SECURITY AGREEMENT
Between
FIBERCORE JENA GMBH (hereinafter "FC")
a corporation organized and existing under the laws of the Federal Republic of
Germany with its corporate seat in Jena/Germany having its office at Xxxxxxxxxxx
Xxxx(xxxx)x 00, 00000 Xxxx/Xxxxxxx
and
CRESCENT INTERNATIONAL LTD. (hereinafter "CI"),
an entity organized and existing under the laws of Bermuda,
having its offices at Xxxxxxxxx Xxxxx, 0 Xxxxxx Xxxxxx, Xxxxxxxx X00, Xxxxxxx
This Security Agreement (this "Agreement") is entered into as of the *** day of
June, 2000, by and between FC and CI.
Whereas the parties are entering into this Agreement in connection with that
certain Securities Purchase Agreement, dated June 8, 2000 (the "Securities
Purchase Agreement") between CI and FiberCore, Inc., a Nevada corporation and
the parent company and sole shareholder of FC, covering, inter alia, convertible
notes in the aggregate nominal amount of up to $7.5 million US dollars, issued
by FiberCore, Inc. in favor of CI (the "Convertible Notes") which shall be
secured by the assets owned by FC listed on Attachment A hereto (the
"Collateral") (all capitalized terms used and not otherwise defined herein shall
have their respective meanings set forth in the Securities Purchase Agreement).
NOW, THEREFORE the parties agree as follows:
1. FC herewith grants to CI a security interest in the Collateral,
according to the terms and conditions of this Agreement , for the
purpose of securing all actual, contingent, present and future claims,
including damage claims, of CI against FiberCore, Inc. with respect to
the fulfillment - or any consequence of non-fulfillment - of all of
FiberCore, Inc.'s obligations arising out of or with respect to the
Convertible Notes (as amended, supplemented or novated) (the "Secured
Obligations").
2. In order to secure the Secured Obligations, FC transfers to CI
ownership of the Collateral for security purposes
(Sicherungsubereignung). All assets comprising part of the Collateral
are tangible and non-fixed assets. CI hereby accepts such transfer of
ownership of the Collateral for security purposes.
All assets comprising the Collateral are located at FC's plant in
Xxxxxxxxxxx Xxxx(xxxx)x 00, 00000 Xxxx/Xxxxxxx, except the "CVD 4 -
Anlage", equipment no. 4273000, which is located at the R & D Department of
FC in Xxxx-Xxx(xxxx)-Xxxxxxxxx 00, 00000 Xxxx/Xxxxxxx . The assets are
identified on Attachment A by the name or description of each item and its
listed equipment number(s), which are marked on each respective item.
Pursuant to an agreement dated October 25, 1996 , as amended, supplemented
or novated, FC has in connection with a capital investment loan from AMP to
FiberCore Inc. in the amount of US$ 3,000,000, granted to Tyco Electronics
Corporation, formerly AMP Incorporated ("AMP"), a security interest in its
current and future assets, up to 125% of the principal amount of the loan
(the "AMP Security Interest"). By a letter dated June 6, 2000, which is
attached to this Agreement as Attachment B, AMP has released the AMP
Security Interest.
3. The transfer of possession of the Collateral shall be effected in such a
way that FC shall retain possession of the Collateral on behalf of CI, in
custody at no cost or charge therefor. In the event any third party obtains
actual possession of the Collateral or any part thereof, FC shall use
commercially reasonable efforts to repossess any Collateral held by such
third party, and hereby assigns to CI its present and future claims for
repossession. CI hereby accepts such assignment.
4.
a) FC is revocably entitled to dispose of the Collateral provided that
any such disposition takes place in the due course of business of FC
and pursuant to an arm's length transaction with a party unrelated to
FC.
b) As long as no Event of Default (as such term is defined in the
Convertible Notes) has occurred, FC is entitled to use the Collateral
in the due course of its business. FC is required to appropriately
maintain the Collateral in order to keep it in good and usable
condition and function. All costs and efforts relating to the
maintenance of the Collateral shall be borne by FC.
c) FC shall adequately insure the assets at its own expense, and shall
provide evidence of such insurance to CI on the Closing Date and upon
reasonable demand by CI.
d) FC is required to substitute any items of the Collateral which are,
for whatever reason, damaged or destroyed, disposed of pursuant to
Section 4(a) above, or replaced in the ordinary course of business. In
such event, FC will transfer to CI the ownership for security purposes
of the assets comprising the substituted Collateral (the "Substituted
Assets"),according to the terms and conditions of this Agreement. The
parties are aware that a transfer in accordance with the preceding
sentences constitutes a claim by CI to transfer of ownership for
security purposes with respect to such Substituted Assets, but such
transfer of ownership is not legally effected by this Agreement. FC
and CI agree that upon the substitution of any Collateral, FC and CI
shall amend Attachment A to this Agreement to include the Substituted
Assets in the Collateral subject to this Agreement.
5. The parties are aware that the lessor of the premises and facilities of
FC located at FC's principal address first set forth above holds a
statutory prior lien on the Collateral, to the extent of its claims
arising from the lease agreements relating to such premises and
facilities. The payment obligations of FC under such lease agreements
amount to Euro27,500 per month, and no payments due under such lease
agreements are currently in arrears. Upon demand of CI, FC will on the
Closing Date and from time to time provide evidence to CI that it has
settled all current liabilities arising out of the lease agreements
relating to said premises and facilities.
Furthermore, in the event of any breach by FC of its obligations arising
under said lease agreements (a "Breach"), which Breach might entitle the
lessor to enforce its statutory lien, CI may, at its discretion, on behalf
of and for the account of FC settle any liabilities or claims arising out
of such Breach,. In such event CI may assert a claim for immediate
reimbursement by FC for any costs and expenses incurred with respect to any
actions taken by it in accordance with the preceding sentence, and the
security interest in the Collateral under this Agreement shall be extended
to any amounts for which CI asserts a reimbursement claim. If any such
Breach occurs, FC will immediately inform CI thereof in writing.
6. FC represents and warrants to CI and its successors and assigns, such
representations and warranties being an independent guarantee
(selbstandiges Garantieversprechen), that as of the Closing Date:
(a) Except to the extent that any part of the Collateral is a fixture of
the land on which such Collateral is located (unless such part is a
Scheinbestandteile within the meaning of sec. 95 para. 1 of the German
Civil Code) FC holds title to and may freely dispose of any of the
Collateral, and of any of the claims assigned hereunder (the
"Claims"), and is the owner of the Collateral and the Claims, free and
clear of all encumbrances and competing security interests of any
third parties whatsoever.
(b) The Collateral and the Claims have not previously been transferred to
any third party.
(c) Except as provided in the next paragraph, FC has full power, authority
and legal right to execute and perform its obligations under this
Agreement, and to transfer and grant a security interest over the
Collateral and the Claims pursuant to this Agreement. The execution
and performance of this Agreement and the transfer of the Collateral
and the Claims hereunder have been duly authorized by all necessary
corporate or other action and do not contravene any law, rule or
regulation, any provision of FC's organizational and governing
documents, any judgment, decree or order of any tribunal, or any
agreement or instrument to which FC is a party or by which it or any
of its property is bound or affected, or constitute a default
thereunder.
The parties to this Agreement are aware of the current negotiations
with the Kreditanstalt fur Wiederaufbau (KFW) and the Berliner Bank
as to the need to obtain KFW's and/or Berliner Bank's consent to this
Agreement.
7. CI may at its own expense, except for any inspection occurring prior to the
date hereof, which shall be at the expense of FiberCore, Inc., inspect the
Collateral within due business course from time to time, or may appoint an
agent to inspect the Collateral. FC will give any necessary information for
the purpose indicated and will grant CI or its agent access to any premises
and facilities in which the Collateral is located.
8. Subject to Section 5 above, upon the occurrence of an Event of Default
under the Convertible Notes or a breach by FC of any of its obligations
arising under this Agreement, CI may enter the premises, take possession of
the Collateral and enforce the Collateral
In any event, CI will enforce the Collateral only to the extent necessary
to settle any claims by CI against FiberCore, Inc. arising out of an Event
of Default.
CI agrees, subject to Section 8 below, to release proceeds from the
enforcement of the Collateral if and to the extent that this Agreement
constitutes an up-stream or cross-stream granting of collateral and that
the application of the proceeds toward the Secured Obligations would
otherwise lead to the situation that FC does not have sufficient assets to
maintain its stated share capital (Stammkapital) in accordance with
Sections 30 and 31 of the German Limited Liability Companies Act ("GmbHG"),
provided that for the purposes of the calculation of the amount to be
released (if any), FC's balance sheet shall be adjusted so that loans
provided to FC by any Affiliate of FiberCore, Inc., to the extent such
loans are subordinated or qualify under Section 32a GmbHG, shall be
disregarded.
In addition, in a situation where FC does not have sufficient assets to
maintain its capital (Stammkapital), FC shall realize, if and to the extent
legally permitted and, acting reasonably in respect of FC's businessany and
all of its assets that are shown in the balance sheet with a Book Value
(Buchwert) that is significantly lower than the market value of the asset
if such asset is not necessary for FC's business (betriebsnotwendig). FC
agrees to take any measures which are possible under applicable law
(including, without limitation, realization of set-off claims) to avoid
that the realization of the Collateral under this Agreement causes FC's net
assets to be reduced below the amount of its registered share capital which
is protected by sections 30 and 31 GmbHG.
CI may, in a commercially reasonable manner, enforce the Collateral through
a private sale, either in its own name or in the name of FC. Following such
sale, CI will distribute to FC any proceeds from such sale in excess of
amounts required to satisfy any claims against FiberCore, Inc. under the
Convertible Notes, as well as any costs relating to such sale . The costs
of any enforcement proceedings hereunder shall be borne by FC.
9. CI shall retransfer the ownership of the Collateral to FC upon
satisfaction of the condition precedent that FiberCore, Inc. has
irrevocably fulfilled all of its obligations arising out of the
Convertible Notes, including, but not limited to, the repayment of the
principal amount of the Convertible Notes and any interest or penalties
due thereon, and the delivery of shares of Common Stock of FiberCore,
Inc. in the event of a conversion of the Convertible Notes, in whole or
in part. FC shall accept such retransfer of ownership.
Upon (i) any complete or partial conversion of the Convertible Notes as
provided in Article 3 or section 2.5 thereof, or (ii) any complete or
partial redemption of the Convertible Notes as provided in Section 2.4 or
Section 2.5 thereof, CI shall release the Collateral (Sicherheitenfreigabe)
by an amount proportional to the principal amount of the Convertible Notes
so converted or redeemed; provided, however, that CI shall be required to
release the Collateral only if and to the extent the Effective Collateral
(as such term is defined in the Convertible Notes) on the applicable
Conversion Date or Redemption Date exceeds 120% of the outstanding
principal amount of the Convertible Notes following such conversion or
redemption. FiberCore, Inc., shall have the right to determine from which
assets the Collateral shall be released,shall give written notice to CI
describing such assets within fourteen (14) calendar days of such release
and shall amend Attachment A to this Agreement to reflect such release.
The Book Value of the Collateral shall be the aggregate Book Value as set
forth on Attachment A to this 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 July 1,
2000.
10. In the event of a change in ownership of the stock of FC or a change in
the legal structure of either of one of the parties hereto or of
FiberCore, Inc. this Agreement shall remain in full force and effect.
CI may transfer any security interests arising under this Agreement in
whole or in par to an Affiliate of CI, provided thatthe Convertible Notes
are simultaneously and proportionately assigned to such Affiliate , and
such Affiliate assumes the respective obligations of CI arising under this
Agreement. CI, or its Affiliate as its successor in accordance with the
preceding paragraph, shall not transfer any security interest arising under
this Agreement to any third party which is not an Affiliate of CI.
11. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with
charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such
party shall have specified most recently by written notice given in
accordance herewith. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall
be:
If to FC:
FiberCore Xxxx XxxX
Xxxxxxxxxxx Xxxx(xxxx)x 00
00000 Xxxx/Xxxxxxx
Attention: Xxxxxx Xxxx
Telephone: + (00) 0000 000 000
Facsimile: + (00) 0000 000 000
with a copy (which shall not constitute notice) to:
FiberCore, Inc.
000 Xxxxxxxxx Xx.
P. O. Xxx 000
Xxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxx/Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Cadwalader Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the CI:
Crescent International Ltd.
c/o GreenLight (Switzerland) SA
00, xx Xxxxx-Xxxxx
0000 Xxxxxx, Xxxxxxxx
Xxxxxxxxxxx
Attention: Xxx Xxxx/Maxi Brezzi
Telephone: x00 00 000 00 00
Facsimile: x00 00 000 00 00
with a copy (which shall not constitute notice) to:
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esq./Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Section by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the
other party hereto.
12. This Agreement shall be of no force or effect until such date on which (i)
FC has obtained the valid written consent of KfW and Berliner Bank AG to FC
entering into this Agreement, (ii) FC has delivered a copy of such valid
written consent to CI, and (iii) CI has acknowledged receipt of such valid
written consent.
13. If any provision of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, all other provisions of this
Agreement shall not be affected thereby. In such event , the parties hereto
shall be required to substitute the invalid provision with such valid
provision which best meets the commercial intentions of the parties. The
preceding shall also apply in the event this Agreement shall be found by a
court of competent jurisdiction to lack any necessary provisions.
This Agreement shall be governed by the laws of the Federal Republic of
Germany. Venue for any disputes arising between the parties out of or in
connection with this Agreement shall be Frankfurt am Main/Germany.
EXECUTION PAGES
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FiberCore Jena GmbH, Jena Crescent International Ltd.,
Bermuda
