**EXHIBIT
      4.22**




***UNLESS
      PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
      TRADE THE SECURITY BEFORE JANUARY 13, 2006.***




**ADB
      SYSTEMS INTERNATIONAL LTD.**




**(Organized
      under the laws of Ontario)**




**Series
      (I) Convertible Secured Debenture**




**Date
                of Issue:**September 12, 2005
            Cdn.
                $•**Interest
                Rate:**11.0% per annum
            **Certificate
                Number:**•




ADB
      SYSTEMS INTERNATIONAL LTD. (the “ **Corporation** ”),
      for value received, hereby acknowledges itself indebted to and promises to
      pay •
(the “ **Registered
      Holder** ”)
      on September 12, 2010 (the “ **Maturity
      Date** ”)
      or on such earlier date as the principal hereof becomes payable in accordance
      with the provisions of this Debenture (as defined herein), on presentation
      and
      surrender of this Debenture, the principal sum of $• in lawful money of Canada,
      at the address of the Registered Holder set forth on the register of the
      Corporation to be maintained as provided in the terms and conditions attached
      hereto as Schedule “A” and forming part hereof (the “ **Terms
      and Conditions** ”),
      subject to the right of the Registered Holder in certain circumstances to elect
      to receive Units (as defined herein) of the Corporation in lieu of receiving
      such sum, as provided in the Terms and Conditions, and to pay interest on such
      principal amount as provided in the Terms and Conditions. The Terms and
      Conditions are hereby incorporated by reference herein.




This
      Debenture is convertible, at the option of the Registered Holder into Units,
      upon and subject to the provisions and conditions contained in the said Terms
      and Conditions. The Schedules and the Exhibits attached hereto are incorporated
      in this Debenture by reference and are deemed to be an integral part
      hereof.




**IN
      WITNESS WHEREOF** the Corporation has caused this Debenture to be executed under the hand of
      its
      duly authorized officer as of the 12 th day
      of September, 2005.




**ADB
                SYSTEMS INTERNATIONAL LTD.**Per:Authorized
                Signing Officer


















**SCHEDULE
      “A”**




**Terms
      and Conditions applicable to**


**Series
      ‘I’ Convertible Secured Debentures**


**dated
      as of September 12, 2005 issued by**


**ADB
      SYSTEMS INTERNATIONAL LTD.**




**ARTICLE
      1 - INTERPRETATION**




**1.1** **Defined
      Terms**




In
      addition to the terms parenthetically defined herein, in this Debenture the
      following terms shall have the following meanings respectively:




“ **A** **gent** ”
      means PowerOne Capital Markets Limited and its successors and assigns, as agent
      on behalf of the Holders;




“ **Business
      Day** ”
      means any day, other than Saturday, Sunday or any statutory holiday in the
      City
      of Toronto;




“ **Capital
      Reorganization** ”
      has the meaning attributed to such term in subsection 4.3(4);




“ **Closing
      Date** ”
      means September 12, 2005 ;




**“Closing
      Market Price”** at any date means the closing price per share for Common Shares on or through,
      as applicable, the Principal Market;




“ **Collateral** ”
      has the meaning attributed to such term in the General Security
      Agreement;




**“Common
      Share Reorganization”** has the meaning attributed to such term in subsection 4.3(1);




**“Common
      Shares”** means the common shares without nominal or par value in the capital of the
      Corporation, as such shares exist as at the Date of Issue; provided that, in
      the
      event of a subdivision, redivision, reduction, combination or consolidation
      thereof, or successive such subdivisions, redivisions, reductions, combinations
      or consolidations, then, subject to adjustments, if any, having been made in
      accordance with Section 4.3, **“Common
      Shares”** shall thereafter mean the shares resulting from such subdivision, redivision,
      reduction, combination or consolidation;




“ **Concurrent
      Offering** ”
      means the non-brokered offering of up to $80,000 principal amount of Debentures
      by the Corporation to purchasers resident in the United States;




“ **Conversion** ”
      has the meaning attributed to such term in subsection 4.1(1);




**“Conversion
      Price”** has
      the meaning attributed to such term in Section 4.1(2);




**“Date
      of Issue”** means
      the date hereof;




**“Date
      of Conversion”** has
      the meaning attributed to such term in subsection 4.2(2);


















**“Debentures”** means
      the Series I secured convertible debentures of the Corporation due on September
      12, 2010, including this Debenture;




**“Event
      of Default”** has
      the meaning attributed to such term in the General Security
      Agreement;




**“General
      Security Agreement”** means the general security agreement granted by the Corporation in favour of
      the
      Agent, pursuant to which the Corporation shall grant a security interest in
      the
      Collateral in favour of the Agent (on behalf of the Holders);




**“Generally
      Accepted Accounting Principles”** means generally accepted accounting principles in Canada from time to
      time;




“ **Hold
      Period** ”
      means four months and one day from the Closing Date;




**“Holders”** means
      the registered holders from time to time of the Debentures, including the
      Registered Holder;




**“including”** means including without limitation;




“ **Initial
      Period** ”
      means the period commencing on the Closing Date and ending on the date which
      is
      12 months following the Closing Date;




**“Interest
      Rate”** means
      11% per annum, calculated and payable as set forth in Section 2.3
      hereof;




**“Maturity
      Date”** has
      the meaning attributed to such term in Section 2.4 hereof;




**“Obligations”** means the aggregate of all indebtedness, obligations and liabilities, direct
      or
      indirect, absolute or contingent, matured or not, of the Corporation to the
      Agent or the Registered Holder wheresoever and howsoever incurred and whether
      incurred arising pursuant to this Debenture and whether incurred at the time
      of,
      or subsequent to the execution hereof, whether incurred alone or with another
      or
      others, including extensions and renewals;




“ **Offering** ”
      means the brokered offering of up to $1,120,000 principal amount of Debentures
      by the Corporation to purchasers resident in Ontario, British Columbia, Alberta
      and other jurisdictions outside of North America;




“ **Ontario
      Act** ”
      means the *Securities
      Act* (Ontario);




**“Permitted
      Security Interests”** has
      the meaning attributed to such term in the General Security
      Agreement;




“ **Person** ”
      means any individual, partnership, limited partnership, joint venture,
      syndicate, sole proprietorship, company or corporation with or without share
      capital, unincorporated association, trust, trustee, executor, administrator
      or
      other legal personal representative, government or governmental authority or
      entity, however designated or constituted;







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            -
            2





“ **PPSA** ”
      means the *Personal
      Property Security Act* (Ontario) as the same may from time to time hereafter be amended or any
      legislation that may be substituted therefor as the same may from time to time
      be amended;




“ **Principal
      Market** ”
      means such stock exchange or quotation system on or through which the Common
      Shares are listed or quoted which has the highest trading volume in the calendar
      month immediately preceding the applicable date, being as at the date hereof
      the
      TSX;




“ **Pro
      Rata Basis** ”
      means, in respect of a Holder, the percentage determined by dividing (i) the
      outstanding principal amount of the Holder’s Debenture by (ii) the aggregate
      outstanding principal amount of all Debentures;




“ **Rights
      Offering** ”
      and “ **Rights
      Period** ”
      have the respective meanings attributed to such terms in subsection
      4.3(2);




“ **Security
      Agency Agreement** ”
      means the agreement to be entered into between the Corporation and PowerOne
      Capital Market Ltd. (on behalf of the Holders) pursuant to which, *inter
      alia* , PowerOne
      Capital Market Ltd. shall act for and on behalf of the Holders in respect of
      the
      security granted in favour of the Holders in connection with the
      Offering;




“ **Security
      Interest** ”
      means, collectively, the mortgage, charge, pledge, assignment and transfer
      of,
      and the security interest in, the Collateral granted to the Agent by the
      Corporation pursuant to the General Security Agreement;




“ **Subsequent
      Period** ”
      means the period commencing on the date that is 12 months and one day following
      the Closing Date and ending on the date which is 5 years following the Closing
      Date;




“ **Successor
      Corporation** ”
      means any corporation continuing from and which acquires all or substantially
      all of the undertaking, property and assets of any other corporation pursuant
      to
      any Capital Reorganization;




“ **Time
      of Expiry** ”
      means 5:00 p.m. (Toronto time) on the Maturity Date;




“ **Trading
      Day** ”
      means a day on which the Principal Market is open for the trading of
      securities;




“ **Transfer
      Form** ”
      means the form of transfer annexed as Exhibit 1 hereto;




“ **TSX** ”
      means the Toronto Stock Exchange;




**“Unit”** means
      a unit of securities issuable on Conversion in accordance with Article 4 hereof,
      each such Unit, subject to adjustment as provided in this Debenture, to be
      comprised of one Common Share and one Warrant;




“ **U.S.
      Securities Act** ”
      means the United States Securities Act of 1993, as amended; and




**“Warrant”** means a Common Share purchase warrant to acquire, subject to adjustments as
      provided in the certificates representing the Warrants, one Common Share at
      an
      exercise price of $0.20 and with a term expiring at 5:00 p.m. (Toronto time)
      on
      September 12, 2010 to be issued in the form of the certificate annexed hereto
      as
      Exhibit 3.







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            -3










**1.2** **Statutory
      References; Terms defined by the PPSA**




Any
      reference in this Debenture to a statute shall be deemed to be a reference
      to
      such statute as amended, re-enacted or replaced from time to time. Unless there
      is something in the context or subject matter inconsistent therewith, words
      and
      phrases not otherwise herein defined that are defined by the PPSA shall have
      the
      meanings ascribed thereto respectively by the PPSA.




**1.3** **Gender
      and Number**




Unless
      the context otherwise requires, words importing the singular include the plural
      and vice-versa and words importing gender include all genders.




**1.4** **Monetary
      References**




Any
      reference in this Debenture to “Dollars”, “dollars” or the symbol “$” shall be
      deemed to be a reference to lawful money of Canada.




**1.5** **Day
      Not a Business Day**




In
      the event that any day on which any action is required to be taken hereunder
      is
      not a Business Day, then such action shall be required to be taken on the
      requisite time on the first Business Day thereafter.




**1.6** **Invalidity
      of Provisions**




Each
      of the provisions contained in this Debenture is distinct and severable and
      a
      declaration of invalidity or unenforceability of any such provision by a court
      of competent jurisdiction shall not affect the validity or enforceability of
      any
      other provision hereof or thereof.




**1.7** **Governing
      Law**




This
      Debenture shall be governed by and construed in accordance with the PPSA and
      the
      other laws of the Province of Ontario and the laws of Canada applicable therein
      and shall be treated in all respects as an Ontario contract.




**1.8** **Assignment**




Subject
      to the restrictions on, and requirements for, transfer prescribed herein, the
      rights and obligations of the Corporation and the Holders shall be binding
      upon
      and shall enure to the benefit of their respective successors, heirs, executors,
      administrators and permitted transferees and assigns.







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**ARTICLE
      2 - THE DEBENTURES**




**2.1** **Debentures
      in Series**




This
      Debenture is one of a series of convertible debentures issued by the
      Corporation, designated as “Series I Convertible Secured Debentures”. The
      maximum aggregate principal amount of the Debentures to be issued by the
      Corporation is $1 ,200,000,
      of which a maximum aggregate of $1,120,000 principal amount of the Debentures
      will be offered pursuant to the Offering, and a maximum aggregate of $80,000
      principal amount of the Debentures will be offered pursuant to the Concurrent
      Offering.




**2.2** **Denominations**




Debentures
      shall be issued in denominations of $1,000 and integral multiples
      thereof.




**2.3** **Terms
      of Debentures**




All
      Debentures shall bear simple interest at the Interest Rate from the Date of
      Issue (or, if issued after the Date of Issue, from the actual date of issuance
      thereof) to the earlier of the Maturity Date and the Date of Conversion (in
      respect of the Debentures then being Converted). Interest on the Debentures
      shall accrue on the outstanding principal amount of the Debentures from day
      to
      day both before and after default, demand, maturity and judgment, for the actual
      number of days elapsed on the basis of a year of 365 days. Where the calendar
      year of calculation contains 366 days, interest hereunder shall be expressed
      as
      a yearly rate for purposes of the *Interest
      Act* (Canada) as such rate multiplied by 366 and divided by 365. Such interest shall
      be calculated and payable in arrears as follows:




(a)
            for
                interest owing in respect of the Initial Period, upon the earlier
                of:




(i)  the
      Date of Conversion (in respect of the principal amount of the Debentures then
      being Converted); and




(ii)  the
      date which is 12 months following the Closing Date (in respect of the principal
      amount of the Debentures then outstanding, if any, on such date);
      and




(b)
            for
                interest owing in respect of the Subsequent Period, upon the earlier
                of:




(i)  the
      Date of Conversion (in respect of the principal amount of the Debentures then
      being Converted); and




(ii)  the
      Maturity Date (in respect of the principal amount of the Debentures then
      outstanding, if any, on the Maturity Date),




and,
      for greater certainty, shall be payable as well after as before
      default.




Interest
      owing in respect of the Subsequent Period is payable in cash by cheque or money
      order. Interest owing in respect of the Initial Period is payable in full by
      the
      issuance of a number of Common Shares calculated pursuant to the following
      formula:







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            -5










A÷B,
      where:




A=
      the accrued interest payable (in dollars); and




B= the volume weighted average trading price of the Common Shares over the
      20
      day trading period ending at the close of business on the day prior to the
      date
      on which the interest payment is due, reduced by the maximum percentage discount
      permitted by the Toronto Stock Exchange,




provided
      that the maximum aggregate number of Common Shares issuable pursuant to the
      above-noted calculation is 974,199 and in the event the Corporation is obligated
      to, and cannot, issue any further Common Shares over and above 974,199, it
      shall
      satisfy the balance of the interest payment owing in cash by paying the amount
      calculated as (i) the total amount of accrued interest payable, less (ii) the
      value of the Common Shares issued in satisfaction of interest
      payments.




**2.4** **Maturity
      Date**




Subject
      to Section 2.5, the Debentures shall mature and the principal hereof shall
      become payable on September 12, 2010 (the “ **Maturity
      Date** ”).




**2.5** **Debentures
      to Rank Equally**




This
      Debenture shall rank equally with all other Debentures of the same series and,
      as soon as issued or negotiated shall, subject to the terms and conditions
      of
      the Security Agency Agreement ,
      be equally and rateably entitled to the benefits hereof as if all the Debentures
      had been issued and negotiated simultaneously.




**2.6** **Registration
      of Debentures**




(1) The
      Corporation shall cause to be kept by and at the principal office of the
      Corporation in the City of Toronto a register in which shall be entered the
      names and latest known addresses of the Holders of this and all other Debentures
      and the other particulars, as prescribed by law, of the Debentures held by
      them
      respectively and of all transfers of Debentures. Such registration shall be
      noted on the Debentures by the Corporation. No transfer of a Debenture shall
      be
      effective as against the Corporation unless made on the register by the
      Registered Holder or his executors or administrators or other legal
      representatives or his or their attorney duly appointed by an instrument in
      form
      and execution reasonably satisfactory to the Corporation and upon compliance
      with such requirements as the Corporation may reasonably prescribe, and unless
      such transfer shall have been duly noted on such Debenture by the
      Corporation.




(2) The
      register referred to in this section shall at all reasonable times be open
      for
      inspection by the Holders.




(3) Subject
      to any restriction under applicable law or policy of any applicable regulatory
      body, any Holder may at any time and from time to time have such Debenture
      or
      any portion of the principal amount thereof transferred at the place at which
      the register is kept pursuant to the provisions of this section in accordance
      with such reasonable regulations as the Corporation may prescribe. The
      transferor of such Debenture or any portion of the principal amount thereof
      shall duly complete and exercise a Transfer Form.







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(4) The
      Corporation shall not be charged with notice of or be bound to see to the
      execution of any trust, whether express, implied or constructive, in respect
      of
      any Debenture, except where the Corporation is required to take notice by
      statute or order of a court of competent jurisdiction and may transfer any
      Debenture on the direction of the Holder thereof, whether named as trustee
      or
      otherwise, as though that Person were the beneficial owner thereof.




(5) The
      Corporation shall not register any transfers of the Debenture or issue or
      transfer any Units issuable on conversion of the Debenture:




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




(ii) in
      connection with any transfers or conversions which are otherwise not in
      compliance with (a) the U.S. Securities Act and the regulations thereunder
      if
      applicable, (b) the Ontario
      Act and the rules and regulations thereunder, (c) applicable securities laws and
      regulations of other relevant jurisdictions, or (d) the policies of the TSX;
      and




(iii) within
      four months and a day from the Date of Issue, unless the Corporation and its
      legal counsel are satisfied, acting reasonably, that it is permitted under
      Ontario securities laws and under the policies of the TSX.




The
      Holder acknowledges that this Debenture and the securities underlying the
      Debenture are subject to resale restrictions which provide that this Debenture
      and such securities may not be resold or otherwise distributed until a period
      of
      at least four (4) months and one day have elapsed from the Date of Issue except
      as permitted by applicable securities laws and acknowledges that the
      certificates representing the Debenture and if the Debenture is Converted or
      if
      the any of the Warrants are exercised prior to the expiry of such hold period,
      the Common Shares issuable upon Conversion, the Warrants and the Common Shares
      underlying the Warrants will bear the following legend denoting the restrictions
      on transfer under applicable securities laws, in addition to any other legends
      required by the TSX or other stock market on which such securities may
      trade:




**“UNLESS
      PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
      TRADE THE SECURITY BEFORE [4 MONTHS AND ONE DAY FROM THE DATE OF ISSUANCE OF
      THE
      DEBENTURE].”**




**2.7** **Ownership
      of Debentures**




(1) The
      Holder of a Debenture shall be deemed to be the owner thereof for all purposes
      and payment of or on account of the principal of a Debenture shall be made
      only
      to or upon the order in writing of the Holder thereof and such payment shall
      be
      a complete discharge to the Corporation and any paying agent for the amounts
      so
      paid.




(2) The
      Holder for the time being of any Debenture shall be entitled to the principal
      evidenced by such Debenture, free from all equities or rights of set-off or
      counterclaim between the Corporation and the original or any intermediate Holder
      thereof (except any equities of which the Corporation is required to







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            -7





take
      notice by law) and all Persons may act accordingly and a transferee of a
      Debenture shall, after the Transfer Form is lodged with the Corporation and
      upon
      compliance with all other conditions contained in such Debenture or by law
      or by
      any policy of any regulatory body, be entitled to be entered on the register
      as
      the owner of such Debenture free from all equities or rights of set-off or
      counterclaim between the Corporation and the transferor or any previous Holder
      thereof, save in respect of equities of which the Corporation is required to
      take notice by statute or by order of a court of competent jurisdiction.
      Delivery to the registered Holder by the Corporation or the receipt by the
      Holder of the principal monies and interest evidenced by this Debenture and
      the
      units issuable pursuant to this Debenture, if any, shall be a good discharge
      to
      the Corporation of its obligations hereunder and the Corporation shall not
      be
      bound to enquire into the title of the Registered Holder, save as ordered by
      a
      Court of competent jurisdiction or as required by statute.




**2.8** **Exchange
      of Debentures**




(1) Debentures
      of any denomination may be exchanged for Debentures of any other authorized
      denomination or denominations, any such exchange to be for Debentures of an
      equivalent aggregate principal amount. Exchanges of Debentures may be made
      at
      the principal offices of the Corporation in the City of Toronto.




(2) Except
      as otherwise provided herein, upon any exchange of Debentures of any
      denomination for Debentures of any other authorized denominations and upon
      any
      transfer of Debentures, the Corporation or other registrar of Debentures may
      make a sufficient charge to reimburse it for any stamp tax, security transfer
      tax or other governmental charge required to be paid, and payment of such charge
      shall be made by the party requesting such exchange or transfer as a condition
      precedent thereto.




**2.9** **Replacement
      of Debentures**




If
      any of the Debentures shall become mutilated or be lost, stolen or destroyed
      and
      in the absence of notice that such Debentures have been acquired by a good
      faith
      purchaser within the meaning of the *Business
      Corporations Act* (Ontario), the Corporation will issue and deliver a new Debenture upon surrender
      and cancellation of the mutilated Debenture, or, in the case of a lost, stolen
      or destroyed Debenture, in lieu of and in substitution for the same. In case
      of
      loss, theft or destruction, the applicant for a new Debenture shall furnish
      to
      the Corporation such evidence of such loss, theft or destruction as shall be
      satisfactory to the Corporation in its discretion and shall also furnish an
      indemnity in amount and form satisfactory to the Corporation in its sole
      discretion. The applicant shall pay all reasonable expenses incidental to the
      issuance of any such new Debenture.




**ARTICLE
      3 - PURCHASE FOR CANCELLATION OF DEBENTURES**




**3.1** **Purchase
      of Debentures for Cancellation**




The
      Corporation may purchase all or any of the Debentures in the market (which
      shall
      include purchase from or through an investment dealer or a firm holding
      membership on a recognized stock exchange) or by invitation for tenders or
      by
      private contract; provided that the price at which any Debenture may be so
      purchased shall not exceed the outstanding principal amount of such
      Debenture.




If,
      upon an invitation for tenders, more Debentures are tendered at the same price
      than the Corporation is prepared to accept, the Debentures to be purchased
      by
      the Corporation shall be selected by







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lot,
      or in such other manner as the Corporation may consider equitable, from the
      Debentures tendered by each Holder who tendered at such lowest price. The Holder
      of any Debenture of which a part only is purchased, upon surrender of such
      Debenture for payment, shall be entitled to receive, without expense to such
      Holder, one or more new Debentures for the unpurchased part so surrendered
      and
      the Corporation shall issue and deliver such new Debenture or Debentures upon
      receipt of the Debenture so surrendered.




**ARTICLE
      4 - CONVERSION**




**4.1** **Conversion**




(1) The
      conversion price is $0.15 (the “ **Conversion
      Price** ”)
      for each Unit to be issued upon the Conversion of the Debentures, unless such
      price shall have been adjusted as provided in this Article, in which case the
      Conversion Price shall mean the price as so adjusted and in effect at such
      time.




(2) Subject
      to and upon compliance with the provisions of this Article 4, the Holder of
      each
      Debenture shall have the right, at his option, at any time prior to the Time
      of
      Expiry, to convert such Debenture or any portion of the principal amount thereof
      which is $1,000 or an integral multiple of $1,000, into Units at the Conversion
      Price (a “ **Conversion** ”).




(3) In
      the event of a Conversion, the accrued and unpaid interest on the principal
      amount of a Holder’s Debenture which is Converted to Units pursuant to this
      Section 4.1 will be paid in cash or Common Shares, as applicable pursuant to
      Section 2.3 above, within 10 Business Days of the Date of
      Conversion.




**4.2** **Manner
      of Exercise or Deemed Exercise of Right to Convert**




(1) The
      Holder of a Debenture wishing to Convert such Debenture in whole or in part
      into
      Units shall surrender such Debenture to the Corporation at its principal office
      in the City of Toronto, together with written notice in form and substance
      satisfactory to the Corporation substantially in the form of Exhibit “2” annexed
      hereto, duly executed by the Holder, his executors, administrators, other legal
      representatives or his or their attorney duly appointed by an instrument in
      form
      and substance satisfactory to the Corporation, exercising his right to convert
      such Debenture in accordance with the provisions of this Article. Thereupon
      such
      Holder or, subject to payment of all applicable stamp taxes, security transfer
      taxes or other governmental charges and compliance with all reasonable
      requirements of the Corporation, his nominee or assignee, shall be entitled
      to
      be entered in the books of the Corporation as at the Date of Conversion (or
      such
      later date as is specified in subsection 4.2(2)) as the registered holder of
      the
      numbers of Common Shares and Warrants into which such Debenture is convertible
      in accordance with the provisions hereof and, as soon as practicable thereafter,
      the Corporation shall deliver to such Holder or, subject as aforesaid, his
      nominee or assignee certificates for such Common Shares and Warrants and a
      cheque for any amounts payable under Sections 2.3, 4.1(3) or 4.5.




(2) For
      the purposes hereof, a Debenture shall be deemed to be surrendered for
      conversion on the date (the ” **Date
      of Conversion** ”)
      which is the date on which it is so surrendered in accordance with the
      provisions hereof and, in the case of a Debenture so surrendered by mail or
      other means of delivery, on the date on which it is received by the Corporation
      at its office specified in subsection 4.2(1), provided that if a Debenture
      is
      surrendered for Conversion on a day on which the register of Common Shares
      is
      closed, the Person entitled to receive Units shall become the holder of record
      of such Common Shares and Warrants as at the date on which such register is
      next
      reopened.







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(3) Any
      part, being $1,000 or an integral multiple thereof, of a Debenture may be
      Converted as provided herein and all references in this Debenture to Conversion
      of Debentures shall be deemed to include Conversion of such parts. The Holder
      of
      any Debenture of which part only is Converted shall, upon the exercise of his
      right of Conversion, surrender such Debenture to the Corporation, and the
      Corporation shall cancel the same and shall forthwith issue and deliver to
      the
      Holder a new Debenture or Debentures in an aggregate principal amount equal
      to
      the unconverted part of the principal amount of the Debenture so
      surrendered.




(4) The
      Common Shares issued upon Conversion shall rank only in respect of dividends
      declared in favour of holders of record of Common Shares on or after the Date
      of
      Conversion or such later date as such Holder shall become the holder of record
      of such Common Shares pursuant to subsection 4.2(2), from which applicable
      date
      they will for all purposes be and be deemed to be issued and outstanding as
      fully paid and non-assessable Common Shares.




**4.3** **Adjustment
      of Conversion Price**




The
      Conversion Price will be subject to adjustment from time to time in the events
      and in the manner provided as follows:




(1) If
      and whenever at any time after the date hereof, and prior to the Time of Expiry,
      the Corporation:




(i) issues
      Common Shares or securities exchangeable for or convertible into Common Shares
      to all or substantially all the holders of Common Shares as a stock dividend
      or
      other distribution (other than an issue of Common Shares to holders of Common
      Shares pursuant to a right granted to such holders to receive such Common Shares
      in lieu of dividends paid in the ordinary course);




(ii) subdivides
      its outstanding Common Shares into a greater number of Common Shares;
      or




(iii) consolidates
      its outstanding Common Shares into a smaller number of Common
      Shares,




(any
      of such events in clauses (i), (ii) and (iii) of this subsection being called
      a
“ **Common
      Share Reorganization** ”),
      then the Conversion Price shall be adjusted effective immediately after the
      effective date or record date for the happening of a Common Share
      Reorganization, as the case may be, at which the holders of Common Shares are
      determined for the purpose of the Common Share Reorganization by multiplying
      the
      Conversion Price in effect immediately prior to such effective date or record
      date by a fraction, the numerator of which will be the number of Common Shares
      outstanding on such effective date or record date before giving effect to such
      Common Share Reorganization and the denominator of which will be the number
      of
      Common Shares outstanding immediately after giving effect to such Common Share
      Reorganization (including, in the case where securities exchangeable for or
      convertible into Common Shares are distributed, the number of Common Shares
      that
      would have been outstanding had all such securities been exchanged for or
      converted into Common Shares on such effective date or record
      date).







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(2) If
      and whenever at any time after the date hereof, and prior to the Time of Expiry,
      the Corporation fixes a record date for the issue of rights, options or warrants
      to all or substantially all the holders of Common Shares (the **“Rights”** )
      under which such holders are entitled, during a period expiring not more than
      forty-five (45) days after the date of such issue (the **“Rights
      Period”** ),
      to subscribe for or purchase Common Shares (or securities convertible into
      Common Shares) at a price per share to the holder (or at an exchange or
      conversion price per share during the Rights Period to the holder in the case
      of
      securities exchangeable for or convertible into Common Shares) of less than
      95%
      of the price (the **“Current
      Market Price”** )
      which is equal to the average Closing Market Price for the period of 20 Trading
      Days immediately preceding such record date (any of such events being called
      a **“Rights
      Offering”** ),
      then the Conversion Price shall be adjusted effective immediately after the
      end
      of the Rights Period to a price determined by multiplying the Conversion Price
      in effect on such record date by a fraction:




(iv) the
      numerator of which will be the aggregate of:




(1) the
      number of Common Shares outstanding as of the record date for the Rights
      Offering; plus




(2) a
      number determined by dividing (a) the product of the number of Common Shares
      issued or subscribed for during the Rights Period upon the exercise of the
      rights, warrants or options under the Rights Offering and the price at which
      such Common Shares are offered by (b) the Current Market Price of the Common
      Shares as of the record date for the Rights Offering, and




(v) the
      denominator of which will be the number of Common Shares outstanding after
      giving effect to the Rights Offering and including the number of Common Shares
      actually issued or subscribed for during the Rights Period upon exercise of
      the
      rights, warrants or options under the Rights Offering.




Any
      Holder who has exercised the right to Convert in accordance with this Article
      4
      during the period beginning immediately after the record date for a Rights
      Offering and ending on the last day of the Rights Period for the Rights Offering
      will, in addition to the Common Shares and Warrants to which that Holder would
      otherwise be entitled upon such Conversion, be entitled to that number of
      additional Common Shares equal to the difference between the shares received
      on
      such Conversion and the shares that would have been received if the Conversion
      Price as adjusted for such Rights Offering pursuant to this subsection had
      applied when the Holder exercised the right to Convert; provided that the
      provisions of Section 4.5 will be applicable to any fractional interest in
      a
      Common Share to which such Holder might otherwise be entitled under the
      foregoing provisions of this subsection. Such additional Common Shares will
      be
      deemed to have been issued to the Holder immediately following the end of the
      Rights Period and a certificate for such additional Common Shares will be
      delivered to such Holder within five Business Days following the end of the
      Rights Period. To the extent that any such rights, options or warrants are
      not
      so exercised on or before the expiry thereof, the Conversion Price will be
      readjusted to the Conversion Price which would then be in effect based on the
      number of Common Shares (or the securities convertible into or exchangeable
      for
      Common Shares) actually delivered on the exercise of such rights, options or
      warrants.




(3) If
      and whenever at any time after the date hereof and prior to the Time of Expiry,
      the Corporation fixes a record date for the issue or the distribution to all
      or
      substantially all the holders of Common Shares







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of
      (i) securities of the Corporation, including rights, options or warrants to
      acquire securities of the Corporation or any of its property or assets and
      including evidences of indebtedness or (ii) any property or other assets,
      including evidences of indebtedness, and if such issuance or distribution does
      not constitute (A) a dividend paid in the ordinary course; (B) a Common Share
      Reorganization; (C) a Rights Offering; or (D) the
      issue of Rights to the holders of all or substantially all of its outstanding
      Common Shares under which such holders are entitled to subscribe for or purchase
      Common Shares or securities exchangeable for or convertible into Common Shares
      during the Rights Period, where the
      cost per Common Share during the Rights Period, is 95% or more of the Current
      Market Price (any
      of such non-excluded events being called a “Special Distribution”), the
      Conversion Price shall be adjusted effective immediately after such record
      date
      to a price determined by multiplying the Conversion Price in effect on such
      record date by a fraction:




(vi) the
      numerator of which will be:




(1) the
      product of the number of Common Shares outstanding on such record date and
      the
      Current Market Price of the Common Shares on such record date; less




(2) subject
      to the prior written consent of the Principal Market, if applicable, the excess,
      if any, of (a) the fair market value, as determined by action by the
      Corporation’s board of directors (whose determination will be conclusive), to
      the holders of Common Shares of such securities or property or other assets
      so
      issued or distributed in the Special Distribution over (b) the fair market
      value
      of the consideration received therefor by the Corporation from the holders
      of
      Common Shares, as determined by the Corporation’s board of directors (whose
      determination will be conclusive); and




(vii) the
      denominator of which will be the product of the number of Common Shares
      outstanding on such record date and the Current Market Price of the Common
      Shares on such record date.




To
      the extent that any Special Distribution is not so made, the Conversion Price
      will be readjusted effective immediately to the Conversion Price which would
      then be in effect based upon such securities or property or other assets as
      actually distributed.




(4) If
      and whenever at any time after the date hereof, and prior to the Time of Expiry,
      there is a reclassification of the Common Shares at any time outstanding or
      change of the Common Shares into other shares or into other securities or other
      capital reorganization (other than a Common Share Reorganization), or a
      consolidation, amalgamation or merger of the Corporation with or into any other
      corporation or other entity (other than a consolidation, amalgamation or merger
      which does not result in any reclassification of the outstanding Common Shares
      or a change of the Common Shares into other shares), or a transfer of the
      undertaking or assets of the Corporation as an entirety or substantially as
      an
      entirety to another corporation or other entity in which the holders of Common
      Shares are entitled to receive shares, other securities or other property (any
      of such events being called a **“Capital
      Reorganization”** ),
      any Holder who exercises the right to Convert Debentures into Common Shares
      pursuant to Debentures then held after the effective date of such Capital
      Reorganization will be entitled to receive, and will accept for the same
      aggregate consideration in lieu of the number of Common Shares to which such
      Holder was previously entitled upon such Conversion, the aggregate number of
      shares, other







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            -12





securities
      or other property or cash which such Holder would have been entitled to receive
      as a result of such Capital Reorganization if, on the effective date thereof,
      the Holder had been the registered holder of the number of Common Shares to
      which such Holder was previously entitled upon Conversion subject to adjustment
      thereafter in accordance with provisions the same, as nearly possible, as those
      contained in this Article 4. The Corporation will take all steps necessary
      to
      ensure that, on a Capital Reorganization, the Holders of Debentures will receive
      the aggregate number of shares, other securities or other property or cash
      to
      which they are entitled as a result of the Capital Reorganization. Appropriate
      adjustments will be made as a result of any such Capital Reorganization in
      the
      application of the provisions set forth in this Article 4 with respect to the
      rights and interests thereafter of Holders of Debentures to the end that the
      provisions set forth in this Article 4 will thereafter correspondingly be made
      applicable as nearly as may reasonably be in relation to any shares, other
      securities or other property thereafter deliverable upon the conversion of
      any
      Debenture. Subject to the prior written consent of the Principal Market, if
      applicable, any such adjustment will be made by and set forth in an instrument
      supplemental hereto approved by action of the board of directors of the
      Corporation and will for all purposes be conclusively deemed to be an
      appropriate adjustment.




(5) If
      the purchase price provided for in any rights, options or warrants (the **“Rights
      Offering Price”** )
      referred to in subsections 4.3(2) or (3) is decreased, the Conversion Price
      will
      forthwith be changed so as to decrease the Conversion Price to the Conversion
      Price that would have been obtained if the adjustment to the Conversion Price
      made under such subsections, as the case may be, with respect to such rights,
      options or warrants had been made on the basis of the Rights Offering Price
      as
      so decreased, provided that the terms of this subsection will not apply to
      any
      decrease in the Rights Offering Price resulting from terms in any such rights,
      options or warrants designed to prevent dilution except to the extent that
      the
      resulting decrease in the Conversion Price under this subsection would be
      greater than the decrease, if any, in the Conversion Price to be made under
      the
      terms of this section by virtue of the occurrence of the event giving rise
      to
      such decrease in the Rights Offering Price.




(6) In
      any case in which this section requires that an adjustment become effective
      immediately after a record date for an event referred to herein, the Corporation
      may defer, until the occurrence of such event, issuing to the Holder of any
      Debenture Converted after such record date and before the occurrence of such
      event the additional Common Shares issuable upon such Conversion by reason
      of
      the adjustment required by such event; provided, however, that the Corporation
      shall deliver to such Holder an appropriate instrument evidencing such Holder’s
      right to receive such additional Common Shares upon the occurrence of such
      event
      and the right to receive any distributions made on such additional Common Shares
      declared in favour of holders of record of Common Shares on and after the Date
      of Conversion or such later date on which such Holder would, but for the
      provisions of this subsection, have become the holder of record of such
      additional Common Shares pursuant to subsection 4.2(1).




**4.4** **Rules
      Regarding Calculation of Adjustment of Conversion Price**




For
      the purposes of Section 4.3:




(1) The
      adjustments provided for in Section 4.3 are cumulative and will be computed
      to
      the nearest one-tenth of one cent and will be made successively whenever an
      event referred to therein occurs, subject to the remaining provisions of this
      section.




(2) No
      adjustment in the Conversion Price will be required unless such adjustment
      would
      result in a change of at least 1% in the prevailing Conversion Price; provided,
      however, that any adjustments which,







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except
      for the provisions of this subsection would otherwise have been required to
      be
      made, will be carried forward and taken into account in any subsequent
      adjustment.




(3) No
      adjustment in the Conversion Price will be made in respect of any event
      described in Section 4.3 if Holders are entitled to participate in such event
      on
      the same terms, *mutatis
      mutandis* ,
      as if they had converted their Debentures prior to or on the effective date
      or
      record date of such event. Any such participation will be subject to the prior
      consent of each stock exchange on which the Common Shares are listed or quoted
      for unlisted trading privileges, or were listed in the year prior to the
      occurrence of the event described in this subsection, if
      applicable.




(4) If
      at any time a dispute arises with respect to adjustments provided for in Section
      4.3, subject to the prior written consent of the Principal Market, if
      applicable, such dispute will be conclusively determined by the Corporation’s
      auditors, or if they are unable or unwilling to act, by such other firm of
      independent chartered accountants as may be selected by action of the
      Corporation’s board of directors and any such determination will be binding upon
      the Corporation, the Holders and shareholders of the Corporation; such auditors
      or accountants will be given access to all necessary records of the
      Corporation.




(5) If
      the Corporation sets a record date to determine the holders of Common Shares
      for
      the purpose of entitling them to receive any dividend or distribution or sets
      a
      record date to take any other action and thereafter and before the distribution
      to such shareholders of any such dividend or distribution or the taking of
      any
      other action, legally abandons its plan to pay or deliver such dividend or
      distribution or take such other action, then no adjustment in the Conversion
      Price shall be made.




(6) In
      the absence of a resolution of the Corporation’s board of directors fixing a
      record date for a Special Distribution or Rights Offering, the Corporation
      shall
      be deemed to have fixed as a record date therefor the date on which the Special
      Distribution or Rights Offering is effected.




**4.5** **No
      Requirement to Issue Fractional Shares or Warrants**




The
      Corporation shall not be required to issue fractional Common Shares or Warrants
      upon the Conversion of Debentures. If more than one Debenture is surrendered
      for
      Conversion at one time by the same Holder, the number of whole Common Shares
      and
      Warrants issuable upon Conversion thereof shall be computed on the basis of
      the
      aggregate principal amount of the Debentures to be Converted. If any fractional
      interest in a Common Share or Warrant, as applicable, would, except for the
      provisions of this section, be deliverable upon the Conversion of any principal
      amount of Debentures, the Corporation shall, in lieu of delivering any
      certificate of such fractional interest, satisfy such fractional interest by
      paying to the Holder of such surrendered Debentures an amount in lawful money
      of
      Canada equal to the value of such fractional interest based upon the Closing
      Market Price of the Common Shares on the Business Day preceding the Date of
      Conversion.







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**4.6** **Corporation
      to Reserve Shares**




The
      Corporation covenants that it will at all times reserve and keep available
      out
      of its authorized Common Shares (if the number thereof is or becomes limited)
      solely for the purpose of issue upon Conversion of Debentures as provided
      herein, and conditionally issue to Holders who may exercise their Conversion
      rights hereunder, such number of Common Shares as shall then be issuable upon
      the Conversion of all outstanding Debentures and any Warrants which may be
      issued on exercise thereof. All Common Shares which shall be so issuable shall
      be duly and validly issued as fully paid and non-assessable.




**4.7** **Cancellation
      of Converted Debentures**




All
      Debentures Converted in whole or in part shall be forthwith cancelled by the
      Corporation (with regard to the Debenture or portion thereof which has been
      Converted) and, subject to subsection 4.2(3), no Debentures shall be issued
      in
      substitution therefor.




**4.8** **Certificate
      as to Adjustment**




The
      Corporation shall from time to time, immediately after the occurrence of any
      event which requires an adjustment or readjustment as provided in Section 4.3,
      deliver a certificate to the Holders specifying the nature of the event
      requiring the same and the amount of the adjustment or readjustment necessitated
      thereby and setting forth in reasonable detail the method of calculation and
      the
      facts upon which such calculation is based. Except in respect of any
      subdivision, redivision, reduction, combination or consolidation of the Common
      Shares, the Corporation shall forthwith give notice to the Holders specifying
      the event requiring such adjustment or readjustment and the amount thereof,
      including the resulting Conversion Price; provided that if the Corporation
      has
      given notice under Section 4.9 covering all the relevant facts in respect of
      such event, no such notice need be given under this section.




**4.9** **Notice
      of Special Matters**




The
      Corporation covenants that, so long as any Debentures remain outstanding, it
      will give notice to the Holders of its intention to fix a record date for any
      event referred to in subsections 4.3(1), (2), (3) or (4) (other than the
      subdivision, redivision, reduction, combination or consolidation of Common
      Shares) or a cash dividend (other than a dividend paid in the ordinary course)
      which may give rise to an adjustment in the Conversion Price, and such notice
      shall specify the particulars of such event and the record date and the
      effective date for such event; provided that the Corporation shall only be
      required to specify in such notice such particulars of such event as shall
      have
      been fixed and determined on the date on which such notice is given. Such notice
      shall be given not less than 14 days prior to the applicable record
      date.







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**ARTICLE
      5 - COVENANTS OF THE CORPORATION**




**5.1** **General
      Covenants**




The
      Corporation hereby covenants with the Holders as follows:




(a)
            the
                Corporation will duly and punctually pay or cause to be paid to every
                Holder the principal thereof and interest accrued on the Debentures
                (and,
                in case of default, interest on the amount in default) of which he
                is the
                Holder on the dates, at the places, and in the manner mentioned
                herein;




(b)
            at
                the request of a Holder, the Corporation will furnish to the Holders
                a
                copy of all financial statements, whether annual or interim, of the
                Corporation and the report, if any, of the Corporation’s auditors thereon
                and of all annual and other periodic reports of the Corporation furnished
                to its shareholders after the date hereof and prior to the Time of
                Expiry;




(c)
            the
                Corporation will duly and punctually perform and carry out all of
                the acts
                or things to be done by it, and perform all covenants required to
                be
                performed by it, as provided in this
                Debenture;




(d)
            upon
                the occurrence of an Event of Default, the Corporation shall permit
                a
                representative of the Agent to inspect the Collateral and the operations
                of the Corporation and for that purpose to enter to the Corporation’s
                premises and any other location where the Collateral may be situated
                during reasonable business hours and upon reasonable
                notice;




(e)
            the
                Corporation shall:




(i) keep
      proper books of accounts and records covering all of its business and affairs
      on
      a current basis as well as accurate and complete records concerning the
      Collateral;




(ii) notify
      the Agent promptly of any loss or damage to or any seizure of any significant
      portion of the Collateral;




(iii) furnish
      the Agent with such information regarding the Collateral and its value and
      location as the Agent may from time to time reasonably request;




(iv) upon
      the occurrence of an Event of Default, permit a representative of the Agent,
      during reasonable business hours and upon reasonable notice, to inspect the
      Corporation’s books of account, records and documents and to make copies,
      extracts and summaries therefrom; and




(v) at
      any time after an Event of Default, permit the Agent or its representative
      to
      make reasonable inquiries of third parties for the purpose of verification
      of
      any of the foregoing; and




(f)
            the
                Corporation shall promptly notify the Agent in writing of the details
                of:




(i) any
      amendment to its articles, including by virtue of the filing of articles of
      amalgamation, effecting a change in the Corporation’s name;







A
            -16










(ii) any
      claim, litigation or proceeding before any court, administrative board or other
      tribunal which either does or could have a material adverse effect on the
      Collateral or the Corporation;




(iii) any
      claim, lien, attachment, execution or other process or encumbrance made or
      asserted against or with respect to the Collateral which either does or could
      have material adverse effect on the validity or enforceability of the Security
      Interest;




(iv) any
      transfer of the Corporation’s interest in the Collateral, whether or not
      permitted hereunder; or




(v) any
      material loss of or damage to the Collateral, whether or not such loss or damage
      is covered by insurance; and




(g)
            the
                Corporation shall keep the Collateral insured as would a reasonable
                prudent owner of similar property against loss or damage by fire,
                theft or
                other usual perils, in such amounts as would a reasonably prudent
                owner of
                similar property and with such insurers as the Agent may reasonably
                require from time to time.




**5.2** **Specific
      Covenants**




The
      Corporation hereby further covenants with the Holders that:




(a)
            all
                Common Shares which shall be issued upon a Conversion, payment of
                interest
                on the Debentures or upon due exercise of any Warrants, shall be
                issued as
                fully paid and non-assessable in the capital of the
                Corporation;




(b)
            it
                will at all times maintain its corporate existence and will carry
                on and
                conduct its business in a proper and efficient manner; provided,
                however,
                that nothing herein contained shall prevent the Corporation from
                ceasing
                to operate any business or property if, in the opinion of its board
                of
                directors, it shall be advisable and in the best interests of the
                Corporation to do so;




(c)
            it
                will use its best efforts to maintain the listing of the Common Shares
                (including the Common Shares issuable pursuant to the terms of the
                Debentures) on or through the TSX or another recognized Canadian
                stock
                exchange;




(d)
            it
                will use its best efforts to maintain its status as a reporting issuer
                in
                each of the Provinces of Ontario, British Columbia, and Alberta not
                in
                default;




(e)
            it
                will at all times, so long as any Debentures remain outstanding and
                may be
                Converted, keep open the register of Debentures and the transfer
                registers
                for the Common Shares and will not take any action which would have
                the
                effect of preventing the Holders from Converting any of the Debentures
                or
                receiving any of the Common Shares upon such
                Conversion;




(f)
            it
                will make all requisite filings, including filings with appropriate
                securities commissions and stock exchanges, in connection with the
                creation and sale of the Debentures, the Conversion of the Debentures
                and
                the issue of the underlying Common
                Shares;







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(g)
            generally,
                it will well and truly perform and carry out all of the acts or things
                to
                be done by it as provided herein;
                and




(h)
            it
                will use its best efforts to comply with, satisfy and fulfil promptly
                all
                prerequisites, conditions and requirements imposed by or arising
                out of
                legal, regulatory and administrative requirements applicable to the
                Corporation with respect to the consummation of the transactions
                contemplated hereby, including filing or causing to be filed all
                documents, certificates, opinions, forms or undertakings required
                to be
                filed by the Corporation in connection with the purchase and sale
                of the
                Debentures, the issuance of the Common Shares and Warrants in accordance
                with the terms of the Debentures and the listing and posting for
                trading
                of such Common Shares on the TSX or another recognized Canadian stock
                exchange, as applicable.




**5.3** **Performance
      of Covenants by the Registered Holder**




The
      Registered Holder may, in its sole discretion and upon notice to the
      Corporation, perform any covenant of the Corporation under this Debenture that
      the Corporation fails to perform and that the Registered Holder is capable
      of
      performing, including any covenant the performance of which requires the payment
      of money; provided that the Registered Holder will not be obligated to perform
      any such covenant on behalf of the Corporation. No such performance by the
      Registered Holder will require the Registered Holder further to perform the
      Corporation’s covenants nor relieve the Corporation from any default or operate
      as a derogation of the rights and remedies of the Registered Holder under this
      Debenture. The Corporation agrees to indemnify and to reimburse the Registered
      Holder for all costs and expenses incurred by the Registered Holder in
      connection with the performance by it of any such covenant, and all such costs
      and expenses shall be payable by the Corporation to the Registered Holder on
      demand, shall bear interest at the highest rate per annum borne by any of the
      Obligations, calculated and compounded monthly, and shall (with all such
      interests) be added and form part of the Obligations.




**ARTICLE
      6 - SECURITY INTEREST**




**6.1** **Grant
      of Security Interest**




As
      continuing collateral security for the due and timely payment and performance
      by
      the Corporation of the Obligations, the Corporation shall grant to the Agent
      (on
      behalf of the Holders) the General Security Agreement.




**ARTICLE
      7 - RESTRICTIONS ON DISPOSITIONS OF COLLATERAL**




**7.1** **General
      Restrictions**




Except
      as herein expressly provided, the Corporation shall not, without the prior
      written consent of the Agent:




(a)
            create,
                allow to be created, assume or suffer to exist any encumbrance upon
                the
                Collateral ranking or purporting to rank in priority to or pari passu
                with
                the Security Interest other than the Permitted Security
                Interests;




(b)
            sell,
                lease, assign or otherwise dispose of or deal with the Collateral;
                or







A
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(c)
            release,
                surrender or abandon possession of the
                Collateral.




**7.2** **Permitted
      Dispositions**




This
      Debenture and the Security Interest shall in no way hinder or prevent the
      Corporation, without the prior written consent of the Agent, at any time or
      from
      time to time until an Event of Default shall have occurred and the Security
      Interest shall become enforceable:




(a)
            from
                collecting and, where necessary, enforcing the collection of any
                and all
                amounts due or to become due to the Corporation under any account;
                or




(b)
            from
                selling, leasing, licensing, consigning or otherwise disposing of
                inventory or of any obsolete, worn out, damaged or otherwise unsuitable
                equipment forming part of the Collateral in the ordinary course of
                the
                Corporation’s business and for the purpose of carrying on the
                same.




**ARTICLE
      8 - NOTICES**




**8.1** **Notice
      to the Corporation**




Any
      notice to the Corporation under the provisions of this Debenture shall be valid
      and effective if delivered personally to, or if given by registered mail,
      postage prepaid, addressed to, the Corporation at its offices in 302 The East
      Mall, Suite 300, Toronto, Ontario, M9B 6C7 Attention: Chief Financial Officer,
      telecopier no. (416) 640-0412, with a copy to Gowling Lafleur Henderson LLP,
      Suite 1600, 1 First Canadian Place, 100 King Street West, Toronto, Ontario,
      M5X
      1G5 Attention: Jason A. Saltzman, telecopier no.(416) 369-7250, and shall be
      deemed to have been given on the date of delivery or on the fifth Business
      Day
      after such letter has been mailed, as the case may be. The Corporation may
      from
      time to time notify the Holders of a change in address which thereafter, until
      changed by further notice, shall be the address of the Corporation for all
      purposes of the Debentures.




**8.2** **Notice
      to Holder**




Except
      as otherwise expressly provided herein, all notices to be given hereunder with
      respect to the Debentures shall be valid and effective if such notice is
      delivered personally or, subject to Section 8.3, sent by first class mail,
      postage prepaid, addressed to such Holders at their post office addresses
      appearing in any of the registers hereinbefore mentioned. Any notice so
      delivered or sent by mail shall be deemed to have been given on the day upon
      which it is delivered or on the fifth Business Day after such letter has been
      mailed, as the case may be. Any accidental error, omission or failure in giving
      or in delivering or mailing any such notice or the non-receipt of any such
      notice by any Holder shall not invalidate or otherwise prejudicially affect
      any
      action or proceeding founded thereon.




**8.3** **Mail
      Service Interruption**




If,
      by reason of any actual or threatened interruption of mail service due to
      strike, lock-out or otherwise, any notice to be given to the Holders or to
      the
      Corporation would be unlikely to reach its destination in a timely manner,
      such
      notice shall be valid and effective only if delivered personally in accordance
      with Sections 8.1 or 8.2, as the case may be.







A
            -19










**ARTICLE
      9 - SUCCESSOR CORPORATIONS**




**9.1** **Certain
      Requirements**




The
      Corporation shall not enter into any transaction (whether by way of
      reconstruction, reorganization, consolidation, amalgamation, merger, transfer,
      sale, lease or otherwise) whereby all or substantially all of its undertaking,
      property and assets would become the property of any other person or, in the
      case of such amalgamation or merger, of the continuing company resulting
      therefrom unless, and may do so if:




(i) such
      other person or continuing corporation is a corporation (herein called the
      “ **Successor
      Corporation** ”)
      incorporated under the laws of Canada or any province thereof;




(ii) the
      Successor Corporation shall execute, prior to, contemporaneously with or
      forthwith after the consummation of such transaction an instrument supplemental
      hereto and such other instruments as are necessary or advisable to evidence
      the
      assumption by the Successor Corporation of the liability for the due and
      punctual payment of all amounts outstanding and payable hereunder from time
      to
      time and the covenant of the Successor Corporation to pay the same and its
      agreement to observe and perform all of the covenants and obligations of the
      Corporation under this Debenture;




(iii) such
      transaction shall, to the satisfaction of the Holders acting reasonably, be
      upon
      such terms as substantially to preserve and not to impair in any material
      respect the rights and powers of the Holders hereunder; and




(iv) no
      condition or state of facts shall exist as to the Corporation or the Successor
      Corporation, either at the time of or immediately before or after the
      consummation of any such transaction and after giving full effect thereto or
      immediately after the Successor Corporation complying with the provisions of
      clause (b) above, that constitutes or would constitute after notice or lapse
      of
      time or both, an Event of Default.




**9.2** **Vesting
      of Powers in Successor**




Whenever
      the conditions of Section 9.1 shall have been duly observed and performed,
      the
      Holders shall execute and deliver the supplemental instrument provided for
      in
      Section 9.1 and thereupon the Successor Corporation shall be bound by the
      covenants and obligations of the Corporation under this Debenture and shall
      possess and from time to time exercise each and every power of the Corporation
      under this Debenture in the name of the Corporation or otherwise, and any act
      or
      proceeding by any provision of this Debenture required to be done or performed
      by any directors or officers of the Corporation may be done and performed with
      like force and effect by the directors or officers of the Successor
      Corporation.







A
            -20















**ARTICLE
      10 - GENERAL PROVISIONS**




**10.1** **Further
      Assurances**




The
      Corporation shall do, execute, acknowledge and deliver or cause to be done,
      executed, acknowledged and delivered, such further acts, deeds, mortgages,
      transfers, assurances or other documents as the Registered Holder shall
      reasonably require to give effect to or preserve and perfect the Security
      Interest in the Collateral intended to be granted to the Agent or Registered
      Holder hereunder, under the General Security Agreement, or any security interest
      the Corporation may hereafter grant or become bound to grant to the Registered
      Holder for the purpose of accomplishing and effecting the intention of this
      Debenture. The Corporation hereby irrevocably appoints the Registered Holder
      to
      be the attorney of the Corporation, coupled with an interest, with full power
      of
      substitution, for and in the name of the Corporation to execute and to do any
      deeds, documents, transfers, demands, assignments, assurance, consents and
      things which the Corporation is obliged to sign, execute or do
      hereunder.




**10.2** **Term**




This
      Debenture shall become effective according to its terms immediately upon the
      execution hereof by the Corporation and shall continue as security for the
      Obligations until all of the Obligations are paid and performed in full and
      this
      Debenture is terminated.




**10.3** **Non-Substitution**




This
      Debenture and the Security Interest are in addition to and not in substitution
      for any other agreement made between the Registered Holder and the Corporation
      or any other security granted by the Corporation to the Registered Holder
      whether before or after the execution of this Debenture.




**10.4** **No
      Merger**




Neither
      the taking of any action suit or proceeding, judicial or extra-judicial nor
      the
      exercise of any power of seizure or disposition shall extinguish the liability
      of the Corporation to pay and perform the Obligations nor shall the acceptance
      of any payment or alternate security constitute or create any novation. No
      covenant, representation or warranty of the Corporation herein shall merge
      in
      any judgment.




**10.5** **Entire
      Agreement**




There
      are no representations, agreements, warranties, conditions, covenants or terms,
      express or implied, collateral or otherwise, affecting this Debenture or the
      Security Interest or the Corporation’s obligations and liabilities hereunder
      other than express herein.




**10.6** **Time
      of Essence**




Time
      shall be of the essence in this Debenture in all respects.







A
            -21















**10.7** **Disclosure
      of Information re Corporation**




The
      Corporation agrees that the Registered Holder may provide from time to time
      such
      information concerning this Debenture, the Collateral and the Obligations to
      such persons as the Registered Holder in good faith believes are entitled to
      the
      same under the PPSA.









A
          -22





**EXHIBIT
      “1”**




**FORM
      OF TRANSFER**




**Re:
      Convertible Debenture of ADB SYSTEMS INTERNATIONAL LTD. due September 12,
      2010**




For
      value received, the undersigned hereby assigns and transfers unto ______________________________________
      of _____________________________________ $ of the principal amount of the within
      Debenture registered in the name of the undersigned on the books of ADB SYSTEMS
      INTERNATIONAL LTD. (the “ **Corporation** ”)
      including the rights thereunder to the accrued and unpaid interest on such
      principal amount and hereby irrevocably constitutes and appoints
      ____________________________ attorney to transfer the said Debenture on the
      books of the Corporation with full powers of substitution in the
      premises.




DATED__________________________
      in the presence of __________________________.




Signed:
      ___________________________________________________














**EXHIBIT
      “2”**




**FORM
      OF ELECTION OF CONVERSION PRIVILEGE**




TO: ADB
      SYSTEMS INTERNATIONAL LTD. LTD.




The
      undersigned hereby irrevocably elects to convert $1,000 or any integral multiple
      thereof principal amount of the within Debenture into Units of the Corporation
      at the Conversion Price in accordance with the Terms and Conditions of the
      Debenture. Please issue share certificates for the Common Shares and Warrants
      comprising such Units as follows:




Principal
      amount converted: $ _____________________________




($1,000
      or integral multiple thereof only)






Name:   __________________________________________________________
              
              Address: __________________________________________________________
              
              ___________________________________________________
              
              Date:  ___________________________________________________
              
              Signed: ___________________________________________________

















**EXHIBIT
      “3”**




**FORM
      OF WARRANT**




**UNLESS
      PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
      TRADE THE SECURITY BEFORE [INSERT THE DATE THAT IS FOUR MONTHS AND A DAY AFTER
      THE DATE OF ISSUE** **.]**




Void
      after 5:00 p.m. (Toronto time) on the 12 th day of September, 2010.




Number
                of Warrants: •
            Series
                • WarrantCertificate No. •




**ADB
      SYSTEMS INTERNATIONAL LTD.**




(Organized
      under the laws of the Province of Ontario)




This
      is to certify that, for value received,
      ______________________________________________ (the “ **Holder** ”),
      shall have the right to purchase from ADB Systems International Ltd. (the
“ **Corporation** ”),
      at any time and from time to time up to 5:00 p.m. (Toronto time) on September
      12, 2010 (the “ **Expiry
      Time** ”),
      one fully paid and non-assessable Common Share (as defined below) for each
      Series I Warrant (individually, a “ **Warrant** ”)
      represented hereby at a price of Cdn$0.20 per share (the “ **Exercise
      Price** ”),
      upon and subject to the following terms and conditions:




1.
            For
                the purpose of this Warrant, the term “**Common
                Shares**”
                means common shares in the capital of the Corporation as constituted
                on
                the date hereof; provided that in the event of a change, subdivision,
                re-division, reduction, combination or consolidation thereof or any
                other
                adjustment under clause 7 hereof, or such successive changes,
                subdivisions, re-divisions, reductions, combinations, consolidations
                or
                other adjustments, then subject to the adjustments, if any, having
                been
                made in accordance with the provisions of this Warrant Certificate,
                “**Common
                Shares**”
                shall thereafter mean the shares, other securities or other property
                resulting from such change, subdivision, re-division, reduction,
                combination or consolidation or other
                adjustment.




2.
            All
                rights under any of the Warrants in respect of which the right of
                subscription and purchase therein provided for shall not theretofore
                have
                been exercised shall wholly cease and determine and such Warrants
                shall be
                wholly void and of no valid or binding effect after the Expiry
                Time.




3.
            The
                right to purchase Common Shares pursuant to the Warrants may only
                be
                exercised by the Holder before the Expiry Time by duly completing
                and
                executing a subscription substantially in the form attached hereto
                as
                Schedule “A”, in the manner therein indicated and surrendering this
                Warrant Certificate and the duly completed and executed subscription
                form
                to the Corporation at the principal office of the Corporation at
                302 The
                East Mall, Suite 300, Toronto, Ontario, M9B 6C7, together with payment
                of
                the purchase price for the Common Shares subscribed for in the form
                of
                cash or a certified cheque payable to the Corporation in an amount
                equal
                to the then applicable Exercise Price multiplied by the number of
                Common
                Shares subscribed for.


















4.
            Issue
                of Common Shares upon Exercise.




(a)  Upon
      such delivery and payment as set forth in Section 3, the Corporation shall
      cause
      to be issued to the Holder the number of Common Shares to be issued and the
      Holder shall become a shareholder of the Corporation in respect of such Common
      Shares with effect from the date of such delivery and payment and shall be
      entitled to delivery of a certificate or certificates evidencing such shares.
      The Corporation shall cause such certificate or certificates to be delivered
      via
      bonded overnight courier to the Holder at the address or addresses specified
      in
      such subscription form within three (3) business days of such delivery and
      payment as herein provided.




(b)  The
      Corporation shall not be required to issue fractional Common Shares upon the
      exercise of the Warrants and no payment shall be made by the Corporation in
      lieu
      of issuing any fractional interest in a Common Share.




5.
            The
                holding of a Warrant shall not constitute the Holder a shareholder
                of the
                Corporation nor entitle the Holder to any right or interest in respect
                thereof except as herein expressly
                provided.




6.
            The
                Corporation covenants and agrees that until the Expiry Time, while
                any of
                the Warrants shall be outstanding, it shall reserve and there shall
                remain
                unissued out of its authorized capital a sufficient number of Common
                Shares to satisfy the right of purchase herein provided, as such
                right of
                purchase may be adjusted pursuant to clauses 7 and 8 hereof. All
                Common
                Shares which shall be issued upon the exercise of the right to purchase
                herein provided for, upon payment therefor of the amount at which
                such
                Common Shares may at the time be purchased pursuant to the provisions
                hereof, shall be issued as fully paid and non assessable shares and
                the
                holders thereof shall not be liable to the Corporation or its creditors
                in
                respect thereof.




7.
            Adjustment




The
      Exercise Price will be subject to adjustment from time to time in the events
      and
      in the manner provided as follows:




(1) If
      and whenever at any time after September 12, 2005, and prior to the Expiry
      Time,
      the Corporation:




(i) issues
      Common Shares or securities exchangeable for or convertible into Common Shares
      to all or substantially all the holders of Common Shares as a stock dividend
      or
      other distribution (other than an issue of Common Shares to holders of Common
      Shares pursuant to a right granted to such holders to receive such Common Shares
      in lieu of dividends paid in the ordinary course);




(ii) subdivides
      its outstanding Common Shares into a greater number of Common Shares;
      or




(iii) consolidates
      its outstanding Common Shares into a smaller number of Common
      Shares,




(any
      of such events in clauses (i), (ii) and (iii) of this subsection being called
      a
“ **Common
      Share Reorganization** ”),
      then the Exercise Price shall be adjusted effective immediately after the







-
            2
            -





effective
      date or record date for the happening of a Common Share Reorganization, as
      the
      case may be, at which the holders of Common Shares are determined for the
      purpose of the Common Share Reorganization by multiplying the Exercise Price
      in
      effect immediately prior to such effective date or record date by a fraction,
      the numerator of which will be the number of Common Shares outstanding on such
      effective date or record date before giving effect to such Common Share
      Reorganization and the denominator of which will be the number of Common Shares
      outstanding immediately after giving effect to such Common Share Reorganization
      (including, in the case where securities exchangeable for or convertible into
      Common Shares are distributed, the number of Common Shares that would have
      been
      outstanding had all such securities been exchanged for or converted into Common
      Shares on such effective date or record date).




(2) If
      and whenever at any time after September 12, 2005, and prior to the Expiry
      Time,
      the Corporation fixes a record date for the issue of rights, options or warrants
      to all or substantially all the holders of Common Shares (the **“Rights”** )
      under which such holders are entitled, during a period expiring not more than
      forty-five (45) days after the date of such issue (the **“Rights
      Period”** ),
      to subscribe for or purchase Common Shares (or securities convertible into
      Common Shares) at a price per share to the holder (or at an exchange or
      conversion price per share during the Rights Period to the holder in the case
      of
      securities exchangeable for or convertible into Common Shares) of less than
      95%
      of the price (the **“Current
      Market Price”** )
      which is equal to the average closing price on the Toronto Stock Exchange for
      the period of 20 trading days immediately preceding such record date (any of
      such events being called a **“Rights
      Offering”** ),
      then the Exercise Price shall be adjusted effective immediately after the end
      of
      the Rights Period to a price determined by multiplying the Exercise Price in
      effect on such record date by a fraction:




(i) the
      numerator of which will be the aggregate of:




(1) the
      number of Common Shares outstanding as of the record date for the Rights
      Offering; plus




(2) a
      number determined by dividing (a) the product of the number of Common Shares
      issued or subscribed for during the Rights Period upon the exercise of the
      rights, warrants or options under the Rights Offering and the price at which
      such Common Shares are offered by (b) the Current Market Price of the Common
      Shares as of the record date for the Rights Offering, and




(ii) the
      denominator of which will be the number of Common Shares outstanding after
      giving effect to the Rights Offering and including the number of Common Shares
      actually issued or subscribed for during the Rights Period upon exercise of
      the
      rights, warrants or options under the Rights Offering.




Any
      Holder who has exercised the Warrants represented hereby during the period
      beginning immediately after the record date for a Rights Offering and ending
      on
      the last day of the Rights Period for the Rights Offering will, in addition
      to
      the Common Shares to which that Holder would otherwise be entitled upon such
      exercise, be entitled to that number of additional Common Shares equal to the
      difference between the shares received on such exercise and the shares that
      would have been received if the Exercise Price as adjusted for such Rights
      Offering pursuant to this subsection had applied when the Holder exercised
      the
      Warrants; provided that the provisions







-
            3
            -





of
      Section 4(b) will be applicable to any fractional interest in a Common Share
      to
      which such Holder might otherwise be entitled under the foregoing provisions
      of
      this subsection. Such additional Common Shares will be deemed to have been
      issued to the Holder immediately following the end of the Rights Period and
      a
      certificate for such additional Common Shares will be delivered to such Holder
      within three business days following the end of the Rights Period. To the extent
      that any such rights, options or warrants are not so exercised on or before
      the
      expiry thereof, the Exercise Price will be readjusted to the Exercise Price
      which would then be in effect based on the number of Common Shares (or the
      securities convertible into or exchangeable for Common Shares) actually
      delivered on the exercise of such rights, options or warrants.




(3) If
      and whenever at any time after September 12, 2005, and prior to the Expiry
      Time,
      the Corporation fixes a record date for the issue or the distribution to all
      or
      substantially all the holders of Common Shares of (i) securities of the
      Corporation, including rights, options or warrants to acquire securities of
      the
      Corporation or any of its property or assets and including evidences of
      indebtedness or (ii) any property or other assets, including evidences of
      indebtedness, and if such issuance or distribution does not constitute (A)
      a
      dividend paid in the ordinary course; (B) a Common Share Reorganization; (C)
      a
      Rights Offering; or (D) the
      issue of Rights to the holders of all or substantially all of its outstanding
      Common Shares under which such holders are entitled to subscribe for or purchase
      Common Shares or securities exchangeable for or convertible into Common Shares
      during the Rights Period, where the cost per Common Share during the Rights
      Period, is 95% or more of the Current Market Price (any
      of such non-excluded events being called a “ **Special
      Distribution** ”),
      the Exercise Price shall be adjusted effective immediately after such record
      date to a price determined by multiplying the Exercise Price in effect on such
      record date by a fraction:




(i) the
      numerator of which will be:




(1) the
      product of the number of Common Shares outstanding on such record date and
      the
      Current Market Price of the Common Shares on such record date; less




(2) subject
      to the prior written consent of the Toronto Stock Exchange, if applicable,
      the
      excess, if any, of (a) the fair market value, as determined by action by the
      Corporation’s board of directors (whose determination will be conclusive), to
      the holders of Common Shares of such securities or property or other assets
      so
      issued or distributed in the Special Distribution over (b) the fair market
      value
      of the consideration received therefor by the Corporation from the holders
      of
      Common Shares, as determined by the Corporation’s board of directors (whose
      determination will be conclusive); and




(ii) the
      denominator of which will be the product of the number of Common Shares
      outstanding on such record date and the Current Market Price of the Common
      Shares on such record date.




To
      the extent that any Special Distribution is not so made, the Exercise Price
      will
      be readjusted effective immediately to the Exercise Price which would then
      be in
      effect based upon such securities or property or other assets as actually
      distributed.







-
            4
            -





(4) If
      and whenever at any time after September 12, 2005, and prior to the Expiry
      Time,
      there is a reclassification of the Common Shares at any time outstanding or
      change of the Common Shares into other shares or into other securities or other
      capital reorganization (other than a Common Share Reorganization), or a
      consolidation, amalgamation or merger of the Corporation with or into any other
      corporation or other entity (other than a consolidation, amalgamation or merger
      which does not result in any reclassification of the outstanding Common Shares
      or a change of the Common Shares into other shares), or a transfer of the
      undertaking or assets of the Corporation as an entirety or substantially as
      an
      entirety to another corporation or other entity in which the holders of Common
      Shares are entitled to receive shares, other securities or other property (any
      of such events being called a **“Capital
      Reorganization”** ),
      any Holder who exercises the Warrants represented hereby into Common Shares
      after the effective date of such Capital Reorganization will be entitled to
      receive, and will accept for the same aggregate consideration in lieu of the
      number of Common Shares to which such Holder was previously entitled upon such
      exercise, the aggregate number of shares, other securities or other property
      or
      cash which such Holder would have been entitled to receive as a result of such
      Capital Reorganization if, on the effective date thereof, the Holder had been
      the registered holder of the number of Common Shares to which such Holder was
      previously entitled upon exercise subject to adjustment thereafter in accordance
      with provisions the same, as nearly possible, as those contained in this Section
      7. The Corporation will take all steps necessary to ensure that, on a Capital
      Reorganization, the Holders of Warrants will receive the aggregate number of
      shares, other securities or other property or cash to which they are entitled
      as
      a result of the Capital Reorganization. Appropriate adjustments will be made
      as
      a result of any such Capital Reorganization in the application of the provisions
      set forth in this Section 7 with respect to the rights and interests thereafter
      of Holders of Warrants to the end that the provisions set forth in this Section
      7 will thereafter correspondingly be made applicable as nearly as may reasonably
      be in relation to any shares, other securities or other property thereafter
      deliverable upon the exercise of any Warrant. Subject to the prior written
      consent of the Toronto Stock Exchange, if applicable, any such adjustment will
      be made by and set forth in an instrument supplemental hereto approved by action
      of the board of directors of the Corporation and will for all purposes be
      conclusively deemed to be an appropriate adjustment.




(5) If
      the purchase price provided for in any rights, options or warrants (the **“Rights
      Offering Price”** )
      referred to in subsections 7(2) or (3) is decreased, the Exercise Price will
      forthwith be changed so as to decrease the Exercise Price to the Exercise Price
      that would have been obtained if the adjustment to the Exercise Price made
      under
      such subsections, as the case may be, with respect to such rights, options
      or
      warrants had been made on the basis of the Rights Offering Price as so
      decreased, provided that the terms of this subsection will not apply to any
      decrease in the Rights Offering Price resulting from terms in any such rights,
      options or warrants designed to prevent dilution except to the extent that
      the
      resulting decrease in the Exercise Price under this subsection would be greater
      than the decrease, if any, in the Exercise Price to be made under the terms
      of
      this section by virtue of the occurrence of the event giving rise to such
      decrease in the Rights Offering Price.




(6) In
      any case in which this section requires that an adjustment become effective
      immediately after a record date for an event referred to herein, the Corporation
      may defer, until the occurrence of such event, issuing to the Holder of any
      Warrant exercised after such record date and before the occurrence of such
      event
      the additional Common Shares issuable upon such exercise by reason of the
      adjustment required by such event; provided, however, that the







-
            5
            -





Corporation
      shall deliver to such Holder an appropriate instrument evidencing such Holder’s
      right to receive such additional Common Shares upon the occurrence of such
      event
      and the right to receive any distributions made on such additional Common Shares
      declared in favour of holders of record of Common Shares on and after the date
      of exercise or such later date on which such Holder would, but for the
      provisions of this subsection, have become the holder of record of such
      additional Common Shares.




(7) If
      and whenever at any time after September 12, 2005 and prior to the Expiry Time,
      any of the events set out in this clause 7 shall occur and the occurrence of
      such event results in an adjustment of the Exercise Price pursuant to the
      provisions of this clause 7, then the number of Common Shares purchasable
      pursuant to this Warrant shall be adjusted contemporaneously with the adjustment
      of the Exercise Price by multiplying the number of Common Shares then otherwise
      purchasable on the exercise thereof by a fraction, the numerator of which shall
      be the Exercise Price in effect immediately prior to the adjustment and the
      denominator of which shall be the Exercise Price resulting from such
      adjustment.




(8) If
      the Corporation takes any action affecting its Common Shares to which the
      foregoing provisions of this clause 7, in the opinion of the board of directors
      of the Corporation, acting in good faith, are not strictly applicable, or if
      strictly applicable would not fairly adjust the rights of the Holder against
      dilution in accordance with the intent and purposes hereof, or would otherwise
      materially affect the rights of the Holder of the Warrants hereunder, then
      the
      Corporation shall execute and deliver to the Holder an amendment hereto
      providing for an adjustment in the application of such provisions so as to
      adjust such rights as aforesaid in such manner as the board of directors of
      the
      Corporation may determine to be equitable in the circumstances, acting in good
      faith. The failure of the taking of action by the board of directors of the
      Corporation to so provide for any adjustment on or prior to the effective date
      of any action or occurrence giving rise to such state of facts will be
      conclusive evidence that the board of directors has determined that it is
      equitable to make no adjustment in the circumstances.




8.
            The
                following rules and procedures shall be applicable to the adjustments
                made
                pursuant to clause 7:




The
      adjustments provided for in Section 7 are cumulative and will be computed to
      the
      nearest one-tenth of one cent and will be made successively whenever an event
      referred to therein occurs, subject to the remaining provisions of this
      section.




(a)No
                  adjustment in the Exercise Price will be required unless such adjustment
                  would result in a change of at least 1% in the prevailing Exercise
                  Price;
                  provided, however, that any adjustments which, except for the provisions
                  of this subsection would otherwise have been required to be made,
                  will be
                  carried forward and taken into account in any subsequent
                  adjustment.




(b)No
                  adjustment in the Exercise Price will be made in respect of any
                  event
                  described in Section 7 if Holders are entitled to participate in
                  such
                  event on the same terms, *mutatis
                  mutandis*,
                  as if they had exercised their Warrants prior to or on the effective
                  date
                  or record date of such event. Any such participation will be subject
                  to
                  the prior consent of each stock exchange on which the Common Shares
                  are
                  listed or quoted for unlisted trading privileges, or were listed
                  in the
                  year prior to the occurrence of the event described in this subsection,
                  if
                  applicable.







-
            6
            -










(c)If
                  at
                  any time a dispute arises with respect to adjustments provided
                  for in
                  Section 7, subject to the prior written consent of the Toronto
                  Stock
                  Exchange, if applicable, such dispute will be conclusively determined
                  by
                  the Corporation’s auditors, or if they are unable or unwilling to act, by
                  such other firm of independent chartered accountants as may be
                  selected by
                  action of the Corporation’s board of directors and any such determination
                  will be binding upon the Corporation, the Holders of Warrants and
                  shareholders of the Corporation; such auditors or accountants will
                  be
                  given access to all necessary records of the
                  Corporation.




(d)If
                  the
                  Corporation sets a record date to determine the holders of Common
                  Shares
                  for the purpose of entitling them to receive any dividend or distribution
                  or sets a record date to take any other action and thereafter and
                  before
                  the distribution to such shareholders of any such dividend or distribution
                  or the taking of any other action, legally abandons its plan to
                  pay or
                  deliver such dividend or distribution or take such other action,
                  then no
                  adjustment in the Exercise Price shall be
                  made.




(e)In
                  the
                  absence of a resolution of the Corporation’s board of directors fixing a
                  record date for a Special Distribution or Rights Offering, the
                  Corporation
                  shall be deemed to have fixed as a record date therefor the date
                  on which
                  the Special Distribution or Rights Offering is
                  effected.




9.
            On
                the happening of each and every such event set out in clause 7, the
                applicable provisions of this Warrant, including the Exercise Price,
                shall, ipso facto, be deemed to be amended accordingly and the Corporation
                shall take all necessary action so as to comply with such provisions
                as so
                amended.




10.
            The
                Corporation shall not be required to deliver certificates for Common
                Shares while the share transfer books of the Corporation are properly
                closed, having regard to the provisions of clauses 7 and 8 hereof,
                prior
                to any meeting of shareholders or for the payment of dividends or
                for any
                other purpose and in the event of the surrender of any Warrant in
                accordance with the provisions hereof and the making of any subscription
                and payment for the Common Shares called for thereby during any such
                period delivery of certificates for Common Shares may be postponed
                for not
                more than five (5) days after the date of the re opening of said
                share
                transfer books. Provided, however, that any such postponement of
                delivery
                of certificates shall be without prejudice to the right of the Holder
                so
                surrendering the same and making payment during such period to receive
                after the share transfer books shall have been re opened such certificates
                for the Common Shares called for, as the same may be adjusted pursuant
                to
                clause 8 hereof as a result of the completion of the event in respect
                of
                which the transfer books were
                closed.




11.
            Nothing
                herein contained or done pursuant hereto shall obligate the Holder
                to
                purchase or pay for or the Corporation to issue any securities except
                those Common Shares in respect of which the Holder shall have exercised
                its right to purchase hereunder in the manner provided
                herein.




12.
            AllSeries
                I Warrants
                of the Corporation shall rank*pari
                passu*,
                notwithstanding the actual date of the issue
                thereof.




13.
            The
                Corporation shall not enter into any transaction whereby all or
                substantially all of its undertaking, property and assets would become
                the
                property of any other corporation (herein called a “**successor
                corporation**”)
                whether by way of reorganization, reconstruction, consolidation,
                amalgamation, merger, transfer, sale, disposition or otherwise, unless
                prior to or







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            7
            -





contemporaneously with the consummation of such transaction the Corporation
      and
      the successor corporation shall have executed such instruments and done such
      things as, in the opinion of counsel to the Holder, are necessary or advisable
      to establish that upon the consummation of such transaction:




(i)
            the
                successor corporation will have assumed all the covenants and obligations
                of the Corporation under this Warrant,
                and




(ii)
            the
                Warrant will be a valid and binding obligation of the successor
                corporation entitling the Holder, as against the successor corporation,
                to
                all the rights of the Holder under this Warrant,*mutatis
                mutandis*.




Whenever
      the conditions of this subsection 13 shall have been duly observed and performed
      the successor corporation shall possess, and from time to time may exercise,
      each and every right and power of the Corporation under this Warrant in the
      name
      of the Corporation or otherwise and any act or proceeding by any provision
      hereof required to be done or performed by any director or officer of the
      Corporation may be done and performed with like force and effect by the like
      directors or officers of the successor corporation.




14.
            The
                Corporation hereby represents and warrants with and to the Holder
                that the
                Corporation is duly authorized and has the corporate and lawful power
                and
                authority to create and issue this Warrant and the Common Shares
                issuable
                upon the exercise hereof and perform its obligations hereunder and
                that
                this Warrant represents a valid, legal and binding obligation of
                the
                Corporation enforceable in accordance with its
                terms.




15.
            If
                any one or more of the provisions or parts thereof contained in this
                Warrant should be or become invalid, illegal or unenforceable in
                any
                respect in any jurisdiction, the remaining provisions or parts thereof
                contained herein shall be and shall be conclusively deemed to be,
                as to
                such jurisdiction, severable therefrom
                and:




(iii)
            the
                validity, legality or enforceability of such remaining provisions
                or parts
                thereof shall not in any way be affected or impaired by the severance
                of
                the provisions or parts thereof severed;
                and




(iv)
            the
                invalidity, illegality or unenforceability of any provision or part
                thereof contained in this Warrant in any jurisdiction shall not affect
                or
                impair such provision or part thereof or any other provisions of
                this
                Warrant in any other jurisdiction.




16.
            Any
                notice, document or communication required or permitted by this Warrant
                to
                be given by a party hereto shall be in writing and is sufficiently
                given
                if delivered personally, or if sent by prepaid registered mail, or
                if
                transmitted by any form of recorded telecommunication tested prior
                to
                transmission, to such party addressed as
                follows:




(v)
            to
                the Holder, in the register to be maintained pursuant to Section
                20
                hereof; and







-
            8
            -










(vi)
            to
                the Corporation at:




302
      The East Mall


Suite
      300


Toronto,
      Ontario


M9B
      6C7




Attention:  President




Telecopier:  416- 640-0412




Notice
      so mailed shall be deemed to have been given on the tenth (10 th )
      business day after deposit in a post office or public letter box. Neither party
      shall mail any notice, request or other communication hereunder during any
      period in which applicable postal workers are on strike or if such strike is
      imminent and may reasonably be anticipated to affect the normal delivery of
      mail. Notice transmitted by a form of recorded telecommunication or delivered
      personally shall be deemed given on the day of transmission or personal
      delivery, as the case may be. Any party may from time to time notify the other
      in the manner provided herein of any change of address which thereafter, until
      change by like notice, shall be the address of such party for all purposes
      hereof.




17.
            Subject
                as hereinafter provided, all or any of the rights conferred upon
                the
                Holder by the terms hereof may be enforced by the Holder by appropriate
                legal proceedings. No recourse under or upon any obligation, covenant
                or
                agreement contained herein shall be had against any shareholder,
                director
                or officer of the Corporation either directly or through the Corporation,
                it being expressly agreed and declared that the obligations under
                the
                Warrants are solely corporate obligations and that no personal liability
                whatever shall attach to or be incurred by the shareholders, directors or
                officers of the Corporation or any of them in respect thereof, any
                and all
                rights and claims against every such shareholder, officer or director
                being hereby expressly waived as a condition of and as a consideration
                for
                the issue of the Warrants.




18.
            The
                Holder may subscribe for and purchase any lesser number of Common
                Shares
                than the number of shares expressed in this Warrant Certificate.
                In the
                case of any subscription for a lesser number of Common Shares than
                expressed in this Warrant Certificate, the Holder hereof shall be
                entitled
                to receive at no cost to the Holder a new Warrant Certificate in
                respect
                of the balance of Warrant not then exercised. Such new Warrant Certificate
                shall be delivered by bonded overnight courier to the Holder by the
                Corporation, contemporaneously with the delivery of the certificate
                or
                certificates representing the Common Shares issued pursuant to clause
                4.




19.
            If
                this Warrant Certificate is stolen, lost, mutilated or destroyed,
                the
                Corporation shall, on such terms as it may in its discretion acting
                reasonably impose, issue and sign and direct the Corporation’s transfer
                agent to countersign a new Warrant Certificate of like denomination,
                tenor
                and date as the Warrant Certificate so stolen, lost, mutilated or
                destroyed for delivery to the
                Holder.




20.
            The
                Corporation shall keep at its principal office (or its transfer agent
                in
                the City of Toronto): (a) a register of holders in which shall be
                entered
                the names and addresses of the holders of the Warrants and of the
                number
                of Warrants held by them; and (b) a register of transfers in which
                shall
                be entered the date and other particulars of each transfer of Warrants.
                The registers hereinbefore referred to shall be open at all reasonable
                times for inspection by any Holder.







-
            9
            -










21.
            The
                transferee of a Warrant Certificate shall, after the transfer form
                attached to the Warrant Certificate as Schedule “B” or any other form of
                transfer acceptable to the Corporation, acting reasonably, is duly
                completed and the Warrant Certificate is lodged with the Corporation
                and
                upon compliance with all other conditions in that regard required
                by this
                Warrant, by the Toronto Stock Exchange or by law, be entitled to
                have his
                name entered on the register of holders as the owner of the Warrants
                represented thereby free from all equities or rights of set off or
                counterclaim between the Corporation and the transferor or any previous
                holder of such Warrant, save in respect of equities of which the
                Corporation or the transferee is required to take notice by statute
                or by
                order of a court of competent
                jurisdiction.




22.
            Warrant
                Certificates may, upon compliance with the reasonable requirements
                of the
                Corporation, be exchanged for Warrant Certificates in any other
                denomination representing in the aggregate the same number of Warrants.
                The Corporation shall issue and sign and direct the Corporation’s transfer
                agent to countersign, all Warrant Certificates necessary to carry
                out the
                exchanges contemplated herein,
                provided:




(i) Warrant
      Certificates may be exchanged only at the principal office of the Corporation
      in
      the City of Toronto;




(ii) any
      Warrant Certificates tendered for exchange shall be surrendered to the
      Corporation and cancelled; and




(iii) except
      as otherwise herein provided, the Corporation shall not charge Holders
      requesting an exchange any sum for any new Warrant Certificate issued.




23.
            The
                Corporation may deem and treat the registered holder of any Warrant
                Certificate as the absolute owner of the Warrants represented thereby
                for
                all purposes, and the Corporation shall not be affected by any notice
                or
                knowledge to the contrary except where the Corporation is required
                to take
                notice by statute or by order of a court of competent jurisdiction.
                A
                Holder shall be entitled to the rights evidenced by such Warrant
                free from
                all equities or rights of set off or counterclaim between the Corporation
                and the original or any intermediate holder thereof and all persons
                may
                act accordingly and the receipt by any such Holder of the Common
                Shares
                purchasable pursuant to such Warrant shall be a good discharge to
                the
                Corporation for the same and the Corporation shall not be bound to
                inquire
                into the title of any such Holder except where the Corporation is
                required
                to take notice by statute or by order of a court of competent
                jurisdiction.




24.
            The
                Holder, if resident in Canada, acknowledges that appropriate legend,
                as
                follows, will be placed upon certificates representing any securities
                issued on the exchange, assignment or exercise of the Warrants represented
                by this certificate until the hold period expires for the Warrants
                so
                represented hereby.




**LEGEND**




**“UNLESS
      PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
      TRADE THE SECURITY BEFORE [INSERT THE DATE THAT IS FOUR MONTHS AND A DAY AFTER
      THE DATE OF ISSUE** **.]** **”**







-
            10
            -





25.
            This
                Warrant shall be governed by the laws of the Province of Ontario
                and the
                federal laws of Canada applicable
                herein.




26.
            The
                Holder, if resident in the United States, acknowledges that appropriate
                legend, as follows, will be placed upon certificates representing
                any
                securities issued on the exchange, assignment or exercise of the
                Warrants
                represented by this certificate until the hold period expires for
                the
                Warrants so represented hereby.




**LEGEND**




**“THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
      THE
      UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR ANY STATE
      SECURITIES LAWS. THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED, HYPOTHECATED
      OR
      OTHERWISE TRANSFERRED OR ENCUMBERED ONLY (A) OUTSIDE THE UNITED STATES IN
      COMPLIANCE WITH RULE 904 OF REGULATION S PROMULGATED UNDER THE 1933 ACT, (B)
      IN
      COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
      1933
      ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH ANY
      APPLICABLE STATE SECURITIES LAWS, OR (C) IN A TRANSACTION THAT IS OTHERWISE
      EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND ANY APPLICABLE
      STATE LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY
      AN
      OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY
      SATISFACTORY TO THE COMPANY. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE
      “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. IF
      THESE SECURITIES ARE BEING SOLD AT ANY TIME THE COMPANY IS A “FOREIGN ISSUER” AS
      DEFINED IN RULE 902 UNDER THE 1933 ACT, A NEW CERTIFICATE, BEARING NO LEGEND,
      THE DELIVERY OF WHICH WILL CONSTITUTE “GOOD DELIVERY” MAY BE OBTAINED FROM THE
      COMPANY’S TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
      DECLARATION, IN FORM SATISFACTORY TO THE COMPANY AND THE COMPANY’S TRANSFER
      AGENT TO THE EFFECT THAT THE SALE OF THE SECURITIES IS BEING MADE IN COMPLIANCE
      WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT.”**




27.
            All
                references herein to monetary amounts are references to lawful money
                of
                Canada.







-
            11
            -





28. Time
      shall be of the essence hereof.




**IN
      WITNESS WHEREOF** ,
      the Corporation has caused this Warrant Certificate to be signed by its duly
      authorized officer.




**DATED** this _______day of ___________, 200_____.




**ADB
                SYSTEMS INTERNATIONAL LTD.**Per:Name:Title:







-
          12
          -





**SCHEDULE
      “A”**




**SUBSCRIPTION
      FORM**




**TO
      BE COMPLETED IF WARRANTS ARE TO BE EXERCISED:**




TO:
            **ADB
                SYSTEMS INTERNATIONAL LTD.**
              302
                The East Mall, Suite 300
              Toronto,
                Ontario
              M9B
                6C7


**THE
      UNDERSIGNED** hereby subscribes for ___________________ common shares of ADB Systems
      International Ltd. according to the terms and conditions set forth in the
      annexed warrant certificate (or such number of other securities or property
      to
      which such warrant entitles the undersigned to acquire under the terms and
      conditions set forth in the annexed warrant certificate).




Address
      for Delivery of
      Shares:__________________________________________________________________________________________________________________________________________




Exercise
      Price Tendered:
      _______________________________________________________________________________________________________________________________________________




(Cdn$0.50
      per share or as adjusted)  Cdn$__________________________________________________________________________________________________________________________________




**DATED** at Toronto, this _____day of _______________, 200___.




**Witness**
            
            Holder’s
                NameAuthorized
                SignatureTitle*(if
                applicable)*













**SCHEDULE
      “B”**




**ASSIGNMENT
      FORM**




**TO
      BE COMPLETED IF WARRANTS ARE TO BE ASSIGNED:**




TO:
            **ADB
                SYSTEMS INTERNATIONAL LTD.**
              302
                The East Mall, Suite 300
              Toronto,
                Ontario
              M9B
                6C7


**FOR
      VALUE RECEIVED** ,
      _________Warrants represented by this Warrant Certificate are hereby
      transferred to
      _______________________________________________________________________




residing
      at
      ___________________________________________________________________________________________________________________________________________________________




You
      are hereby instructed to take the necessary steps to effect this
      transfer.




**DATED** at _____________________, this ________ day of __________________ , ________
      .




**Witness**
            
            Holder’s
                NameAuthorized
                SignatureTitle*(if
                applicable)*





Signature
      guaranteed:




The
      signature must be guaranteed by a Canadian chartered bank or a member of a
      recognized stock exchange or other entity acceptable to the
      Corporation.