Document:

EX-10.6 Amended and Restated Registration Rights

 

EXHIBIT 10.6

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

     THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as
of August 24, 2007, by and among Ad.Venture Partners, Inc., a Delaware corporation (the “Company”),
and each of the undersigned parties listed under Insiders on the signature page hereto (each, an
“Insider” and collectively, the “Insiders”).

     WHEREAS, pursuant to the Arrangement Agreement dated March 13, 2007 and amended by amendment
no. 1 thereto on July 2, 2007 and further amended by amendment no. 2 thereto effective as of August
6, 2007 among the Company, 6732097 Canada Inc., a corporation incorporated under the laws of Canada
and an indirect wholly owned subsidiary of the Company (the “Purchaser”), and 180 Connect Inc., a
corporation incorporated under the laws of Canada (the “Arrangement”), the New Insiders (as defined
below) are receiving shares of Common Stock (as defined below) or common shares of Purchaser that
are exchangeable for Common Stock (the “Exchangeable Shares”) as consideration for their common
shares in the Company;

     WHEREAS, the Initial Insiders (as defined below) acquired Common Stock prior to the date
hereof;

     WHEREAS, the Initial Insiders and the Company are parties to a Registration Rights Agreement
dated August 31, 2005 (the “Prior Registration Rights Agreement”); and

     WHEREAS, in connection with the Arrangement and pursuant to Section 6.6(a) of the Prior
Registration Rights Agreement, the Company and the Initial Insiders wish to amend and restate the
Prior Registration Rights Agreement and accept the rights and covenants hereof in lieu of their
rights and covenants under the Prior Registration Rights Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     1. DEFINITIONS. The following capitalized terms used herein have the following
meanings:

          “Agreement” means this Agreement, as amended, restated, supplemented, or otherwise modified
from time to time.

          “Business Day” means any day, except a Saturday, Sunday or legal holiday on which the banking
institutions in the City of New York are authorized or obligated by law or executive order to
close.

          “Commission” means the Securities and Exchange Commission, or such successor federal agency or
agencies as may be established in lieu thereof.

          “Common Stock” means the common stock, par value $0.0001 per share, of the Company.

          “Company” is defined in the preamble to this Agreement.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder.

          “Form S-3” is defined in Section 2.3.

          “Indemnified Party” is defined in Section 4.3.

          “Indemnifying Party” is defined in Section 4.3.

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          “Initial Insiders” means Howard S. Balter, H. Balter 2007 Associates, LLC, The Howard S.
Balter 2007 Grantor Retained Annuity Trust II, Ilan M. Slasky, Ilan Slasky 2007 Grantor Retained
Annuity Trust, Lawrence J. Askowitz, Dr. Shlomo Kalish, Thomas Rogers, JF Investments LLC, William
Margiloff and Hillel Weinberger.

          “Initial Insider Demand Registration” is defined in Section 2.1.1(a).

          “Initial Insider Demanding Holder” is defined in Section 2.1.1(b).

          “Initial Insider Shares” mean all of the shares of Common Stock owned or held by Initial
Insiders as of the date of the consummation of the Arrangement; provided, that such shares
shall cease to be Initial Insider Shares when: (a) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act (as defined below) and
such securities shall have been sold, transferred, disposed of or exchanged in accordance with such
Registration Statement; (b) such securities shall have been otherwise transferred pursuant to Rule
144 of the Securities Act (or any similar provisions thereunder, but not Rule 144A), and new
certificates for them not bearing a legend restricting further transfer shall have been delivered
by the Company and subsequent public distribution of them shall not require registration under the
Securities Act; or (c) such securities shall have ceased to be outstanding.

          “Insider” is defined in the preamble to this Agreement.

          “Insider Indemnified Party” is defined in Section 4.1.

          “Insider Shares” means the Initial Insider Shares and the New Insider Shares.

          “Maximum Number Of Shares” is defined in Section 2.1.1(d).

          “New Insiders” means M. Brian McCarthy, Peter Giacalone, Anton R. Simunovic, Byron G. Osing,
David R. Hallmen and Matthew G. Roszak.

          “New Insider Demand Registration” is defined in Section 2.1.2(a).

          “New Insider Demanding Holder” is defined in Section 2.1.2(b).

          “New Insider Shares” mean all of the shares of Common Stock received by the New Insiders in
connection with the Arrangement (including the shares of Common stock issued upon exchange of the
Exchangeable Shares); provided, that such shares shall cease to be New Insider Shares when:
(a) a Registration Statement with respect to the sale of such securities shall have become
effective under the Securities Act (as defined below) and such securities shall have been sold,
transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such
securities shall have been otherwise transferred pursuant to Rule 144 of the Securities Act (or any
similar provisions thereunder, but not Rule 144A), and new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and subsequent public
distribution of them shall not require registration under the Securities Act; or (c) such
securities shall have ceased to be outstanding.

          “Notices” is defined in Section 6.2.

          “Piggy-Back Registration” is defined in Section 2.2.1.

          “Prospectus” means a prospectus relating to a Registration Statement, as amended or
supplemented, and all materials incorporated by reference in such Prospectus.

          “Purchase Option” means the option to purchase 450,000 units (each consisting of one share of
common stock and two warrants) issued to Wedbush Morgan Securities Inc. or its designees in
connection with the Company’s initial public offering (as transferred from time to time in
accordance with its terms).

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          “Purchase Option Shares” means the Purchase Option, the units issuable thereof, the Common
Stock and warrants included in such units and the Common Stock issuable upon exercise of such
warrants.

          “Register,” “registered” and “registration” mean a registration effected by preparing and
filing a registration statement or similar document under the Securities Act and such registration
statement becoming effective.

          “Registration Statement” means a registration statement filed by the Company with the
Commission in compliance with the Securities Act and the rules and regulations promulgated
thereunder for a public offering and sale of Common Stock (other than a registration statement on
Form S-4 or Form S-8, or their successors, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another entity).

          “Release Date” means the date that is six months after the consummation of the Arrangment.

          “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
of the Commission promulgated thereunder.

          “Underwriter” means a securities dealer who purchases any Insider Shares as principal in an
underwritten offering and not as part of such dealer’s market-making activities.

     2. REGISTRATION RIGHTS.

          2.1 Demand Registration.

               2.1.1 Demand Registration by Initial Insiders.

                    (a) General Request for Registration. At any time and from time to time on or after
the Release Date, the holders of a majority-in-interest of the Initial Insider Shares held by the
Initial Insiders or the transferees of the Initial Insider Shares, may make a written demand for
registration under the Securities Act of all or part of their Initial Insider Shares (an “Initial
Insider Demand Registration”). Any demand for an Initial Insider Demand Registration shall specify
the number of Initial Insider Shares proposed to be sold and the intended method(s) of distribution
thereof. The Company will notify all holders of Initial Insider Shares of any demand pursuant to
this Section 2.1.1(a), or pursuant to Section 2.1.1(b) below, as the case may be, within five (5)
Business Days, and each holder of Initial Insider Shares who wishes to include all or a portion of
such holder’s Initial Insider Shares in such Initial Insider Demand Registration (each such holder
including shares of Initial Insider Shares in such Initial Insider Demand Registration, a “Initial
Insider Demanding Holder”) shall so notify the Company within ten (10) Business Days after the
receipt by the holder of the notice from the Company. Upon any such request, the Initial Insider
Demanding Holders shall be entitled to have their Initial Insider Shares included in the Initial
Insider Demand Registration subject to Section 2.1.1(d) and the provisions set forth in Section
3.1.1. The Company shall not be obligated to effect more than an aggregate of two (2) Initial
Insider Demand Registrations under this Section 2.1.1(a) in respect of Initial Insider Shares.

                    (b) Effective Registration. A registration will not count as an Initial Insider Demand
Registration until the Registration Statement filed with the Commission with respect to such
Initial Insider Demand Registration has been declared effective and the Company has complied with
all of its obligations under this Agreement with respect thereto; provided,
however, that if, after such Registration Statement has been declared effective, the
offering of Initial Insider Shares pursuant to an Initial Insider Demand Registration is interfered
with by any stop order or injunction of the Commission or any other governmental agency or court,
the Registration Statement with respect to such Initial Insider Demand Registration will be deemed
not to have been declared effective, unless and until, (i) such stop order or injunction is
removed, rescinded or otherwise terminated, and (ii) with respect to a Initial Insider Demand
Registration, a majority-in-interest of the Initial Insider Demanding Holders thereafter elect to
continue the offering; provided, further, that the Company shall not be obligated
to file a second Registration Statement until any such Registration Statement that has been filed
is counted as an Initial Insider Demand Registration or is terminated.

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                    (c) Underwritten Offering. If a majority-in-interest of the Initial Insider Demanding
Holders so elect and such holders so advise the Company as part of their written demand for an
Initial Insider Demand Registration, the offering of such Initial Insider Shares pursuant to such
Initial Insider Demand Registration shall be in the form of an underwritten offering. In each such
case, the right of any holder to include such holder’s Initial Insider Shares in such registration
shall be conditioned upon such holder’s participation in such underwriting and the inclusion of
such holder’s Initial Insider Shares in the underwriting to the extent provided herein. All Initial
Insider Demanding Holders who propose to distribute their Initial Insider Shares through such an
underwriting shall enter into an underwriting agreement in customary form with the Underwriter or
Underwriters selected for such underwriting by a majority-in-interest of the holders initiating the
Initial Insider Demand Registration.

                    (d) Reduction of Offering. If the managing Underwriter or Underwriters for an Initial
Insider Demand Registration that is to be an underwritten offering advises the Company and the
Initial Insider Demanding Holders in writing that the dollar amount or number of shares of Initial
Insider Shares that the Initial Insider Demanding Holders desire to sell, taken together with all
other shares of Common Stock or other securities that the Company desires to sell and the shares of
Common Stock, if any, as to which registration has been requested pursuant to written contractual
piggy-back registration rights held by other holders of the Company’s securities who desire to sell
securities, exceeds the maximum dollar amount or maximum number of shares that can be sold in such
offering without adversely affecting the proposed offering price, the timing, the distribution
method, or the probability of success of such offering (such maximum dollar amount or maximum
number of shares, as applicable, the “Maximum Number Of Shares”), then the Company shall include in
such registration: (i) first, the Initial Insider Shares as to which the Initial Insider Demand
Registration has been requested together with all other shares of Common Stock or other securities
that the Company desires to sell and the shares of Common Stock, if any, as to which registration
has been requested pursuant to the Purchase Option, that can be sold without exceeding the Maximum
Number of Shares (all pro rata in accordance with the number of such shares that the Company or
such holders shall have requested to be included in such registration); (ii) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares
of Common Stock for the account of other persons that the Company is obligated to register pursuant
to written contractual arrangements with such persons and that can be sold without exceeding the
Maximum Number of Shares; and (iii), third, to the extent that the Maximum Number of Shares have
not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock that other
stockholders desire to sell that can be sold without exceeding the Maximum Number of Shares.

                    (e) Withdrawal. If a majority-in-interest of the Initial Insider Demanding Holders
disapprove of the terms of any underwriting or are not entitled to include all of their Initial
Insider Shares in any offering, such majority-in-interest of the Initial Insider Demanding Holders
may elect to withdraw from such offering by giving written notice to the Company and the
Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the
Registration Statement filed with the Commission with respect to such Initial Insider Demand
Registration. In such event, the Company need not seek effectiveness of such Registration Statement
for the benefit of other Initial Insiders. If the majority-in-interest of the Initial Insider
Demanding Holders withdraws from a proposed offering relating to a Initial Insider Demand
Registration then such registration shall not count as an Initial Insider Demand Registration
provided for in Section 2.1.1(a).

               2.1.2 Demand Registration by New Insiders.

                    (a) General Request for Registration. At any time and from time to time on or after
the Release Date, any New Insider or a transferee of New Insider Shares, may make a written demand
for registration under the Securities Act of all or part of their New Insider Shares (a “New
Insider Demand Registration”). Any demand for a New Insider Demand Registration shall specify the
number of New Insider Shares proposed to be sold and the intended method(s) of distribution
thereof. The Company will notify all holders of New Insider Shares of any demand pursuant to this
Section 2.1.2(a), or pursuant to Section 2.1.2(b) below, as the case may be, within five (5)
Business Days, and each holder of New Insider Shares who wishes to include all or a portion of such
holder’s New Insider Shares in such New Insider Demand Registration (each such holder including
shares of New Insider Shares in such New Insider Demand Registration, a “New Insider Demanding
Holder”) shall so notify the Company within ten (10) Business Days after the receipt by the holder
of the notice from the Company. Upon any such request, the New Insider Demanding Holders shall be
entitled to have their New Insider

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Shares included in the New Insider Demand Registration subject to Section 2.1.2(d) and the
provisions set forth in Section 3.1.1. The Company shall not be obligated to effect more than an
aggregate of two (2) New Insider Demand Registrations under this Section 2.1.2(a) in respect of New
Insider Shares.

                    (b) Effective Registration. A registration will not count as a New Insider Demand
Registration until the Registration Statement filed with the Commission with respect to such New
Insider Demand Registration has been declared effective and the Company has complied with all of
its obligations under this Agreement with respect thereto; provided, however, that
if, after such Registration Statement has been declared effective, the offering of New Insider
Shares pursuant to a New Insider Demand Registration is interfered with by any stop order or
injunction of the Commission or any other governmental agency or court, the Registration Statement
with respect to such New Insider Demand Registration will be deemed not to have been declared
effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise
terminated, and (ii) with respect to a New Insider Demand Registration, a majority-in-interest of
the New Insider Demanding Holders thereafter elect to continue the offering; provided,
further, that the Company shall not be obligated to file a second Registration Statement
until any such Registration Statement that has been filed is counted as a New Insider Demand
Registration or is terminated.

                    (c) Underwritten Offering. If a majority-in-interest of the New Insider Demanding
Holders so elect and such holders so advise the Company as part of their written demand for a New
Insider Demand Registration, the offering of such New Insider Shares pursuant to such New Insider
Demand Registration shall be in the form of an underwritten offering. In each such case, the right
of any holder to include such holder’s New Insider Shares in such registration shall be conditioned
upon such holder’s participation in such underwriting and the inclusion of such holder’s New
Insider Shares in the underwriting to the extent provided herein. All New Insider Demanding Holders
who propose to distribute their New Insider Shares through such an underwriting shall enter into an
underwriting agreement in customary form with the Underwriter or Underwriters selected for such
underwriting by a majority-in-interest of the holders initiating the New Insider Demand
Registration.

                    (d) Reduction of Offering. If the managing Underwriter or Underwriters for a New
Insider Demand Registration that is to be an underwritten offering advises the Company and the New
Insider Demanding Holders in writing that the dollar amount or number of shares of New Insider
Shares that the New Insider Demanding Holders desire to sell, taken together with all other shares
of Common Stock or other securities that the Company desires to sell and the shares of Common
Stock, if any, as to which registration has been requested pursuant to written contractual
piggy-back registration rights held by other holders of the Company’s securities who desire to sell
securities, exceeds the maximum dollar amount or maximum number of shares that can be sold in such
offering without adversely affecting the proposed offering price, the timing, the distribution
method, or the probability of success of such offering, then the Company shall include in such
registration: (i) first, the New Insider Shares as to which the New Insider Demand Registration has
been requested together with all other shares of Common Stock or other securities that the Company
desires to sell and the shares of Common Stock, if any, as to which registration has been requested
pursuant to the Purchase Option, that can be sold without exceeding the Maximum Number of Shares
(all pro rata in accordance with the number of such shares that the Company or such holders shall
have requested to be included in such registration); (ii) second, to the extent that the Maximum
Number of Shares has not been reached under the foregoing clause (i), the shares of Common Stock
for the account of other persons that the Company is obligated to register pursuant to written
contractual arrangements with such persons and that can be sold without exceeding the Maximum
Number of Shares; and (iii), third, to the extent that the Maximum Number of Shares have not been
reached under the foregoing clauses (i) and (ii), the shares of Common Stock that other
stockholders desire to sell that can be sold without exceeding the Maximum Number of Shares.

                    (e) Withdrawal. If a majority-in-interest of the New Insider Demanding Holders
disapprove of the terms of any underwriting or are not entitled to include all of their New Insider
Shares in any offering, such majority-in-interest of the New Insider Demanding Holders may elect to
withdraw from such offering by giving written notice to the Company and the Underwriter or
Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement
filed with the Commission with respect to such New Insider Demand Registration. In such event, the
Company need not seek effectiveness of such Registration Statement for the benefit of other New
Insiders. If the majority-in-interest of the New Insider Demanding Holders withdraws from

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a proposed offering relating to a New Insider Demand Registration then such registration shall
not count as a New Insider Demand Registration provided for in Section 2.1.2(a).

          2.2 Piggy-Back Registration.

                2.2.1 Piggy-Back Rights. If at any time on or after the Release Date the Company
proposes to file by Registration Statement, other than a Registration Statement in connection with
a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form
S-8, then the Company shall (a) give written notice of such proposed filing to the holders of
Insider Shares as soon as practicable but in no event less than ten (10) Business Days before the
anticipated filing date, which notice shall describe the amount and type of securities to be
included in such offering, the intended method(s) of distribution, and the name of the proposed
managing Underwriter or Underwriters, if any, of the offering, and (b) offer to the holders of
Insider Shares in such notice the opportunity to register such number of Insider Shares as such
holders may request in writing within five (5) Business Days following receipt of such notice (a
“Piggy-Back Registration”). The Company shall cause such Insider Shares to be included in such
registration and shall use commercially reasonable efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Insider Shares requested to be
included in a Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company and to permit the sale or other disposition of such Insider
Shares in accordance with the intended method(s) of distribution thereof. All holders of Insider
Shares who propose to distribute securities through a Piggy-Back Registration that involves an
Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the
Underwriter or Underwriters selected for such Piggy-Back Registration.

                2.2.2 Reduction of Offering. If the managing Underwriter or Underwriters for a
Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders
of Insider Shares in writing that the dollar amount or number of shares of Common Stock that the
Company desires to sell, taken together with shares of Common Stock, if any, as to which
registration has been demanded pursuant to written contractual arrangements with persons other than
the holders of Insider Shares hereunder, the Insider Shares as to which registration has been
requested under this Section 2.2, and the shares of Common Stock, if any, as to which registration
has been requested pursuant to the written contractual piggy-back registration rights of other
shareholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include
in any such registration:

                    (i) first, subject to the demand registration rights granted to the holders of the Purchase
Option Shares, the shares of Common Stock or other securities that the Company desires to sell that
can be sold without exceeding the Maximum Number of Shares together with the Insider Shares as to
which registration has been requested and any other shares of Common Stock or other securities as
to which registration has been requested pursuant to the Purchase Option (pro rata in accordance
with the number of shares which each such person has actually requested to be included in such
registration that can be sold without exceeding the Maximum Number of Shares),

                    (ii) second, to the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the shares of Common Stock, if any, as to which registration has been
requested pursuant to written contractual piggy-back registration rights which other shareholders
desire to sell that can be sold without exceeding the Maximum Number of Shares, and

                    (iii) third, to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the shares of Common Stock, if any, that other stockholders desire
to sell that can be sold without exceeding the Maximum Number of Shares.

               2.2.3 Withdrawal. Any holder of Insider Shares may elect to withdraw such holder’s
request for inclusion of Insider Shares in any Piggy-Back Registration by giving written notice to
the Company of such request to withdraw prior to the effectiveness of the Registration Statement.
The Company may also elect to withdraw a registration statement at any time prior to the
effectiveness of the Registration Statement. Notwithstanding any such withdrawal, the Company shall
pay all expenses incurred by the holders of Insider Shares in connection with such Piggy-Back
Registration as provided in Section 3.3.

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          2.3 Registrations on Form S-3. Any holder of Insider Shares may at any time and from
time to time after the Release Date, request in writing that the Company register the resale of any
or all of such Insider Shares on Form S-3 or any similar short-form registration that may be
available at such time (“Form S-3”); provided, however, that: (a) the Company shall
not be obligated to effect such request through an underwritten offering and (b) the Company shall
not be obligated to effect such a request if the Company has within the preceding twelve (12) month
period effected two (2) registrations on Form S-3. Upon receipt of such written request, the
Company will promptly give written notice of the proposed registration to all other holders of
Insider Shares and, as soon as practicable thereafter, effect the registration of all or such
portion of such holder’s or holders’ Insider Shares, as the case may be, as are specified in such
request, together with all or such portion of the Insider Shares of any other holder or holders
joining in such request as are specified in a written request given within five (5) Business Days
after receipt of such written notice from the Company; provided, however, that the
Company shall not be obligated to effect any such registration pursuant to this Section 2.3: (i) if
Form S-3 is not available for such offering; or (ii) if the holders of the Insider Shares, together
with the holders of any other securities of the Company entitled to inclusion in such registration,
propose to sell Insider Shares and such other securities (if any) at any aggregate price to the
public of less than $500,000. Registrations effected pursuant to this Section 2.3 shall not be
counted as Demand Registrations effected pursuant to Section 2.1.

     3. REGISTRATION PROCEDURES.

          3.1 Filings; Information. Whenever the Company is required to effect the registration
of any Insider Shares pursuant to Section 2, the Company shall use commercially reasonable efforts
to effect the registration and sale of such Insider Shares in accordance with the intended
method(s) of distribution thereof as expeditiously as practicable, and in connection with any such
request:

               3.1.1 Filing Registration Statement. The Company shall, as expeditiously as possible
and in any event within sixty (60) days after receipt of a request for a Demand Registration
pursuant to Section 2.1, prepare and file with the Commission a Registration Statement on any form
for which the Company then qualifies or which counsel for the Company shall deem appropriate and
which form shall be available for the sale of all Insider Shares to be registered thereunder in
accordance with the intended method(s) of distribution thereof, and shall use commercially
reasonable efforts to cause such Registration Statement to become and remain effective for the
period required by Section 3.1.3; provided, however, that the Company shall have
the right to defer any Demand Registration for up to ninety (90) days, and any Piggy-Back
Registration for such period as may be applicable to deferment of any demand registration to which
such Piggy-Back Registration relates, in each case if the Company shall furnish to the holders a
certificate signed by the Chief Executive Officer of the Company stating that, in the good faith
judgment of the Board of Directors of the Company, it would be materially detrimental to the
Company and its shareholders for such Registration Statement to be effected at such time;
provided further, however, that the Company shall not have the right to exercise
the right set forth in the immediately preceding proviso more than once in any 365-day period in
respect of a Demand Registration hereunder.

               3.1.2 Copies. The Company shall, prior to filing a Registration Statement or
Prospectus, or any amendment or supplement thereto, furnish without charge to the holders of
Insider Shares included in such registration, and such holders’ legal counsel, copies of such
Registration Statement as proposed to be filed, each amendment and supplement to such Registration
Statement (in each case including all exhibits thereto and documents incorporated by reference
therein), the Prospectus included in such Registration Statement (including each preliminary
Prospectus), and such other documents as the holders of Insider Shares included in such
registration or legal counsel for any such holders may reasonably request in order to facilitate
the disposition of the Insider Shares owned by such holders.

               3.1.3 Amendments and Supplements. The Company shall prepare and file with the
Commission such amendments, including post-effective amendments, and supplements to such
Registration Statement and the Prospectus used in connection therewith as may be necessary to keep
such Registration Statement effective and in compliance with the provisions of the Securities Act
until all Insider Shares, and all other securities covered by such Registration Statement, have
been disposed of in accordance with the intended method(s) of distribution set forth in such
Registration Statement (which period shall not exceed the sum of one hundred eighty (180) days plus
any period during which any such disposition is interfered with by any stop order or injunction of
the Commission or any governmental agency or court) or such securities have been withdrawn.

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               3.1.4 Notification. After the filing of a Registration Statement, the Company shall
promptly, and in no event more than two (2) Business Days after such filing, notify the holders of
Insider Shares included in such Registration Statement of such filing, and shall further notify
such holders promptly and confirm such advice in writing in all events within two (2) Business Days
of the occurrence of any of the following: (i) when such Registration Statement becomes effective;
(ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the
issuance or threatened issuance by the Commission of any stop order (and the Company shall take all
actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any
request by the Commission for any amendment or supplement to such Registration Statement or any
Prospectus relating thereto or for additional information or of the occurrence of an event
requiring the preparation of a supplement or amendment to such Prospectus so that, as thereafter
delivered to the purchasers of the securities covered by such Registration Statement, such
Prospectus will not contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein not misleading, and
promptly make available to the holders of Insider Shares included in such Registration Statement
any such supplement or amendment; except that before filing with the Commission a Registration
Statement or Prospectus or any amendment or supplement thereto, including documents incorporated by
reference, the Company shall furnish to the holders of Insider Shares included in such Registration
Statement and to the legal counsel for any such holders, copies of all such documents proposed to
be filed sufficiently in advance of filing to provide such holders and legal counsel with a
reasonable opportunity to review such documents and comment thereon, and the Company shall not file
any Registration Statement or Prospectus or amendment or supplement thereto, including documents
incorporated by reference, to which such holders or their legal counsel shall reasonably object.

               3.1.5 State Securities Laws Compliance. The Company shall use commercially reasonable
efforts to (i) register or qualify the Insider Shares covered by the Registration Statement under
such securities or “blue sky” laws of such jurisdictions in the United States as the holders of
Insider Shares included in such Registration Statement (in light of their intended plan of
distribution) may request and (ii) take such action necessary to cause such Insider Shares covered
by the Registration Statement to be registered with or approved by such other federal or state
authorities as may be necessary by virtue of the business and operations of the Company and do any
and all other acts and things that may be necessary or advisable to enable the holders of Insider
Shares included in such Registration Statement to consummate the disposition of such Insider Shares
in such jurisdictions; provided, however, that in no event shall the Company be
required to register the Insider Shares in a jurisdiction in which such registration would cause
(i) the Company to be obligated to qualify to do business in any such jurisdiction, or would
subject the Company to taxation as a foreign corporation doing business in such jurisdiction or
(ii) the principal stockholders of the Company to be obligated to escrow their shares of capital
stock of the Company (except to the extent such shares are already subject to an escrow in such
jurisdiction).

               3.1.6 Agreements for Disposition. The Company shall enter into customary agreements
(including, if applicable, an underwriting agreement in customary form) and take such other actions
as are reasonably required in order to expedite or facilitate the disposition of such Insider
Shares. The representations, warranties and covenants of the Company in any underwriting agreement
which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be
made to and for the benefit of the holders of Insider Shares included in such registration
statement. No holder of Insider Shares included in such registration statement shall be required to
make any representations or warranties in the underwriting agreement except as reasonably requested
by the Company and, if applicable, with respect to such holder’s organization, good standing,
authority, title to Insider Shares, lack of conflict of such sale with such holder’s material
agreements and organizational documents, and with respect to written information relating to such
holder that such holder has furnished in writing expressly for inclusion in such Registration
Statement. Holders of Insider Shares shall agree to such covenants and indemnification and
contribution obligations for selling stockholders as are customarily contained in agreements of
that type. Further, such holders shall cooperate fully in the preparation of the registration
statement and other documents relating to any offering in which they include securities pursuant to
Section 2 hereof. Each holder shall also furnish to the Company such information regarding itself,
the Insider Shares held by such holder, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of the Insider Shares.

               3.1.7 Cooperation. The principal executive officer of the Company, the principal
financial officer of the Company, the principal accounting officer of the Company and all other
officers and members of the management of the Company shall cooperate fully in any offering of
Insider Shares hereunder,

8

 

which cooperation shall include, without limitation, the preparation of the Registration
Statement with respect to such offering and all other offering materials and related documents, and
participation in meetings with Underwriters, attorneys, accountants and potential investors.

               3.1.8 Records. The Company shall make available for inspection by the holders of
Insider Shares included in such Registration Statement, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant or other
professional retained by any holder of Insider Shares included in such Registration Statement or
any Underwriter, all financial and other records, pertinent corporate documents and properties of
the Company, as shall be necessary to enable them to exercise their due diligence responsibility,
and cause the Company’s officers, directors and employees to supply all information reasonably
requested by any of them in connection with such Registration Statement.

               3.1.9 Opinions and Comfort Letters. The Company shall furnish to each holder of
Insider Shares included in any Registration Statement a signed counterpart, addressed to such
holder, of (i) any opinion of counsel to the Company delivered to any Underwriter and (ii) any
comfort letter from the Company’s independent public accountants delivered to any Underwriter. In
the event no legal opinion is delivered to any Underwriter, the Company shall furnish to each
holder of Insider Shares included in such Registration Statement, at any time that such holder
elects to use a Prospectus, an opinion of counsel to the Company to the effect that the
Registration Statement containing such Prospectus has been declared effective and that no stop
order is in effect.

               3.1.10 Earnings Statement. The Company shall comply with all applicable rules and
regulations of the Commission and the Securities Act, and make available to its shareholders, as
soon as practicable, an earnings statement covering a period of twelve (12) months, beginning
within six (6) months after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.

               3.1.11 Listing. The Company shall use commercially reasonable efforts to cause all
Insider Shares included in any registration to be listed on such exchanges or otherwise designated
for trading in the same manner as similar securities issued by the Company are then listed or
designated or, if no such similar securities are then listed or designated, in a manner
satisfactory to the holders of a majority of the Insider Shares that are included in such
registration.

          3.2 Obligation to Suspend Distribution. Upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a resale
registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by the Company,
pursuant to a written insider trading compliance program adopted by the Company’s Board of
Directors, of the ability of all “insiders” covered by such program to transact in the Company’s
securities because of the existence of material non-public information, each holder of Insider
Shares included in any registration shall immediately discontinue disposition of such Insider
Shares pursuant to the Registration Statement covering such Insider Shares until such holder
receives the supplemented or amended Prospectus contemplated by Section 3.1.4(iv) or the
restriction on the ability of “insiders” to transact in the Company’s securities is removed, as
applicable, and, if so directed by the Company, each such holder will deliver to the Company all
copies, other than permanent file copies then in such holder’s possession, of the most recent
Prospectus covering such Insider Shares at the time of receipt of such notice.

          3.3 Registration Expenses. The Company shall bear all customary costs and expenses
incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back
Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section
2.3, and all reasonable expenses incurred in performing or complying with its other obligations
under this Agreement, whether or not the Registration Statement becomes effective, including,
without limitation: (i) all registration and filing fees; (ii) fees and expenses of compliance with
securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue
sky qualifications of the Insider Shares, subject to the limit set forth in paragraph (ix) below);
(iii) printing expenses; (iv) the Company’s internal expenses (including, without limitation, all
salaries and expenses of its officers and employees); (v) the fees and expenses incurred in
connection with the listing of the Insider Shares, as required by Section 3.1.11; (vi) National
Association of Securities Dealers, Inc. fees; (vii) fees and disbursements of counsel for the
Company and fees and expenses for independent certified public accountants retained by the Company
(including the expenses or costs associated with the delivery of any opinions or comfort letters
requested

9

 

pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by
the Company in connection with such registration and (ix) the fees and expenses of one legal
counsel selected by the holders of a majority-in-interest of the Insider Shares that are included
in such registration (not to exceed, including the fees and disbursements to counsel in clause (ii)
of this Section 3.3, $20,000). The Company shall have no obligation to pay any underwriting
discounts or selling commissions attributable to the Insider Shares being sold by the holders
thereof, which underwriting discounts or selling commissions shall be borne solely by such holders.
Additionally, in an underwritten offering, all selling shareholders and the Company shall bear the
expenses of the underwriter pro rata in proportion to the respective amount of shares each is
selling in such offering.

          3.4 Information. The holders of Insider Shares shall provide such information as may
reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the
preparation of any Registration Statement, including amendments and supplements thereto, in order
to effect the registration of any Insider Shares under the Securities Act pursuant to Section 2 and
in connection with the Company’s obligation to comply with federal and applicable state securities
laws.

          3.5 Holder Obligations. No holder of Insider Shares may participate in any
underwritten offering pursuant to this Section 3 unless such holder (i) agrees to sell only such
holder’s Insider Shares on the basis reasonably provided in any underwriting agreement, and (ii)
completes, executes and delivers any and all questionnaires, powers of attorney, custody
agreements, indemnities, underwriting agreements and other documents reasonably required by or
under the terms of any underwriting agreement or as reasonably requested by the Company.

     4. INDEMNIFICATION AND CONTRIBUTION.

          4.1 Indemnification by the Company. The Company agrees to indemnify and hold harmless
each Insider and each other holder of Insider Shares, and each of their respective officers,
employees, affiliates, directors, partners, members, attorneys and agents, and each person, if any,
who controls an Insider and each other holder of Insider Shares (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) (each, an “Insider Indemnified Party”),
from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or
several, arising out of or based upon any untrue statement (or allegedly untrue statement) of a
material fact contained in any Registration Statement under which the sale of such Insider Shares
was registered under the Securities Act, any preliminary Prospectus, final Prospectus or summary
Prospectus contained in the Registration Statement, or any amendment or supplement to such
Registration Statement, or arising out of or based upon any omission (or alleged omission) to state
a material fact required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expense, loss, claim, damage or liability arises out of or is
based upon any untrue statement or allegedly untrue statement or omission or alleged omission made
in such Registration Statement, preliminary Prospectus, final Prospectus, or summary Prospectus, or
any such amendment or supplement, in reliance upon and in conformity with information furnished to
the Company, in writing, by such selling holder expressly for use therein; provided,
however, that the foregoing indemnity shall not inure to the benefit of any holder (or to
the benefit of any person controlling such holder) from whom the person asserting such losses,
claims or liabilities purchased the Insider Shares, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such holder to such person, if required by law so to have been
delivered at or prior to the written confirmation of the sale of the Insider Shares to such person,
and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to
such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by
the Company with Section 3.1.3 hereof. The Company also shall indemnify the Underwriter, their
officers, employees, affiliates, directors, partners, members, attorneys and agents, and each
person who controls the Underwriter on substantially the same basis as that of the indemnification
provided above in this Section 4.1.

          4.2 Indemnification by Holders of Insider Shares. Each selling holder of Insider
Shares will, with respect to any Registration Statement where Insider Shares were registered under
the Securities Act, indemnify and hold harmless the Company, each of its directors and officers,
each underwriter, if any, and each other person, if any, who controls such selling holder, such
underwriter or the Company (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act), against any losses, claims, judgments, damages or liabilities, whether joint or
several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect

10

 

thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of
a material fact contained in any Registration Statement under which the sale of such Insider Shares
was registered under the Securities Act, any preliminary Prospectus, final Prospectus or summary
Prospectus contained in the Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any omission or the alleged omission to
state a material fact required to be stated therein or necessary to make the statement therein not
misleading, if the statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by such selling holder expressly for use therein,
and shall reimburse the Company, its directors and officers, and each such controlling person for
any legal or other expenses reasonably incurred by any of them in connection with investigation or
defending any such loss, claim, damage, liability or action. Each selling holder’s indemnification
obligations hereunder shall be several and not joint and shall be limited to the amount of any net
proceeds actually received by such selling holder in connection with the sale of the Insider Shares
by such selling holder pursuant to the Registration Statement containing such untrue statement or
allegedly untrue statement.

          4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any person of
any notice of any loss, claim, damage or liability or any action in respect of which indemnity may
be sought pursuant to Section 4.1 or 4.2, such person (the “Indemnified Party”) shall, if a claim
in respect thereof is to be made against any other person for indemnification hereunder, promptly
notify such other person (the “Indemnifying Party”) in writing of the loss, claim, judgment,
damage, liability or action. If the Indemnified Party is seeking indemnification with respect to
any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be
entitled to participate in such claim or action, and, to the extent that it elects jointly with all
other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to
the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of such claim or action, the Indemnifying Party shall not
be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof other than reasonable costs of
investigation. In any such proceeding, the Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (i) the Indemnified Party and the Indemnifying Party shall have mutually agreed to the
retention of such counsel, or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying Party and representation
of both parties by the same counsel would be inappropriate due to actual or potential differing
interest between them. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such consent or there is a
final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party
from and against any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying
Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated in this
Section 4.3, the Indemnifying Party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is entered into more than
thirty (30) days after receipt by such Indemnifying Party of the aforesaid request, and (ii) such
Indemnifying Party shall not have reimbursed the Indemnified Party in accordance with such request
prior to the date of such settlement (other than reimbursement for fees and expenses the
Indemnifying Party is contesting in good faith). No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of
any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless
such judgment or settlement includes an unconditional release of such Indemnified Party from all
liability arising out of such claim or proceeding.

          4.4 Contribution.

               4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is
unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action
referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such
loss, claim, damage, liability or action in such proportion as is appropriate to reflect the
relative benefits received by the Indemnified Parties on the one hand and the Indemnifying Parties
on the other from the offering. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the Indemnified Party failed to give the notice
required under Section 4.3 above, then each Indemnifying Party shall contribute to such amount paid
or payable by such Indemnified Party in

11

 

such proportion as is appropriate to reflect not only such relative benefits but also the
relative fault of the Indemnified Parties on the one hand and the Indemnifying Parties on the other
in connection with the actions or omissions which resulted in such loss, claim, damage, liability
or action, as well as any other relevant equitable considerations. The relative fault of any
Indemnified Party and any Indemnifying Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by such Indemnified Party
or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

               4.4.2 The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred to in the
immediately preceding Section 4.4.1. The amount paid or payable by an Indemnified Party as a result
of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any legal or other expenses
incurred by such Indemnified Party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 4.4, no holder of Insider Shares shall be
required to contribute any amount in excess of the dollar amount of the net proceeds (after payment
of any underwriting fees, discounts, commissions or taxes) actually received by such holder from
the sale of Insider Shares which gave rise to such contribution obligation. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

     5. UNDERWRITING AND DISTRIBUTION.

          5.1 Rule 144. The Company covenants that it shall file any reports required to be
filed by it under the Securities Act and the Exchange Act and shall take such further action as the
holders of Insider Shares may reasonably request, all to the extent required from time to time to
enable such holders to sell Insider Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, or any similar
provision thereto, but not Rule 144A.

     6. MISCELLANEOUS.

          6.1 Assignment; No Third Party Beneficiaries. This Agreement and the rights, duties
and obligations of the Company hereunder may not be assigned or delegated by the Company in whole
or in part. This Agreement and the rights, duties and obligations of the holders of Insider Shares
hereunder may be freely assigned or delegated by such holder of Insider Shares in conjunction with
and to the extent of any permitted transfer of Insider Shares by any such holder in accordance with
applicable law. This Agreement and the provisions hereof shall be binding upon and shall inure to
the benefit of each of the parties and their respective successors and the permitted assigns of the
Insider or holder of Insider Shares or of any assignee of the Insider or holder of Insider Shares.
This Agreement is not intended to confer any rights or benefits on any persons that are not party
hereto other than as expressly set forth in Section 4 and this Section 6.1.

          6.2 Notices. All notices, demands, requests, consents, approvals or other
communications (collectively, “Notices”) required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and shall be personally served, delivered
by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram,
telex or facsimile, addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice provided in accordance with this Section 6.2. Notice
shall be deemed given on the date of service or transmission if personally served or transmitted by
telegram, telex or facsimile; provided, that if such service or transmission is not on a
Business Day or is after normal business hours, then such notice shall be deemed given on the next
Business Day. Notice otherwise sent as provided herein shall be deemed given on the next Business
Day following timely delivery of such notice to a reputable air courier service with an order for
next-day delivery.

12

 

To the Company:

Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036

with a copy to:

Cooley Godward Kronish LLP

101 California Street, 5th Floor

San Francisco, CA 94111

Attention: Kenneth L. Guernsey

     To an Insider, to the address set forth below such Insider’s name on the signature pages
hereof.

with a copy to:

Cooley Godward Kronish LLP

101 California Street, 5th Floor

San Francisco, CA 94111

Attention: Kenneth L. Guernsey

          6.3 Severability. This Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity or enforceability of
this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may
be possible and be valid and enforceable.

          6.4 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, and all of which taken together shall constitute one and the
same instrument.

          6.5 Entire Agreement. This Agreement (including all agreements entered into pursuant
hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute the
entire agreement of the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements, representations, understandings, negotiations and discussions
between the parties, whether oral or written.

          6.6 Modifications and Amendments. No amendment, modification or termination of this
Agreement shall be binding upon any party unless executed in writing by such party.

          6.7 Titles and Headings. Titles and headings of sections of this Agreement are for
convenience only and shall not affect the construction of any provision of this Agreement.

          6.8 Waivers and Extensions. Any party to this Agreement may waive any right, breach or
default which such party has the right to waive, provided, that such waiver will not be
effective against the waiving party unless it is in writing, is signed by such party, and
specifically refers to this Agreement. Waivers may be made in advance or after the right waived has
arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of
any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding
or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a waiver or extension
of the time for performance of any other obligations or acts.

          6.9 Remedies Cumulative. In the event that the Company fails to observe or perform any

13

 

covenant or agreement to be observed or performed under this Agreement, the Insider or any
other holder of Insider Shares may proceed to protect and enforce its rights by suit in equity or
action at law, whether for specific performance of any term contained in this Agreement or for an
injunction against the breach of any such term or in aid of the exercise of any power granted in
this Agreement or to enforce any other legal or equitable right, or to take any one or more of such
actions, without being required to post a bond. None of the rights, powers or remedies conferred
under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be
cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement
or now or hereafter available at law, in equity, by statute or otherwise.

          6.10 Governing Law. This Agreement shall be governed by and interpreted and construed
in accordance with the laws of the State of New York applicable to contracts formed and to be
performed entirely within the State of New York, without regard to the conflicts of law provisions
thereof to the extent such principles or rules would require or permit the application of the laws
of another jurisdiction. The Company and the holders of the Insider Shares irrevocably and
unconditionally submit to the exclusive jurisdiction of the United States District Court for the
Southern District of New York or, if such court does not have jurisdiction, the New York State
Supreme Court in the Borough of Manhattan, in any action arising out of or relating to this
Agreement, agree that all claims in respect of the action may be heard and determined in any such
court and agree not to bring any action arising out of or relating to this Agreement in any other
court. In any action, the Company and the holders of the Insider Shares irrevocably and
unconditionally waive and agree not to assert by way of motion, as a defense or otherwise any
claims that it is not subject to the jurisdiction of the above court, that such action is brought
in an inconvenient forum or that the venue of such action is improper. Without limiting the
foregoing, the Company and the holders of the Insider Shares agree that service of process at each
parties respective addresses as provided for in Section 6.2 above shall be deemed effective service
of process on such party.

          6.11 Waiver of Trial by Jury. Each party hereby irrevocably and unconditionally waives
the right to a trial by jury in any action, suit, counterclaim or other proceeding (whether based
on contract, tort or otherwise) arising out of, connected with or relating to this Agreement, the
transactions contemplated hereby, or the actions of the Insider in the negotiation, administration,
performance or enforcement hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

14

 

     IN WITNESS WHEREOF, the parties have caused this Amended and Restated Registration Rights
Agreement to be executed and delivered by their duly authorized representatives as of the date
first written above.

	 	 	 	 	 	 	 
	 	 	AD.VENTURE PARTNERS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Howard S. Balter
 

Name: Howard S. Balter
	 	 
	 

	 	 	 	Title: Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	INSIDERS:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Howard S. Balter
 

Howard S. Balter
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 	 	H. Balter 2007 Associates, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Lisa Balter
 

Name: Lisa Balter
	 	 
	 

	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 	 	The Howard S. Balter 2007 Grantor Retained Annuity

Trust II	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Howard S. Balter
 

Name: Howard S. Balter
	 	 
	 

	 	 	 	Title: Trustee	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 

 

 

	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ilan M. Slasky
 

Ilan M. Slasky
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 	 	Ilan Slasky 2007 Grantor Retained Annuity Trust	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ilan M. Slasky
 

Name: Ilan M. Slasky
	 	 
	 

	 	 	 	Title: Trustee	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence J. Askowitz
 

Lawrence J. Askowitz
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Dr. Shlomo Kalish
 

Dr. Shlomo Kalish
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 

 

 

	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Rogers
 

Thomas Rogers
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 	 	JF INVESTMENTS LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ken Jacquin
 

	 	 
	 	 	Name: Ken Jacquin

Title:	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 
 

William Margiloff
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 
 

Hillel Weinberger
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Ad.Venture Partners, Inc.

c/o Cooley Godward Kronish llp

The Grace Building

1114 Avenue of the Americas

New York, New York 10036	 	 

 

 

	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ M. Brian McCarthy
 

M. Brian McCarthy
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o 180 Connect Inc.

6501 E. Belleview Avenue

Englewood, CO 80111	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Peter Giacalone
 

Peter Giacalone
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o 180 Connect Inc.

6501 E. Belleview Avenue

Englewood, CO 80111	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 
 

Anton R. Simunovic
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o 180 Connect Inc.

6501 E. Belleview Avenue

Englewood, CO 80111	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Byron G. Osing
 

Byron G. Osing
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o 180 Connect Inc.

6501 E. Belleview Avenue

Englewood, CO 80111	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David R. Hallmen
 

David R. Hallmen
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o 180 Connect Inc.

6501 E. Belleview Avenue

Englewood, CO 80111	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Matthew G. Roszak
 

Matthew G. Roszak
	 	 
	 
	 	 	 	 	 	 
	 	 	c/o 180 Connect Inc.

6501 E. Belleview Avenue

Englewood, CO 80111EX-10.13 Convertible Debenture $3,975,248.48

 

EXHIBIT 10.13

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

THE HOLDER, AND ANY ASSIGNEE BY ACCEPTANCE OF THIS DEBENTURE, ACKNOWLEDGE AND AGREE THAT, BY REASON
OF THE PROVISIONS OF SECTION 4(A) OF THIS DEBENTURE, FOLLOWING CONVERSION OF A PORTION OF THIS
DEBENTURE, THE UNPAID AND UNCONVERTED PRINCIPAL AMOUNT OF THIS DEBENTURE MAY BE LESS THAN THE
AMOUNT STATED ON THE FACE HEREOF.

Original Issue Date: March 22, 2006

Replacement Date: August 24, 2007

Original Conversion Price (subject to adjustment herein): $3.9702

$3,975,248.48

REPLACEMENT 9.33% CONVERTIBLE DEBENTURE

DUE MARCH 22, 2011

     THIS REPLACEMENT CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly
issued 9.33% Replacement Convertible Debentures of 180 Connect Inc. (formerly known as Ad.Venture
Partners, Inc.), a Delaware corporation, having its principal place of business at 6501 E.
Belleview Avenue, Englewood, Colorado 80111 (the “Company”), designated as its 9.33%
Replacement Convertible Debenture, due March 22, 2011 (this replacement debenture, the
“Debenture” and collectively with the other such series of replacement debentures, the
“Debentures”). This Debenture replaces that certain convertible debenture of 180 Connect
Inc., a corporation incorporated under the laws of Canada (“180 Connect CN”), pursuant to
the Arrangement completed on August 24, 2007, whereby the Company assumed the obligations of 180
Connect CN under the originally issued convertible debenture.

 

 

     FOR VALUE RECEIVED, the Company promises to pay to Midsummer Investment, Ltd. or its
registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the
principal sum of $3,975,248.48 by March 22, 2011, or such earlier date as this Debenture is
required or permitted to be repaid as provided hereunder (the “Maturity Date”), and to pay
interest to the Holder on the aggregate unconverted and then outstanding principal amount of this
Debenture in accordance with the provisions hereof. The Debentures shall be superior in right of
payment and otherwise rank superior to all other Indebtedness (as defined herein) of the Company,
except for Permitted Indebtedness (as defined herein). This Debenture is subject to the following
additional provisions:

     Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have
the meanings set forth in the Purchase Agreement and (b) the following terms shall have the
following meanings:

     “Alternate Consideration” shall have the meaning set forth in Section 5(e).

     “Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company or any Significant Subsidiary thereof; (b) there is commenced
against the Company or any Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Significant Subsidiary thereof
is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case
or proceeding is entered; (d) the Company or any Significant Subsidiary thereof suffers any
appointment of any custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment; (e) the Company or any
Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the
Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or (g) the Company or any
Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing.

     “Buy-In” shall have the meaning set forth in Section 4(d)(v).

     “Change of Control Transaction” means the occurrence after the date hereof of any of
(i) an acquisition after the date hereof by an individual or legal entity or “group” (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal
or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of
40% of the voting securities of the Company (other than by means of conversion or exercise of the
Debentures and the Securities issued together with the Debentures), or (ii) the Company merges into
or consolidates with any other Person, or any Person merges into or consolidates with the Company
and, after giving effect to such transaction, the stockholders of the Company immediately prior to
such transaction own less than 60% of the aggregate voting

- 2 -

 

power of the Company or the successor entity of such transaction, or (iii) the Company sells or
transfers all or substantially all of its assets to another Person and the stockholders of the
Company immediately prior to such transaction own less than 60% of the aggregate voting power of
the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within
a two year period of more than one-half of the members of the Company’s board of directors which is
not approved by a majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority of the members of the
board of directors who are members on the date hereof), or (v) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for any of the events
set forth in clauses (i) through (iv) above.

     “Conversion Date” shall have the meaning set forth in Section 4(a).

     “Conversion Price” shall have the meaning set forth in Section 4(b).

     “Conversion Shares” means, collectively, the shares of Common Stock issuable upon
conversion of this Debenture in accordance with the terms hereof.

     “Debenture Register” shall have the meaning set forth in Section 2(b).

     “Effectiveness Period” shall have the meaning set forth in the Registration Rights
Agreement.

     “Equity Conditions” shall mean, during the period in question, (i) the Company shall
have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one
or more Notices of Conversion of the Holder, if any, (ii) the Company shall have paid all
liquidated damages and other amounts owing to the Holder in respect of this Debenture, (iii) there
is an effective Registration Statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the shares issuable pursuant to the Transaction Documents
(and the Company believes, in good faith, that such effectiveness will continue uninterrupted for
the foreseeable future pursuant to the terms of the Registration Rights Agreement) or the legend
may be removed from the applicable Security pursuant to Section 4.1 of the Purchase Agreement, (iv)
the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the
Transaction Documents are listed for trading on such Trading Market (and the Company believes, in
good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for
the foreseeable future), (v) there is a sufficient number of authorized but unissued and otherwise
unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the
Transaction Documents, (vi) there is no existing Event of Default or no existing event which, with
the passage of time or the giving of notice, would constitute an Event of Default, (vii) the
issuance of the shares in question to the Holder would not violate the limitations set forth in
Section 4(c) herein, (viii) there has been no public announcement of a pending or proposed
Fundamental Transaction or Change of Control Transaction that has not been consummated and (ix) the
Holder is not in possession of any information that constitutes, or may constitute, material
non-public information.

- 3 -

 

     “Event of Default” shall have the meaning set forth in Section 8.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

     “Forced Conversion” shall have the meaning set forth in Section 6(d).

     “Forced Conversion Date” shall have the meaning set forth in Section 6(d).

     “Forced Conversion Notice” shall have the meaning set forth in Section 6(d).

     “Forced Conversion Notice Date” shall have the meaning set forth in Section 6(d).

     “Fundamental Transaction” shall have the meaning set forth in Section 5(e).

     “Interest Payment Date” shall have the meaning set forth in Section 2(a).

     “Late Fees” shall have the meaning set forth in Section 2(c).

     “Mandatory Default Amount” means the sum of (i) the greater of (A) 120% of the
outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, or (B)
the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon,
divided by the Conversion Price on the date the Mandatory Default Amount is either (a) demanded (if
demand or notice is required to create an Event of Default) or otherwise due or (b) paid in full,
whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default
Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP,
and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this
Debenture.

     “New York Courts” shall have the meaning set forth in Section 9(d).

     “Notice of Conversion” shall have the meaning set forth in Section 4(a).

     “Optional Redemption Amount” means the sum of (i) 100% of the principal amount of the
Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated damages and
other amounts due in respect of the Debenture.

     “Optional Redemption Date” shall have the meaning set forth in Section 6(a).

     “Original Issue Date” means the date of the first issuance of the Debentures,
regardless of any transfers of any Debenture and regardless of the number of instruments which may
be issued to evidence such Debentures.

     “Permitted Indebtedness” means (a) the Indebtedness existing on the Original Issue
Date and set forth on Schedule 3.1(ff) attached to the Purchase Agreement, (b) lease obligations
and purchase money indebtedness of up to $7,000,000, in the aggregate, incurred in connection with

- 4 -

 

the acquisition of capital assets and lease obligations with respect to newly acquired or leased
assets (provided, however, such amount may be increased in proportion to payments of existing lease
obligations and purchase money indebtedness made by the Company or any of its Subsidiaries to
Wheels LT, Lease Plan U.S.A. Inc. or ULTEA, Inc., but in no event may the Company and its
Subsidiaries incur or suffer to exist lease obligations and purchase money indebtedness in excess
of $40,000,000 in the aggregate (inclusive of amounts presently outstanding)) and (c) up to
$40,000,000 of non-equity linked Indebtedness in the aggregate (after the payment of expenses)
incurred by the Company for the purposes of extinguishing all of the obligations of the Company and
any of its Subsidiaries under the Credit Agreement dated April 14, 2002 (the “Credit
Agreement”) between General Electric Capital Corporation (“GE Capital”) and 180 Connect
Inc., a Nevada corporation, as amended, and the Affiliate Guaranty dated May 2, 2005 granted by the
Company in respect of Indebtedness under the Credit Agreement, provided that such Indebtedness is
on terms and conditions substantially similar to, or no less favorable to the Company than, the
terms and conditions of the Credit Agreement and provided that the lender under any such facility
is a U.S. or Canadian nationally recognized and regulated commercial lender whose primary business
is not investing in securities.

     “Permitted Lien” means the individual and collective reference to the following: (a)
Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves (in the good faith judgment of the management
of the Company) have been established in accordance with GAAP; and (b) Liens imposed by law which
were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s
and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary
course of the Company’s business, and which (x) do not individually or in the aggregate materially
detract from the value of such property or assets or materially impair the use thereof in the
operation of the business of the Company and its consolidated Subsidiaries or (y) are being
contested in good faith by appropriate proceedings, which proceedings have the effect of preventing
for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien,
(c) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder in favor
of GE Capital, (d) Liens incurred in connection with Permitted Indebtedness under clause (b)
thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries
other than the assets so acquired or leased or (e) Liens incurred in connection with Permitted
Indebtedness under clause (c) thereunder.

     “Purchase Agreement” means the Securities Purchase Agreement among the Company and the
original Holders, dated as of March 21, 2006, as amended, modified or supplemented from time to
time in accordance with its terms.

     “Share Delivery Date” shall have the meaning set forth in Section 4(d).

     “Threshold Period” shall have the meaning set forth in Section 6(d).

- 5 -

 

     Section 2. Interest.

     a) Payment of Interest in Cash. The Company shall pay interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this Debenture at the
rate of 9.33% per annum, payable quarterly, in arrears, on January 1, April 1, July 1 and
October 1, beginning on the first such date after the Original Issue Date, on each
Conversion Date (as to that principal amount then being converted), on each Optional
Redemption Date (as to that principal amount then being redeemed) and on the Maturity Date
(except that, if any such date is not a Business Day, then such payment shall be due on the
next succeeding Business Day) (each such date, an “Interest Payment Date”), in cash.
Notwithstanding the foregoing, the per annum rate of interest hereunder shall be reduced by
1.33% beginning on the month following the date that the Holder receives an opinion from
counsel to the Company, in form and substance reasonably satisfactory to the Holder, that
distributions (including interest payments) under this Debenture are no longer subject to
mandatory tax withholding under the Canadian Tax Act.

     b) Interest Calculations. Interest shall be calculated on the basis of a
360-day year of twelve 30-day months and shall accrue daily commencing on the Original Issue
Date until payment in full of the principal sum, together with all accrued and unpaid
interest, liquidated damages and other amounts which may become due hereunder, has been
made. Solely for purposes of the Interest Act (Canada), the yearly rate of interest to
which interest calculated for a period of less than one year on the basis of 360 days
consisting of twelve 30-day periods is equivalent is such rate of interest multiplied by a
fraction of which (i) the numerator is the product of (A) the actual number of days in the
year commencing on the first day of such period, multiplied by (B) the sum of (y) the
product of 30 multiplied by the number of complete months elapsed in such period and (z) the
actual of number of days elapsed in any incomplete month in such period; and (ii) the
denominator is the product of (a) 360 multiplied by (b) the actual number of days in such
period. Interest shall cease to accrue with respect to any principal amount converted,
provided that the Company actually delivers the Conversion Shares within the time period
required by Section 4(d)(ii). Interest hereunder will be paid to the Person in whose name
this Debenture is registered on the records of the Company regarding registration and
transfers of this Debenture (the “Debenture Register”).

     c) Late Fee. All overdue accrued and unpaid interest to be paid hereunder
shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the
maximum rate permitted by applicable law (“Late Fees”) which shall accrue daily from
the date such interest is due hereunder through and including the date of payment in full.

     d) Prepayment. Except as otherwise set forth in this Debenture, the Company
may not prepay any portion of the principal amount of this Debenture without the prior
written consent of the Holder.

- 6 -

 

     Section 3. Registration of Transfers and Exchanges.

     a) Different Denominations. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be payable for such
registration of transfer or exchange.

     b) Investment Representations. This Debenture has been issued subject to
certain investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable US and Canadian federal, provincial and state securities laws and
regulations.

     c) Reliance on Debenture Register. Prior to due presentment for transfer to
the Company of this Debenture, the Company and any agent of the Company may treat the Person
in whose name this Debenture is duly registered on the Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Debenture is overdue, and neither the Company nor any such agent shall
be affected by notice to the contrary.

     Section 4. Conversion.

     a) Voluntary Conversion. At any time after the Original Issue Date until this
Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in
part, into shares of Common Stock at the option of the Holder, at any time and from time to
time (subject to the conversion limitations set forth in Section 4(c) hereof). The Holder
shall effect conversions by delivering to the Company a Notice of Conversion, the form of
which is attached hereto as Annex A (a “Notice of Conversion”), specifying
therein the principal amount of this Debenture to be converted and the date on which such
conversion shall be effected (a “Conversion Date”). If no Conversion Date is
specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice
of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder
shall not be required to physically surrender this Debenture to the Company unless the
entire principal amount of this Debenture has been so converted plus all accrued and unpaid
interest thereon has been paid. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s). The Company may deliver an
objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of
Conversion. The Holder, and any assignee by acceptance of this Debenture, acknowledge and
agree that, by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less
than the amount stated on the face hereof.

- 7 -

 

     b) Conversion Price. The conversion price in effect on any Conversion Date
shall be equal to $3.9702 (subject to adjustment herein) (the “Conversion Price”).

     c) Conversion Limitations.

     i. Holder’s Restriction on Conversion. The Company shall not effect
any conversion of this Debenture, and a Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving effect to the
conversion set forth on the applicable Notice of Conversion, such Holder (together
with such Holder’s Affiliates, and any other person or entity acting as a group
together with such Holder or any of such Holder’s Affiliates) would beneficially own
in excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned
by such Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which are
issuable upon (A) conversion of the remaining unconverted principal amount of this
Debenture beneficially owned by such Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including, without limitation, any
other Debentures or the Warrants) beneficially owned by such Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 4(c)(i), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To
the extent that the limitation contained in this Section 4(c)(i) applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by such Holder together with any Affiliates) and of which principal
amount of this Debenture is convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such
Holder’s determination of whether this Debenture may be converted (in relation to
other securities owned by such Holder together with any Affiliates) and which
principal amount of this Debenture is convertible, in each case subject to such
aggregate percentage limitations. To ensure compliance with this restriction, each
Holder will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to any
group status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 4(c)(i), in determining the number of outstanding
            shares of Common Stock, a Holder may rely on the number of outstanding shares of
Common Stock as stated in the most recent of the following: (x) the Company’s most
recent interim financial statements filed on EDGAR; (y) a more recent public
announcement by the Company; or (z) a more recent notice by the

- 8 -

 

Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to such Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this Debenture, by
such Holder or its Affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be
4.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon conversion of
this Debenture held by the Holder. The Beneficial Ownership Limitation provisions
of this Section 4(c)(ii) may be waived by such Holder, at the election of such
Holder, upon not less than 61 days’ prior notice to the Company, to change the
Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock upon conversion of this Debenture held by the Holder and the provisions of
this Section 4(c)(i) shall continue to apply. Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation,
the Beneficial Ownership Limitation may not be further waived by such Holder. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(c)(i) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or
to make changes or supplements necessary or desirable to properly give effect to
such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Debenture.

     d) Mechanics of Conversion.

     i. Conversion Shares Issuable Upon Conversion of Principal Amount. The
number of shares of Common Stock issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal amount
of this Debenture to be converted by (y) the Conversion Price.

     ii. Delivery of Certificate Upon Conversion. Not later than three
Trading Days after each Conversion Date (the “Share Delivery Date”), the
Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or
certificates representing the Conversion Shares which, on or after the Effective
Date and as otherwise set forth in Section 4.1(c) of the Purchase Agreement, shall
be free of restrictive legends and trading restrictions (other than those which may
then be required by the Purchase Agreement) representing the number of shares of
Common Stock being acquired upon the conversion of this Debenture and (B) a bank
check in the amount of accrued and unpaid interest. On or after the Effective Date
or such other date that Conversion Shares may be issued without a

- 9 -

 

legend pursuant to Section 4.1(c) of the Purchase Agreement, the Company shall
use its best efforts to deliver any certificate or certificates required to be
delivered by the Company under this Section 4 electronically through the Depository
Trust Company or another established clearing corporation performing similar
functions.

     iii. Failure to Deliver Certificates. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or before
its receipt of such certificate or certificates, to rescind such Conversion, in
which event the Company shall promptly return to the Holder any original Debenture
delivered to the Company and the Holder shall promptly return the Common Stock
certificates, if any, representing the principal amount of this Debenture tendered
for conversion to the Company.

     iv. Obligation Absolute; Partial Liquidated Damages. The Company’s
obligations to issue and deliver the Conversion Shares upon conversion of this
Debenture in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any waiver
or consent with respect to any provision hereof (other than a written waiver or
written consent of the Holder with respect to the Company’s obligations to issue and
deliver the specific Conversion Shares at issue), the recovery of any judgment
against any Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the Holder
or any other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the Company of
any such action the Company may have against the Holder. In the event the Holder of
this Debenture shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder or
anyone associated or affiliated with the Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a court, on notice
to Holder, restraining and or enjoining conversion of all or part of this Debenture
shall have been sought and obtained, and the Company posts a surety bond for the
benefit of the Holder in the amount of 150% of the outstanding principal amount of
this Debenture, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. If the Company
fails for any reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the
Company

- 10 -

 

shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
for each $1000 of principal amount being converted, $10 per Trading Day (increasing
to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin
to accrue) for each Trading Day after such third Trading Day until such certificates
are delivered. Nothing herein shall limit a Holder’s right to pursue actual damages
or declare an Event of Default pursuant to Section 8 hereof for the Company’s
failure to deliver Conversion Shares within the period specified herein and such
Holder shall have the right to pursue all remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law.

     v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section 4(d)(ii), and if after
such Share Delivery Date the Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which the Holder was
entitled to receive upon the conversion relating to such Share Delivery Date (a
“Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition
to any other remedies available to or elected by the Holder) the amount by which (x)
the Holder’s total purchase price (including any brokerage commissions) for the
Common Stock so purchased exceeds (y) the product of
(1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion
at issue multiplied by (2) the actual sale price at which the sell order giving rise
to such purchase obligation was executed (including any brokerage commissions) and
(B) at the option of the Holder, either reissue (if surrendered) this Debenture in a
principal amount equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued if the Company had timely complied with its delivery requirements under
Section 4(d)(ii). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion
of this Debenture with respect to which the actual sale price of the Conversion
Shares (including any brokerage commissions) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately preceding sentence, the
Company shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount of such loss.
Nothing herein shall limit a Holder’s right to pursue any other remedies available
to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s failure
to timely deliver certificates representing shares of Common Stock upon conversion
of this Debenture as required pursuant to the terms hereof.

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     vi. Reservation of Shares Issuable Upon Conversion. The Company
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock for the sole purpose of issuance upon conversion
of this Debenture as herein provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other than the Holder (and the other
holders of the Debentures), not less than such aggregate number of shares of the
Common Stock as shall (subject to the terms and conditions set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and restrictions of
Section 5) upon the conversion of the outstanding principal amount of this
Debenture. The Company covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable and, if a Registration Statement is then effective under the
Securities Act, shall be registered for public sale in the US in accordance with
such Registration Statement.

     vii. Fractional Shares. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, a whole share of Common Stock.

     viii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Debenture shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates, provided that the Company
shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holder of this Debenture so converted and the Company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.

     Section 5. Certain Adjustments.

     a) Stock Dividends and Stock Splits. If the Company, at any time while this
Debenture is outstanding: (A) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any Common
Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon conversion of this Debenture or upon exercise of the
Warrants); (B) subdivides outstanding shares of Common Stock into a larger number of shares;
(C) combines (including by way of a reverse stock split) outstanding shares of Common Stock
into a smaller number of shares; or (D) issues, in the event of a reclassification of shares
of the Common Stock, any

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shares of capital stock of the Company, then the Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock
(excluding any treasury shares of the Company) outstanding immediately before such event and
of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

     b) [RESERVED]

     c) Subsequent Rights Offerings. If the Company, at any time while the
Debenture is outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common
Stock at a price per share that is lower than the VWAP on the record date referenced below,
then the Conversion Price shall be multiplied by a fraction of which the denominator shall
be the number of shares of the Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the numerator shall be the number of shares of the
Common Stock outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so offered
(assuming delivery to the Company in full of all consideration payable upon exercise of such
rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such rights,
options or warrants.

     d) Pro Rata Distributions. If the Company, at any time while this Debenture is
outstanding, distributes to all holders of Common Stock (and not to the Holders) evidences
of its indebtedness or assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security (other than the Common Stock, which shall be subject
to Section 5(b)), then in each such case the Conversion Price shall be adjusted by
multiplying such Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a fraction of which
the denominator shall be the VWAP determined as of the record date mentioned above, and of
which the numerator shall be such VWAP on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so distributed
applicable to 1 outstanding share of the Common Stock as determined by the Board of
Directors of the Company in good faith. In either case the adjustments shall be described
in a statement delivered to the Holder describing the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to 1 share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.

- 13 -

 

     e) Fundamental Transaction. If, at any time while this Debenture is
outstanding, (A) the Company effects any merger or consolidation of the Company with or into
another Person, (B) the Company effects any sale of all or substantially all of its assets
in one transaction or a series of related transactions, (C) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other securities, cash or
property, or (D) the Company effects any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall
have the right to receive, for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental Transaction, the same
kind and amount of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of 1 share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the determination of the
Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of 1 share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder
a new debenture consistent with the foregoing provisions and evidencing the Holder’s right
to convert such debenture into Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 5(e) and
insuring that this Debenture (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.

     f) Calculations. All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock
(excluding any treasury shares of the Company) issued and outstanding.

     g) Notice to the Holder.

     i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, the Company shall promptly
mail to each Holder a notice setting forth the Conversion Price after

- 14 -

 

such adjustment and setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security, despite the prohibition
thereon in the Purchase Agreement, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the case of a
Variable Rate Transaction (as defined in the Purchase Agreement).

     ii. Notice to Allow Conversion by Holder. If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to all
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the assets
of the Company, of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be filed at each
office or agency maintained for the purpose of conversion of this Debenture, and
shall cause to be delivered to the Holder at its last address as it shall appear
upon the Debenture Register, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange,
provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required to
be specified in such notice. The Holder is entitled to convert this Debenture
during the 20-day period commencing on the date of such notice through the effective
date of the event triggering such notice.

     Section 6. Redemption and Forced Conversion.

     a) Optional Redemption at Election of the Holder. Subject to the provisions of
this Section 6, at any time after the 3 year anniversary of the Original Issue Date, the
Holder may deliver a notice to the Company (an “Optional Redemption Notice” and the
date such notice is deemed delivered hereunder, the “Optional Redemption Notice
Date”) of its election to cause the Company redeem some or all of the then outstanding

- 15 -

 

Debentures for cash in an amount equal to the Optional Redemption Amount on the 10th
Trading Day following the Optional Redemption Notice Date (such date, the “Optional
Redemption Date” and such redemption, the “Optional Redemption”). The Optional
Redemption Amount is payable in full on the Optional Redemption Date. The Company covenants
and agrees that it will honor all Notices of Conversion tendered from the time of delivery
of the Optional Redemption Notice through the date all amounts owing thereon are due and
paid in full.

     b) [RESERVED]

     c) Redemption Procedure. The payment of cash pursuant to an Optional
Redemption shall be made on the Optional Redemption Date. If any portion of the payment
pursuant to an Optional Redemption shall not be paid by the Company by the applicable due
date, interest shall accrue thereon until such amount is paid in full at an interest rate
equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.
Notwithstanding anything herein contained to the contrary, if any portion of an Optional
Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to
the Company given at any time thereafter, to invalidate ab initio such
redemption. The Holder may elect to convert the outstanding principal amount of the
Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under
this Section 6 by the delivery of a Notice of Conversion to the Company.

     d) Forced Conversion. Notwithstanding anything herein to the contrary, if
after the Effective Date, the VWAPs for each of any 20 consecutive Trading Days, which
period shall have commenced only after the Effective Date, (such period the “Threshold
Period”) exceeds $9.9252 (subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common Stock that
occur after the Original Issue Date) (the “50% Threshold Price”) or $11.7298
(subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the
Original Issue Date) (the “Threshold Price”), the Company may, within 2 Trading Days
after the end of any such Threshold Period, deliver a written notice to the Holder (a
“Forced Conversion Notice” and the date such notice is delivered to the Holder, the
“Forced Conversion Notice Date”) to cause the Holder to convert (i) up to 50% of the
then outstanding principal amount of Debentures in the case such VWAPs exceed the 50%
Threshold Price for each Trading Day in the applicable Threshold Period or (ii) all or a
part of the then outstanding principal amount of Debentures in the case such VWAPs exceed
the Threshold Price for each Trading Day in the applicable Threshold Period pursuant to
Section 4, it being agreed that the “Conversion Date” for purposes of Section 4 shall be
deemed to occur on the third Trading Day following the Forced Conversion Notice Date (such
third Trading Day, the “Forced Conversion Date”). The Company may not deliver a
Forced Conversion Notice, and any Forced Conversion Notice delivered by the Company shall
not be effective, unless all of the Equity Conditions are met on each Trading Day occurring
during the applicable Threshold Period through and including the later of the Forced
Conversion Date and the Trading Day on the date such

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Conversion Shares pursuant to such conversion are delivered to the Holder. Any Forced
Conversion shall be applied ratably to all Holders based on their initial purchases of
Debentures pursuant to the Purchase Agreement, provided that any voluntary conversions by a
Holder shall be applied against such Holder’s pro-rata allocation, thereby decreasing the
aggregate amount forcibly converted hereunder if only a portion of this Debenture is
forcibly converted. Notwithstanding the foregoing, a Forced Conversion shall be subject to
all of the provisions of Section 4, including, without limitation, the provision requiring
payment of liquidated damages, and no Holder shall be subject to a Forced Conversion
hereunder if such Forced Conversion would violate the limitations on conversions set forth
in Section 4(c).

     Section 7. Negative Covenants. As long as any portion of this Debenture
remains outstanding, the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:

     a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
suffer to exist any indebtedness for borrowed money of any kind, including but not limited
to, a guarantee, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom;

     b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any
Liens of any kind, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom;

     c) amend its charter documents, including without limitation, the certificate of
amalgamation, articles of amalgamation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;

     d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its Common Stock or Common Stock Equivalents
other than (a) as expressly permitted or required under the Transaction Documents and (b) as
to repurchases of Common Stock or Common Stock Equivalents of departing employees, officers
and directors of the Company, provided that such repurchases shall not exceed an aggregate
of $100,000 for all officers and directors during the term of this Debenture;

     e) engage in any transactions with any officer, director, employee or any affiliate of
the Company, including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner, in each
case in excess of $10,000 other than (i) for payment of salary, directors’ fees or
consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock appreciation rights and
performance share units under any long term share compensation

- 17 -

 

plan of the Company and any stock option agreements under any stock option plan of the
Company;

     f) enter into any agreement with respect to any of the foregoing; or

     g) pay cash dividends or distributions on any equity securities of the Company.

     Section 8. Events of Default.

     a) “Event of Default” means, wherever used herein, any of the following events
(whatever the reason for such event and whether such event shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order of any court,
or any order, rule or regulation of any administrative or governmental body):

     i. any default in the payment of (A) the principal amount of any Debenture or
(B) interest, liquidated damages and any other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise) which default,
solely in the case of an interest payment or other default under clause (B) above,
is not cured within 5 Trading Days;

     ii. the Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures (other than a breach by the Company of its
obligations to deliver shares of Common Stock to the Holder upon conversion, which
breach is addressed in clause (ix) below) which failure is not cured, if possible to
cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure
sent by the Holder or by any other Holder and (B) 10 Trading Days after the Company
has become or should have become aware of such failure;

     iii. the Company shall fail to observe or perform any material covenant or
material agreement contained in, or a default or event of default (subject to any
grace or cure period provided in the applicable agreement, document or instrument)
other than set forth in Sections 8(a)(i), (ii) and (xi) hereof shall occur under (A)
any of the Transaction Documents (subject to the additional days set forth in
Section 8(a)(xi) with respect to the Registration Rights Agreement) or (B) any other
material agreement, lease, document or instrument to which the Company or any
Subsidiary is obligated (and not covered by clause (vi) below) which failure,
default or event of default, solely in the case clause (B) above could have, or
could reasonably be expected to result in, a Material Adverse Effect;

     iv. any material representation or warranty made in this Debenture, any other
Transaction Documents, any written statement pursuant hereto or thereto or any other
report, financial statement or certificate made or delivered to

- 18 -

 

the Holder or any other Holder shall be untrue or incorrect in any material
respect as of the date when made or deemed made;

     v. the Company or any Significant Subsidiary shall be subject to a Bankruptcy
Event;

     vi. the Company or any Subsidiary shall default on any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there may
be secured or evidenced, any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement that (a) involves an obligation greater
than $150,000, whether such indebtedness now exists or shall hereafter be created,
and (b) results in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;

     vii. the Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume listing or quotation
for trading thereon within 5 Trading Days;

     viii. the Company shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or in excess of 40%
of its assets in one transaction or a series of related transactions (whether or not
such sale would constitute a Change of Control Transaction);

     ix. the Company shall fail for any reason to deliver certificates to a Holder
prior to the fifth Trading Day after a Conversion Date or any Forced Conversion Date
pursuant to Section 4(d) or the Company shall provide at any time notice to the
Holder, including by way of public announcement, of the Company’s intention to not
honor requests for conversions of any Debentures in accordance with the terms
hereof;

     x. any monetary judgment, writ or similar final process shall be entered or
filed against the Company, any Subsidiary or any of their respective property or
other assets for more than $150,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 45 calendar
days; or

     xi. a Registration Statement shall not have been declared effective by the
Commission on or prior to the 210th calendar day after its Filing Date
(as defined in the Registration Rights Agreement).

     b) Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable in cash

- 19 -

 

at the Mandatory Default Amount. Commencing 5 days after the occurrence of any Event
of Default that results in the eventual acceleration of this Debenture, the interest rate on
this Debenture shall accrue at an interest rate equal to the lesser of 18% per annum or the
maximum rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not
provide, and the Company hereby waives, any presentment, demand, protest or other notice of
any kind, and the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies available to it
under applicable law. Such acceleration may be rescinded and annulled by Holder at any time
prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture
until such time, if any, as the Holder receives full payment pursuant to this Section 8(b).
No such rescission or annulment shall affect any subsequent Event of Default or impair any
right consequent thereon. Notwithstanding anything herein to the contrary, the Holder shall
be required to elect to accelerate hereunder in respect any Event of Default that occurs
solely as a result of a Fundamental Transaction within 30 days of the consummation of the
applicable Fundamental Transaction.

     Section 9. Miscellaneous.

     a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holder hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth
above, facsimile number (516) 677-5388, Attn: Peter Giacalone, Chief Executive Officer or
such other facsimile number or address as the Company may specify for such purpose by notice
to the Holder delivered in accordance with this Section 9. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile number or address of such Holder appearing
on the books of the Company, or if no such facsimile number or address appears, at the
principal place of business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section 9 prior to 5:30 p.m. (New York City time), (ii) the date
immediately following the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section 9 between 5:30 p.m. (New
York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business
Day following the date of mailing, if sent by nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is required to be
given.

     b) Absolute Obligation. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and accrued interest, as

- 20 -

 

applicable, on this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct debt obligation of the Company.
This Debenture ranks pari passu with all other Debentures now or hereafter
issued under the terms set forth herein.

     c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft
or destruction of such Debenture, and of the ownership hereof, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it.

     d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without regard to
the principles of conflict of laws thereof. Each party agrees that all legal proceedings
concerning the interpretation, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York, Borough of Manhattan (the
“New York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such New York Courts, or such New
York Courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Debenture and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by applicable
law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding arising out of or
relating to this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture, then the
prevailing party in such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.

     e) Waiver. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Debenture. The
failure of the Company or the Holder to insist upon strict adherence to any term of

- 21 -

 

this Debenture on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term or any other
term of this Debenture. Any waiver by the Company or the Holder must be in writing.

     f) Severability. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all
other Persons and circumstances. If it shall be found that any interest or other amount
deemed interest due hereunder violates the applicable law governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or
other law which would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the performance of this
indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort to any such
law, hinder, delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has been enacted.

     g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.

     h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect any of the
provisions hereof.

     i) Assumption. Any successor to the Company or any surviving entity in a
Fundamental Transaction shall (i) assume, contemporaneous with or prior to such Fundamental
Transaction, all of the obligations of the Company under this Debenture and the other
Transaction Documents pursuant to written agreements in form and substance satisfactory to
the Holder as to the assumption of this Debenture and the other Transaction Documents (such
approval not to be unreasonably withheld or delayed) and (ii) issue to the Holder, if
requested by such Holder, a new debenture of such successor entity evidenced by a written
instrument substantially similar in form and substance to this Debenture, including, without
limitation, having a principal amount and interest rate equal to the principal amount and
the interest rate of this Debenture and having similar ranking to this Debenture, which
shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or
delayed). The provisions of this Section 9(i) shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any limitations
of this Debenture.

*********************

- 22 -

 

     IN WITNESS WHEREOF, the Company has caused this Replacement Convertible Debenture to be duly
executed by a duly authorized officer as of this 24th day of August, 2007.

	 	 	 	 	 
	 	180 CONNECT INC.

 	 
	 	By:  	/s/ Peter Giacalone
 	 
	 	 	Name:  	Peter Giacalone 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

Replacement Convertible Debenture Signature page

 

 

ANNEX A

NOTICE OF CONVERSION

     The undersigned hereby elects to convert principal under the 9.33% Convertible Debenture of
180 Connect Inc., a Delaware corporation (the “Company”), due on March 22, 2011, into
shares of common stock, no par value per share (the “Common Stock”), of the Company
according to the conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.

     By the delivery of this Notice of Conversion the undersigned represents and warrants to the
Company that its ownership of the Common Stock does not exceed the amounts determined in accordance
with Section 13(d) of the Exchange Act, specified under Section 4 of this Debenture.

     The undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion:

Principal Amount of Debenture to be Converted:

Conversion Price:

Number of shares of Common Stock to be issued:

Signature:

Name:

Address:

A-1

 

Schedule 1

CONVERSION SCHEDULE

The 9.33% Convertible Debentures due on March 22, 2011, in the aggregate principal amount of
$___ issued by 180 Connect Inc. This Conversion Schedule reflects conversions made under
Section 4 of the above referenced Debenture.

Dated:

	 	 	 	 	 	 	 
	 	 	 	 	Aggregate	 	 
	 	 	 	 	Principal	 	 
	 	 	 	 	Amount	 	 
	 	 	 	 	Remaining	 	 
	 	 	 	 	Subsequent to	 	 
	 	 	 	 	Conversion	 	 
	Date of Conversion	 	 	 	(or original	 	 
	(or for first entry,	 	Amount of	 	Principal	 	 
	Original Issue Date)	 	Conversion	 	Amount)	 	Company Attest
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 

S-1

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