks are open for business in New York, New York
and Vancouver, British Columbia other than a Saturday, a Sunday or a day
observed as a holiday in Vancouver, British Columbia under the laws of the
Province of British Columbia or the federal laws of Canada or in New York, New
York under the laws of the State of New York or the federal laws of the United
States of America;
 
 **“CBCA”** means
the *Canada
Business Corporations Act* as now
in effect and as it may be amended from time to time prior to the Effective
Date;
 
 **“Circular”** means
the notice of the Meeting and accompanying management information circular to be
sent to holders of Common Shares in connection with the Meeting;
 
 **“Commission”** means
the British Columbia Securities Commission;
 
 **“Common
Shares”** means
the common shares in the capital of the Corporation;
 
 **“Corporation
Documents”** has the
meaning ascribed thereto in section 3.1(n);
 
 **“Court”** means
the British Columbia Supreme Court;
 
 **“Dilutive
Securities”** means
Common Share purchase warrants and Common Share purchase options;
 
 **“Director”** means
the Director appointed pursuant to section 260 of the CBCA;
 
 **“Disclosure
Letter”** means
the letter delivered by the Corporation to ADSX dated as of the date
hereof;
 
 **“Dissent
Rights”** means
the rights of dissent in respect of the Arrangement described in section 3.1 of
the Plan of Arrangement;
 
 **“Effective
Date”** means
the date shown on the certificate of arrangement to be issued by the Director
under the CBCA giving effect to the Arrangement;
 
 **“Effective
Time”** has the
meaning ascribed thereto in the Plan of Arrangement;
 
 **“Encumbrance”** means
any lien, claim, charge, pledge, hypothecation, security interest, mortgage,
title retention agreement, option or encumbrance of any nature or kind
whatsoever;
 
 
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3
 
 **“Environmental
Laws”** means
all applicable Laws, including applicable common laws, relating to the
protection of the environment and employee and public health and
safety;
 
 **“Exchange
Ratio”** has the
meaning ascribed thereto in the Plan of Arrangement;
 
 **“Final
Order”** means
the final order of the Court approving the Arrangement as such order may be
amended at any time prior to the Effective Date or, if appealed, then, unless
such appeal is withdrawn or denied, as affirmed;
 
 **“Financial
Statements”** has the
meaning ascribed thereto in section 3.1(h);
 
 **“First
Tranche Exchange Ratio”** has the
meaning ascribed thereto in the Plan of Arrangement;
 
 **“GAAP”** has the
meaning ascribed thereto in section 3.1(h);
 
 **“Governmental
Entity”** means
any (a) multinational, federal, provincial, state, regional, municipal, local or
other government, governmental or public department, central bank, court,
tribunal, arbitral body, commission, board, bureau or agency, domestic or
foreign, (b) any subdivision, agent, commission, board, or authority of any of
the foregoing or (c) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of any of
the foregoing;
 
 **“including”** means
including without limitation;
 
 **“Information”** has the
meaning ascribed thereto in section 5.7(c);
 
 **“Interim
Order”** means
the interim order of the Court in respect of the Arrangement, as contemplated by
section 2.3;
 
 **“Intangible
Rights”** has the
meaning ascribed thereto in section 3.1(x);
 
 **“Laws”** means
all statutes, regulations, statutory rules, principles of law, orders, published
policies and guidelines, and terms and conditions of any grant of approval,
permission, authority or license of any court, Governmental Entity, statutory
body or self-regulatory authority, and the term **“applicable”** with
respect to such Laws and in the context that refers to one or more Persons,
means that such Laws apply to such Person or Persons or its or their business,
undertaking, property or securities and emanate from a Person having
jurisdiction over the Person or Persons or its or their business, undertaking,
property or securities;
 
 **“Leases”** has the
meaning ascribed thereto in section 3.1(u);
 
 **“Material
Adverse Change”** when
used in connection with ADSX or the Corporation, means any change, effect, event
or occurrence that is, or would reasonably
be expected to be, material and adverse to the business, operations, financial
condition or prospects of such party and its subsidiaries taken as a whole,
other than any change, effect, event or occurrence relating to (i) the Canadian
or United States' economy or securities markets in general or (ii) the North
American industry in general (including commodity prices) in which ADSX or the
Corporation, as the case may be, operate but not specifically relating to ADSX
or the Corporation or their respective subsidiaries;
 
 **“Material
Adverse Effect”** when
used in connection with ADSX or the Corporation, means any matter
 
 
 
 Page 4
 
 or action
that has an effect that is, or would reasonably be expected to be, material and
adverse to the business, operations, financial condition or prospects of such
party and its subsidiaries taken as a whole;
 
 **“Meeting”** means
the special meeting of holders of Common Shares, including any adjournment
thereof, to be called to consider the Arrangement;
 
 **“Person”** includes
any individual, firm, partnership, joint venture, venture capital fund,
association, trust, trustee, executor, administrator, legal personal
representative, estate, group, body corporate, corporation, unincorporated
association or organization, Governmental Entity, syndicate or other entity,
whether or not having legal status;
 
 **“Plan
of Arrangement”** means
the plan of arrangement substantially in the form and content of Exhibit I
annexed hereto and any amendments or variations thereto made in accordance with
section 7.1 hereof or Article 6 of the Plan of Arrangement or made at the
direction of the Court in the Final Order;
 
 **“Plans”** has the
meaning ascribed thereto in section 3.1(m);
 
 **“Pre-Effective
Date Period”** shall
mean the period from and including the date hereof to and including the
Effective Time on the Effective Date;
 
 **“Product”** means
each product, repair process or service under development, developed,
manufactured, licensed, distributed or sold by the Corporation or a Subsidiary
and any other products in which the Corporation or a Subsidiary has any
proprietary rights or beneficial interest.
 
 **“Qualified
Options”** means
the Common Share purchase options granted under the Corporation's 1996 and 2000
Stock Option Plans, as amended, listed in Disclosure Letter and in each case
being outstanding and unexercised on the Effective Date;
 
 **“Regulatory
Approvals”** means
all those sanctions, rulings, consents, orders, exemptions, permits and other
approvals (including the lapse, without objection, of a prescribed time under a
statute or regulation that states that a transaction may be implemented if a
prescribed time lapses following the giving of notice without an objection being
made) of Governmental Entities, regulatory agencies or self-regulatory
organizations required in connection with the transactions contemplated by this
Agreement;
 
 **“Replacement
Security”** has the
meaning ascribed thereto in section 2.2 of the Plan of Arrangement;
 
 **“Replacement
Warrant”** means
each Common Share purchase warrant that is a Replacement Security or a Two
Tranche Replacement Option;
 
 **“Representatives”** has the
meaning ascribed thereto in section 5.7(a);
 
 **“S-8
Registration Statement”** has the
meaning ascribed thereto in section 2.8;
 
 **“SEC”** means
the United States Securities and Exchange Commission;
 
 **“Securities
Act”** means
the *Securities
Act* (British
Columbia), as now in effect and as it may be
amended from time to time prior to the Effective Date;
 
 **“subsidiary”** has the
meaning ascribed thereto in the Securities Act;
 
 
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 ****
 **“Subsidiaries”** means
eXI Wireless Systems Inc., eXI Solutions Inc. and HOUNDware Corp.; and **“Subsidiary”** means
any one of them;
 
 **“Superior
Proposal”** has the
meaning ascribed thereto in section 5.5(a);
 
 **“Tax”** and **“Taxes”** means,
with respect to any entity, (A) all income taxes (including any tax on or based
upon net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all capital taxes, gross
receipts taxes, environmental taxes, sales taxes, use taxes, ad valorem taxes,
value added taxes, transfer taxes, franchise taxes, license taxes, withholding
taxes, payroll taxes, employment taxes, Canada or Québec Pension Plan premiums,
excise, severance, social security premiums, workers’ compensation premiums, unemployment insurance or
compensation premiums, stamp taxes, occupation taxes, premium taxes, property
taxes, windfall profits taxes, alternative or add-on minimum taxes, goods and
services tax, customs duties or other taxes, fees, imports, assessments or
charges of any kind whatsoever, together with any interest and any penalties or
additional amounts imposed by any taxing authority (domestic or foreign) on such
entity, and any interest, penalties, additional taxes and additions to tax
imposed with respect to the foregoing, and (B) any liability for the payment of
any amount of the type described in the immediately preceding clause (A) as a
result of being a “transferee” (within the meaning of section 6901 of the United
States Internal Revenue Code or any other applicable Laws) of another entity or
a member of an affiliated or combined group;
 
 **“Tax
Returns”** means
all returns, declarations, reports, information returns and statements required
to be filed with any taxing authority relating to Taxes; and
 
 **“Two Tranche Replacement
Option”** has the
meaning ascribed thereto in section 2.2 of the Plan of Arrangement.
 
 **1.2** **Interpretation
Not Affected by Headings, etc.**
 
 The
division of this Agreement into Articles, sections, and other portions and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation hereof. Unless otherwise indicated, all
references to an “Article” or “section”
followed by a number and/or a letter refer to the specified Article or section
of this Agreement. The terms “this Agreement”, “hereof”, “herein” and
“hereunder” and similar expressions refer to this Agreement (including the
Exhibits hereto) and not to any particular Article, section or other portion
hereof and include any agreement or
instrument supplementary or ancillary hereto.
 
 **1.3** **Currency**
 
 All sums
of money referred to in this Agreement are expressed in lawful money of Canada
unless otherwise expressly indicated.
 
 **1.4** **Number,
etc.**
 
 Unless
the context otherwise requires, words importing the singular shall include the
plural and *vice
versa* and
words importing any gender or no gender shall include all genders and the
neuter.
 
 
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 Page 6
 
 **1.5** **Date
for Any Action**
 
 In the
event that any date on which any action is required to be taken hereunder by any
of the parties hereto is not a Business Day, such action shall be required to be
taken on the next succeeding day which is a Business Day.
 
 **1.6** **Entire
Agreement**
 
 This
Agreement and the agreements and other documents herein referred to constitute
the entire agreement between the parties hereto pertaining to the terms of the
Arrangement and supersede all other prior agreements, understandings,
negotiations and discussions, whether oral or written, between the
parties hereto with respect to the terms of the Arrangement. The letter
agreement between the Corporation and ADSX dated October 29, 2004 is hereby
terminated and of no further force and effect.
 
 **Article
II — The
Arrangement**
 
 2.1  Implementation Steps by the
Corporation
 
 The
Corporation covenants in favour of ADSX that the Corporation shall as soon
as reasonably practicable :
 
 (a)
    apply
      in a manner acceptable to ADSX, acting reasonably, under section 192 of
      the CBCA for an order approving the Arrangement and for the Interim Order,
      and thereafter proceed with and diligently pursue the obtaining of the
      Interim Order;
 
 (b)
    convene
      and hold the Meeting for the purpose of considering the Arrangement
      Resolution (and for any other proper purpose as may be set out in the
      notice for such meeting);
 
 (c)
    subject
      to obtaining such shareholder approval as is required by the Interim
      Order, proceed with and diligently pursue the application to the Court for
      the Final Order; and
 
 (d)
    subject
      to obtaining the Final Order, the satisfaction or waiver of theother
      conditions herein contained in favour of each party and compliance with
      section 2.2, send to the Director, for endorsement and filing by the
      Director, the Articles of Arrangement and such other documents as may be
      required in connection therewith under the CBCA to give effect to the
      Arrangement.
 
 **2.2** **Implementation
Steps by ADSX and the Corporation**
 
 ADSX and
the Corporation shall agree upon the timing of the Corporation’s obtaining of
the Final Order and a date that will be the Effective Date, such timing and date
to be determined in a manner that enables the Corporation to discharge its
obligation as to timeliness under sections 2.1(c) and (d). The Corporation shall
not send to the Director , for
endorsement and filing by the Director, the Articles of Arrangement and such
other documents as may be required in connection therewith under the CBCA to
give effect to the Arrangement before the expiration of the 10 Business Day
period described at section 2.2(c) of the Plan of Arrangement or such shorter
period as ADSX may agree to in writing. Each party hereto shall use its
reasonable best efforts to cause the Effective Date to occur as soon as
reasonably practicable.
  
  Page
7
  **2.3** **Interim
Order**
 
 The
notice of motion for the application referred to in section 2.1(a) shall request
that the Interim Order provide:
 
 (a)
    for
      the class of Persons to whom notice is to be provided in respect of theArrangement
      and the Meeting and for the manner in which such notice is to be
      provided;
 
 (b)
    that
      the requisite shareholder approval for the Arrangement Resolution shall be
      2/3rdsof
      the votes cast on the Arrangement Resolution by holders of Common Shares
      present in person or by proxy at the
Meeting;
 
 (c)
    that,
      in all other respects, the terms, restrictions and conditions of the
      by-laws and articles of the Corporation, including quorum requirements and
      all other matters, shall apply in respect of the Meeting;
    and
 
 (d)
    for
      the grant of the Dissent Rights.
 
 **2.4** **Articles
of Arrangement**
 
 The
Articles of Arrangement shall, with such other matters as are necessary to
effect the Arrangement, and all as subject to the provisions of the Plan of
Arrangement, provide for the transactions contemplated by section 2.2 of the
Plan of Arrangement, with the result that ADSX will become the registered and
beneficial owner of all outstanding Common Shares as at the Effective Time.
 
 The
parties acknowledge and agree that, following the public announcement of this
Agreement and the Arrangement and prior to the Effective Date, ADSX or any
subsidiary may, in furtherance of the transactions herein contemplated, purchase
in the secondary market up to 10% of the outstanding Common
Shares.
 
 **2.5** **Information
Circular**
 
 As
promptly as practicable after the execution and delivery of this Agreement, and
in any event within 90 **** days
thereafter, ADSX and the Corporation shall prepare the Circular together with
any other documents required by the Securities Act or other applicable Laws in
connection with the Arrangement, and the Corporation shall cause the Circular
and other documentation required in connection with the Meeting to be sent to
each holder of Common Shares and filed as required by the Interim Order and
applicable Laws. The Corporation shall not mail the Circular, or any amendment
or supplement thereto, to which ADSX reasonably objects, provided that ADSX
shall not advance any such objection based on any matter that the Corporation is
required by law to disclose in the Circular, amendment or supplement. The
Corporation covenants that the information to be contained in the Circular or
any amendment thereto (including any information referred to therein or
incorporated therein by reference) relating to the Corporation and the
Subsidiaries will be accurate and complete in all material respects as at the
date thereof and will not contain a misrepresentation (as such term is defined
in the Securities Act) as at such date. ADSX covenants that the information to
be contained in the Circular or any amendment thereto (including any information
referred to therein or incorporated therein by reference) relating to ADSX will
be accurate and complete in all material respects as at the date thereof and
will not contain a misrepresentation (as such term is defined in the Securities
Act) as at such date.
 
 
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 ****
 **2.6** **Securities
Compliance**
 
 ADSX and
the Corporation shall use all reasonable efforts to obtain all orders required
from the applicable Canadian securities authorities to permit the issuance and
first resale of the ADSX Common Shares issued in connection with the
Arrangement, and the ADSX Common Shares issued from time to time upon the
exercise of the Replacement Securities, in each case without qualification with
or approval of or the filing of any document, including any prospectus or
similar document, or the taking of any proceeding with, or the obtaining of any further
order, ruling or consent from, any Governmental Entity or regulatory authority
under any Canadian federal, provincial or territorial securities or other Laws
or pursuant to the rules and regulations of any regulatory authority
administering such Laws, or the fulfilment of any other legal requirement in any
such jurisdiction (other than, with respect to such first resales, any
restrictions on transfer by reason of, among other things, a holder being a
“control person”****of ADSX or
the Corporation for purposes of Canadian federal, provincial or territorial
securities Laws).
 
 The
issuance of ADSX Common Shares under the Arrangement will not be registered
under the United States Securities Act of 1933, as amended. The ADSX Common
Shares will be issued in reliance upon the exemption available pursuant to
Section 3(a)(10) of the United States Securities Act of 1933. Section 3(a)(10)
exempts securities issued in exchange for one or more outstanding securities
from the general requirement of registration where the terms and conditions of
the issuance and exchange of such securities have been approved by any court of
competent jurisdiction, after a hearing upon the fairness of the terms and
conditions and exchange at which all persons to whom the securities will be
issued have the right to appear. ADSX Common Shares issued under the Arrangement
to persons who are affiliates of the Corporation or ADSX prior to the Effective
Time or persons who are affiliates of ADSX after the Effective Time may be
subject to resale restrictions under United States securities laws.
 
 **2.7** **Preparation
of Filings**
 
 (a)
    ADSX
      and the Corporation shall cooperate in:
 
 (i)
    the
      preparation of any application for the orders and any other documents
      reasonably deemed by ADSX or the Corporation to be necessary to discharge
      their respective obligations under United States and Canadian federal,
      provincial, territorial or state securities Laws in connection with the
      Arrangement and the other transactions contemplated
  hereby;
 
 (ii)
    the
      taking of all such action as may be required under any applicable United
      States and Canadian federal, provincial, territorial or state securities
      Laws (including “blue sky laws”) in
      connection with the issuance of the ADSX Common Shares in connection with
      the Arrangement or the exercise of the Replacement Securities; provided,
      however, that with respect to the United States “blue sky” and Canadian provincial
      qualifications neither ADSX nor the Corporation shall be required to
      register or qualify as a foreign corporation or to take any action that
      would subject it to service of process in any jurisdiction where such
      entity is not now so subject, except as to matters and transactions
      arising solely from the offer and sale of ADSX Common Shares;
 
 (iii)
    the
      taking of all such action as may be required under the CBCA in connection
      with the transactions contemplated by this Agreement and the Plan of
      Arrangement.
  Page
9
 (b)
    Each
      of ADSX and the Corporation shall furnish to the other allsuch
      information concerning it and its shareholders as may be required for the
      effectuation of the actions described in sections 2.5 and 2.6 and the
      foregoing provisions of this section 2.7, and each covenants that no
      information furnished by it in connection with such actions or otherwise
      in connection with the consummation of the Arrangement and the other
      transactions contemplated by this Agreement will contain any untrue
      statement of a material fact or omit to state a material fact required to
      be stated in any such document or necessary in order to make any
      information so furnished for use in any such document not misleading in
      the light of the circumstances in which it is furnished or to be
      used.
 
 (c)
    ADSX
      and the Corporation shall each promptly notify the other if at any time
      before or after the Effective Time it becomes aware that the Circular or
      an application for an order contains any untrue statement of a material
      fact or omits to state a material fact required to be stated therein or
      necessary to make the statements contained therein not misleading in light
      of the circumstances in which they are made, or that otherwise requires an
      amendment or supplement to the Circular or such application. In any such
      event, ADSX and the Corporation shall cooperate in the preparation of a
      supplement or amendment to the Circular or such other document, as
      required andas
      the case may be, and, if required, shall cause the same to be distributed
      to shareholders of ADSX or the Corporation and/or filed with the relevant
      securities regulatory authorities.
 
 (d)
    The
      Corporation shall ensure that the Circular complies with all applicable
      Laws and, without limiting the generality of the foregoing, that the
      Circular does not contain any untrue statement of a material fact or omit
      to state a material fact required to be stated therein or necessary to
      make the statements contained therein not misleading in light of the
      circumstances in which they are made (other than with respect to any
      information relating to and provided by ADSX). Without limiting the
      generality of the foregoing, the Corporation shall ensure that the
      Circular provides holders of Common Shares with information in sufficient
      detail to permit them to form a reasoned judgment concerning the matters
      to be placed before them at the Meeting.
 
 **2.8** **Registration
Statement**
 
 As
promptly as practicable after the execution of this Agreement, ADSX shall file a
registration statement on Form S-8 (the “S-8
Registration Statement”) with the SEC to register the ADSX Common Shares to be
issued from time to time after the Effective Time upon exercise of the
Qualified  Options. ADSX will use its reasonable best efforts to maintain
the effectiveness of the S-8 Registration Statement for so long as any Qualified
Options remain outstanding or, in each case, until such earlier time as ADSX
determines to be sufficient on the written advice of its outside counsel. For
greater certainty, ADSX is not obligated to file a registration statement with
the SEC to register the ADSX Common Shares issuable from time to time pursuant
to Replacement Warrants.
 
 **Article
III — Representations and
Warranties**
 
 **3.1** **Representations
and Warranties of the Corporation**
 
 The
Corporation represents and warrants to and in favour of ADSX as follows and
acknowledges that ADSX is relying upon such representations and warranties in
connection with the matters contemplated by this
Agreement:
  
 
 Page
10
  (a)
    *Organization.*
 
 (i)
    Each
      of the Corporation and its Subsidiaries has been duly incorporated or
      formed under all applicable Laws, is validly subsisting and has full
      corporate or legal power and authority to own its properties and conduct
      its businesses as currently owned and conducted, and, except as set out in
      and for the reasons set out in the Disclosure Letter, is in good standing
      under the corporate Laws applicable to it; neither the character of the
      Corporation’s or its Subsidiaries’ properties nor the nature of their
      respective businesses requires the Corporation or its Subsidiaries to be
      duly qualified to do business as a foreign corporation in any jurisdiction
      outside those identified in the Disclosure Letter and each of the
      Corporation and its Subsidiaries is so qualified and in good standing in
      each jurisdiction listed. All of the outstanding shares of its
      Subsidiaries are validly issued, fully paid and non-assessable and all
      such shares are owned directly or indirectly by the Corporation, free and
      clear of all Encumbrances, except as set forth in the Disclosure Letter,
      and there are no outstanding options, rights, entitlements, understandings
      or commitments (contingent or otherwise) regarding the right to acquire
      any such shares in any of its Subsidiaries. The Corporation has disclosed
      in the Disclosure Letter the names and jurisdictions of incorporation of
      it and each of its Subsidiaries.
 
 (ii)
    The
      Corporation does not have any subsidiaries other than the Subsidiaries.
 
 (iii)
    Neither
      the Corporation nor any Subsidiary has any interest in any other
      corporation or entity, except as described in the Disclosure
      Letter.
 
 (b)
    *Capitalization.*
 
 The
authorized capital of the Corporation consists of an unlimited number of Common
Shares. As of January 25, 2005, there were 10,145,009 Common Shares outstanding
and only 933,000 Common Shares were reserved, in the aggregate, for issuance in
respect of Dilutive Securities. There are no options, warrants, conversion
privileges or other rights, agreements, arrangements or commitments
(pre-emptive, contingent or otherwise) obligating the Corporation or any
Subsidiary to issue or sell any shares of the Corporation or any of its
Subsidiaries or securities or obligations of any kind convertible
into or exchangeable for any shares of the Corporation, any Subsidiary or any
other Person, nor is there outstanding any stock appreciation rights, phantom
equity or similar rights, agreements, arrangements or commitments based upon the
book value, income or any other attribute of the Corporation or any Subsidiary,
except as described in the Disclosure Letter, which description sets forth all
of the material terms of the securities, including but not limited to, exercise,
conversion or exchange price, as the case may be, term, vesting schedule and
identity of the holder. There have been no Common Shares issued since September
30, 2004, other than as set forth in the Disclosure Letter. All outstanding
Common Shares have been duly authorized and are validly issued (in compliance
with all applicable securities laws) and outstanding as fully paid and
non-assessable shares, free of pre-emptive rights, any and all Encumbrances or
other restrictions or limitations whatsoever, and no shares of capital stock are
held in the Corporation’s treasury. There are no outstanding bonds, debentures
or other evidences of indebtedness of the Corporation or any Subsidiary having
the right to vote (or that are convertible for or exercisable into securities
having the right to vote) with the holders of the Common Shares on any matter.
There are no outstanding contractual obligations of the Corporation or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any of
its
 
 
 
 Page 11
 
 outstanding
securities or with respect to the voting or disposition of any outstanding
securities of any of its Subsidiaries.
 
 (c)
    *Authority
      and No Violation.*
 
 (i)
    The
      Corporation has the requisite corporate power and authority to enter into
      this Agreement and to perform its obligations hereunder. The execution anddelivery
      of this Agreement by the Corporation and the consummation by each of the
      transactions contemplated by this Agreement, have been duly authorized by
      its Board of Directors and no other corporate proceedings on its part are
      necessary to authorize this Agreement or the transactions contemplated
      hereby other than:
 
 (A)
    with
      respect to the Circular and other matters relating solely to the
      implementation of the Arrangement, the approval of the Board of Directors
      of the Corporation; and
 
 (B)
    with
      respect to the completion of the Arrangement, the approval of the holders
      of the Common Shares.
 
 (ii)
    This
      Agreement has been duly executed and delivered by the Corporation and
      constitutes its legal, valid and binding obligation, enforceable against
      it in accordance with its terms, subject to bankruptcy, insolvency and
      other similar Laws affecting creditors' rights (including equitable
      rights) generally.
 
 (iii)
    The
      Board of Directors of the Corporation has (A) determined unanimously that
      the Arrangement is fair to the holders of the Common Shares and is in the
      best interests of the Corporation, (B) been advised by Dlouhy Merchant
      Group Inc. that it is prepared to render an opinion that each of the
      Exchange Ratio and the First Tranche Exchange Ratio and Adjustment
      Exchange Ratio, if applicable, is fair from a financial point of view to
      the holders of the Common Shares, (C) determined to recommend that the
      holders of the Common Shares vote in favour of the Arrangement and (D)
      advised the Corporation that the members of the Board of Directors will
      vote the Common Shares held bythem
      in favour of the Arrangement and will so represent in the Circular.
 
 (iv)
    Each
      of Malik Talib, Karim Khoja, John Stark and Noordin Nanji has advised the
      Corporation that it or he will vote the Common Shares held by him or over
      which he has voting control, including, if applicable, any Common Shares
      held under an employee share purchase plan, in favour of the Arrangement
      and will so represent in the Circular.
 
 (v)
    The
      approval of this Agreement, the execution and delivery by the Corporation
      of this Agreement and the performance by it of its obligations hereunder
      and the completion of the Arrangement and the transactions contemplated
      thereby, will not, except as disclosed in the Disclosure
      Letter:
 
 (A)
    result
      in a violation or breach of, require any consent to be obtained under or
      give rise to any termination rights or payment obligation under any
      provision of:
 
 (I)
    its
      or any Subsidiary’s certificate of
      incorporation, articles, by-laws or other charter documents, including any
      unanimous shareholder
  
 Page
12
 agreement
      or any other agreement or understanding with any party holding an
      ownership interest in any
Subsidiary;
 
 (II)
    subject
      to obtaining the Regulatory Approvals relating to the Corporation, any
      Laws, regulation, order, judgment or decree;
or
 
 (III)
    any
      material contract, agreement, license, franchise or permit to which the
      Corporation or any Subsidiary is party or by which it is
      bound;
 
 (B)
    give
      rise to any right of termination or acceleration of indebtedness, orcause
      any third party indebtedness to come due before its stated maturity or
      cause any available credit to cease to be
available;
 
 (C)
    result
      in the imposition of any encumbrance, charge or lien upon any of its
      assets or the assets of any Subsidiary, or restrict, hinder, impair or
      limit the ability of the Corporation or any Subsidiary to carry on the
      business of the Corporation or any Subsidiary as and where it is now being
      carried on or as and where it may be carried on in the future;
      or
 
 (D)
    result
      in any payment (including severance, unemployment compensation, golden
      parachute, bonus or otherwise) becoming due to any director or employee of
      the Corporation or any Subsidiary or increase any benefits otherwise
      payable under any Plan or result in the acceleration of time of payment or
      vesting of any such benefits, including the time of exercise of stock
      options.
 
 (vi)
    No
      consent, approval, order or authorization of, or declaration or filing
      with, any Governmental Entity or other Person is required to be obtained
      by the Corporation and its Subsidiaries in connection with the execution
      and delivery of this Agreement or the consummation by the Corporation of
      the transactions contemplated hereby other than (A) any approvals required
      by the Interim Order, (B) the Final Order, (C) filings with the Director
      under the CBCA and(D)
      the Regulatory Approvals relating to the
Corporation.
  (d)
    *No
      Defaults.*
  Neither
the Corporation nor any of its Subsidiaries is in default under, and there
exists no event, condition or occurrence which, after notice or lapse of time or
both, would constitute such a default under any contract, agreement, license or
franchise to which it is a party which would, if terminated due to such default,
cause a Material Adverse Effect.
 
 The
copies of the constating documents of the Corporation and the Subsidiaries
provided to ADSX are true, accurate, and complete and reflect all amendments
made to the date of this Agreement. The corporate minute books of the
Corporation and its Subsidiaries made available to ADSX for review are correct
and, except as set forth in the Disclosure Letter, complete as of the date they
were made available, no further entries have been made through the date of this
Agreement, and, except as set forth in the Disclosure Letter, such minute books
contain an accurate record of all shareholder and corporate actions of the
shareholders and directors (and any committees thereof) of the Corporation and
its Subsidiaries taken by written consent or at a meeting since January 1, 2000.
All corporate actions taken by the Corporation and its Subsidiaries have been
duly authorized or ratified. All accounts, books,
 
 
 
 Page
13
 
 ledgers
and official and other records of the Corporation and its Subsidiaries fairly
and accurately reflect all of the transactions, properties, assets and
liabilities of the Corporation and its Subsidiaries.
  (e)
    *Absence
      of Certain Changes or Events.*
 
 Except as
disclosed in the Disclosure Letter or publicly available reports filed by the
Corporation with the Commission prior to the date of this Agreement, since
September 30, 2004 each of the Corporation and the Subsidiaries has conducted
its business only in the ordinary and regular course of business consistent with
past practice and there has not occurred:
 
 (i)
    any
      change in its condition (financial or otherwise), properties, assets,
      liabilities, working capital, businesses, operations, results of
      operations or prospects and those of its Subsidiaries, that could
      reasonably be expected to have a Material Adverse
  Effect;
 
 (ii)
    any
      damage, destruction or loss, whether covered by insurance or not, that
      could reasonably be expected to have a Material Adverse
      Effect;
 
 (iii)
    any
      Material Adverse Change in the sales patterns, pricing policies, accounts
      receivable or accounts payable of the Corporation or any of its
      Subsidiaries;
 
 (iv)
    any
      redemption, repurchase or other acquisition of Common Shares by theCorporation
      or any declaration, setting aside or payment of any dividend or other
      distribution (whether in cash, stock or property) with respect to Common
      Shares;
 
 (v)
    any
      increase in or modification of the compensation payable or to become
      payable by it or any Subsidiary to any directors, officers or employees of
      the Company or a Subsidiary, or any grant to any such director or employee
      of any increase in severance or termination pay, including any increase
      pursuant to any bonus, profit sharing or other plan or commitment other
      than merit increases to non-officer
employees;
 
 (vi)
    any
      adoption of any plan or benefit program nor any payment of or commitment
      to pay, nor any increase in or modification of, any bonus, pension,
      insurance or benefit arrangement (including, but not limited to, the
      granting of stock options, restricted stock awards or stock appreciation
      rights) made to, for or with any of its directors, officers or
      employees;
 
 (vii)
    any
      acquisition or sale or transfer, lease, mortgage, or other disposition of
      any of its property or assets, other than in the ordinary course of
      business consistent with past practice;
 
 (viii)
    (A)
      any incurrence, assumption or guarantee by it of any debt for borrowed
      money, (B) any issuance or sale of any securities convertible into or
      exchangeable for its debt securities, or (C) any issuance or sale of
      options orother
      rights to acquire from it debt securities or any securities convertible
      into or exchangeable for any such debt
securities;
 
 (ix)
    any
      payment to any Affiliate or forgiveness of any indebtedness due or owing
      from any Affiliate to the Corporation;
  Page
14
 (x)
    any
      creation or assumption by it of any mortgage, pledge, security interest or
      lien or other encumbrance on any asset;
 
 (xi)
    any
      extraordinary losses or waiver of any rights of material
      value;
 
 (xii)
    the
      making of any loan, advance or capital contribution to or investment in
      any person other than travel loans or advances made in the ordinary course
      of business;
 
 (xiii)
    any
      settlement of a claim or litigation nor the filing of any motions, orders,
      briefs or settlement agreements in any proceedings before any government
      authority;
 
 (xiv)
    any
      entering into, amendment of, relinquishment, termination or non-renewal by
      it of any material contract, agreement, license, franchise, lease
      transaction, commitment or other right or obligation, other than in the
      ordinary course of business consistent with past
  practice;
 
 (xv)
    any
      labour dispute or charge of unfair labour practice (other than routine
      individual grievances), any activity or proceeding by a labour union or
      representative thereof to organize any of its employees or any campaign
      being conducted to solicit authorization from employees to be represented
      by such labour union;
 
 (xvi)
    any
      change in any existing election, or the making of any new election, with
      respect to any tax law in any jurisdiction which election could have an
      adverse effect on the tax treatment of the Corporation, a Subsidiary or
      the business operations of the Corporation or a
  Subsidiary;
 
 (xvii)
    any
      resolution to approve a split, combination or reclassification of anyof
      the Common Shares;
 
 (xviii)
    any
      change in its accounting methods, principles or practices;
    and
 
 (xix)
    any
      agreement or arrangement to take any action which, if taken prior to the
      date hereof, would have made any representation or warranty set forth in
      this Agreement materially untrue or incorrect as of the date when
      made;
 
 (xx)
    (A)
      any liquidation of inventory nor acceptance of product returns other than
      in the ordinary course, (B) any event that would result in the
      acceleration or delay in the collection of receivables, (C) any event that
      would result in the acceleration or delay in the payment of payables or
      (D) any change in any material respect in the practices of the Corporation
      and its Subsidiaries in connection with the payment of payables and for
      the collection of receivables;
 
 (xxi)
    any
      activity or transaction with an Affiliate outside the ordinary course of
      business, other than with respect to the
Arrangement;
 
 (xxii)
    any
      amendment to its constating documents;
  Page
15
 (xxiii)
    the
      issuance of any capital stock or other securities, or the granting or
      entering into any agreement to grant, any options, convertible rights,
      other rights, warrants, calls or agreements relating to its capital
      stock;
 
 (xxiv)
    any
      entry or omission of any entry in its books of account other than in the
      ordinary course of business and consistent with past practice and in
      accordance with GAAP and on a basis consistent with prior
      periods;
 
 (xxv)
    any
      merger into or with nor any consolidation with, any other corporation nor
      any acquisition of the business or assets (other than in the ordinary
      course of business with respect to the acquisition of assets) of any
      Person.
 
 (f)
    *Employment
      Matters*.


Except as
set forth in the Disclosure Letter:
 
 (i)
    and
      except as set forth in the management information circular prepared in
      connection with the annual meeting of the Corporation held June 30, 2004,
      neither the Corporation nor any Subsidiary is a party to any written or
      oral policy, agreement, obligation or understanding providing for
      severance or termination payments to, or any employment agreement with,
      any director, officer or employee;
 
 (ii)
    neither
      the Corporation nor any Subsidiary is a party to any collective bargaining
      agreement nor subject to any application for certification or threatened
      or apparent union-organizing campaigns for employees not covered under a
      collective bargaining agreement nor are there any current, pending or
      threatened strikes or lockouts at either the Corporation or any
      Subsidiary;
 
 (iii)
    neither
      the Corporation nor any Subsidiary is subject to any claim for wrongful
      dismissal, constructive dismissal or any other tort claim,actual
      or threatened, or any litigation, actual or threatened, relating to
      employment or termination of employment of employees or independent
      contractors; and
 
 (iv)
    the
      Corporation and all Subsidiaries have operated in accordance with all
      applicable Laws with respect to employment and labour, including, but not
      limited to, employment and labour standards, occupational health and
      safety, employment equity, pay equity, workers’ compensation, human rights and labour
      relations and there are no current, pending or threatened proceedings
      before any board or tribunal with respect to any of the above areas, other
      than where the failure to so operate or such proceedings which,
      individually or in the aggregate, would not have a Material Adverse
      Effect.
 
 (g)
    *Disclosure.*
 The
Corporation has publicly disclosed in documents filed with the Commission,
copies of which have been provided to ADSX, any information regarding any event,
circumstance or action taken or failed to be taken which could individually or
in the aggregate reasonably be expected to have a Material Adverse
Effect.
 
 Page
16
 (h)
    *Financial
      Statements and Assets.*
 
 (i)
    The
      audited consolidated financial statements for the Corporation as at and
      for each of the 12-month periods ended December 31, 2000, 2001, 2002 and
      2003 and the unaudited consolidated financialstatements
      for the 9-month period ended September 30, 2004, all as filed on theSystem
      for Electronic Document Analysis and Retrieval,(collectively, the “Financial Statements”), have been prepared in
      accordance with Canadian generally accepted accounting principles (“GAAP”)
      applied consistently; such Financial Statements present fairly, in all
      material respects, the consolidated financial position and results of
      operations of the Corporation and its Subsidiaries as of the respective
      dates thereof and for the respective periods covered thereby and reflect
      appropriate and adequate reserves in respect of contingent liabilities, if
      any, of the Corporation and its Subsidiaries on a consolidated basis.
 
 (ii)
    Except
      for (i) the liabilities reflected on the Corporation’s September 30, 2004
      consolidated balance sheet included in the Financial Statements, (ii)
      trade payables and accrued expenses incurred since September 30, 2004 in
      the ordinary course of business, (iii) executory contract obligations
      under (x) contracts listed in the Disclosure Letter and/or (y) contracts
      not required to be listed in the Disclosure Letter, and (iv) the
      liabilities set forth in the Disclosure Letter, the Corporation and its
      Subsidiaries do not have any liabilities or obligations (whether accrued,
      absolute, contingent, known, unknown or otherwise, and whether or not of a
      nature required to be reflected or reserved against in a balance sheet in
      accordance with GAAP).
 
 (iii)
    Except
      as otherwise set forth in the Disclosure Letter, the accounts receivable
      reflected on the September 30, 2004 consolidated balance sheet included in
      the Financial Statements and all of the accounts receivable of the
      Corporation and its Subsidiaries arising since September 30, 2004 arose
      from bona fide transactions in the ordinary course of business, and the
      goods and services involved have been sold, delivered and performed to the
      account obligors, and no further filings (with governmental agencies,
      issuers or others) are required to be made, no further goods are required
      to be provided and no further services are required to be rendered in
      order to complete the sales and fully render the services and to entitle
      the Corporation and its Subsidiaries, as the case may be, to collect the
      accounts receivable in full in accordance with the Corporation’s normal
      payment terms. Except as set forth in the Disclosure Letter, no such
      account has been assigned or pledged to any other person, firm or
      corporation, and, except only to the extent fully reserved against as set
      forth in the September 30, 2004 consolidated balance sheet included in
      such Financial Statements, no defense or set-off to any such account has
      been asserted by the account obligor or exists. No accounts receivable
      arose from sales made on a consignment basis.
 
 (iv)
    Except
      as otherwise set forth in the Disclosure Letter, the inventory of the
      Corporation and its Subsidiaries as of the Effective Date shall consist of
      items of a quality, condition and quantity consistent with normal
      seasonally-adjusted inventory levels of the Corporation and its
      Subsidiaries and be usable and saleable in the ordinary course of business
      for the purposes for which it is intended, except to the extent written
      down or reserved against on the Effective Date Balance Sheet****(as
      defined in, and which is to be prepared in accordance with, the Plan of
      Arrangement). Except as otherwise set forth in the Disclosure Letter, the
      inventory of the Corporation and its Subsidiaries is valued
    on
  Page
17
 their
      respective books of account in accordance with GAAP (on a first in first
      out basis) at the lower of cost or market, and the value of obsolete
      materials, materials below standard quality and slow-moving materials have
      been written down in accordance with
GAAP.
 (v)
    Each
      of theCorporation
      and its Subsidiaries has good and marketable title to all of its assets,
      including those reflected in the latest balance sheet included in the
      Financial Statements or acquired since the date of the latest balance
      sheet included in the Financial Statements (except as since transferred,
      sold or otherwise disposed of in the ordinary course of business for fair
      market value), free and clear of all Encumbrances except as shown in the
      Disclosure Letter and none of the assets of the Corporation or its
      Subsidiaries are in the possession of or under the control of any other
      Person.
 
 (i)
    *Books
      and Records.*
 The
books, records and accounts of the Corporation and its Subsidiaries, in all
material respects, (i) have been maintained in accordance with good business
practices on a basis consistent with prior years, (ii) are stated in reasonable
detail and accurately and fairly reflect the transactions and dispositions of
the assets of the Corporation and its Subsidiaries and (iii) accurately and
fairly reflect the basis for the Corporation consolidated financial statements.
The Corporation has devised and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; and
(ii) transactions are recorded as necessary (A) to permit preparation of
consolidated financial statements in conformity with GAAP and (B) to maintain
accountability for assets.
 
 (j)
    *Litigation,
      Etc.*
 
 Except as
set forth in the Disclosure Letter, there is no claim, action, proceeding or
investigation pending or, to the knowledge of the Corporation, threatened
against or relating to the Corporation or any Subsidiary or affecting any of
their properties, licenses or assets before any court or Governmental Entity or
regulatory authority or body that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect, or prevent or delay consummation of
the transactions contemplated by this Agreement or the Arrangement, nor is the
Corporation aware of any basis for any such claim, action, proceeding or
investigation. Neither the Corporation nor any Subsidiary, nor their respective
assets and properties, is subject to any outstanding judgment, order, writ,
injunction or decree that has had or is reasonably likely to have a Material
Adverse Effect, that involves or may involve, or restricts or may restrict, or
requires or may require, the expenditure of a material amount of money as a
condition to or a necessity for the right or ability of the Corporation or any
Subsidiary, as the case may be, to conduct its business in any manner in which
it has been carried on prior to the date hereof, or prevent or delay
consummation of the transactions contemplated by this Agreement or the
Arrangement.
 
 (k)
    *Environmental.*
 
 Except as
otherwise set forth in the Disclosure Letter:
 
 (i)
    all
      operations of the Corporation and its Subsidiaries have been conducted,
      and are now, in compliance with all Environmental Laws and neither the
      Corporation nor any Subsidiary is aware of, or is subject
    to:
  Page
18
 (A)
    any
      proceeding, application, order or directive which relates to environmental
      health or safety matters, and which may require any material work,
      repairs, construction or expenditures; or
 
 (B)
    any
      demand or notice with respect to the breach of any Environmental Laws
      applicable to the Corporation or anySubsidiary;
 
 (ii)
    neither
      the Corporation, its Subsidiaries nor, to the knowledge of the
      Corporation, any prior owner, lessee or operator of any real property
      currently or formerly owned, leased or used by the Corporation or any of
      its Subsidiaries, has caused or permitted any hazardous material to be
      used, generated, reclaimed, transported, released, treated, stored or
      disposed of in a manner which could form the basis for an environmental
      claim against the Corporation, any of its Subsidiaries or ADSX; and
      neither the Corporation nor any of its Subsidiaries has assumed any
      liability of any Person for cleanup, compliance or required capital
      expenditures in connection with any environmental claim;
    and
 
 (iii)
    no
      hazardous materials are or were stored or otherwise located, and no
      underground storage tanks or surface impoundments are or were located, on
      real property currently or formerly owned, leased or used by the
      Corporation or any Subsidiary or, to the knowledge of the Corporation, on
      adjacent parcels of real property, and no part of such real property or,
      to the knowledge of the Corporation, any part of such adjacent parcels of
      real property, including the groundwater located thereon, is presently
      contaminated by hazardous materials.
 
 (l)
    *Tax
      Matters.*
 
 (i)
    The
      Corporation and each of its Subsidiaries have timely filed, or caused to
      be filed, all Tax Returns required to be filed by them (all of which
      returns were correct and complete in all material respects) and have paid,
      or caused to be paid, all Taxes that are due and payable in all material
      respects, and, except as set forth in the Disclosure Letter, the
      Corporation has provided adequate accruals in accordance with GAAP in its
      most recently published financial statements for any Taxes for theperiod
      covered by such financial statements that have not been paid, whether or
      not shown as being due on any Tax Returns. The Corporation and each of its
      Subsidiaries have made adequate provision in accordance with GAAP in their
      respective books and records for any Taxes accruing in respect of any
      period subsequent to the period covered by such financial statements.
      Since such publication date, no material Tax liability not reflected in
      such statements or otherwise provided for has been assessed, proposed to
      be assessed, incurred or accrued other than in the ordinary course of
      business. Neither the Corporation nor any Subsidiary is currently the
      beneficiary of any extension of time within which to file any tax
      return.
 
 (ii)
    Except
      as set out in the Disclosure Letter, neither the Corporation nor any
      Subsidiary has received any written notification that any material issues
      have been raised (and are currently pending) by Canada Revenue Agency, the
      United States Internal Revenue Service or any other taxing authority,
      including, without limitation, any sales tax authority, in connection with
      any of the Tax Returns referred to above, and, except as set forth in the
      Disclosure Letter, no waivers of statutes of limitations have been given
      or
  Page
19
  requested
      with respect to the Corporation or any Subsidiary. All Tax liabilities of
      the Corporation and its Subsidiaries has been assessed for all fiscal
      years up to and including the fiscal year ended December 31, 2003. There
      are no material proposed (but unassessed) additional Taxes and none has
      been asserted. No Tax liens have been filed other than for Taxes not yet
      due and payable.
 (iii)
    The
      aggregate federal and provincial investment tax credit available to the
      Corporation and its Subsidiaries as at September 30, 2004 was
      $1,254,402.
 
 (iv)
    The
      calculations of investment tax credits still available to the Corporation
      and its Subsidiaries, or used by any of the Corporation or a Subsidiary,
      are as shown on copies of form T2038 or any equivalents attached to the
      Disclosure Letter, and have been accepted as true, correct, and complete
      by any relevant taxation authority for the purposes of the Income Tax Act
      (Canada) or any relevant provincial taxing statutes, except as set out in
      the Disclosure Letter.
  (m)
    *Pension
      and Employee Benefits.*
 (i)
    Other
      than as disclosed in the Disclosure Letter, the Corporation and each
      Subsidiary have complied with all the terms of, and all applicable Laws in
      respect of, its pension and other employee compensation and benefit
      obligations, including the terms of any funding and investment contracts
      or obligations applicable thereto, arising under or relating to each of
      the pension or retirement income plans or other employee compensation or
      benefit plans, agreements, policies, programs, arrangements or practices,
      whether written or oral, which are maintained by or binding upon it
      (collectively referred to as the “Plans”)
      and all Plans are fully funded and in good standing with such regulatory
      authorities as may be applicable, and no notice of underfunding,
      non-compliance, failure to be in good standing or otherwise has been
      received by the Corporation from any such regulatory authority. The
      Disclosure Letter identifies each Plan. A true and complete copy of each
      Plan (including any trust agreement, statement of investment policies and
      procedures, insurance contract, employee brochure or the like and all
      amendments thereto, prepared in connection with the Plan) has been
      provided to ADSX. The Company has provided to ADSX all actuarial
      valuations, if any, prepared for each Plan during the past five years.
 
 (ii)
    No
      step has been taken, no event has occurred and no condition or
      circumstance exists that has resulted in or could reasonably be expected
      to result in any Plan being ordered or required to be terminated or wound
      up in whole or in part or having its registration under applicable Laws
      refused or revoked, or being placed under the administration of any
      trustee or receiver or regulatory authority or being required to pay any
      material Taxes, fees, penalties or levies under applicable Laws. There are
      no actions, suits, claims (other than routine claims for payment of
      benefits in the ordinary course), trials, demands, investigations,
      arbitrations or other proceedings which arepending
      or threatened in respect of any of the Plans or their assets which
      individually or in the aggregate would have a Material Adverse
      Effect.
  
 
 Page 20
 (n)
    *Reports*.
 The
Corporation has filed with the Commission true and complete copies of all forms,
reports, schedules, statements and other documents required to be filed by it
since January 1, 2000 (such forms, reports, schedules, statements and other
documents, including any financial statements or other documents, including any
schedules included therein, are referred to as the “Corporation Documents”). The Corporation
Documents, at the time filed, (i) did not contain any misrepresentation (as
defined in the Securities Act) and (ii) complied in all material respects with
the requirements of applicable securities Laws. The Corporation has not filed
any confidential material change report with the Commission or any other
securities authority or regulator or any stock exchange or other self-regulatory
authority which at the date hereof remains confidential.
 
 (o)
    *Non-Arm’s
      Length
Transactions*
 
 Neither
the Corporation nor any of its Subsidiaries has entered into any contracts,
agreements, options, or arrangements or incurred or assumed any obligation or
liability (whether fixed or contingent) with, on behalf of, or with respect to
any “related party” (as that term is Ontario Securities Commission Rule 61-501)
except as disclosed in the Disclosure Letter .
 (p)
    *Compliance
      with
Laws.*
  Except as
disclosed in the Disclosure Letter, neither the Corporation nor any of its
Subsidiaries has received any citations, complaints, consent orders, compliance
schedules, or received any written notice from any government authority or any
other written notice that it is not in compliance with any Laws. Except as
disclosed in the Disclosure Letter, the Corporation and its Subsidiaries have
complied with and are not in violation of any applicable Laws, orders, judgments
and decrees. Without limiting the generality of the foregoing, all securities of
the Corporation (including, without limitation, all options, rights or other
convertible or exchangeable securities) have been issued in compliance with all
applicable securities
Laws and all securities to be issued upon exercise of any such options, rights
and other convertible or exchangeable securities will be issued in compliance
with all applicable securities Laws.
 
 (q)
    *Guarantees.*
 
 None of
the Corporation or its Subsidiaries has given or agreed to give, nor is it a
party to or bound by, any guarantee of indebtedness, indemnity or suretyship of
other obligations of any person other than the Corporation or a Subsidiary as
disclosed in the Disclosure Letter, nor is it contingently responsible for such
indemnity or suretyship or obligations.
 
 (r)
    *Restrictions
      on Business Activities.*
 There is
no agreement, judgment, injunction, order or decree binding upon the Corporation
or any Subsidiary that has or could reasonably be expected to have the effect of
prohibiting, restricting or materially impairing any business practice of the
Corporation or any Subsidiary, any acquisition of property by the Corporation
or any Subsidiary or the conduct of business by the Corporation or any
Subsidiary as currently conducted.
 
 
 
 Page
21
 
 (s)
    *Registration
      Rights.*
 
 No holder
of securities issued by the Corporation has any right to compel the Corporation
to register or otherwise qualify such securities for public sale in Canada or
the United States.
 
 (t)
    *Material
      Contracts.*
 All of
the material contracts and commitments (written and oral) of the Corporation and
its Subsidiaries, taken as a whole, are set forth in the Disclosure Letter,
true, correct and complete copies (descriptions in the case of an oral contract
or commitment) of all such contracts and commitments have been delivered to ADSX
and all such contracts (which for greater certainty, do not include commitments)
are enforceable against the other parties to them in accordance with their
respective terms, subject to bankruptcy, insolvency and other similar Laws
affecting creditors’ rights generally, and
to general principles of equity.
 
 (u)
    *Real
      Property.*
 (i)
    The
      Disclosure Letter lists all real property and any interest therein
      (including without limitation any option or other right or obligation to
      purchase any real property or any interest therein) currently owned, or
      ever owned, by the Corporation or a Subsidiary, in each case setting forth
      the street address and legal description of each property covered
      thereby.
 
 (ii)
    The
      Disclosure Letter lists all leases, licenses or similar agreements
      relating to the use or occupancy by the Corporation or a Subsidiary of
      real estate owned by a third party (“Leases”), true and correct copies of
      which have previously beenfurnishedto
      ADSX, in each case setting forth (i) the lessor and lessee thereof and the
      commencement date, term and renewal rights under each of the Leases, and
      (ii) the street address and legal description of each property covered
      thereby. The Leases and all guaranties with respect thereto, are in full
      force and effect and have not been amended in writing or otherwise, and no
      party thereto is in default or breach under any such Lease. No event has
      occurred which, with the passage of time or the giving of notice or both,
      would cause a material breach of or default under any of such Leases.
      Neither the Corporation, its Subsidiaries nor their respective agents or
      employees have received written notice of any claimed abatements, offsets,
      defenses or other bases for relief or
adjustment.
 
 (v)
    *Commitments.*
 Except as
otherwise set forth in the Disclosure Letter, neither the Corporation nor any of
its Subsidiaries is a party to or bound by any of the following, whether written
or oral;
 
 (i)
    any
      contract that cannot by its terms be terminated by the Corporation or a
      Subsidiary with 30 days’ or less notice without penalty or whose term
      continues beyond one year after the date of this
  Agreement;
 
 (ii)
    any
      contract or commitment for capital expenditures by the Corporation or a
      Subsidiary in excess of $50,000 per calendar quarter in the
      aggregate;
  Page
22
 (iii)
    any
      lease or license with respect to any properties, real or personal, whether
      as landlord, tenant, licensor or licensee;
 
 (iv)
    agreement,
      contract, indenture or other instrument relating to the borrowing of money
      or the guarantee of any obligation or the deferred payment of the purchase
      price of any properties;
 
 (v)
    partnership
      agreement;
 
 (vi)
    contract
      with any Affiliate of the Corporation or a Subsidiary relating to the
      provision of goods or services by or to the Corporation of the Subsidiary,
      as the case may be;
 
 (vii)
    agreement
      for the sale of any assets that in the aggregate have a net book value on
      the books of the Corporation or a Subsidiary of greater than $5,000 other
      than sales of inventory in the normal course of
  business;
 
 (viii)
    agreement
      that purports to limit the freedom of the Corporation or a Subsidiary to
      compete freely in any line of business or in any geographic
      area;
 
 (ix)
    preferential
      purchase right, right of first refusal, or similar agreement;
      or
 
 (x)
    other
      contract that is material to the business of the Corporation or a
      Subsidiary.
 
 (w)
    *Insurance.*
 
 The
Disclosure Letter contains a complete and correct list of all insurance policies
(including, without limitation, fire liability, product liability, workers’
compensation and vehicular) currently in effect that relate to the Corporation
or a Subsidiary or their respective properties, including the amounts of such
insurance and annual premiums with respect thereto, all of which have been in
full force and effect from and after the date(s) set forth on the Disclosure
Letter. Such policies are sufficient for compliance for the Corporation and its
Subsidiaries with all applicable Laws and all material contracts of the
Corporation and its Subsidiaries. Except as disclosed in the Disclosure Letter,
none of the insurance carriers has indicated to the Corporation or a Subsidiary
an intention to cancel any such policy or to materially increase any insurance
premiums (including, without limitation, workers’ compensation premiums), or
that any insurance required to be listed on the Disclosure Letter will not be
available in the future on substantially the same terms as currently in effect.
Neither the Corporation nor any Subsidiary has any claim pending or anticipated
against any of its insurance carriers under such policies and, to the knowledge
of the Corporation, there has been no actual or alleged occurrence of any kind
which could reasonably be expected to give rise to any such claim. During the
prior three years, all notices required to have been given by the Corporation or
a Subsidiary to any insurance company have been timely and duly given, and no
insurance company has asserted that any claim is not covered by the applicable
policy relating to such claim.
 
 (x)
    *Intangible
      Rights*.
  Set forth
in the Disclosure Letter is a list and description of all material foreign and
domestic patents, patent rights, trademarks, service marks, trade names, brands
and copyrights (whether or not registered and, if applicable, including pending
applications for registration) owned, used, licensed or controlled by the
Corporation or a Subsidiary and all goodwill associated therewith. Each of the
Corporation and its
 
 
 
 Page
23
 
 Subsidiaries
owns or has the right to use and shall as of the Effective Date own or have the
right to use any and all information, know-how, trade secrets, patents,
copyrights, trademarks, tradenames, software, formulae, methods, processes and
other intangible properties that are necessary or customarily used by the
Corporation or Subsidiary, as the case may be, for the ownership, management or
operation of its properties (“Intangible Rights”) including, but not limited to,
the Intangible Rights listed on the Disclosure Letter. Except as set forth in
the Disclosure Letter, (i) the Corporation or a Subsidiary is the sole and
exclusive owner of all right, title and interest in and to all of the Intangible
Rights, and has the exclusive right to use and license the same, free and clear
of any claim or conflict with the Intangible Rights of others; (ii) no
royalties, honorariums or fees are payable by the Corporation or a Subsidiary to
any person by reason of the ownership or use of any of the Intangible Rights;
(iii) there have been no claims made against the Corporation or a Subsidiary
asserting the invalidity, abuse, misuse, or unenforceability of any of the
Intangible Rights or interests therein and, to the knowledge of the Corporation,
no grounds for any such claims exist; (iv) the Corporation has not made any
claim of any violation or infringement by others of any of its Intangible Rights
or interest therein and, to the knowledge of the Corporation, no grounds for any
such claim exist; (v) neither the Corporation nor any Subsidiary has received
any notice that it is in conflict with or infringing upon the asserted
intellectual property rights of others in connection with the Intangible Rights,
and neither the use of the Intangible Rights nor the operation of the businesses
of the Corporation and each of its Subsidiaries is infringing or has infringed
upon any intellectual property rights of others; (vi) the Intangible Rights are
sufficient and include all intellectual property rights necessary for the
Corporation and its Subsidiaries to lawfully conduct their respective businesses
as they are currently being conducted; (vii) no interest in any of the
Intangible Rights of the Corporation or its Subsidiaries has been assigned,
transferred, licensed or sublicensed by the Corporation to any person; (viii) to
the extent that any item constituting part of the Intangible Rights has been
registered with, filed in or issued by, any Governmental Entity, such
registrations, filings or issuances are listed on the Disclosure Letter and were
duly made and remain in full force and effect; (ix) to the knowledge of the
Corporation, there has not been any act or failure to act by the Corporation, a
Subsidiary or any of their respective directors, officers, employees, attorneys
or agents during the prosecution or registration of, or any other proceeding
relating to, any of the Intangible Rights or of any other fact which could
render invalid or unenforceable, or negate the right to issuance of any of the
Intangible Rights; (x) to the extent any of the Intangible Rights constitutes
proprietary or confidential information, the Corporation or a Subsidiary has
adequately safeguarded such information from disclosure; and (xi) all of the
current Intangible Rights of the Corporation and its Subsidiaries will remain in
full force and effect following the Effective Time without alteration or
impairment.
 
 (y)
    *Equipment
      and Other Tangible Property.*
 Except as
otherwise disclosed in the Disclosure Letter, the equipment, furniture,
machinery, vehicles, structures, fixtures and other tangible property of the
Corporation and its Subsidiaries (collectively, the “Tangible Corporation
Properties”), other than inventory, are suitable for the purposes for which
intended and in good operating condition and repair consistent with normal
industry standards, except for ordinary wear and tear, and except for such
Tangible Corporation Properties as shall have been taken out of service on a
temporary basis for repairs or replacement consistent with the prior practices
and normal industry standards of the Corporation and its Subsidiaries. To the
knowledge of the Corporation, the Tangible Corporation Properties are free of
any structural or engineering defects, and during the past five years there has
not been any significant interruption of the business of the Corporation or its
Subsidiaries due to inadequate maintenance or obsolescence of the Tangible
Corporation Properties.
  Page
24
  (z)
    *Banks.*
 
 The
Disclosure Letter sets forth (i) the name of each bank, trust company or other
financial institution and stock or other broker with which the Corporation or a
Subsidiary has an account, credit line or safe deposit box or vault, (ii) the
names of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (iii) the purpose of each such account, safe deposit box
or vault, and (iv) the names of all persons authorized by proxies, powers of
attorney or other like instrument to act on behalf of the Corporation or a
Subsidiary in matters concerning any of its business or affairs. Except as
otherwise disclosed in the Disclosure Letter, no such proxies, powers of
attorney or other like instruments are irrevocable.
 
 (aa)
    *Absence
      of Certain Business Practices.*
 
 Neither
the Corporation, a Subsidiary nor any other Affiliate or agent of the
Corporation or a Subsidiary, or any other person acting on behalf of or
associated with the Corporation or a Subsidiary, acting alone or together, has
(a) received, directly or indirectly, any rebates payments, commissions,
promotional allowances or any other economic benefits, regardless of their
nature or type, from any customer, supplier, employee or agent of any customer
or supplier; or (b) directly or indirectly given or agreed to give any money,
gift or similar benefit to any customer, supplier, or agent of any customer or
supplier, any official or employee of any government (domestic or foreign), or
any political party or candidate for office (domestic or foreign), or other
person who was, is or may be in a position to help or hinder the business of the
Corporation or a Subsidiary (or assist the Corporation or a Subsidiary in
connection with any actual or proposed transaction), in each case which (i) may
subject the Corporation or a Subsidiary to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, may have had an adverse effect on the assets, business, operations or
prospects of the Corporation or a Subsidiary, or (iii) if not continued in the
future, may adversely affect the assets, business, operations or prospects of
the Corporation or a Subsidiary.
 
 (ab)
    *Products,
      Services and Authorizations.*
  (i)
    Each
      Product designed, manufactured, repaired or serviced by the Corporation or
      a Subsidiary has been designed, manufactured, repaired or serviced in
      accordance with (i) the specifications under which the Product is normally
      and has normally been manufactured, and (ii) in all material respects, the
      provisions of all applicable laws, policies, guidelines and any other
      governmental requirements.
 
 (ii)
    The
      Disclosure Letter sets forth (i) a list of all Products which at any time
      have been recalled, withdrawn or suspended by the Corporation or a
      Subsidiary, whether voluntarily or otherwise, including the date recalled,
      withdrawn or suspended and a brief description of all completed or pending
      proceedings seeking the recall, withdrawal, suspensions or seizure of any
      Product, (ii) a brief description of all completed or pending proceedings
      seeking the recall, withdrawal, suspension or seizure of any Product, and
      (iii) a list of all regulatory letters received by the Corporation, a
      Subsidiary or any of their respective agents relating to the Corporation
      or a Subsidiary or any of the Products.
 
 (iii)
    There
      exists no set of facts which could reasonably be expected to furnish a
      basis for the recall, withdrawal or suspension of any product
      registration, product license, repair or overhaul license, manufacturing
      license, wholesale dealers license, export license
or
  
 Page
25
 other
      license, approval or consent of any governmental or regulatory authority
      with respect to the Corporation, a Subsidiary or any of the
      Products.
 (iv)
    There
      are no material claims existing or threatened under or pursuant to any
      warranty, whether express or implied, on products or services sold by the
      Corporation or a Subsidiary. There are no claims existing and there is no
      basis for any claim against the Corporation or a Subsidiary for injury to
      persons, animals or property as a result of the sale, distribution or
      manufacture of any product or performance of any service by the
      Corporation, including, but not limited to, claims arising out of the
      defective or unsafe nature of its products or services. The Corporation
      and each of its Subsidiaries has full and adequate insurance coverage for
      products liability claims against it.
 
 (v)
    Set
      forth in the Disclosure Letter is a list of all authorizations, consents,
      approvals, franchises, licenses and permits required by any Person (other
      than a Governmental Entity) for the operation of the business of the
      Corporation and its Subsidiaries as presently operated (the “Other Person
      Authorizations”). All of the Other Person Authorizations have been duly
      issued or obtained and are in full force and effect and the Corporation
      and each of its Subsidiaries is in compliance with the terms of all the
      Other Person Authorizations. The Corporation has no knowledge of any facts
      which could be expected to cause it to believe that the Other Person
      Authorizations will not be renewed in the ordinary course. Each of the
      Other Person Authorizations will continue in full force and effect after
      the Effective Time, in each case without (i) the occurrence of any breach,
      default or forfeiture of rights thereunder, or (ii) the consent, approval,
      or act of, or the making of any filings with, any
  Person.
 
 (ac)
    *Transactions
      With Affiliates.*
  Except as
set forth in the Disclosure Letter and except for payment of compensation for
employment to employees consistent with past practices, and participation in
Plans by employees, neither the Corporation nor any Subsidiary has purchased,
acquired or leased any property or services from, or sold, transferred or leased
any property or services to, or loaned or advanced any money to, or borrowed any
money from, or entered into or been subject to any management, consulting or
similar agreement with, or engaged in any other significant transaction with any
officer, director or shareholder of the Corporation or a Subsidiary or any of
their respective Affiliates. Except as disclosed in the Disclosure Letter, no
Affiliate of the Corporation or a Subsidiary is indebted to the Corporation or
Subsidiary for money borrowed or other loans or advances, and neither the
Corporation nor any of its Subsidiaries is indebted to any such
Affiliate.
 
 (ad)
    *Other
      Information.*
 The
information furnished by the Corporation to ADSX pursuant to this Agreement
(including, without limitation, information contained in the Disclosure Letter,
the instruments referred to in such Disclosure Letter and the certificates and
other documents to be executed or delivered pursuant hereto by the Corporation
at or prior to the Effective Time) is not false or misleading in any material
respect, contains no misstatement of any material fact, nor omits to state any
material fact required to be stated in order to make the statements therein not
misleading.
 
 
 
 Page
26
 
 (ae)
    *Existing
      Bonus Plans.*
 
 Except as
disclosed in the Disclosure Letter, there are no plans or other like
arrangements for the payment of bonuses or commissions of any kind to directors,
officers, employees or consultants of the Corporation or any of the
Subsidiaries. The Disclosure Letter sets forth the Corporation’s reasonable
estimate of the amounts of bonuses and commissions payable to each director,
officer, employee or consultant of the Corporation or any of the Subsidiaries
with respect to any period ended on or before December 31, 2004.
 
 (af)
    *Exclusive
      Products.*
 
 The only
right under any agreement, written or oral, by which any Person other than
Prosec Protection Systems Inc. (“Prosec”) may sell Exclusive Product in the
Territory (both terms as defined in the OEM Agreement 2005 (“OEM Agreement”)
dated December 23, 2004 between the Corporation and Prosec) is the Corporation’s
right to sell Exclusive Product as an addition to, replacement for, or expansion
of existing systems in the Territory as referred to in the OEM
Agreement.
 
 **3.2** **Representations
and Warranties of ADSX**
 
 ADSX
represents and warrants to and in favour of the Corporation as follows and
acknowledge that the Corporation is relying upon such representations and
warranties in connection with the matters contemplated by this
Agreement:
 (a)
    *Organization.*
 
 ADSX has
been duly incorporated or formed under all applicable Laws, is validly
subsisting and has full corporate or legal power and authority to own its
properties and conduct its businesses as currently owned and conducted.
 (b)
    *Capitalization.*
 
 The
authorized capital of ADSX consists of 125,000,000 ADSX Common Shares. As of
January 10, 2005 (i) there were 56,820,264 ADSX Common Shares issued and
outstanding and (ii) there were no options, warrants, conversion privileges or
other rights, agreements, arrangements or commitments (contingent or otherwise)
obligating ADSX to issue or sell any shares or securities or obligations of any
kind convertible into or exchangeable for any shares, except for options and
warrants entitling the holders thereof to acquire up to 7,415,763 ADSX Common
Shares. All outstanding ADSX Common Shares have been duly authorized and are
validly issued and outstanding as fully
paid and non-assessable shares, free of pre-emptive rights. There are no
outstanding bonds, debentures or other evidences of indebtedness of ADSX having
the right to vote (or that are convertible for or exercisable into securities
having the right to vote) with the holders of ADSX Common Shares on any matter.
Other than under employee stock option plans, there are no outstanding
contractual obligations of ADSX to repurchase, redeem or otherwise acquire any
of its outstanding securities or with respect to the voting or disposition of
any outstanding securities of any of its subsidiaries.
  
 
 Page
27
 
 (c)
    *Authority
      and No Violation.*
 
 (i)
    ADSX
      has the requisite corporate power and authority to enter into this
      Agreement and to perform its obligations hereunder and thereunder. The
      execution and delivery of this Agreement by ADSX and the consummation by
      ADSX of the transactions contemplated by this Agreement have been duly
      authorized by its Board of Directors and no other corporate proceedings on
      its part are necessaryto
      authorize this Agreement or the transactions contemplated hereby or
      thereby.
 
 (ii)
    This
      Agreement has been duly executed and delivered by ADSX and constitutes a
      legal, valid and binding obligation, enforceable against ADSX in
      accordance with its terms, subject to bankruptcy, insolvency and other
      similar Laws affecting creditors’
      rights generally, and to general principles of equity.
 
 (iii)
    The
      approval and the execution and delivery by ADSX of this Agreement and the
      performance by it of its obligations hereunder and the completion of the
      Arrangement and the transactions contemplated thereby, will
      not:
 
 (A)
    result
      in a violation or breach of, require any consent to be obtained under, or
      give rise to any termination rights or payment obligation under any
      provision of:
 
 (I)
    its
      certificate of incorporation, articles, by-laws or other charter
      documents, including any unanimous shareholder agreement or any other
      material agreement or understanding with any party holding an ownership
      interest in it;
 
 (II)
    subject
      to obtaining the Regulatory Approvals relating to ADSX, any Laws,
      regulation, order, judgment or decree; or
 
 (III)
    any
      material contract, agreement, license, franchise or permit to which it is
      party or by which it is bound;
 
 (B)
    except
      as would not, individually or in the aggregate, have a Material Adverse
      Effect, give rise to any right of termination or acceleration of
      indebtedness, or cause any third party indebtedness to come due before its
      stated maturity or cause any available credit to cease to be available;
      or
 
 (C)
    except
      as would not, individually or in the aggregate, have a Material Adverse
      Effect, result in the imposition of any Encumbrance upon any of its
      assets, or restrict, hinder, impair or limit its ability to carry on its
      business as and where it is now being carried on or as and where it may be
      carried on in the future.
 
 (iv)
    No
      consent, approval, order or authorization of, or declaration or filing
      with, any Governmental Entity or other Person is required to be obtained
      by ADSX in connection with the execution and delivery of this Agreement or
      the consummation by ADSX of the transactions contemplated hereby other
      than (A) the Regulatory Approvals relating to ADSX and (B) any other
      consents, approvals, orders, authorizations, declarations or filings of or
      with a Governmental Entity which, if not obtained, would not in the
      aggregate have a Material Adverse Effect.
  
 
 Page
28
 
 (d)
    *Absence
      of Certain Changes or Events.*
 
 Except as
disclosed in publicly available reports filed by ADSX with the SEC prior to the
date of this Agreement, since September 30, 2004 ADSX has conducted its business
only in the ordinary course of business consistent with past practice and there
has not occurred:
 
 (i)
    any
      Material Adverse Change in its affairs or in its financial condition,
      results of operations, business or prospects;
 
 (ii)
    any
      damage, destruction or loss, whether covered by insurance or not, that
      could reasonably be expected to have a Material Adverse Effect;
      or
 
 (iii)
    any
      agreement or arrangement to take any action which, if taken prior to the
      date hereof, would have made any representation or warranty set forth in
      this Agreement materially untrue or incorrect as of the date when
      made.
 
 (e)
    *Disclosure.*
 
 ADSX has
publicly disclosed in documents filed with the SEC, all information regarding
any event, circumstance or action taken or failed to be taken which could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
 (f)
    *Financial
      Statements.*
 
 The
audited consolidated financial statements for ADSX as at and for each of the
12-month periods ended December 31, 2000, 2001, 2002 and 2003 and the unaudited
consolidated financial statements for the 9-month period ended September 30,
2004 have been prepared in accordance with United States generally accepted
accounting principles, the requirements of applicable Governmental Entities and
applicable securities Laws; such financial statements present fairly, in all
material respects, the consolidated financial position and results of operations
of ADSX and its Subsidiaries as of the respective dates thereof and for the
respective periods covered thereby.
 
 (g)
    *Litigation.*
 
 There is
no claim, action, proceeding or investigation pending or, to the knowledge of
ADSX, threatened against or relating to ADSX or affecting any of its properties,
licenses or assets before any court or Governmental Entity or regulatory
authority or body that, if adversely determined, could reasonably be expected to
prevent or delay consummation of the transactions contemplated by this Agreement
or the Arrangement, nor is ADSX aware of any basis for any such claim, action,
proceeding or investigation.
 (h)
    *Reports.*
 
 ADSX has
filed with the SEC true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by it since September 30,
2002, and such documents, at the time filed, (i) did not contain any
misrepresentation (as defined in the Securities Act and (ii) complied in all
material respects with the requirements of applicable securities Laws. ADSX has
not filed any confidential material change report with the SEC or any other
securities authority or regulator or any stock exchange or other self-regulatory
authority which at the date hereof remains confidential.
  
 
 Page
29
 
 (i)
    *The
      ADSX Common Shares.*
 
 The ADSX
Common Shares are quoted on the NASDAQ Small Cap Market.
 
 **3.3** **Survival**
 
 For
greater certainty, the representations and warranties of each the Corporation
and ADSX contained herein shall survive the execution and delivery of this
Agreement and shall terminate on the earlier of the termination of this
Agreement in accordance with its terms and the day after the Effective
Date.
 
 **Article
IV — Regulatory
Approvals**
 
 **4.1** **Applications**
 
 The
Corporation and ADSX shall proceed diligently, in a coordinated fashion, to
apply for and obtain the Regulatory Approvals.
 
 **4.2** **Obtaining
of Regulatory Approvals**
 
 For
purposes of this Agreement, no Regulatory Approval shall be considered to have been
obtained if it contains any condition that:
 
 (a)
    would
      put ADSX at a material competitive disadvantage by comparison with its
      competitors in any jurisdiction in which ADSX has significant operations,
      if the competitive disadvantage is greater than any competitive
      disadvantage which may reasonably be expected in consequence of regulatory
      requirements that result from the operations of a business in ADSX’s
      industry in multiple jurisdictions, or is materially onerous to ADSX in
      some other respect; or
 
 (b)
    would
      put the combined operations of ADSX and the Corporation at a material
      competitive disadvantage by comparison with its competitors in any
      jurisdiction in which ADSX, the Corporation or their respective
      subsidiaries have significant operations, if the competitive disadvantage
      is greater than any competitive disadvantage which may reasonably be
      expected in consequence of regulatory requirements that result from the
      operations of a securities firm in multiple jurisdictions, or is
      materially onerous to the combined operations of ADSX and the Corporation
      in some other respect.
 
 In
addition, no Regulatory Approval shall be considered to have been obtained if an
appeal has been instituted from the granting of any Regulatory Approval and
remains outstanding.
 
 **Article
V —
Covenants**
 
 **5.1** **Retention
of Goodwill**
 
 During
the Pre-Effective Date Period, the Corporation will, subject to the transactions
contemplated by this Agreement, continue to carry on the business of the
Corporation and its Subsidiaries in a manner consistent with prior practice,
work to preserve the attendant goodwill of such entities and to contribute to
retention of that goodwill to and after the Effective Date, but subject to the
following provisions of this
 
 
 
 Page 30
 
 Article
V. The following provisions of this Article V are intended to be in furtherance
of this general commitment.
 
 **5.2** **Consultations**
 
 During
the Pre-Effective Date Period, the Corporation and the Subsidiaries will consult
on an ongoing basis with senior officers of ADSX to be designated by ADSX for
that purpose in order that the representatives of ADSX will become more familiar
with the philosophy and techniques of the Corporation and the Subsidiaries, as
well as with their business and financial affairs and in order to provide
experience as a basis for ongoing relationships in connection with the
acquisition of the Corporation
by ADSX after the Effective Date. These consultations will include any
commitments, arrangements or transactions proposed to be entered into by the
Corporation or the Subsidiaries that would give rise to a material liability or
commitment of any kind where such liability or commitment is unusual or is of
such a nature as to be inconsistent with the historical conduct by the
Corporation and the Subsidiaries of its business, with materiality being
determined for the purposes of this section 5.2 by reference to the capital base
of the Corporation on a consolidated basis. The Corporation and ADSX will
develop procedures such that these consultations will be carried out quickly and
effectively without detracting from the ability of the Corporation to arrive at
decisions in a timely manner.
 
 **5.3** **Covenants
of the Corporation**
 
 (a)
    The
      Corporation covenants and agrees that, until the Effective Date or the
      earlier termination of this Agreement in accordance with Article VII,
      except (i) with the prior written consent of ADSX to any deviation
      therefrom (such consent not to be unreasonably withheld as it relates to
      sections (xvii and (xx)); (ii) with respect to any binding commitments
      which were disclosed in the Disclosure Letter; or (iii) with respect to
      any matter contemplated by or arising out of this Agreement or the Plan of
      Arrangement, the Corporation will:
 
 (i)
    and
      will cause each of the Subsidiaries to, carry on its business in, and only
      in, the ordinary course in substantially the same manner as heretofore
      conducted and, to the extent consistent with such business, use all
      reasonable efforts to preserve intact its present business organization
      and keep available the services of its present officers and employees and
      others having business dealings with it to the end that its goodwill and
      business shall be maintained, provided nothing in this Agreement shall be
      construed as requiring EXI Solutions Inc. to carry on
      business;
 
 (ii)
    not,and
      will cause each of the Subsidiaries not to,commence
      to undertake a substantial or unusual expansion of its business facilities
      or an expansion that is out of the ordinary course of business consistent
      with prior practice in light of current market and economic
      conditions;
 
 (iii)
    not
      declare or pay any dividends on or make any other distributions on or in
      respect of the outstanding shares of the
Corporation;
 
 (iv)
    not
      amend its articles or by-laws, including, but not limited to, a
      subdivision or consolidation of Common
Shares;
  (v)
    not
      allot, reserve, set aside or issue, authorize or propose the allotment,
      reservation, setting aside or issuance of, or purchase or redeem or
      propose the purchase or
  Page
31
 redemption
      of, any shares in its capital or of any Subsidiary or any class or
      securities convertible or exchangeable into, or rights, warrants or
      options to acquire, any such shares or other convertible or exchangeable
      securities, except for (a) issuances by a Subsidiary of the Corporation of
      its capital stock to the Corporation and (b) the issuance of Common Sharespursuant
      to vested Dilutive Securities granted prior to January 25,
      2005;
  (vi)
    not,
      whether through its Board of Directors or otherwise, amend the exercise
      price or term or accelerate the vesting of any unvested Dilutive
      Securities or accelerate the release of, or the expiry date of any hold
      period relating to, any Common Shares held in either the Corporation’s employee share purchase plan or otherwise
      amend, vary or modify, or take any other action under, either such Plan or
      the Corporation’s stock option plan;
 
 (vii)
    not,and
      will cause each of the Subsidiaries not to,modify, amend or terminate any material contract or agreement to which the
      Corporation or Subsidiary is a party or waive, release or assign any
      material rights or claims;
 
 (viii)
    not,and
      will cause each of the Subsidiaries not to,acquire
      or agree to acquire any Common Shares or other outstanding securities,
      whether by public or private transaction, pursuant to any normal course or
      substantial issuer bid, or otherwise, or any shares or other outstanding
      securities of any Subsidiary;
 
 (ix)
    not,and
      will cause each of the Subsidiaries not to, acquire or agree to acquire by
      amalgamating, merging or consolidating with, purchasing substantially all
      of the assets of or otherwise, any business of any corporation,
      partnership, association or other business organization or division
      thereof, (other than inventory and equipment in the ordinary course
      consistent with past practice, to the extent not otherwise prohibited by
      this Agreement);
 
 (x)
    not,and
      will cause each of the Subsidiaries not to,except
      with respect to the sale in the ordinary course of business consistent
      with past practice, sell, lease or otherwise dispose of any of its
      assets;
 
 (xi)
    not,and
      will cause each of the Subsidiaries not to,guarantee
      the payment of indebtedness or incur indebtedness for money borrowed or
      issue or sell any debt securities;
 
 (xii)
    continue
      to provide ADSX and its representatives with information as reasonably
      requested by them from time to time concerning the business, assets,
      liabilities and affairs of the Corporation and the Subsidiaries, and with
      access (on a basis that does not detract unreasonably from their
      performance of their business responsibilities) to management and
      employees of the Corporation and the
Subsidiaries;
 
 (xiii)
    use
      its reasonable efforts to comply promptly with all requirements which
      applicable Laws may impose on the Corporation or the Subsidiaries with
      respect to the transactions contemplated hereby and by the
      Arrangement;
 
 (xiv)
    not
      permit the Corporation or the Subsidiaries to grant any of their employees
      any
  Page
32
 increase
      in compensation, to pay any bonus or to pay any severance or termination
      amounts whether or not such compensation, payment or amount is payable in
      cash, enter into any employment agreement with any executive officer or
      adopt any benefit plan except to the extent required by Laws for severance
      payable on termination of an employee for cause or to the extent required
      by Laws as a result of an employee voluntarily terminating his employment;
  (xv)
    not
      permit the Corporation or a Subsidiary to adopt or implement anybonus
      or commission plan or arrangement not in effect as at the date of this
      Agreement;
 
 (xvi)
    not,and
      will cause each of the Subsidiaries not to,enter
      into any contracts, agreements, options, or arrangements or incur or
      assume any obligation or liability (whether fixed or contingent) with, on
      behalf of, or with respect to any “related party” (as that term is Ontario
      Securities Commission Rule 61-501); and
 
 (xvii)
    not,
      and will cause each of the Subsidiaries not to, enter into
      any:
 
 (A)
    contract
      that cannot by its terms be terminated by the Corporation or a Subsidiary
      with 30 days’ or less notice without penalty or whose term continues
      beyond one year after the date of this
Agreement;
 
 (B)
    contract
      or commitment for capital expenditures by the Corporation or a Subsidiary
      in excess of $50,000 per calendar quarter in the
  aggregate;
 
 (C)
    lease
      or license with respect to any properties, real or personal, whether as
      landlord, tenant, licensor or licensee;
 
 (D)
    agreement,
      contract, indenture or other instrument relating to the borrowing of money
      or the guarantee of any obligation or the deferred payment of the purchase
      price of any properties;
 
 (E)
    partnership
      agreement;
 
 (F)
    contract
      with any Affiliate of the Corporation or a Subsidiary relating to the
      provision of goods or services by or to the Corporation of the Subsidiary,
      as the case may be;
 
 (G)
    agreement
      for the sale of any assets that in the aggregate have a net book value on
      the books of the Corporation or a Subsidiary of greater than $5,000 other
      than sales of inventory in the normal course of
  business;
 
 (H)
    agreement
      that purports to limit the freedom of the Corporation or a Subsidiary to
      compete freely in any line of business or in any geographic
      area;
 
 (I)
    preferential
      purchase right, right of first refusal, or similar agreement;
      or
 
 (J)
    other
      contract that is material to the business of the Corporation or a
      Subsidiary;
 
 (xviii)
    promptly
      advise ADSX orally and, if then requested, in
writing:
  Page
33
 (A)
    of
      any event occurring subsequent to the date of this Agreement that would
      render any representation or warranty of the Corporation contained in this
      Agreement, if made on or as of the date of such event or the Effective
      Date, untrue or inaccurate in any material
respect;
 
 (B)
    of
      any Material Adverse Change in respect of the Corporation;
    and
 
 (C)
    of
      any breach by the Corporation of any covenant or agreement contained in
      this Agreement;
 
 (xix)
    not
      make any change with respect to any accounting methods, principles or
      practices used by the Corporation; and
 
 (xx)
    not
      modify, amend or terminate the agreement dated January 18, 2005 between
      the Corporation and Focus Enterprises Inc.
 
 (b)
    The
      Corporation shall and shall cause the Subsidiaries to perform all
      obligations required or desirable to be performed by the Corporation or
      any of the Subsidiaries under this Agreement and shall do all such other
      acts and things as may be necessary or desirable in order to consummate
      and make effective, as soon as reasonably practicable, the transactions
      contemplated in this Agreement and, without limiting the generality of the
      foregoing, the Corporation shall and where appropriate shall cause
      Subsidiaries to:
 
 (i)
    use
      all reasonable efforts to obtain the approvals of holders of Common Shares
      to the Arrangement, subject, however, to the exercise by the Board of
      Directors of the Corporation of its fiduciary duties as provided
      herein;
 
 (ii)
    apply
      for and use all reasonable efforts to obtain all Regulatory Approvals
      relating to the Corporation or any of the
Subsidiaries;
 
 (iii)
    apply
      for and use all reasonable efforts to obtain the Interim Order and the
      Final Order;
 
 (iv)
    defend
      all lawsuits or other legal, regulatory or other proceedings challenging
      or affecting this Agreement or the consummation of the transactions
      contemplated hereby;
   (v)
    use
      all reasonable efforts to have lifted or rescinded any injunction or
      restraining order or other order relating to the Corporation or a
      Subsidiary which may adversely affect the ability of the parties to
      consummate the transactions contemplated hereby;
and
 
 (vi)
    effect
      all necessary registrations, filings and submissions of information
      required by Governmental Entities from the Corporation or any of its
      subsidiaries.
 
 (c)
    The
      Corporation shall, before the Effective Date, cause the termination,
      without compensation or any other payment or liability in connection with
      such termination, of the:
 
 (i)
    Consulting
      and Executive Agreement dated October 29, 1999 between the Corporation and
      Karim Khoja; and
  Page
34
 (ii)
    Management
      Services Agreement dated March 9, 1998, as amended, between the
      Corporation and Corpanada Capital Inc.
 
 and
provide evidence satisfactory to ADSX, acting reasonably, of such
termination.
 
 (d)
    The
      Corporation shall, before the Effective Date, cause EXI Solutions Inc. to
      be dissolved pursuant to Section 316 of the*Business
      Corporations Act*(British Columbia), and shall provide evidence satisfactory to ADSX,
      acting reasonably, of such dissolution.
 
 **5.4** **Covenants
of ADSX**
 
 ADSX
hereby covenants and agrees:
 
 (a)
    to
      perform all obligations required or desirable to be performed by it under
      this Agreement and to do all such other acts and things as may be
      necessary or desirable in order to consummate and make effective, as soon
      as reasonably practicable, the transactions contemplated by this Agreement
      and, without limiting the generality of the foregoing,
  to:
 
 (i)
    apply
      for and use all reasonable efforts to obtain all Regulatory Approvals
      relating to ADSX or any of its
subsidiaries;
 
 (ii)
    defend
      all lawsuits or other legal, regulatory or other proceedings to which it
      is a party challenging or affecting this Agreement or the consummation of
      the transactions contemplated hereby;
 
 (iii)
    use
      all reasonable efforts to have lifted or rescinded any injunction or
      restraining order or other order relating to ADSX which may adversely
      affect the ability of the parties to consummate the transactions
      contemplated hereby;
 
 (iv)
    effect
      all necessary registrations, filings and submissions of informationrequired
      by Governmental Entities from ADSX or its subsidiaries;
  and
 
 (vi)
    cause
      ADSX to reserve a sufficient number of ADSX Common Shares for issuance
      upon the completion of the Arrangement and the exercise from time to time
      of Replacement Securities;
 
 (b)
    the
      ADSX Common Shares to be issued pursuant to the Arrangement or upon the
      exercise from time to time of the Replacement Securities will, in all
      cases, be duly and validly issued by ADSX on their respective dates of
      issue; and
 
 (c)
    promptly
      advise the Corporation orally and, if then requested, in
      writing:
 
 (i)
    of
      any event occurring subsequent to the date of this Agreement that would
      render any representation or warranty of ADSX contained in this Agreement,
      if made on or as of the date of such event or the Effective Date, untrue
      or inaccurate in any material respect;
 
 (ii)
    of
      any Material Adverse Change in respect of ADSX;
and
 
 (iii)
    of
      any breach by ADSX of any covenant or agreement contained in this
      Agreement.
  
 ****
 Page
35
  **5.5** **Covenants
Regarding Non-Solicitation**
 
 (a)
    The
      Corporation shall immediately cease any discussions or negotiations with
      any parties that may be ongoing with respect to an Acquisition Proposal
      and shall not, directly or indirectly, through any officer, director,
      employee, representative or agent of the Corporation or any of its
      subsidiaries, (i) solicit, initiate or knowingly encourage (including by
      way of furnishing information or entering into any form of agreement,
      arrangement or understanding) the initiation of any inquiries or proposals
      regarding an Acquisition Proposal, (ii) participate in any discussions or
      negotiations regarding any Acquisition Proposal, (iii) withdraw or modify
      in a manner adverse to ADSX the approval of the Board of Directors of the
      Corporation of the transactions contemplated hereby, (iv) approve or
      recommend any Acquisition Proposal or (v) cause the Corporation to enter
      into any agreement related to any Acquisition Proposal; provided, however,
      that, subject to section 5.6 but notwithstanding the preceding part of
      this section 5.5(a) and any other provision of this Agreement, nothing
      shall prevent the Board of Directors of the Corporation from considering,
      negotiating, approving, and recommending to the Corporation’s shareholders
      or entering into an agreement in respect of an unsolicited*bona
      fide*written Acquisition Proposal that the Board of Directors of the
      Corporation determines in good faith, acting reasonably, after
      consultationwith
      the Corporation’s financial advisors and after receiving an opinion of
      outside counsel to the effect that it is appropriate that the Board of
      Directors of the Corporation take such action in order to discharge
      properly its fiduciary duties, would, if consummated in accordance with
      its terms, result in a transaction (x) more favourable to the
      Corporation’s shareholders than the transaction contemplated by this
      Agreement and (y) having a value per Common Share greater than the per
      share value attributable thereto under the transaction contemplated by
      this Agreement (any such Acquisition Proposal being referred to herein as
      a “Superior
  Proposal”).
 
 (b)
    The
      Corporation shall promptly notify ADSX, at first orally and then in
      writing, of all current Acquisition Proposals, and of all future
      Acquisition Proposals, of which the Corporation’s directors or senior
      officers are or become aware, or any amendments to the foregoing, or any
      request for non-public information relating to the Corporation or any
      Subsidiaries in connection with an Acquisition Proposal or for access to
      the properties, books or records of the Corporation or any Subsidiary by
      any Person that informs the Corporation or such Subsidiary that it is
      considering making, or has made, an Acquisition Proposal. Such notice
      shall include a description of the material terms and conditions of any
      proposal and provide such details of the proposal, inquiry or contact as
      ADSX may reasonably request including the identity of the Person making
      such proposal,inquiry
      or contact.
 
 (c)
    If
      the Corporation receives a request for material non-public information
      from a Person who proposes a*bona
      fide*Acquisition Proposal in respect of the Corporation (the existence and
      content of which have been disclosed to ADSX), and the Board of Directors
      of the Corporation determines that such proposal would be a Superior
      Proposal pursuant to section 5.5(a) having received the advice referred to
      therein, then, and only in such case, the Board of Directors of the
      Corporation may, subject to the execution by such Person of a
      confidentiality agreement containing a standstill provision substantially
      similar to that contained in section 5.8, provide such Person with access
      to information regarding the Corporation; provided, however, that the
      Person making the Acquisition Proposal shall not be precluded under such
      confidentiality agreement from making the Acquisition Proposal, and
      provided further that the Corporation sends a copy of any such
      confidentiality agreement to ADSX immediately upon its execution
      and
  
 Page
36
  ADSX
      is provided with a list of or copies of the information provided to such
      Person and immediately provided with access to similar information to
      which such Person was provided.
 (d)
    The
      Corporation shall ensure that its officers, directors and employees and
      its Subsidiaries and their officers, directors and employees and any
      financial advisors or other advisors or representatives retained by it are
      aware of theprovisions
      of this section 5.5, and it shall be responsible for any breach of this
      section 5.5 by its financial advisors or other advisors or
      representatives.
 
 **5.6** **Notice
of Superior Proposal Determination**
 
 The
Corporation shall not accept, approve, recommend or enter into any agreement in
respect of an Acquisition Proposal (other than a confidentiality agreement
contemplated by section 5.5(c)) on the basis that it would constitute a Superior
Proposal unless (i) it has provided ADSX with a copy of the Acquisition Proposal
document which the Board of Directors of the Corporation has determined in
accordance with section 5.5(a) would be a Superior Proposal, and (ii) five
Business Days shall have elapsed from the later of the date ADSX received notice
of the Corporation’s proposed determination to accept, approve, recommend or
enter into an agreement in respect of such Acquisition Proposal, and the date
ADSX received a copy of the Acquisition Proposal. Information provided shall
constitute confidential Information for purposes of section 5.7(b).
 
 During
such five Business Day period, the Corporation acknowledges that ADSX shall have
the opportunity, but not the obligation, to offer to amend the terms of this
Agreement and the Arrangement. The Board of Directors of the Corporation will
review any offer by ADSX to amend the terms of this
Agreement in good faith in order to determine, in its discretion in the exercise
of its fiduciary duties, whether ADSX’s offer upon acceptance by the Corporation
would result in the Acquisition Proposal not being a Superior Proposal. If the
Board of Directors of the Corporation so determines, it will enter into an
amended agreement with ADSX reflecting ADSX’s amended proposal. If the Board of
Directors of the Corporation continues to believe, in good faith and after
consultation with financial advisors and outside counsel, that the Acquisition
Proposal is nonetheless a Superior Proposal and therefore rejects ADSX’s amended
proposal, the Corporation will pay to ADSX the break fee payable to ADSX under
section 7.4 as required thereunder.
 
 The
Corporation also acknowledges and agrees that each successive modification of
any Acquisition Proposal shall constitute a new Acquisition Proposal for
purposes of the requirement under clause (ii) of this section 5.6 to initiate an
additional five Business Day notice period.
 
 **5.7** **Access
to Information; Monitoring by ADSX of the Corporation’s
Finances**
 
 (a)
    Subject
      to sections 5.7(c) and (d) and applicable Laws, upon reasonable notice,
      the Corporation shall (and shall cause each of the Subsidiaries to) afford
      ADSX’s officers, employees, counsel, accountants and other authorized
      representatives and advisors (“Representatives”) access, duringnormal
      business hours from the date hereof and until the earlier of the Effective
      Date and the termination of this Agreement, to its properties, books,
      contracts and records as well as to its management personnel, and, during
      such period, the Corporation shall (and shall cause each of the
      Subsidiaries to) furnish promptly to ADSX all information concerning the
      Corporation’s business, properties, financial condition and performance
      and personnel as ADSX may reasonably request. Without limiting the
      generality of the foregoing, promptly upon request by ADSX, and in any
      event within 20 days of month-end in respect of any monthly report,
      the
  Page
37
 Corporation
      shall provide ADSX with monthly financial reports on the Corporation and
      such other financial information and supporting documentation in respect
      of the Corporation as ADSX may require from time to time.
 (b)
    Subject
      to sections 5.7(c) and (d) and applicable Laws, upon reasonable notice,
      ADSX shall afford the Corporation’s Representatives access, during normal
      business hours from the date hereof and until the earlier of the Effective
      Date and the termination of this Agreement, to such of ADSX’s management
      personnel as ADSX may determine, acting reasonably, and, during such
      period, ADSX shall furnish promptly to the Corporation all information
      respecting Material Adverse Changes in ADSX’s business, properties and
      personnel as the Corporation may reasonably
request.
 
 (c)
    Each
      of ADSX and the Corporation acknowledges that certain information provided
      to it under section 5.7(a) or (b) above will be non-public and/or
      proprietary in nature (the “Information”). Except as permitted below,
      each of ADSX and the Corporation will keep Information confidential and
      will not, without the prior written consent of the other, disclose it, in
      any mannerwhatsoever,
      in whole or in part, to any other Person, and will not use it for any
      purpose other than to evaluate the transactions contemplated by this
      Agreement. Each of ADSX and the Corporation will make all reasonable,
      necessary and appropriate efforts to safeguard the Information from
      disclosure to anyone other than as permitted hereby and to control the
      copies, extracts or reproductions made of the Information. The Information
      may be provided to the Representatives of each of ADSX and the Corporation
      who require access to the same to assist it in proceeding in good faith
      with the transactions contemplated by this Agreement, and whose assistance
      is required for such purposes, provided that it has first informed such
      Representatives to whom Information is provided that the Representative
      has the same obligations, including as to confidentiality, restricted use
      and otherwise, that it has with respect to such Information. This
      provision shall not apply to such portions of the Information that: (i)
      are or become generally available to the public otherwise than as a result
      of disclosure by a party or its Representatives; or (ii) become available
      to a party on a non-confidential basis from a source other than, directly
      or indirectly, the other party or its Representatives, provided that such
      source is not to the knowledge of the first party, upon reasonable
      inquiry, prohibited from transmitting the Information by a contractual,
      legal or fiduciary obligation; or (iii) were known to a party or were in
      its possession on a non-confidential basis prior to being disclosed toit
      by the other party or by someone on its behalf; or (iv) are required by
      applicable Laws or court order to be disclosed. The provisions of this
      section 5.7(c) shall survive the termination of this
      Agreement.
 
 (d)
    The
      parties acknowledge that certain information may be competitively
      sensitive and that disclosure thereof shall be limited to that which is
      reasonably necessary for the purpose of (i) preparing submissions or
      applications in order to obtain the Regulatory Approvals, (ii) preparing
      the Circular, (iii) avoiding conflicts, (iv) integrating the operations of
      ADSX and the Corporation and (v) determining whether the Arrangement will
      be completed in accordance with section 2.2(a) or section 2.2(b) of the
      Plan of Arrangement.
 
 **5.8** **Mutual
Standstill**
 
 During
the period commencing on the date hereof and continuing until the Effective Date
or the termination of this Agreement, each of ADSX and the Corporation agrees
that it will not, otherwise than pursuant to this Agreement (including without
limitation sections 2.4 and 5.6), the Arrangement and the transactions
contemplated hereby and thereby or with the prior approval of the other, which
approval
 
 
 
 Page
38
 
 may be
given on such terms as the other may determine: (i) in any manner acquire, agree
to acquire or make any proposal or offer to acquire, directly or indirectly, any
securities or property of the other; (ii) propose or offer to enter into,
directly or indirectly, any merger or
business combination involving the other or to purchase, directly or indirectly,
a material portion of the assets of the other; (iii) directly or indirectly,
“solicit”, or participate or join with any Person in the
“solicitation” of any “proxies” (as such terms are defined in the Securities
Act) to vote, to seek to advise or to influence any Person with respect to the
voting of any voting securities of the other (but for greater certainty the
Corporation acknowledges that ADSX and its agents and advisors will be entitled
to solicit proxies and otherwise influence any Person to vote in favour of the
Arrangement at the Meeting and ADSX acknowledges that the Corporation and its
agents and advisors will be entitled to solicit proxies and otherwise influence
any Person to vote in favour of the Arrangement at the Meeting); (iv) otherwise
act alone or in concert with others to seek to control or to influence the
management, Board of Directors or policies of the other; (v) make any public or
private disclosure of any consideration, intention, plan or arrangement
inconsistent with any of the foregoing; or (vi) advise, assist or encourage any
of the foregoing or work in concert with others in respect of the foregoing. For
the purpose of this section 5.8, each reference to ADSX or the Corporation shall
include its subsidiaries and its successors. The termination of this Agreement
shall also terminate any other agreements between the parties which have an
effect similar to this section 5.8.
 
 **5.9** **Closing
Matters**
 
 Each of
ADSX and the Corporation shall deliver, at the closing of the transactions
contemplated hereby, such customary certificates, resolutions and other closing
documents as may be required by the other parties hereto, acting
reasonably.
 
 **Article
VI — Conditions**
 
 **6.1** **Mutual
Conditions Precedent**
 
 The
respective obligations of the parties hereto to complete the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Effective Date, of the following conditions precedent, each of which
may only be waived by the mutual consent of ADSX and the
Corporation:
 
 (a)
    the
      Arrangement shall have been approved at the Meeting by not less than
      two-thirds of the votes cast by the holders of Common Shares who are
      represented at the Meeting;
 
 (b)
    the
      Arrangement shall have been approved at the Meeting in accordance with any
      conditions in addition to those set out in section 6.1(a) which may be
      imposed by the Interim Order and which are satisfactory to each of the
      Corporation and ADSX, acting reasonably;
 
 (c)
    the
      Interim Order and the Final Order shall each have been obtained in form
      and terms satisfactory to each of the Corporation and ADSX, actingreasonably,
      and shall not have been set aside or modified in a manner unacceptable to
      such parties on appeal or otherwise;
 
 (d)
    there
      shall not be in force any order or decree restraining or enjoining the
      consummation of the transactions contemplated by this Agreement and there
      shall be no proceeding (other than an appeal made in connection with the
      Arrangement), of a judicial or administrative nature or otherwise, in
      progress or threatened that relates to or results from the transactions
      contemplated by this Agreement that would, if successful, result in an
      order or ruling that would preclude
  
 Page
39
 (d)
    completion
      of the transactions contemplated by this Agreement in accordance with the
      terms hereof or would otherwise be inconsistent with the Regulatory
      Approvals which have been obtained;
and
  (e)
    this
      Agreement shall not have been terminated pursuant to Article
      VII.
 
 **6.2** **Additional
Conditions Precedent to the Obligations of ADSX**
 
 The
obligations of ADSX to complete the transactions contemplated by this Agreement
shall also be subject to the fulfilment of each of the following conditions
precedent (each of which is for ADSX’s exclusive benefit and may be waived by
ADSX, any one of which, if not satisfied or waived, will relieve ADSX of any
obligation under this Agreement):
 
 (a)
    all
      covenants of the Corporation under this Agreement to be performed on or
      before the Effective Date shall have been duly performed by the
      Corporation in all material respects and ADSX shall have received a
      certificate of the Corporation addressed to ADSX and dated the Effective
      Date, signed on behalf of the Corporation by two senior executive officers
      of the Corporation, confirming the same as at the Effective
      Date;
 
 (b)
    the
      representations and warranties of the Corporation shall be true and
      correct as of the Effective Date as if made on and as of such date (except
      to the extent such representations and warranties speak as of an earlier
      date, in which event such representations and warranties shall be true and
      correct as of such earlier date, or except as affected by transactions
      contemplated or permitted by this Agreement) and ADSX shall have received
      a certificate of the Corporation addressed to ADSX and dated the Effective
      Date, signed on behalf of the Corporation by two senior executive officers
      of the Corporation, confirming thesame
      as at the Effective Date;
 
 (c)
    between
      the date hereof and the Effective Date, there shall not have occurred, in
      the judgment of ADSX, acting reasonably, a Material Adverse Change to the
      Corporation;
 
 (d)
    the
      Board of Directors of the Corporation shall have adopted all necessary
      resolutions, and all other necessary corporate action shall have been
      taken by the Corporation and the Subsidiaries, to permit the consummation
      of the Arrangement;
 
 (e)
    the
      Board of Directors of the Corporation shall have made and shall not have
      modified or amended, in any material respect, prior to the Meeting, an
      affirmative recommendation that the holders of the Common Shares approve
      the Arrangement, and such recommendation shall be included in the
      Circular;
 
 (f)
    the
      Regulatory Approvals shall have been obtained in accordance with Article
      IV and shall be in full force and effect and shall not be the subject of
      any stop-order or proceedings seeking a stop-order or any revocation
      proceedings;
 
 (g)
    holders
      of no more than 5% of the issued and outstanding Common Shares shall have
      exercised their Dissent Rights (and not withdrawn such exercise) in
      respect of the Arrangement;
 
 (h)
    the
      noon spot exchange rate for U.S. dollars expressed in Canadian dollars as
      reported by the Bank of Canada is on no date between the date hereof andthe
      Effective Date or the earlier termination of this Agreement equal to or
      less than $1.056;
  
  Page
40
 (i)
    the
      Corporation shall have delivered to ADSX financial statements of the
      Corporation on a consolidated basis for the year ended December 31, 2004,
      with an unqualified audit report thereon, and a letter from the
      Corporation’s auditor consenting to the use by ADSX in connection with the
      transactions contemplated by this Agreement of such December 31, 2004
      financial statements and the Financial Statements of the Corporation on
      which the auditor has reported;
 
 (j)
    all
      authorizations, consents, waivers and approvals from parties to contracts
      or other agreements to which any of the Corporation or its Subsidiaries is
      a party, or by which any of them is bound, as may be required to be
      obtained by them in connection with them in connection with the
      performance of this Agreement, the failure to obtain which would prevent
      the consummation of the Plan of Arrangement or have, individually or in
      the aggregate, a Material Adverse Effect on the Corporation, shall have
      been obtained;
 
 (k)
    the
      Board of Directors of the Corporation shall have passed a resolution
      ratifying and approving the grant of all Qualified Options granted under
      the Corporation’s 2000 Stock Option Plan, such resolution to be passed
      before the exercise of any such Qualified Option, and the Corporation
      shall have provided to ADSX (i) a certified true copy of such resolution,
      such certification to be made by the Chief Executive Officer of the
      Corporation, and (ii) evidence satisfactory to ADSX, acting reasonably,
      that such resolution was passed prior to the exercise of the subject
      Qualified Options;
 
 (l)
    ADSX
      shall have received an opinion dated the Effective Date, from counsel to
      the Corporation, in form and substance, satisfactory to ADSX, acting
      reasonably, with respect to those matters set forth in sections 3.1(a)
      (including, without limitation, an opinion that all outstanding Dilutive
      Securities have been duly authorized and validly granted; and, for greater
      certainty, the opinion with respect to the issued and outstanding share
      capital of the Corporation shall be based on a review of the corporate
      records of the Corporation and not a certificate of the Corporation’s
      transfer agent), 3.1(b), 3.1(c) and 3.1(d), and with respect to such other
      matters as ADSX may request, acting reasonablyand
      in giving such opinion counsel to the Corporation shall be entitled to
      rely on a certificate of an officer of the Corporation as to factual
      matters; and
 
 (m)
    the
      number of ADSX Common Shares and Replacement Securities or Two Tranche
      Replacement Options (as the case may be) issuable on the Effective Date
      under the Plan of Arrangement, calculated on the assumption that such
      issuance will occur pursuant to section 2.2(a) of the Plan of Arrangement,
      shall represent less than 19.9% of the number of ADSX Common Shares
      outstanding on the Effective Date before giving effect to such
      issuance.
 
 
 ADSX may
not rely on the failure to satisfy any of the above conditions precedent as a
basis for a non-compliance by ADSX with its obligations under this Agreement if
the condition precedent would have been satisfied but for a material default by
ADSX in complying with its obligations hereunder.
 
 **6.3** **Additional
Conditions Precedent to the Obligations of the Corporation**
 
 The
obligations of the Corporation to complete the transactions contemplated by this
Agreement shall also be subject to the following conditions precedent (each of
which is for the exclusive benefit of the
 
 
 
 Page 41
 
 Corporation
and may be waived by the Corporation which, if not satisfied or waived, will
relieve the Corporation of any obligation under this Agreement):
 
 (a)
    all
      covenants of ADSX under this Agreement to be performed on or before the
      Effective Date shall have been duly performed by ADSX in all material
      respects and the Corporation shall have received a certificate of ADSX
      addressed to the Corporation and dated the Effective Date, signed on
      behalf of ADSX by two senior executive officers of the Corporation,
      confirming the same as at the Effective
Date;
 
 (b)
    all
      representations and warranties of ADSX under this Agreement shall be true
      and correct in all material respects as of the Effective Date as if made
      on and as of such date (except to the extent such representations and
      warranties speak as of an earlier date, in which event such
      representations and warranties shall be true and correct in all material
      respects as of such earlier date, or except as affected by transactions
      contemplated or permitted by this Agreement) and the Corporation shall
      have received a certificate of ADSX addressed to the Corporation and dated
      the Effective Date, signed on behalf of ADSX by two senior executive
      officers of ADSX, confirming the same as at the Effective
      Date;
 
 (c)
    between
      the date hereof and the Effective Date, there shall not have occurred, in
      the judgment of the Board of Directors of the Corporation, acting
      reasonably, a Material Adverse Change to
ADSX;
  (d)
    the
      Boards of Directors of ADSX shall have adopted all necessary resolutions,
      and all other necessary corporate action shall have been taken by ADSX to
      permit the consummation of the Arrangement and the issue of the ADSX
      Common Shares pursuant to the Arrangement and the exercise from time to
      time of the Replacement Securities;
 (e)
    the
      Regulatory Approvals shall have been obtained in accordance with Article
      IV and shall be in full force and effect and shall not be the subject of
      any stop-order or proceedings seeking a stop-order or any revocation
      proceedings;
 
 (f)
    the
      Corporation or its Board of Directors shall have received an opinion from
      a Person independent from the Corporationthat
      each of the Exchange Ratio and the First Tranche Exchange Ratio and
      Adjustment Exchange Ratio, if applicable, is fair from a financial point
      of view to the holders of the Common Shares;
 
 (g)
    the
      Corporation shall have received an opinion dated the Effective Date, from
      counsel to ADSX, in form and substance satisfactory to the Corporation,
      acting reasonably, with respect to those matters set out in section 3.2(c)
      and with respect to such other matters as the Corporation may request,
      acting reasonably and in giving such opinion counsel to ADSX shall be
      entitled to rely on a certificate of an officer of ADSX as to factual
      matters;
  (h)
    the
      ADSX Average Trading Volume is not less than 300,000;
  and
 (i)
    the
      Corporation shall have received a written memorandum from its United
      States legal counsel dated the Effective Date and in form and substance
      satisfactory to the Corporation, acting reasonably, that ADSX Common
      Shares issuable pursuant to the Arrangement (not including ADSX Common
      Shares issuable pursuant to Replacement Securities or Two Tranche
      Replacement Options that are not Qualified Options) will not be subject to
      resale restrictions
  
 Page
42
  pursuant
      to U.S. federal securities laws other than resale restrictions applicable
      to affiliates of ADSX or former affiliates of the Corporation.
 The
Corporation may not rely on the failure to satisfy any of the above conditions
precedent as a basis for noncompliance by the Corporation with its obligations
under this Agreement if the condition precedent would have been satisfied but
for a material default by the Corporation in complying with its obligations
hereunder.
 
 **6.4** **Notice
and Cure Provisions**
 
 ADSX and
the Corporation will give prompt notice to the other of the occurrence, or
failure to occur, at any time from the date hereof until the Effective Date, of
any event or state of facts which occurrence or failure would, or would be
likely to:
   (a)
    cause
      any of the representations or warranties of the other contained herein to
      be untrue or inaccurate in any material respect on the date hereof or on
      the Effective Date; or


(b)
    result
      in the failure to comply with or satisfy any covenant, condition or
      agreement to be complied with or satisfied by the other hereunder prior to
      the Effective Date.
  Neither
ADSX nor the Corporation may elect not to complete the transactions contemplated
hereby pursuant to the conditions precedent contained in sections 6.1, 6.2 and
6.3, or exercise any termination right arising therefrom, unless forthwith and
in any event prior to the filing of the Final Order for acceptance by the
Director, ADSX or the Corporation, as the case may be, have delivered a written
notice to the other specifying in reasonable detail all breaches of covenants,
representations and warranties or other matters which ADSX or the Corporation,
as the case may be, are asserting as the basis for the non-fulfilment of the
applicable condition precedent
or the exercise of the termination right, as the case may be. If any such notice
is delivered, provided that ADSX or the Corporation, as the case may be, are
proceeding diligently to cure such matter, if such matter is susceptible to
being cured, the other may not terminate this Agreement until the later of March
31, 2005 and the expiration of a period of 30 days from such notice. If such
notice has been delivered prior to the date of the Meeting, such meeting shall
be postponed until the expiry of such period.
 
 **6.5** **Satisfaction
of Conditions**
 
 The
conditions precedent set out in sections 6.1, 6.2 and 6.3 shall be conclusively
deemed to have been satisfied, waived or released when, with the agreement of
ADSX and the Corporation, a certificate of arrangement in respect of the
Arrangement is issued by the Director.
 
 **Article
VII — Amendment and
Termination**
 
 **Amendment**
 
 **7.1** **Amendment**
 
 This
Agreement may, at any time and from time to time before or after the holding of
the Meeting but not later than the Effective Date, be amended by mutual written
agreement of the parties hereto, and any such amendment may, without
limitation:
  
  Page
43
 (a)
    change
      the time for performance of any of the obligations or acts of the
      parties;
 
 (b)
    waive
      any inaccuracies or modify any representation contained herein or in any
      document delivered pursuant hereto;
 
 (c)
    waive
      compliance with or modify any of the covenants herein contained and waive
      or modify performance of any of the obligations of the parties;
      and
 
 (d)
    waive
      compliance with or modify any conditions precedent herein
      contained;
 
 provided,
however, that any such change, waiver or modification does not invalidate any
required security holder approval of the Arrangement.
 
 **7.2** **Mutual
Understanding Regarding Amendments**
 
 If ADSX
or the Corporation, as the case may be, proposes any amendment or amendments to
this Agreement or to the Plan of Arrangement, the other will act reasonably in
considering such amendment and if the other and its shareholders are not
prejudiced by reason of any such amendment the other will co-operate in a
reasonable fashion with ADSX or the Corporation, as the case may be, so that
such amendment can be effected subject to applicable Laws and the rights of the
security holders.
 
 **7.3** **Termination**
 
 (a)
    If
      any condition contained in sections 6.1 or 6.2 is not satisfied at or
      before the Effective Date to the satisfaction of ADSX, then ADSX may by
      notice to the Corporation terminate this Agreement and the obligations of
      the parties hereunder except as otherwise herein provided, but without
      detracting from the rights of ADSX arising from any breach by the
      Corporation but for which the condition would have been
      satisfied.
 
 (b)
    If
      any condition contained in sections 6.1 or 6.3 is not satisfied at or
      before the Effective Date to the satisfaction of the Corporation, then theCorporation
      may by notice to ADSX terminate this Agreement and the obligations of the
      parties hereunder except as otherwise herein provided, but without
      detracting from the rights of the Corporation arising from any breach by
      ADSX but for which the condition would have been
  satisfied.
 
 (c)
    This
      Agreement may, at any time before or after the holding of the Meeting but
      not later than the Effective Date:
 
 (i)
    be
      terminated by the mutual agreement of the Corporation and ADSX (without
      further action on the part of the Corporation’s shareholders if terminated
      after the holding of the Meeting);
 
 (ii)
    be
      terminated by the Corporation, provided that the Corporation is then not
      in breach or default of any of its obligations hereunder, upon any
      determination by the Corporation’s Board of Directors that an Acquisition
      Proposal constitutes a Superior Proposal, subject to the payment by the
      Corporation of the money payable to ADSX under section 7.4;
    or
  
  Page
44
 (iii)
    be
      terminated by ADSX upon the occurrence of any of the events referenced in
      subparagraphs (a), (b) and (c) of section 7.4, subject to the payment by
      the Corporation of the money payable to ADSX undersection
      7.4.
 
 (d)
    If
      the Effective Date does not occur on or prior to June 30, 2005, then this
      Agreement shall terminate, provided that the Corporation and ADSX may
      mutually agree to extend such date.
 
 (e)
    If
      this Agreement is terminated in accordance with the foregoing provisions
      of this section 7.3, no party shall have any further liability to perform
      its obligations hereunder except as otherwise contemplated hereby, and
      provided that, subject to section 7.5, neither the termination of this
      Agreement nor anything contained in this section 7.3(e) shall relieve any
      party from any liability for any breach by it of this Agreement, including
      from any inaccuracy in its representations and warranties and any
      non-performance by it of its covenants made
herein.
 
 **7.4** **Break
Fee**
 
 If (a)
the Board of Directors of the Corporation shall have withdrawn or modified in a
manner adverse to ADSX the board’s approval or recommendation of the Arrangement
(other than as a direct result of and in direct response to a material breach by
ADSX of its obligations hereunder or a Material Adverse Change to ADSX), or
approved or recommended any Superior Proposal, or determined at the conclusion
of the process
set out in sections 5.5 and 5.6 that any Acquisition Proposal is a Superior
Proposal, or resolved to take any of the foregoing actions, or (b) an
Acquisition Proposal shall have been made directly to the holders of the Common
Shares or any Person shall have publicly announced an intention to make an
Acquisition Proposal and after such Acquisition Proposal shall have been made
known, made or announced the holders of the Common Shares shall fail to approve
the Arrangement at the Meeting, or (c) through the fault (whether by commission
or omission) of the Corporation, the Arrangement is not, prior to March 31,
2005, submitted for the approval of the holders of the Common Shares at the
Meeting, then in any such case the Corporation shall pay to ADSX $800,000,
together with $300,000 as payment in full of ADSX’s out-of-pocket costs and
expenses in connection with the transactions contemplated by this Agreement, in
immediately available funds to an account designated by ADSX, such amounts to be
paid as liquidated damages and not as a penalty, being a genuine pre-estimate of
the damage that will be suffered by ADSX in the circumstances. Such payment
shall be due (i) in the case of the event in (a), at 11:00 a.m. on the first
Business Day following
such action by the Corporation’s Board of Directors, (ii) in the case of the
event in (b), at 11:00 a.m. on the first Business Day following the Meeting and
(iii) in the case of the event in (c), at 11:00 a.m. on April 1, 2005.
Notwithstanding the provisions of section 7.4(b) above, if the holders of the
Common Shares shall fail to approve the Arrangement (other than as a direct
result of and in direct response to a material breach by ADSX of its obligations
hereunder or a Material Adverse Change to ADSX) at the Meeting in circumstances
in which no Acquisition Proposal shall have then been made directly to the
holders of the Common Shares or no person shall have then publicly announced an
intention to make an Acquisition Proposal, at 11:00 a.m. on the first Business
Day following the Meeting, the Corporation shall pay to ADSX
$300,000 **** as
payment in full of ADSX's out-of-pocket costs and expenses in connection with
the transactions contemplated by this Agreement, in immediately available funds
to an account designated by ADSX but shall not be obligated to make any other
payment hereunder.
 
 The
Corporation shall not be obligated to make more than one payment pursuant to
this section 7.4.
 
 
 ****
 Page
45
 
 **7.5** **Effect
of Break Fee Payment**
 
 For
greater certainty, the parties hereto agree that if the Corporation pays to ADSX
the amount required by section 7.4 as a result of the occurrence of any of the
events referenced in subparagraphs (a), (b) and (c) of section 7.4, ADSX shall
have no other remedy for any breach of this Agreement by the
Corporation.
 
 **Article
VIII — General**
 
 **8.1** **Notices**
 
 All
notices and other communications which may or are required to be given pursuant
to any provision of this Agreement or the Plan of Arrangement shall be given or
made in writing and shall be deemed to be validly given if served personally or
by telecopy, in each case addressed to the particular party at:
 
 (a)
    If
      to the Corporation, at:
 
 EXI
Wireless Inc.
 13551
Commerce Parkway, Suite 100
 Richmond,
B.C. V6V 2L1
 Canada
 
 Attention:
Mr. Malik Talib
 
  Telecopier
No.:604-232-5707
 
 with a
copy to:
  Lang
Michener LLP
 1500-1055
West Georgia Street
 Vancouver,
B.C. V6E 4N7
  Attention:
Richard Bennett
  Telecopier
No.: 604- 685-7084
 
 (b)
    If
      to ADSX:
 
 Applied
Digital Solutions, Inc.
 1690
South Congress Avenue, Suite 200
 Delray
Beach, Florida 33445 USA
 
 Attention:
General Counsel
 
 Telecopier
No.: 561-805-8001
 
 
 
 Page
46
  with a
copy to:
  Getz
Prince Wells
 1810-1111
West Georgia St.
 Vancouver,
British Columbia
 V6E 4M3
Canada
  Attention:
Drew Wells
  Telecopier
No.: 604-685-9798





(c)
    If,
      for the purposes of the Plan of Arrangement, to Karim
    Khoja:





Telecopier
No.: 011-971-434-08907




with a
copy to:




Lang
Michener LLP


1500-1055
West Georgia Street


Vancouver,
B.C. V6E 4N7




Attention:
Richard Bennett




Telecopier
No.: 604- 685-7084





or at
such other address of which any party may, from time to time, advise the other
parties by notice in writing given in accordance with the foregoing. The date of
receipt of any such notice shall be deemed to be the date of delivery or
telecopying thereof.





**8.2** **Assignment**





No party
hereto may assign its rights or obligations under this Agreement or the
Arrangement.





**8.3** **Binding
Effect**





This
Agreement and the Arrangement shall be binding upon and shall enure to the benefit
of the parties hereto and their respective successors.





**8.4** **Waiver
and Modification**





The
Corporation and ADSX may waive or consent to the modification of, in whole or in
part, any inaccuracy of any representation or warranty made to them hereunder or
in any document to be delivered pursuant hereto and may waive or consent to the
modification of any of the covenants herein contained for their respective
benefit or waive or consent to the modification of any of the obligations of the
other parties hereto. Any waiver or consent to the modification of any of the
provisions of this Agreement, to be effective, must be in writing executed by
the party granting such waiver or consent.







Page
47




**8.5** **Further
Assurances**





Each
party hereto shall, from time to time, and at all times hereafter, at the
request of the other parties hereto, but without further consideration, do all
such further acts and execute and deliver all such further documents and
instruments as shall be reasonably required in order to fully perform and carry
out the terms and intent hereof.





**8.6** **Expenses**





(a)
    Subject
      to section 7.4, the parties agree that all out-of-pocket expensesof
      the parties relating to the Arrangement and the transactions contemplated
      hereby, including legal fees, accounting fees, financial advisory fees,
      regulatory filing fees, all disbursements of advisors and printing and
      mailing costs, shall be paid by the party incurring such expenses. The
      Corporation covenants that the amount of such expenses incurred by the
      Corporation from the time the transactions contemplated hereby first
      commenced until the Effective Date shall not exceed the aggregate of
      $300,000 and US$300,000.





(b)
    The
      Corporation represents and warrants to ADSX that no broker, finder or
      investment banker is entitled to any brokerage, finder’s or other fee or
      commission in connection with the Arrangement, except as set out in the
      Disclosure Letter.





**8.7** **News
Releases**





Subject
to applicable Laws and the rules of NASDAQ and the TSX Venture Exchange, ADSX
and the Corporation agree to consult with each other as to the general nature of
any news releases or public statements with respect to this Agreement or the
Arrangement, and to use their respective reasonable efforts not to issue any
news releases or public statements inconsistent with the results of such
consultations. Subject to applicable Laws and the rules of NASDAQ and the TSX
Venture Exchange, each party shall use its reasonable efforts to enable the
other parties to review and comment on all such news releases prior to the
release thereof. The parties agree to issue jointly a news release with respect
to this Arrangement as soon as practicable following the execution of this
Agreement.





**8.8** **Governing
Laws**







This
Agreement shall be governed by and construed in accordance with the laws of the
Province of British Columbia and the laws of Canada applicable therein and shall
be treated in all respects as an British Columbia contract.





**8.9** **Counterparts**





This
Agreement may be executed in one or more counterparts, of which together shall
constitute one and the same instrument.





IN
WITNESS WHEREOF the parties hereto have executed this Agreement as of the date
first written above.




Page 48
  THE CORPORATE SEAL
      of
    )**APPLIED DIGITAL SOLUTIONS,
      INC.**
    )was hereto affixed in the presence
      of:
    ))))))/s/ Scott Silverman
    )                                                  
      c/s


Authorized
Signatory


Scott
Silverman


Chairman
and CEO


THE CORPORATE SEAL
      of
    )**EXI WIRELESS
      INC.**
    )was hereto affixed in the presence
      of:
    ))))))/s/ Malik Talib
    )                                                  
      c/s


Authorized
Signatory


Malik Talib
 Chief Executive Officer and
President













**Appendix
A**





**PLAN
OF ARRANGEMENT**


**Under
Section 192 of the** ***Canada
Business Corporations Act***





**Article
1**—**Interpretation**




**1.1** **Definitions**





In this
Plan of Arrangement, unless there is something in the subject matter or context
inconsistent therewith, the following terms shall have the respective meanings
set out below and grammatical variations of such terms shall have corresponding
meanings:





**“Acquisition
Agreement”** means the
agreement made as of January 25, 2005 between the ADSX and the Corporation, as
amended, supplemented and/or restated in accordance therewith prior to the
Effective Date, providing for, among other things, the Arrangement;





**“ADSX”** means
Applied Digital Solutions, Inc., a corporation existing under the laws of the
State of Missouri;





**“ADSX’s
Accountant”** means
KPMG LLP or Wolrige Mahon, as determined by ADSX in its discretion;





**“ADSX
Common Share”** means a
share of common stock in the capital of ADSX;





**“Adjustment
Exchange Ratio”** means the
quotient obtained by dividing the Balance Owing Per Share by the Market Price as
at the Settlement Date;





**“Arrangement”** means the
arrangement under section 192 of the CBCA on the terms and subject to the
conditions set out in this Plan of Arrangement, subject to any amendments or
variations thereto made in accordance with section 7.1 of the Acquisition
Agreement or Article 6 hereof or made at the direction of the Court in the Final
Order;





**“Arrangement
Resolution”** means the
special resolution passed by the holders of the Common Shares at the
Meeting;





**“Articles
of Arrangement”** means the
articles of arrangement of the Corporation in respect of the Arrangement,
required by the CBCA to be sent to the Director after the Final Order is
made;





**“Balance
Owing** **”**
means the difference, if any, between the Holdback Amount and the
Deduction;





**“Balance
Owing Per Share”** means the
quotient obtained by dividing the Balance Owing by the number of Common Shares
transferred to ADSX pursuant to section 2.2(b)(i)(A);





**“Business
Day”** means any
day on which commercial banks are open for business in New York,
New York and Vancouver, British Columbia, other than a Saturday, a Sunday or a
day observed as a holiday in Vancouver, British Columbia under the laws of the
Province of British Columbia or the federal laws of Canada or in New York, New
York under the laws of the State of New York or the federal laws of the United
States of America;





**“Canadian
Dollar Equivalent”** means in
respect of an amount expressed in a foreign currency (the “Foreign Currency Amount”) at any date the product obtained by
multiplying:









Page
2







(a)
    the
      Foreign Currency Amount by; and





(b)
    the
      noon spot exchange rate on such date for such foreign currency expressed
      in Canadian dollars as reported by the Bank of Canada;





**“CBCA”** means the *Canada
Business Corporations Act* , R.S.C.
1995, c. C-44;





**“Certificate”** means the
certificate of arrangement giving effect to the Arrangement, issued pursuant to
subsection 192(7) of the CBCA after the Articles of Arrangement have been
filed;





**“Circular”** means the
notice of the Meeting and accompanying management information circular to be
sent to holders of Common Shares in connection with the Meeting;





**“Comment
Period”** has the
meaning ascribed thereto in section 2.3;





**“Common
Shares”** means the
outstanding common shares in the capital of the Corporation;





**“Corporation”** means eXI
Wireless Inc., a corporation existing under the laws of Canada;





**“Court”** means the
British Columbia Supreme Court;





**“Deduction”** means the
difference, if any, between CDN$4,750,000 and the Net Assets as at the Effective
Date as set out in the Settlement Statement;





**“Depositary”** means
Computershare Trust Company of Canada Inc. at its offices set out in the Letter
of Transmittal Form;





**“Dilutive
Security”** means
each Common Share purchase option and each Common Share purchase warrant, in
each case being outstanding and unexercised on the Effective Date;





**“Director”** means the
Director appointed under section 260 of the CBCA;





**“Dissent
Procedures”** has the
meaning ascribed thereto in section 3.1;





**“Dissenting
Shareholder”** means a
holder of Common Shares who dissents in respect of the Arrangement in strict
compliance with the Dissent Procedures;





**“Effective
Date”** means the
date shown on the Certificate;





**“Effective
Date Balance Sheet”** means the
consolidated balance sheet of the Corporation as of the Effective Date, prepared
in accordance with GAAP consistently applied, together with a review engagement
report thereon of ADSX’s Accountant;





**“Effective
Date Percentage”** means the
difference between 100% and the Holdback Percentage;





**“Effective
Time”** means
12:01 a.m. on the Effective Date;





**“Election
Deadline”** means
5:00 p.m. (local time) at the place of deposit on the date which is two Business
Days prior to the date of the Meeting;





Page
3


**“Exchange
Ratio”** means the
quotient obtained by dividing CDN$1.60 by the Market Price as at the Effective
Date;





**“Final
Order”** means the
final order of the Court approving the Arrangement;





**“First
Tranche Exchange Ratio”** means the
product obtained by multiplying the Exchange Ratio by the difference between 1
and the Holdback Percentage;





**“GAAP”** means
Canadian generally accepted accounting principles;





**“Holdback
Amount”** means
120% of the difference between $4,750,000 and the estimate of ADSX of the Net
Assets of the Corporation as at the Effective Date as set out in any notice
given by ADSX in accordance with section 2.2(b);





**“Holdback
Percentage”** means the
quotient obtained by dividing the Holdback Amount by the Original Price,
expressed as a decimal;





**“Interim
Order”** means the
interim order of the Court made in connection with the process for obtaining
shareholder approval of the Arrangement and related matters;





**“ITA”** means the *Income
Tax Act* (Canada);





**“Khoja”** means
Karim Khoja, a shareholder of the Corporation of and Chairman of the Board of
the Corporation as at the date of the Acquisition Agreement;





**“Letter
of Transmittal Form”** means the
Letter of Transmittal Form for use by holders of Common Shares, in the form
accompanying the Circular;





**“Market
Price”** means, in
respect of an ADSX Common Share on any particular date, the Canadian Dollar
Equivalent of the weighted volume average daily closing price of ADSX Common
Shares (calculated each day on the basis of the closing price multiplied by the
volume of shares traded that day) during a period of 10 consecutive trading days
ending three trading days before such date on the NASDAQ Small Cap Market, or,
if the ADSX Common Shares are not then quoted on the NASDAQ Small Cap Market, on
such other stock exchange or automated quotation system on which the ADSX Common
Shares are listed or quoted, as the case may be, as may be selected by the Board
of Directors of ADSX for such purpose;





**“Meeting”** means the
special meeting of the holders of Common Shares (including any adjournment
thereof) that is to be convened as provided by the Interim Order to consider,
and if deemed advisable, approve the Arrangement;





**“Meeting
Date”** means the
date of the Meeting;





**“Net
Assets”** means the
difference between the total assets of the Corporation as at the Effective Date
calculated in accordance with GAAP applied on a basis consistent with prior
periods and the total liabilities of the Corporation as at the Effective Date
calculated in accordance with GAAP applied on a basis consistent with prior
periods, subject to adjustment in accordance with the principles described on
Appendix I;





**“Original
Notice Date”** has the
meaning ascribed thereto in section 2.2(c);





Page
4


**“Original
Price”** means the
product obtained by multiplying CDN$1.60
by the number of Common Shares transferred to ADSX pursuant to section
2.2(b)(i)(A);





**“Person”** includes
any individual, firm, partnership, joint venture, venture capital fund,
association, trust, trustee, executor, administrator, legal personal
representative, estate, group, body corporate, corporation, unincorporated
association or organization, government body, syndicate or other entity, whether
or not having legal status;





**“Replacement
Security”** has the
meaning ascribed thereto in section 2.2(a)(ii);





**“Settled
Exchange Ratio”** means the
sum of the First Tranche Exchange Ratio and the Adjustment Exchange
Ratio;





**“Settlement
Date”** means the
second Business Date after the date that is the earlier of (i) the last day of
the Comment Period, if ADSX receives no comments from Khoja in accordance with
section 2.3 and (ii) the date the Statements are finally determined pursuant to
section 2.3(d);





**“Settlement
Time”** means
11:59 p.m. (Pacific Standard Time) on the Settlement Date;





**“Settlement
Statement”** means a
statement prepared under section 2.3(a) showing the particulars of the
calculations of the Net Assets and the Balance Owing Per Share;





**“Statements”** has the
meaning ascribed thereto in section 2.3(a);





**“Two
Tranche Option”** has the
meaning ascribed thereto in section 2.2(b); and





**“Two
Tranche Replacement Option”** has the
meaning ascribed thereto in section 2.2(b)(i)(B).





**1.2** **Sections
and Headings**





The
division of this Plan of Arrangement into sections and the insertion of headings
are for reference purposes only and shall not affect the interpretation of this
Plan of Arrangement. Unless otherwise indicated, any reference in this Plan of
Arrangement to a section or an exhibit refers to the specified section of or
exhibit to this Plan of Arrangement.





**1.3** **Number,
Gender and Persons**





In this
Plan of Arrangement, unless the context otherwise requires, words importing the
singular number include the plural and *vice
versa* and
words importing any or no gender include all genders and the
neuter.





**Article
2 — Arrangement**





**2.1** **Binding
Effect**





This Plan
of Arrangement will become effective at, and be binding at and after, the
Effective Time on (i) the Corporation, (ii) ADSX, (iii) all holders of Common
Shares and (iv) all holders of securities exchangeable for or convertible into
Common Shares.








Page
5


**2.2** **Arrangement**





(a)
    Subject
      to section 2.2(b), commencing
      at the Effective Time, the following shall occur and shall be deemed to
      occur in the following order without any further act or
      formality:





(i)
    each
      Common Share (other than Common Shares held by ADSX or any subsidiary or
      affiliate thereof which shall not be exchanged under this Arrangement and
      shall remain outstanding as Common Shares held by ADSX or any subsidiary
      or affiliate thereof) will be transferred by the holder thereof, without
      any act or formality on his part, to ADSX in exchange for that number of
      fully paid and non-assessable ADSX Common Shares determined by using the
      Exchange Ratio (accordingly each of the holders of Common Shares will be
      entitled to receive the number of ADSX Common Shares equal to the product
      of the Exchange Ratio multiplied by the number of Common Shares held by
      such holder), and the name of each such holder will be removed from the
      register of holders of Common Shares and added to the register of holders
      of ADSX Common Shares; and





(ii)
    each
      Dilutive Security shall be exchanged for an option or warrant, as the case
      may be (a “Replacement Security”), to purchase a number of ADSX Common
      Shares equal to the product of the Exchange Ratio multiplied by the number
      of Common Shares subject to such Dilutive Security at an exercise price
      per ADSX Common Share equal to the exercise price per share of such
      Dilutive Security immediately prior to the Effective Time divided by the
      Exchange Ratio. If the foregoing calculation results in a Replacement
      Security being exercisable for a fraction of an ADSX Common Share, then
      the number of ADSX Common Shares subject to such Replacement Security
      shall be rounded down to the next whole number of ADSX Common Shares and
      the total exercise price for the Replacement Security will be reduced by
      the exercise price of the fractional ADSX Common Share. The term to
      expiry, conditions to and manner of exercising, vesting schedule, and all
      other terms and conditions of such Replacement Security will otherwise be
      unchanged, and any document or agreement previously evidencing an Option
      shall thereafter evidence and be deemed to evidence such Replacement
      Security.





(b)
    If
      ADSX estimates, acting reasonably, that the Net Assets of the Corporation
      as at the Effective Date are likely to be less than CDN$4,250,000, then,
      at the option (the “Two Tranche Option”) of ADSX, exercisable by notice in
      writing to the Corporation, such notice (i) to be givenin
      accordance with section 2.2(c) and(ii)
      to disclose the amount that ADSX so estimates will be the Net Assets of
      the Corporation on the Effective Date and the basis of ADSX’s estimate in
      sufficient detail to enable the Corporation, acting reasonably, to assess
      the reasonableness of ADSX’s estimate, section 2.2(a) shall have no
      application and:





(i)
    commencing
      at the Effective Time, the following shall occur and shall be deemed to
      occur in the following order without any further act or
      formality:





(A)
    each
      Common Share (other than Common Shares held by ADSX or any subsidiary or
      affiliate thereof which shall not be exchanged under this Arrangement and
      shall remain outstanding as Common Shares held by ADSX or any subsidiary
      or affiliate thereof) will be transferred by the holder thereof, without
      any act or formality on his part, to ADSX in exchange for that number of
      fully paid and non-assessable ADSX Common Shares determined by using the
      First Tranche Exchange Ratio (accordingly each of the holders of Common
      Shares will be entitled to receive the number of ADSX Common Shares equal
      to









Page
6
  the
      product of the First Tranche Exchange Ratio multiplied by the number of
      Common Shares held by such holder), and the name of each such holder will
      be removed from the register of holders of Common Shares and added to the
      register of holders of ADSX Common Shares;
and


(B)
    each
      Dilutive Security shall be exchanged for an option or warrant, as the case
      may be (a “Two Tranche Replacement Option”), to
  purchase:





(I)
    from
      the Effective Time until the Settlement Time, a number of ADSX Common
      Shares equal to the product of the First Tranche Exchange Ratio multiplied
      by the number of Common Shares subject to such Dilutive Security
      immediately prior to the Effective Time at an exercise price per ADSX
      Common Share equal to the exercise price per share of such Dilutive
      Security immediately prior to the Effective Time divided by the First
      Tranche Exchange Ratio; and





(II)
    after
      the Settlement Time, a number of ADSX Common Shares equal to the
      difference between (i) the product of the Settled Exchange Ratio
      multiplied by the number of Common Shares subject to such Dilutive
      Security immediately prior to the Effective Time and (ii) the number of
      ADSX Common Shares issued pursuant to such Two Tranche Replacement Option
      prior to the Settlement Time, at an exercise price per ADSX Common Share
      equal to the exercise price per share of such Dilutive Security
      immediately prior to the Effective Time divided by the Settled Exchange
      Ratio.





If the
foregoing calculation results in a Two Tranche Replacement Option being
exercisable for a fraction of an ADSX Common Share, then the number of ADSX
Common Shares subject to such Two Tranche Replacement Option shall be rounded
down to the next whole number of ADSX Common Shares and the total exercise price
for the Two Tranche Replacement Option will be reduced by the exercise price of
the fractional ADSX Common Share. The term to expiry, conditions to and manner
of exercising, vesting schedule, and all other terms and conditions of such Two
Tranche Replacement Option will otherwise be unchanged, and any document or
agreement previously evidencing an Dilutive Security shall thereafter evidence
and be deemed to evidence such Two Tranche Replacement Option.





(ii)
    Forthwith
      after the Settlement Time, ADSX shall issue to the holders of the Common
      Shares transferred to ADSX pursuant to (b)(i)(A) above, for each Common
      Share so transferred, the number of fully paid and non-assessable
      additional ADSX Common Shares determined by using the Adjustment Exchange
      Ratio (accordingly each of the holders of Common Shares will be entitled
      to receive the number of ADSX Common Shares equal to the product of the
      Adjustment Exchange Ratio multiplied by the number of Common Shares
      transferred by such holder).




(c)
    The
      notice referred to in section 2.2(b) shall be given no earlier than the
      pronouncement of the Final Order and no later than 10 Business Days after
      the date on which the Final Order is pronounced, provided that if the
      Effective Date is more than seven Business Days after the date (the
      “Original Notice Date”) that is:


Page
7
  (i)
    the
      date on which ADSX gave such notice, if ADSX gave such notice no later
      than 10 Business Days after the date on which the Final Order is
      pronounced; or
  (ii)
    the
      date that is the 10thBusiness Day after the date on which the Final Order is pronounced, if
      ADSX did not give such notice on or before such
    date,


then,
unless the reason the Effective Date is more than seven Business Days after the
Original Notice Date is solely and directly because of ADSX’s failure to perform
all or any of its obligations under the Acquisition Agreement during such period
of seven Business Days after the Original Notice Date, any notice ADSX may have
given shall be deemed to be rescinded, cancelled and of no effect and ADSX may
give notice at any time prior to the Effective Time.





**2.3** **Preparation
of Effective Date Balance Sheet**





If ADSX
exercises the Two Tranche Option:





(a)
    Forthwith
      after the Effective Date ADSX shall prepare the Effective Date Balance
      Sheet and the Settlement Statement (together, the “Statements”) and
      instruct ADSX’s Accountants to issue a review engagement report on the
      Effective Date Balance Sheet. The calculation of Net Assets will be made
      based on the information contained in the Effective Date Balance Sheet,
      subject to such adjustments as may be required by the principles described
      at Appendix I. ADSX shall use its reasonable best efforts to cause ADSX’s
      Accountants to deliver to ADSX final drafts of the Statements within 30
      days of the Effective Date.





(b)
    Promptly
      after receiving final drafts of the Statements and before ADSX’s
      Accountants issue the Statements in final form, ADSX shall deliver final
      drafts of the Statements to Khoja for his consideration and comment. ADSX
      will promptly deliver, upon request by Khoja, such documentation
      supporting the Effective Date Balance Sheet as he may request, acting
      reasonably.





(c)
    ADSX
      shall amend the final draft Statements to the extent appropriate in the
      light of the comments in writing of Khoja, provided such comments are
      received by ADSX within 15 days (the “Comment Period”) of the date that
      ADSX delivers the Statements to Khoja pursuant to section 2.3(b). Subject
      to section 2.3(d), the resulting Statements shall be binding on ADSX,
      Khoja and all other interested Persons.





(d)
    If
      ADSX and Khoja fail, within 10 days of the last day of the Comment Period,
      to reach agreement on any comments made by Khoja during the Comment Period
      (or such longer period as ADSX and Khoja may agree to in writing), a
      Canadian chartered accountant independent of ADSX and Khoja shall be
      selected by agreement between ADSX and Khoja to finally determine the
      Statements with all reasonable dispatch. If ADSX and Khoja are unable to
      agree on the independent accountant, he or she shall be selected by lot
      from a nominee proposed by ADSX, on the one hand, and a nominee proposed
      by Khoja, on the other. In making his or her determination, the
      independent chartered accountant shall act as an expert and not as an
      arbitrator. The resulting Statements shall be binding on ADSX, Khoja and
      all other interested Persons.





(e)
    The
      notice provisions of the Acquisition Agreement shall govern the
      communications contemplated by this section
2.3.





Page
8


**Article
3 — Rights of Dissent**


****


**3.1** **Rights
of Dissent**





Holders
of Common Shares may exercise rights of dissent with respect to such shares
pursuant to and in the manner set forth in section 190 of the CBCA and this
section 3.1 (the “Dissent Procedures”) in connection with the Arrangement. Holders of
Common Shares who duly exercise such rights of dissent and who:





(a)
    are
      ultimately entitled to be paid fair value for their Common Shares shall be
      deemed to have transferred such Common Shares to the Corporation and such
      shares shall be cancelled on the Effective Date;
or





(b)
    are
      ultimately not entitled, for any reason, to be paid fair value for their
      Common Shares shall be deemed to have participated in the Arrangement on
      the same basis as a non-dissenting holder of Common Shares and shallreceive
      ADSX Common Shares on the basis determined in accordance with section 2.2,





but in no
case shall ADSX, the Corporation or any other Person be required to recognize
such holders as holders of Common Shares after the Effective Time, and the names
of such holders of Common Shares shall be deleted from the registers of holders
of Common Shares at the Effective Time.





**Article
4 — Certificate and Fractional Shares**





**4.1** **Exchange
of Certificates for ADSX Common Shares**





(a)
    At
      or promptly after the Effective Time, ADSX shall deposit with the
      Depositary, for the benefit of the holders of Common Shares, certificates
      representing the ADSX Common Shares issued pursuant to sections 2.2(a)(i)
      or 2.2(b)(i)(A), as applicable, in exchange for outstanding Common Shares.
      Upon surrender to the Depositary for cancellation of a certificate which
      immediately prior to the Effective Time represented outstanding Common
      Shares that were exchanged for ADSX Common Shares, together with such
      other documents and instruments (including, but not limited to, letters of
      transmittal) as would have been required to effect the transfer of the
      shares formerly represented by such certificate under the CBCA and the
      by-laws of the Corporation and such additional documents and instruments
      as the Depositary may reasonably require, the holder of such surrendered
      certificate shall be entitled to receive in exchange therefor, and the
      Depositary shall deliver to such holder, a certificate representing that
      number of ADSX Common Shares which such holder has the right to receive
      (together with any dividends or distributions with respect thereto
      pursuant to section 4.2) in accordance with sections 2.2(a)(i) or
      2.2(b)(i)(A), as applicable, and the certificate so surrendered shall
      forthwith be cancelled.





(b)
    At
      or promptly after the Settlement Time, ADSX shall deposit with the
      Depositary for the benefit of the holders of Common Shares, certificates
      representing the ADSX Common Shares issued pursuant to section 2.2(b)(ii)
      and the Depositary shall deliver to each holder a certificate representing
      that number of ADSX Common Shares which such holder has the right to
      receive (together with any dividends or distributions with respect to
      section 4.2) in accordance with section
2.2(b)(ii).





(c)
    In
      the event of a transfer of ownership of Common Shares which is not
      registered in the transfer records of the Corporation, a certificate
      representing the proper number of ADSX
Common







Page
9
 
 Shares
      may be issued to the transferee if the certificate representing such
      Common Shares is presented to the Depositary, accompanied by all documents
      required to evidence and effect such transfer. Until surrendered as
      contemplated by this section 4.1, each certificate which immediately prior
      to the Effective Time represented one or more outstanding Common Shares
      shall be deemed at all times after the Effective Time to represent only
      the right to receive upon such surrender (i) the certificate(s)
      representing ADSX Common Shares as contemplated by this section 4.1, and
      (ii) any dividends or distributions with a record date after the Effective
      Time theretofore paid or payable with respect to ADSX Common Shares as
      contemplated by section 4.2.


(d)
    If
      ADSX exercises the Two Tranche Option it shall promptly notify the
      Depositary of that fact, and, when it is determined, of the day that is
      the Settlement Date.





**4.2** **Distributions
with Respect to Unsurrendered Certificates**





No
dividends or other distributions declared or made after the Effective Time with
respect to ADSX Common Shares or ADSX Common Shares with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
certificate which immediately prior to the Effective Time represented
outstanding Common Shares that were exchanged pursuant to section 2.2, unless
and until the holder of record of such certificate shall surrender such
certificate in accordance with section 4.1. Subject to applicable law, there
shall be paid to the record holder of the certificates representing whole Common
Shares, without interest, (i) the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole ADSX Common Share or ADSX Common Share, as the case may be, and (ii)
on the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole ADSX Common
Share or ADSX Common Share, as the case may be.





**4.3** **No
Fractional Shares**





No
certificates or scrip representing fractional ADSX Common Shares shall be
issued upon the surrender for exchange of certificates pursuant to section 4.1
and no dividend, stock split or other change in the capital structure of ADSX
shall relate to any such fractional security and such fractional interests shall
not entitle the owner thereof to exercise any rights as a security holder of
ADSX in lieu of any such fractional securities. If any calculation of ADSX
Common Shares issuable pursuant to section 4.1 results in a holder of Common
Shares being entitled to a total number of ADSX Common Shares that includes a
fractional share, that fraction will be rounded up to the nearest whole number
if it is equal to or greater than 0.5 and rounded down in any other case.




**4.4** **Lost
Certificates**





In the
event any certificate which immediately prior to the Effective Time represented
one or more outstanding Common Shares that were exchanged pursuant to section
2.2 has been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such certificate to be lost, stolen or destroyed,
the Depositary will issue in exchange for such lost, stolen or destroyed
certificate, cash and/or one or more certificates representing one or more ADSX
Common Shares (and any dividends or distributions with respect thereto)
deliverable in accordance with such holder’s Letter of Transmittal Form. When
authorizing such payment in exchange for any lost, stolen or destroyed
certificate, the Person to whom certificates representing ADSX
Common Shares are to be issued shall, as a condition precedent











Page
10





to the
issuance thereof, give an indemnity satisfactory to ADSX and its transfer agents
against any claim that may be made against ADSX with respect to the certificate
alleged to have been lost, stolen or destroyed.





**4.5** **Extinction
of Rights**





Any
certificate which immediately prior to the Effective Time represented
outstanding Common Shares that were exchanged pursuant to section 2.2 and not
deposited, with all other instruments required by section 4.1, on or prior to
the third anniversary of the Effective Date shall cease to represent a claim or
interest of any kind or nature as a shareholder of ADSX. On such date, the ADSX
Common Shares to which the former registered holder of the certificate referred
to in the preceding sentence was ultimately entitled shall be deemed to have
been surrendered to ADSX together with all entitlements to dividends,
distributions and interest thereon held for such former registered holder.
Neither ADSX or the Depositary shall be liable to any person in respect of any
cash, ADSX Common Shares (as dividends, distributions and interest in respect
thereof) delivered to a public official pursuant to any applicable abandoned
property escheat or similar law.





**4.6** **Withholding
Rights**





ADSX and
the Depositary shall be entitled to deduct and withhold from any dividend or
consideration otherwise payable to any holder of Common Shares or ADSX Common
Shares such amounts as ADSX or the Depositary is required or permitted to deduct
and withhold with respect to such payment under the ITA, the United States
Internal Revenue Code of 1986, as amended, or any provision of provincial,
state, local or foreign tax law, in each case, as amended. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
hereof as having been paid to the holder of the shares in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the extent that the
amount so required or permitted to be deducted or withheld from any payment to a
holder exceeds the cash portion of the consideration otherwise payable to the
holder, ADSX and the Depositary are hereby authorized to sell or otherwise
dispose of such portion of the consideration as is necessary to provide
sufficient funds to ADSX or the Depositary, as the case may be, to enable it to
comply with such deduction or withholding requirement and ADSX or the Depositary
shall notify the holder thereof and remit any unapplied
balance of the net proceeds of such sale.





**Article
5 — Amendments**





**5.1** **Amendments
to Plan of Arrangement**





The
Corporation reserves the right to amend, modify and/or supplement this Plan of
Arrangement at any time and from time to time prior to the Effective Date,
provided that each such amendment, modification and/ or supplement must be (i)
set out in writing, (ii) approved by ADSX, (iii) filed with the Court and, if
made following the Meeting, approved by the Court, and (iv) communicated to
holders of Common Shares if and as required by the Court.





Any
amendment, modification or supplement to this Plan of Arrangement may be
proposed by the Corporation at any time prior to the Meeting (provided that ADSX
shall have consented thereto) with or without any other prior notice or
communication, and if so proposed and accepted by the Persons voting at the
Meeting (other than as may be required under the Interim Order), shall become
part of this Plan of Arrangement for all purposes.







Page
11





Any
amendment, modification or supplement to this Plan of Arrangement that is
approved by the Court following the Meeting shall be effective only if (i) it is
consented to by each of the Corporation and ADSX, and (ii) if required by the
Court, it is consented to by holders of the Common Shares voting in the manner
directed by the Court.










Page 12





**APPENDIX
I**


**AGREED
CALCULATION PRINCIPLES**





For the
purposes of calculating Net Assets:





§
    The
      Corporation’s expenses relating to the Acquisition Agreement and the
      agreement ancillary to it, and the transactions contemplated by them, to
      the extent not previously discharged by the Corporation or not reflected
      on the Effective Date Balance Sheet, shall be deducted as a liability in
      the calculation of Net Assets. For greater certainty, such expenses shall
      include, but not be limited to, all legal, accounting and investment
      banking fees and amounts payable for any fairness
  opinion.





§
    If
      the Effective Date is not the last day of the month, operating expenses
      otherwise recorded on the last day of the month shall be pro-rated evenly
      over all days of that month.





§
    The
      investment tax credit recoverable shall be the greater
  of:




(a)  the
lesser of




(i)
    the
      amount recorded on the Corporation’s publicly filed Consolidated Balance
      Sheet as of September 30, 2004, and




(ii)
    the
      amount recorded on the Effective Date Balance Sheet,
and




(b)  the
lesser of




(i)
    the
      Corporation’s available investment tax credits as of the Effective Date,
      and




(ii)
    the
      amount recorded on the Effective Date Balance Sheet for income taxes
      payable.





§
    The
      amount of the Corporation’s net deferred tax assets, also known as future
      income taxes net of future income tax liabilities, as reflected in the
      calculation of Net Assets shall be the lesser of the amount recorded on
      the Corporation’s publicly filed Consolidated Balance Sheet as of
      September 30, 2004 and the amount reflected on the Effective Date Balance
      Sheet.





§
    In
      calculating Net Assets, the liabilities of the Corporation shall be
      reduced by an amount equal to 60% of any deferred revenue liability
      reflected on the Effective Date Balance Sheet (for which the account
      receivable is still outstanding) attributable to sales of proprietary
      hardware or software.





§
    No
      deduction in calculating Net Assets shall be made in respect of amounts
      paid or accrued for payment to Dissenting Shareholders pursuant to the
      Dissent Procedures.