Contract
THIS
DEBENTURE AND THE SECURITIES ISSUABLE UPON THE CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(TOGETHER WITH THE REGULATIONS
PROMULGATED THEREUNDER, THE "SECURITIES ACT"),
OR
ANY STATE OR OTHER SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF WITHIN THE UNITED STATES
(AS THAT TERM IS DEFINED IN REGULATION S PROMULGATED
UNDER THE SECURITIES ACT) OR TO A U.S. PERSON (AS
THAT
TERM IS DEFINED IN REGULATION S) IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID ACT AND
ANY
APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. HEDGING TRANSACTIONS
INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. ANY
PERSON ACCEPTING ANY INTEREST IN THE SECURITIES REPRESENTS
THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING SUCH
SECURITIES IN AN OFFSHORE TRANSACTION PURSUANT TO RULE
903
OR 904 OF REGULATION S.
UNLESS
PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE
HOLDER OF THIS DEBENTURE MUST NOT TRADE THE DEBENTURE
OR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF
BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE
LATER
OF (i) FEBRUARY 1, 2008; OR (ii) THE DATE THE ISSUER BECAME
A
REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.
SECURED
CONVERTIBLE
DEBENTURE
No. N- _______ |
Date
of Issuance
|
US$1,000,000.00 |
February
1,
2008
|
FOR
VALUE
RECEIVED, Colorep, Inc., a California corporation (the "Company"),
hereby promises to pay Carthew Bay Technologies Inc., an Ontario corporation
(the
"Lender"),
the
principal sum of One Million U.S. Dollars (US$1,000,000), together with
interest
thereon from the date of this Debenture as set forth herein. Capitalized terms
used but not
defined herein shall have the same meaning as set forth in that certain Note
Purchase Agreement
dated as of February 1, 2008 by and between the Company and Lender (the
"Note
Purchase
Agreement").
1.
Principal
and Term.
Unless
the CBT Transaction has occurred, in which case
all
principal due and owing under this Debenture shall be cancelled, and subject
to
the terms and
conditions set forth herein, the principal and accrued interest due and owing
under this Debenture
shall be due and payable by the Company in one installment on April 30, 2008;
provided,
however,
that
such due date shall automatically be extended to June 30, 2008 to the extent
that: (i) the CBT Agreement has been executed but the CBT Transaction has not
been consummated on or before Xxxxx 00, 0000, (xx) the CBT Transaction has
progressed such that Lender
and the Company reasonably expect that to receive all necessary regulatory
approvals and
acceptances required pursuant to the CBT Agreement and that the CBT Transaction
will in fact close, and (iii) the holders of the Senior Subordinated Notes
still
outstanding, if any, shall also
have
agreed to extend the due dates of such notes to June 30, 2008 (such date as
determined in accordance with this Section 1 being referred to herein as the
"Maturity
Date").
To
the extent that
the
principal due and owing under this Debenture has been cancelled in accordance
with Section 2.3 of the Note Purchase Agreement, the unpaid accrued interest
payable to Lender hereunder
shall be satisfied pursuant to Section 2.3 of the Note Purchase
Agreement.
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2. Interest.
Interest
on the unpaid principal balance of this Debenture shall accrue
at
a rate equal to one percent (1.0%) per month, or part thereof (the "Interest
Rate"),
beginning
on the date hereof, and payable in cash in one installment on the Maturity
Date,
if not converted
earlier pursuant to Section 2.3 of the Note Purchase Agreement. Notwithstanding
the foregoing,
to the extent that the Maturity Date is extended to June 30, 2008 and there
is a
CBT Termination
of the CBT Agreement, the interest due and owing under this Debenture shall
be
payable in monthly installments each month from and after the date of such
CBT
Termination until
the
Maturity Date; provided,
that
there is no default under the Colorep Credit Facility; provided,
further,
that
any such payments of interest shall not include accrued and unpaid interest
accruing
from and after the date hereof until the date of the CBT Termination, which
such
interest
shall not be due and payable until the Maturity Date. For purposes of this
Debenture, "CBT
Termination" shall
refer to a termination of the CBT Agreement due to (i) a breach of the
CBT
Agreement by Lender, (ii) Lender's failure to obtain any corporate, governmental
or third party
approval (including, without limitation, the approval of the shareholders of
CBT), consents or
authorizations required to close the CBT Transaction or (iii) Lender's
acceptance of a CBT Alternate
Transaction.
Notwithstanding
the foregoing, in the event that Lender is required to enter into an
intercreditor agreement pursuant to which its security interest granted under
the Security Agreement is subordinated to the interests of the commercial lender
under the Colorep Credit Facility, additional interest shall accrue at a rate
of
one half percent (0.5%) per month, or part thereof, on that portion of the
unpaid principal balance of this Debenture which is subordinated further to
such
intercreditor agreement, beginning on the date such intercreditor agreement
is
executed
and payable pursuant to the terms and conditions as set forth
above.
3. Payment.
If
the
CBT Transaction has occurred, all principal and accrued interest due and owing
under this Debenture shall be cancelled. In all other instances, payments
shall
be
made in lawful money of the United States of America at the principal office
of
the Company,
or at such other place as the holder hereof may from time to time designate
in
writing to
the
Company. Payment shall be credited first to Costs (as defined below), if any,
then to accrued
interest due and payable and any remainder applied to principal. Prepayment
of
principal,
together with accrued interest, may not be made without the Lender's consent.
The Company
hereby waives demand, notice, presentment, protest and notice of
dishonor.
2
4. Security. Payments
of amounts due and owing under this Debenture shall be
secured under that certain Security Agreement (the "Security
Agreement")
by and
between the
Company and Lender, the form of which is attached hereto as Exhibit
A.
Reference is hereby
made to the Security Agreement for a description of the nature and extent of
the
security for
this
Debenture and the rights with respect to such security of the holder of this
Debenture.
5. Conversion
of the Debentures.
If
not
otherwise cancelled upon the closing
of the CBT Transaction, this Debenture and any amounts due hereunder shall
be
convertible
into Conversion Shares, at the option of the holder hereof, in accordance with
the terms
of
Section 2.3 of the Note Purchase Agreement. As promptly as practicable after
conversion
of this Debenture, the Company at its expense shall issue and deliver to the
holder of this
Debenture, upon surrender of the Debenture, a certificate or certificates for
the number of full
Conversion Shares issuable upon such conversion.
6. Amendments
and Waivers; Resolutions of Dispute; Notice.
The
amendment
or waiver of any term of this Debenture, the resolution of any controversy
or
claim arising
out of or relating to this Debenture and the provision of notice shall be
conducted pursuant
to the terms of the Note Purchase Agreement.
7. Successors
and Assigns.
This
Debenture applies to, inures to the benefit of,
and
binds the successors and assigns of the parties hereto. Any transfer of this
Debenture may
be
effected only pursuant to the Note Purchase Agreement and by surrender of this
Debenture
to the Company and reissuance of a new debenture to the transferee. The Lender
and any
subsequent holder of this Debenture receives this Debenture subject to the
foregoing terms and
conditions, and agrees to comply with the foregoing terms and conditions for
the
benefit of the
Company.
8. Officers
and Directors Not Liable.
In
no
event shall any officer or director
of the Company be liable for any amounts due and payable pursuant to this
Debenture except
to
the extent that such officer or director's act or failure to act constitutes
fraud, misrepresentation
or a knowing violation of law.
9. Expenses.
The
Company hereby agrees, subject only to any limitation imposed
by applicable law, to pay all expenses, including reasonable attorneys' fees
and
legal expenses,
incurred by the holder of this Debenture ("Costs")
in
endeavoring to collect any amounts
payable hereunder which are not paid when due, whether by declaration or
otherwise. The
Company agrees that any delay on the part of the holder in exercising any rights
hereunder will
not
operate as a waiver of such rights. The holder of this Debenture shall not
by
any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies,
and no waiver of any kind shall be valid unless in writing and signed by the
party or parties waiving such
rights or remedies.
10. Governing
Law.
This
Debenture shall be governed by and construed under
the
laws of the State of California as applied to other instruments made by
California residents
to be performed entirely within the State of California.
[SIGNATURE
PAGE TO FOLLOW]
3
IN
WITNESS WHEREOF, the undersigned has executed this Secured Convertible
Debenture
as of the date first written above.
COLOREP, INC. | ||
|
|
|
By: | ||
Name:
Xxxxx Xxxx
Title:
Chief Executive Officer
|
Signature
Page to Secured Convertible Debenture
Exhibit
A
Security
Agreement