**Exhibit 10.21**

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR ANY STATE SECURITIES LAWS OR THE SECURITIES LAWS OF ANY JURISDICTION. THE HOLDERHEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION MEETING THEREQUIREMENTS OF RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT TO A PERSON THAT IS NOT A U.S. PERSON WHO AGREES TO RESTRICTIONS ON RESALE THAT ARE CONSISTENT WITH THE REQUIREMENTS OF REGULATION S UNDER THE U.S. SECURITIES ACT,(C) FOLLOWING THE DISTRIBUTION COMPLIANCE PERIOD REQUIRED UNDER RULE 903 OF REGULATION S UNDER THE SECURITIES ACT, IN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON OR PERSONS IN THE UNITED STATES PURSUANT TO ANAVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS IN A TRANSACTION THAT IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR OTHER REGULATIONSGOVERNING THE OFFER AND SALE OF SECURITIES, OR (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION,IN EITHER CASE, REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U. S. SECURITIES ACT. 

 

SECURED CONVERTIBLE PROMISSORY NOTE 

 

FOR VALUE RECEIVED, the undersigned, API NANOTRONICS CORP. (the “Company”), a Delawarecorporation, hereby promises to pay to the order of              or registered assigns (“Holder”), the principal sum of             dollars ($            ) (or such lesser amounts as may be outstanding from time to time under this Note) on theMaturity Date, as defined in Section 1 below. Unless otherwise set forth herein, all references to $ means United States dollars. 

This Note is one of a series of Secured Convertible Promissory Notes made of even date herewith or that may be made after the date hereof in each case by the Company to evidence the Company’s indebtedness in connection with atransaction relating to the purchase of the assets or a note made by Cryptek Technologies Inc. (“Cryptek”) by the Company (this Note, together with all 

such other Secured Convertible Promissory Notes as may be outstanding from time to time, the “Notes”). 

1. Maturity. This Note shall be due and payable upon the earlier to occur of the following events (the “Maturity Date”):(i) June 23, 2012; (ii) within ten (10) days in the event the Company does not purchase by August 15, 2009 either (A) all of the right, title and interest of Wachovia Bank National Association (“Wachovia”) inthat certain loan secured by the assets of Cryptek Technologies Inc. (the “Cryptek Loan”) or (B) substantially all of the assets of Cryptek Technologies Inc. (“Cryptek”) from Cryptek or (iii) in the event that theCompany purchases the Cryptek Loan, but does not acquire the assets of Cryptek through a foreclosure or similar proceeding, then within thirty (30) days of the date that all amounts due under the Cryptek Loan are repaid in full or the CryptekLoan is otherwise fully satisfied and retired. 

2. Interest. Interest shall accrue on the unpaid principal balance hereof and on anyinterest payment that is not made when due at the rate of twelve percent (12%) per annum (the “Base Rate”) until the principal amount of this Note is paid in full. Accrued interest shall be due and payable quarterly, on the last dayof each calendar quarter, March 31, June 30, September 30 and December 31, of each year, with a final payment of accrued and unpaid interest due and payable on the Maturity Date. In the Event of Default (as definedherein) interest shall accrue on all unpaid amounts due hereunder, including without limitation interest, at the rate of the Base Rate plus three percent (3%). If a judgment is entered against Lender on this Note, the amount of the judgment soentered shall bear interest at the highest rate authorized by law as of the date of the entry of the judgment. In addition, in the event that the Company purchases the rights, title and interest of Wachovia in the Cryptek Loan but does not acquirethe assets of Cryptek through a foreclosure or similar proceeding and subsequently all amounts due under the Cryptek Loan are repaid in full or the Cryptek Loan is otherwise fully satisfied and retired, the holder of this Note shall receive a prorata portion of one-third of the net gain realized by the Company on the Cryptek Loan. The holder’s pro rata portion shall be determined by a percentage equal to 100 times a fraction the numerator of which is the principal amount of this Noteand the denominator of which is the sum of the principal amount of all Notes issued by API in connection with the purchase of the Cryptek Loan and the amount of funds contributed by API to the purchase of the Cryptek Loan. Net gain shall be thedifference between the total amount paid to the Company in satisfaction of the Cryptek Loan and all expenses and costs, including, without limitation, legal fees and expenses, travel, due diligence costs and accounting fees and expenses, incurred bythe Company in connection with the negotiations for and purchase of the Cryptek Loan and the assets of Cryptek. 

3. Payments.Payments of both principal and interest shall be made at the principal executive office of the Company, or such other place as the holder hereof shall designate to the Company in writing, in lawful money of the United States of America, provided,that Holder, in its sole discretion, may require that payments be made in Canadian funds, based on an exchange rate for the Canadian dollar as reported in the Wall Street Journal on the date of this Note. The Company shall notify Holder prior to anypayment, and Holder shall instruct the Company as to whether such payment shall be made in United 

 

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States or Canadian funds. Payments shall be made pro rata among all holders of Notes in accordance with the outstanding principal balances of their Notes.

So long as no Event of Default has occurred in this Note, all payments hereunder shall first be applied to interest, then to principal.Upon the occurrence of an Event of Default in this Note, all payments hereunder shall first be applied to costs pursuant to Section 12.4, then to interest and the remainder to principal. 

4. Registration, Transfer and Exchange of Notes. The Company will keep at its principal office a register in which it will provide for theregistration of and transfer of this Note, at its own expense (excluding transfer taxes). If this Note is surrendered at said office or at the place of payment named in this Note for registration of transfer or exchange (accompanied in the case ofregistration of transfer or exchange by a written instrument of transfer in form satisfactory to the Company duly executed by or on behalf of the holder), the Company, at its expense, will deliver in exchange one or more new notes in denominationsof $10,000 or larger multiples of $1,000, as requested by the holder for the aggregate unpaid principal amount. Any note or notes issued in a transfer or exchange shall carry the same rights to increase notes surrendered. The Holder agrees thatprior to making any sale, transfer, pledge, assignment, hypothecation, or other disposition (each, a “Transfer”) of this Note, the Holder shall give written notice to the Company describing the manner in which any such proposed Transfer isto be made and providing such additional information and documentation regarding the Transfer as the Company reasonably requests. If the Company so requests, the Holder shall at his expense provide the Company with an opinion of counsel (whichcounsel must be reasonably satisfactory to the Company), in form and substance satisfactory to the Company, that the proposed Transfer complies with applicable federal and state securities laws. The Company shall have no obligation to Transfer thisNote unless the Holder thereof has complied with the foregoing provisions, and any such attempted Transfer shall be null and void. 

5.Registered Owner. Prior to due presentation for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of, andinterest on, such Note and for all other purposes. 

6. Conversion. 

Holder shall have the following conversion rights: 

(a) Subject to the terms and conditions of this Note, Holder shall have the right, at Holder’s option, at anytime after the date on which the Company purchases substantially all of the assets of Cryptek through the foreclosure of theCryptek Loan to convert the outstanding principal amount of this Note and/or accrued and unpaid interest or any portion thereof into shares of common stock, $.001 par value (the “Common Stock”), of the Company, at a price per shareequal to the greater of (i) $.75 per share or (ii) the variable weighted average price of the common stock of the Company as reported by the OTC Bulletin Board during the three (3) consecutive trading days ending on the date theCompany purchases the Cryptek Loan from Wachovia, or in case an adjustment in such price has taken place pursuant to the provisions of 

 

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this Note, then at the price as last adjusted (such price or adjusted price being referred to herein as the “Conversion Price”). Such rightsof conversion shall be exercised by Holder by giving written notice that Holder elects to convert the stated portion of the principal amount of and/or accrued and unpaid interest on this Note into Common Stock and by surrender of this Noteaccompanied by a written instrument of transfer duly executed by Holder to the Company, at the Company’s principal office (or such other office or agency of the Company as the Company may designate by notice in writing to Holder) at any timeduring its usual business hours. For convenience, the conversion of any portion of the principal of or accrued interest on this Note into Common Stock is hereinafter sometimes referred to as the “conversion” of this Note. Holder mayexercise this conversion right at any time and from time to time on and after the date of its receipt of this Note. The exchange rate for conversion shall be determined using the noon buying rate of the Federal Reserve Bank of New York as of thedate immediately preceding the date of conversion, or if not available, as listed in the Wall Street Journal for the day immediately preceding the date of conversion or, if determining the exchange rate using such other method is appropriate orrequired under Securities and Exchange Commission laws, rules or regulations or the laws, rules and regulations of any applicable securities exchange national quotation system, then such method shall be used. 

(b) Promptly after the receipt of the written notice referred to above and surrender of this Note for conversion, the Company shall issue and deliver, orcause to be issued and delivered, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion. Such conversion shall be deemed to have been effected and the Conversion Price shall be the Conversion Priceas of the close of business on the date on which such written notice shall have been received by the Company and this Note shall have been surrendered for conversion as aforesaid, and at such time the person or persons in whose name or names anycertificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become at such time the holder or holders of record of the shares represented thereby. In the event that only a portion of thisNote is converted, the Company shall execute and deliver to Holder, at the expense of the Company, a new Note, in the same form as this Note, in principal amount and accrued interest equal to the unconverted portion of this Note. 

(c) No fractional shares shall be issued upon conversion into Common Stock and no payment or adjustment shall be made upon any conversion on account ofany cash dividends (having a record date prior to the effective date of conversion) on the Common Stock issued upon such conversion. If any fractional share of Common Stock would, except for the provisions of the first sentence of this paragraph(c), be delivered upon such conversion, the Company, in lieu of delivering such fractional share, shall pay to Holder an amount in cash equal to the fraction represented by such share multiplied by the closing price of the Common Stock on theconversion date. 

(d) Whenever the Company shall (i) declare or pay a dividend or make a distribution on shares of Common Stock inshares of Common Stock or in any other shares of capital stock of the Company or in other securities of the Company (ii) subdivide, split or reclassify the outstanding shares of Common Stock into a greater number of shares of Common Stock or(iii) combine or reclassify the outstanding shares of Common Stock into a smaller number of shares of Common Stock, the Conversion Price in effect at the time of the record date for such 

 

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dividend or distribution or on the effective date of such subdivision, split, combination or reclassification, shall be proportionately adjusted so thatHolder shall upon conversion into shares of Common Stock after such time, be entitled to receive the number of shares of Common Stock or other securities of the Company which Holder would have been entitled to receive immediately after such time hadthis Note been converted into shares of Common Stock immediately prior to such time. Such adjustment shall be made successively each time any event described in this paragraph (d) shall occur. 

(e) In case of any reclassification, capital reorganization or change by the Company of the outstanding shares of Common Stock (other than a change inpar value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision, combination or reclassification of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock(which is treated in paragraph (d) above), but including any change of such shares into one or more other classes or series of shares of capital stock), or in case of any consolidation of the Company with, or merger of the Company with or into,another person (other than a consolidation or merger in which the Company is the continuing entity and which does not result in any reclassification or change of the Company’ outstanding shares), or in case of any sale or other conveyance toanother person of the property of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing person shall provide, as a condition to such transaction, that Holder shall acquire, upon conversion of, or inexchange for, this Note the kind and amount of shares and other securities and property (including cash and evidences of indebtedness) which would have been received by Holder upon such reclassification, reorganization, change, consolidation,merger, or sale or conveyance of assets if Holder had converted this Note into shares of Common Stock immediately prior thereto. Such other person, which shall thereafter be deemed to be the Company for purposes of this paragraph (e), shall providefor similar future adjustments as nearly equivalent as may be practicable to the adjustments provided herein. Such adjustment shall be made successively each time any event described above in this paragraph (e) shall occur. 

(f) In the event the Company at any time after the date of the original issuance of this Note shall distribute shares of stock or other securities ofother persons, evidences of indebtedness issued by the Company or other property (other than cash) to the holders of its Common Stock by way of dividend or otherwise, in either case other than in connection with a capital reorganization,consolidation, merger or sale or other conveyance of all or substantially all of the Company’s assets (each of which transactions is provided for in paragraph (e) above), then, in each such case, Holder, upon conversion of this Note intoshares of Common Stock as provided hereby, shall be entitled to receive, and the Company shall reserve for issuance to Holder upon such conversion, the shares of stock or other securities, evidences of indebtedness, or other property which it wouldhave been entitled to receive if it had so converted and become the holder of record of the shares of Common Stock issued upon such conversion immediately prior to the record date fixed for the determination of the stockholders entitled to receivesuch dividend or distribution. The foregoing adjustments shall be made successively whenever any event listed above in this paragraph (f) shall occur. 

(g) Upon the occurrence of any event requiring an adjustment of the Conversion Price, then and in each such case the Company shall give prompt written notice thereof to 

 

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Holder, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the method upon which suchcalculation is based and stating that such adjustment calculation has been reviewed and approved by the Company’s independent certified public accountants. 

(h) In case at any time: 

(i) the Company shall declare any dividend upon its Common Stockpayable in cash, stock, property or any security (whether of the Company or otherwise) or make any other distribution to the holders of its Common Stock; 

(ii) the Company shall offer for subscription prorata to the holders of its Common Stock any additional shares of stock of any class or other rights; 

(iii) there shall be any capital reorganization or reclassification of the capital stock of the Company, or a consolidation or merger ofthe Company with or into, or a sale of all or substantially all its assets to, another entity or entities; or 

(iv) thereshall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; 

then, in any one or more of said cases, the Company shall give(A) at least 10 days prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any suchreorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up and (B) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, or atleast 10 days prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (A) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on whichthe holders of Common Stock shall be entitled thereto and such notice in accordance with the foregoing clause (B) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securitiesor other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up, as the case may be. 

(i) The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon the conversion of this Note, as provided in this Note, free fromany pre-emptive rights (if any), such number of shares of Common Stock as shall then be issuable upon the conversion of this Note. The Company covenants that all shares of Common Stock which shall be so issued shall be duly and validly issued andfully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Company covenants that it shall from time to time take all such action as may berequisite to assure that the par value per share of the Common Stock is at all times equal to or less than the Conversion Price in effect at the time. The Company shall not take any action which results in any adjustment of the Conversion Price ifthe total number of shares of Common Stock which have been issued at or 

 

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prior to the time such action was taken and those which are issuable after such action upon conversion of this Note and exercise of all options andconversion of all convertible securities of the Company would exceed the total number of shares of Common Stock authorized by the Company’ Certificate of Incorporation. 

(j) The issuance to the Holder of certificates for shares of Common Stock upon conversion of this Note shall be made without charge to the holder for anyissuance, stock transfer or documentary stamp tax in respect thereof. All such certificates shall bear a legend stating that the shares represented by such certificates have not been registered under the U.S. Securities Act of 1933, as amended, orapplicable state or provincial law and such other legends as are customary for unregistered securities. 

(k) No adjustment in theConversion Price shall be required unless such adjustment would require an increase or decrease of at least one percent in such price; provided, however, that any such adjustment which is not required to be made shall be carried forward and takeninto account in any subsequent adjustment. 

7. Prepayment. 

7.1 Optional Prepayment. The Company, at its option and without any premium, may prepay in whole or in part the principal amount ofthis Note at 100% of the face value of this Note at any time; provided, however that the Company shall give Holder not less than 10 days written notice prior to any pre-payment of this Note (the “Prepayment Notice”). The Prepayment Noticeshall specify the date upon (“Prepayment Date”) and the place at which, payment may be obtained and shall call upon the Holder to surrender this Note to the Company in the manner and at the place designated. On the Prepayment Date, theHolder shall surrender this Note to the Company in the manner and at the place designated in the Prepayment Notice, and thereupon prepayment shall be made to Holder and this Note shall be cancelled. In the event that less than all the principalamount of this Note is prepaid, upon surrender of this Note to the Company, the Company shall execute and deliver to Holder a new note or notes in principal amount equal to the unpaid principal amount of this Note. The Company shall, at the time ofany such prepayment, pay to the holder of this Note all interest accrued and unpaid to the Prepayment Date. The parties acknowledge that Holder may effect Holder’s conversion rights under Section 6 prior to any such Prepayment Date,notwithstanding receipt of a Prepayment Notice. 

7.2 Cessation of Rights. From and after the Prepayment Date, unlessthere has been a default under the Prepayment Notice, all interest on the redeemed principal amount shall cease to accrue and all rights of Holder as a Holder of this Note shall cease with respect to the principal amount prepaid and, with respect tosuch amount, this Note thereafter shall not be deemed to be outstanding for any purpose whatsoever. By acceptance of this Note, Holder agrees to execute and deliver such documents as may be reasonably requested from time to time by the Company inorder to implement the foregoing provisions of this Section. 

 

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8. Covenants of the Company. The Company covenants and agrees that it shall not, without the priorwritten approval of the Holder: 

8.1 Obtain or incur any indebtedness or other monetary obligations that are senior to or onparity with the Note. 

8.2 Allow, suffer or cause to exist any lien, claim, security interest or encumbrance on theCompany’s property or assets, other than purchase money indebtedness incurred in the ordinary course of business. 

9. Events ofDefault.

9.1 Occurrences of Events of Default. Each of the following events shall constitute an “Event ofDefault” for purposes of this Note: 

(a) if the Company fails to pay any amount payable under this Note and suchdefault is not cured within ten (10) days of written notice from the Holder; 

(b) if the Company breaches any of itsrepresentations, warranties or covenants set forth in this Note and such breach is not cured within thirty (30) days of notice of such breach; 

(c) the commencement of an involuntary case against the Company or any of its subsidiaries under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointing of a receiver,liquidator, assignee, custodian, trustee or similar official of the Company or for any substantial part of the Company or one of its subsidiary’s property, or ordering the winding-up or liquidation of the Company or one of its subsidiary’saffairs; 

(d) if the Company or any of its subsidiaries shall commence a voluntary case under any applicable bankruptcy,insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator,assignee, trustee, custodian or similar official of the Company or its subsidiary or for any substantial part of the Company or one of its subsidiary’s property, or shall make any general assignment for the benefit of creditors, or shall takeany corporate action in furtherance of any of the foregoing; or 

(e) if the Company’s business shall fail, asdetermined in good faith by the Holder and evidenced by the Company’s inability to pay its ongoing debts as such debts become due. 

9.2 Acceleration Upon Event of Default. If any Event of Default shall have occurred and be continuing, for any reason whatsoever (and whether such occurrence 

 

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shall be voluntary or involuntary or come about or be effected by operation of law or otherwise), the unpaid principal amount of, and the accrued intereston, this Note shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Company. 

10. Investment Representations of the Holder. With respect to the purchase of this Note, the Holder hereby represents and warrants to the Companyas follows: 

10.1 Experience. The Holder has substantial experience in evaluating and investing in private placementtransactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. 

10.2 Not a U.S. Person. The Holder is not a U.S. Person as defined in Rule 902 of Regulation S under the Securities Act of 1933(the “Act”) and was not formed for the purpose of investing in securities not registered under the Act; 

10.3Own Account. The Holder is not acquiring the Note for the account or benefit of a U.S. Person; 

10.4 OfferLocation. The offer to purchase the Note of the Company was made to the Holder outside of the United States; 

10.5Regulation S. All subsequent offers and sales of the Note and the common stock issuable upon conversion of the Notes shall be made in compliance with the resale provisions of Regulation S under the Act, pursuant to Rule 144 promulgatedthereunder, pursuant to another applicable exemption from registration under the Act, or pursuant to an effective registration statement (however, no registration rights are granted hereby); and in each case, in accordance with any applicable statesecurities laws. In any case, neither the Note nor the common stock issuance upon conversation of the Notes will be resold or transferred to a U.S. person(s) or for the account or benefit of a U.S. person or within the United States until the end ofthe six month period distribution compliance commencing on the later of (i) the date of this subscription agreement and (ii) the date the undersigned’s subscription funds have been received by the Company and thereafter cannot be soldto a U.S. person, for the account or benefit of a U.S. person or within the United States, unless the Shares are registered under the Act or are exempt from the registration requirements of the Act; 

10.6 Registration Exemption. The Holder understands that the Note is being offered and sold to it in reliance on the exemption fromthe registration requirements of United States federal and state securities laws; 

10.7 Representations True. TheHolder understands that the Company is relying upon the truth and accuracy of the representations, warranties, agreement and understandings of the undersigned set forth herein in order to determine the applicability of such exemption and thesuitability of the undersigned to acquire the Note. 

 

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10.8 Access to Data. The Holder has had an opportunity to discuss theCompany’s business, management and financial affairs with the Company’s management and has also had an opportunity to ask questions of the Company’s officers, which questions were answered to its satisfaction. 

11. Security. This Promissory Note is secured by a Security Agreement (the “Security Agreement”) dated the date hereof among Holder andthe Company and the Subsidiaries. This Promissory Note, the Security Agreement and any and all other agreements presently existing or hereafter entered into which evidence and/or secure any indebtedness from the Company to Holder shall hereinafterbe collectively referred to as the “Loan Documents.” The terms, covenants, conditions, provisions, stipulations and agreements of the Loan Documents are hereby made a part of this Note, to the same extent and with the same effect as ifthey were fully set forth herein. The Company does hereby covenant to abide by and comply with each and every term, covenant, condition, provision, stipulation and agreement set forth in the Loan Documents. 

12. Miscellaneous. 

12.1 Invalidity of Any Provision. If any provision or part of any provision of this Note shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affectany other provisions of this Note and this Note shall be construed as if such invalid, illegal or unenforceable provisions or part hereof had never been contained herein, but only to the extent of its invalidity, illegality or unenforceability.

12.2 Governing Law. The Note shall be governed in all respects by the laws of the State of Delaware, excluding itsconflict of laws. 

12.3 Notices. Any notice or other communication required or permitted hereunder shall be inwriting and shall be deemed to have been duly given (i) on the date of delivery if delivered personally, (ii) one (1) business day after transmission by facsimile transmission with a written confirmation copy sent by first class mail,or (iii) five (5) days after mailing if mailed by first class mail, to the following addresses: 

 
If to the Company:  API Nanotronics Corp.  229 Colonnade Road  Ottawa, Ontario  K2E 7K3 Canada  Attention: Chief Financial Officer
And if to the Holder, to the address or facsimile number of Holder as set forth onthe Company’s records, or such other address as the Holder has provided to the Company by notice duly given. 

 

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12.4 Collection. If the indebtedness represented by this Note or any part thereofis collected at law or in equity or in bankruptcy, receivership or other judicial proceedings or if this Note is placed in the hands of attorneys for collection after the occurrence of an Event of Default, the Company agrees to pay, in addition tothe outstanding principal and accrued interest payable hereon, reasonable attorneys’ fees and costs incurred by the Holder, or on behalf of the Holder by a representative of the Holder. 

12.5 Successors and Assigns. The rights and obligations of the Company and the Holder shall be binding upon and benefit thesuccessors, assigns, heirs, administrators and transferees of the parties. 

12.6 Waivers. The Company and anyendorsers, sureties, guarantors, and all others who are, or may become liable for the payment hereof severally: (a) waive presentment for payment, demand, notice of demand, notice of nonpayment or dishonor, protest and notice of protest of thisNote, and all other notices in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note, (b) consent to all extensions of time, renewals, postponements of time of payment of this Note or othermodifications hereof from time to time prior to or after the maturity date hereof, whether by acceleration or in due course, without notice, consent or consideration to any of the foregoing, (c) agree to any substitution, exchange, addition, orrelease of any of the security for the indebtedness evidenced by this Note or the addition or release of any party or person primarily or secondarily liable hereon, (d) agree that Holder shall not be required first to institute any suit, or toexhaust its remedies against the Company or any other person or party to become liable hereunder or against the security in order to enforce the payment of this Note and (e) agree that, notwithstanding the occurrence of any of the foregoing(except by the express written release by Holder of any such person), the Company shall be and remain, directly and primarily liable for all sums due under this Note. 

12.7 Time. Time is of the essence in this Note. 

12.8 Captions. The captions of sections of this Note are for convenient reference only, and shall not affect the construction orinterpretation of any of the terms and provisions set forth in this Note. 

12.9 Number and Gender. Whenever used inthis Note, the singular number shall include the plural, and the masculine shall include the feminine and the neuter, and *vice versa*. 

12.10 Remedies. All remedies of the Holder shall be cumulative and concurrent and may be pursued singly, successively, or together at the sole discretion of the Holder and may be exercised as often as occasiontherefor shall arise. No act of omission or commission of the Holder, including specifically any failure to exercise any right, remedy or recourse shall be effective unless it is set forth in a written document executed by the Holder and then onlyto the extent specifically recited therein. A waiver or release with reference to one event shall not be construed as 

 

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continuing as a bar to or as a waiver or release of any subsequent right, remedy, or recourse as to any subsequent event. 

12.11 No Waiver by Holder. The acceptance by Holder of any payment under this Note which is less than the amount then due or theacceptance of any amount after the due date thereof, shall not be deemed a waiver of any right or remedy available to Holder nor nullify the prior exercise of any such right or remedy by Holder. None of the terms or provisions of this Note may bewaived, altered, modified or amended except by a written document executed by Holder and then only to the extent specifically recited therein. No course of dealing or conduct shall be effective waive, alter, modify or amend any of the terms orprovisions hereof. The failure or delay to exercise any right or remedy available to Holder shall not constitute a waiver of the right of the Holder to exercise the same or any other right or remedy available to Holder at that time or at anysubsequent time. 

12.12 Submission to Jurisdiction. BORROWER, AND ANY ENDORSERS, SURETIES, GUARANTORS AND ALL OTHERSWHO ARE, OR WHO MAY BECOME, LIABLE FOR THE PAYMENT HEREOF SEVERALLY, IRREVOCABLY AND UNCONDITIONALLY (A) AGREE THAT ANY SUIT, ACTION, OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER AGREEMENT, DOCUMENT ORINSTRUMENT DELIVERED PURSUANT TO, OR IN CONNECTION WITH THIS NOTE SHALL BE BROUGHT AND MAINTAINED IN THE COURTS IN AND FOR SUFFOLK COUNTY, NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK; (B) CONSENT TO THEEXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING; AND (C) WAIVE ANY OBJECTION WHICH IT OR THEY MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION, OR PROCEEDING IN ANY OF SUCH COURTS. 

12.13 Waiver of Trial by Jury. HOLDER AND BORROWER HEREBY KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTEITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH, OR ANY COURSE OF CONDUCT,COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER TO MAKE THE LOAN EVIDENCED BY THIS NOTE. 

[signature page follows] 

 

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**API NANOTRONICS CORP.,**a Delaware corporationBy: 
/s/ Stephen Pudles
 Stephen Pudles Chief Executive Officer
 

**HOLDER**

 
By: 
 
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