THE CONVERTIBLE NOTE EVIDENCED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAS BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
IN ADDITION, THIS CONVERTIBLE NOTE MAY ONLY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF TO
CRESCENT INTERNATIONAL LTD. OR AN AFFILIATE OF CRESCENT INTERNATIONAL LTD.
THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF
FIBERCORE, INC. SET FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF
JUNE 9, 2000, BETWEEN FIBERCORE, INC. AND CRESCENT INTERNATIONAL LTD. A
COPY OF THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS
MAY BE OBTAINED FROM FIBERCORE, INC.'S EXECUTIVE OFFICES.
--------------------
CONVERTIBLE NOTE
DUE JULY 5, 2002
July 5, 2000 $1,500,000
FiberCore, Inc., a Nevada corporation (the "Company"), for value received
hereby promises to pay to the Holder (as defined below) on July 5, 2002 the
principal amount of $1,500,000 payable in such coin or currency of the United
States of America as at the time of payment shall be legal tender for public and
private debts at the principal office of the Company. This Convertible Note
shall be secured by the Collateral as provided in the Security Agreement and the
Pledge Agreement (as these terms are hereinafter defined).
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The terms defined in this Article whenever used
in this Convertible Note shall have the respective meanings hereinafter
specified.
(a) "Accountant" shall have the meaning set forth in Section 3.2(f).
(b) "Additional Capital Shares" shall have the meaning set forth in
Section 3.5(d).
(c) "Adjustment Events" shall have the meaning set forth in Section
3.5(a).
(d) "Affiliate" shall mean any Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
direct or indirect common control with another Person. For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controls" and "controlled" have meanings correlative to the
foregoing.
(e) "Book Value" of the Collateral shall mean the aggregate book value of
the Collateral as set forth on Attachment A to the Security Agreement; provided,
however, that the Book Value of the Collateral shall decrease by an aggregate
amount of $150,000 per month on the first calendar day of each month, on and
after January 1, 2000.
(f) "Capital Shares" shall mean the Common Stock, the Note Conversion
Shares and any shares of any other class of common stock, whether now or
hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
(g) "Closing Date" shall mean July 5, 2000.
(h) "Collateral" shall have the meaning specified in the Security
Agreement.
(i) "Common Stock" shall mean the Company's common stock, $0.001 par value
per share.
(j) "Company" shall mean FiberCore, Inc., a corporation organized and
existing under the laws of the State of Nevada.
(k) "Conversion Date" shall mean any day on which all or some part of the
principal amount of this Convertible Note is converted into Note Conversion
Shares in accordance with the terms of this Convertible Note and the Securities
Purchase Agreement, provided that a Conversion Date must be a Trading Day.
(l) "Conversion Notice" shall have the meaning set forth in Section
3.2(a).
(m) "Conversion Price" shall have the meaning set forth in Section 3.1(a).
(n) "Conversion Valuation Period" shall mean, with respect to the
Conversion Date, the twenty-two (22) Trading Day period immediately preceding
the Conversion Date.
(o) "Convertible Note" shall mean this Convertible Note or such other
Convertible Note or Notes exchanged therefor as provided in Section 2.1.
(p) "Crescent International" shall mean Crescent International Ltd., an
entity organized and existing under the laws of Bermuda.
(q) "Effective Collateral" shall mean the lesser of (A) the Book Value or
(B) Distributable Capital which shall mean: total assets (Aktiva), less total
reserves (Ruckstellungen), less total liabilities (Verbindlichkeiten), less
additional items for investment subsidies for fixed assets (Sonderposten fur
Investitionszuschusse zum Anlagevermogen), less additional items for investment
grants for fixed assets (Sonderposten fur Investitionszulage zum
Anlagevermogen), less registered capital (Stammkapital), of FiberCore Jena, as
shown on the balance sheet of FiberCore Jena on the date such calculation is
made.
(r) "Event of Default" shall have the meaning set forth in Section 6.1.
(s) "Fibercore Jena" shall mean FiberCore Jena GmbH, a corporation
organized and existing under the laws of the Federal Republic of Germany and a
wholly-owned Subsidiary of the Company.
(t) "Holder" shall mean Crescent International or an Affiliate of Crescent
International.
(u) "Lowest Average Price" shall mean the average of the lowest three
consecutive Trade Prices during the applicable Conversion Valuation Period.
(v) "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere
with the ability of the Company to enter into and perform its obligations under
any of the Securities Purchase Agreement, the Registration Rights Agreement,
this Convertible Note, the Security Agreement and the Pledge Agreement.
(w) "Minimum Trade Price" shall mean $2.50.
(x) "Note Conversion Shares" shall mean shares of Common Stock into which
this Convertible Note is or may be converted.
(y) "Outstanding" when used with reference to Common Stock or Capital
Shares (collectively, the "Shares"), shall mean, at any date as of which the
number of such Shares is to be determined, all issued and outstanding Shares,
and shall include all such Shares issuable in respect of outstanding scrip or
any certificates representing fractional interests in such Shares; provided,
however, that "Outstanding" shall not refer to any such Shares then directly or
indirectly owned or held by or for the account of the Company.
(z) "Person" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
(aa) "Principal Market" shall mean the Nasdaq National Market, the Nasdaq
SmallCap Market, the American Stock Exchange, the Bulletin Board or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
(bb) "Pledge Agreement" shall mean that certain Share Pledge Agreement,
dated as of the date hereof, by and between the Company and Crescent
International.
(cc) "Pledges" shall have the meaning specified in the Pledge Agreement.
(dd) "Redemption Date" shall have the meaning set forth in Section 2.6.
(ee) "Redemption Price" shall mean one hundred twenty percent (120%) of
the applicable principal amount of this Convertible Note being redeemed, plus
the amount of any interest payable thereon.
(ff) "Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated as of June 9, 2000, by and between the Company and Crescent
International.
(gg) "SEC" shall mean the U.S. Securities and Exchange Commission.
(hh) "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(ii) "Securities Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of June 9, 2000, by and between the Company and Crescent
International.
(jj) "Security Agreement" shall mean that certain Security Agreement,
dated as of June 9, 2000, by and between Crescent International and FiberCore
Jena.
(kk) "Subsidiary" shall mean any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than fifty
percent (50%) of either the equity interests in, or the voting control of, such
Person.
(ll) "Trade Price" shall mean the volume-weighted average price as
reported by Bloomberg L.P. using the Average Quoted Recap function.
(mm) "Trading Day" shall mean any day during which the Principal Market
shall be open for business.
Other capitalized terms used but not defined herein shall have their
respective meanings set forth in the Securities Purchase Agreement.
ARTICLE 2
EXCHANGES AND TRANSFER; REDEMPTION
SECTION 2.1. Exchange and Registration of Transfer of Convertible Notes.
The Holder may, at its option, surrender this Convertible Note at the office of
the Company and receive in exchange therefor a Convertible Note or Notes, each
in the denomination of $50,000 or an integral multiple of $50,000 in excess
thereof. Any new Convertible Note or Notes issued upon exchange shall be dated
as of the date of this Convertible Note, and, subject to Article 4 hereof, shall
be payable to such Person, or order, as such Holder may designate. The aggregate
principal amount of such Convertible Note or Notes exchanged in accordance with
this Section 2.1 shall equal the aggregate unpaid principal amount of this
Convertible Note as of the date of such surrender; provided, however, that upon
such exchange there shall be filed with the Company the name and address for all
purposes hereof of the Holder or Holders of the Convertible Note or Notes
delivered in such exchange; and provided further that any such exchange may only
be made to Crescent International or an Affiliate of Crescent International.
This Convertible Note, when presented for registration of transfer or for
exchange, conversion or payment, shall (if so required by the Company) be duly
endorsed by, or be accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company duly executed by, the Holder or its
attorney duly authorized in writing.
SECTION 2.2. Loss. Theft. Destruction of Convertible Note. Upon (i)
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Convertible Note, (ii) receipt of indemnity or security
reasonably satisfactory to the Company, in the case of any such loss, theft or
destruction, and (iii) upon surrender and cancellation of this Convertible Note,
in the case of any such mutilation, the Company will make and deliver, in lieu
of such lost, stolen, destroyed or mutilated Convertible Note, a new Convertible
Note of like tenor and unpaid principal amount dated as of the date hereof. This
Convertible Note shall be held and owned upon the express condition that the
provisions of this Section 2.2: (i) are exclusive with respect to the
replacement of a mutilated, destroyed, lost or stolen Convertible Note and (ii)
preclude any and all other rights and remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of negotiable instruments or other securities without their
surrender.
SECTION 2.3. Party Deemed Absolute Owner. The Company may deem Crescent
International or any Affiliate of Crescent International in whose name this
Convertible Note shall be registered upon the registry books of the Company to
be, and may treat it as, the absolute owner of this Convertible Note (whether or
not this Convertible Note shall be overdue) for the purpose of receiving payment
of or on account of the principal of this Convertible Note, for the conversion
of this Convertible Note and for all other purposes. No Person other than
Crescent International or an Affiliate of Crescent International may own this
Convertible Note. The Company shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon this Convertible Note to the extent of
the sum or sums so paid or the conversion so made.
SECTION 2.4. Redemption.
(a) Optional Redemption by the Company.
(i) The Company, at its election upon notice given as provided
in Section 2.6 and subject to the provisions of paragraph (a)(ii) of this
Section 2.4, and after the earlier of (A) the Effective Date and (B) 90
calendar days from the date hereof, may at any time and from time to time
redeem this Convertible Note, in whole or in part, at the Redemption
Price, and only with respect to that portion of this Convertible Note for
which the Company has not been provided with a Conversion Notice.
(ii) If the Company shall elect to redeem this Convertible
Note during the period in which there exists a Failed Registration
Statement (as such term is defined in the Registration Rights Agreement)
until the date on which the Note Conversion Shares may be first sold by
the Investor pursuant to Rule 144 (or any similar provision then in
effect) under the Securities Act, then the Holder shall have a right to
reject such redemption. If the Holder exercises such redemption right, the
2.0% penalty set forth in Section 1.1(c) of the Registration Rights
Agreement shall be reduced to 1.0%.
(iii) Unless the Holder agrees otherwise, the Company shall
not be permitted to partially redeem this Convertible Note if the amount
redeemed would be less than US$400,000; provided that the Company shall
have the right to redeem this Convertible Note for its then outstanding
principal amount if such outstanding amount is less than US$400,000.
(b) Mandatory Redemption by the Company. If on July 31, 2000 the
acquisition by the Company or its Subsidiary of at least 90% of the issued and
outstanding capital stock of Xtal Fibras Opticas S.A. from Algar S.A. shall not
have been consummated and all necessary consents, authorizations and approvals
pertaining thereto shall not have been obtained by the Company, this Convertible
Note shall be immediately redeemed by the Company at a price equal to the
outstanding principal amount of this Convertible Note, and only with respect to
that portion of this Convertible Note for which the Company has not been
provided with a Conversion Notice. Upon a mandatory redemption pursuant to this
section 2.4(b), the Investor shall not in any event be required to return to the
Company any fees or penalties paid by the Company to the Investor with respect
to this Convertible Note. If the Company fails to timely redeem this Convertible
Note in accordance with this subsection (b), then until the Company has redeemed
this Convertible Note, the Company shall on the last Trading Day of each
calendar month, or proportion thereof, beginning in the month in which this
Convertible Note is required to be redeemed pursuant to this Section 2.4(b), pay
to the Holder an additional amount of 2.0% of the outstanding principal balance
of this Convertible Note.
SECTION 2.5. Twenty Percent Limitation. Upon submitting a Conversion
Notice in accordance with Section 3.2 hereof, the Holder has the right to
require the Company to seek shareholder approval to permit the Company to
convert this Convertible Note into a number of shares of Common Stock in excess
of 19.9% of the Outstanding Common Stock of the Company, to the extent such
shareholder approval is required by applicable rules of the Principal Market. If
shareholder approval is obtained in accordance with Section 2.2 of the
Securities Purchase Agreement, the Holder has the option of converting this
Convertible Note, in accordance with Article 3 hereof, at either (i) the
Conversion Price stated in the Conversion Notice or (ii) the Conversion Price as
computed on the date such shareholder approval was obtained, which date for the
purposes of this Section 2.5 shall be deemed the Conversion Date. If, within
seventy-five (75) days of the Holder exercising its right to require the Company
to seek shareholder approval, the Company should fail to obtain the requisite
approval of shareholders, the Holder may require the Company to immediately
redeem this Convertible Note at the Redemption Price, and only with respect to
that portion of this Convertible Note which has not been previously converted or
redeemed. Until the Company redeems this Convertible Note pursuant to this
Section 2.5 and pays the Redemption Price to the Holder, the Company shall on
the last Trading Day of each calendar month for the period beginning in the
month this Convertible Note is required to be redeemed pursuant to this Section
2.5 and ending in the month prior to the month in which the Redemption Price is
paid to the Holder, pay to the Holder an additional amount of 2.0% of such
portion of the outstanding principal balance of this Convertible Note which,
upon conversion of this Convertible Note, would be convertible into a number of
shares of Common Stock in excess of 19.9% of the Outstanding Common Stock of the
Company.
SECTION 2.6. Notice of Redemption: Right to Convert in Lieu of Accepting
Redemption. In the case of redemption of this Convertible Note, notice thereof
shall be given in writing to the Holder not fewer than ten (10) Trading Days
prior to the date fixed for such redemption (the "Redemption Date"). The
redemption notice shall specify the Redemption Date and shall make reference to
this Section 2.6 pursuant to which such redemption is to be made. Such notice of
redemption and all other notices to be given to the Holder shall be given by
facsimile and confirmed by registered mail at its designated address.
Upon notice of any redemption being given as provided in this Section 2.6,
the Holder shall have the right to exercise, either in whole or in part, the
conversion privilege pursuant to Article 3 hereof until 5:00 P.M., New York City
time, on the Trading Day preceding the Redemption Date.
SECTION 2.7. Partial Redemption of Convertible Notes: Notation Thereon.
Upon any partial redemption of this Convertible Note pursuant to this Article 2,
the Holder at its option may (i) require the Company to issue and deliver, at
the expense of the Company (other than for transfer taxes, if any), upon
surrender of this Convertible Note, a new Convertible Note payable to such
person or persons, or order, as may be designated by the Holder for the
principal amount of this Convertible Note then remaining unredeemed, such
Convertible Note to be dated as of the date of this Convertible Note, or (ii)
present this Convertible Note to the Company for notation hereon of the payment
of the portion of the principal amount so redeemed. The Company may, as a
condition of payment of all or any of the principal of or interest on this
Convertible Note, require the Holder to present this Convertible Note for
notation of such payment and, if this Convertible Note be paid in full, require
the surrender hereof.
ARTICLE 3
CONVERSION OF NOTE
SECTION 3.1. Conversion: Conversion Price.
(a) At the option of the Holder, at any time until this Convertible
Note is paid in full, this Convertible Note may be converted, either in whole or
in part, up to the principal amount hereof, into shares of Common Stock. The
conversion price ("Conversion Price") per share shall be equal to the lower of
(i) the average of the Trade Prices during the ten (10) Trading Days immediately
preceding the Closing Date and (ii) 93% of the Lowest Average Price during the
Conversion Valuation Period.
(b) During the term of this Convertible Note, the Company shall have
the right to reject the conversion of all or part of this Convertible Note (as
the case may be) if the applicable Conversion Price would be less than the
Minimum Trade Price; provided, however, that the Company shall not be entitled
to exercise such rejection right with respect to any subsequent conversions of
all or part of this Convertible Note (as the case may be) if (x) the average of
the Trade Prices during the seven (7) Trading Days immediately preceding the
applicable Conversion Notice or Notices exceeds the Minimum Trade Price, or (y)
the applicable Conversion Notice is delivered by facsimile to the Company more
than 180 calendar days following the first exercise by the Company of its
rejection right pursuant to this Section 3.1(b).
(c) During the term of this Convertible Note, the Company shall have
a further right to reject the conversion of all or part of this Convertible Note
during the period in which there exists a Failed Registration Statement (as such
term is defined in the Registration Rights Agreement) until the date on which
the Registrable Securities may be sold by the Investor pursuant to Rule 144 (or
any similar provision then in effect) under the Securities Act.
(d) Notwithstanding anything to the contrary contained herein, on
each Conversion Date, the number of Note Conversion Shares into which this
Convertible Note may be converted shall not exceed the number of shares such
that, when aggregated with all other shares of Common Stock and Registrable
Securities then beneficially or deemed beneficially owned by the Holder, would
result in the Holder owning more than 9.9% of all of such Common Stock as would
be outstanding on such Conversion Date, as determined in accordance with Section
13(d) of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 3.1(c), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 13(d) of the Exchange Act
and the regulations promulgated thereunder is greater on a Conversion Date than
on the date upon which the Conversion Notice associated with such Conversion
Date is given, the amount of Common Stock outstanding on such Conversion Date
shall govern for purposes of determining whether the Holder would own more than
9.9% of the Common Stock following such Conversion Date.
SECTION 3.2. Exercise of Conversion Privilege.
(a) In order to convert this Convertible Note into Note Conversion
Shares, the Holder shall on the Conversion Date send via facsimile, and in
accordance with the notice provisions of Section 10.4 of the Securities Purchase
Agreement, a copy of the fully executed Conversion Notice in the form attached
hereto in Annex I (the "Conversion Notice") stating that the Holder elects to
convert. The Conversion Notice shall specify (i) the Conversion Date, the (ii)
portion of this Convertible Note to be converted, (iii) the applicable
Conversion Price, (iv) the name or names (with address) of the persons who are
to become holders of the Note Conversion Shares in connection with such
conversion, and (v) a calculation of the number of Note Conversion Shares
issuable upon such conversion.
(b) Unless the Company agrees otherwise, the Holder shall not
deliver more than one Conversion Notice per calendar week, or deliver a
Conversion Notice requesting conversion of this Convertible Note for a principal
amount of less than US$400,000; provided that the Holder shall have the right to
deliver a Conversion Notice for the conversion of the then outstanding principal
amount of this Convertible Note if such outstanding principal amount is less
than US$400,000.
(c) Upon receipt by the Company of a facsimile copy of a Conversion
Notice, the Company shall immediately send, via facsimile, a confirmation of
receipt of the Conversion Notice to the Holder. Such confirmation shall indicate
that the Conversion Notice has been received and shall specify the name and
telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the conversion of this Convertible
Note. The Company shall not be obligated to issue certificates evidencing the
Note Conversion Shares issuable upon conversion, unless either this Convertible
Note is delivered to the Company as provided below, or the Holder notifies the
Company that this Convertible Note has been lost, stolen or destroyed (subject
to the requirements of Section 2.2).
(d) Partial Conversion. Upon any partial conversion of this
Convertible Note pursuant to this Article 3, the Holder at its option may (i)
require the Company to issue and deliver, at the expense of the Company (other
than for transfer taxes, if any), upon surrender of this Convertible Note, a new
Convertible Note payable to such person or persons, or order, as may be
designated by the Holder for the principal amount of this Convertible Note then
remaining unconverted, such Convertible Note to be dated as of the date of this
Convertible Note, or (ii) present this Convertible Note to the Company for
notation hereon of the portion of the principal amount so converted. Upon any
full conversion of this Convertible Note pursuant to this Article 3, the Holder
shall surrender and deliver this Convertible Note to the Company.
(e) Release of Collateral. Upon (i) any complete or partial
conversion of this Convertible Note as provided in this Article 3 or Section 2.5
hereof, or (ii) any complete or partial redemption of this Convertible Note as
provided in Section 2.4 or Section 2.5 hereof, the Holder shall release the
Collateral by an amount proportional to the principal amount of this Convertible
Note so converted or redeemed; provided, however, that the Holder shall be
required to release the Collateral only if and to the extent the Effective
Collateral on the applicable Conversion Date or Redemption Date exceeds 120% of
the outstanding principal amount of the Convertible Notes following such
conversion or redemption. The Company shall have the right to determine from
which assets the Collateral shall be released, shall give written notice to the
Holder describing such assets within fourteen (14) calendar days of such
release, and shall amend Attachment A to the Security Agreement to reflect such
release.
(f) Release of Pledges. Upon written request of the Company, the
Holder agrees to release the Pledges if the Effective Collateral exceeds 120% of
the outstanding principal amount of the Convertible Notes. Such written request
shall be accompanied by a certificate of an accountant confirming the value of
the Distributable Collateral which can be distributed in accordance with
sections 30 and 31 of the German Limited Liability Companies Act ("GmbHG") of as
of the date of the request. After the release of the Pledges pursuant to the
prior sentence and upon the Holder's request, the Company shall be required to
provide the Holder with monthly certificates from a certified accountant setting
forth the current details of the value of the Distributable Collateral. If at
any time after the Pledges have been released, the outstanding principal amount
of the Convertible Notes exceeds the Effective Collateral by more than [Euro]
100,000, the Company agrees to enter into a new pledge agreement on the same
terms and conditions of the Pledge Agreement, with all costs and expenses
relating to such pledge agreement to be borne by the Company.
(g) In the event of a dispute with respect to the calculation of the
Conversion Price, the Company shall promptly issue to the Holder the number of
undisputed Note Conversion Shares and shall submit the disputed calculations to
its outside accountant (the "Accountant") via facsimile within three (3) days of
receipt of the Conversion Notice. The Company shall cause the Accountant to
perform the calculations and notify the Company and Holder of the results no
later than two (2) Trading Days from the time it receives the disputed
calculations. The Accountant's calculations shall be deemed conclusive absent
manifest error.
SECTION 1.3. Delivery of Note Conversion Shares Upon Conversion. The
Company shall, no later than the close of business on the third Trading Day
after receipt by the Company of (i) a facsimile copy of a Conversion Notice and
(ii) all necessary documentation duly executed and in proper form required for
conversion, including this Convertible Note (or after the provisions required by
Section 2.2 in the case of a lost, stolen or destroyed Convertible Note), issue
and surrender the Note Conversion Shares to an express courier service for
either overnight or (if delivery is outside the United States) two (2) day
delivery to the Holder at the address or addresses and in the name or names
provided in the Conversion Notice. The person or persons entitled to receive the
Note Conversion Shares issuable upon conversion of this Convertible Note shall
be treated for all purposes as the record holder or holders of such Note
Conversion Shares on the Conversion Date.
SECTION 1.4. Fractional Shares. No fractional Note Conversion Shares or
scrip representing fractional Note Conversion Shares shall be issued upon
conversion of this Convertible Note. If any conversion of this Convertible Note
would create a fractional Note Conversion Share or a right to acquire a
fractional Note Conversion Share, such fractional Note Conversion Share shall be
disregarded and the number of Note Conversion Shares issuable upon conversion,
in the aggregate, shall be the next higher number of shares.
SECTION 1.5. Adjustment of Conversion Price. The Conversion Price and,
accordingly, the number of Note Conversion Shares issuable upon the conversion
of this Convertible Note shall be subject to adjustment from time to time upon
the happening of certain events as follows:
(a) Reclassification, Consolidation, Merger or Mandatory Share Exchange.
(i) Upon occurrence of any of the events specified in
subsection (a)(ii) below (the "Adjustment Events") while this Convertible
Note remains outstanding and unexpired, the Company, or such successor or
purchasing corporation, as the case may be, shall, without payment of any
additional consideration therefore, execute a new Convertible Note
providing that the Holder shall have the right to convert such new
Convertible Note (upon terms not less favorable to the Holder than those
then applicable to this Convertible Note) and to receive upon such
exercise, in lieu of each Common Share theretofore issuable upon
conversion of this Convertible Note, the kind and amount of shares of
stock, other securities, money or property receivable upon such
reclassification, change, consolidation, merger, mandatory share exchange,
sale or transfer by the holder of one Common Share issuable upon
conversion of this Convertible Note had this Convertible Note been
converted immediately prior to such reclassification, change,
consolidation, merger, mandatory share exchange or sale or transfer. Such
new Convertible Note shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 3.5.
(ii) The Adjustment Events include (1) any reclassification or
change of Common Stock issuable upon conversion of this Convertible Note
(other than a change in par value, or from par value to no par value per
share, or from no par value per share to par value, or as a result of a
subdivision or combination of outstanding Common Stock issuable upon
conversion of this Convertible Note), (2) any consolidation, merger or
mandatory share exchange of the Company with or into another corporation
(other than a merger or mandatory share exchange with another corporation
in which the Company is a continuing corporation and which does not result
in any reclassification or change, other than a change in par value, or
from par value to no par value per share, or from no par value per share
to par value, or as a result of a subdivision or combination of
Outstanding Common Stock issuable upon conversion of this Convertible
Note), or (3) any sale or transfer to another corporation of the property
of the Company as an entirety or substantially as an entirety.
The provisions of this subsection (a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers, mandatory share exchanges
and sales and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Convertible Note remains outstanding and unexpired, shall subdivide
or combine its Common Stock, the Conversion Price (i) shall be proportionately
reduced, in case of subdivision of such shares, as of the effective date of such
subdivision, or, if the Company shall take a record of holders of its Common
Stock for the purpose of so subdividing, as of such record date, whichever is
earlier, or (ii) shall be proportionately increased, in the case of combination
of such shares, as of the effective date of such combination, or, if the Company
shall take a record of holders of its Common Stock for the purpose of so
combining, as of such record date, whichever is earlier.
(c) Stock Dividends. If the Company at any time while this
Convertible Note is outstanding and unexpired shall pay a dividend in its
Capital Shares, or make any other distribution of its Capital Shares, then the
Conversion Price shall be adjusted, as of the date the Company shall take a
record of the holders of its Capital Shares for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the date of
such payment or other distribution), to that price determined by multiplying the
Conversion Price in effect immediately prior to such payment or other
distribution by a fraction:
(i) the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend or
distribution, and
(ii) the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or
distribution.
The provisions of this subsection (c) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a) or (b).
(d) Issuance of Additional Capital Shares. If the Company at any
time while this Convertible Note remains outstanding and unexpired shall issue
any additional Capital Shares (the "Additional Capital Shares"), otherwise than
as provided in the foregoing subsections (a) through (c) above, at a price per
share less, or for other consideration lower, than the Conversion Price in
effect immediately prior to such issuance, or without consideration, then upon
such issuance the Conversion Price shall be reduced to that price determined by
multiplying the Conversion Price in effect immediately prior to such event by a
fraction:
(i) the numerator of which shall be the number of Outstanding
Capital Shares immediately prior to the issuance of the Additional Capital
Shares plus the number of Capital Shares which the aggregate consideration
for the total number of such Additional Capital Shares so issued would
purchase at the then effective Conversion Price, and;
(ii) the denominator of which shall be the number of
Outstanding Capital Shares immediately after the issuance of the
Additional Capital Shares plus the number of Additional Capital Shares so
issued.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or
(c). No adjustment of a Conversion Price shall be made under this subsection
(d) upon the issuance of any Additional Capital Shares which are issued
pursuant to the exercise of any warrants, options or other subscription or
purchase rights or pursuant to the exercise of any conversion or exchange
rights in any convertible or exchangeable securities if any such adjustments
shall previously have been made upon the issuance of any such warrants,
options or other rights or upon the issuance of any convertible or
exchangeable securities (or upon the issuance of any warrants, options or any
rights therefor) pursuant to subsection (e) or (f).
(e) Issuance of Warrants, Options or Other Rights. If the Company at
any time while this Convertible Note remains outstanding and unexpired shall
issue any warrants, options (other than options under the Company's stock option
plan) or other rights to subscribe for or purchase any Additional Capital Shares
and the price per share for which Additional Capital Shares may at any time
thereafter be issuable pursuant to such warrants, options or other rights shall
be less than the Conversion Price in effect immediately prior to such issuance,
then upon such issuance the Conversion Price shall be adjusted as provided in
subsection (d) hereof on the basis that:
(i) the maximum number of Additional Capital Shares issuable
pursuant to all such warrants, options or other rights shall be deemed to
have been issued as of the date of actual issuance of such warrants,
options or other rights, and
(ii) the aggregate consideration for such maximum number of
Additional Capital Shares issuable pursuant to such warrants, options or
other rights, shall be deemed to be the consideration received by the
Company for the issuance of such warrants, options, or other rights plus
the minimum consideration to be received by the Company for the issuance
of Additional Capital Shares pursuant to such warrants, options, or other
rights.
(f) Issuance of Convertible or Exchangeable Securities. If the
Company at any time while this Convertible Note remains outstanding and
unexpired shall issue any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Conversion Price
in effect immediately prior to such issuance, then upon such issuance the
Conversion Price shall be adjusted as provided in subsection (d) hereof on the
basis that:
(i) the maximum number of Additional Capital Shares necessary
to effect the conversion or exchange of all such convertible or
exchangeable securities shall be deemed to have been issued as of the date
of issuance of such convertible or exchangeable securities, and
(ii) the aggregate consideration for such maximum number of
Additional Capital Shares shall be deemed to be the consideration received
by the Company for the issuance of such convertible or exchangeable
securities plus the minimum consideration received by the Company for the
issuance of such Additional Capital Shares pursuant to the terms of such
convertible or exchangeable securities.
No adjustment of the Conversion Price shall be made under this subsection (f)
upon the issuance of any convertible or exchangeable securities which are
issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants, options or
other rights pursuant to subsection (e) hereof.
(g) Adjustment of Number of Shares. Upon each adjustment of the
Conversion Price pursuant to any provisions of this Section 3.5, the number of
Note Conversion Shares issuable hereunder at the option of the Holder shall be
calculated, to the next higher whole share, to be the quotient obtained by
dividing (i) the then outstanding principal amount of this Convertible Note by
(ii) the Conversion Price immediately after such adjustment.
(h) Liquidating Dividends, Etc. If the Company at any time while
this Convertible Note is outstanding and unexpired makes a distribution of its
assets or evidences of indebtedness to the holders of its Capital Shares as a
dividend in liquidation or by way of return of capital or other than as a
dividend payable out of earnings or surplus legally available for dividends
under applicable law or any distribution to such holders made in respect of the
sale of all or substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (a) through (g)),
provided, in each case, that such distribution described in this subsection (h)
does not constitute an Event of Default hereunder, the Holder shall be entitled
to receive upon the conversion of this Convertible Note, in addition to the Note
Conversion Shares receivable upon such exercise, and without payment of any
consideration other than the Conversion Price, an amount in cash equal to the
value of such distribution per Capital Share multiplied by the number of Note
Conversion Shares which, on the record date for such distribution, are issuable
upon Conversion of this Convertible Note (with no further adjustment being made
following any event which causes a subsequent adjustment in the number of Note
Conversion Shares issuable upon the exercise hereof), and an appropriate
provision therefor shall be made a part of any such distribution. The value of a
distribution which is paid in other than cash shall be determined in good faith
by the Board of Directors.
(i) Other Provisions Applicable to Adjustments Under this Section.
The following provisions will be applicable to the making of adjustments in a
Conversion Price hereinabove provided in this Section 3.5:
(i) Computation of Consideration. To the extent that any
Additional Capital Shares or any convertible or exchangeable securities or
any warrants, options or other rights to subscribe for or purchase any
Additional Capital Shares or any convertible or exchangeable securities
shall be issued for a cash consideration, the consideration received by
the Company therefor shall be deemed to be the amount of the cash received
by the Company therefor, or, if such Additional Capital Shares or
convertible or exchangeable securities are offered by the Company for
subscription, the subscription price, or, if such Additional Capital
Shares or convertible or exchangeable securities are sold to underwriters
or dealers for public offering without a subscription offering, or through
underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in any such case excluding
any amounts paid or incurred by the Company for and in the underwriting
of, or otherwise in connection with the issue thereof. To the extent that
such issuance shall be for a consideration other than cash, then, the
amount of such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith by
the Company's Board of Directors. The consideration for any Additional
Capital Shares issuable pursuant to any warrants, options or other rights
to subscribe for or purchase the same shall be the consideration received
by the Company for issuing such warrants, options or other rights, plus
the additional consideration payable to the Company upon the exercise of
such warrants, options or other rights. The consideration for any
Additional Capital Shares issuable pursuant to the terms of any
convertible or exchangeable securities shall be the consideration paid or
payable to the Company in respect of the subscription for or purchase of
such convertible or exchangeable securities, plus the additional
consideration, if any, payable to the Company upon the exercise of the
right of conversion or exchange in such convertible or exchangeable
securities. In case of the issuance at any time of any Additional Capital
Shares or convertible or exchangeable securities in payment or
satisfaction of any dividend upon any class of stock preferred as to
dividends in a fixed amount, the Company shall be deemed to have received
for such Additional Capital Shares or convertible or exchangeable
securities a consideration equal to the amount of such dividend so paid or
satisfied.
(ii) Readjustment of Conversion Price. Upon the expiration of
the right to convert or exchange any convertible or exchangeable
securities, or upon the expiration of any rights, options or warrants, the
issuance of which convertible or exchangeable securities, rights, options
or warrants effected an adjustment in a Conversion Price, if any such
convertible or exchangeable securities shall not have been converted or
exchanged, or if any such rights, options or warrants shall not have been
exercised, the number of Capital Shares deemed to be issued and
Outstanding by reason of the fact that they were issuable upon conversion
or exchange of any such convertible or exchangeable securities or upon
exercise of any such rights, options, or warrants shall no longer be
computed as set forth above, and such Conversion Price shall forthwith be
readjusted and thereafter be the price which it would have been (but
reflecting any other adjustments in the Conversion Price made pursuant to
the provisions of this Section 3.5 after the issuance of such convertible
or exchangeable securities, rights, options or warrants) had the
adjustment of the Conversion Price made upon the issuance or sale of such
convertible or exchangeable securities or issuance of rights, options or
warrants been made on the basis of the issuance only of the number of
Additional Capital Shares actually issued upon conversion or exchange of
such convertible or exchangeable securities, or upon the exercise of such
rights, options or warrants, and thereupon only the number of Additional
Capital Shares actually so issued, if any, shall be deemed to have been
issued and only the consideration actually received by the Company
(computed as set forth in sub-subsection (i) hereof) shall be deemed to
have been received by the Company. If the purchase price provided for in
any rights, options or warrants, or the additional consideration (if any)
payable upon the conversion or exchange of any convertible or exchangeable
securities, or the rate at which any convertible or exchangeable
securities are convertible into or exchangeable for Capital Shares changes
at any time (other than under or by reason of provisions designed to
protect against dilution), the Conversion Price in effect at the time of
the change shall be adjusted to the Conversion Price that would have been
in effect at such time had such rights, options, warrants or convertible
or exchangeable securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold.
(iii) Other Action Affecting Capital Shares. In case after the
date hereof the Company shall take any action affecting the number of
Outstanding Capital Shares, other than an action described in any of the
foregoing subsections (a) through (h) hereof, inclusive, which in the
opinion of the Company's Board of Directors would have a Materially
Adverse Effect upon the rights of the Holder at the time of a conversion
of this Convertible Note, the Conversion Price shall be adjusted in such
manner and at such time as the Board or Directors on the advice of the
Company's independent public accountants may in good faith determine to be
equitable in the circumstances.
SECTION 1.6. Notice of Adjustments. Whenever the Conversion Price under
the terms of this Convertible Note shall be adjusted pursuant to Section 3.5
hereof, the Company shall promptly issue a certificate signed by its President
or a Vice President and by its Treasurer or Assistant Treasurer or its Secretary
or Assistant Secretary, setting forth in reasonable detail (i) the event
requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by
which such adjustment was calculated (including a description of the basis on
which the Company's Board of Directors made any determination hereunder), and
(iv) the Conversion Price and number of Note Conversion Shares purchasable at
that Conversion Price after giving effect to such adjustment. The Company shall
promptly cause copies of such certificate to be delivered by facsimile and
courier to the Holder.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1. Status of Convertible Note.
(a) Subject to Section 4.2 below, this Convertible Note is a direct,
general and unconditional obligation of the Company, and constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other similar laws of general applicability relating to or affecting creditors'
rights and to general principals of equity. To secure the obligations of the
Company under the Convertible Notes, on the Subscription Date the Company
granted the Holder a security interest in the Collateral and the Pledges. On the
Subscription Date, the Collateral had a Book Value of [Euro] 5,942,211.34, as
set forth on Attachment A to the Security Agreement. To perfect the security
interest in the Collateral, on the Subscription Date the Company caused
FiberCore Jena to execute and deliver to the Holder, an executed original copy
of the Security Agreement. To perfect the security interest in the Pledges, on
the Subscription Date the Company executed and delivered to the Holder an
executed original copy of the Pledge Agreement.
(b) The Company agrees that it will not, without the prior written
consent of the Holder, take any action, nor fail to take any action which would
in any manner adversely affect the rights of the Holder pursuant to this
Convertible Note or the value of the Collateral or the Pledges or subject the
Holder to any liability. If the Company fails to pay the entire principal amount
evidenced by this Convertible Note and all accrued interest when it becomes due,
the Holder will have all the rights with regard to the Collateral and the
Pledges granted by the laws in effect in the Federal Republic of Germany to a
creditor upon default by its debtor. Without limiting the above, if the Company
fails to pay the entire principal amount evidenced by this Convertible Note and
all accrued interest when it becomes due, the Holder may, by notice to the
Company accompanied by an agreement by the Holder to return any principal paid
with regard to this Convertible Note if it determined that that principal is not
subject to offset as provided below, obtain the Collateral and assert its rights
under the Pledge Agreement in satisfaction of the obligations created by this
Convertible Note. The Company waives, to the full extent permitted by law, any
right to object to the retention of the Collateral by the Holder and the
assertion by the Holder of its rights under the Pledge Agreement, and to require
the Holder to dispose of the Collateral and the Pledges.
SECTION 1.2. Restrictions on Transfer. This Convertible Note may only be
owned by Crescent International or an Affiliate of Crescent International. This
Convertible Note, and any Note Conversion Shares issued according to the terms
hereof, have not been and will not be registered under the Securities Act. This
Convertible Note and any Note Conversion Shares may not be offered or sold,
directly or indirectly, except pursuant to registration under the Securities
Act, an available exemption therefrom, or pursuant to Regulation S.
ARTICLE 5
COVENANTS
The Company covenants and agrees that so long as this Convertible Note
shall be outstanding:
SECTION 5.1. Payment of Convertible Note. The Company will punctually,
according to the terms hereof, (a) pay or cause to be paid the principal of this
Convertible Note, (b) pay or cause to be paid interest on this Convertible Note
at a fixed rate of 8.0% per annum payable in quarterly installments on March 1,
June 1, September 1 and December 1 of each calendar year, beginning on September
1, 2000, on the outstanding amount of this Convertible Note; provided however
that, the Company shall be required to pay such interest only if the Company
fails for a period of ten (10) Trading Days to fulfill its obligation under
Section 3.3 hereof to deliver to the Holder certificates representing the Note
Conversion Shares upon conversion by the Holder in accordance with Article 3
hereof, and (c) issue Note Conversion Shares upon conversion.
SECTION 5.2. Notice of Default. If any one or more events occur which
constitute or which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default (as hereinafter defined) or if the Holder
shall demand payment or take any other action permitted upon the occurrence of
any such Event of Default, the Company will forthwith give written notice to the
Holder, specifying the nature and status of the Event of Default or other event
or of such demand or action, as the case may be.
SECTION 5.3. Sufficient Number of Authorized Common Stock. So long as this
Convertible Note shall be outstanding, the Company shall at all times have
authorized and reserved for issuance, free from preemptive rights, a sufficient
number of Common Stock to yield a number of Note Conversion Shares sufficient to
satisfy the conversion rights of the Holder pursuant to the terms and conditions
hereof.
SECTION 5.4. Insurance. The Company will carry and maintain in full force
and effect at all times insurance with insurers the Company reasonably believes
to be financially sound and reputable in such amounts as is customary in the
respective industries of the Company.
SECTION 5.5. Payment of Obligations. The Company will pay and discharge at
or before maturity, all its respective material obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same;
SECTION 5.6. Compliance with Laws. The Company will comply in all material
respects with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.7. Inspection of Property, Books and Records. The Company will
keep proper books of record and account in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business and
activities and will permit representatives of the Holder at the Holder's expense
to visit and inspect any of its respective properties, to examine and make
abstracts from any of its respective books and records and to discuss its
respective affairs, finances and accounts with its respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default. "Event of Default" wherever used herein
means any one of the following events:
(a) default in the issuance of Note Conversion Shares due upon conversion;
(b) default in the due and punctual payment of the principal of, or any
other amount owing in respect of, this Convertible Note when and as the same
shall become due and payable, and continuance of such default for a period of
thirty (30) calendar days; or
(c) substantial failure in the performance or observance of Section 5.5 of
this Convertible Note and the continuance of such default for a period of thirty
(30) calendar days; or
(d) default in the performance or observance of any covenant or agreement
of the Company in this Convertible Note (other than a covenant or agreement a
default in the performance of which is specifically provided for elsewhere in
this Section), the Security Agreement and the Pledge Agreement, and the
continuance of such default for a period of thirty (30) calendar days after
there has been given to the Company by the Holder a written notice specifying
such default and requiring it to be remedied; or
(e) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company under the Bankruptcy
Code or any other applicable Federal or state law, or appointing a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Company or of any substantial part of their respective properties, or ordering
the winding-up or liquidation of the Company's affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 30 calendar
days, except in case that such event does not result in a Material Adverse
Effect; or
(f) the institution by the Company or any Subsidiary of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other applicable Federal or state law, or the consent by
it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action, except in
case that such event does not result in a Material Adverse Effect; or
(g) except with respect to a conversion pursuant to Section 2.5, the
Company shall fail to issue and deliver the Note Conversion Shares within thirty
(30) Trading Days of its receipt of the original Convertible Note and the
original Conversion Notice in accordance with Section 3.2; or
(h) any principal of other indebtedness of the Company or any Subsidiary,
exceeding $500,000 is not repaid on its original or, as agreed to by the
applicable creditor, extended maturity date, or becomes due and payable by
reason of default before its original maturity date; or
(i) the Company or any Subsidiary is (a) unable to pay its debts as they
fall due, (b) stops, suspends, or threatens in writing to stop or suspend
payment of all or any material part of its debts (other than debts contested in
good faith by appropriate proceedings), (c) begins negotiations or takes any
proceeding or other step with a view to readjustment, rescheduling or deferral
of all of its indebtedness (or any material part thereof) that it will or might
otherwise be unable to pay when due, (d) seeks the appointment of a statutory
manager or proposes in writing or makes a general assignment or an arrangement
or composition with or for the benefit of its creditors or any group or class
thereof or files a petition for suspension of payments or other relief of
debtors for bankruptcy or is declared bankrupt or a moratorium or statutory
management is agreed or declared in respect of or affecting all or any material
part of the indebtedness of the Company or any of its wholly owned subsidiaries,
or (e) the Company ceases or threatens in writing to cease to carry on all or
any material part of the business carried on by the Company and its Subsidiaries
taken as a whole and as a result of such cessation or threat of cessation, the
Company will not be able to perform or comply with its payment obligations under
this Convertible Note, except in case that any such event does not result in a
Material Adverse Effect; or
(j) on or after the date hereof, a final judgment or final judgments for
the payment of money shall have been entered by any court or courts of competent
jurisdiction against the Company and remains undischarged for a period (during
which execution shall be effectively stayed) of 30 Trading Days, provided that
the aggregate amount of all such judgments at any time outstanding (to the
extent not paid or to be paid, as evidenced by a written communication to that
effect from the applicable insurer, by insurance) exceeds $500,000; or
(k) it becomes unlawful for the Company to perform or comply with its
obligations under this Convertible Note, the Securities Purchase Agreement, the
Registration Rights Agreement, the Security Agreement or the Pledge Agreement.
SECTION 6.2. Acceleration of Maturity: Rescission and Annulment. If an
Event of Default occurs and is continuing, then and in every such case any
Holder may declare the principal of this Convertible Note to be due and payable
immediately, by a notice in writing to the Company, and upon any such
declaration the principal of, and interest on, this Convertible Note shall
become immediately due and payable.
SECTION 6.3. Remedies Not Waived. No course of dealing between the Company
and the Holder or any delay in exercising any rights hereunder shall operate as
a waiver by the Holder.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Register. (a)The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this
Convertible Note. Upon any transfer of this Convertible Note in accordance with
Article 2 and 4 hereof, the Company shall register such transfer on the
Convertible Note register.
(b) The Company may deem the person in whose name this Convertible
Note shall be registered upon the registry books of the Company to be, and may
treat it as, the absolute owner of this Convertible Note (whether or not this
Convertible Note shall be overdue) for the purpose of receiving payment of
principal of this Convertible Note, for the conversion of this Convertible Note
and for all other purposes, and the Company shall not be affected by any notice
to the contrary. All such payments and such conversions shall be valid and
effective to satisfy and discharge the liability upon this Convertible Note to
the extent of the sum or sums so paid or the conversion or conversions so made.
SECTION 7.2. Withholding. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Convertible Note.
SECTION 7.3. Governing Law. THIS CONVERTIBLE NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES THEREOF). WITH RESPECT TO ANY
SUIT, ACTION OR PROCEEDINGS RELATING TO THIS CONVERTIBLE NOTE, THE COMPANY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK AND HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SUBJECT TO APPLICABLE LAW, THE
COMPANY AGREES THAT FINAL JUDGMENT AGAINST IT IN ANY LEGAL ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS CONVERTIBLE NOTE SHALL BE CONCLUSIVE AND MAY
BE ENFORCED IN ANY OTHER JURISDICTION WITHIN OR OUTSIDE THE UNITED STATES BY
SUIT ON THE JUDGMENT, A CERTIFIED COPY OF WHICH JUDGMENT SHALL BE CONCLUSIVE
EVIDENCE THEREOF AND THE AMOUNT OF ITS INDEBTEDNESS, OR BY SUCH OTHER MEANS
PROVIDED BY LAW.
SECTION 7.4. Headings. The headings of the Articles and Sections of this
Convertible Note are inserted for convenience only and do not constitute a part
of this Convertible Note.
IN WITNESS WHEREOF, the Company has caused this Convertible Note to be
signed by its duly authorized officer under its corporate seal, attested by its
duly authorized officer, on the date of this Convertible Note.
FIBERCORE, INC.
By:_________________________________
Name:
Title:
Attest
By:____________________________
Name:
Title: Assistant Secretary
[Corporate Seal]
ANNEX I TO THE CONVERTIBLE NOTE
FORM OF CONVERSION NOTICE
TO _____________________:
The undersigned owner of the convertible note, dated [ ], 2000, issued by
FiberCore, Inc. (the "Convertible Note") hereby irrevocably exercises the option
to convert $[ ] of the principal amount of the Convertible Note into Common
Stock, par value $0.001 per share, of FiberCore, Inc. (the "Note Conversion
Shares"), in accordance with the terms of the Convertible Note. The applicable
Conversion Price is US$[ ] and the number of Note Conversion Shares issuable
upon conversion is [ ].
The undersigned directs that the Note Conversion Shares issuable and
certificates therefor (to the extent that certificates evidencing Common Stock
are then being issued by FiberCore, Inc.) deliverable upon the conversion,
together with any check in payment for fractional Note Conversion Shares, be
issued in the name of and delivered, if appropriate, to the undersigned unless a
different name has been indicated below.
Dated:
Signature:
Fill in for registration of Note Conversion Shares:
Please print name and address:
(including zip code number)