**Exhibit 4.16**

 

**AGENCY AGREEMENT**

** **
| June 15, 2004                      |                         |   |
|------------------------------------|------------------------------|--------|
|                               |                         |   |
| ADB Systems International Ltd.     |                         |   |
| 6725 Airport Road, Suite 201       |                         |   |
| Mississauga, Ontario  L4V 1V2 |                         |   |
|                               |
| **Attention:**                     | **Jeffrey  Lymburner**       |
|                               | **Chief  Executive Officer** |
|                                    |                              |        |  |

 

Dear Sirs/Mesdames:

 

First Associates Investments Inc. (the “**Agent**”)understands that ADB Systems International Ltd. (the “**Company**”) desires to issue andsell, in one or more closings, up to $5,000,000 principal amount of convertiblenotes (the “**ConvertibleNotes**”) of the Company (the “**Offering**”), having the termsdescribed in Schedule “A” to this agreement.

 

The Company hereby appoints the Agent, andthe Agent hereby agrees to act, as the Company’s exclusive agent in respect ofthe Offering to use its best efforts to offer for sale and obtain subscriptionsfor the Convertible Notes in the Qualifying Provinces in accordance withapplicable Securities Laws; provided that the Agent will be under no obligationto purchase any of the Convertible Notes.

 

In consideration of the Agent’s services tobe rendered in connection with the Offering, including (i) assisting inpreparing documentation relating to the sale of the Convertible Notes; (ii)distributing the Convertible Notes, both directly and indirectly; (iii)performing administrative work in connection with the Offering; and (iv) allother services arising out of this agreement, the Company agrees to pay theAgency Fee (as hereinafter defined), and to issue the Compensation Options (ashereinafter defined) to the Agent at the Time of Closing.

 

The Company agrees that the Agent will bepermitted to appoint other registered dealers (or other dealers duly qualifiedin their respective jurisdictions) as their agents to assist in the Offeringand that the Agent may determine the remuneration payable to such other dealersappointed by them, such remuneration to be payable by the Agent.

 

This offer is conditional upon and subject tothe additional terms and conditions set forth below.

 

**1.****                                      Interpretation**

 

1.1                                 Unless expressly provided otherwise, where used in this agreement orany schedule hereto, the following terms shall have the followingmeanings, respectively:

 

“**Agency Fee**” means the commissionpayable to the Agent;

 

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(a)                                  in respect of Protected List Purchases, 4% of the proceeds of theProtected List Purchases; and

 

(b)                                 in respect of all other purchases, excluding Protected ListPurchases, 8% of the remaining aggregate proceeds of the Offering;

 

“**Agent**” shall have the meaningascribed thereto in the first paragraph of this agreement;

 

“**Applicable Securities Laws**”means, collectively, the applicable securities laws of each of the QualifyingProvinces and the securities legislation of each other relevant jurisdictionand the respective regulations and rules made and forms prescribed thereundertogether with all applicable published policy statements and blanket orders andrulings of the Securities Commissions and each other relevant securitiesregulatory authority;

 

“**Business Day**” means a day otherthan a Saturday, Sunday or statutory or banking holiday in the Province ofOntario;

 

“**CCRA**” means the Canada Customsand Revenue Agency;

 

“**Closing Date**” means the date onwhich the Offering is to be completed, as specified in Schedule “A” tothis agreement;

 

“**Common Shares**” means the commonshares in the capital of the Company;

 

“**Company**” shall have the meaningascribed thereto in the first paragraph of this agreement;

 

“**Company’s Information Record**”means any statement contained in any press release, material change report,financial statements, annual information form, annual or interim report, proxycircular or other document of the Company which has been or is publiclydisseminated by or with the consent of the Company, whether pursuant to anyApplicable Securities Laws or otherwise;

 

“**Compensation Options**” means thecompensation options (each a “**Compensation Option**”) of the Company topurchase Compensation Units issued to the Agent as follows:

 

(a)                                  such number of Compensation Units as is equal to 5.0% of the numberof Units issuable upon full conversion of the Convertible Notes sold asProtected List Purchases; and

 

(b)                                 such number of Compensation Units as is equal to 10.0% of the numberof Units issuable upon full conversion of the Convertible Notes sold to allother purchasers excluding the Convertible Notes sold as Protected ListPurchases;

 

and each Compensation Option will beexercisable into one Compensation Unit at an exercise price of $0.31 perCompensation Unit at any time prior to 5:00 p.m. (Toronto time) on the secondanniversary of the Closing Date.

 

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“**Compensation Option Certificate**”means the option certificate to be executed by the Company evidencing theCompensation Options in form and substance satisfactory to the Company and theAgent;

 

“**Compensation Unit Shares**” meansthe Common Shares included in the Compensation Units;

 

“**Compensation Units**” means theunits of securities of the Company issuable upon exercise of the CompensationOptions, each such unit to be comprised of one Common Share and one-half of oneWarrant;

 

“**Compensation Unit Warrants**”means the Warrants included in the Compensation Units;

 

“**Compensation Warrant Shares**”means the Common Shares to be issued to the Agent upon exercise of theCompensation Unit Warrants;

 

“**Convertible Notes**” shall havethe meaning ascribed thereto in the first paragraph of this Agreement;

 

“**Convertible Note Certificates**”means the certificates to be executed by the Company evidencing the ConvertibleNotes in form and substance satisfactory to the Company and the Agent;

 

“**due inquiry**”, when used inrelation to the Company, means after inquiries have been made of theappropriate officers, employees and directors of the Company who may reasonablybe expected to have knowledge of facts which are material with respect to thefact in question;

 

“**Encumbrance**” means anyencumbrance, lien, charge, hypothec, pledge, mortgage, title retentionagreement or other security interest;

 

“**Exchange**” means the TorontoStock Exchange;

 

“**Exchange Approval**” means theconditional approval of the Exchange to the Offering, as set forth in a letterdated June 3, 2004;

 

“**including**” means includingwithout limitation and shall not be construed to limit any general statementwhich it follows to the specific or similar items or matters immediatelyfollowing it;

 

“**Indemnified Party**” shall havethe meaning ascribed thereto in Section 9.1;

 

“**material change**” means amaterial change for the purposes of the Applicable Securities Laws or any ofthem or where undefined under the Applicable Securities Laws of a jurisdictionmeans a change in the business, operations or capital of the Company or itssubsidiaries, that would reasonably be expected to have a significant effect onthe market price or value of any of the Company’s securities and includes a decisionto implement such a change made by the Company’s board of directors or bysenior management of the Company who believe that confirmation of the decisionby the board of directors is probable;

 

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“**material fact**” means a materialfact for the purposes of the Applicable Securities Laws or any of them or whereundefined under the Applicable Securities Laws of a jurisdiction means a factthat significantly affects, or would reasonably be expected to have asignificant effect on, the market price or value of the Company’s securities;

 

“**misrepresentation**” means amisrepresentation as defined under the Applicable Securities Laws or any ofthem or, where undefined under the Applicable Securities Laws of a jurisdiction,means (i) an untrue statement of a material fact, or (ii) an omission to statea material fact that is required to be stated or that is necessary to make astatement not misleading in light of the circumstances in which it was made;

 

“**MI 45-102**” means MultilateralInstrument 45-102 – Resale of Securities;

 

“**Offering**” shall have the meaningascribed thereto in the first paragraph of this agreement;

 

“**Outstanding Convertible Securities**”means all options (whether put or call options), including options granted orproposed to be granted to officers, directors, employees or consultants, sharepurchase or acquisition rights or warrants and other convertible securitiesoutstanding as at the date of this agreement, whether issued pursuant to anestablished plan or otherwise;

 

“**person**” includes any individual,corporation, limited partnership, general partnership, joint stock company orassociation, joint venture association, company, trust, bank, trust company,land trust, investment trust society or other entity, organization, syndicate,whether incorporated or not, trustee, executor or other legal personalrepresentative, and governments and agencies and political subdivisionsthereof;

 

“**Protected List Purchases**” meanspurchases of up to an aggregate of **$1,000,000** of Convertible Notes byinvestors who are (i) residents of Norway; or (ii) insiders of the Company;

 

“**Purchasers**” means, collectively,each of the purchasers of the Convertible Notes under the Offering, including,if applicable, the Agent;

 

“**Qualifying Provinces**” means theprovinces of British Columbia, Alberta, Ontario and such other provinces as theAgent and the company may agree upon;

 

“**Securities Commissions**” means,collectively, the securities commissions or similar regulatory authorities in eachof the Qualifying Provinces and “**Securities Commission**” means a securities commission orother securities regulatory authority in any one Qualifying Province as thecontext may require;

 

“**Selling Group**” means,collectively, those registered dealers appointed by the Agent to assist in theOffering as contemplated in the fourth paragraph of this agreement;

 

“**Subscription Agreements**” means,collectively, the subscription agreements entered into between the Purchasersand the Company in respect of the Offering;

 

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“**Subsidiaries**” means thesubsidiaries (as such term is defined under the **Securities Act** (Ontario)) of the Company all as described inSchedule “B” of this agreement;

 

“**Survival Limitation Date**” meansthe second anniversary of the Closing Date;

 

**“Tax Act”******means the **Income Tax Act**(Canada), as amended from time to time and all rules and regulations madepursuant thereto and any proposed amendments thereto;

 

“**Time of Closing**” means the timeon the Closing Date at which the Offering is to be completed, as specified inSchedule “A” to this agreement;

 

**“Underlying Compensation Securities”** means the Compensation Unit Shares and Compensation Warrantscomprising the Convertible Notes issuable upon exercise of the CompensationOptions and the Compensation Warrant Shares;

 

“**Units**” means the units ofsecurities of the Company issuable upon conversion of the Convertible Notes,each such unit (subject to adjustment in accordance with the terms of theConvertible Note Certificates) to be comprised of on Common Share and one-halfof one Warrant;

 

**“Unit Shares”** means the Common Shares included in the Units;

 

**“Warrants”** means the Common Share purchase warrants to be included in theUnits and Compensation Units, having the attributes described inSchedule “A” of this agreement;

 

**“Warrant Certificates”** means the warrant certificates issuable by the Company pursuant tothe terms of the Convertibles Notes or the Compensation Option Certificate, asthe case may be, evidencing the Warrants in form and substance satisfactory tothe Company and the Agent; and

 

**“Warrant Shares”** means the Common Shares issuable upon the exercise of the Warrantsincluded in the Units.

 

1.2                                 The division of this agreement into sections, subsections, paragraphsand other subdivisions and the insertion of headings are for convenience ofreference only and shall not affect the construction or interpretation of thisagreement. Unless something in the subject matter or context is inconsistenttherewith, references herein to sections, subsections, paragraphs and othersubdivisions are to sections, subsections, paragraphs and other subdivisions ofthis agreement. In this agreement, words importing the singular number onlyshall include the plural and vice versa and words importing gender shallinclude all genders.

 

1.3                                 Any action or payment required or permitted to be taken or madehereunder on a day which is not a Business Day shall or may be, as the case maybe, taken or made on the next succeeding Business Day with the same force andeffect as if taken or made within the period for the taking or making of suchaction.

 

1.4                                 This agreement shall be governed by and construed in accordance withthe laws of the Province of Ontario and the federal laws of Canada applicabletherein and time shall be of the essence hereof.

 

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1.5                                 All amounts expressed herein in terms of money refer to lawfulcurrency of Canada and all payments to be made hereunder shall be made in suchcurrency.

 

1.6                                 The following are the schedules attached to this agreement, whichschedules are deemed to be a part hereof and are hereby incorporated byreference herein:

 
| Schedule A |   | – |   | Details of the Offering                                |
|-----------------|--------|--------|--------|--------------------------------------------------------|
| Schedule B |   | – |   | Details as to the Subsidiaries of the  Company         |
| Schedule C |   | – |   | Details as to Outstanding Convertible  Securities      |
| Schedule D |   | – |   | Detail as to the intellectual property of  the Company |
| Schedule E |   | – |   | Terms for Purchasers and U.S. Persons                  |
| Schedule F |   | – |   | Permitted Encumbrances                                 |

 

**2.****                                      Nature Of Transaction**

 

2.1                                 Each Purchaser who is resident in one of the Qualifying Provincesshall purchase under one or more “private placement” exemptions so that thepurchases will be exempt from the prospectus requirements of the ApplicableSecurities Laws. Each other Purchaser shall purchase in accordance with suchprocedures as the Company and the Agent may mutually agree, acting reasonably,in order to fully comply with the Applicable Securities Laws. The Companyhereby agrees to use its commercially reasonable efforts to secure compliancewith all Applicable Securities Laws on a timely basis in connection with thedistribution of the Convertible Notes to the Purchasers, including by filingwithin the periods stipulated under Applicable Securities Laws and at theCompany’s expense all private placement forms required to be filed by theCompany in connection with the Offering and paying all filing fees required tobe paid in connection therewith so that the distribution of the ConvertibleNotes may lawfully occur in the Qualifying Provinces without the necessity offiling a prospectus (including so as to ensure that the requirements for a fourmonth, from the Closing Date, “hold period” under MI 45-102 in respect of theConvertible Notes, Units and Warrant Shares are complied with by theCompany).  The Agent agrees to assistthe Company in all reasonable respects to secure compliance with all regulatoryrequirements in connection with the Offering. The Agent will notify the Companywith respect to the identity of each Purchaser as soon as practicable and witha view to leaving sufficient time to allow the Company to secure compliancewith all relevant regulatory requirements under Applicable Securities Lawsrelating to the sale of the Convertible Notes.

 

2.2                                 Any offering and sale of such Convertible Notes of a person residentin the United States should be in accordance with Schedule “E” to thisagreement.

 

**3.****                                      Representations, Warranties and Covenants of the Agent**

 

**3.1****                                **The Agent hereby represents, warrants and covenants with the Companythat it (and will use its commercially reasonable best efforts to cause themembers of the Selling Group to): (i) will conduct and has conducted activitiesin connection with arranging for the sale of the Convertible Notes in compliancewith all Applicable Securities Laws; (ii) will not solicit and has notsolicited

 

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offers to purchase or sell the ConvertibleNotes so as to require registration of, or filing of a prospectus, offeringmemorandum or similar disclosure document with respect to the Convertible Notesunder the laws of any jurisdiction, including the United States and will not,without the consent of the Company or as otherwise contemplated in thisagreement, solicit offers to purchase or sell the Convertible Notes in anyjurisdiction outside of the Qualifying Provinces where the solicitation or saleof the Convertible Notes would result in any ongoing disclosure requirements insuch jurisdiction or in any registration requirements in such jurisdictionexcept for the filing of a notice or report of the solicitation or sale, orwhere the Company may be subject to liability in connection with the sale ofthe Convertible Notes which is materially more onerous than its liability underthe Applicable Securities Laws in the Qualifying Provinces and any otherapplicable securities legislation to which it is subject as at the date of thisagreement; (iii) will obtain from each Purchaser an executed SubscriptionAgreement in a form reasonably acceptable to the Company and to the Agentrelating to the transactions herein contemplated, together with alldocumentation (including questionnaires, undertakings and documents required bythe Exchange) as may be necessary in connection with subscriptions forConvertible Notes, as applicable, to ensure compliance with ApplicableSecurities Laws and Exchange Approval; (iv) will not provide, and has notprovided to prospective purchasers an offering memorandum within the meaning ofApplicable Securities Laws and will not advertise and has not advertised theOffering in (A) printed media of general and regular paid circulation, (B)radio, (C) television, or (D) telecommunication (including electronic display)and will not make or has not made use of any green sheet or other internalmarketing document without the consent of the Company, such consent to bepromptly considered and not to be unreasonably withheld; (v) holds all licensesand permits that are required for carrying on its activities as contemplated inthis agreement; (vi)  it has good andsufficient right and authority to enter into this agreement and complete itstransactions contemplated under this agreement on the terms and conditions setforth herein; (vii) it, and any member of the Selling Group is appropriatelyregistered under applicable securities legislation so as to permit it tolawfully fulfil its obligations hereunder; (viii) it is a member in goodstanding with the Exchange; and (ix) it will not, in connection with the Offering,make any representation or warranty with respect to the Company or theConvertible Notes except as set forth in the Subscription Agreement to beentered into between the Purchasers and the Company or except as shall beexpressly authorized in writing by the Company;

 

**4.****                                      Representations, Warranties and Covenants of the Company**

 

4.1                                 **The Company herebyrepresents, warrants and covenants to and with the Agent, for its own benefitand in trust for the benefit of the Purchasers, that:**

 

**4.1.1****                     General Matters**

 

(a)                                  as at the date hereof: (i) the authorized capital of the Companyconsists of an unlimited number of Common Shares; and (ii) the issued andoutstanding capital of the Company consists solely of 61,849,192 Common Shares,all of which have been issued as fully paid and non-assessable;

 

(b)                                 the Company (i) has been duly organized and is validly existing andin good standing under laws of the Province of Ontario; (ii) has all requisitecorporate power,

 

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authority andcapacity to carry on its business as now conducted and to own, lease andoperate its properties and assets; and (iii) will have all required corporatepower and authority to create, issue, allot and sell, as the case may be, theConvertible Notes, the Unit Shares and Warrants, the Warrant Shares, theCompensation Options and the Underlying Compensation Securities at the time oftheir issuance, to enter into this agreement and the Subscription Agreementsand to execute the Convertible Note Certificates, the Warrant Certificates andCompensation Option Certificate and to carry out the provisions of thisagreement, the Subscription Agreements, the Convertible Note Certificates, theWarrant Certificates and the Compensation Option Certificate;

 

(c)                                  the ownership interest of the Company’s Subsidiaries is as set outin Schedule “B” hereto, with such ownership interest being free and clearof Encumbrances, except as otherwise noted in such Schedule and other thanthe Encumbrances represented by the registrations and the Encumbrances definedas Permitted Security Interests set out in Schedule “F”;

 

(d)                                 except for the Subsidiaries, the Company does not own and does nothave any agreements of any nature to acquire, directly or indirectly, anysecurities, or other equity or proprietary interest in, any person and theCompany does not have any agreements to acquire or lease any other businessoperations;

 

(e)                                  each of the Subsidiaries (i) has been duly incorporated and isvalidly existing and in good standing under the laws of its jurisdiction ofsubsistence and (ii) has all requisite power and authority to carry on itsbusiness as now conducted and to own, lease and operate its properties andassets;

 

(f)                                    the Company has not engaged in any “off balance sheet” or similarfinancing;

 

(g)                                 the Company and each of the Subsidiaries is, in all materialrespects, conducting its business in compliance with all applicable laws, rulesand regulations of each jurisdiction in which its business is carried on and isduly licensed, registered or qualified in all jurisdictions in which it owns,leases or operates its property or carries on business to enable its businessto be carried on as now conducted and its property and assets to be owned,leased and operated and all such licences, registrations and qualifications areand will at the Time of Closing be valid, subsisting and in good standing,except in respect of matters which do not and will not result in any materialadverse change to the business, business prospects or condition (actual orproposed, whether financial or otherwise) of the Company, taken as a whole, andexcept for the failure to be so qualified or the absence of any such licence,registration or qualification which does not and will not have a materialadverse effect on the assets or properties, business, results of operations,prospects or condition (financial or otherwise) of the Company, taken as awhole;

 

(h)                                 attached as Schedule “C” to this agreement is a complete listof all Outstanding Convertible Securities of the Company and the Subsidiariesand, except as contemplated herein or under the terms of the securities listedin Schedule “C”, no person now has any agreement or option or right orprivilege (whether by law, pre-emptive or contractual)

 

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issued orcapable of becoming an agreement for (i) the purchase, subscription or issuanceof any unissued shares, securities or warrants of the Company or anySubsidiary; or (ii) the repurchase by or on behalf of the Company or anySubsidiary, of any issued and outstanding securities of the Company or anySubsidiary;

 

(i)                                     other than as disclosed in the Company’s management informationcircular dated May 11, 2004, and to the best of the Company’s knowledge,information and belief, after due inquiry, other than the constating documentsof the Company (to the extent that they would constitute an agreement), noagreement exists among the shareholders of the Company in respect of theCompany and no agreement will exist at the Time of Closing;

 

(j)                                     neither the Company nor any of the Subsidiaries has committed an actof bankruptcy or sought protection from its creditors from any court orpursuant to any legislation, proposed a compromise or arrangement to itscreditors generally, taken any proceeding with respect to a compromise orarrangement, taken any proceeding to have itself declared bankrupt or wound up,as the case may be, taken any proceeding to have a receiver appointed of anypart of its assets, had any person holding an Encumbrance (an “**Encumbrancer**”)or receiver take possession of any of its property, had an execution ordistress become enforceable or levied upon any portion of its property or hadany petition for a receiving order in bankruptcy filed against it, and at theTime of Closing, neither the Company nor any of the Subsidiaries, will not bean insolvent person (as that term is defined in the **Bankruptcy and Insolvency Act** (Canada));

 

(k)                                  other than the Encumbrances represented by the registrations and theEncumbrances defined as Permitted Security Interests set out inSchedule “F” hereto, the Company and each of the Subsidiaries is the ownerof all of its property and assets used by it in connection with its business,unless leased or licensed, in each case with good and marketable title thereto,free and clear of any Encumbrances and of any rights or privileges capable ofbecoming Encumbrances;

 

(l)                                     except as otherwise disclosed in the Company’s Information Record,neither the Company nor any of the Subsidiaries, is subject to any materiallyadverse liabilities or obligations, direct or indirect, accrued, absolute,contingent or otherwise;

 

(m)                               other than pursuant to written agreements, copies of which have beenprovided to the Agent or its counsel, neither the Company nor any of theSubsidiaries, has guaranteed or otherwise given security for or agreed toguarantee or give security for any liability, debt or obligation of any person;

 

(n)                                 since December 31, 2003,****except as disclosed in theCompany’s Information Record and except as contemplated in this agreement, theCompany and each of the Subsidiaries has carried on business in the ordinarycourse and there has not been:

 

(i)                                     any material change in the assets, liabilities or obligations(absolute, accrued, contingent or otherwise), business, business prospects,condition (financial or otherwise) or results of operations of the Company,taken as a whole, other than: (A)

 

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the growth andexpansion of the business of the Company and (B) those changes occurring in theordinary course of business, none of which is (either singly or taken together)materially adverse;

 

(ii)                                  any material change in the capital stock or long-term debt of theCompany, taken as a whole;

 

(iii)                               any material adverse change in the business, business prospects,condition (financial or otherwise) or results of the operations of the Company,taken as a whole;

 

(iv)                              any declaration, setting aside or payment of any dividend or otherdistribution with respect to any shares in the capital of the Company or anydirect or indirect redemption, purchase or other acquisition of any shares; or

 

(v)                                 any change in accounting or tax practices followed by the Company;

 

(o)                                 there is no action, proceeding or investigation (whether or notpurportedly by or on behalf of the Company or any of the Subsidiaries) pendingor, to the best of the Company’s knowledge, information and belief, after dueinquiry, threatened against or affecting the Company or any of the Subsidiaries(including any predecessor companies) at law or in equity (whether in anycourt, arbitration or similar tribunal) or before or by any federal,provincial, state, municipal or other governmental department, commission,board or agency, domestic or foreign which in any way materially adverselyaffects the Company, taken as a whole, or the condition (financial orotherwise) of the Company, taken as a whole, or which questions the validity ofthe Convertible Notes or the issuance of the Unit Shares, Warrants, WarrantShares or the Underlying Compensation Securities or any action taken or to betaken by the Company pursuant to or in connection with this agreement;

 

(p)                                 neither the Company nor any of the Subsidiaries is in default or inbreach in any material respect of, and the execution and delivery of thisagreement, the Subscription Agreements, the Convertible Note Certificates, theWarrant Certificates, the Compensation Option Certificate by the Company, theperformance and compliance with the terms of such agreements and certificatesand the issue and sale, as applicable, of the Convertible Notes and theCompensation Options by the Company will not result in any material breach of,or be in conflict with or constitute a default under, or create a state offacts which, after notice or lapse of time, or both, would constitute a defaultunder any term or provision of the constating documents, by-laws or resolutionsof the Company or any material mortgage, note, indenture, contract, agreement,instrument, lease or other document to which the Company or any Subsidiary is aparty or by which any of them is bound or any judgment, decree, order, statute,rule or regulation applicable to it;

 

(q)                                 the Company is, and will at the Time of Closing be, a “reporting issuer”(or its equivalent), not in default, in the provinces of Ontario, Alberta andBritish Columbia and will use its commercially reasonable best efforts tomaintain such status for a period from the date hereof up to and including thefourth anniversary of the Closing. In particular,

 

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withoutlimiting the foregoing, the Company has at all times complied with itsobligations to make timely disclosure of all material changes relating to itand no such disclosure has been made on a confidential basis and there is nomaterial change relating to the Company which has occurred and with respect towhich the requisite material change statement has not been filed, except to theextent that the Offering constitute a material change;

 

(r)                                    no portion of the Company’s Information Record to the date hereofcontained a misrepresentation as at its date of public dissemination (providedthat the foregoing representation is not intended to extend to information andstatements in reliance upon and in conformity with information furnished to theCompany by or on behalf of the Agent specifically for use therein);

 

(s)                                  to the best of the Company’s knowledge, the auditors who audited theconsolidated financial statements of the Company most recently delivered to thesecurityholders of the Company and delivered their report with respect theretoare a participating audit firm as required by National Instrument 52-108 –Auditor Oversight;

 

(t)                                    there has never been any reportable disagreement during the fiveyear period preceding the date of this agreement (within the meaning ofNational Instrument 51-102 Continuous Disclosure Obligations) with the presentor any former auditor of the Company;

 

(u)                                 the currently issued and outstanding Common Shares are listed andposted for trading on the Exchange and no order ceasing or suspending tradingin any securities of the Company or prohibiting the issue and sale, asapplicable, of the Convertible Notes, Warrants, Warrant Shares, Compensation Optionsor Underlying Compensation Securities or the trading of any of the Company’sissued securities has been issued and no proceedings for such purpose arepending or, to the best of the Company’s knowledge, information and belief,after due inquiry, threatened;

 

(v)                                 Equity Transfer Services Inc. has been duly appointed as theregistrar and transfer agent for the Common Shares at its principal transferoffice in the City of Toronto;

 

(w)                               the Company and each of the Subsidiaries has filed all federal, provincial,local and foreign tax returns that are required to be filed or have requestedextensions thereof (except in any case in which the failure so to file wouldnot have a material adverse effect on the assets and properties, business,results of operations, prospects or condition (financial or otherwise) of theCompany, taken as a whole) and has paid all taxes required to be paid by it andany other assessment, fine or penalty levied against it, to the extent that anyof the foregoing is due and payable, except for any such assessment, fine orpenalty that has been disclosed to the Agent and is currently being contestedin good faith. The Company and each of the Subsidiaries has withheld from eachpayment made to any of its past or present employees, officers or directors,the amount of all taxes and other deductions required to be withheld therefromand has paid the same to the proper tax or other receiving officers within thetime required under the applicable legislation;

 

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(x)                                   the Company and each of the Subsidiaries has established on itsbooks and records reserves that are adequate for the payment of all taxes notyet due and payable and there are no liens for taxes on the assets of theCompany or any of the Subsidiaries, except for taxes not yet due and there areno audits known by the Company or, to the best of the Company’s knowledge,information and belief, after due inquiry, to be pending, of the tax returns ofthe Company or any of the Subsidiaries (whether federal, provincial, local orforeign) and to the best of  theCompany’s knowledge, information and belief, after due inquiry, there are noclaims which have been or may be asserted relating to any such tax returns,which audits and claims, if determined adversely, would result in the assertionby any governmental agency of any deficiency that would have a material adverseeffect on the assets or properties, business, results of operations, prospectsor condition (financial or otherwise) of the Company, taken as a whole;

 

(y)                                 none of CCRA or any provincial, state or foreign taxation authorityhas asserted or, to the best of the Company’s knowledge, information andbelief, after due inquiry, threatened to assert any assessment, claim orliability for taxes due or to become due in connection with any review orexamination of the tax returns of the Company or any of the Subsidiaries filedfor any year which would have a material adverse effect on the assets orproperties, business, results of operations, prospects or condition (financialor otherwise) of the Company, taken as a whole;

 

(z)                                   the Company and the Subsidiaries maintain a system of internalaccounting controls sufficient to provide reasonable assurance that: (i)transactions are executed in accordance with management’s general or specificauthorizations; (ii) transactions are recorded as necessary to permitpreparation of financial statements in conformity with generally acceptedaccounting principles and to maintain asset accountability, (iii) access toassets is permitted only in accordance with management’s general or specificauthorization; and (iv) the recorded accountability for assets is compared withthe existing assets at reasonable intervals and appropriate action is takenwith respect to any differences;

 

(aa)                            neither the Company or any of the Subsidiaries nor, to the best ofthe Company’s knowledge, information and belief, after due inquiry, any otherparty is in default in the observance or performance of any material term ormaterial obligation to be performed by any of them under any material contractto which the Company or any of the Subsidiaries is a party or otherwise boundand no event has occurred which with notice or lapse of time or both wouldconstitute such a default, in any such case which default or event would have amaterial adverse effect on the assets or properties, business, results ofoperations, prospects or condition (financial or otherwise) of the Company,taken as a whole;

 

(bb)                          the net proceeds of the Offering will be used in the mannerspecified in Schedule ”A” hereto;

 

(cc)                            this agreement, the Subscription Agreements, the Convertible NoteCertificates, the Warrant Certificates, the Compensation Option Certificate andall other contracts and documentation required in connection with the issue andsale of the Convertible Notes and the Compensation Options and the distributionof the Unit Shares, Warrants, Warrant

 

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Shares andUnderlying Compensation Securities shall be, prior to the Closing Date, dulyauthorized, executed and delivered by the Company, and each when executed anddelivered shall be a valid and binding obligation of the Company enforceable inaccordance with its terms, except as the enforceability thereof may be limitedby (i) bankruptcy, insolvency, moratorium or similar laws affecting creditor’srights generally, (ii) general equitable principles, or (iii) limitations underapplicable law in respect of rights of indemnity, contribution and waiver ofcontribution;

 

(dd)                          the attributes of the Convertible Notes, Warrants, Warrant Shares,Compensation Options and Underlying Compensation Securities will conform in allmaterial respects with the description thereof in this agreement and theSubscription Agreements;

 

(ee)                            the forms of the certificates representing the Common Shares, theConvertible Notes, the Warrants and Compensation Options have been dulyapproved by the directors of the Company and the certificate representing theCommon Shares complies with the provisions of the Business Corporations Act(Ontario) and, to the extent applicable, the rules and policies of theExchange;

 

(ff)                                there is no person acting or purporting to act at the request of theCompany, other than the Agent, who is entitled to any brokerage, agency orsimilar fee in connection with the transactions contemplated herein;

 

(gg)                          the Company and each of the Subsidiaries has its property and assetsinsured against loss or damage by insurable hazards or risks. Such insurancecoverage is of a type and in an amount typical to the business in which theCompany and its Subsidiaries operate as conducted by a reasonably prudentperson, based on the advice of reputable insurance brokers consulted by theCompany. Neither the Company nor any of its Subsidiaries has made any materialclaim on any policy of insurance or been refused any insurance coverage soughtor applied for. The Company does not have any reason to believe that it willnot be able to renew its existing insurance coverage of the Company and each ofthe Subsidiaries as an when such coverage expires or to obtain similar coveragefrom similar insurers as may be necessary to continue its business at a costthat would not be reasonably expected to have a material adverse effect on theassets or properties, business, results of operations, prospects or condition(financial or otherwise) of the Company, taken as a whole;

 

(hh)                          except as disclosed in the Company’s Information Record and to thebest of the Company’s knowledge, information and belief, after due inquiry,none of the directors or officers of the Company or any Subsidiary, any holderof more than 10% of any class of shares of the Company, or any associate oraffiliate (as such terms are defined in the Securities Act (Ontario)) of any ofthe foregoing persons, has any material interest, direct or indirect, in anymaterial transaction or any proposed material transaction which, as the casemay be, materially affected, is material to or will materially affect theCompany;

 

(ii)                                  the Company will promptly notify the Agent in writing if, prior tothe Time of Closing, there shall occur any material change or change in amaterial fact (in either case, whether actual, anticipated, contemplated orthreatened and other than a change or fact

 

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relatingsolely to the Agent) or any event or development involving a prospectivematerial change or a change in a material fact in any or all of the business,affairs, operations, assets (including information or data relating to theestimated value or book value of assets), liabilities (contingent orotherwise), capital, ownership, control, management or prospects of theCompany;

 

(jj)                                  the Company will promptly notify the Agent in writing with fullparticulars of any such actual, anticipated, contemplated, threatened orprospective change or other matter referred to in the first precedingparagraph;

 

(kk)                            the Company will in good faith discuss with the Agent as promptly aspossible any circumstance or event which is of such a nature that there is orought to be consideration given as to whether there may be a material change orchange in a material fact or other matter as described in the proceeding twoparagraphs; and

 

neitherthe Company, nor any of its affiliates, nor any person acting on its or theirbehalf, has paid or will pay any commission or other remuneration, directly orindirectly for soliciting the exercise of the Warrants.

 

**4.1.2****                     Intellectual Property**

 

(a)                                  for the purposes of this Section 4.1.2, “**Intellectual Property**”means the intellectual and industrial property specified in paragraphs (c) and(d) below and all Intellectual Property Rights therein, including worksprotected by the law of copyright, trade-marks, patents, inventions anddiscoveries, industrial designs, trade secrets, know-how and rights toinformation of a confidential nature;

 

(b)                                 for the purposes of this Section 4.1.2, “**Intellectual PropertyRights**” means all intellectual and industrial property rights,including all rights to copyrights, trade-marks, patents, inventions anddiscoveries, industrial designs, design rights, trade secrets, know-how andrights to information of a confidential nature;

 

(c)                                  attached hereto as Part I of Schedule “D” is a complete andaccurate list and particulars of all Intellectual Property owned by the Companyor the Subsidiaries (the “**Owned Intellectual Property**”);

 

(d)                                 attached hereto as Part II of Schedule “D” is a complete listof all Intellectual Property which the Company and/or Subsidiaries have licenseto use but do not own, other than “off the shelf” software which is generallyavailable to the public and has not been customized for use by the business ofthe Company or any of the Subsidiaries (the “**Licensed Intellectual Property**”),as well as a complete list of the agreements, licenses and consents under whichthe Company or the Subsidiaries have been granted the right to use the LicensedIntellectual Property.  To the best ofthe Company’s knowledge, information and belief, after due inquiry, all suchagreements, licenses and consents are in full force and effect and neither theCompany nor the Subsidiaries are in breach of any provisions thereof;

 

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(e)                                  the Owned Intellectual Property and the Licensed IntellectualProperty together comprise all Intellectual Property necessary to conduct therespective businesses of the Company and the Subsidiaries;

 

(f)                                    except as disclosed on the Company’s Information Record, theCompany, directly or through the Subsidiaries, is the beneficial owner of theOwned Intellectual Property, free and clear of all Encumbrances (other than theEncumbrances represented by the registrations and the Encumbrances defined asPermitted Security Interests set out in Schedule “F” attached hereto), andis not a party to or bound by any contract, agreement, or other obligationwhatsoever that limits or impairs its ability to sell, transfer, assign orconvey, or that otherwise affects, the Owned Intellectual Property other thanpursuant to the contracts, agreements or obligations set out inSchedule “D”.  Same as set out inSchedule “D”, no person has been granted any interest in or right to useall or any portion of the Owned Intellectual Property;

 

(g)                                 the Company is not aware of a claim of any infringement or breach ofany Intellectual Property Rights of any other Person by the Company, nor hasthe Company or any of the Subsidiaries received any notice that the conduct ofits business, including the use of the Owned Intellectual Property or theLicensed Intellectual Property, infringes upon or breaches any IntellectualProperty Rights of any other Person.  Tothe best of the Company’s knowledge, information and belief, after due inquiry,the conduct of the respective businesses of the Company and the Subsidiariesdoes not infringe upon the Intellectual Property Rights or use in anyunauthorized manner the intellectual property of any other Person.  To the best of Company’s knowledge,information and belief, after due inquiry, there has been no infringement orviolation of any of its rights in the Owned Intellectual Property by any otherPerson.    The Company is not aware ofany state of facts that casts doubt on the validity or enforceability of any ofthe Intellectual Property Rights in the Owned Intellectual Property.  The Company has provided to the Agent trueand complete copies of all contracts and amendments thereto that relate to theOwned Intellectual Property and Licensed Intellectual Property;

 

(h)                                 the Owned Intellectual Property is not, and to the best of theCompany’s knowledge, information and belief, after due inquiry, will not be,the subject of any claims of opposition from any employees or contract staff ofthe Company or any of the Subsidiaries. Except as disclosed in Schedule “D” to this Agreement, allIntellectual Property, developed by Persons employed by or under contract tothe Company or any of the Subsidiaries and used or enjoyed in the business ofthe Company or any of the Subsidiaries, was developed in the normal course ofthe employee’s or contractor’s duties, and no claim for compensation under anyapplicable laws has been made or is pending. The Company and each of the Subsidiaries has, or on and prior to theTime of Closing will have, entered into confidentiality agreements andagreements with regard to ownership of Intellectual Property with all currentemployees employed full-time or part-time within the business, and with allindependent contractors who currently provide services (other than contractresearch) to the business; and

 

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(i)                                     save as set out in Schedule “D”, no license has been granted toany third party in respect of any of the Owned Intellectual Property and to thebest of the Company’s knowledge, information and belief, after due inquiry,there are no circumstances which could entitle a third party to call for such alicense.

 

**4.1.3****                     Due Diligence Matters**

 

(a)                                  Prior to the Closing Date, the Company shall allow the Agent toconduct all due diligence which they may reasonably require to conduct inrespect of the Offering and if one or more visits to the offices of the Companyis required, such visit(s) shall be made within normal business hours; and

 

(b)                                 the minute books and corporate records of the Company and theSubsidiaries made or to be made available to Goodman and Carr LLP or its localagent counsel in connection with the Agent’s due diligence investigations ofthe Company for the period from their respective dates of incorporation to thedate of examination thereof, are the original minute books and records of theCompany and the Subsidiaries or true copies thereof and contain copies of allproceedings (or certified copies thereof) of the shareholders, the boards ofdirectors and all committees of the boards of directors of such companies andthere have been no other proceedings of the shareholders, boards of directorsor any committee of the boards of directors of such companies to the date ofreview of such corporate records and minute books not reflected in such minutebooks and corporate and other records other than those which have beendisclosed to the Agent in writing and those which or not material in thecontext of the Company, taken as a whole.

 

**4.1.4****                     Employment Matters**

 

(a)                                  The Company and each of the Subsidiaries is in all material respectsin compliance with all applicable laws and regulations respecting employmentand employment practices;

 

(b)                                 each material plan for retirement, bonus, stock purchase, profitsharing, stock option, deferred compensation, severance or termination pay,insurance, medical, hospital, dental, vision care, drug, sick leave,disability, salary continuation, legal benefits, unemployment benefits,vacation, incentive or otherwise contributed to or required to be contributedto, by the Company or any of the Subsidiaries for the benefit of any current orformer director, officer, employee or consultant (the “**Employee Plans**”)has been maintained in material compliance with its terms and with the requirementsprescribed by any and all statutes, orders, rules and regulations that areapplicable to such Employee Plan. The Company does not and has not had anypension plan (as that term is defined in the **Pension Benefits Act** (Ontario));

 

(c)                                  all material accruals for unpaid vacation pay, premiums forunemployment insurance, health premiums, federal or provincial pension planpremiums, accrued wages, salaries and commissions and Employee Plan paymentshave been reflected in the books and records of the Company and theSubsidiaries;

 

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(d)                                 there has not been and there is not to the knowledge of the Company,after due inquiry, currently any labour trouble which is adversely effecting orcould adversely effect, in a material manner, the carrying on of the businessof the Company and the Subsidiaries; and

 

(e)                                  except as disclosed in the Company’s Information Record and to thebest of the Company’s knowledge, information and belief, after due inquiry,neither the Company nor any of the Subsidiaries owes any monies to, nor has theCompany or any of the Subsidiaries any present loans to, or borrowed any moniesfrom or is otherwise indebted to, any officer, director, employee, shareholderor any person not dealing at “arm’s length” (as such term is defined in the TaxAct) with any of them except for usual employee reimbursements and compensationpaid in the ordinary and normal course of its business. To the best of theCompany’s knowledge information and belief, after due inquiry, except  usual employee or consulting arrangementsmade in the ordinary and normal course of business, neither the Company nor anyof the Subsidiaries is a party to any contract, agreement or understanding withany officer, director, employee, shareholder or any other person not dealing atarm’s length with it. To the best of the Company’s knowledge, information andbelief, after due inquiry, no officer, director or employee of the Company orany of the Subsidiaries and no entity which is an affiliate or associate of oneor more of the foregoing, owns, directly or indirectly, any interest in (exceptfor shares representing less than 5% of the outstanding shares of any class orseries of any publicly traded company), or is an officer, director, employee orconsultant of, any person which is, or is engaged in, a business competitivewith the Company which could materially adversely impact on the ability to dulyand properly perform its services. To the knowledge of the Company, after dueinquiry, no officer, director, employee or security holder of the Company orany of the Subsidiaries has any cause of action or other claim whatsoeveragainst, or owes any amount to, the Company or any of the Subsidiaries inconnection with its business except for claims in the ordinary and normalcourse of the business such as for accrued vacation pay or other amounts ormatters which would not be material to the Company.

 

**4.1.5****                     Regulatory Matters**

 

(a)                                  All necessary documents and proceedings have been or will be filedand taken and all other legal requirements have been or will be fulfilled undereach of the Applicable Securities Laws in connection with the issuance and saleof the Convertible Notes, Units and Warrant Shares to the Purchasers and theCompensation Options and the Underlying Compensation Securities to the Agent.

 

**5.****                                      Covenants of the Company**

 

The Company hereby covenants to and with theAgent on its own behalf and on behalf of the Purchasers as follows:

 

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**5.1****                                **General Covenants

 

(a)                                  The Company will cause the Convertible Notes, Unit Shares, Warrants,the Warrant Shares, the Compensation Options and the Underlying CompensationSecurities, to be duly and validly created and issued (in the case of all suchsecurities other than the Warrants, the Compensation Options and theCompensation Warrants, as fully-paid and non-assessable);

 

(b)                                 the Company will accept or reject, in whole or in part, in its solediscretion Subscription Agreements with the Purchasers and, provided it shallnot reject any Subscription Agreement unless the Company, acting reasonably,makes the determination that it is prudent to reject any such SubscriptionAgreement;

 

(c)                                  the Company will use its commercially reasonable best efforts to obtainthe necessary regulatory consents from the Exchange for the issuance of theConvertible Notes and the Compensation Options, in each case on such conditionsas are acceptable to the Agent and the Company, acting reasonably;

 

(d)                                 the Company will use its commercially reasonable best efforts toarrange for the listing and posting for trading of the Unit Shares, the WarrantShares, the Compensation Unit Shares and the Compensation Warrant Shares on theExchange as soon as possible following their issue;

 

(e)                                  the Company will comply with the applicable provisions of MI 45-102such that the Purchasers resident in such jurisdictions where MI 45-102 is inforce will be entitled to avail themselves of the four month from the ClosingDate “hold period” in respect of the Convertible Notes, Unit Shares, Warrantsand Warrant Shares in accordance with MI 45-102; and

 

(f)                                    the Company will not, directly or indirectly offer, issue, sell,contract to sell, announce an intention to sell, sell any option or contract topurchase, purchase any option or contract to sell any Common Shares orfinancial instruments convertible or exchangeable into Common Shares (otherthan for the issuance of options under the Company’s existing option plan andsecurities issued in connection with an arms’ length acquisition, merger,consolidation or amalgamation with any one or more corporations or for theissuance of Common Shares pursuant to any purchase warrants or CompensationOptions existing on the date hereof) for a period ending 180 days after theClosing Date without the prior written consent of the Agent, such consent notto be unreasonably withheld;

 

**6.****                                      Conditions to Purchase Obligation**

 

6.1                                 The following are conditions of the Agent’s and the Purchasers’obligations to close the purchase of the Convertible Notes from the Company ascontemplated hereby, which conditions the Company covenants to exercise itscommercially reasonable efforts to have fulfilled at or prior to the ClosingDate, which conditions may be waived in writing in whole or in part by theAgent on its own behalf and on behalf of the Purchasers:

 

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(a)                                  the Company’s board of directors shall have authorized and approvedthis agreement, the forms of Subscription Agreements, Convertible NoteCertificates, Warrant Certificates, Compensation Option Certificate and anyother agreements or documents pursuant to which the Convertible Notes, UnitShares, Warrants, Warrant Shares, Compensation Options and UnderlyingCompensation Securities are to be issued, the issuance of the ConvertibleNotes, Warrants, Warrant Shares, Compensation Options and UnderlyingCompensation Securities and all matters relating to the foregoing;

 

(b)                                 the Company shall have made and/or obtained the necessary filings,approvals, consents and acceptances of the appropriate regulatory authoritiesin the Qualifying Provinces and the Exchange in connection with the Offering,on terms which are acceptable to the Company and the Agent, acting reasonably,on or prior to the Closing Date, it being understood that the Agent shall doall that is reasonably required to assist the Company to fulfil this condition;

 

(c)                                  the Unit Shares, Warrant Shares, Compensation Unit Shares andCompensation Warrant Shares shall have been conditionally accepted for listingand will, as soon as possible following their issue, be posted for trading onthe Exchange (subject only to the usual conditions of the Exchange);

 

(d)                                 the Company shall deliver a certificate of the Company, signed onbehalf of the Company, without personal liability, by a senior officer of theCompany as may be acceptable to the Agent, acting reasonably, addressed to theAgent, its counsel and to the Purchasers and dated the Closing Date, in formand content satisfactory to the Agent’s counsel, acting reasonably, certifyingthat:

 

(i)                                     no order ceasing or suspending trading in any securities of theCompany or prohibiting the issuance and sale of the Convertible Notes, UnitShares, Warrants, Warrant Shares, Compensation Options, Underlying CompensationSecurities or any of the Company’s issued securities has been issued and noproceedings for such purpose are pending or, to the best of the knowledge,information and belief of such officers, after due inquiry, threatened;

 

(ii)                                  the representations and warranties of the Company contained in thisagreement are true and correct at the Time of Closing, with the same force andeffect as if made by the Company as at the Time of Closing, after giving effectto the transactions contemplated hereby; and

 

(iii)                               the Company has complied with all the covenants and satisfied allthe terms and conditions of this agreement on its part to be complied with orsatisfied at or prior to the Time of Closing which have not otherwise beenwaived pursuant to the terms of this agreement;

 

(e)                                  the Company shall have accepted the Subscription Agreements with thePurchasers and, unless the Company, acting reasonably, makes the determinationthat it is prudent to reject any such Subscription Agreement, the Company willaccept each duly executed

 

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SubscriptionAgreement accompanied by the required subscription funds submitted to theCompany;

 

(f)                                    the Company will have caused a favourable legal opinion to be deliveredby its counsel addressed to the Agent, its counsel and the Purchasers in theQualifying Provinces with respect to such matters as the Agent may reasonablyrequest relating to this transaction, acceptable in all reasonable respects tothe Agent’s counsel, including to the effect that:

 

(i)                                     the Company is validly subsisting under the laws of the Province ofOntario and has all requisite corporate power, authority and capacity to carryon its business as now conducted and to own, lease and operate its propertiesand assets;

 

(ii)                                  the Company has the corporate capacity and power to execute anddeliver this agreement, the Subscription Agreements and any additionalagreements or certificates relating to the issuance of the Convertible Notes,Unit Shares, Warrants, Warrant Shares, Compensation Options and UnderlyingCompensation Securities and to perform its obligations hereunder andthereunder;

 

(iii)                               this agreement, the Subscription Agreements and the otheragreements, certificates or instruments pursuant to which the ConvertibleNotes, Unit Shares, Warrants, Warrant Shares, Compensation Options andUnderlying Compensation Securities are to be issued have been duly authorized,and the Convertible Notes and Compensation Options have been duly executed anddelivered by the Company and are legally binding upon the Company andenforceable in accordance with their respective terms (subject to the usualqualifications);

 

(iv)                              the Notes and the Compensation Options have been validly created andissued;

 

(v)                                 the Unit Shares, Warrants, Convertible Notes, Warrant Shares, andUnderlying Compensation Securities have been reserved for issuance and whenissued upon the right of conversion (including automatic conversion) orpurchase, as the case may be, in accordance with the terms of the ConvertibleNote Certificates, Warrant Certificates and the Compensation OptionCertificate, respectively, and upon receipt by the Company of the properconsideration therefor, and in the case of the Unit Shares, Convertible Notes,Warrant Shares, Compensation Unit Shares and Compensation Warrant Shares willbe validly issued as fully paid and non- assessable;

 

(vi)                              the Exchange has conditionally approved the Units Shares, WarrantsShares, Compensation Unit Shares and Compensation Warrant Shares for listing,subject to the Corporation fulfilling all of the requirements of the Exchangeas set out in the Exchange’s conditional approval letter dated June 3,2004, and subject to the Exchange’s discretion to refuse to provide finalacceptance for the subscription of a subscriber;

 

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(vii)                           the execution and delivery of this agreement, the SubscriptionAgreements and the other agreements, certificates or instruments pursuant towhich the Convertible Notes, Unit Shares, Warrants, Warrant Shares,Compensation Options and Underlying Compensation Securities are to be issued,the fulfilment of the terms hereof and thereof, the issue, sale and delivery atthe Closing Date of the Convertible Notes and Compensation Options (and anysecurities issuable, directly or indirectly, thereunder) do not and will notresult in a breach of and do not create a state of facts which after notice orlapse of time or both will result in a breach of, and do not and will not conflictwith, any of the terms, conditions or provisions of the constating documents ofthe Company;

 

(viii)                        the offering, sale and delivery by the Company of the ConvertibleNotes to the Purchasers and the Compensation Options to the Agent are exemptfrom the prospectus and registration requirements of the Applicable SecuritiesLaws and no documents are required to be filed, proceedings taken or approvals,permits, consents, orders or authorizations obtained under the ApplicableSecurities Laws to permit such offering, sale and delivery, other than thefiling of any private placement reports, fees or undertakings required to befiled under such laws;

 

(ix)                                the issue and delivery of the Unit Shares and Warrants upon dueconversion of the Convertible Notes, the Warrant Shares and CompensationWarrant Shares upon due exercise of the Warrants, and the Compensation UnitShares and Compensation Warrants upon due excise of the Compensation Optionsare exempt from the prospectus and registration requirements of the ApplicableSecurities Laws and no documents are required to be filed, proceedings taken orapprovals, permits, consents, orders or authorizations obtained under theApplicable Securities Laws to permit such issue and delivery, other than thefiling of any private placement reports, fees or undertakings required to befiled under such laws;

 

(x)                                   as to the first trade rights and restrictions relating to theConvertible Notes, Unit Shares, Warrants, Warrant Shares and UnderlyingCompensation Securities; and

 

(xi)                                as to such other legal matters which counsel for the Company and theAgent, acting reasonably, may agree upon.

 

In giving such opinions, counsel to theCompany shall be entitled to rely where appropriate upon local counsel andshall be entitled as to matters of fact not within their knowledge to rely upona certificate of fact from responsible persons in a position to have knowledgeof such facts and their accuracy and shall be entitled to rely on certificatesof such public officials and other persons as are necessary orappropriate.  The Company agrees, andthe aforesaid legal opinion shall expressly provide, that the Agent may delivercopies of the opinion to each of the addressees thereof;

 

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(g)                                 The directors and senior officers of the Company shall execute anddeliver the special covenant addressed to the Agent set out in Appendix I ofSchedule “A” to this agreement; and

 

(h)                                 the Agent shall have received such other certificates, statutorydeclarations, opinions, agreements and materials, in form and substancesatisfactory to the Agent and its counsel, as the Agent or its counsel mayreasonably request.

 

**7.****                                      Closing**

 

7.1                                 The Offering will be completed at **the offices of the Company’s legal counsel**,Gowling Lafleur Henderson LLP, 40 King Street West, Toronto, Suite 5800,Ontario, M5H 3Z7 at the Time of Closing or such other place, date or time asmay be mutually agreed to, provided that if the Company has not been able tocomply with any of the covenants or conditions set out herein required to becomplied with by the Time of Closing or such other date and time as may bemutually agreed to, the respective obligations of the parties will terminatewithout further liability or obligation except for payment of expenses inaccordance with Section 11, indemnity in accordance with Section 9and contribution in accordance with Section 10.

 

7.2                                 At the Time of Closing, the Company shall deliver to the Agent:

 

(a)                                  Convertible Note Certificates duly registered as the Agent maydirect;

 

(b)                                 the Compensation Option Certificate duly registered as the Agent maydirect;

 

(c)                                  the requisite legal opinions and certificates as contemplated above;and

 

(d)                                 such further documentation as may be contemplated herein or ascounsel to the Agent or the applicable regulatory authorities may reasonablyrequire,

 

against payment of the purchase price for theConvertible Notes by certified cheque, wire transfer or bank draft and deliveryof the duly completed and executed Subscription Agreements and otherdocumentation required to be provided by or on behalf of the Purchasers or theAgent pursuant to this agreement. The Company will, at the Time of Closing, andupon such payment of the purchase price, pay the Agency Fee to the Agent and reimbursethe Agent for all of its reasonable estimated expenses as contemplated inSection 11 hereto incurred up to the Closing Date upon the delivery by itto the Company of one or more invoices therefor, subject to any adjustment whensuch actual expenses are finally determined in accordance with, and anylimitations set out in, Section 11 hereof.

 

7.3                                 All terms and conditions of this agreement shall be construed asconditions and any breach or failure to comply with any such terms andconditions shall entitle the Agent to terminate its obligations (and that ofthe Purchasers to purchase the Convertible Notes) by written notice to thateffect given to the Company prior to the Time of Closing. It is understood thatthe Agent may waive in whole or in part, or extend the time for compliancewith, any of such terms and conditions on behalf of themselves and thePurchasers without prejudice to their rights in respect of any such

 

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terms and conditions or any othersubsequent breach or non-compliance, provided that to be binding on the Agentand the Purchasers, any such waiver or extension must be in writing.

 

**8.****                                      Termination of Purchase Obligation**

 

8.1                                 Without limiting any of the foregoing provisions of this agreement,and in addition to any other remedies which may be available to it, the Agent(on its own behalf and on behalf of the Purchasers) shall be entitled, at itsoption, to terminate and cancel, without any liability, its obligations underthis agreement and those of the Purchasers, by giving written notice to theCompany at any time through to the Time of Closing, if:

 

(a)                                  the Agent, acting reasonably, is not satisfied in any reasonablerespect with the results of its due diligence investigations carried out priorto the Time of Closing;

 

(b)                                 any order or ruling is issued, any inquiry, investigation or otherproceeding (whether formal or informal) in relation to the Company or any ofthe Subsidiaries or any of their respective directors and officers is made,threatened or announced by any officer or official of any stock exchange,Securities Commission or other regulatory authority (other than an order basedsolely upon the activities or alleged activities of the Agent) or any law orregulation in a Qualifying Province is promulgated or changed which operates toprevent or restrict trading in or distribution of the Convertible Notes, UnitShares, Warrants, Warrant Shares, Compensation Options or UnderlyingCompensation Securities;

 

(c)                                  there should develop, occur or come into effect any incident ofnational or international consequence, any law, regulation or inquiry or anyother event, action or occurrence of any nature whatsoever which, in thereasonable opinion of the Agent, materially and adversely affects or maymaterially and adversely affect the financial markets in Canada generally orthe business, affairs or capital of the Company, taken as a whole;

 

(d)                                 there should occur any material change or change in a material factwhich, in the reasonable opinion of the Agent, impacts materially and adverselyon the marketability of the Convertible Notes;

 

(e)                                  the Company is in breach of any material term, condition or covenantof this agreement (which has not been waived, in writing, by the Agent) or anymaterial representation or warranty given by the Company in this agreementbecomes or is false (and such representation or warranty is not waived, inwriting, by the Agent); or

 

(f)                                    if the Agent otherwise determines it would be unprofitable orimpractical to offer or continue to offer the Convertible Notes;

 

the occurrence or non-occurrence of any ofthe foregoing events or circumstances to be determined in the sole discretionof the Agent, acting reasonably.

 

8.2                                 The Agent shall make reasonable efforts to give notice to theCompany (in writing or by other means) of the occurrence of any of the eventsreferred to in Section 8.1, provided that neither

 

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the giving nor the failure to give suchnotice shall in any way affect the Agent’s entitlement to exercise this rightat any time through to the Time of Closing.

 

8.3                                 The Agent’s rights of termination contained in this section arein addition to any other rights or remedies it may have in respect of anydefault, act or failure to act or non-compliance by the Company in respect ofany of the matters contemplated by this agreement.

 

8.4                                 If the obligations of the Agent and the Purchasers are terminatedunder this agreement pursuant to the termination rights provided for inSection 8.1, the Company’s liabilities to the Agent and the Purchasersshall be limited to the Company’s obligations under the indemnity, contributionand expense provisions of Sections 9, 10, and 11, respectively, of thisagreement.

 

**9.****                                      Indemnity**

 

9.1                                 The Company hereby covenants and agrees to indemnify the Agent, andits directors, officers, shareholders, employees and agents (each beinghereinafter referred to as an “**Indemnified Party**”), against all losses (other than a lossof profits), claims, actions, damages, liabilities, costs or expenses, joint orseveral, including reimbursement to the Agent upon demand of the aggregateamount paid in settlement of any actions, suits, proceedings or claims and thereasonable fees and expenses of their counsel that may be incurred in advisingwith respect to and/or defending any claim to which any Indemnified Party maybecome subject or otherwise involved in any capacity under any statute orcommon law or otherwise, caused or incurred by reason of:

 

(a)                                  the Indemnified Party having acted as agent of the Company inrespect of the Offering (other than by reason of the negligence, wilfulmisconduct or bad faith of the Indemnified Party);

 

(b)                                 any statement (other than a statement relating solely to, andprovided by, the Agent) contained in the Company’s Information Record which, atthe time and in the light of the circumstances under which it was made,contains or is alleged to contain a misrepresentation;

 

(c)                                  the omission or alleged omission to state in any certificate of theCompany delivered hereunder or pursuant hereto or in the Company’s InformationRecord any material fact (other than a material fact omitted in reliance uponinformation furnished to the Company by or on behalf of the Agent) required tobe stated therein or necessary to make any statement therein not misleading inlight of the circumstances under which it was made;

 

(d)                                 any order made or inquiry, investigation or proceeding commenced orthreatened by any Securities Commission or other competent authority based uponany misrepresentation or alleged misrepresentation in the Company’s InformationRecord (other than a statement included in reliance upon information furnishedto the Company by or on behalf of the Agent) which prevents or restricts the tradingin the Convertible Notes, Unit Shares, Warrants, Warrant Shares, UnderlyingCompensation Securities or the distribution to the public, as the case may be,of the Convertible Notes, Unit Shares, Warrants or Warrant

 

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Shares in anyof the Qualifying Provinces or the distribution to the Agent of the UnderlyingCompensation Securities;

 

(e)                                  the Company not complying with any requirement of any ApplicableSecurities Laws or regulatory requirements (including any private placementfiling or other requirements under any of the Applicable Securities Laws inconnection with the Offering); or

 

(f)                                    any material breach of any representation or warranty of the Companycontained herein or the failure of the Company to comply with any of itsobligations hereunder.

 

9.2                                 If any action or claim shall be asserted against an IndemnifiedParty in respect of which indemnity may be sought from the Company pursuant tothe provisions of Section 9.1 or if any potential claim contemplatedhereby shall come to the knowledge of an Indemnified Party, the IndemnifiedParty shall promptly notify the Company in writing. If, through the fault ofthe Indemnified Party, the Company does not receive notice of any such action,claim or potential claim in time to contest effectively the determination ofany liability susceptible of being contested, the Company shall be entitled toset off against the amount claimed by the Indemnified Party the amount of anylosses incurred by the Company which result from the Indemnified Party’sfailure to give such notice on a timely basis. The Company shall be entitledbut not obligated to participate in or assume the defence thereof, provided,however, that the defence shall be through legal counsel acceptable to theIndemnified Party, acting reasonably. In addition, the Indemnified Party shallalso have the right to employ separate counsel in any such action andparticipate in the defence thereof, and the fees and expenses of such counselshall be borne by the Indemnified Party if:

 

(a)                                  the employment thereof has been specifically authorized in writingby the Company;

 

(b)                                 the Indemnified Party has been advised by counsel, actingreasonably, in a written opinion setting out the reasons therefor, that representationof the Company and the Indemnified Party by the same counsel would beinappropriate due to actual or potential differing interests between them; or

 

(c)                                  the Company has failed within a reasonable time after receipt ofsuch written notice to assume the defense of such action or claim;

 

provided that the Company shall not berequired to assume the fees and expenses of more than one additional counsel tothe Indemnified Party. Neither party shall effect any settlement of any suchaction or claim or make any admission of liability or fact without the writtenconsent of the other party, such consent to be promptly considered and not tobe unreasonably withheld. The indemnity hereby provided for shall remain infull force and effect and shall not be limited to or affected by any otherindemnity in respect of any matters specified herein obtained by theIndemnified Party from any other person.

 

9.3                                 To the extent that any Indemnified Party is not a party to thisagreement, the Agent shall obtain and hold the right and benefit of theindemnity provisions hereof in trust for and on behalf of

 

25

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such Indemnified Party, entitled to enforcesuch provisions for its benefit and on behalf of such Indemnified Party.

 

**10.****                               Contribution**

 

10.1                           In the event that the indemnity provided for above is, for anyreason, illegal or unenforceable as being contrary to public policy or for anyother reason, the Agent and the Company shall contribute to the aggregate ofall losses, claims, costs, damages, expenses or liabilities (including anylegal or other expenses reasonably incurred by the Indemnified Party) of thenature provided for above such that the Agent shall be responsible for thatportion represented by the percentage that the portion of the Agency Fee paidby the Company to the Agent bears to the gross proceeds realized from the saleof the Convertible Notes, and the Company shall be responsible for the balance,provided that, in no event, shall the Agent be responsible for any amount inexcess of the amount of the Agency Fee actually received by the Agent. In theevent that the Company may be held to be entitled to contribution from theAgent under the provisions of any statute or law, the Company shall be limitedto contribution in an amount not exceeding the lesser of: (i) the portion ofthe full amount of losses, claims, costs, damages, expenses and liabilities,giving rise to such contribution for which the Agent is responsible, asdetermined above, and (ii) the amount of the Agency Fee actually received bythe Agent. Notwithstanding the foregoing, a party guilty of fraudulentmisrepresentation shall not be entitled to contribution from the other party.Any party entitled to contribution will, promptly after receiving notice ofcommencement of any claim, action, suit or proceeding against such party inrespect of which a claim for contribution may be made against the other partyunder this section, notify such party from whom contribution may be sought. Inno case shall such party from whom contribution may be sought be liable underthis agreement unless such notice has been provided, but the omission to sonotify such party shall not relieve the party from whom contribution may besought from any other obligation it may have otherwise than under this section,except to the extent that such failure to notify jeopardizes the legal positionof the party from whom contribution may be sought. The right to contributionprovided in this section shall be in addition to, and not in derogationof, any other right to contribution which the Agent or the Company may have bystatute or otherwise by law.

 

10.2                           The Company waives its right to recover contribution from the Agentor any other Indemnified Party with respect to any liability of the Companysolely by reason of or arising out of any misrepresentation contained in theCompany’s Information Record, other than a misrepresentation included inreliance upon and in conformity with written information furnished to theCompany by or on behalf of the Agent specifically for use therein.

 

**11.****                               Expenses**

 

11.1                           Whether or not the Offering is completed, all expenses incurred fromtime to time in connection with the Offering (including the Agent’s reasonableout-of-pocket expenses which include those expenses incurred in connection withdue diligence and marketing meetings) and the reasonable fees and disbursementsof the Agent’s legal counsel (up to a maximum of $40,000, exclusive ofdisbursements) or incidental to the Offering and all matters in connection withthe transactions herein, including the costs and filing fees with respect tothe private placement of the Convertible Notes, costs associated with thelisting and posting for trading on the Exchange of the

 

26

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Unit Shares, the Warrant Shares, theCompensation Unit Shares and Compensation Warrant Shares, the cost of theregistration and delivery of the Convertible Notes, Unit Shares, WarrantCertificates, Warrant Shares, the Compensation Option Certificates and theUnderlying Compensation Securities and the fees and expenses of each of theCompany’s auditors, counsel and local counsel shall be borne by theCompany.  Subject to the foregoing, theCompany shall also be responsible for any exigible Goods and Services Tax onthe foregoing amounts. The Company covenants and agrees to fully reimburse theAgent from time to time for all such expenses within 5 business days from thereceipt of one or more invoices.

 

**12.****                               Right of First Refusal**

 

12.1                           Subject to meeting or exceeding the thresholds set out underSection 12.2 below, the Company hereby grants the Agent the right of firstrefusal to provide, for a period from completion of the Offering set out inSection 12.2 below, the following services to the Company and itsSubsidiaries, if such services are required by the Company or the Subsidiaries:

 

(a)                                  services as lead manager or lead underwriter for all equityfinancings (whether private or public) conducted in Canada (and whether or notsuch financing is conducted entirely in Canada or is the Canadian portion of afinancing that is also conducted in the United States or elsewhere); and

 

(b)                                 services as lead manager or lead underwriter for the Canadiantranche of any foreign-led equity financing.

 

12.2                           The period under which the Agent will have the right of firstrefusal will be:

 

(a)                                  one year if the aggregate gross proceeds raised in the Offering (the“Gross Proceeds”), other than those allocable to Protected List Purchases, areat least $1,000,000 but less than $2,000,000; and

 

(b)                                 two years if the Gross Proceeds, other than those allocable toProtected List Purchases, are at least $2,000,000.

 

12.3                           The rights of the Agent referred to in Section 12.1 hereof mustbe exercised by the Agent within a reasonable period of time, and in any eventnot later than the tenth Business Day after the Agent has been provided withwritten notice from the Company that such services are required, which noticeshall set out, in reasonably sufficient detail, the services required and theproposed terms of such services.  If theAgent does not exercise such rights, the Company may retain a third party toprovide such services but not on more favourable terms than those which wereoffered to the Agent.  Any morefavourable terms of such services must first be offered to the Agent beforebeing offered to a third party. Further, if the Company engages the Agent pursuant to the provisionsdescribed in Section 12.1 hereof, or if the Agent is required to executeany documents relating to an offering, the Company and the Agent, as the casemay be, shall enter into one or more agreements with respect to such events ina form satisfactory to the Company and the Agent, acting reasonably.

 

27

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**13.****                               Survival of Warranties, Representations, Covenants and Agreements**

 

13.1                           All warranties, representations, covenants and agreements of theCompany herein contained or contained in documents submitted or required to besubmitted pursuant to this agreement shall survive the purchase by thePurchasers of the Convertible Notes and shall continue in full force and effect(with respect to representations and warranties, as to their truth and accuracyas at the Time of Closing) for the benefit of the Purchasers for a periodending on the Survival Limitation Date.

 

**14.****                               General Contract Provisions**

 

14.1                           Any notice or other communication to be given hereunder shall be inwriting and shall be given by delivery or by telecopier, as follows:

 

**ifto the Company**:

 

ADB Systems International Ltd.6725 Airport Road, Suite 201Mississauga, Ontario  L4V 1V2

 

Attention:                 JeffreyLymburnerTelecopier Number:                (905) 672-7514

 

**witha copy (which will not constitute notice) to**:

 

Gowling Lafleur Henderson LLP40 King Street WestScotia Plaza, Suite 5800Toronto, Ontario  M5H 3Z7

 

Attention:                 JasonA. SaltzmanTelecopier Number:                (416) 863-3479

 

**orif to the Agent:**

 

First Associates Investments Inc.BCE Place 900 – 181 Bay StreetToronto, Ontario  M5J 2T3

 

Attention:                 HowardKatz****Telecopier Number:                (416) 864-9151

 

**witha copy (which will note constitute notice) to:**

 

Goodman and Carr LLP200 King Street West, Suite 2300Toronto, Ontario M5H 3W5

 

28

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Attention:                 GaryM. LitwackTelecopier Number:                (416) 595-0567

 

and if so given, shall be deemed to have beengiven and received upon receipt by the addressee or a responsible officer ofthe addressee if delivered, or four hours after being telecopied and receiptconfirmed during normal business hours, as the case may be. Any party may, atany time, give notice in writing to the others in the manner provided for aboveof any change of address or telecopier number.

 

14.2                           This agreement constitutes the entire agreement between the Agentand the Company relating to the subject matter hereof and supersedes all prioragreements between the Agent and the Company with respect to their respectiverights and obligations in respect of the Offering.

 

14.3                           Time shall be of the essence of this agreement and of every parthereof and no extension or variation of this agreement shall operate as awaiver of this provision.

 

14.4                           The parties hereto covenant and agree to sign such other documents,do and perform and cause to be done and performed such further and other actsand things as may be necessary or desirable in order to give full effect tothis agreement and every provision of it.

 

14.5                           Other than as otherwise provided herein, no party to this agreementmay assign this agreement, any part hereof or its rights hereunder without theprior written consent of the other party. Subject to the foregoing, this agreement shall enure to the benefit ofand be binding upon the parties hereto and their respective successors and permittedassigns.

 

14.6                           In the event that any provision or part of this agreement shall bedeemed void or invalid by a court of competent jurisdiction, the remainingprovisions or parts shall be and remain in full force and effect. If, in anyjudicial proceeding, any provision of this agreement is found to be so broad asto be unenforceable, it is hereby agreed that such provision shall beinterpreted to be only so broad as to be enforceable.

 

14.7                           This agreement may be executed by telecopier and in one or morecounterparts which, together, shall constitute an original copy hereof as ofthe date first noted above.

 

If this agreement accurately reflects theterms of the transaction which we are to enter into and if such terms areagreed to by the Company, please communicate your acceptance by executing whereindicated below and returning by telecopier one copy and returning by courierone originally executed copy to the Agent (Attention: Howard****Katz).

 

29

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Yours very truly,

 

 
| **FIRST ASSOCIATES INVESTMENTS INC.** |                         |
|---------------------------------------|------------------------------|
|                                  |
|                                  |
| Per:                                  |                         |   |
|                                  | Patrick Leung                |
|                                  | Director, Investment Banking |
|                                       |                              |  |  |

 

 

The foregoing accurately reflects the termsof the transaction which we are to enter into and such terms are agreed to andwith effect as of the date first above written.

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

 

30

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**SCHEDULE “A”**

** **

**ADB SYSTEMS INTERNATIONAL LTD.**

** **

**Thisis Schedule “A” to the Agency Agreement between ADB Systems InternationalLtd. and First Associates Investments Inc. made as of June 15, 2004.**

** **
| **Issue:**             |   | Up to $5,000,000 principal amount of  Convertible Notes, to be issued by way of private placement exemptions from  prospectus and registration requirements, subject to the receipt of any applicable  regulatory and stock exchange approvals. |
|------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                            |
| **Issue Price:**       |   | The Convertible Notes will be issued at par  in integral multiples of $1,000.                                                                                                                                                                   |
|                   |   |                                                                                                                                                                                                                                            |
| **Convertible Notes:** |   | The Convertible Notes will have the  following material terms:                                                                                                                                                                                  |
|                   |   |                                                                                                                                                                                                                                            |
|                   |   | (a)                                                                                                                                                                                                                                             | The Convertible Notes will bear interest  at an annual rate of 7% of the principal amount of the Convertible Notes  outstanding from time to time, payable on the earlier of the conversion of  the Convertible Notes or the Maturity Date (as defined below).  Interest will continue to accrue until  paid; |
|                   |   |                                                                                                                                                                                                                                            |   |
|                   |   | (b)                                                                                                                                                                                                                                             | The Convertible Notes will mature and be  payable on the date that is the third anniversary of the Closing Date (the  “Maturity Date”) |
|                   |   |                                                                                                                                                                                                                                            |   |
|                   |   | (c)                                                                                                                                                                                                                                             | At any time up to and including the  Maturity Date, all or any portion of the principal amount of the Convertible  Notes outstanding from time to time will be convertible, at the option of the  holder, provided that the holder complies with the notice provisions  therefor, into units of securities of the Company (“Units”) at a conversion  price of $0.31 per Unit (the “Conversion Price”), subject to adjustments for  stock splits, consolidations, other capital reorganizations, extraordinary  dividends or distributions; |
|                   |   |                                                                                                                                                                                                                                            |   |
|                   |   | (d)                                                                                                                                                                                                                                             | Each Unit will consist of one common  share in the capital of ADB (a “Common Share”) and one-half of one Common  Share purchase warrant (a “Warrant”).   Each whole Warrant will entitle the holder to acquire one Common Share  at an exercise price of $0.50 per share, and will be exercisable at any time  prior to the fourth anniversary of the Closing Date; and |
|                   |   |                                                                                                                                                                                                                                            |   |
|                   |   | (e)                                                                                                                                                                                                                                             | In the event that at any time from and  after the first anniversary of the Closing Date the volume weighted average  trading price of the Common Shares through its principal trading market for a  20 consecutive trading day period is $0.70 or more, all then outstanding  Convertible Notes, including any accrued interest thereon, will be  automatically converted into Units at the Conversion Price. |
|                   |   |                                                                                                                                                                                                                                            |
| **Use of Proceeds:**   |   | For working capital and general corporate  purposes.                                                                                                                                                                                            |
|                   |   |                                                                                                                                                                                                                                            |
| **Security:**          |   | The Convertible Notes will provide general  security over the Corporation’s assets.                                                                                                                                                        |

 

31

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|              |   | Such security will be subordinate  liabilities of the Corporation to current secured creditors.                                                                                                                                                                                                                                                                        |
|-------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                                                                                                                                                                                                                                                                   |
| **Listing:**      |   | The Common Share component of the Units  (and the Common Shares issuable upon exercise of the Warrants) will be listed  on the TSX.                                                                                                                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                                                                   |
| **Commission:**   |   | 8% of the gross proceeds of the  Offering.  In addition, the Agent will  receive an option, exercisable until the second anniversary of the Closing  Date, to purchase that number of Units as is equal to 10% of the Units  issuable upon full conversion of the Convertible Notes sold under the  Offering, at an exercise price equal to the Conversion Price. |
|              |   |                                                                                                                                                                                                                                                                                                                                                                   |
| **Closing Date:** |   | On or about June 15, 2004.  The Offering may be completed through one  or more closings.                                                                                                                                                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                                                                   |
| **Closing Time:** |   | **2:00**p.m. (Toronto  time) on the Closing Date.                                                                                                                                                                                                                                                                                                                      |

 

32

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**APPENDIX ISPECIAL COVENANT**

** **

TO:                            The Agent (as such term is defined in the above agreement)

 

Terms used below shall have the meaningascribed thereto in the above agreement.

 

The undersigned severally covenant and agreethat they will not, directly or indirectly offer, issue, sell, contract tosell, announce an intention to sell, sell any option or contract to purchase,purchase any option or contract to sell any Common Shares or financialinstruments convertible or exchangeable into Common Shares (other than for theissuance of options under the Company’s existing option plan and securitiesissued in connection with an arms’ length acquisition, merger, consolidation oramalgamation with any one or more corporations or for the issuance of CommonShares pursuant to any purchase warrants or Compensation Options existing onthe date hereof) for a period ending 180 days after the Closing Date withoutthe prior written consent of the Agent, such consent not to be unreasonablywithheld.

 

This special covenant may be signed by the directorsand officers in as may counterparts as may be necessary, originally or bytelecopier facsimile signature, each of which so signed shall be deemed to bean original, and such counterparts together shall constitute one and the sameinstrument and notwithstanding the date of execution shall be deemed to bearthe date first written below.

 

Dated as of the           day of June, 2004.

 

 
|               |   |               |   |
|--------------------|--------|--------------------|--------|
|   • |   |   • |   |
|               |   |               |   |
|               |   |               |   |
|   • |   |   • |   |

 

33

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**SCHEDULE “B”**

** **

**DETAILS AS TO THE SUBSIDIARIES OF THE COMPANY**

** **

**Thisis Schedule “B” to the Agency Agreement between ADB Systems InternationalLtd. and First Associates Investments Inc. made as of June 15, 2004.**

 
| **Name  of Subsidiary**           |   | **Country  of Incorporation** |   | **Ownership  Interest** |   |
|-----------------------------------|--------|-------------------------------|--------|-------------------------|--------|
|                              |   |                          |   |                    |   |
| ADB Systemer AS                   |   | Norway                        |   | 99.4                    | %      |
| ADB Systems International Limited |   | Ireland                       |   | 100                     | %      |
| ADB Systems Limited               |   | England                       |   | **100**                 | %      |
| Bid.Com (U.K.) Limited            |   | England                       |   | 100                     | %      |
| ADB Systems, Inc.                 |   | USA (Delaware)                |   | 100                     | %      |
| Bid.Com USA, Inc.                 |   | USA (Florida)                 |   | **100**                 | %      |
| Bid.Com International Inc.        |   | Canada (Ontario)              |   | 100                     | %      |
| Bid.Com International Pty. Ltd.   |   | Australia                     |   | 100                     | %      |
| Internet Liquidators USA, Inc.    |   | USA (Florida)                 |   | 100                     | %      |
| ADB Systems USA, Inc.             |   | USA (Delaware)                |   | 100                     | %      |
| GE Asset Manager LLC              |   | USA (Delaware)                |   | 50                      | %      |

 

34

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**SCHEDULE “C”**

** **

**DETAILS AS TO THE OUTSTANDING CONVERTIBLE SECURITIES**

** **

**Thisis Schedule “C” to the Agency Agreement between ADB Systems InternationalLtd. and First Associates Investments Inc. made as of June 15, 2004.**

 

**SecuredConvertible Debt:**

 
| **Series  Number** |   | **Lender**                          |   | **Principal  Outstanding** |      | **Maturity  Date** |      |
|--------------------|--------|-------------------------------------|--------|----------------------------|-----------|--------------------|-----------|
|               |   |                                |   |                       |      |               |      |
| D2                 |   | Chris Bulger                        |   | $                          | 20,000    |               | 31-Dec-04 |   |
| D7                 |   | Jeff Lymburner                      |   | 20,250                     |      | 31-Dec-04          |      |
| D11                |   | Kenneth and Kelly Sparfel           |   | 20,000                     |      | 31-Dec-04          |      |
|               |   | Total Series D                      |   | 60,250                     |      |               |      |
|               |   |                                |   |                       |      |               |      |
| E2                 |   | Greenwich Growth Fund               |   | 75,000                     |      | 19-Aug-06          |      |
| E3                 |   | Janet Harop                         |   | 25,000                     |      | 19-Aug-06          |      |
| E4                 |   | Christopher Harop                   |   | 50,000                     |      | 19-Aug-06          |      |
| E5                 |   | Mike Robb                           |   | 15,000                     |      | 19-Aug-06          |      |
| E6                 |   | Jim Moskos                          |   | 35,000                     |      | 19-Aug-06          |      |
| E7                 |   | Paul Godin                          |   | 50,000                     |      | 19-Aug-06          |      |
| E8                 |   | Arne Hellesto                       |   | 200,000                    |      | 19-Aug-06          |      |
|               |   | Total Series E                      |   | 600,000                    |      |               |      |
|               |   |                                |   |                       |      |               |      |
| F                  |   | Stonestreet Limited  Partnership    |   | 500,000                    |      | 19-May-07          |      |
|               |   |                                |   |                       |      |               |      |
|               |   | Total Convertible Debt  Outstanding |   | $                          | 1,010,250 |               |      |   |

 

**Options:**

 

As of June 11, 2004 thereare 2,156,707 options issued to employees, directors and third parties that canbe converted into common shares.

 

35

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**Warrants:**

 
| **Holder**                |   | **Warrant Number** |   | **Date Issued** |   | **Expiry Date** |   | **Number Issued** |   |
|---------------------------|--------|--------------------|--------|-----------------|--------|-----------------|--------|-------------------|--------|
|                      |   |               |   |            |   |            |   |              |   |
| GE Capital                |   | GE-02-1            |   | 13-Dec-02       |   | 5-Jan-05        |   | 250,000           |   |
| GE Capital                |   | GE-02-2            |   | 13-Dec-02       |   | 5-Jan-05        |   | 1,000,000         |   |
| GE Capital                |   | GE-02-3            |   | 13-Dec-02       |   | 5-Jan-05        |   | 750,000           |   |
|                      |   |               |   |            |   |            |   | **2,000,000**     |   |
|                      |   |               |   |            |   |            |   |              |   |
| Stonestreet Associate     |   | 2002-1             |   | 25-Apr-02       |   | 25-Apr-05       |   | 50,000            |   |
|                      |   |               |   |            |   |            |   | **50,000**        |   |
|                      |   |               |   |            |   |            |   |              |   |
| C. Bulger                 |   | Not applicable     |   | To be issued    |   | 31-Dec-04       |   | 83,333            |   |
| C. Dawson                 |   | W-D-9              |   | 21-Feb-03       |   | 31-Dec-04       |   | 104,167           |   |
| M. & A. Lai           |   | W-D-11             |   | 21-Feb-03       |   | 31-Dec-04       |   | 104,167           |   |
| Lai Children’s Trust |   | W-D-10             |   | 21-Feb-03       |   | 31-Dec-04       |   | 104,167           |   |
| R. Lymburner              |   | W-D-7A             |   | To be issued    |   | 31-Dec-04       |   | 84,375            |   |
| A. Rowsome                |   | W-D-8              |   | 3-Feb-03        |   | 31-Dec-04       |   | 62,500            |   |
| K. & K. Sparfel       |   | Not applicable     |   | To be issued    |   | 31-Dec-04       |   | 83,333            |   |
| Stonestreet Associate     |   | W-02-01            |   | 30-Aug-02       |   | 31-Dec-04       |   | 150,000           |   |
|                      |   |               |   |            |   |            |   | **776,043**       |   |
|                      |   |               |   |            |   |            |   |              |   |
| H. Schweizer              |   | 03-01              |   | 26-Jun-03       |   | 26-Jun-05       |   | 150,000           |   |
| A. Hellesto               |   | 03-02              |   | 26-Jun-03       |   | 26-Jun-05       |   | 416,667           |   |
| F. Jung                   |   | 03-03              |   | 26-Jun-03       |   | 26-Jun-05       |   | 100,000           |   |
| K. MacDonald              |   | 03-04              |   | 26-Jun-03       |   | 26-Jun-05       |   | 100,000           |   |
| V. Konidis                |   | 03-05              |   | 26-Jun-03       |   | 26-Jun-05       |   | 100,000           |   |
| P.Bacasalmasi             |   | 03-06              |   | 26-Jun-03       |   | 26-Jun-05       |   | 100,000           |   |
| K. Prasad                 |   | 03-07              |   | 26-Jun-03       |   | 26-Jun-05       |   | 322,916           |   |
| Growlings Canada Inc.     |   | 03-08              |   | 26-Jun-03       |   | 26-Jun-05       |   | 693,092           |   |
| B. Piva                   |   | 03-09              |   | 26-Jun-03       |   | 26-Jun-05       |   | 83,333            |   |
| Greenwhich Growth Fund    |   | 03-10              |   | 26-Jun-03       |   | 26-Jun-05       |   | 250,000           |   |
| Strategy Capital Corp.    |   | 03-11              |   | 26-Jun-03       |   | 26-Jun-05       |   | 104,167           |   |
| K. & K. Sparfel       |   | 03-12              |   | 26-Jun-03       |   | 26-Jun-05       |   | 83,333            |   |
| C. Cimicata               |   | 03-13              |   | 26-Jun-03       |   | 26-Jun-05       |   | 208,333           |   |
| J. Racanelli              |   | 03-14              |   | 26-Jun-03       |   | 26-Jun-05       |   | 20,833            |   |
|                      |   |               |   |            |   |            |   | **2,732,674**     |   |
|                      |   |               |   |            |   |            |   |              |   |
| Stonestreet               |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 785,714           |   |
| Greenwich Growth Fund     |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 107,143           |   |
| J. Harrop                 |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 35,714            |   |
| C. Harrop                 |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 71,429            |   |
| M. Robb                   |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 21,429            |   |
| P. Godin                  |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 71,429            |   |
| J. Moskos                 |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 50,000            |   |
| A. Helesto                |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 285,714           |   |
| Stonestreet Associate     |   | Not applicable     |   | To be issued    |   | 19-Aug-06       |   | 30,000            |   |
|                      |   |               |   |            |   |            |   | **1,458,571**     |   |
|                      |   |               |   |            |   |            |   |              |   |
| Stonestreet               |   | Not applicable     |   | To be issued    |   | 19-May-07       |   | 806,452           |   |
|                      |   |               |   |            |   |            |   | **806,452**       |   |
|                      |   |               |   | **GRAND TOTAL** |   |            |   | **7,823,740**     |   |

** **

**36**

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** **

**SCHEDULE “D”**

** **

**DETAILS AS TO THE INTELLECTUAL PROPERTY**

** **

**Thisis Schedule “D” to the Agency Agreement between ADB Systems InternationalLtd. and First Associates Investments Inc. made as of June 15, 2004.**

 

**PARTI – OWNED INTELLECTUAL PROPERTY**

** **

ADB has established Intellectual Property andIntellectual Property Rights through its software development activities andcreation of on-line transaction processes.

 

**Overview of software products**

** **

ADB Systems has developed an integratedseries of software applications designed for asset lifecycle management.  These software applications include:

 

•                                          Dyn@mic Buyer, an on-line solution that helps organizations automatetheir tendering activities (e.g. reverse auctions, request forquotations/proposals) and reduce procurement costs.

 

•                                          ProcureMate, a web-based solution that allows organization tostreamline the purchasing of maintenance, repairs and operating (MRO) supplieswhile reducing procurement costs.

 

•                                          WorkMate, a comprehensive enterprise asset management solution thatallows organizations to automate and integrate maintenance management,materials management and procurement activities.

 

•                                          Dyn@mic Seller, a web-based sales solution that enablesorganizations to manage inventory and reduce surplus through the use of on-lineauctions.

 

**Overview of patents**

** **

ADB has also registered a number of patents,(issued and pending), with U.S. Patent Office relating to its on-linetransaction processes.  These patentsinclude:

 

37

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**PATENT PORTFOLIO SUMMARY**(UpdatedJune 4, 2004)

 
| **FILING  DATE**       |   | **TYPE**                        |   | **SERIAL  NO.**                               |   | **OUR  FILE** |   | **TITLE  (INVENTORS)**                                          |   | **STATUS**                                                                                   |
|------------------------|--------|---------------------------------|--------|-----------------------------------------------|--------|---------------|--------|-----------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|
| July 11, 1996     |   | CDN patent appln                |   | 2,180,995                                     |   | 08-886238CA   |   | Computer Auction System  (GODIN, Paul B.;  LYMBURNER, Jeffrey)  |   | Filed Reinstatement and Response to outstanding  Office Action – December 18, 2003 |
| August 26, 1996   |   | US patent appln                 |   | 5,890,138                                     |   | 08-886238US   |   | Computer Auction System  (GODIN, Paul B.;  LYMBURNER, Jeffrey)` |   | Issued – March 30, 1999                                                            |
| March 9, 1999     |   | US patent appln  (Divisional)   |   | 6,266,652 B1 claimed priority from  5,890,138 |   | 08-886238US1  |   | Computer Auction System  (GODIN, Paul B.;  LYMBURNER, Jeffrey)  |   | Issued – July 24, 2001                                                             |
| February 22, 2001 |   | US patent appln  (continuation) |   | 09/789,636                                    |   | 08-886238US2  |   | Computer Auction System  (GODIN, Paul B.;  LYMBURNER, Jeffrey`  |   | Abandoned on Instruction  May 17, 2002                                                  |

 

**Overview of Trade Names andTrademarks**

** **

Trademarks ortrade names which the Company owns include ADBTM; PROCUREMATETM; WORKMATETM; BIDBUDDYTM; SEARCH BUDDYTM: DYNAMIC BUYERTM and DYNAMIC SELLERTM.

 

**PARTII – LICENSED INTELLECTUAL PROPERTY**

** **

**Dyn@micBuyer Technology Components**

** **

Dynamic Buyer was constructed on theMicrosoft .Net platform and used the MS-SQL database engine. The related coreIP includes XML parsers and translation components, user abstraction layers andspecialized component factories.

 

**Dyn@micSeller Technology Components**

** **

Dynamic Seller was developed using theMicrosoft COM+ and D-Com architectures and technologies. It utilizes MS-SQL asits database. The related core IP includes XML parsers and translationcomponents, user abstraction layers and specialized component factories.

 

**WorkMateTechnology Components**

** **

The Workmate application is constructed usingthe Powerbuilder suite of development tools and using Oracle as themulti-platform database engine. The related IP includes integration engines,component class libraries and specialized OLAP reporting engines.

 

38

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**ProcureMateTechnology components**

** **

Procuremate was created using the MicrosoftVisual Studio suite of development tools. It utilizes Oracle as themulti-platform database engine. The related core IP includes XML parsers andtranslation components, user abstraction layers, Web Integration Engines andcomponents, as well as specialized component factories.

 

**PARTIII – RIGHTS GRANTED IN OWNED INTELLECTUAL PROPERTY**

** **

Patent License Agreement between NCRCorporation and ADB Systems International Inc. dated April 17, 2001.

 

ADB Systems International Inc. and the Brick– Loan Transaction Documents.

 

ADB License Agreement for Dynamic Buyer andDynamic Seller between ADB Systems USA, Inc. and GE Asset Manager, LLC formingpart of the Amended and Restated Operating Agreement between General ElectricCapital Corporation and ADB Systems USA, Inc.

 

39

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**SCHEDULE “E”**

** **

**TERMS FOR SALES TO U.S. PERSONS**

** **

**Thisis Schedule “E” to the Agency Agreement between ADB Systems InternationalLtd. and First Associates Investments Inc. made as of June 15, 2004.**

 

****See attached.****

 

40

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**SCHEDULE “F”**

** **

**PERMITTED ENCUMBRANCES**

** **

**“Permitted Security Interests”** means with respect to any property or asset of any Person:

 

(a)                                  security interests forprovincial or municipal taxes, charges, rates and assessments not yet due or,if due, the validity of which is being contested in good faith and securityinterests for the excess of the amount of any past due taxes for which a finalassessment has not been received over the amount of such taxes as estimated andpaid by such Person;

 

(b)                                 the security interests of anyjudgement rendered or claim filed against the Corporation or its property whichit shall be contesting in good faith and in respect of which there shall havebeen deposited with an arms-length Person acceptable to the Registered Holder,acting reasonably, cash, security or a surety bond satisfactory to sucharms-length Person in an amount sufficient to pay such judgement or claim;

 

(c)                                  defects or irregularities oftitle which do not in the aggregate materially impair the value of the propertyto which they related or interfere with the use of the property to which theyrelate for the purposes for which it is held by such Person;

 

(d)                                 pledges or deposits to securepayment of workers’ compensation, good faith deposits in connection withtenders, contracts (other than contracts for the repayment of moneys borrowed)or leases, deposits to secure public or statutory obligations, deposits tosecure or in lieu of surety or appeal bonds, and pledges or deposits forsimilar purposes in the ordinary course of business;

 

(e)                                  purchase money securityinterests;

 

(f)                                    security interests granted bythe Corporation to secure indebtedness of the Corporation to any of the Holdersof the Notes;

 

(g)                                 the security interestsperfected by the registrations made under the PPSA and listed below; and

 

(h)                                 any other security interestsaccepted from time to time by the Holders of Notes representing a majority ofthe aggregate principal amounts then outstanding under all Notes in writing.

 

For the purposes of this Schedule “F”,the term “security interests” means any mortgage, charge, pledge,hypothecation, lien (statutory or otherwise), assignment, finance lease, titleretention agreement or arrangement, security interest or other encumbrance oradverse claim of any nature, or any other security agreement or arrangementcreating in favour of any creditor a right in respect of a particular propertyor asset.

 

41

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**Permitted PPSA Registrations**

** **
| File Number:         |   | 084987306                        |
|----------------------|--------|----------------------------------|
| Registration Number: |   | 20021104151100439461             |
|                 |   | 20021108165217583169             |
|                 |   | 20030826182015316880             |
|                 |   | 20040527145115302544             |
|                 |   |                             |
| Debtor Name:         |   | ADB Systems International Ltd.   |
| Secured Party:       |   | Jeff Lymburner                   |
|                 |   |                             |
| File Number:         |   | 888880464                        |
| Registration Number: |   | 20021104144390654204             |
|                 |   | 20021108165217583161             |
|                 |   | 20030826182015316881             |
|                 |   | 20040527145115302545             |
|                 |   |                             |
| Debtor Name:         |   | ADB Systems International Ltd.   |
| Secured Party:       |   | Christopher Bulger               |
|                 |   |                             |
| File Number:         |   | 888880518                        |
| Registration Number: |   | 20021104144390654209             |
|                 |   | 20021108165217583166             |
|                 |   | 20031021145615300346             |
|                 |   | 20040527145115302546             |
|                 |   |                             |
| Debtor Name:         |   | ADB Systems International Ltd.   |
| Secured Party:       |   | Kenneth Sparfel, Kelly  Sparfel  |
|                 |   |                             |
| File Number:         |   | 881960004                        |
| Registration Number: |   | 20020510181117159588             |
|                 |   | 20030826092017152348             |
|                 |   |                             |
| Debtor Name:         |   | ADB Systems International Inc.   |
| Secured Party:       |   | Xerox Canada Ltd.                |
|                 |   |                             |
| File Number:         |   | 897234246                        |
| Registration Number: |   | 20030812145215303748             |
| Debtor Name:         |   | ADB Systems International  Ltd.  |
| Secured Party:       |   | Stonestreet Limited  Partnership |

 

42

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| File Number:         |   | 897234255                                    |
|----------------------|--------|----------------------------------------------|
| Registration Number: |   | 20030812145215303749                         |
| Debtor Name:         |   | ADB Systems International  Ltd.              |
| Secured Party:       |   | Greenwich Growth Fund Ltd.                   |
|                 |   |                                         |
| File Number:         |   | 897592122                                    |
| Registration Number: |   | 20030825184115313987                         |
| Debtor Name:         |   | ADB Systems International  Ltd.              |
| Secured Party:       |   | Canaccord Capital Corp.                      |
|                 |   | ITF Janet Harrop A/C 133388S7                |
| Description:         |   | General Security Agreement                   |
|                 |   |                                         |
| File Number:         |   | 897592131                                    |
| Registration Number: |   | 20030825184115313988                         |
| Debtor Name:         |   | ADB Systems International Ltd.               |
| Secured Party:       |   | Canaccord Capital Corp.                      |
|                 |   | ITF Christopher Harrop A/C  133384S6         |
| Description:         |   | General Security Agreement                   |
|                 |   |                                         |
| File Number:         |   | 897592149                                    |
| Registration Number: |   | 20030825184115313989                         |
| Debtor Name:         |   | ADB Systems International  Ltd.              |
| Secured Party:       |   | Robb, Michael                                |
| Description:         |   | General Security Agreement                   |
|                 |   |                                         |
| File Number:         |   | 897592158                                    |
| Registration Number: |   | 20030825184115313990                         |
| Debtor Name:         |   | ADB Systems International  Ltd.              |
| Secured Party:       |   | Mokos, James                                 |
| Description:         |   | General Security Agreement                   |
|                 |   |                                         |
| File Number:         |   | 897592167                                    |
| Registration Number: |   | 20030825184115313991                         |
| Debtor Name:         |   | ADB Systems International  Ltd.              |
| Secured Party:       |   | Gundyco ITF Paul Godin RRSP  A/C 59121001-11 |
| Description:         |   | General Security Agreement                   |
|                 |   |                                         |
| File Number:         |   | 897592176                                    |
| Registration Number: |   | 20030825184115313992                         |
| Debtor Name:         |   | ADB Systems International  Ltd.              |
| Secured Party:       |   | Hellesto, Arne                               |

 

43

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| Description:         |   | General Security Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|----------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| File Number:         |   | 605431161                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Registration Number: |   | 20040512170314627442                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Debtor Name:         |   | ADB Systems International  Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Secured Party:       |   | Stonestreet Limited  Partnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Description:         |   | General Security Agreement  with respect to $500,000 Principal Series F of secured convertible note  issued by debtor to secured party, but which is to rank **pari passu****with the Permitted Security Interests, except in  respect of** (i) the Company’s world-wide account receivables  and all proceeds therefrom; and (ii) the proceeds from the account  receivables insurance policy No. GG1-27888 issued by Export Development  Canada and St. Paul Guarantee Insurance Company, insuring 90% of value of the  Receivables**, for which the security interest of Stonestreet  Limited Partnership referred to above is to rank in priority**pursuant  to a priority agreement dated June 15, 2004 by Stonestreet Limited  Partnership and the Company in favour of the Holders of the Notes**.** |

 

44

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