**Exhibit 2.7**

 

**UNLESS PERMITTED UNDERSECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITYBEFORE SEPTEMBER 20, 2004.**

 
| **Date of Issue:** |   | **May 19, 2004**   |   | **Principal Amount:  CDN$500,000** |
|--------------------|--------|--------------------|--------|-----------------------------------------|
| **Interest Rate:** |   | **7.0% per annum** |   | **Certificate Number: F-1**             |

 

**SERIES F CONVERTIBLESECURED NOTE**

 

**ADB SYSTEMS INTERNATIONALLTD.,**a company incorporated under the laws of the Province of Ontario(hereinafter called the “**Company**”)

 

**WHEREAS** the Company, under the lawsrelating thereto, is duly authorized to create and issue this Note as hereinprovided;

 

**NOW THEREFORE** it is hereby covenanted,agreed and declared as follows:

 

# **ARTICLE ONEINTERPRETATION**

# ** **

## **Section 1.01****                            Definitions**:  In this Note, unless there is something inthe subject matter or context inconsistent therewith, the expressions followinghave the following meanings, namely:

##  

### (a)                                  “**AssignmentForm**” means the form of assignment set out in Schedule ”B”hereto;

###  

### (b)                                 “**CommonShares**” means the fully paid and non-assessable common shares in thecapital of the Company as constituted on the date hereof, and after the datehereof any other shares, other securities, money or property which the Holderis entitled to receive upon conversion of this Note pursuant toArticle Three;

###  

### (c)                                  “**ConversionDate**” or “**Date of Conversion**” shall have the meaningspecified in Section 3.02(b) hereof;

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### (d)                                 “**ConversionForm**” means the form of conversion set out in Schedule ”C”hereto;

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### (e)                                  “**Company**”means ADB Systems International Ltd. and includes any successor corporation toor of the Company which shall have complied with the provisions ofArticle Six;

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### (f)                                    “**ConversionPrice**” means the amount of CDN$0.31 for which each Unit may beissued from time to time upon the conversion of this Note, as adjusted inaccordance with the provisions of Article Three;

###  

### (g)                                 “**CurrentMarket Price**” shall have the meaning specified inSection 3.03(d) hereof;

 

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### (h)                                 “**Date ofIssue**” means the date upon which the Note is issued;

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### (i)                                     “**Event ofDefault**” shall have the meaning specified in Section 4.03 hereof;

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### (j)                                     “**Holder**”means the registered holder of this Note on the books of the Company and asevidenced on the registration table set out in Schedule ”A” hereof;

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### (k)                                  “**MaturityDate**” means May 19, 2007;

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### (l)                                     “**Note**”means this series F 7% secured convertible note and any note issued inreplacement, substitution or exchange, in whole or in part, of this series F 7%secured convertible note;

###  

### (m)                               “**Notice ofConversion**” shall have the meaning specified in Section 3.02hereof;

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### (n)                                 “**OntarioSecurities Act**” shall have the meaning specified inSection 2.06(b);

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### (o)                                 “**Payment Date**”shall have the meaning specified in Section 2.02 hereof;

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### (p)                                 “**person**”means any individual, corporation, company, partnership, joint venture,association, trust or other organization or entity;

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### (q)                                 “**PrincipalAmount**” means five hundred thousand dollars in lawful money ofCanada (CDN$500,000) less any amounts which as of the date of determination ofthe Principal Amount:

###  

#### (i)                                     havebeen prepaid by the Company on account of this Note; and

####  

#### (ii)                                  havebeen converted by the Holder into Common Shares in accordance with theprovisions hereof;

####  

### (r)                                    “**this Note**”,“**the Note**”,“**hereto**”,“**herein**”,“**hereby**”,“**hereunder**”,“**hereof**”and similar expressions refer to this Note and not to any particular Article,Section, subsection, clause, subdivision or other portion hereof and includeany and every instrument supplemental or ancillary hereto;

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### (s)                                  “**Time ofExpiry**” shall have the meaning specified in Section 3.01hereof;

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### (t)                                    “**TSX**”means the Toronto Stock Exchange;

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### (u)                                 “**Unit**”means one Common Share and one-half of a Warrant;

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### (v)                                 “**U.S.Securities Act**” shall have the meaning specified inSection 2.06(a); and

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### (w)                               “**Warrant**”means a warrant to acquire one Common Share at an exercise price of CDN$0.50and with a term expiring at 5:00 p.m. (Toronto time) on May 19, 2007.

 

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## **Section 1.02****                            Number and Gender**:  Words importing the singular number onlyshall include the plural and vice versa and words importing the masculinegender shall include the feminine gender and words importing persons shallinclude firms and corporations and vice versa.

##  

## **Section 1.03****                            Headings**:  The division of this Note into Articles and Sections and theinsertion of headings are for convenience of reference only and shall notaffect the construction or interpretation of this Note.

##  

## **Section 1.04****                            Applicable Law**:  This Note shall be governed by andinterpreted in accordance with the laws of the Province of Ontario and the lawsof Canada applicable therein without reference to conflict of lawsprinciples.  The Company and the Holderirrevocably attorn to the exclusive jurisdiction of the courts of the Provinceof Ontario with respect to any matters arising out of this Note.

##  

## **Section 1.05****                            Time of Essence**:  Time is of the essence in the performance ofthis Note.

##  

## **Section 1.06****                            Currency**:  All references to currency herein are to lawful money of Canada(CDN$) unless otherwise specified herein.

##  

# **ARTICLE TWOTHE NOTE**

# ** **

## **Section 2.01****                            Promise to Pay**:  The Company hereby acknowledges itselfindebted and promises to pay the outstanding Principal Amount to the Holder onthe Maturity Date.

##  

## **Section 2.02****                            Interest**:  Interest on the Note shall be charged at the rate of 7% per annumcalculated annually, payable by the Company in cash.  Interest on the Note shall accrue on the outstanding principalamount of the Note from day to day both before and after default, demand,maturity and judgment, for the actual number of days elapsed on the basis of ayear of 365 days.  Where the calendaryear of calculation contains 366 days, interest hereunder shall be expressed asa yearly rate for purposes of the *Interest Act* (Canada) as such ratemultiplied by 366 and divided by 365. Accrued interest shall be paid by the Company quarterly on the lastbusiness day of the quarter (a “**Payment Date**”) without any deductions forwithholding or other taxes except as may be required pursuant to Part 13 of the*IncomeTax Act* (Canada), with the first payment due on June 30,2004.  Any portion of the interestaccrued on the Note shall be paid in cash.

##  

## **Section 2.03****                            Person Entitled to Payment**:  The Holder shall be entitled to theprincipal moneys and interest evidenced by this Note.  Delivery to the Holder by the Company or the receipt by theHolder of the principal moneys and interest evidenced by this Note and theUnits issuable pursuant to this Note, respectively, shall be a good dischargeto the Company of its obligations hereunder, and the Company shall not be boundto enquire into the title of the Holder, save as ordered by a court ofcompetent jurisdiction or as required by statute.  The Company shall not be bound to see to the execution of anytrust affecting the ownership of this Note nor be affected by notice of anyequity that may be subsisting in respect hereof or thereof.  The Holder of this Note shall be entitled topayment of all amounts due hereunder free from all

 

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## equities orrights of set-off or counterclaim between the Company and the original or anyintermediate Holder hereof and all persons may act accordingly and a transfereeof this Note shall, after the Assignment Form is delivered to the Company andupon compliance with all other conditions required by this Note or by law, becomethe Holder of this Note free from all equities or rights of set-off orcounterclaim between the Company and the transferor or any previous Holderhereof, save in respect of equities of which the Company is required to takenotice by statute or by order of a court of competent jurisdiction.

##  

## **Section 2.04****                            Mutilation, Loss, Theft or Destruction**:  In case this Note shallbecome mutilated or be lost, stolen or destroyed, the Company shall execute anddeliver a new Note having the same Date of Issue upon surrender andcancellation of the mutilated Note, or in case this Note is lost, stolen ordestroyed, in lieu of and in substitution for the same.  In case of loss, theft or destruction theperson applying for a substituted Note shall furnish to the Company such evidenceof such loss, theft or destruction as shall be satisfactory to the Company,shall furnish indemnity satisfactory to the Company and shall pay allreasonable expenses incidental to the issuance of any substituted Note.

##  

## **Section 2.05****                            Transfer**:  The Company shall maintain a register on which are recorded thenames and addresses of each Holder hereof. Subject to compliance with the terms of this Note and with applicablelaws and regulations, a transfer shall be recorded by the Company in theregister of Holders hereof maintained by the Company, upon surrender of thisNote with the Assignment Form duly completed by the Holder or by its dulyauthorized attorney or representative, or accompanied by proper evidence ofsuccession, assignment or other authority to transfer on behalf of theHolder.  Upon each transfer the Companyshall cancel this Note and execute and deliver such replacement Note as isrequired, in the form hereof.

##  

## **Section 2.06****                            Restrictions on Transfers**:  The Company shall not register any transfersof the Note or issue or transfer any Units issuable on conversion of the Note:

##  

### (a)                                  to aUnited States person, any person in the United States or any person for theaccount or benefit of a United States person or a person in the United Statesexcept pursuant to Rule 144 under the *United States Securities Act of 1993*, asamended (the “**U.S. Securities Act**”), if available;

###  

### (b)                                 inconnection with any transfers or conversions which are otherwise not incompliance with (i) the U.S. Securities Act and the regulations thereunder ifapplicable, (ii) the *Securities Act* (Ontario) (the “**OntarioSecurities Act**”) and the rules and regulations thereunder, (iii)applicable securities laws and regulations of other relevant jurisdictions, or(iv) the policies of the TSX; and

###  

### (c)                                  withinfour months and a day from the Date of Issue, unless the Company and its legalcounsel are satisfied, acting reasonably, that it is permitted under Ontariosecurities laws and under the policies of the TSX.

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## **Section 2.07****                            Representations of the Holder**:  The Holder, by its acceptance of this Note,represents, acknowledges and agrees that:

 

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### (a)                                  thisNote and the Units issuable on conversion of this Note have not been, and willnot be, qualified for sale under the U.S. Securities Act, or the securitieslaws and regulations of any province or territory of Canada or any otherjurisdiction;

###  

### (b)                                 theUnits issuable on conversion of this Note may not be distributed, sold ortransferred:

###  

#### (i)                                     toa United States person, any person in the United States or any person for theaccount or benefit of a United States person or a person in the United Statesexcept pursuant to Rule 144 under the U.S. Securities Act, if available;

####  

#### (ii)                                  exceptin compliance with the U.S. Securities Act and the regulations thereunder ifapplicable, or the Ontario Securities Act and the rules and regulationsthereunder and the applicable securities laws and regulations of other relevantjurisdictions and the policies of the TSX;

####  

### (c)                                  compliancewith the applicable securities laws and regulations of any jurisdiction is theresponsibility of the Holder or its transferee; and

###  

### (d)                                 theHolder will not trade the Note or the Units issuable on conversion of the Notewithin four months and a day from the Date of Issue, unless permitted underOntario securities laws and under the policies of the TSX.

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## **Section 2.08****                            General Security Agreement**:  Payment and performance of the PrincipalAmount, together with interest thereon and any other indebtedness, liabilities,covenants and obligations of the Company to the Holder arising in respect ofthis Note shall be secured by a general security agreement substantially in theform attached hereto as Schedule ”D”.

##  

## **Section 2.09****                            No Prepayment**:  The Company shall not have the right toprepay, whether in whole or in part, the Principal Amount prior to the MaturityDate.

##  

# **ARTICLE THREECONVERSION AND REDEMPTION OF NOTE**

# ** **

## **Section 3.01****                            Conversion and Conversion Price**:

##  

### (a)                                  Conversionby Holder: Subject to TSX approval, the Holder of this Note shall have the right,at the Holder’s option, at any time prior to the close of business on theMaturity Date (such time and date in this Article being referred to as the“**Time ofExpiry**”), both before and after default, to convert the whole or anypart of the Principal Amount into a maximum of 1,612,903 Units at theConversion Price.

###  

### (b)                                 AutomaticConversion: If, after the date that is four (4) months plus a day from the ClosingDate, the trading price of the Company’s common shares on the TSX closes above$0.70 for at least five consecutive trading days, the outstanding principal

 

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### amountof this Note will automatically convert into Units at the Conversion Price at thenext following trading day (the “**Automatic Conversion Date**”).

###  

### (c)                                  Theaccrued and unpaid interest on the Principal Amount which is converted to Unitspursuant to this Section 3.01 will be paid in cash within 10 business daysof the Conversion Date or the Automatic Conversion Date, as the case may be.

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## **Section 3.02****                            Manner of Exercise of Right to Convert:**

##  

### (a)                                  Mannerof Conversion:

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#### (i)                                     Conversion by Holder:  The Holder electing to convert this Note inwhole or in part into Units shall deliver written notice (“**Notice of Conversion**”) to theCompany at its address for purposes of notice under Section 7.01 togetherwith a completed Conversion Form attached hereto as Schedule ”C”exercising the right to convert this Note in accordance with the provisionshereof.  Thereupon the Holder shall beentitled to be entered in the books of the Company as at the Date of Conversion(or such later date as is specified in Section 3.02(b)) as the holder ofthe number of Units into which this Note is convertible in accordance with theprovisions of this Article and, as soon as practicable thereafter upon thereceipt of the Note by the Company, the Company shall deliver to the Holdercertificates for such Units.  In theevent of the conversion of this Note in part, the Company shall without chargeforthwith execute and deliver to the Holder a new note certificate in aprincipal amount equal to the unconverted part of this Note so surrendered inthe same form as this Note, except as to Principal Amount.  For the purposes of this Article, theConversion Date or Date of Conversion shall be the date that the Notice ofConversion is delivered to the Company in accordance with Section 7.01hereof (or such later date as is specified in Section 3.02(b)).

####  

#### (ii)                                  AutomaticConversion: The Company shall notify the Holder within five (5) business days of theAutomatic Conversion Date that the automatic conversion has occurred on theAutomatic Conversion Date and shall specify the manner for the Holder todeliver the Note to the Company.  The Holdershall be entitled to be entered in the books of the Company as at the AutomaticConversion Date (or such later date as is specified in Section 3.02(b)) asthe holder of the number of Units into which this Note is convertible inaccordance with the provisions of this Article and, as soon as practicablethereafter upon the receipt of the Note by the Company, the Company shalldeliver to the Holder certificates for such Units.

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### (b)                                 If:

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#### (i)                                     theNotice of Conversion is delivered, or

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#### (ii)                                  theAutomatic Conversion Date occurred,

 

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#### on aday on which the registers of Units are properly closed, the Holder shallbecome the holder of record of such Units as at the date on which suchregisters are next re-opened.  Forgreater certainty, if a Notice of Conversion is delivered by the Holder to theCompany, or if the Automatic Conversion Date occurred, on or prior to the Timeof Expiry and the registers of Units are properly closed from the Company’sreceipt of the Notice of Conversion or from the Automatic Conversion Date, asthe case may be, until after the Time of Expiry, the Holder shall become theholder of record of such Units as at the date on which such registered are notre-opened notwithstanding the passing of the Time of Expiry and the MaturityDate.

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### (c)                                  Anypart of this Note may be converted as provided in this Article and allreferences in this Note to conversion shall be deemed to include conversion ofsuch parts.

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### (d)                                 TheCommon Shares issued upon such conversion shall rank only in respect ofdividends declared in favour of shareholders of record on and after the Date ofConversion or such later date as the Holder shall become the holder of recordof such Common Shares pursuant to subsections (a) and (b) of thisSection 3.02, from which applicable date they will for all purposes be andbe deemed to be outstanding as fully paid and non-assessable.

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## **Section 3.03****                            Adjustment of Conversion Price**:

##  

### (a)                                  If and whenever at any time afterthe date hereof and prior to the Time of Expiry the Company shall (i)subdivide, re-divide or change its then outstanding Common Shares into agreater number of Common Shares, (ii) reduce, combine or consolidate its thenoutstanding Common Shares into a lesser number of Common Shares, or (iii) issueCommon Shares (or securities exchangeable for or convertible into CommonShares) to the holders of all or substantially all of its then outstandingCommon Shares by way of a stock dividend or other distribution (any of suchevents herein called a “**Common Share Reorganization**”), then theConversion Price shall be adjusted effective immediately after the effectivedate of any such event in (i) or (ii) above or the record date at which theholders of Common Shares are determined for the purpose of any such dividend ordistribution in (iii) above, as the case may be, by multiplying the ConversionPrice in effect on such effective date or record date, as the case may be, by afraction, the numerator of which shall be the number of Common Sharesoutstanding on such effective date or record date, as the case may be, beforegiving effect to such Common Share Reorganization and the denominator of whichshall be the number of Common Shares outstanding immediately after givingeffect to such Common Share Reorganization including, in the case wheresecurities exchangeable for or convertible into Common Shares are distributed,the number of Common Shares that would be outstanding if such securities wereexchanged for or converted into Common Shares.

 

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### (b)                                 If and whenever at any time afterthe date hereof and prior to the Time of Expiry, the Company shall distributeany class of shares or rights, options or warrants or other securities (otherthan those referred to in 3.03(a) above), evidences of indebtedness or property(excluding cash dividends paid in the ordinary course) to holders of all orsubstantially all of its then outstanding Common Shares, the Holder shallreceive, in addition to the number of the Common Shares in respect of which theright to purchase is then being exercised, the aggregate number of CommonShares or other securities or property that the Holder would have been entitledto receive as a result of such event, if, on the record date thereof, theHolder had been the registered holder of the number of Common Shares to whichthe Holder was theretofore entitled upon the exercise of the rights of theHolder hereunder.

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### (c)                                  If and whenever at any time afterthe date hereof and prior to the Time of Expiry there is a capitalreorganization of the Company or a reclassification or other change in theCommon Shares (other than a Common Share Reorganization) or a consolidation ormerger or amalgamation of the Company with or into any other corporation orother entity (other than a consolidation, merger or amalgamation which does notresult in any reclassification of the outstanding Common Shares or a change ofthe Common Shares into other securities), or a transfer of all or substantiallyall of the Company’s undertaking and assets to another corporation or otherentity in which the holders of Common Shares are entitled to receive shares,other securities or other property (any of such events being called a “**CapitalReorganization**”), theHolder of this Note shall be entitled to receive and shall accept, upon theexercise of the right of conversion at any time after the effective datethereof, in lieu of the number of Units to which the Holder was theretoforeentitled on conversion, the kind and amount of shares or other securities ormoney or other property that the Holder would have been entitled to receive asa result of such Capital Reorganization if, on the effective date thereof, theHolder had been the registered holder of the number of Units to which theHolder was theretofore entitled upon conversion, subject to adjustmentthereafter in accordance with provisions the same, as nearly as may bepossible, as those contained in this Section 3.03.

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### (d)                                 If and whenever at anytime after the date hereof and prior to the Time of Expiry, the Company shallfix a record date for the issuance of rights, options or warrants to all orsubstantially all of the holders of the outstanding Common Shares entitlingthem, for a period expiring not more than forty-five (45) days after the recorddate, to subscribe for or purchase Common Shares or securities convertible,exercisable or exchangeable into Common Shares (each, a “**Convertible Security**”) at aprice per share (or having a conversation, exercise or exchange price pershare) less than 95% of the Current Market Price (as defined below) on theearlier of the record date and the date on which the Company announces itsintention to make such issuance (any such issuance being herein called a “**RightsOffering**”), the Conversion Price shall be adjusted on the recorddate so that it shall equal the number which is the product of the ConversionPrice in effect immediately prior to the record date and the fraction:

 

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#### (i)                                     the numerator of whichshall be the total number of Common Shares outstanding immediately prior to therecord date plus a number of Common Shares equal to the number arrived at bymultiplying the total number of additional Common Shares offered for subscriptionor purchase or into or for which the total number of rights, options orwarrants so offered are convertible or exchangeable by the quotient obtained bydividing the purchase or subscription price for each Common Share or conversionprice for each Convertible Security offered for subscription or purchase bysuch Current Market Price for the Common Shares, and

####  

#### (ii)                                  the denominator of whichshall be the total number of Common Shares outstanding immediately prior tosuch record date plus the total number of additional Common Shares offered forsubscription or purchase or into or for which the total number of rights,options or warrants so offered are convertible or exchangeable.

####  

To the extent thatany rights, options or warrants are not so issued or any of the rights, optionsor warrants so issued are not exercised prior to the expiration thereof, theConversion Price will be readjusted to the Conversion Price in effectimmediately prior to the record date, and the Conversion Price will be furtheradjusted based upon the number of additional Common Shares actually deliveredupon the exercise of the rights, options or warrants, as the case may be.

 

For the purposesof this Section 3.03(d) or Section 2.02, “**Current Market Price**”, at anydate, means the weighted average price per Common Share at which the CommonShares have traded: (a) on the TSX; or (b) if the Common Shares are not quotedon the TSX, on any stock exchange or over-the-counter market upon which theCommon Shares are then listed or quoted for trading, during the ten (10)consecutive trading days (on each of which at least five hundred (500) CommonShares are traded in board lots) ending the third (3rd) trading day before suchdate, and the weighted average price shall be determined by dividing theaggregate sale price of all Common Shares sold in board lots on the exchange ormarket, as the case may be, during the ten (10) consecutive trading days by thenumber of Common Shares sold, provided that if the Common Shares are not listedor quoted for trading on any stock exchange or market, the price shall bedetermined by the board of directors of the Company in its sole discretion,acting reasonably.

 

### (e)                                  If and whenever at anytime after the date hereof and prior to the Time of Expiry, any of the eventsset out in Section 3.03(a) or (d) shall occur and the occurrence of suchevent results in an adjustment of the Conversion Price pursuant to theprovisions of Section 3.03(a) or (d), then the number of Common Sharespurchasable pursuant to this certificate shall be adjusted contemporaneouslywith the adjustment of the Conversion Price by multiplying the number of CommonShares then otherwise purchasable on the exercise thereof by a fraction, thenumerator of which shall be the Conversion Price in effect immediately prior to

 

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### the adjustment andthe denominator of which shall be the Conversion Price resulting from suchadjustment.

###  

### (f)                                    If the Company takes any actionaffecting its Common Shares to which the foregoing provisions of thisSection 3.03, in the opinion of the board of directors of the Company,acting in good faith, are not strictly applicable, or if strictly applicablewould not fairly adjust the rights of the Holder against dilution in accordancewith the intent and purposes hereof, or would otherwise materially affect therights of the Holder hereunder, then the Company shall execute and deliver tothe Holder an amendment hereto (subject to the approval of the TSX) providingfor an adjustment in the application of such provisions so as to adjust suchrights as aforesaid in such manner as the board of directors of the Company maydetermine to be equitable in the circumstances, acting in good faith. Thefailure of the taking of action by the board of directors of the Company to soprovide for any adjustment on or prior to the effective date of any action oroccurrence giving rise to such state of facts will be conclusive evidence thatthe board of directors has determined that it is equitable to make noadjustment in the circumstances.

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## **Section 3.04****                            Adjustment Rules**:  The following rules and procedures shall be applicable to theadjustments made pursuant to Section 3.03:

##  

### (a)                                  no adjustment in theConversion Price shall be required unless a change of at least 1% of theprevailing Conversion Price would result, provided, however, that anyadjustment which, except for the provisions of this Section 3.04(a), wouldotherwise have been required to be made, shall be carried forward and takeninto account in any subsequent adjustment;

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### (b)                                 the adjustments providedfor in Section 3.03 are cumulative and shall apply to successivesubdivisions, consolidations, dividends, distributions and other eventsresulting in any adjustment under the provisions of such clause;

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### (c)                                  in the absence of aresolution of the board of directors of the Company fixing a record date forany dividend or distribution referred to in Section 3.03 above, theCompany shall be deemed to have fixed as the record date therefor the date onwhich such dividend or distribution is effected;

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### (d)                                 if the Company sets arecord date to take any action and thereafter and before the taking of suchaction abandons its plan to take such action, then no adjustment to theConversion Price will be required by reason of the setting of such record date;

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### (e)                                  forthwith after anyadjustment to the Conversion Price or the number of Common Shares purchasablepursuant to this Note, the Company shall provide to the Holder a certificate ofan officer of the Company certifying as to the amount of such adjustment and,in reasonable detail, describing the event requiring and the manner ofcomputing or determining such adjustment;

 

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### (f)                                    any question that at anytime or from time to time arises with respect to the amount of any adjustmentto the Conversion Price or other adjustment pursuant to Section 3.03 shallbe conclusively determined by a firm of independent chartered accountants (whomay be the Company’s auditors) as determined by the Company in its solediscretion and shall be binding upon the Company and the Holder;

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### (g)                                 On the happening of eachand every such event set out in Section 3.03, the applicable provisionshereof, including the Conversion Price, shall, ipso facto, be deemed to beamended accordingly and the Company shall take all necessary action so as tocomply with such provisions as so amended.

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## **Section 3.05****                            No Requirement to Issue Fractional Shares**:  The Company shall not berequired to issue fractional Common Shares upon the conversion of this Notepursuant to this Article and no payment shall be made by the Company inlieu of issuing any fractional interest in a Common Share.

##  

## **Section 3.06****                            Company to Reserve Common Shares**:  The Company covenants that it will allot tothe Holder who may exercise the conversion rights hereunder, such number ofCommon Shares as shall then be issuable upon the conversion of this Note andupon exercise of the Warrants issued on such conversion.  The Company covenants that all Common Shareswhich shall be so issuable shall be duly and validly issued as fully paid andnon-assessable.

##  

# **ARTICLE FOURCOVENANTS OF THE COMPANY AND DEFAULT**

# ** **

## **Section 4.01****                            Covenants**:  The Company hereby covenants and agrees that so long as anyamounts remain unpaid pursuant to this Note it will strictly observe andperform the following covenants:

##  

### (a)                                  TheCompany shall reserve and allot out of its authorized capital a number ofCommon Shares at all times equal to the number of Common Shares necessary tosatisfy the rights of conversion (including automatic conversion) of thePrincipal Amount and interest of this Note and the rights of acquisitionpursuant to the Warrants.

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### (b)                                 TheCompany shall take all necessary action to adjust the Conversion Price asprovided under Section 3.03 hereof.

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## **Section 4.02****                            Acceleration on Event of Default**:  If an Event of Default shall occur and becontinuing, the unpaid balance of the Principal Amount, and all accruedinterest and all other amounts payable under, this Note may be declared by theHolder on written notice to the Company to be, and upon such notice shallbecome, immediately due and payable.

##  

## **Section 4.03****                            Events of Default**:  Any of the following conditions or eventswhich shall occur shall constitute events of default (“**Events of Default**”) underthis Note:

 

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### (a)                                  ifthe Company shall default in the payment of any of the Principal Amount whenthe same becomes due and payable, whether at the Maturity Date or otherwise;

###  

### (b)                                 ifthe Company shall default in the payment of any interest on this Note when thesame becomes due and payable, whether at the Maturity Date or otherwise;

###  

### (c)                                  ifthe Company shall default in the performance of or compliance with any term,condition or covenant contained in this Note (other than a default in thepayment of the Principal Amount and interest) and such default shall not havebeen remedied within a period of 10 business days after such default shallfirst have become known to any officer of the Company or written notice thereofshall have been received by the Company from the Holder;

###  

### (d)                                 ifthe Company or any active subsidiary shall (i) be generally not paying itsdebts as they become due or become insolvent, (ii) file, or consent by answeror otherwise to the filing against it of, a petition for relief orreorganization or arrangement or any other petition in bankruptcy, forliquidation or otherwise take advantage of any bankruptcy or insolvency law ofany jurisdiction, (iii) make an assignment, an arrangement or a compromise forthe benefit of its creditors, (iv) consent to the appointment of a custodian,receiver, trustee or other officer with similar powers of itself or of anysubstantial part of its property, (v) cease to carry on business, or (vi) takecorporate action for the purpose of any of the foregoing;

###  

### (e)                                  if acourt or governmental authority of competent jurisdiction shall enter a finalorder appointing, with or without the consent of the Company, a custodian,receiver, trustee or other officer with similar powers with respect to it orwith respect to any substantial part of its property, or if a final order forrelief shall be entered in any case or proceeding for liquidation orreorganization or otherwise to take advantage of any bankruptcy or insolvencylaw of any jurisdiction, or ordering the dissolution, winding-up or liquidationof the Company, or if any petition for any such relief shall be filed againstthe Company and such petition shall not be dismissed within 90 days; or

###  

### (f)                                    ifthe Company shall fail to pay the principal of or premium or interest on anysecured indebtedness or liability of the Company which ranks prior to theindebtedness of the Company hereunder when the same becomes due and payable(whether by scheduled maturity, required prepayment, acceleration, demand orotherwise) and such failure shall continue after the expiration of anyapplicable grace or remedial period.

###  

# **ARTICLE FIVESATISFACTION AND DISCHARGE**

# ** **

## **Section 5.01****                            Discharge**:  The Holder shall at the request of the Company release anddischarge this Note and execute and deliver such instruments as are requisitefor the purpose and to release the Company from its covenants herein contained,upon the Principal Amount of and interest

 

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## (includinginterest on amounts in default, if any) on this Note and all other moneyspayable hereunder having been paid or satisfied.

##  

# **ARTICLE SIXSUCCESSOR CORPORATIONS**

# ** **

## **Section 6.01****                            Certain Requirements**:  The Company shall not, directly orindirectly, sell, lease, transfer or otherwise dispose of all or substantiallyall of its property and assets as an entirety to any other entity, and shallnot consolidate, amalgamate, or merge with or into any other corporation (anysuch other entity or corporation being herein referred to as a “successorcorporation”) without the prior written consent of the Holder, not to beunreasonably withheld or delayed, and unless the successor corporation shallexecute, prior to or contemporaneously with the consummation of any suchtransaction, an instrument to evidence the assumption by the successorcorporation of the due and punctual payment of all the Principal Amount of thisNote and the interest thereon and all other moneys payable hereunder and thecovenant of the successor corporation to pay the same and its agreement toobserve and perform all the covenants and obligations of the Company under thisNote.

##  

## **Section 6.02****                            Vesting of Powers in Successor**:  Whenever the conditions of Section 6.01have been fully observed and performed the successor corporation shall possessand from time to time may exercise each and every right and power of theCompany under this Note in the name of the Company or otherwise and any act orproceeding by any provision of this Note required to be done or performed bythe Company or its officers may be done and performed with like force andeffect by the successor corporation or its officers.

##  

# **ARTICLE SEVENGENERAL**

# ** **

## **Section 7.01****                            Notice to Company**:  Any notice to the Company under theprovisions of this Note shall be valid and effective if delivered by prepaidcourier or telecopied to the Company at its offices in 6275 Airport Road, Suite201, Mississauga, Ontario L4V 1V2 Attention: Director of Finance, telecopierno.: 905-672-5705, with a copy to Gowling Lafleur Henderson LLP, Suite 5800,Scotia Plaza, 40 King Street West, Toronto, Ontario, M5H 3Z7 Attention: JasonA. Saltzman, telecopier no.: (416) 369-7250, and shall be deemed to have beeneffectively given on the date of delivery or transmission. The Company may fromtime to time notify the Holder in writing of a change of address whichthereafter, until changed by like notice, shall be the address of the Companyfor all purposes of this Note.

##  

## **Section 7.02****                            Notice to Holder**: Any notice to theHolder under the provisions of this Note shall be valid and effective ifdelivered by prepaid courier or telecopied to the Holder at the address set outin the registration table set out on Schedule ”A” hereto, and shall bedeemed to have been effectively given on the date of delivery or transmission.The Holder may from time to time notify the Company in writing of a change ofaddress which thereafter, until changed by like notice, shall be the address ofthe Holder for all purposes of this Note.

 

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## **Section 7.03****                            Severability**:  In the event that any provision or any partof any provision hereof is deemed to be invalid by reason of the operation ofany law or by reason of the interpretation placed thereon by a court, this Noteshall be construed as not containing such provision or such part and suchprovision or such part shall not affect the validity of any other provision orthe remainder of such provision hereof, and all other provisions hereof whichare otherwise lawful and valid shall remain in full force and effect.

##  

## **Section 7.04****                            Binding Effect**: This Note and all ofits provisions shall enure to the benefit of the Holder, its successors andassigns and shall be binding upon the Company, its successors and assigns, asthe case may be.

##  

**IN WITNESS WHEREOF**the Company has executed these presents under the hand of its properofficer in that behalf as of the date first above written.

 

 
|   | **ADB SYSTEMS  INTERNATIONAL  LTD.** |
|--------|--------------------------------------|
|   |                                 |
|   |                                 |
|   | Per:                                 |   |   |
|   |                                 | Michael  Robb |
|   |                                 | Chief  Financial Officer |

 

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**SCHEDULE ”A”****REGISTERED HOLDER PARTICULARS**

 
| **Date:**     |   | **Registration  Particulars:**   |   | **Certified  by:  (Officer of the Company)** |
|---------------|--------|----------------------------------|--------|----------------------------------------------|
|          |   |                             |   |                                         |
| May  19, 2004 |   | Stonestreet  Limited Partnership |   |                                         |
|          |   |                             |   |                                         |
|          |   | 320  Bay Street, Suite 1300      |   |                                         |
|          |   | Toronto,  Ontario                |   | Michael  Robb                                |
|          |   | M5H  4A6                         |   | Chief  Financial Officer                     |

 

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**SCHEDULE ”B”**ASSIGNMENT FORM

 

TO:                            **ADBSYSTEMS INTERNATIONAL LTD.**

 

**FOR VALUE RECEIVED**, the undersignedhereby sells, assigns and transfers to the following person all rights of theundersigned pursuant to a Note issued by ADB Systems International Ltd.represented by Certificate Number:                          .

 
| Name  of Assignee: |   |   |
|--------------------|--------|--------|
|               |   |   |
| Address:           |   |   |
|               |   |   |
|               |   |   |

 

 

and theundersigned hereby irrevocably constitutes and appoints such assignee to be thelawful attorney of the undersigned to transfer such rights to the Note on thebooks of ADB Systems International Ltd., with full power of substitution.

 
| Date:  |                    |   |   |
|--------|-------------------------|--------|--------|
|   |                    |
|   |                    |
|   |                    |
|   | Name:                   |
|   | Title  (if applicable): |
|   | Address:                |

 

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**SCHEDULE ”C”****CONVERSION FORM**

 

 

TO:                                                    **ADBSYSTEMS INTERNATIONAL LTD.**

 

The undersigned hereby irrevocably elects to convertthe Note represented by Certificate Number:                       (orCDN$                            principal amount thereof into Units of ADB Systems International Ltd. inaccordance with the terms of the said Note.

 

DATED at                              this             day of                     ,            .

 

 
|   | Per: |   |   |
|--------|------|--------|--------|

 

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**SCHEDULE ”D”**

**GENERAL SECURITY AGREEMENT**

 

 

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