SUBSCRIPTION AGREEMENT
TO: ADB SYSTEMS INTERNATIONAL INC.,
An Ontario Corporation (the "COMPANY)
Dear Sirs:
Xxxxxxxxxxx Limited Partnership (the "SUBSCRIBER") understands that the
Company is proposing to issue:
(a) a series A 8% secured convertible note in the principal amount of
$408,000 ("SERIES A NOTE"); and
(b) a series B 8% secured convertible note in the principal amount of
$216,000 ("SERIES B NOTE").
The forms of Series A Note and Series B Note are set forth respectively
in EXHIBIT A and EXHIBIT B attached hereto. The aggregate principal amount of
$624,000 for the Series A Note and Series B Note is referred to in this
subscription agreement as the "LOAN AMOUNT". The Subscriber understands that the
Company is also proposing to issue one or more Series D 8% secured convertible
notes up to a maximum principal amount of $376,000 to other investors ("SERIES D
NOTES").
In addition, the Company is proposing to issue a series C 8% secured
convertible note in the principal amount of $120,000 ("SERIES C NOTE") as
payment for the fee owing to the Subscriber in the amount of $120,000 (the
"TERMINATION FEE") plus applicable goods and service tax ("GST") as
consideration for the Subscriber entering into a termination and waiver
agreement in the form of EXHIBIT C attached hereto (the "TERMINATION AND WAIVER
AGREEMENT"), terminating the obligations of the Company pursuant to an earlier
agreement with the Subscriber dated April 25, 2002 excepting only the Company's
obligation to indemnify the Subscriber pursuant to s.7(a)(i) therein and the
Subscriber's obligation to indemnify the Company pursuant to s.7(b)(i) therein
from liability, loss or damage resulting from any misrepresentation or breach of
warranty contained in such agreement. The Form of the Series C Note is set forth
in Exhibit A to the Termination and Waiver Agreement.
Series A Note, Series B Note and Series C Note are collectively
referred to hereinafter as the "NOTES" and individually as a "NOTE". The
maturity date (the "MATURITY DATE") for each Note is December 31, 2004.
Each of the Series A Note and Series B Note can be converted at the
Subscriber's option, subject to the Maximum Investment Limitation set forth
below, into one unit (a "UNIT") at a conversion price of $0.12 per Unit, at any
time following Shareholder Approval (as defined below) in the case of Series A
Note, and at any time after December 20, 2002 in the case of Series B Note, 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 "UNIT 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 D.
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Series C Note can be converted at the Subscriber's option, subject to
the Maximum Investment Limitation set forth below, into one common share in the
capital of the Company (a "NOTE C SHARE") at a conversion price of $0.12 per
share, at any time after December 20, 2002 and prior to receipt of payment in
full both before and after default. The interest on Series C Note will accrue
and be payable only from the earlier of the Maturity Date or the occurrence of
an event of default as defined therein.
Subject to the Maximum Investment Limitation set forth below, the
interest accrued on the Series A Note, Series B Note and Series C 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 Unit Shares and the Note C Shares are collectively referred to in
this Agreement as the "COMPANY SHARES". 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 Notes 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. Term Sheet. The Term Sheet dated August 16, 2002 attached as SCHEDULE 1
setting forth the salient terms of this transaction is hereby incorporated by
reference.
2. Subscription for Notes
(a) The Subscriber hereby subscribes for the Series A Note, Series B
Note and the Series C Note. The closing of the issue of the Notes
(the "CLOSING") shall take place at 8:00 am (Toronto time) (the
"TIME OF CLOSING") at the offices of Gowling Xxxxxxx Xxxxxxxxx
XXX, 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 3 below shall have
been satisfied or waived (such closing day or such other time
being hereinafter referred to as the "CLOSING DATE").
(b) The Notes 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 Notes,
the documentation contemplated herein and such further
documentation as counsel for the Subscriber may reasonably require
against payment of the Loan Amount for the Series A Note and the
Series B Note by certified cheque or wire transfer payable to or
to the order of the Company, and against delivery of the
Termination and Waiver Agreement (as hereinafter defined) executed
by the Subscriber.
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3. Conditions of Closing
(a) The Company's obligation to issue the Notes to the Subscriber is
subject to the conditions that:
(i) such issuance be conditionally accepted by the Toronto
Stock Exchange (the "TSX");
(ii) the issuance of the Notes and the Underlying Securities are
exempt from the registration requirements and 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"); and
(iii) the execution and delivery by the Subscriber of the
Termination and Waiver agreement.
(b) The Subscriber's obligation to subscribe for the Notes is subject
to the following conditions:
(i) the satisfactory completion of due diligence by the
Subscriber prior to the Closing Date;
(ii) the issue of the Notes having been approved by the board of
directors of the Company;
(iii) the issue of the Notes having been conditionally approved
by the TSX;
(iv) the issue of the Series C Note as payment of the
Termination Fee and payment by the Company to the
Subscriber on Closing of any GST applicable on the
Termination Fee;
(v) 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;
(vi) payment and satisfaction by the Company of the Due
Diligence Fees as provided herein;
(vii) payment of the fees and disbursements of the Subscriber's
counsel with respect to the transactions contemplated
herein (the "SUBSCRIBER COUNSEL FEE") in the amount of
$25,000 to Subscriber's counsel in trust; and
(viii) delivery of definitive agreements and all other documents
and instruments required by the Subscriber including a
legal opinion as to, among other things,
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resale restrictions applicable to the Notes and the
Underlying Securities, in form satisfactory to the
Subscriber and its counsel.
(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 except for the Company's obligation to pay the Due
Diligence Fees and the Subscriber Counsel Fee from the Company's
own funds.
4. 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 Notes as principal for its
own account, and not for the benefit of any other person;
(ii) the Subscriber is resident in the Province of Ontario and
is an "accredited investor" as such term is defined in
Ontario Securities Commission Rule 45-501 "Exempt
Distributions" ("RULE 45-501");
(iii) the Notes are 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 Notes 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; and
(C) rights to contribution and indemnity thereunder may be
limited under public policy or otherwise under
applicable law; and
(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 Notes, fully understands the investment
in the Notes and the restrictions on transfer described in
this subscription agreement and is able to bear the
economic risk of the investment in the Notes.
(b) 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
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or possessions, other than pursuant to an effective registration
statement or an applicable exemption under the 1933 Act.
(c) The Subscriber covenants and agrees with the Company that:
(i) it will execute and deliver all documentation and provide
all information required by the Securities Laws, if
required, to permit the purchase of the Notes on the terms
set forth herein, including, an accredited investor
certificate in the form attached hereto as SCHEDULE 2, a
TSX Private Placement Questionnaire and Undertaking in the
form attached hereto as SCHEDULE 3;
(ii) 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;
(iii) it will vote all common shares beneficially owned by the
Subscriber entitled to vote at the special meeting of the
shareholders of the Corporation to be held on or about
October 22, 2002 in favour of the plan of arrangement
contemplated in the Brick Loan transaction, provided that
the details of such plan of arrangement do not materially
vary from those disclosed to the Subscriber in written form
prior to Closing; and
(iv) it will remit to applicable governmental authority all GST
amount paid to the Subscriber by the Company on the
Termination Fee.
(d) Canadian Notes, Shares and Warrants Legend.
The Subscriber acknowledges that
(i) the Notes, and
(ii) certificates representing
(A) the Unit Shares and the Warrants issued upon the
conversion of the Series A Note and the Series B Note
prior to December 31, 2002,
(B) the Warrant Shares purchased upon exercise of the
Warrants prior to December 31, 2002,
(C) the Interest Shares issued prior to December 31,
2002,and
(D) the Note C Shares issued upon the exercise of the
Series C Notes prior to December 31, 2002,
will contain the following legend required pursuant to
Multilateral Instrument 45-102 (Resale of Securities) of the
Canadian Securities Administrators adopted as a Rule by the OSC
("MI 45-102"), and the Subscriber agrees to comply with the terms
of such legend:
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"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER
OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE
DECEMBER 31, 2002."
(e) 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.
5. 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 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 Notes, 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 Notes 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
Notes;
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(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) the Fee 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 Fee
Warrants;
(ix) 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 expected to be
obtained at a special meeting of shareholders of the
Company to be held on or about October 22, 2002;
(x) as at August 28, 2002, there were 41,583,628 common shares
in the capital of the Company issued and outstanding; and
(xi) 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.
6. Reliance upon Representations, Warranties
The parties agree that, by the Company delivering the Notes to the
Subscriber and by the Subscriber accepting the Notes, 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
Notes 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 Notes or the Underlying Securities.
7. 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;
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(b) to cause the Notes to be duly and validly created and issued;
(c) to cause the Shares issuable upon the conversion of the Notes,
upon the exercise of the Warrants and upon of the payment of
interest on the Series A Note and Series B 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; and
(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.
8. Costs
(a) All expenses incurred by the Company (including the fees and
disbursements of counsel for the Company) relating to the issuance
of the Notes, 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.
(b) The Company agrees to pay all reasonable fees and expenses of the
Subscriber (including the Subscriber Counsel Fee not exceeding
$25,000), and other reasonable costs, expenses and liabilities
incurred by the Subscriber and any out-of-pocket costs related to
printing, courier, travel, telephone, fax, information meetings
and all other reasonable out-of-pocket expenses relating to this
transaction. The Company shall provide a direction of payment on
Closing to the Subscriber directing the Subscriber to withhold the
amount of $25,000 from the Loan Amount as payment of the
Subscriber Counsel Fee. The $25,000 amount withheld shall be paid
to the Subscriber's counsel in trust, and any funds remaining
after presentation of its invoice by the Subscriber's counsel
shall be remitted to the Company.
9. Due Diligence Fees.
(a) In consideration for agreeing to conduct due diligence on the
Company and to review disclosure documents filed by the Company
under Securities Laws, the Company will pay due diligence fees
(the "DUE DILIGENCE FEES") as follows:
(i) to YMP Consultants Inc. (the "CONSULTANT") a due diligence
payment of $25,000 (the "FEE PAYMENT"), which shall be paid
on Closing in accordance with the Company's direction to
the Subscriber which direction shall state that the Fee
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Amount is to be withheld from the Loan Amount and to be
paid to the Consultant, and
(ii) to Xxxxxxxxxxx Corporation (the "GENERAL PARTNER") 150,000
warrants, each warrant entitling the holder to purchase one
common share of the Company at $0.14 per share from
December 22, 2002 until December 31, 2004 (the "FEE
WARRANTS").
(b) The Fee Warrants shall be evidenced by a certificate (the "FEE
WARRANT CERTIFICATE") in the form of Exhibit D, and shall be
issued and delivered to the General Partner on the Closing Date.
The General Partner agrees that the legending requirements set out
in section 4(d) herein also apply to the Fee Warrant Certificate
and to certificate representing common shares issuable upon
exercise of the Fee Warrants (the "FEE WARRANT SHARES").
(c) The General Partner hereby represents that it is an "accredited
investor" pursuant to Rule 45-501 as evidenced by the Accredited
Investor Certificate attached hereto as SCHEDULE 2 completed and
signed by the General Partner, and is acquiring the Fee Warrants
as principal for its own account for investment purposes and not
with a view to resale or distribution.
(d) All the representations, covenants, warranties, undertakings,
remedies, indemnification, and other rights made or granted to or
for the benefit of the Subscriber are hereby also made and granted
to the General Partner and its successors and assigns in respect
to the Fee Warrants and the Fee Warrants Shares.
(e) The Company on the one hand, and the Subscriber on the other hand,
agree to indemnify the other against and hold the other harmless
from any and all liabilities to any persons claiming brokerage
commissions or due diligence fees other than the Consultant and
the General Partner on account of services purported to have been
rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby and arising
out of such party's actions. The Company and the Subscriber each
represents that, to its knowledge, there are no parties entitled
to receive commissions or similar payments in connection with the
Offering.
10. Maximum Investment Limitation
(a) The Company shall not issue any Shares to the Subscriber, nor
issue the Fee Warrant Shares to the General Partner, if:
(i) the number of common shares beneficially owned by the
Subscriber and its affiliates on the date of issue, and
(ii) the number of common shares to be issued to the Subscriber
and its affiliates,
would result in beneficial ownership by the Subscriber and its
affiliates of more than 19.99% of the outstanding common shares of
the Company on such date of issue (the "MAXIMUM INVESTMENT
LIMITATION"). For the purposes of this provision, beneficial
ownership shall be determined in accordance with Section 13(d) of
the Securities
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Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to
aggregate issuance of only 19.99% and aggregate issuance of common
shares to the Subscriber may exceed 19.99%. The Subscriber may
void the Maximum Investment Limitation described in this provision
upon 75 days prior written notice to the Company. The Subscriber
may determine which of the equity of the Company deemed
beneficially owned by the Subscriber is to be allocated to the
19.99% amount described above and which to be allocated to the
excess above 19.99%.
(b) Any interest accrued on the Notes that are not paid in Interest
Shares when due as a result of the Maximum Investment Limitation
must be paid by the Company to the Subscriber in cash.
(c) For the purposes of determining the percentage holdings of the
Subscriber and its affiliates, the Subscriber agrees to notify the
Company in writing identifying the Subscriber's affiliates. Prior
to any issuance of any Shares to the Subscriber or its affiliates,
the Company shall calculate and advise the Subscriber as to how
many common shares of the Company the Subscriber and its
affiliates hold according to the Company's records. The Company is
entitled to rely conclusively on the Holder's notice with respect
to the identities of the Holder's affiliates and will not be held
liable and the Holder will have no cause of action whatsoever for
the failure by the Company to comply with the Maximum Investment
Limitation as a result of any inaccuracy in such notification from
the Holder.
(d) The Company agrees to reject any portion of a conversion notice
delivered by the Subscriber to the Company with respect to the
conversion of any Note, any portion of a subscription form
delivered by the Subscriber to the Company with respect to the
exercise of any Warrant, and any portion of a subscription form
delivered by the General Partner to the Company with respect to
the exercise of any Fee Warrant, which, if converted or exercised,
would result in a contravention of the Maximum Investment
Limitation, and any such portion of the subscription notice or
subscription form, as the case may be, shall be deemed to be null
and void with respect the conversion or exercise for which the
subscription form or the exercise form is delivered. Any portion
of a conversion notice or subscription form, as the case may be,
rejected in accordance with this clause (c) may be converted or
exercised, as the case may be, at a subsequent time, subject to
the Maximum Investment Limitation.
11. Subsequent Financing
Except for:
(i) the Brick Loan and a proposed subordinated, convertible
loan transactions of up to $376,000 with one or more other
investors upon terms no more favourable to the investor(s)
than as contemplated hereby,
(ii) stock or stock options granted to employees or directors of
the Company pursuant to a plan which has been approved by
the shareholders of the Company prior to August 16, 2002
and issuances of stock pursuant to such stock options,
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(iii) stock issued upon the exercise of options or warrants which
are outstanding as of August 16, 2002,
the Company will not, without the consent of the Subscriber (which
consent shall not be unreasonably withheld or delayed), issue any
equity, convertible debt or other securities convertible into
common shares of the Company until March 27, 2003.
12. Security for the Notes
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 Series A Note and the Series B Note, all in accordance
with the general security agreement attached hereto as EXHIBIT E hereto (the
"GENERAL SECURITY AGREEMENT").
13. 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.
14. 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.
15. 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.
16. Assignment
This subscription agreement is not transferable or assignable.
17. Time of the Essence
Time shall be of the essence hereof.
18. Currency
All references herein to monetary amounts are references to lawful
money of Canada.
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19. Headings
The headings contained herein are for convenience of reference only and
shall not affect the meaning or interpretation hereof.
20. 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 Notes.
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.
XXXXXXXXXXX LIMITED PARTNERSHIP
Subscriber
by its general partner, Xxxxxxxxxxx Corporation
By:______________________________________
Xxxxxxxxx Xxxxxxx
Chief Operating Officer
XXXXXXXXXXX CORPORATION
General Partner to the Subscriber executing
this Agreement only with respect to Sections
9(a)(ii), 9(c), 9(d) and 9(e) herein.
By:______________________________________
Xxxxxxxxx Xxxxxxx
Chief Operating Officer
ACCEPTED: Dated as of August ____, 2002.
ADB SYSTEMS INTERNATIONAL INC.
By:_________________________________
Name:
Title:
SCHEDULE 1
TERM SHEET
SCHEDULE 2
ACCREDITED INVESTOR CERTIFICATE
TO: ADB SYSTEMS INTERNATIONAL INC. (THE "COMPANY")
RE: SUBSCRIPTION FOR CONVERTIBLE SECURED NOTES OF THE COMPANY
The undersigned Subscriber/officer of the Subscriber (or in the case of a trust,
the trustee or an officer of the trustee of the trust) hereby certifies that:
1. he/she has read the subscription agreement and understands that the
offering of convertible secured notes to the Subscriber, is being made
on a registration and prospectus exempt basis;
2. the Subscriber is an "accredited investor" as that term is defined in
Ontario Securities Commission Rule 45-501 "Exempt Distributions" by
virtue of the Subscriber being:
[PLEASE CHECK ONE]
(i) _________ an individual who beneficially owns, or who together with a
spouse beneficially owns, financial assets(1) having an
aggregate realizable value that, before taxes but net of any
related liabilities(2), exceeds $1,000,000
(ii) ________ an individual whose net income before taxes exceeded $200,000
in each of the two most recent years or whose net income
before taxes combined with that of a spouse exceeded $300,000
in each of those years and who, in either case, has a
reasonable expectation of exceeding the same net income level
in the current year
(iii) _______ a person or company registered under the Securities Act
(Ontario) or securities legislation in another jurisdiction as
an adviser or dealer, other than a limited market dealer
(iv) ________ an individual who has been granted registration under the
Securities Act (Ontario) or securities legislation in another
jurisdiction as a representative of a company which is
registered as a dealer or adviser, whether or not that
individual's registration is still in effect
(v) _________ a company, limited partnership, limited liability partnership,
trust or estate, other than a mutual fund or non-redeemable
investment fund, that had net assets of at least $5,000,000 as
reflected in its most recently prepared financial statements
(vi) ________ a person in respect of which all of the owners of interests,
direct or indirect, legal or
--------
1 For the purposes of this certificate, the term "financial assets" means cash,
securities or any contract of insurance or deposit or evidence thereof that is
not a security for the purposes of the Securities Act (Ontario).
2 For the purposes of this certificate, the term "related liabilities" means:
liabilities incurred or assumed for the purposes of financing the acquisition or
ownership of financial assets and liabilities that are secured by financial
assets.
beneficial, are persons that are accredited investors.
(vii) _______ other _____________________________________[PLEASE INSERT
EXEMPTION BEING RELIED UPON, AS REFERRED TO IN APPENDIX 1 TO
THIS CERTIFICATE]
3. he/she: (a) if the Subscriber, is making the above statement based on
personal knowledge of his/her financial situation and has reviewed personal
financial documentation with an accountant, financial advisor or other financial
professional to determine the above statement is true; or (b) if other than the
Subscriber, is making the above statement based on a review of the financial
statements of the Subscriber for the most recently completed financial year and
any interim financial statements prepared since the end of such financial year
and has undertaken such other review and due diligence necessary to determine
and certify that the Subscriber is an "accredited investor" as that term is
defined in Ontario Securities Commission Rule 45-501 "Exempt Distributions"; and
4. he/she understands that the Company is relying on this certificate as
evidence of the Subscriber's status as an accredited investor in accordance with
Ontario Securities Commission Rule 45-501 and its companion policy.
DATED at __________________________________ this ____________ day of
____________________________________, 2002.
XXXXXXXXXXX LIMITED PARTNERSHIP
Subscriber
by its general partner, Xxxxxxxxxxx Corporation
By:____________________________________________
Xxxxxxxxx Xxxxxxx
Chief Operating Officer
APPENDIX 1
FOR THE PURPOSES OF SUBSCRIBING FOR CONVERTIBLE SECURED NOTES OF ADB SYSTEMS
INTERNATIONAL INC., ALL INVESTORS RESIDENT IN OR OTHERWISE SUBJECT TO THE LAWS
OF THE PROVINCE OF ONTARIO RELYING ON THE "OTHER" CATEGORY OF "ACCREDITED
INVESTOR" ON THE CERTIFICATE TO WHICH THIS APPENDIX IS ATTACHED MUST QUALIFY AS
ONE OF THE FOLLOWING (PLEASE CIRCLE THE APPLICABLE PROVISION BELOW AND INSERT
SAME IN THE SPACE PROVIDED ON THE CERTIFICATE TO WHICH THIS APPENDIX IS
ATTACHED):
(i) a bank listed in Schedule I or II, or an authorized foreign
bank branch listed in Schedule III, of the Bank Act (Canada);
(ii) the Business Development Bank incorporated under the Business
Development Bank Act (Canada);
(iii) a loan corporation or trust corporation registered under the
Loan and Trust Corporations Act or under the Trust and Loan
Companies Act (Canada), or under comparable legislation in any
other province or territory of Canada;
(iv) a co-operative credit society, credit union central, federation
of caisses populaires, credit union or league, or regional
caisse populaire, or an association under the Cooperative
Credit Associations Act (Canada), in each case located in
Canada;
(v) a company licensed to do business as an insurance company in
any province or territory of Canada;
(vi) a subsidiary of any company referred to in paragraph (i), (ii),
(iii), (iv) or (v), where the company owns all of the voting
shares of the subsidiary;
(vii) the Government of Canada or of any province or territory of
Canada, or any crown corporation, instrumentality or agency of
a Canadian federal, provincial or territorial government;
(viii) any Canadian municipality or any Canadian provincial or
territorial capital city;
(ix) any national, federal, state, provincial, territorial or
municipal government of or in any foreign jurisdiction, or any
instrumentality or agency thereof;
(x) a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a
provincial pension commission or similar regulatory authority;
(xi) a registered charity under the Income Tax Act (Canada);
(xii) a promoter of the Company or an affiliated entity of a promoter
of the Company;
(xiii) a spouse, parent, grandparent or child of an officer, director
or promoter of the Company;
(xiv) a person that, in relation to the Company, is an affiliated
entity or a person referred to in clause (c) of the definition
of distribution in subsection 1(1) of the Securities Act
(Ontario);
(xv) a person that is recognized by the Ontario Securities
Commission as an accredited investor;
(xvi) a mutual fund or non-redeemable investment fund that, in
Ontario, distributes its securities only to persons that are
accredited investors;
(xvii) a mutual fund or non-redeemable investment fund that, in
Ontario, distributes its securities under a prospectus for
which a receipt has been granted by the Ontario Securities
Commission;
(xviii) a managed account (being an investment portfolio account of a
client established in writing with a portfolio adviser who
makes investment decisions for the account and has full
discretion to trade in securities of the account without
requiring the client's express consent to a transaction);
(xix) an account that is fully managed by a trust corporation
registered under the Loan and Trust Corporations Act (Ontario);
or
(xx) an entity organized outside of Canada that is analogous to any
of the entities referred to in paragraphs (i) through (vi),
item (iii) on the certificate to which this appendix is
attached and paragraph (x) in form and function.
ACCREDITED INVESTOR CERTIFICATE
TO: ADB SYSTEMS INTERNATIONAL INC. (THE "COMPANY")
RE: SUBSCRIPTION FOR COMMON SHARE PURCHASE WARRANTS OF THE COMPANY
The undersigned Subscriber/officer of the Subscriber (or in the case of a trust,
the trustee or an officer of the trustee of the trust) hereby certifies that:
5. he/she has read the subscription agreement and understands that the
offering of common share purchase warrants to the Subscriber, is being
made on a registration and prospectus exempt basis;
6. the Subscriber is an "accredited investor" as that term is defined in
Ontario Securities Commission Rule 45-501 "Exempt Distributions" by
virtue of the Subscriber being:
[PLEASE CHECK ONE]
(i) ________ an individual who beneficially owns, or who together with a
spouse beneficially owns, financial assets(3) having an
aggregate realizable value that, before taxes but net of any
related liabilities(4), exceeds $1,000,000
(ii) _______ an individual whose net income before taxes exceeded $200,000 in
each of the two most recent years or whose net income before
taxes combined with that of a spouse exceeded $300,000 in each
of those years and who, in either case, has a reasonable
expectation of exceeding the same net income level in the
current year
(iii) ______ a person or company registered under the Securities Act
(Ontario) or securities legislation in another jurisdiction as
an adviser or dealer, other than a limited market dealer
(iv) _______ an individual who has been granted registration under the
Securities Act (Ontario) or securities legislation in another
jurisdiction as a representative of a company which is
registered as a dealer or adviser, whether or not that
individual's registration is still in effect
(v) ________ a company, limited partnership, limited liability partnership,
trust or estate, other than a mutual fund or non-redeemable
investment fund, that had net assets of at least $5,000,000 as
reflected in its most recently prepared financial statements
(vi) _______ a person in respect of which all of the owners of interests,
direct or indirect, legal or beneficial, are persons that are
accredited investors.
--------
3 For the purposes of this certificate, the term "financial assets" means cash,
securities or any contract of insurance or deposit or evidence thereof that is
not a security for the purposes of the Securities Act (Ontario).
4 For the purposes of this certificate, the term "related liabilities" means:
liabilities incurred or assumed for the purposes of financing the acquisition or
ownership of financial assets and liabilities that are secured by financial
assets.
(vii) _______ other _____________________________ [PLEASE INSERT EXEMPTION
BEING RELIED UPON, AS REFERRED TO IN APPENDIX 1 TO THIS
CERTIFICATE]
7. he/she: (a) if the Subscriber, is making the above statement based on
personal knowledge of his/her financial situation and has reviewed personal
financial documentation with an accountant, financial advisor or other financial
professional to determine the above statement is true; or (b) if other than the
Subscriber, is making the above statement based on a review of the financial
statements of the Subscriber for the most recently completed financial year and
any interim financial statements prepared since the end of such financial year
and has undertaken such other review and due diligence necessary to determine
and certify that the Subscriber is an "accredited investor" as that term is
defined in Ontario Securities Commission Rule 45-501 "Exempt Distributions"; and
8. he/she understands that the Company is relying on this certificate as
evidence of the Subscriber's status as an accredited investor in accordance with
Ontario Securities Commission Rule 45-501 and its companion policy.
DATED at __________________ this _________ day of _______________________, 2002.
XXXXXXXXXXX CORPORTAION
Subscriber
By:______________________________________
Xxxxxxxxx Xxxxxxx
Chief Operating Officer
APPENDIX 1
FOR THE PURPOSES OF SUBSCRIBING FOR COMMON SHARE PURCHASE WARRANTS OF ADB
SYSTEMS INTERNATIONAL INC., ALL INVESTORS RESIDENT IN OR OTHERWISE SUBJECT TO
THE LAWS OF THE PROVINCE OF ONTARIO RELYING ON THE "OTHER" CATEGORY OF
"ACCREDITED INVESTOR" ON THE CERTIFICATE TO WHICH THIS APPENDIX IS ATTACHED MUST
QUALIFY AS ONE OF THE FOLLOWING (PLEASE CIRCLE THE APPLICABLE PROVISION BELOW
AND INSERT SAME IN THE SPACE PROVIDED ON THE CERTIFICATE TO WHICH THIS APPENDIX
IS ATTACHED):
(i) a bank listed in Schedule I or II, or an authorized foreign
bank branch listed in Schedule III, of the Bank Act (Canada);
(ii) the Business Development Bank incorporated under the Business
Development Bank Act (Canada);
(iii) a loan corporation or trust corporation registered under the
Loan and Trust Corporations Act or under the Trust and Loan
Companies Act (Canada), or under comparable legislation in any
other province or territory of Canada;
(iv) a co-operative credit society, credit union central, federation
of caisses populaires, credit union or league, or regional
caisse populaire, or an association under the Cooperative
Credit Associations Act (Canada), in each case located in
Canada;
(v) a company licensed to do business as an insurance company in
any province or territory of Canada;
(vi) a subsidiary of any company referred to in paragraph (i), (ii),
(iii), (iv) or (v), where the company owns all of the voting
shares of the subsidiary;
(vii) the Government of Canada or of any province or territory of
Canada, or any crown corporation, instrumentality or agency of
a Canadian federal, provincial or territorial government;
(viii) any Canadian municipality or any Canadian provincial or
territorial capital city;
(ix) any national, federal, state, provincial, territorial or
municipal government of or in any foreign jurisdiction, or any
instrumentality or agency thereof;
(x) a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a
provincial pension commission or similar regulatory authority;
(xi) a registered charity under the Income Tax Act (Canada);
(xii) a promoter of the Company or an affiliated entity of a promoter
of the Company;
(xiii) a spouse, parent, grandparent or child of an officer, director
or promoter of the Company;
(xiv) a person that, in relation to the Company, is an affiliated
entity or a person referred to in clause (c) of the definition
of distribution in subsection 1(1) of the Securities Act
(Ontario);
(xv) a person that is recognized by the Ontario Securities
Commission as an accredited investor;
(xvi) a mutual fund or non-redeemable investment fund that, in
Ontario, distributes its securities only to persons that are
accredited investors;
(xvii) a mutual fund or non-redeemable investment fund that, in
Ontario, distributes its securities under a prospectus for
which a receipt has been granted by the Ontario Securities
Commission;
(xviii) a managed account (being an investment portfolio account of a
client established in writing with a portfolio adviser who
makes investment decisions for the account and has full
discretion to trade in securities of the account without
requiring the client's express consent to a transaction);
(xix) an account that is fully managed by a trust corporation
registered under the Loan and Trust Corporations Act (Ontario);
or
(xx) an entity organized outside of Canada that is analogous to any
of the entities referred to in paragraphs (i) through (vi),
item (iii) on the certificate to which this appendix is
attached and paragraph (x) in form and function.
SCHEDULE 3
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 A 8% convertible secured note in the principal amount of
$408,000 ("Series A 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.
Series B 8% convertible secured note in the principal amount of
$216,000 ("Series B Note") convertible at the holder's option at any
time after December 20, 2002 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.
Series C convertible secured note in the principal amount of $120,000
("Series C Note") convertible at the holder's option at any time after
December 20, 2002 for common share of the issuer at $0.12 per share
until the maturity date December 31, 2004.
(c) Purchase Price - Advance of the principal amounts for the Series A Note
and Series B Note in the aggregate of $624,000. Series C Note is issued
as payment for a termination fee owed by the Company to the purchaser
for terminating certain previous obligations by the issuer in favour of
the purchaser.
2. DETAILS OF PURCHASER
(a) Name of Purchaser - Xxxxxxxxxxx Limited Partnership
(b) Address - 000 Xxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, X0X 0X0
(c) Names and addresses of persons having a greater than 10% beneficial
interest in the purchaser-
Xxxxxxxxxxx Corporation, General Partner of Xxxxxxxxxxx Limited
Partnership 000 Xxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, X0X 0X0
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 -
None
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.
XXXXXXXXXXX LIMITED PARTNERSHIP, by its
general partner, Xxxxxxxxxxx Corporation
Name of Purchaser (please print)
___________________________________________
Authorized Signature
President
___________________________________________
Official Capacity (please print)
Xxxxxxx Xxxxxxxxxxx
___________________________________________
Please print here name of individual whose
signature appears above, if different from
name of purchaser printed above
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
(b) Name of Issuer of the Securities - ADB Systems International Inc.
(b) Number and Class of Securities to be Purchased -
150,000 common share purchase warrants, each warrant entitling the
holder thereof to purchase one common share of the issuer at $0.14 per
share at any time from December 22, 2002 up to 5:00 p.m. on December
31, 2004.
(c) Purchase Price - N/A.
2. DETAILS OF PURCHASER
(a) Name of Purchaser - Xxxxxxxxxxx Corporation
(b) Address - 000 Xxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, X0X 0X0
(c) Names and addresses of persons having a greater than 10% beneficial
interest in the purchaser -
1. Xxxxxxxxx Xxxxxxx, 00 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx X0X 0X0
2. Xxxxxxx Xxxxxxxxxxx, 00 Xxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxx
3. Xxxxxxxx Xxxxxxx, _____________________________________________________
4. _______________________________________________________________________
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 -
None
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.
XXXXXXXXXXX CORPORATION
Name of Purchaser (please print)
---------------------------------------------------
Authorized Signature
President
---------------------------------------------------
Official Capacity (please print)
Xxxxxxx Xxxxxxxxxxx
---------------------------------------------------
Please print here name of individual whose
signature appears above, if different from name of
purchaser printed above
EXHIBIT A
FORM OF SERIES A NOTE
EXHIBIT B
FORM OF SERIES B NOTE
EXHIBIT C
FORM OF TERMINATION AND WAIVER AGREEMENT
EXHIBIT D
FORM OF WARRANT
EXHIBIT E
FORM OF GENERAL SECURITY AGREEMENT
