**Exhibit4.20**

 

**SUBSCRIPTIONAGREEMENT**

 

**TO:**         **ADB SYSTEMS INTERNATIONAL LTD.**(the“**Company**”)

 

Dear Sirs:

 

The undersigned (the “**Subscriber**”) understands thatthe Company is proposing to issue one Series F 7% secured convertible note (the“**Series FNote**”) in the principal amount of $500,000.  The Series F Note has a maturity date of May19, 2007 (the “**Maturity Date**”).  Theform of the Series F Note (the “**Note Certificate**”) is set forth in **Exhibit A**attachedhereto.

 

The Subscriber wishes to subscribe for the Series FNote in the principal amount of Cdn$500,000.00 (the “**Loan Amount**”) in accordancewith and subject to the terms of this subscription agreement (the “**Note**”).

 

The outstanding principal amount of the Note can beconverted at the Subscriber’s option into units (each a “**Unit**”) at a conversion price(the “**ConversionPrice**”) of $0.31 per Unit prior to receipt of payment in full bothbefore and after default.  In addition,if, after the date that is four (4) months plus a day from the Closing Date (ashereinafter defined), the trading price of the Company’s common shares on theToronto Stock Exchange (the “**TSX**”) closes above $0.70 for at least fiveconsecutive trading days, the outstanding principal amount of the Note willautomatically convert into Units at the Conversion Price on the next followingbusiness day (the “**Automatic Conversion Date**”).  Each Unit consists of one common share inthe capital of the Company (a “**Company Share**”) and one half of one commonshare purchase warrant (the “**Warrant**”), with each whole Warrantentitling the holder to purchase one common share of the Company at $0.50 pershare exercisable until May 19, 2007. The form of the****Warrant (the “**Warrant****Certificate**”) is annexedhereto as **ExhibitB**.

 

The Company Shares and the common shares issuable uponthe exercise of the Warrants (the “**Warrant Shares**”) are collectively referredto in this Agreement as the “**Shares**”. The Shares and the Warrants are collectively referred to in thisAgreement as the “**Underlying****Securities**”.  The Note and the Underlying Securities arecollectively referred to in this Agreement as the “**Securities**”.

 

The following terms and conditions shall apply to thissubscription.

 

1.             Subscriptionfor Notes

 

(a)           TheSubscriber hereby subscribers for the Note in accordance and subject to theterms of this subscription agreement.

 

(b)           Theclosing of the issue of the Note (the “**Closing**”) shall take place at 2:00 p.m.(Toronto time) (the “**Time of Closing**”) at the offices of Folger,Rubinoff LLP, Toronto, Ontario, on May 19, 2004, or at such other time andplace as may be agreed upon by the parties, provided that on such date theconditions set forth in section 2****below shall have been satisfied or waived(such closing day or such other time being hereinafter referred to as the “**Closing Date**”).

 

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(c)           TheNote shall be issued on the Closing Date as fully registered and shall be fullytransferable subject to compliance with applicable Securities Laws (ashereinafter defined).

 

(d)           At theTime of Closing on the Closing Date, the Company shall deliver to or to theorder of the Subscriber the definitive Note Certificate representing the Notesubscribed for hereunder, the documentation contemplated herein and suchfurther documentation as counsel for the Subscriber may reasonably requireagainst payment of the Loan Amount by certified cheque or wire transfer payableto or to the order of the Company.

 

2.             Conditionsof Closing

 

(a)           TheCompany’s obligation to issue the Note to the Subscriber is subject to theconditions that:

 

(i)            such issuance beconditionally accepted by the TSX;

 

(ii)           the issuance of the Noteand Underlying Securities are exempt from the prospectus filing requirementsunder applicable securities statutes, regulations, rules, policy statements andinterpretation notes and by the applicable rules and policies of the TSX(collectively, “**Securities Laws**”); and

 

(iii)          the representations andwarranties of the Subscriber are true and correct as at the Closing Date.

 

(b)           TheSubscriber’s obligation to subscribe for the Note is subject to the followingconditions:

 

(i)            the issue of the Notehaving been approved by the board of directors of the Company;

 

(ii)           the issue of the Notehaving been conditionally approved by the TSX;

 

(iii)          the Company shall haveprovided evidence satisfactory to the Subscriber that the Company has obtainedcommitment to raise $500,000 in additional to the Loan Amount;

 

(iv)          the Company shall have maintained onClosing from Export Development Canada (“**EDC**”) and St. Paul Guarantee InsuranceCompany (“**St.Paul Guarantee**”), an account receivables insurance policy (the “**ReceivableInsurance Policy**”) insuring 90% of value of the Company’s world-wideaccount receivables (the “**Receivables**”);

 

(v)           the Company shall have irrevocablydirected EDC and St. Paul Guarantee to pay the proceeds from the ReceivableInsurance Policy to the holder(s) of the Series F Note shown on the CertifiedHolder’s List described in section 6(i)(i), in accordance with the PaymentInstruction described in section 6(i)(ii), upon any claim made under theReceivable Insurance Policy;

 

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(vi)          the security interest granted by theCompany in favour of each of persons shown in **Schedule 3** shall have beendischarged or postponed and subordinated to the security interest to be grantedby the Company in favour of the Subscriber;

 

(vii)         Jeff Lymburner (“**Lymburner**”) shall haveprovided a limited recourse guarantee (the “**Guarantee**”) for the Company’sobligations under the Note, secured by a pledge of 800,000 shares in theCompany beneficially owned by Lymburner (the “**Pledged Shares**”) inaccordance with a share pledge agreement by Lymburner in favour of theSubscriber (the “**Share Pledge Agreement**”);

 

(viii)        all covenants of the Company hereunderthat are required to be performed on or prior to the Closing Date shall havebeen performed;

 

(ix)           the Subscriber shall have beensatisfied with the results of its due diligence review on the affairs of theCompany; and

 

(x)            the representations andwarranties of the Company shall be true and correct as at the Closing Date.

 

(c)           If anyof the conditions set forth in (a) or (b) above is not satisfied or waivedprior to Closing, this subscription agreement shall terminate and the partiesshall have no further obligations hereunder.

 

3.             Representations,Warranties and Covenants of Subscriber and Resale Restrictions

 

(a)           TheSubscriber hereby represents and warrants to the Company (which representationsand warranties shall survive the Closing) that:

 

(i)            the Subscriber isacquiring the Note as principal for its own account, and not for the benefit ofany other person;

 

(ii)           the Subscriber is aresident of Ontario, and is an “accredited investor” as such term is defined inOntario Securities Commission Rule 45-501 “Exempt Distributions” (“**Rule 45-501**”);

 

(iii)          the Subscriber has an office or place of business set forth in the TSXPrivate Placement Questionnaire and Undertaking attached hereto as **Schedule 2**;

 

(iv)          this agreement has been dulyauthorized, executed and delivered by the Subscriber and constitutes the validand binding agreement of the Subscriber, enforceable in accordance with itsterms, except that:

 

(A)          enforcementthereof may be limited by bankruptcy, insolvency and other laws affecting theenforcement of creditors’ rights generally;

 

(B)           specificperformance, injunction and other equitable remedies may only be granted in thediscretion of a court of competent jurisdiction; and

 

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(C)           rightsto contribution and indemnity thereunder may be limited under public policy orotherwise under applicable law.

 

(b)           TheSubscriber acknowledges that the Note has not been and will not be registeredunder the United States Securities Act of 1933, as amended (the “**1933 Act**”),and may not be offered, sold, resold or delivered within the United States ofAmerica, its territories or possessions, other than pursuant to an effectiveregistration statement or an applicable exemption under the 1933 Act.

 

(c)           The Subscriber covenants andagrees with the Company that:

 

(i)            it will execute and deliver all documentation and provide allinformation required by the Securities Laws, if required, to permit thepurchase of the Note on the terms set forth herein, including,

 

(A)          an accredited investor certificate in the form attached hereto as **Schedule 1**,and

 

(B)           a TSX Private Placement Questionnaire and Undertaking in the formattached hereto as **Schedule 2**; and

 

(ii)           it will comply with the Securities Laws concerning any resale of theSecurities, and in particular, the Subscriber understands and acknowledges that the Securities will besubject to a four month resale restriction under applicable Securities Laws.

 

(d)           Legend.  The Subscriber, if residentin Canada, acknowledges that

 

(i)            the Note Certificate, and

 

(ii)           certificates representing

 

(A)          theCompany Shares and the Warrants issued upon the conversion of the Note prior toSeptember 20, 2004, and

 

(B)           theWarrant Shares purchased upon exercise of the Warrants prior to September 20,2004,

 

will contain the following legend required pursuant toMultilateral Instrument 45-102 (Resale of Securities) of the CanadianSecurities Administrators adopted as a Rule by the OSC (“**MI 45-102**”), and theSubscriber agrees to comply with the terms of such legend:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THEHOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE SEPTEMBER 20, 2004.”

 

(e)           The Subscriber acknowledges that the Company will be required to provideapplicable securities regulatory authorities with certain information requiredby the Securities Laws and agrees to provide the Company with any such requiredinformation.

 

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4.             Representationsand Warranties of the Company  

 

The Company hereby represents and warrants to theSubscriber (which representations and warranties shall survive closing) that:

 

(i)            the Company is now and hasbeen a reporting issuer under the *Securities Act* (Ontario) for the fourmonths immediately preceding the date hereof and is not in default thereunder;

 

(ii)           the Company has been dulyorganized under the laws of the Province of Ontario and has all requiredcorporate power and authority to enter into and carry out the provisions ofthis subscription agreement and the transactions contemplated hereby;

 

(iii)          this subscription agreementhas been duly authorized, executed and delivered by the Company and is a validand binding agreement enforceable in accordance with their respective terms,except that:

 

(A)          enforcementthereof may be limited by bankruptcy, insolvency and other laws affecting theenforcement of creditors’ rights generally;

 

(B)           specificperformance, injunction and other equitable remedies may only be granted in thediscretion of a court of competent jurisdiction; and

 

(C)           rightsto contribution and indemnity thereunder may be limited under public policy orotherwise under applicable law;

 

(iv)          all necessary corporateaction has been taken or will have been taken prior to the Closing Date by theCompany to validly create, issue and sell the Note subscribed for by theSubscriber pursuant to this subscription agreement;

 

(v)           the Company Shares will bevalidly authorized, issued and outstanding as fully paid and non-assessableshares in the capital of the Company upon due conversion of the Note;

 

(vi)          the Warrants will be validlyauthorized, issued in the capital of the Company upon the due conversion of theNote;

 

(vii)         the Warrant Shares will bevalidly authorized, issued and outstanding as fully paid and non-assessableshares in the capital of the Company upon the due exercise of the Warrants;

 

(viii)        no approval, authorization,consent or other order of, and no filing, registration or recording with, anygovernmental authority is required by the Company in connection with theexecution and delivery or with the performance by the Company of thissubscription agreement except the conditional and final approval of the TSX ofwhich the conditional approval has been obtained;

 

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(ix)           as at May 14, 2004, therewere 61,420,621common shares in the capital of the Company issued andoutstanding;

 

(x)            as at May 13, 2004, thevalue of the Company’s world-wide accounts receivable was $872,837;

 

(xi)           as at May 13, 2004, the aggregateprincipal amounts outstanding under the Series E 11% convertible notes of theCompany issued on August 19, 2003 (the “**Series****E Notes**”) were $600,000 and there were nointerest on the Series E Notes that were due and unpaid;and

 

(xii)          the Company’s common sharesare listed for trading on the TSX and except as publicly disclosed, the Companyhas not received any oral or written notice that its common stock will bedelisted from the TSX or that the Company’s common shares do not meet allrequirements for the continuation of such listing.

 

5.             Relianceupon Representations, Warranties 

 

The parties agree that,by the Company delivering the Note Certificate to the Subscriber and by theSubscriber accepting the Note Certificate, each party will be representing andwarranting that the party’s representations and warranties contained in thissubscription agreement are true as at the Closing Date, with the same force andeffect as if they had been made by the such party at the Closing Date, and thatthey will survive the purchase by the Subscriber of the Note and continue infull force and effect for a period of two (2) years following the Closing Datenotwithstanding any subsequent disposition by the Subscriber of the Note or theUnderlying Securities.

 

6.             Covenantsof the Company.

 

The Company hereby covenants and agrees with theSubscriber as follows:

 

(a)           tocause the Note to be duly and validly created and issued;

 

(b)           tocause the Shares issuable upon the conversion of the Note and upon the exerciseof the Warrants to be duly and validly authorized, created and issued asfully-paid and non-assessable common shares in the capital of the Company;

 

(c)           to useits commercial best efforts to ensure that the Company Shares and WarrantShares are listed and posted for trading on the TSX upon their issue;

 

(d)           topromptly comply with all applicable filing and other requirements under allapplicable Securities Laws, including without limitation, the filing of Form45-501F1 under Rule 45-501 within 10 days of the Closing Date;

 

(e)           to useits commercial best efforts to maintain its status as a reporting issuer in theprovince of Ontario and to continue to be in compliance with its obligationsunder the Securities Laws of Ontario, including without limitation, the paymentof participation fees under Ontario Securities Commission Rule 13-502;

 

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(f)            toobtain the Receivable Insurance Policy on or prior to the Closing Date, to keepthe Receivable Insurance Policy in good standing for as long as any amountremains outstanding under the Series F Note, and not to cancel or amend theReceivable Insurance Policy without prior written consent of the Subscriber;

 

(g)           tocreate and maintain a register of holder(s) of the Series F Note (the “**HolderRegister**”) and shall record in the Holder Register all relevantinformation on the Series F Note and holder(s) thereof, including withoutlimitation, name and address of each holder, outstanding principal amount(s) ofthe Series F Note, numbers of Note Certificates, outstanding amount and paymentof interest on the Series F Note, conversion of any principal amount of theSeries F Note, and any assignment of the Series F Note;

 

(h)           todeliver on or prior to the Closing Date a copy of the executed ReceivableInsurance Policy;

 

(i)            notto make any claim under the Receivable Insurance Policy as long as any amountremains outstanding under any of the Series F Note, unless such claims issubmitted together with:

 

(i)            a list of holder(s) of theSeries F Note as at the time of making such claim certified by an officer ofthe Company (the “**Certified Holders’ List**”); and

 

(ii)           a payment instructionsettling out the amounts to be paid to each holder shown on the certified listreferred to in section 6(i)(i) signed by each of such holder (the “**PaymentInstruction**”);

 

(j)            todeliver on or prior to the Closing Date to EDC and St. Paul Guarantee anirrevocable direction (the “**Direction**”) that, as long as any amountremains outstanding under any of the Series E Notes or the Series F Note, theproceeds of the Receivable Insurance Policy shall be paid firstly to theholders of the Series E Notes shown on the certified holders’ list and secondlyto the holder(s) of the Series F Note shown on the Certified Holders’ List inaccordance with the Payment Instruction to be submitted together with any claimmade under the Receivable Insurance Policy;

 

(k)           torenew the Receivable Insurance Policy each year during the term of the Series FNote;

 

(l)            tocause each person listed on **Schedule 3** to discharge their securityinterest against the Company, or to execute a subordination and postponementagreement to subordinate their security interest against the Company to thesecurity interest to be granted by the Company in favour of the subscribers ofthe Series F Note; and

 

(m)          ifapplicable, make withholdings required under Part 13 of the *Income TaxAct* (Canada) with respect to any payments to be made to theSubscriber under the Note and remit such withholdings to applicable governmentalauthority.

 

7.             SubsequentFinancing

 

(a)           TheCompany shall not, during one year following the Closing Date, complete anydebt or equity financing without the Subscriber’s prior written consent, suchconsent

 

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not to be unreasonably withheld.  However, no such consent from the Subscriberis required if:

 

(i)            in case the financing isby way of issuance of additional debt,

 

(A)          theterms of the financing are not more favorable to the holders of the additionaldebt than the terms of the Series F Note to the Subscriber (including withoutlimitation, the conversion price, the number of underlying warrants issuableupon conversion and the exercise price and term of the underlying warrants);and

 

(B)           theSubscriber will rank in priority over the holders of any additional debt withrespect to security interest in Company’s assets and with respect toentitlement to the proceeds of the Receivables Insurance Policy; and

 

(C)           incase the financing is by way of issuance of additional equity, the issue priceof any offered shares shall be at least $0.31 per share, and the exercise pricefor any convertible securities (other than convertible debt) issued with theshares such as warrants shall be at least $0.50 per share with an exerciseperiod no longer than three years.

 

(b)           TheCompany shall provide prior written notice to the Subscriber of any financingduring the one year period following the Closing Date.

 

8.             Costs

 

(a)           Allexpenses incurred by the Company (including the fees and disbursements ofcounsel for the Company) relating to the issuance of the Series F Note, issueof the Underlying Securities, listing of the Shares, printing, photocopying,professional fees and all other costs and expenses incurred by the Companyrelating to the transactions contemplated herein shall be borne by the Company.

 

(b)           TheSubscriber party shall bear its own legal and other professional expensesincurred in connection with the offering of the Series F Note, provided thatthe Company will reimburse the Subscriber for that portion of the Subscriber’slegal fees reasonably relating to the preparation of the documents required inthe offering of the Series F Note.

 

(c)           TheCompany will not incur or pay any agent’s fees, broker’s fees or other fees orcommissions in connection with the offering of the Series F Note except legaland audit fees.

 

9.             Securityfor the Note

 

The Company agrees to grant to the Subscriber ageneral security interest over all assets of the

 

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Company to secure the Company’s performance of its obligations underthe Note, all in accordance with the general security agreement attached to theform of Note (the “**General Security Agreement**”).

 

10.           Jurisdiction

 

This subscription agreement is governed by the laws ofthe Province of Ontario and the federal laws of Canada applicable therein.  By the Subscriber executing thissubscription agreement below, the Subscriber irrevocably attorns to thejurisdiction of the courts of Ontario.

 

11.           FacsimileSubscriptions

 

The Company shall be entitled to rely on delivery byfacsimile of an executed copy of this subscription agreement and acceptance bythe Company of that delivery shall be legally effective to create a valid andbinding agreement between the Subscriber and the Company in accordance with theterms of this subscription agreement.

 

12.           Confidentiality.  

 

Each of the Subscriber and the Company shall maintainin confidence the matters referred to in this subscription agreement and shallnot make any public disclosure, except to the extent required by law, of theterms of this agreement without the consent of the other, such consent not tobe unreasonably withheld.  The wordingof any public disclosure which is made must be approved by each of the parties.

 

13.           Assignment

 

This subscription agreement is not transferable orassignable.

 

14.           Timeof the Essence

 

Time shall be of the essence hereof.

 

15.           Currency

 

All references herein to monetary amounts arereferences to lawful money of Canada.

 

16.           Headings

 

The headings contained herein are for convenience ofreference only and shall not affect the meaning or interpretation hereof.

 

17.           EntireAgreement

 

This subscription agreement (including the annexedschedules hereto) constitutes the only agreement between the parties withrespect to the subject matter hereof and shall supersede any and all priornegotiations and understandings and there are no representations, covenants orother agreements relating to the subject matter hereof except as stated orreferred to herein or therein.  Thissubscription agreement may only be amended or modified in any respect bywritten instrument executed by each of the parties hereto.

 

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Please acknowledge your acceptance of the foregoingsubscription agreement by signing and returning a copy to the undersignedwhereupon it shall become a binding agreement between us.

 

**DATED** this          day of May, 2004.

 
|                                                                                                   | **STONESTREET LIMITED PARTNERSHIP, by its  general partner, Stonestreet Corporation** |
|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                                                                   |                                                                                  |
|                                                                                                   | By:                                                                                   |   |
|                                                                                                   | Elizabeth Leonard                                                                     |
|                                                                                                   | Chief Operating Officer                                                               |
|                                                                                                   |                                                                                  |
|                                                                                                   | 320 Bay Street,  Suite 1300                                                           |
|                                                                                                   | Toronto, Ontario                                                                      |
|                                                                                                   | M5H 4A6                                                                               |
|                                                                                                   |                                                                                  |
|                                                                                                   | Phone:  416-867-6059                                                                  |
|                                                                                                   | Fax:  416-956-8989                                                                    |
|                                                                                                   |                                                                                  |
| **ACCEPTED**  as of this          day of  May, 2004. |                                                                                  |
|                                                                                                   |                                                                                  |
| **ADB  SYSTEMS INTERNATIONAL LTD.**                                                                    |                                                                                  |
|                                                                                                   |                                                                                  |
|                                                                                                   |                                                                                  |
| By:                                                                                                    |                                                                                  |   |   |
| Name:                                                                                                  |                                                                                  |
| Title:                                                                                                 |                                                                                  |
|                                                                                                        |                                                                                       |  |  |  |

 

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**SCHEDULE 1**

 

**ACCREDITED INVESTOR CERTIFICATE – ONTARIO SUBSCRIBERS ONLY**

 

**TO:**                         **ADB SYSTEMS INTERNATIONAL LTD. (THE“COMPANY”)**

 

**RE:**                         **SUBSCRIPTION FOR SERIES E CONVERTIBLENOTES OF THE COMPANY**

 

The undersigned Subscriber/officer of the Subscriber (or in the case ofa trust, the trustee or an officer of the trustee of the trust) herebycertifies that:

 

1.             he/shehas read the subscription agreement and understands that the offering ofconvertible secured note to the Subscriber, is being made on a registration andprospectus exempt basis;

 

2.             theSubscriber is an “accredited investor” as that term is defined in OntarioSecurities Commission Rule 45-501 “Exempt Distributions” by virtue of theSubscriber being:

 

***[please check one]***

 
| (i)    | o      | an individual who beneficially owns, or who together  with a spouse beneficially owns, financial assets having an aggregate  realizable value that, before taxes but net of any related liabilities  exceeds $1,000,000                                                                                                                                                                                                                  |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (ii)   | o      | an individual whose net income before taxes exceeded  $200,000 in each of the two most recent years or whose net income before  taxes combined with that of a spouse exceeded $300,000 in each of those years  and who, in either case, has a reasonable expectation of exceeding the same  net income level in the current year                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (iii)  | o      | a person or company registered under the *Securities  Act* (Ontario) or securities legislation in another jurisdiction as  an adviser or dealer, other than a limited market dealer                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (iv)   | o      | an individual who has been granted registration  under the *Securities  Act* (Ontario) or securities legislation in another jurisdiction as  a representative of a company which is registered as a dealer or adviser,  whether or not that individual’s registration is still in effect                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (v)    | o      | a company, limited partnership, limited liability  partnership, trust or estate, other than a mutual fund or non-redeemable  investment fund, that had net assets of at least $5,000,000 as reflected in  its most recently prepared financial statements                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (vi)   | o      | a person in respect of which all of the owners of  interests, direct or indirect, legal or beneficial, are persons that are  accredited investors.                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (vii)  | o      | other                                                     **[*please  insert exemption being relied upon, as referred to in Appendix 1 to this  certificate*]** |

 

3.             he/she:(a) if the Subscriber, is making the above statement based on personalknowledge of his/her financial situation and has reviewed personal financialdocumentation with an accountant,

 

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financial advisor or other financial professional to determine theabove statement is true; or (b) if other than the Subscriber, is making theabove statement based on a review of the financial statements of the Subscriberfor the most recently completed financial year and any interim financialstatements prepared since the end of such financial year and has undertakensuch other review and due diligence necessary to determine and certify that theSubscriber is an “accredited investor” as that term is defined in OntarioSecurities Commission Rule 45-501 “Exempt Distributions”; and

 

4.             he/sheunderstands that the Company is relying on this certificate as evidence of theSubscriber’s status as an accredited investor in accordance with OntarioSecurities Commission Rule 45-501 and its companion policy.

 

DATED at Toronto this             day of May, 2004.

 

 
|   | **STONESTREET LIMITED PARTNERSHIP, by its  general partner, Stonestreet Corporation** |
|--------|---------------------------------------------------------------------------------------|
|   |                                                                                  |
|   | By:                                                                                   |   |
|   | Elizabeth Leonard                                                                     |
|   | Chief Operating Officer                                                               |

 

For thepurposes of this certificate:

 

(a)           “*company*” means any corporation,incorporated association, incorporated syndicate or other incorporatedorganization;

 

(b)           “*control person*” means any person, companyor combination of persons or companies holding a sufficient number of anysecurities of the issuer to affect materially the control of the issuer but anyholding of any persons, company or combination of persons or companies holdingmore than 20% of the outstanding voting securities of the issuer, in theabsence of evidence to the contrary, shall be deemed to affect materially thecontrol of the issuer;

 

(c)           “*director*” where used in relation to aperson, includes a person acting in a capacity similar to that of a director ofa company;

 

(d)           “*entity*” means a company, syndicate,partnership, trust or unincorporated organization;

 

(e)           “*financial assets*” means cash, securities,or any contract of insurance or deposit or evidence thereof that is not asecurity for the purposes of the *Securities Act* (Ontario);

 

(f)            “*individual*” means a natural person, butdoes not include a partnership, unincorporated association, unincorporated syndicate,unincorporated organization, trust or a natural person in his or her capacityas trustee, executor, administrator or other legal personal representative;

 

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(g)           “*managed account*” means an investmentportfolio account of a client established in writing with a portfolio adviserwho makes investment decisions for the account and has full discretion to tradein securities of the account without requiring the client’s express consent toa transaction;

 

(h)           “*mutual fund*” includes an issuer ofsecurities that entitle the holder to receive on demand, or within a specifiedperiod after demand, an amount computed by reference to the value of aproportionate interest in the whole or in a part of the net assets, including aseparate fund or trust account, of the issuer of the securities;

 

(i)            “*non-redeemable investment fund*” means anissuer

 

(i)            whose primary purpose is to invest moneyprovided by its securityholders;

 

(ii)           that does not invest for the purpose ofexercising effective control, seeking to exercise effective control, or beingactively involved in the management of the issuers in which it invests, otherthan other mutual funds or non-redeemable investment funds; and

 

(iii)          that is not a mutual fund;

 

(j)            “*officer*” means the chair, any vice-chairof the board of directors, the president, any vice-president, the secretary,the assistant secretary, the treasurer, the assistant treasurer, and thegeneral manager of a company, and any other person designated an officer or acompany by by-law or similar authority, or any individual acting in a similarcapacity on behalf of the issuer;

 

(k)           “*person*” means an individual, partnership,unincorporated association, unincorporated syndicate, unincorporated organization,trust, trustee, executor, administrator, or other legal representative;

 

(l)            “*portfolio adviser*” means

 

(i)            a portfolio manager; or

 

(ii)           a broker or investment dealer exempted fromregistration as an adviser under subsection 148(1) of the Regulation if thatbroker or investment dealer is not exempt from the by-laws or regulations ofthe Toronto Stock Exchange or the Investment Dealers’ Association of Canadareferred to in that subsection;

 

(m)          “*portfolio manager*” means an adviserregistered for the purpose of managing the investment portfolio of clientsthrough discretionary authority granted by the clients;

 

(n)           “*promoter*” means (a) a person or companywho, acting alone or in conjunction with one or more other persons, companiesor a combination thereof, directly or indirectly, takes the initiative infounding, organizing or substantially reorganizing the business of the issuer,or (b) a person or company who, in connection with the founding, organizing orsubstantial reorganization of the business of the issuer, directly orindirectly, receives in consideration of services or property, or both servicesand property, 10% or more of any

 

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classof securities of the issuer or 10% or more of the proceeds from the sale of anyclass of securities of a particular issue, but a person or company who receivessuch securities or proceeds either solely as underwriting commissions or solelyin consideration of property shall not be deemed a promoter within the meaningof this definition if such person or company does not otherwise take part infounding, organizing or substantially reorganizing the business;

 

(o)           “*related liabilities*” means liabilitiesincurred or assumed for the purpose of financing the acquisition or ownershipof financial assets and liabilities that are secured by financial assets; and

 

(p)           “*spouse*” in relation to an individual,means another individual to whom that individual is married, or anotherindividual of the opposite sex or the same sex with whom that individual isliving in a conjugal relationship outside marriage.

 

Affiliated Entities, Control and Subsidiaries

 

1.             A person or companyis considered to be an affiliated entity of another person or company if one isa subsidiary entity of the other, or if both are subsidiary entities of thesame person or company, or if each of them is controlled by the same person orcompany.

 

2.             A person or company is considered to be controlled bya person or company if

 

(a)           in the case of a person or company,

 

(i)            voting securities of the first-mentionedperson or company carrying more than 50% of the votes for the election ofdirectors are held, otherwise than by way of security only, by or for thebenefit of, the other person or company, and

 

(ii)           the votes carried by the securities areentitled, if exercised, to elect a majority of the directors of thefirst-mentioned person or company;

 

(b)           in the case of a partnership that does not havedirectors, other than a limited partnership, the second-mentioned person orcompany holds more than 50% of the interests in the partnership; or

 

(c)           in the case of a limited partnership, the generalpartner is the second-mentioned person or company.

 

3.             A person or company is considered to be a subsidiaryentity of another person or company if

 

(a)           it is controlled by,

 

(i)            that other, or

 

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(ii)           that other and one or more persons orcompanies each of which is controlled by that other, or

 

(iii)          two or more persons or companies, each ofwhich is controlled by that other, or

 

(b)           it is a subsidiary entity of a person or company thatis the other’s subsidiary entity.

 

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**Appendix 1**

 

**For thepurposes of subscribing for the Series F Convertible Notes, all investorsresident in or otherwise subject to the laws of the Province of Ontario relyingon the “other” category of “accredited investor” on the certificate to whichthis appendix is attached must qualify as one of the following (*pleasecircle the applicable provision below and insert same in the space provided onthe certificate to which this appendix is attached*):**

 

(a)           a bank listed inSchedule I or II of the *Bank Act* (Canada), or an authorizedforeign bank listed in Schedule III of that Act;

 

(b)           the BusinessDevelopment Bank incorporated under the *Business Development Bank Act* (Canada);

 

(c)           a loan corporation ortrust corporation registered under the *Loan and Trust Corporations A*ct or underthe *Trustand Loan Companies Act* (Canada), or under comparable legislation inany other jurisdiction;

 

(d)           a co-operative creditsociety, credit union central, federation of caisses populaires, credit unionor league, or regional caisse populaire, or an association under the *CooperativeCredit Associations Act*(Canada), in each case, located in Canada;

 

(e)           a company licensed todo business as an insurance company in any jurisdiction;

 

(f)            a subsidiary entity ofany person or company referred to in paragraph (a), (b), (c), (d) or (e), wherethe person or company owns all of the voting shares of the subsidiary entity;

 

(h)           the government ofCanada or of any jurisdiction, or any crown corporation, instrumentality oragency of a Canadian federal, provincial or territorial government;

 

(i)            any Canadianmunicipality or any Canadian provincial or territorial capital city;

 

(j)            any national, federal,state, provincial, territorial or municipal government of or in any foreignjurisdiction, or any instrumentality or agency thereof;

 

(k)           a pension fund that isregulated by either the Office of the Superintendent of Financial Institutions(Canada) or a provincial pension commission or similar regulatory authority;

 

(l)            aregistered charity under the *Income Tax Act (*Canada);

 

(p)           apromoter of the issuer or an affiliated entity of a promoter of the issuer;

 

(q)           a spouse, parent,brother, sister, grandparent or child of an officer, director or promoter ofthe issuer;

 

(r)            a person or companythat, in relation to the issuer, is an affiliated entity or a person or companyreferred to in clause (c) of the definition of distribution in subsection 1(1)of the

 

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*SecuritiesAct (Ontario)*;

 

(s)           an issuer that isacquiring securities of its own issue;

 

(u)           a person or companythat is recognized by the Commission as an accredited investor;

 

(v)           a mutual fund ornon-redeemable investment fund that, in Ontario, distributes its securitiesonly to persons or companies that are accredited investors;

 

(w)          a mutual fund ornon-redeemable investment fund that, in Ontario, distributes its securitiesunder a prospectus for which a receipt has been granted by the Director or, ifit has ceased distribution of its securities, has previously distributed itssecurities in this manner;

 

(x)            a fully managedaccount if it is acquiring a security that is not a security of a mutual fundor non-redeemable investment fund;

 

(y)           an account that isfully managed by a trust corporation registered under the *Loan and Trust Corporations Act*or under the *Trust and Loan Companies Act*(Canada), or under comparablelegislation in any other jurisdiction; and

 

(z)            an entity organizedoutside of Canada that is analogous to any of the entities referred to inparagraphs (a) through (f) and item (iii) of the Certificate to which thisappendix is attached and paragraph (k) in form and function.

 

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**SCHEDULE 2**

 

**THE TORONTO STOCK EXCHANGE**

 

**PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING**

 

To be completed by each proposed private placement purchaser of listedsecurities or securities which are convertible into listed securities.

 

**QUESTIONNAIRE**

 

**1.**             **DESCRIPTION OF TRANSACTION**

 

(a)           Name of Issuer of theSecurities -  ADB Systems InternationalLtd.

 

(b)           Number andClass of Securities to be Purchased -

 

Series F 7% convertible secured note in the principalamount of Cdn$500,000.00 (the “**Note**”), convertible at the holder’s optionat any time until the maturity date of May 19, 2007 for units at $0.31 perunit.  Each unit consists of one commonshare of the issuer and one half of one common share purchase warrant.  Each whole warrant entitles the holderthereof to purchase one additional common share of the issuer at $0.50 pershare at any time prior to 5:00 p.m. on May 19, 2007. 

 

(c)           Purchase Price –Advance of the principal amounts for the Series F Note in the amount ofCdn$500,000.

 

**2.**             **DETAILS OF PURCHASER**

 

(a)           Name of Purchaser –Stonestreet Limited Partnership

 

(b)           Address – 320 BayStreet, Suite 1300, Toronto, Ontario, M5H 4A6

 

(c)           Names and addresses ofpersons having a greater than 10% beneficial interest in the purchaser-Stonestreet Corporation, General Partner of Stonestreet Limited Partnership

320 Bay Street, Suite 1300, Toronto, Ontario, M5H 4A6

 

**3.**             **RELATIONSHIP TO ISSUER**

 

(a)           Is the purchaser (orany person named in response to 2(c) above) an insider of the issuer for thepurposes of the*Securities Act* (Ontario) (before giving effect to thisprivate placement)?  If so, state thecapacity in which the purchaser (or person named in response to 2(c)) qualifiesas an insider  -

 

No.

 

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(b)           If the answer to (a) is“no”, are the purchaser and the issuer controlled by the same person orcompany?  If so, give details  -

 

No.

 

**4.**             **DEALINGS OF PURCHASER IN SECURITIES OFTHE ISSUER**

 

Give details of all trading by the purchaser, asprincipal, in the securities of the issuer (other than debt securities whichare not convertible into equity securities), directly or indirectly, within thesixty (60) days preceding the date hereof -

 

See schedule attached.

 

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**UNDERTAKING**

 

**TO:**         **TORONTO STOCK EXCHANGE**

 

**THEUNDERSIGNED** has subscribed for and agreed to purchase, asprincipal, the securities described in Item 1 of the Private PlacementQuestionnaire and Undertaking.

 

**THEUNDERSIGNED** undertakes not to sell or otherwise dispose ofany of the said securities so purchased or any securities derived therefrom fora period of four (4) months from the date of closing of the transaction hereinor for such period as is prescribed by applicable securities legislation,whichever is longer, without the prior consent of the Toronto Stock Exchangeand any other regulatory body having jurisdiction.

 

**DATED**at Torontothis                        dayof May, 2004.

 
|   | **STONESTREET  LIMITED PARTNERSHIP**, by its  general partner, Stonestreet Corporation                                 |
|--------|------------------------------------------------------------------------------------------------------------------------|
|   | Name of Purchaser (*please print)*                                                                                     |
|   |                                                                                                                   |
|   |                                                                                                                   |
|   | Authorized Signature                                                                                                   |
|   |                                                                                                                   |
|   | Chief Operating Officer                                                                                                |
|   | Official Capacity *(please print)*                                                                                     |
|   |                                                                                                                   |
|   | Elizabeth Leonard                                                                                                      |
|   | Please print here name of individual whose signature  appears above, if different from name of purchaser printed above |
|   |                                                                                                                   |

 

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**SCHEDULE 3**

 

**LIST OF SECURED PARTIES**

 
| **Secured Party**                  |   | **File No.  Under PPSA (Ontario)** |   | **Registration  No.**                                            |
|------------------------------------|--------|------------------------------------|--------|------------------------------------------------------------------|
| Christopher Bulger                 |   | 888880464                          |   | 20021104144390654204  20021108165217583161  20030826182015316881 |
|                               |   |                               |   |                                                             |
| Jeff Lymburner                     |   | 084987306                          |   | 20021104151100439461  20021108165217583169  20030826182015316880 |
|                               |   |                               |   |                                                             |
| Kenneth Sparfel and  Kelly Sparfel |   | 888880518                          |   | 20021104144390654209  20021108165217583166  20031021145615300346 |

 

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**EXHIBIT A**

 

**FORM OF NOTE**

 

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**EXHIBIT B**

 

**FORM OF WARRANT**

 

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