X0305 4 2012-03-22 0 0001081078 API Technologies Corp. ATNY 0001443689 Senator Investment Group LP 510 MADISON AVENUE, 28TH FLOOR NEW YORK NY 10022 0 0 1 0 Convertible Subordinated Note 2012-03-22 4 P 0 26000000 16000000 A Common Stock, par value $0.001 4333333 26000000 I See footnote The Convertible Subordinated Note (the "Note") may be converted into a number of shares of Common Stock equal to the outstanding principal amount of the Note divided by $6.00 (the "Conversion Price"). The Conversion Price is subject to adjustment upon the occurrence of certain events, such as stock splits. If API Technologies, Inc. (the "Company") amends its charter to authorize the issuance of preferred stock before the Note is converted into Common Stock, then subject to certain limited additional conditions, the Note will automatically convert into shares of Series A Mandatorily Redeemable Preferred Stock (the "Preferred Stock") having a Liquidation Preference equal to the outstanding principal amount of the Note. The Preferred Stock, if the Note is converted into Preferred Stock, will have be convertible into the same number of shares of Common Stock as the Note and on the same terms. The Note shall convert to Preferred Stock, if ever, before March 22, 2013, but only if the Company amends its charter to authorize the Preferred Stock. The Note may be converted into shares of Common Stock at any time. The Note, or the Preferred Stock if the Note is converted into Preferred Stock, must be redeemed by the Company on March 22, 2019, unless an earlier mandatory redemption event, as described in the Note Purchase Agreement, dated as of March 22, 2012, by and among API Technologies Corp., as Issuer, and the Purchasers named therein, as the same may be amended, supplemented, modified or replaced from time to time (the "Purchase Agreement"), occurs. Beginning March 31, 2013,the Note shall bear interest at a rate of 6% per annum, compounded quarterly, which shall be paid in kind by adding such unpaid and accrued interest to the outstanding principal of the Note. The number of shares of Common Stock into which the Note may convert will increase by the amount of such interest divided by the Conversion Price. In addition, the number of shares may increase upon the occurrence of certain events (as described in the Purchase Agreement) which entitle the holder of the Note to receive certain additional payments in kind. The occurrence of such events is outside of the control of the Note holder. The securities are held for the account or benefit of certain investment funds (the "Funds") for which Senator Investment Group LP ("Senator LP") serves as investment manager. As investment manager and investment advisor Senator LP may be deemed to be the beneficial owner of the Issuer's securities held for the account or benefit of the Funds. Douglas Silverman, a United States citizen, and Alexander Klabin, a United States citizen, have control of a Delaware limited liability company that may be deemed to control Senator LP. The entities and individuals identified above disclaim any membership in any "group". /s/ Edward Larmann, Chief Operating Officer 2012-03-26