SUBSCRIPTION AGREEMENT
TO: ADB SYSTEMS INTERNATIONAL INC.,
An Ontario Corporation (the "COMPANY)
Dear Sirs:
Greenwich Growth Fund Ltd. (the "SUBSCRIBER") understands that the
Company is proposing to issue one or more series D 8% secured convertible notes
in the principal amount of $376,000 ("SERIES D NOTES"). The form of Series D
Note is set forth in EXHIBIT A attached hereto. The Subscriber also understands
that the Company is proposing to issue a series A 8% secured convertible note in
the principal amount of $408,000 ("SERIES A NOTE") and a series B 8% secured
convertible note in the principal amount of $216,000 ("SERIES B NOTE"). In
addition, the Subscriber understands that the Company is issuing a series C 8%
secured convertible note in the principal amount of $120,000 ("SERIES C NOTE")
as payment of a termination fee to Xxxxxxxxxxx Limited Partnership in accordance
with a termination and waiver agreement dated August 30, 2002 between the
Company and Xxxxxxxxxxx Limited Partnership.
The Subscriber wishes to subscribe for a Series D Note No. 1 (the
"NOTE") in the principal amount of $100,000 (the "LOAN AMOUNT") having a
maturity date of December 31, 2004 (the "MATURITY DATE") in accordance with and
subject to the terms of this subscription agreement.
The Note can be converted at the Subscriber's option into one unit (a
"UNIT") at a conversion price of $0.12 per Unit, at any time following
Shareholder Approval (as defined below), both prior to receipt of payment in
full both before and after default. Each Unit consists of one common share in
the capital of the Company (a "COMPANY SHARE") and one half of one common share
purchase warrant (the "WARRANT"), each whole Warrant entitling the holder to
purchase one common share of the Company at $0.14 per share exercisable until
December 31, 2004. The form of the Warrant (the "WARRANT CERTIFICATE") is
annexed hereto as EXHIBIT B.
The interest accrued on the Note may be payable by the Company, at its
option, by issuing to the Subscriber common shares (the "INTEREST SHARES") at a
deemed issue price equal to the weighted average trading price of the Company's
common shares on the Toronto Stock Exchange (the "TSX") for the 10 trading days
immediately preceding the date for payment of interest.
The Company Shares, the Interest Shares and the common shares issuable
upon the exercise of the Warrants (the "WARRANT SHARES") are collectively
referred to in this Agreement as the "SHARES". The Shares and the Warrants are
collectively referred to in this Agreement as the "UNDERLYING SECURITIES". The
Note and the Underlying Securities are collectively referred to in this
Agreement as the "SECURITIES".
The following terms and conditions shall apply to this subscription.
1. Subscription for Note
(a) The closing of the issue of the Note (the "CLOSING") shall take
place at 8:00 a.m. (Toronto time) (the "TIME OF CLOSING") at the
offices of Gowling Xxxxxxx Xxxxxxxxx XXX,
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Xxxxxxx, Xxxxxxx, on August 30, 2002, or at such other time and
place as may be agreed upon by the parties, provided that on such
date the conditions set forth in section 2 below shall have been
satisfied or waived (such closing day or such other time being
hereinafter referred to as the "CLOSING DATE").
(b) The Note shall be issued on the Closing Date as fully registered
and shall be fully transferable subject to compliance with
applicable Securities Laws (as hereinafter defined).
(c) At the Time of Closing on the Closing Date, the Company shall
deliver to or to the order of the Subscriber the definitive Note,
the documentation contemplated herein and such further
documentation as counsel for the Subscriber may reasonably require
against payment of the Loan Amount by certified cheque or wire
transfer payable to or to the order of the Company.
2. Conditions of Closing
(a) The Company's obligation to issue the Note to the Subscriber is
subject to the conditions that:
(i) such issuance be conditionally accepted by the Toronto
Stock Exchange (the "TSX"); and
(ii) the issuance of the Note and Underlying Securities are
exempt from the registration requirements and the
prospectus filing requirements under applicable securities
statutes, regulations, rules, policy statements and
interpretation notes and by the applicable rules and
policies of the TSX (collectively, "SECURITIES LAWS").
(b) The Subscriber's obligation to subscribe for the Note is subject
to the following conditions:
(i) the issue of the Note having been approved by the board of
directors of the Company;
(ii) the issue of the Note having been conditionally approved by
the TSX;
(iii) the Company shall have completed, contemporaneously with
the Closing hereunder, the loan transaction (the "BRICK
LOAN") whereby The Brick Warehouse Corporation ("THE
BRICK") will have advanced to the Company on the Closing
Date a first advance of not less than $1.0 million and an
expense advance of not less than $0.5 million for payment
of expenses related to the transaction with The Brick; and
(iv) delivery of definitive agreements and all other documents
and instruments required by the Subscriber including a
legal opinion as to, among other things, resale
restrictions applicable to the Note and Underlying
Securities, in form satisfactory to the Subscriber and its
counsel.
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(c) If any of the conditions sets forth in (a) and (b) above is not
satisfied or waived prior to Closing, this subscription agreement
shall terminate and the parties shall have no further obligations
hereunder.
3. Representations, Warranties and Covenants of Subscriber and Resale
Restrictions
(a) The Subscriber hereby represents and warrants to the Company
(which representations and warranties shall survive the Closing)
that:
(i) the Subscriber is acquiring the Note as principal for its
own account, and not for the benefit of any other person;
(ii) the Subscriber is a mutual fund registered in the British
Virgin Islands, with its registered office at Xxxxxxxx
Xxxxx, XX Xxx 000, Xxxx Xxxx, Xxxxxxx, Xxxxxxx Xxxxxx
Xxxxxxx; the administrator to the Subscriber is
Consolidated Fund Management Limited, a company registered
in Bermuda;
(iii) the Note is being acquired for investment purposes only and
not with a view to resale or distribution;
(iv) the Subscriber acknowledges that it has not subscribed for
the Note as a result of any advertisement in printed media
of general and regular paid circulation, radio or
television, including electronic display;
(v) this agreement has been duly authorized, executed and
delivered by the Subscriber and constitutes the valid and
binding agreement of the Subscriber, enforceable in
accordance with its terms, except that:
(A) enforcement thereof may be limited by bankruptcy,
insolvency and other laws affecting the enforcement of
creditors' rights generally;
(B) specific performance, injunction and other equitable
remedies may only be granted in the discretion of a
court of competent jurisdiction;
(C) rights to contribution and indemnity thereunder may be
limited under public policy or otherwise under
applicable law;
(vi) the Subscriber is knowledgeable, sophisticated and
experienced in business and financial matters and is
capable of evaluating the merits and risks of the
investment in the Note, fully understands the investment in
the Note and the restrictions on transfer described in this
subscription agreement and is able to bear the economic
risk of the investment in the Note;
(vii) the Subscriber is not a citizen, resident or national of
Canada, or a corporation, partnership, syndicate or
unincorporated organization, trust or other entity created
in, organized under or existing under the laws of Canada or
any province or territory thereof (collectively, a
"Canadian Person");
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(viii) the Subscriber is not a United States person (as defined in
Rule 902(o) of Regulation S promulgated under the United
States Securities Act of 1933);
(ix) the Subscriber is subscribing for the Note as principal for
its own account and not for the benefit of any Canadian
Person, a United States person or any other person nor for
resale in Canada or the United States and the Subscriber
confirms that the Note has not been offered to the
Subscriber in Canada or the United States and that this
agreement was not executed by the Subscriber in Canada or
the United States;
(x) the administrator to the Subscriber has an office or place
of business in the jurisdiction set forth in the TSX
Private Placement Questionnaire and Undertaking attached
hereto as SCHEDULE 1 and this subscription has been
arranged through that office or place of business; and
(xi) the subscription of the Note and Underlying Securities by
the Subscriber does not and will not contravene any
Securities Laws of the jurisdiction in which the Subscriber
is resident and does not create any obligation to prepare
and file a prospectus or similar document, or any other
report with respect to the subscription of the Note and
Underlying Securities or any registration or other
obligation on the part of the Company.
(b) Subscriber's Acknowledgements
(i) The Subscriber acknowledges that the Securities have not
been and will not be registered under the United States
Securities Act of 1933, as amended (the "1933 ACT"), and
may not be offered, sold, resold or delivered within the
United States of America, its territories or possessions,
other than pursuant to an effective registration statement
or an applicable exemption under the 1933 Act.
(ii) The Subscriber acknowledges that
(A) the Note, and
(B) certificates representing
(1) the Company Shares and the Warrants issued upon
the conversion of the Note prior to December 31,
2002,
(2) the Warrant Shares purchased upon exercise of the
Warrants prior to December 31, 2002, and
(3) the Interest Shares issued prior to December 31,
2002,
will contain the following legend required pursuant to
Securities Laws of Ontario and the Subscriber agrees to
comply with the terms of such legend:
"UNLESS PERMITTED UNDER THE APPLICABLE CANADIAN PROVINCIAL
SECURITIES LEGISLATION AND THE POLICIES OF THE
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TORONTO STOCK EXCHANGE, THE HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL NOT TRADE SUCH
SECURITIES OR THE UNDERLYING SECURITIES OVER THE FACILITIES
OF THE TORONTO STOCK EXCHANGE OR TO ANY PERSON RESIDENT IN
CANADA, BEFORE DECEMBER 31, 2002."
(iii) The Subscriber acknowledges that the Company will be
required to provide applicable securities regulatory
authorities with certain information required by the
Securities Laws and agrees to provide the Company with any
such required information.
(iv) The Subscriber acknowledges that Part 13 of the Income Tax
Act (Canada) may apply to payments made by the Company to
the Subscriber under the Note.
(v) The Subscriber acknowledges that the Subscriber's ability
to transfer the Securities subscribed for herein is limited
by, among other things, applicable Securities Laws and the
TSX Private Placement Questionnaire and Undertaking
attached hereto as Schedule 1;
(vi) The Subscriber acknowledges and accepts the plan of
arrangement contemplated in the Brick Loan transaction
which is to be submitted for approval at the special
meeting of the shareholders of the Corporation to be held
on or about October 22, 2002, provided that the details of
such plan of arrangement do not materially vary from those
disclosed to the Subscriber prior to Closing.
(c) The Subscriber covenants and agrees with the Company that:
(i) the Note subscribed for herein by the Subscriber pursuant
to this subscription agreement and the Underlying
Securities that may be issued on conversion thereof will
not be traded over the facilities of the TSX or to any
person resident in Canada for the applicable four month
hold period;
(ii) it will execute and deliver all documentation and provide
all information required by the Securities Laws, if
required, to permit the subscription of the Note on the
terms set forth herein, including a TSX Private Placement
Questionnaire and Undertaking in the form attached hereto
as Schedule 1; and
(iii) it will comply with the Securities Laws concerning any
resale of the Securities, and in particular, the Subscriber
understands and acknowledges that the Securities will be
subject to a four month resale restriction under applicable
Securities Laws.
4. Representations and Warranties of the Company
The Company hereby represents and warrants to the Subscriber (which
representations and warranties shall survive closing) that:
(i) the Company is now and has been a reporting issuer under
the Securities Act of Ontario for the four months
immediately preceding the date hereof and is not in
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default thereunder and it is a "qualifying issuer" as
defined in MI 45-102 as of the Closing Date;
(ii) the Company has been duly organized under the laws of the
Province of Ontario and has all required corporate power
and authority to enter into and carry out the provisions of
this subscription agreement and the transactions
contemplated hereby;
(iii) this subscription agreement, the Note, and other agreements
delivered together with this subscription agreement or in
connection herewith have been duly authorized, executed and
delivered by the Company and are valid and binding
agreements enforceable in accordance with their respective
terms, except that:
(A) enforcement thereof may be limited by bankruptcy,
insolvency and other laws affecting the enforcement of
creditors' rights generally;
(B) specific performance, injunction and other equitable
remedies may only be granted in the discretion of a
court of competent jurisdiction; and
(C) rights to contribution and indemnity thereunder may be
limited under public policy or otherwise under
applicable law;
(iv) all necessary corporate action has been taken or will have
been taken prior to the Closing Date by the Company to
validly create, issue and sell the Note subscribed for by
the Subscriber pursuant to this subscription agreement;
(v) the Company Shares will be validly authorized, issued and
outstanding as fully paid and non-assessable shares in the
capital of the Company upon the due conversion of the Note;
(vi) the Warrant Shares will be validly authorized, issued and
outstanding as fully paid and non-assessable shares in the
capital of the Company upon the due exercise of the
Warrants;
(vii) the Interest Shares will be validly authorized, issued and
outstanding as fully paid and non-assessable shares in the
capital of the Company upon the issuance by the Company;
(viii) no approval, authorization, consent or other order of, and
no filing, registration or recording with, any governmental
authority is required by the Company in connection with the
execution and delivery or with the performance by the
Company of this subscription agreement except:
(A) the conditional and final approval of the TSX of which
the conditional approval has been obtained; and
(B) the approval of shareholders of the Company
("SHAREHOLDER APPROVAL") with respect to the issuance
of the Underlying Securities, which is
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expected to be obtained at a special meeting of
shareholders of the Company to be held on or about
October 22, 2002;
(ix) as at August 28, 2002, there were 41,583,628 common shares
in the capital of the Company issued and outstanding; and
(x) the Company's common shares are listed for trading on the
TSX. Except as publicly disclosed, the Company has not
received any oral or written notice that its common stock
will be delisted from the TSX or that the Company's common
shares do not meet all requirements for the continuation of
such listing.
5. Reliance upon Representations, Warranties
The parties agree that, by the Company delivering the Note to the
Subscriber and by the Subscriber accepting the Note, each party will be
representing and warranting that the party's representations and warranties
contained in this subscription agreement are true as at the Closing Date, with
the same force and effect as if they had been made by the such party at the
Closing Date, and that they will survive the purchase by the Subscriber of the
Note and continue in full force and effect for a period of two (2) years
following the Closing Date notwithstanding any subsequent disposition by the
Subscriber of the Note or the Underlying Securities.
6. Covenants of the Company.
The Company hereby covenants and agrees with the Subscriber as follows:
(a) to obtain Shareholder Approval no later than October 31, 2002;
(b) to cause the Note to be duly and validly created and issued;
(c) to cause the Shares issuable upon the conversion of the Note, upon
the exercise of the Warrants and upon of the payment of interest
on the Note to be duly and validly authorized, created and issued
as fully-paid and non-assessable common shares in the capital of
the Company;
(d) to use its commercial best efforts to ensure that the Shares are
listed and posted for trading on the TSX upon their issue;
(e) to promptly comply with all applicable filing and other
requirements under all applicable Securities Laws, including
without limitation, the filing of Form 45-102F2 under MI 45-102
and Form 45-501F1 under Rule 45-501 within 10 days of the Closing
Date together with applicable fees;
(f) to use its commercial best efforts to maintain its status as a
reporting issuer in the province of Ontario, to maintain its
status as a "qualifying issuer" as defined in MI 45-102, and to
continue to be in compliance with its obligations under the
Securities Laws of Ontario; and
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(g) if applicable, make withholdings required under Part 13 of the
Income Tax Act (Canada) with respect to any payments to be made to
the Subscriber under the Note and remit such withholdings to
applicable governmental authority.
7. Costs
All expenses incurred by the Company (including the fees and
disbursements of counsel for the Company) relating to the issuance of the Note,
issue of the Underlying Securities, listing of the Shares, printing,
photocopying, professional fees, the costs for holding the shareholders' meeting
and preparation of meeting materials with respect to Shareholder Approval, and
all other costs and expenses incurred by the Company relating to the
transactions contemplated herein shall be borne by the Company.
8. Security for the Note
The Company agrees to grant to the Subscriber a general security
interest over all assets of the Company to secure the Company's performance of
its obligations under the Note, all in accordance with the general security
agreement attached hereto as EXHIBIT C hereto (the "GENERAL SECURITY
AGREEMENT").
9. Jurisdiction
This subscription agreement is governed by the laws of the Province of
Ontario and the federal laws of Canada applicable therein. By the Subscriber
executing this subscription agreement below, the Subscriber irrevocably attorns
to the jurisdiction of the courts of Ontario.
10. Facsimile Subscriptions
The Company shall be entitled to rely on delivery by facsimile of an
executed copy of this subscription agreement and acceptance by the Company of
that delivery shall be legally effective to create a valid and binding agreement
between the Subscriber and the Company in accordance with the terms of this
subscription agreement.
11. Confidentiality.
Each of the Subscriber and the Company shall maintain in confidence the
matters referred to in this subscription agreement and shall not make any public
disclosure, except to the extent required by law, of the terms of this agreement
without the consent of the other, such consent not to be unreasonably withheld.
The wording of any public disclosure which is made must be approved by each of
the parties.
12. Assignment
This subscription agreement is not transferable or assignable.
13. Time of the Essence
Time shall be of the essence hereof.
14. Currency
All references herein to monetary amounts are references to lawful
money of Canada.
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15. Headings
The headings contained herein are for convenience of reference only and
shall not affect the meaning or interpretation hereof.
16. Entire Agreement
This subscription agreement (including the annexed schedules hereto)
constitutes the only agreement between the parties with respect to the subject
matter hereof and shall supersede any and all prior negotiations and
understandings and there are no representations, covenants or other agreements
relating to the subject matter hereof except as stated or referred to herein or
therein. This subscription agreement may only be amended or modified in any
respect by written instrument executed by each of the parties hereto.
SIGNATURE PAGE TO FOLLOW
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If the foregoing is in accordance with your understanding, please sign
and return this subscription agreement as soon as possible to evidence your
agreement to issue the Note.
DATED at ___________________________ this _____________ day of __________, 2002.
Please acknowledge your acceptance of the foregoing subscription
agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
GREENWICH GROWTH FUND LTD.
By:_________________________________
Name:
Title:
ACCEPTED: Dated as of August ____, 2002
ADB SYSTEMS INTERNATIONAL INC.
By:_________________________________
Name:
Title:
SCHEDULE 1
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of Issuer of the Securities - ADB Systems International Inc.
(b) Number and Class of Securities to be Purchased -
Series D 8% convertible secured note No. 1 in the principal amount of
$100,000 (the "Note"), convertible at the holder's option at any time
after approval of shareholders of the issuer until the maturity date of
December 31, 2004 for units at $0.12 per unit. Each unit consists of
one common share of the issuer and one half of one common share
purchase warrant. Each whole warrant entitles the holder thereof to
purchase one common share of the issuer at $0.14 per share at any time
prior to 5:00 p.m. on December 31, 2004.
(c) Purchase Price - Advance of the principal amount for the Note.
2. DETAILS OF PURCHASER
(a) Name of Purchaser - Greenwich Growth Fund Ltd.
(b) Address - X.X. Xxx Xx 0000, 0xx Xxxxx, Xxx Xx Xxxxx Xxxxx,
14 Par-La-Ville Road, Xxxxxxxx XX JX, Bermuda
(c) Names and addresses of persons having a greater than 10% beneficial
interest in the purchaser-
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3. RELATIONSHIP TO ISSUER
(a) Is the purchaser (or any person named in response to 2(c) above) an
insider of the issuer for the purposes of the Securities Act (Ontario)
(before giving effect to this private placement)? If so, state the
capacity in which the purchaser (or person named in response to 2(c))
qualifies as an insider -
No.
(b) If the answer to (a) is "no", are the purchaser and the issuer
controlled by the same person or company? If so, give details -
No.
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the purchaser, as principal, in the
securities of the issuer (other than debt securities which are not
convertible into equity securities), directly or indirectly, within the
sixty (60) days preceding the date hereof -
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UNDERTAKING
TO: TORONTO STOCK EXCHANGE
THE UNDERSIGNED has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of the Private Placement Questionnaire and
Undertaking.
THE UNDERSIGNED undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of four
(4) months from the date of closing of the transaction herein or for such period
as is prescribed by applicable securities legislation, whichever is longer,
without the prior consent of the Toronto Stock Exchange and any other regulatory
body having jurisdiction.
DATED at ________________________ this __________ day of ________________, 2002.
GREENWICH GROWTH FUND LTD.
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Name of Purchaser (please print)
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Authorized Signature
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Official Capacity (please print)
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Please print here name of individual
whose signature appears above, if
different from name of purchaser
printed above
EXHIBIT A
FORM OF SERIES D NOTES
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
FORM OF GENERAL SECURITY AGREEMENT
