<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1997.
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SPECTRAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 04-2729372
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
50 HALL ROAD
STURBRIDGE, MASSACHUSETTS 01566
(508) 347-2261
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RAYMOND E. JAEGER, PH.D.
CHAIRMAN OF THE BOARD
SPECTRAN CORPORATION
50 HALL ROAD
STURBRIDGE, MASSACHUSETTS 01566
(508) 347-2261
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
IRA S. NORDLICHT, ESQ. WILLIAM C. LANCE, ESQ.
HACKMYER & NORDLICHT PEABODY & BROWN
645 FIFTH AVENUE 101 FEDERAL STREET
NEW YORK, NEW YORK 10022 BOSTON, MASSACHUSETTS 02110
(212) 421-6500 (617) 345-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
==============================================================================================================
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value per
share........................... 2,070,000 $23.3125 $48,256,875 $14,624
==============================================================================================================
<FN>
(1) Includes 270,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457.
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 9, 1997
PROSPECTUS
1,800,000 SHARES
[SPECTRAN LOGO]
COMMON STOCK
Of the 1,800,000 shares of Common Stock offered hereby, 1,450,000 shares
are being sold by SpecTran Corporation ("SpecTran" or the "Company") and 350,000
shares are being sold by a Selling Stockholder. See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
the shares by the Selling Stockholder. The Common Stock is quoted on the Nasdaq
National Market under the symbol "SPTR." On January 7, 1997, the last reported
sale price for the Common Stock, as reported on the Nasdaq National Market, was
$23.375 per share. See "Price Range of Common Stock and Dividend Policy."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
===========================================================================================
<CAPTION>
PROCEEDS TO
UNDERWRITING PROCEEDS TO SELLING
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDER(2)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
- -------------------------------------------------------------------------------------------
Total(3)................... $ $ $ $
===========================================================================================
<FN>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $400,000 and payable by the Selling Stockholder estimated at $60,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to a maximum of 270,000 additional shares of Common Stock to cover
over-allotments, if any. If such option is exercised in full, the total
"Price to Public," "Underwriting Discount" and "Proceeds to Company" will be
$ , $ and $ , respectively. See "Underwriting."
</TABLE>
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in Boston, Massachusetts, on
or about , 1997.
TUCKER ANTHONY RAYMOND JAMES & ASSOCIATES, INC.
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
(Inside Front Cover - PAGE 2 Captions)
Corporate logo on the top of the page with the text immediately below
"Innovation in optical fiber"
1. Picture of glass preforms.
Text under the picture "Spectran Communication Fiber Technologies, Inc. -
Multimode optical fiber - Single-mode optical fiber"
2. Picture of computer peripheral, keyboard and mouse.
Text under the picture "Spectran Specialty Optics Company - Specialty fiber
and cable - Value-added components and assemblies"
3. Picture of four different types of cables.
Text under the picture "General Photonics, LLC a Spectran/General Cable
Joint Venture - Engineered fiber optic cable - Installation products"
<PAGE> 4
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN
ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS) MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE
10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
------------------------
The following trademarks and tradenames of SpecTran are mentioned in this
Prospectus: SPECTRAGUIDE[Registered Trademark], HCS[Registered Trademark]
(Hard Clad Silica), Avioptics[Trademark], Flightguide[Trademark],
Ultrasil[Trademark], PYROCOAT[Trademark], V-System[Trademark] and
V-Pin[Trademark].
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the financial statements and notes
thereto, appearing elsewhere in this Prospectus or incorporated herein by
reference. The discussion in this Prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 that involve risks and uncertainties. The
Company's actual results and the timing of certain events may differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
THE COMPANY
SpecTran Corporation ("SpecTran" or the "Company") develops, manufactures
and markets high quality optical fiber, optical fiber cables and value-added
optical fiber components and assemblies. The Company's products are used in a
broad range of applications, including local area networks ("LANs"), wide area
networks ("WANs"), customer premises systems, computer and peripheral
connections, intranets, the Internet, telephone systems, industrial process
controls, avionics and medical devices. The Company, either directly or through
its joint venture, sells its products to over 500 customers, including large
multi-national companies such as Lucent Technologies Inc. ("Lucent"), Corning
Incorporated ("Corning"), Siemens-Rolm, Nortel, Lockheed-Martin and Ericsson.
Rapid advances in information, communications and entertainment
technologies are creating growing demand for higher speed, greater bandwidth
communications, which the Company believes will be increasingly satisfied by
optical fiber-based communication systems. Optical fiber offers a number of
advantages over many other modes of communication, such as increased bandwidth,
lower transmission loss, immunity to electromagnetic and radio frequency
interference, greater security, smaller size and lower weight. An industry
expert forecasts that worldwide consumption of optical fiber and cable will grow
at a compound annual rate of approximately 18% in kilometers over the period of
1996-2001. The Company primarily focuses on niche markets which it believes will
grow at significantly faster rates than the overall optical fiber and cable
market during this period.
SpecTran operates through two wholly-owned subsidiaries, SpecTran
Communication Fiber Technologies, Inc. ("SpecTran Communication") and SpecTran
Specialty Optics Company ("SpecTran Specialty"), and through General Photonics,
LLC ("General Photonics"), a recently formed joint venture with General Cable
Corporation ("General Cable"), one of the largest manufacturers and suppliers in
the United States wire and cable industry. SpecTran Communication develops,
manufactures and markets multimode and single-mode optical fiber for data
communications and telecommunications applications. SpecTran Specialty, acquired
in February 1994, develops, manufactures and markets specialty multimode and
single-mode fiber and value-added fiber optic products for industrial,
military/aerospace, communication and medical applications. General Photonics
develops, manufactures and markets communications-grade fiber optic cable
primarily for the customer premises market in the United States, Canada and
Mexico.
SpecTran's strategy is to capitalize on its proprietary manufacturing
processes and technologies and license rights in order to strengthen its
position as a leading supplier to data communications and specialty markets and
to further penetrate targeted international telecommunications markets. The
Company is implementing this strategy by increasing its production capacity and
efficiency; pursuing alliances with other industry leaders; developing
higher-margin, value-added products; expanding international and domestic
distribution; leveraging its core technologies and acquiring complementary
products, technologies and businesses. The Company's research and development
activities are directed towards improving its manufacturing processes and
efficiencies for existing products as well as developing new products. The
Company intends to focus on market niches where it has established or believes
it can develop a leadership position, deliver technologically innovative
products and continue to capitalize on its vertically integrated infrastructure.
SpecTran, incorporated in 1981 in Delaware, has executive offices at 50
Hall Road, Sturbridge, Massachusetts 01566, and its telephone number is (508)
347-2261.
3
<PAGE> 6
- --------------------------------------------------------------------------------
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by Company.............. 1,450,000 shares
Common Stock Offered by the
Selling Stockholder........................ 350,000 shares
Common Stock to be Outstanding after
the Offering............................... 7,200,071 shares(1)
Use of Proceeds.............................. For the expansion of manufacturing capacity,
working capital and general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market Symbol................ SPTR
<FN>
- ---------------
(1) Based upon 5,400,071 shares of Common Stock of the Company issued and
outstanding on December 31, 1996. Excludes 650,703 shares of Common Stock
subject to options granted to employees and directors of the Company at a
weighted average exercise price of $9.64 per share. Includes 350,000 shares
of Common Stock to be outstanding upon exercise by the Selling Stockholder
of its warrant to purchase such shares at an exercise price of $2.00 per
share, which shares are being sold by the Selling Stockholder in the
offering.
</TABLE>
------------------------
Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option to purchase up to 270,000
shares of Common Stock and does not reflect the exercise after December 31, 1996
of options issued under the Company's Incentive Stock Option Plans.
- -------------------------------------------------------------------------------
4
<PAGE> 7
- --------------------------------------------------------------------------------
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following data should be read in conjunction with the Company's
consolidated financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included or
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- -----------------
1991 1992 1993 1994(1) 1995(2)(3) 1995 1996(3)
------- ------- ------- ------- ---------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA(3):
Net Sales............................... $16,255 $21,371 $25,578 $26,926 $38,581 $27,035 $44,915
Gross Profit............................ 6,096 8,734 9,615 7,623 13,061 9,094 16,294
Income (Loss) from Operations........... 3,218 4,852 5,368 (670) 565 293 4,064
Net Income (Loss)....................... 2,758 3,644 3,655 (487) 542 270 2,524
Net Income (Loss) per Share............. $ .50 $ .66 $ .67 $ (.09) $ .10 $ .05 $ .43
Weighted Average Number of Common Shares
Outstanding........................... 5,521 5,556 5,488 5,203 5,583 5,410 5,930
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) ADJUSTED(5)
------- ------------ -----------
<S> <C> <C> <C>
BALANCE SHEET DATA(3):
Working Capital.................................................. $16,168 29,789 $61,949
Total Assets..................................................... 46,561 57,846 90,006
Long-term Debt................................................... 12,000 24,000 24,000
Stockholders' Equity............................................. 27,163 27,361 59,521
</TABLE>
- ---------------
(1) Included in 1994 are results of SpecTran Specialty from its date of
acquisition on February 18, 1994.
(2) Included in 1995 are results of Applied Photonic Devices, Inc. from its date
of acquisition on May 23, 1995.
(3) See accompanying pro forma condensed consolidated balance sheet as of
September 30, 1996 and pro forma condensed consolidated statements of
operations for the year ended December 31, 1995 and the nine months ended
September 30, 1996 following the consolidated financial statements giving
effect to the formation of General Photonics as if that transaction had
occurred January 1, 1995 and the sale of $24.0 million of senior notes and
the restructuring of the Company's revolving credit facility, as if those
transactions had occurred September 30, 1996. See also "Recent
Developments -- Senior Debt Financing and Refinancing of Existing Bank
Loans" and "Recent Developments -- Joint Venture."
(4) Adjusted on a pro forma basis to give effect to the formation of General
Photonics and the senior debt financing and refinancing as shown in the
accompanying pro forma condensed consolidated financial statements.
(5) Adjusted to reflect (i) the events described under "Recent Developments --
Senior Debt Financing and Refinancing of Existing Bank Loans" and "Recent
Developments -- Joint Venture," (ii) the sale of 1,450,000 shares of Common
Stock offered by the Company hereby at an assumed public offering price of
$23.375 per share and the application of the estimated net proceeds to the
Company therefrom as described under "Use of Proceeds" and (iii) the
exercise by the Selling Stockholder of its warrant to purchase 350,000
shares of Common Stock at an exercise price of $2.00 per share.
- --------------------------------------------------------------------------------
5
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider the following risk factors inherent in and affecting
the business of the Company. The discussion in this Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve
risks and uncertainties. Such statements include market size, market growth
rates and market share estimates, about which the Company cannot provide any
assurances of accuracy. The Company's actual results and the timing of certain
events may differ materially from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."
COMPETITION. The markets for the Company's products are very competitive.
The Company's main competitors for its general applications optical fibers,
including both data communications and telecommunications, are its licensors,
Corning and Lucent, to whom the Company pays royalties and who have
substantially greater resources and operating experience than the Company. The
Company's main competitors for its specialty fiber and fiber products generally
have been smaller operations, but some of these competitors are part of
companies with greater resources and operating experience than the Company.
General Photonics' optical fiber cable products compete with products offered by
large companies with substantially greater resources and operating experience
than General Photonics or the Company. Access to the United States optical fiber
market is to some extent limited by patents covering fundamental optical fiber
technology. The Company believes that certain Corning patents, which may have
been relevant to the Company's single-mode fiber, including patents covered by a
non-exclusive license from Corning to the Company, have expired in many
countries (including the United States). The Company further believes that a
certain United States patent, covered by this non-exclusive license, with
relevance to the Company's multimode fiber, expires in 1999. In addition, the
Company believes that a certain Lucent patent licensed to the Company relating
to its multimode and single-mode fiber expires in 1997. The expiration of these
patents may permit other companies to enter the market without a Corning or
Lucent patent license. In addition, there can be no assurance that other
companies, foreign or domestic, will not be licensed by Corning or Lucent.
Competition could increase if new companies enter the market or if existing
competitors expand their product lines. An increase in competition could have a
material adverse effect on the Company's business, results of operations or
financial condition because of, among other things, price reductions and loss of
market share. There can be no assurance that the Company will be able to
maintain its competitive position. See "Business -- Competition."
PRICE COMPETITION AND CHANGING MARKET CONDITIONS. Price competition for
the Company's optical fiber is intense. In past periods in which excess supply
or production capacity has been available, the unit price of optical fiber has
declined and customers have been reluctant to enter into long-term supply
agreements. For example, in 1994 the Company's unit price, gross margins and net
income declined due, in part, to industry oversupply and to two large customers
supplying their needs internally. Industry experts have noted that demand for
optical fiber currently exceeds supply and the Company believes that demand will
continue to exceed supply in the near term. However, a number of the Company's
competitors have announced capacity increases which could become operational as
early as the latter part of 1997. There can be no assurance that market
conditions will not change in the future. A decline in the unit price of the
Company's optical fiber due to changes in the market could have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Business -- Competition" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
TECHNOLOGICAL ADVANCES; DEPENDENCE ON FUTURE PRODUCT DEVELOPMENT. The
fiber optic industry has been characterized by rapid technological advances and
improvements in manufacturing efficiencies. The Company's ability to operate
profitably depends, in large part, upon its timely access to, or development of,
technological advances and its ability to use those advances to improve existing
products, develop new products and manufacture those products efficiently. There
is no assurance that the Company will be successful in these endeavors. The
failure to introduce new or enhanced products on a timely and cost competitive
basis could have a material adverse effect on the Company's business, results of
operations or financial condition. See "Business -- Research and Development."
6
<PAGE> 9
COMPETING TECHNOLOGIES. The Company's fiber optic products compete
directly with other existing products which use competing technologies,
including copper wire, enhancements to the existing copper wire telephony
infrastructure and wireless communications. Improvements in existing alternative
approaches or the development and introduction of new competing approaches or
technologies to the Company's fiber optic products could have a material adverse
effect on the Company's business, operating results or financial condition.
MANAGEMENT OF GROWTH. The Company has experienced rapid growth,
particularly during 1995 and the first nine months of 1996. The future success
of the Company will depend upon, among other factors, the ability of the Company
to generate capital through operations, to recruit and retain highly skilled and
experienced management and technical personnel and to manage the effects of
growth on all aspects of its business, including research, development,
manufacturing, distribution, marketing, administration and finance. Any failure
by the Company to generate adequate capital, attract or retain necessary
personnel, conduct its expansion or manage growth effectively could have a
material adverse effect on the Company's business, results of operations or
financial condition.
CAPACITY EXPANSION. Currently, the Company is operating substantially at
full capacity at its principal fiber manufacturing plant in Sturbridge,
Massachusetts. The Company has recently begun a major capacity expansion at that
manufacturing facility, and SpecTran Specialty is expanding and moving into a
new facility. There can be no assurance that these expansions in manufacturing
capacity will be completed on time and/or on budget, that the Company will not
experience manufacturing delays or problems, a decrease in production yields and
other inefficiencies that can accompany the start-up of new manufacturing
facilities or that adequate equipment and personnel will be available to operate
these new manufacturing facilities. The completion of the Company's planned
expansion will require substantial funds. The Company anticipates that the
estimated net proceeds from this offering, borrowings and internally generated
cash flow will be adequate to fund the expansion. If adequate funds are not
available to complete the expansion, the Company may be required to scale-down
the expansion. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources." If the Company experiences significant delays or problems in
implementing its capacity expansions, such delays or problems could have a
material adverse effect on the Company's business, results of operations or
financial condition.
CORNING LICENSE, INCLUDING LIMITATIONS THEREUNDER. A significant portion
(approximately 43% in 1995 and 40% in the first nine months of 1996) of the
optical fiber manufactured and sold by the Company is subject to its license
from Corning which contains certain annual quantity limitations. Sales made
directly or indirectly to certain customers such as Corning, Lucent and the
United States Government are permitted without limitation. The quantities that
can be manufactured under the license increase annually through the year 2000.
The Company believes, however, that after expiration of a certain Corning patent
in 1999, it no longer will need this license to manufacture any of its current
multimode products, and, thus, no longer will be subject to these quantity
limitations. The Company believes that manufacturing and sale of its single-mode
fiber is not subject to the Corning license. Corning has the right to terminate
the license in the event that more than 30% of the Company's voting stock is
acquired, directly or indirectly, by another manufacturing company. Such
termination could have a material adverse effect on the Company's business,
results of operations or financial condition. See "Business -- Proprietary
Rights."
MATERIAL SUPPLY AGREEMENTS. In 1996 the Company announced three-year
agreements with Corning and Lucent to supply multimode fiber valued at
approximately $28 million and $35 million in total revenues, respectively.
Should the Company not be able to perform under these agreements, such failure
would have a material adverse effect on its business, results of operations or
financial condition.
NEW JOINT VENTURE. In December 1996 the Company announced the formation of
General Photonics, a joint venture with General Cable for the manufacture of
optical cable. General Photonics will purchase its optical fiber from the
Company and General Cable will become the joint venture's principal sales outlet
for optical fiber cable for the customer premises market in the United States,
Canada and Mexico. The Company believes that it will be able to supply General
Photonics' needs for optical fiber products. The Company also believes, but
cannot assure, that General Cable will be able to sell General Photonics'
optical cable products
7
<PAGE> 10
and that General Photonics will become a major customer of the Company. In
addition, there are risks inherent in a joint venture relationship including,
among other things, whether the parties will be able to work together
successfully and share the same goals and strategies over a long period of time.
Failure of the General Photonics joint venture could have a material adverse
effect on the Company's business, results of operations or financial condition.
See "Business -- Customers and Marketing" and "Recent Developments -- Joint
Venture."
INTERNATIONAL SALES. For the fiscal years ended December 31, 1994 and 1995
and the nine month period ended September 30, 1996, export sales from the United
States accounted for approximately 11%, 22% and 25%, respectively, of the
Company's total revenues. The Company anticipates that international sales will
continue to account for a significant portion of sales. The Company intends to
continue to expand its export sales and to enter additional international
markets, which will require significant management attention and financial
resources. The Company's operating results are subject to the risks inherent in
international sales, including, but not limited to, regulatory requirements,
political and economic changes and disruptions, transportation delays and
potentially adverse tax consequences. In addition, fluctuations in exchange
rates may render the Company's products less competitive relative to local
product offerings, or could result in foreign exchange losses, depending upon
the currency in which the Company sells its products. Sales of certain products
may be restricted by foreign patents, and the Company may be required to seek
additional patent licenses and pay royalties. These factors could have a
material adverse effect on the Company's business, results of operations or
financial condition.
SIGNIFICANT DEPENDENCE UPON SINGLE OPTICAL FIBER MANUFACTURING
FACILITY. While some manufacturing of optical fiber is done at the Company's
facility in Avon, Connecticut, substantially all of its manufacturing of optical
fiber occurs at its plant in Sturbridge, Massachusetts. Although the Company
maintains a certain amount of business interruption insurance, any significant
disruption of operations at this facility, its other facilities or those of
General Photonics could have a material adverse effect on the Company's
business, results of operations or financial condition.
ENVIRONMENTAL REGULATIONS. The Company is subject to a number of federal,
state and local governmental regulations related to the use, storage, discharge
and disposal of toxic, volatile or otherwise hazardous chemicals used in its
business. Any failure to comply with present or future regulations could result
in fines being imposed on the Company and the suspension of production or a
cessation of operations. In addition, such regulations could restrict the
Company's ability to expand or could require the Company to acquire costly
equipment or to incur other significant expenses to comply with environmental
regulations or to clean up any discharges.
MERGERS AND ACQUISITIONS. The Company may in the future pursue
acquisitions of complementary product lines, technologies or businesses. Future
acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt and contingent liabilities and amortization
expenses related to goodwill and other intangible assets, which could have a
material adverse effect on the Company's business, results of operations or
financial condition. In addition, mergers and acquisitions involve numerous
risks, including difficulties in the assimilation of the operations,
technologies and products of the acquired companies, the diversion of
management's attention from other business concerns, the risk of entering
markets in which the Company has no or limited direct prior experience, the
seasonality of sales, the possible difficulty of operating companies in
different geographical locations with different corporate cultures, and the
potential loss of key employees of the acquired company. There are currently no
binding agreements or understandings with respect to any future acquisitions.
FLUCTUATIONS IN OPERATING RESULTS. The Company's revenues and operating
results may vary significantly from quarter to quarter as a result of a number
of factors, many of which are outside of management's control. These factors
include, among others, changes in demand for the Company's products, changes in
pricing policies by the Company and its competitors, manufacturing delays and
inefficiencies, the timing of the Company's and its competitors' planned
capacity increases, the entrance of new competitors, the timing and impact of
acquisitions and general economic conditions both domestically and
internationally.
8
<PAGE> 11
VOLATILITY OF THE COMPANY'S STOCK PRICE. The market price of the Company's
Common Stock has fluctuated significantly. The Company believes that factors
both related and unrelated to the performance of the Company have caused market
price volatility, and there can be no assurance that the market price of the
Company's Common Stock will not experience significant fluctuations in the
future. See "Price Range of Common Stock and Dividend Policy."
NO DIVIDENDS. The Company has paid no dividends since its inception. It
anticipates retaining future earnings for operations and does not anticipate
that dividends will be paid in the foreseeable future. See "Price Range of
Common Stock and Dividend Policy."
ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's Restated
Certificate of Incorporation and Amended and Restated By-Laws and Delaware law
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, control of the
Company. See "Description of Securities." In addition, Corning has the right to
terminate its patent license to the Company in the event that more than 30% of
the Company's voting stock is acquired, directly or indirectly, by another
manufacturing company. In connection with the recently formed General Photonics
joint venture, General Cable has agreed that it will not, without the Company's
consent, acquire any interest in the Company's securities for at least the life
of the venture. The Company has recently sold $24.0 million of senior secured
notes. The holders of the senior secured notes have the right to require the
Company to repay the senior secured notes if any person other than a member of
then current management or a group composed of all members of then current
management acquires more than 30% of the Company's voting stock prior to January
1, 2000 or 50% of the Company's voting stock thereafter. See "Recent
Developments -- Senior Debt Financing and Refinancing of Existing Bank Loans."
Some employee benefits may be accelerated upon the occurrence of certain change
in control events. Such arrangements, individually and in the aggregate, could
diminish the opportunities for a stockholder to participate in tender offers
(including tender offers at a price above the then current market price of the
Common Stock) and mergers and major corporate transactions and could limit the
price that certain investors might be willing to pay in the future for shares of
Common Stock.
9
<PAGE> 12
RECENT DEVELOPMENTS
Joint Venture. In December 1996, the Company formed General Photonics, a
50-50 joint venture between the Company and General Cable. General Cable, a
subsidiary of Wassall plc, is one of the leading manufacturers and suppliers in
the United States wire and cable industry, with 1995 sales approximating $1.1
billion. General Cable, through its subsidiary, General Cable Industries, Inc.
purchased certain assets of the Company's optical fiber cable subsidiary,
Applied Photonic Devices, Inc. ("APD"), for approximately $6.3 million (subject
to adjustment) and then contributed them to General Photonics for a 50% equity
interest. APD contributed its remaining assets to General Photonics in exchange
for the other 50% equity interest. General Photonics' primary mission is to
design, develop and manufacture optical fiber cable for the customer premises
market in the United States, Canada and Mexico. General Photonics will purchase
its optical fiber from SpecTran Communication. Fiber optic cable and other
products manufactured by General Photonics will be marketed primarily through
General Cable's direct sales force and sales representatives, with marketing,
technical sales support as well as some direct sales and customer support
provided by General Photonics personnel. Both the Company and General Cable have
agreed not to compete with General Photonics. In addition, General Cable has
agreed that it will not, without the Company's consent, acquire any interest in
the Company's securities for at least the life of the joint venture. General
Photonics will be accounted for as an unconsolidated subsidiary under the equity
method of accounting pursuant to which the Company will record its 50% interest
in the net operating results. Prior to the formation of General Photonics, APD's
results of operations, including net sales and expenses, were consolidated with
those of the Company. APD's operations had accounted for approximately 25% of
the Company's 1996 net sales. See "Pro Forma Condensed Consolidated Financial
Information."
Senior Debt Financing and Refinancing of Existing Bank Loans. In December
1996, the Company sold to a limited number of selected institutional investors
an aggregate principal amount of $24.0 million of senior secured notes (the
"Notes"), consisting of $16.0 million of 9.24% Series A Senior Secured Notes due
December 26, 2003 (the "Series A Notes") and $8.0 million of 9.39% Series B
Senior Secured Notes due December 26, 2004 (the "Series B Notes"). Interest on
the Notes is payable semi-annually, with five equal annual principal repayments
required beginning December 26, 1999 for the Series A Notes and December 26,
2000 for the Series B Notes. The Notes constitute senior secured debt of the
Company secured by a first priority security interest in substantially all of
the assets of the Company and all current and hereinafter created or acquired
subsidiaries, a pledge by the Company of the issued and outstanding stock of its
subsidiaries and mortgages on real estate owned by the Company's subsidiaries.
The Company's obligations are also guaranteed by the Company's subsidiaries and
rank on an equal basis with all other senior secured indebtedness of the
Company. The Company may repay the Notes at any time, subject to the payment of
an amount to compensate the noteholders for lost interest, except for a one-time
prepayment of up to $3.0 million of the Notes, ratably, which the Company may
make without any such payment on any annual anniversary date of the Notes
commencing December 26, 2000. The noteholders have the right to require
repayment of the notes if any person other than a member of then current
management or a group composed of all members of then current management
acquires more than 30% of the voting stock of the Company prior to January 1,
2000 or 50% thereafter. The Notes also provide for certain financial and
non-financial covenants usual for this type of transaction. The Company
concurrently used approximately $14 million from the sale of the Notes to repay
all outstanding indebtedness and restructured its existing $22.0 million of
total borrowing capacity with its principal bank, composed of a $14.5 million
revolving credit agreement and $7.5 million in equipment and real estate term
loans, into a $20.0 million revolving credit agreement, maturing December 1999,
with the same security interest in the Company's assets as the Notes. The
Company has the option to select from time to time the interest rate on the
revolving credit agreement at either the LIBOR rate plus 1.5% or Fleet Bank's
prime rate provided that, under certain circumstances, Fleet Bank may deem that
the LIBOR rate is not available. See "Pro Forma Condensed Consolidated Financial
Information."
Expansion of Manufacturing Facility. The Company has commenced the
expansion of its principal manufacturing facility for multimode and single-mode
fiber located in Sturbridge, Massachusetts. The expansion will increase the size
of the facility from approximately 50,000 square feet to approximately 100,000
square feet and is expected to result in an approximately 100% increase in
manufacturing capacity. This
10
<PAGE> 13
expansion is planned in stages (the first phase is expected to be completed in
the second half of 1997) and will be financed by the net proceeds of this
offering, cash flow from operations and borrowings. See "Business -- Properties"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Acquisition of New Facility by Specialty Fiber Operation. In October 1996,
SpecTran Specialty purchased a 42,000 square foot building located in Avon,
Connecticut. The Company expects that the facility will be ready to commence
manufacturing operations in approximately mid-1997. The Company will continue to
conduct its specialty fiber operations at its current facilities until
modifications to the new building are completed. The Company is expanding the
new facility to approximately 58,000 square feet which it anticipates will
result in an increase in SpecTran Specialty's manufacturing capacity of
approximately 50%. See "Business -- Properties."
Recent Supply Agreements. In 1996 the Company announced three year
agreements with Corning and Lucent to supply multimode fiber valued at
approximately $28 million and $35 million in total revenues, respectively. These
sales are not subject to the annual quantity limitations contained in the
Company's patent license from Corning.
11
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,450,000 shares of
Common Stock offered hereby by the Company are estimated to be $31.5 million
($37.4 million if the Underwriters' over-allotment option is exercised in full),
at an assumed public offering price of $23.375 per share and after deducting the
underwriting discount and estimated offering expenses payable by the Company.
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholder in this offering, but will receive $700,000 from the Selling
Stockholder's exercise of its warrant.
The Company intends to use the net proceeds from this offering for the
expansion of manufacturing capacity, working capital and general corporate
purposes. Pending such use, net proceeds will be invested in short-term,
high-grade interest-bearing securities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "SPTR." Set forth below is high and low bid information for the
Company's Common Stock for the periods indicated as reported on the Nasdaq
National Market:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter......................................... 6 1/8 4 5/8
Second Quarter........................................ 6 1/2 4 7/8
Third Quarter......................................... 6 3/4 5 1/2
Fourth Quarter........................................ 6 5
1996
First Quarter......................................... 8 1/4 5 1/4
Second Quarter........................................ 23 1/2 8
Third Quarter......................................... 19 3/4 12 1/2
Fourth Quarter........................................ 22 15 5/8
1997
First Quarter (through January 7, 1997)............... 22 5/8 20 3/8
</TABLE>
On January 7, 1997, the closing price of the Common Stock, as reported on
the Nasdaq National Market, was $23 3/8, and on that date there were 753 holders
of record of the Company's Common Stock.
The Company has not paid any cash dividends on the Common Stock and does
not intend to pay cash dividends in the foreseeable future. The Company expects
that earnings will be retained to finance the Company's business. Future
dividends, if any, will depend upon the Company's earnings, financial condition,
cash requirements, future prospects and other factors deemed relevant by the
Company's Board of Directors from time to time.
12
<PAGE> 15
CAPITALIZATION
<TABLE>
The following table sets forth the capitalization of the Company as of
September 30, 1996 on a pro forma basis to reflect the events described under
"Recent Developments -- Senior Debt Financing and Refinancing of Existing Bank
Loans" and "Recent Developments -- Joint Venture," and on a pro forma adjusted
basis to reflect (i) the sale of 1,450,000 shares of Common Stock offered by the
Company hereby at an assumed public offering price of $23.375 and the
application of the estimated net proceeds to the Company therefrom as described
under "Use of Proceeds," and (ii) the exercise by the Selling Stockholder of its
warrant to purchase 350,000 shares of Common Stock at an exercise price of $2.00
per share. This table should be read in conjunction with, and is qualified in
its entirety by, the Company's financial statements and the notes thereto
included elsewhere or incorporated by reference in this Prospectus.
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term Debt............................................. $12,000 $24,000 $24,000
------- ------- -------
Stockholders' Equity:
Common Stock, voting, $.10 par value; authorized
20,000,000 shares; 5,396,963 issued and outstanding
(actual and pro forma); 7,196,963 (pro forma adjusted)
(1)................................................... 539 539 719
Common Stock, non-voting, $.10 par value; authorized
250,000 shares; none issued........................... -- --
Paid-in Capital............................................ 26,745 26,745 58,725
Net Unrealized Gain on Marketable Securities............... 15 15 15
Retained Earnings (Deficit)................................ (136) 62 62
------- ------- -------
Total Stockholders' Equity....................... 27,163 27,361 59,521
------- ------- -------
Total Capitalization............................. $39,163 $57,846 $83,521
======= ======= =======
<FN>
- ---------------
(1) Excludes 643,811 shares of Common Stock subject to options granted to
employees and directors of the Company at a weighted average exercise price
of $9.45 per share.
</TABLE>
13
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and related
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere or incorporated by reference in
this Prospectus. The statements of operations data for the years ended December
31, 1993, 1994 and 1995, and the balance sheet data at December 31, 1994 and
1995 are derived from, and are qualified by reference to, the audited
consolidated financial statements and related notes thereto included elsewhere
in this Prospectus which have been audited by KPMG Peat Marwick LLP. The
statements of operations data for the years ended December 31, 1991 and 1992 and
the balance sheet data at December 31, 1991, 1992 and 1993 are derived from
audited consolidated financial statements not included herein. The statements of
operations data for the nine months ended September 30, 1995 and 1996 and the
balance sheet data at September 30, 1996 are derived from unaudited consolidated
financial statements that include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the information set forth therein. The results of operations for
the nine months ended September 30, 1996 or any other period are not necessarily
indicative of future results.
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ ------------------
1991 1992 1993 1994(1) 1995(2)(3) 1995 1996(3)
------- ------- ------- ------- ---------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA(3):
Net Sales................................... $16,255 $21,371 $25,578 $26,926 $38,581 $27,035 $44,915
Cost of Sales............................... 10,159 12,637 15,963 19,303 25,520 17,941 28,621
------- ------- ------- ------- ------- ------- -------
Gross Profit................................ 6,096 8,734 9,615 7,623 13,061 9,094 16,294
Selling and Administrative Expenses......... 2,525 3,253 3,293 6,319 9,669 6,698 9,909
Research and Development Cost............... 353 629 954 1,974 2,827 2,103 2,321
------- ------- ------- ------- ------- ------- -------
Income (Loss) from Operations............... 3,218 4,852 5,368 (670) 565 293 4,064
Interest Income............................. 245 244 246 327 328 240 166
Interest Expense............................ (81) (58) (37) (303) (626) (434) (528)
Other, Net.................................. 46 (26) 52 159 510 358 122
------- ------- ------- ------- ------- ------- -------
Other Income (Expense), Net................. 210 160 261 183 212 164 (240)
Income (Loss) before Income Taxes........... 3,428 5,012 5,629 (487) 777 457 3,824
Income Tax Expense.......................... 670 1,368 1,974 -- 235 187 1,300
------- ------- ------- ------- ------- ------- -------
Net Income (Loss)........................... $ 2,758 $ 3,644 $ 3,655 $ (487) $ 542 $ 270 $ 2,524
======= ======= ======= ======= ======= ======= =======
Net Income (Loss) per Share................. $ .50 $ .66 $ .67 $ (.09) $ .10 $ .05 $ .43
Weighted Average Number of Common Shares
Outstanding............................... 5,521 5,556 5,488 5,203 5,583 5,410 5,930
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
AS OF DECEMBER 31, --------------------------------------
--------------------------------------------------- PRO FORMA
1991 1992 1993 1994 1995 ACTUAL PRO FORMA(4) ADJUSTED(5)
------- ------- ------- ------- ------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(3):
Working Capital............... $ 7,780 $11,860 $11,853 $11,379 $15,959 $16,168 $29,789 $61,949
Total Assets.................. 19,810 22,848 26,712 31,362 40,365 46,561 57,846 90,006
Long-term Debt................ 708 367 300 5,240 10,000 12,000 24,000 24,000
Stockholders' Equity.......... 15,864 20,009 23,614 23,104 24,296 27,163 27,361 59,521
<FN>
- ---------------
(1) Included in 1994 are results of SpecTran Specialty from its date of
acquisition on February 18, 1994.
(2) Included in 1995 are results of APD from its date of acquisition on May 23,
1995.
(3) See accompanying pro forma condensed consolidated balance sheet at September
30, 1996 and pro forma condensed consolidated statements of operations for
the year ended December 31, 1995 and the nine months ended September 30,
1996, following the consolidated financial statements, giving effect to the
formation of General Photonics as if that transaction had occurred January
1, 1995 and the sale of $24.0 million of senior notes and the restructuring
of the Company's revolving credit facility as if those transactions had
occurred September 30, 1996. See also "Recent Developments -- Senior Debt
Financing and Refinancing of Existing Bank Loans" and "Recent Developments
-- Joint Venture."
(4) Adjusted on a pro forma basis to give effect to the formation of General
Photonics and the senior debt financing and refinancing as shown in the
accompanying pro forma condensed consolidated financial statements.
(5) Adjusted to reflect (i) the events described under "Recent Developments --
Senior Debt Financing and Refinancing of Existing Bank Loans" and "Recent
Developments -- Joint Venture," (ii) the sale of 1,450,000 shares of Common
Stock offered by the Company hereby at an assumed public offering price of
$23.375 per share and the application of the estimated net proceeds to the
Company therefrom as described under "Use of Proceeds" and (iii) the
exercise by the Selling Stockholder of its warrant to purchase 350,000
shares of Common Stock at an exercise price of $2.00 per share.
</TABLE>
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations section and other parts of this Prospectus contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve
risks and uncertainties. The Company's actual results and the timing of certain
events may differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in "Risk
Factors" and "Business."
OVERVIEW
Currently, SpecTran develops, manufactures, and markets high quality
optical fiber, optical fiber cables and value-added optical fiber components and
assemblies. Prior to 1993, the Company had a narrow customer base and was
focused on the production of multimode fiber for the domestic market. In 1993
the Company began to implement a strategic plan to diversify its products,
markets and customer base. As part of this plan, the Company reintroduced
single-mode fiber in 1993 and began marketing it internationally. In 1994 the
Company acquired Ensign-Bickford's specialty fiber operations (which later
became SpecTran Specialty), allowing the Company to become a world-wide leader
in fiber optic specialty applications. The Company entered the fiber optic cable
market in May 1995 by acquiring APD in order to participate more extensively in
the rapid growth of the data communications market, the principal end market of
multimode fiber. In December 1996 the Company formed General Photonics, a joint
venture with General Cable, to develop, manufacture and market fiber optic
cable.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales.................................. 62.4% 71.7% 66.1% 66.4% 63.7%
----- ----- ----- ----- -----
Gross Profit................................. 37.6% 28.3% 33.9% 33.6% 36.3%
Selling and Administrative Expenses............ 12.9% 23.5% 25.1% 24.7% 22.1%
Research and Development Cost.................. 3.7% 7.3% 7.3% 7.8% 5.2%
----- ----- ----- ----- -----
Income (Loss) from Operations.................. 21.0% (2.5)% 1.5% 1.1% 9.0%
Other Income (Expense), net.................... 1.0% .7% .5% .6% (.5)%
Income (Loss) before Income Taxes.............. 22.0% (1.8)% 2.0% 1.7% 8.5%
Income Tax Expense............................. 7.7% -- 0.6% 0.7% 2.9%
----- ----- ----- ----- -----
Net Income (Loss)......................... 14.3% (1.8)% 1.4% 1.0% 5.6%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Net Sales
Net sales increased $17.9 million, or 66.1%, from $27.0 million to $44.9
million for the nine months ended September 30, 1996. This increase was
primarily due to strong market demand for the Company's multimode and
single-mode communications fiber. The acquisition of APD in May 1995 also
contributed to the increase in net sales. Selling prices for multimode and
single-mode fiber have increased in 1996, largely due to the strong market
demand and price adjustments related to certain raw material cost increases in
the case of multimode fiber. SpecTran Communication represented approximately
half of the Company's net sales with the balance divided relatively evenly
between SpecTran Specialty and APD.
15
<PAGE> 18
Gross Profit
Gross profit increased $7.2 million, or 79.2%, from $9.1 million to $16.3
million for the nine months ended September 30, 1996. As a percentage of net
sales, the gross profit increased to 36.3% for the nine months ended September
30, 1996 from 33.6% for the nine months ended September 30, 1995. This increase
in gross profit was primarily due to increased net sales in 1996 and lower
production costs resulting from manufacturing process and yield improvements.
The increase in gross margin was partially offset by lower margins at APD which
was acquired in May 1995 and at SpecTran Specialty.
As a percentage of net sales, royalties decreased from 4.2% for the nine
months ended September 30, 1995 to 3.8% for the nine months ended September 30,
1996. This decrease in royalties as a percentage of net sales was primarily due
to an increase in the net sales not subject to royalties.
Selling and Administrative
Selling and administrative expenses increased by $3.2 million, or 47.9%,
from $6.7 million to $9.9 million for the nine months ended September 30, 1996.
This increase was primarily due to including a full nine months of APD expenses
in the 1996 period versus only four months in the 1995 period. A substantially
higher provision for incentive compensation in the 1996 period also contributed
to the increase. As a percentage of net sales, selling and administrative
expenses decreased to 22.1% for the nine months ended September 30, 1996 from
24.7% for the nine months ended September 30, 1995.
Research and Development
Research and development costs increased by $218,000, or 10.4%, from $2.1
million to $2.3 million for the nine months ended September 30, 1996. As a
percentage of net sales, research and development costs decreased from 7.8% for
the nine months ended September 30, 1995 to 5.2% for the nine months ended
September 30, 1996. The Company's increased research and development spending,
in absolute dollars, is primarily in programs designed to improve manufacturing
cost and product performance in both the multimode and single-mode product
lines, to develop new special performance fiber products and to develop
alternative process technologies.
Other Income (Expense), net
Other income (expense) net declined by $404,000 for the nine months ended
September 30, 1996 compared to the same period of 1995. The decline was caused
by higher interest expense of $94,000 (21.7%) and lower interest income of
$74,000 (30.8%) in the 1996 nine month period versus the comparable 1995 period,
in addition to the absence of the non-recurring material recovery income in the
1996 nine month period.
Income Taxes
A tax provision of 34% of pre-tax income was provided for the nine months
ended September 30, 1996 compared to a tax provision of 41% of pre-tax income in
the comparable period in 1995. The estimated effective tax rate for 1996 of 34%
is lower than the statutory and prior year's tax rates due to an anticipated
reduction in 1996 in the valuation allowance for deferred tax assets due to the
Company's belief that it is more likely than not that the additional deferred
tax asset will be realized through the utilization of operating loss and tax
credit carryforwards. The higher rate in the 1996 September quarter was to
adjust the year-to-date estimated tax rate up to 34% from the 27% that had been
used in the 1996 first half.
Net Income
Net income for the nine months ended September 30, 1996 was $2.5 million or
5.6% of net sales. Net income for the same period in 1995 was $270,000, or 1.0%
of net sales.
16
<PAGE> 19
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Sales
Net sales increased $11.7 million, or 43.3%, from $26.9 million to $38.6
million for the year ended December 31, 1995. The increase was primarily caused
by higher sales volumes due to strong market demand for the Company's standard
communication fiber, both multimode and single-mode, as well as specialty
products. The acquisition of APD and a full year of sales of SpecTran Specialty,
acquired in February 1994, also contributed to the increase.
Gross Profit
Gross profit increased $5.4 million, or 71.3%, from $7.6 million to $13.1
million for the year ended December 31, 1995. The gross profit, as a percentage
of net sales, increased to 33.9% in 1995 from 28.3% in 1994. Major factors
positively impacting gross profit were improved manufacturing efficiencies,
especially in the Company's single-mode product line. However, the gross profit
was negatively impacted in 1995 by approximately $1.8 million of costs
associated with manufacturing development of single-mode fiber compared to $2
million in 1994. Royalties on sales were approximately 4.1% and 5.5% of total
net sales during 1995 and 1994, respectively. The decrease in royalties was due
to a higher level of sales in 1995 not subject to royalties.
Selling and Administrative
Selling and administrative expenses increased $3.4 million, or 53.0%, from
$6.3 million to $9.7 million for the year ended December 31, 1995. As a
percentage of net sales, these costs increased during 1995 to 25.1% from 23.5%
during 1994. The significant increase in total selling and administrative
spending was primarily due to expenses related to the operation of the acquired
APD increased personnel costs and increased market development activities
related to single-mode fiber in 1995.
Research and Development
Research and development costs increased by $853,000, or 43.2%, from $2.0
million to $2.8 million for the year ended December 31, 1995. Research and
development costs as a percentage of net sales remained constant from 1994 to
1995 at 7.3%. The Company has continued to invest in programs to improve
manufacturing cost and product performance in both the single-mode and multimode
product lines, to develop new special performance fiber products and to develop
alternative process technologies.
Other Income (Expense), net
Other income (expense), net increased by $29,000, or 16.0%, from $183,000
to $212,000 for the year ended December 31, 1995. Interest expense increased by
$323,000, or 106.7% from $303,000 to $626,000 during 1995 as a result of
increased levels of outstanding debt during 1995 associated with the acquisition
of APD. Other income increased in 1995 by $351,000 primarily due to
non-recurring material recovery income and proceeds received in connection with
the conversion of the Company's primary group health insurance provider from a
mutual company to a stock company.
Income Taxes
Income tax expense for the year ended December 31, 1995 was 30.3% of
pre-tax income versus no tax provision or benefit for the previous year. Income
tax expense was reduced due to a reduction in the valuation allowance for
deferred tax assets. The valuation allowance was reduced $437,000 in 1995 due to
the Company's belief at the time that it was more likely than not that the
additional deferred tax asset will be realized. Excluding the effect of
adjusting the valuation allowance, income tax expense as a percentage of pre-tax
income was 56.0% in 1995. See Note 10 of "Notes to Consolidated Financial
Statements." No tax benefit was provided in 1994 due to the uncertainty of the
future realization of net operating loss and tax credit carryforwards.
17
<PAGE> 20
Net Income (Loss)
The Company's net income in 1995 was $542,000, a 1.4% return on net sales
compared to a net loss in 1994 of $487,000.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Net Sales
Net sales increased $1.3 million, or 5.3%, from $25.6 million to $26.9
million for the year ended December 31, 1994, due primarily to additional
revenue provided by SpecTran Specialty.
The increased revenue provided by SpecTran Specialty offset the decline in
revenues from the Company's standard products where sales to two key customers,
as anticipated and previously reported, declined significantly in 1994 and
unfavorable market conditions throughout most of the year caused lower average
unit selling prices than in 1993. Also helping to offset the decrease in sales
of the Company's standard datacommunication multimode fiber were initial sales
of single-mode optical fiber.
Gross Profit
Gross profit decreased $2.0 million, or 20.7%, from $9.6 million to $7.6
million for the year ended December 31, 1994. The gross profit, as a percentage
of net sales, dropped to 28.3% in 1994 from 37.6% in 1993. A major factor
negatively impacting gross profit was approximately $2 million of costs
associated with manufacturing development of single-mode fiber. Royalties on net
sales were approximately 5.5% and 6.4% of total net sales during 1994 and 1993,
respectively. The decrease was due to a higher level of sales in 1994 not
subject to royalties.
Selling and Administrative
Selling and administrative expenses increased $3.0 million, or 91.9%, from
$3.3 million to $6.3 million for the year ended December 31, 1994. As a
percentage of net sales, these costs increased during 1994 to 23.5% from 12.9%
during 1994. The significant increase in total selling and administrative
spending was primarily due to expenses related to the operation of the acquired
SpecTran Specialty, increased personnel costs, and higher costs associated with
international marketing of single-mode fiber.
Research and Development
Research and development costs increased by $1.0 million, or 107.0%, from
$954,000 to $2.0 million for the year ended December 31, 1994. Research and
development costs as a percentage of net sales increased to 7.3% in 1994 from
3.7% in 1993. The Company has invested heavily in improved multimode product and
processes, alternative process technologies and development of single-mode
fiber, accounting for this increase.
Other Income (Expense), net
Other income (expense), net decreased by $78,000, or 29.8%, from $261,000
to $183,000 for the year ended December 31, 1994. The change was made up of
increased interest income of $81,000 (33.2%), increased interest expense of
$266,000 (720.5%) and increased other income of $107,000 (203.4%). Interest
income increased during 1994 primarily as a result of higher yields on
investments. The increase in interest expense was a result of increased levels
of outstanding debt during 1994. The Company had $5.2 million outstanding on a
revolving loan at a variable rate of interest. Other income increased in 1994 by
$106,000 primarily due to royalty income received by SpecTran Specialty.
Income Taxes
No tax benefit was provided for the 1994 loss largely due to the
uncertainty of future realization of certain of the carryforward amounts of
investment and research and experimentation tax credits which begin to expire in
1996. A tax provision of 35.1% of pre-tax income was provided in 1993.
18
<PAGE> 21
Net Income (Loss)
The Company's net loss in 1994 was $487,000. Net income in 1993 was $3.7
million which was a 14.3% return on sales.
QUARTERLY INFORMATION
The following table represents unaudited quarterly operating results for
the Company for the quarters ended in the fiscal years ended December 31, 1994
and December 31, 1995 and the three quarters ended September 30, 1996. The
Company believes that the following selected quarterly information includes all
adjustments (consisting of normal, recurring adjustments) that the Company
considers necessary for a fair presentation, in accordance with generally
accepted accounting principles. Results for any particular quarter are not
necessarily indicative of any future period. See "Risk Factors -- Fluctuations
in Operating Results."
<TABLE>
<CAPTION>
1994 1995 1996
---------------------------------- ---------------------------------- ---------------------------
QTR.1 QTR.2 QTR.3 QTR.4 QTR.1 QTR.2 QTR.3 QTR.4 QTR.1 QTR.2 QTR.3
------ ------ ------- ------ ------ ------ ------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales................. $5,786 $6,639 $ 6,135 $8,366 $7,965 $9,099 $9,971 $11,546 $13,473 $15,281 $16,161
Gross Profit.............. 2,061 2,103 1,267 2,192 2,894 2,841 3,359 3,967 4,756 5,318 6,220
Selling and Administrative
Expenses................ 1,312 1,627 1,716 1,664 2,038 2,128 2,532 2,971 2,819 3,449 3,641
Income from Operations.... 457 166 (1,208) (85) 102 54 136 273 1,028 1,198 1,838
Net Income (Loss)......... 319 136 (720) (222) 83 8 179 272 684 833 1,007
Net Income (Loss) per
Common Share............ $ .06 $ .03 $ (.14) $ (.04) $ .02 -- $ .03 $ .05 $ .12 $ .14 $ .17
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of cash are cash flow from operations,
established bank credit facilities and existing cash balances. During the nine
months ended September 30, 1996, the Company generated $1.6 million in net cash
from operating activities, borrowed an additional $2.0 million under its bank
credit facility, and reduced its marketable securities by an additional $2.8
million. Substantially all of this cash was used to fund capital expenditures of
approximately $6.2 million.
As of September 30, 1996, the Company had approximately $4.6 million of
cash, cash equivalents and marketable securities, including approximately $1.4
million in marketable securities classified as long-term assets, which could be
converted to cash if necessary. The Company's net working capital position as of
September 30, 1996 was approximately $16.2 million.
In December 1996, as part of the formation of General Photonics, its 50-50
joint venture with General Cable, the Company sold certain assets of APD for
approximately $6.3 million (subject to adjustment). Also in December 1996, the
Company sold an aggregate principal amount of $24.0 million of senior secured
notes and concurrently restructured its existing loans from its principal bank
into a $20.0 million revolving credit agreement. Approximately $14 million
raised from the sale of the Notes was used to repay existing indebtedness
leaving all $20.0 million of the revolving credit agreement available for use by
the Company. See "Recent Developments -- Joint Venture" and "Recent Developments
- -- Senior Debt Financing and Refinancing of Existing Bank Loans."
The Company has plans for capacity expansion requiring significant capital
expenditures through approximately the end of 1997. Planned expenditures for
capacity expansion include approximately $32 million for SpecTran Communication
and approximately $9 million for SpecTran Specialty. When completed, these
expansions are expected to increase SpecTran Communication's capacity by 100%
and SpecTran Specialty's by 50%. The Company intends to finance these expansions
through a combination of cash flow from operations, net proceeds from this
offering and borrowings.
19
<PAGE> 22
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 123, "Accounting for Stock-Based Compensation," which
established financial accounting and reporting standards for stock-based
employee compensation plans. Companies are encouraged, rather than required, to
adopt a new method that accounts for stock compensation awards based on their
fair value using an option pricing model. Companies that do not adopt this new
method will be required to make pro forma footnote disclosures of net income as
if the fair value-based method of accounting required by SFAS No. 123 had been
applied. The Company adopted SFAS No. 123 on January 1, 1996. Adoption of this
pronouncement did not have a material impact on the Company's financial position
or results of operations as the Company will make pro forma footnote disclosures
in its December 31, 1996, financial statements.
On January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. This statement also requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying value or fair value less costs to sell. Adoption of the statement had
no impact on the Company's financial statements.
20
<PAGE> 23
BUSINESS
The discussion in this Prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 that involve risks and uncertainties. The
Company's actual results and the timing of certain events may differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed below and in "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
GENERAL
SpecTran develops, manufactures and markets high quality optical fiber,
optical fiber cables and value-added optical fiber components and assemblies.
The Company's products are used in a broad range of applications, including
LANs, WANs, customer premises systems, computer and peripheral connections,
intranets, the Internet, telephone systems, industrial process controls,
avionics and medical devices. The Company, either directly or through its joint
venture, sells its products to over 500 customers, including large
multi-national companies such as Lucent, Corning, Siemens-Rolm, Nortel,
Lockheed-Martin and Ericsson.
Rapid advances in information, communications and entertainment
technologies are creating growing demand for higher speed, greater bandwidth
communications, which the Company believes will be increasingly satisfied by
optical fiber-based communication systems. Optical fiber offers a number of
advantages over many other modes of communication, such as increased bandwidth,
lower transmission loss, immunity to electromagnetic and radio frequency
interference, greater security, smaller size and lower weight. An industry
expert forecasts that worldwide consumption of optical fiber and cable will grow
at a compound annual rate of approximately 18% in kilometers over the period of
1996-2001. The Company primarily focuses on niche markets which it believes will
grow at significantly faster rates than the overall optical fiber and cable
market during this period.
SpecTran operates through two wholly-owned subsidiaries, SpecTran
Communication and SpecTran Specialty, and through General Photonics, a recently
formed joint venture with General Cable, one of the largest manufacturers and
suppliers in the United States wire and cable industry. SpecTran Communication
develops, manufactures and markets multimode and single-mode optical fiber for
data communications and telecommunications applications. SpecTran Specialty,
acquired in February 1994, develops, manufactures and markets proprietary
multimode and single-mode fiber and value-added fiber optic products for
industrial, military/aerospace, communication and medical applications. General
Photonics, which was formed in December 1996 and is the successor to the fiber
optic cable business previously conducted by the Company's subsidiary, APD,
develops, manufactures and markets communications-grade fiber optic cable
primarily for the customer premises market in the United States, Canada and
Mexico.
TECHNOLOGY
Fiber optic technology utilizing glass as a communications medium was
developed in the 1970s and offers numerous technical advantages over traditional
media such as copper. Optical fibers are hair-thin solid strands of high quality
glass usually combined in cables for transmitting information in the form of
light pulses. An optical fiber consists of a core of high purity glass which
transmits light with little signal loss. This core is typically encased within a
covering layer of high purity glass referred to as optical cladding, which
reduces signal loss through the side walls of the fiber. The information to be
transmitted is converted from electrical impulses into light waves by a laser or
light emitting diode. At the point of reception, the light waves are converted
back into electrical impulses by a photo-detector.
Optical fiber's advantages include its high bandwidth, which permits
reliable transmission of complex signals such as multiple high-quality audio and
video channels and high-speed data formats such as Fiber Distributed Data
Interface (FDDI), Asynchronous Transfer Mode (ATM) and other communications
protocols. Compared to traditional copper cable used in telephony, optical fiber
has thousands of times the information carrying capacity, occupies less space
and operates over greater distances with significantly less attenuation. This
high capacity and reliability makes optical fiber systems well suited for
interactive
21
<PAGE> 24
applications, allowing digitally encoded voice, data and video signals to be
transmitted in large volumes at high speed. Furthermore, optical fiber is immune
to electrical surges and electromagnetic interference which cause static in
copper wire transmission and wireless communication. Optical fiber has technical
advantages over wireless communications media such as transmission quality and
signal reliability. Optical fiber is also a safer choice in flammable
environments because it does not carry electricity. Additionally, communicating
through optical fiber is more secure than copper and wireless communications
because tapping into fiber optic cable without detection is very difficult.
Optical fiber quality is measured by several performance characteristics
and is reflected in the price of the fiber. These performance characteristics
include bandwidth, attenuation (signal loss over distance), tensile strength,
geometry and the dimensional and optical uniformity of the fiber. Optical fiber
users and manufacturers have established specifications and standards for both
multimode and single-mode fiber.
OPTICAL FIBER MARKETS AND APPLICATIONS
Overview. Industry data suggest that the worldwide fiber market measured
in kilometers is composed of approximately 90% single-mode fiber and
approximately 10% multimode fiber. According to industry data, in 1995 the
worldwide market totaled over 20 million kilometers having grown approximately
28% in that year and in 1994. An industry expert believes that worldwide
consumption of optical fiber in kilometers will grow at an annual rate of
approximately 18% over the period from 1996-2001. In the past, North America has
accounted for at least half of the worldwide consumption of optical fiber. In
recent years, however, North America's share of the fiber market has declined
due to dramatically increased fiber usage in other parts of the world. In 1995
North America's share amounted to approximately 40%, with the Pacific Rim and
other emerging markets such as India, China, Latin America and Eastern Europe
together accounting for approximately 42%. Furthermore, that same industry
expert is forecasting that by the year 2001 the Pacific Rim will be the highest
volume consumer of optical fiber.
Multimode Fiber. The principal market for the Company's multimode fiber
products is the data communications industry in North America, with an emphasis
on short distance communications between computers and from computers to
peripheral equipment, such as in LANs, WANs, intranets and the Internet. The
Company believes that the North American market for multimode fiber presently is
approximately $150 million annually, of which SpecTran Communication's share is
approximately 20%. An industry expert projects that the consumption of multimode
fiber in North America will grow at a compound annual rate, in kilometers, of
approximately 24% through 2001. The Company believes that during the last two
years SpecTran Communication's production and sale of multimode fiber grew in
excess of overall optical fiber and cable market rates.
Single-mode Fiber. The principal market for the Company's single-mode
fiber products is the telecommunications industry, where the fiber is used
mainly for long distance telephone lines. The Company believes that the
worldwide market for single-mode fiber is approximately $1.6 billion annually.
An industry expert estimates that this market has grown at a compound annual
rate, in kilometers, in excess of 20% during the last two years and that the
worldwide single-mode fiber market will grow at approximately 15% through 2001.
As part of the Company's reintroduction in 1993 of its single-mode fiber
product, the Company spent over $6 million in research and manufacturing
development in part to ensure that its product would meet the standards required
by the marketplace. The Company has and will continue to focus its single-mode
fiber sales efforts in selected developing and newly industrialized countries
that are aggressively upgrading their communication infrastructures, such as the
Pacific Rim countries, India and Latin American countries. The single-mode fiber
market in these countries is projected to grow at annual rates well in excess of
the growth anticipated for the single-mode market as a whole. Single-mode fiber
sales in dollars currently represent a small portion of SpecTran Communication's
sales. However, the volume of SpecTran Communication's single-mode sales in
kilometers for 1996 began to approach the kilometer volume of its sales of
multimode fiber.
Specialty Fiber Products. Fiber optic products are increasingly being
utilized as components and sub-assemblies for a variety of applications in the
communications, industrial, military/aerospace and medical
22
<PAGE> 25
markets. The Company has focused on and believes it is a leading company in
these markets world-wide. The Company believes that the aggregate worldwide
market for these specialty applications approximates at least $90 million
annually and is expected to grow at a rate in excess of the overall fiber and
cable market through 2001.
Fiber Optic Cable. Fiber optic cables are engineered protective sheaths
which surround optical fiber and are the means by which optical fiber is
typically installed and used. Cables are constructed of various extruded
polymers, filling compounds, strength members and other jacketing materials. The
price of optical fiber cables varies depending upon the design complexity and
the number of optical fibers in a cable, with the largest cost component being
the optical fiber included in the cable. The Company presently believes that the
market for optical cable for the customer premises market in the United States,
Canada and Mexico, the market and territory General Photonics primarily serves,
approximates $350 million annually. An industry expert estimates that this
market will grow at a compound annual rate, measured in cabled fiber kilometers,
of approximately 24% through 2001, similar to the expected growth in the
multimode optical fiber market.
BUSINESS STRATEGY
SpecTran's strategy is to capitalize on its proprietary manufacturing
processes and technologies and license rights in order to strengthen its
position as a leading supplier to data communications and specialty markets and
to further penetrate targeted international telecommunications markets. The
Company is implementing this strategy by increasing its production capacity and
efficiency; pursuing strategic alliances with other industry leaders; developing
higher-margin, value-added products; expanding international and domestic
distribution; leveraging its core technologies; and seeking to acquire
complementary products, technologies and businesses. The Company's research and
development activities are directed towards improving its manufacturing
processes and efficiencies for existing products as well as developing new
products. The Company intends to focus on market niches where it has established
or believes it can develop a leadership position, deliver technologically
innovative products and continue to take advantage of its vertically integrated
infrastructure.
Expand Manufacturing Capacity. In order to capitalize on the expected
growth in its target markets, the Company is significantly expanding
manufacturing capacity at all of its operations. The largest investment is being
made at SpecTran Communication with the goal of ensuring product availability
for the Company's customers. The Company believes that this expansion should
result in certain economies of scale enabling it to reduce unit manufacturing
costs.
Pursue Strategic Alliances. The Company has aggressively pursued strategic
relationships in order to leverage its strengths with those of other industry
leaders. Recently, the Company formed General Photonics, a joint venture with
General Cable. Because General Cable has an established presence in the data
communications market, its distribution network and field sales force will be
the primary means by which General Photonics products will be marketed. The
Company intends to continue to review partnering opportunities with candidates
that have the potential to accelerate its growth and increase its profitability.
In addition, the Company has patent licenses from Corning and Lucent which it
uses in conjunction with its own internal proprietary technologies and has
multi-year agreements to supply optical fiber to both of these companies.
Develop Value-Added Products. Fiber optics components are increasingly
used in a wide range of products being developed and sold by OEMs. These
components are often highly engineered, requiring significant technical
development such as that provided by the Company. These specialized components
generally have higher gross margins and can often be provided on a sole source
basis. The Company is aggressively pursuing these markets by developing
relationships with OEMs and continually improving its own internal engineering
and development efforts. The Company believes these specialty markets represent
a significant future profit opportunity.
Expand International and Domestic Distribution. With its increased product
diversity and greater manufacturing capacity, the Company is seeking to expand
its international and domestic distribution. The Company has increased its
international sales to approximately 25% of total sales in the first nine months
of 1996 from approximately 11% in 1994 through acquisitions and new
international distributors. The Company will continue to focus its single-mode
fiber sales in selected developing and newly industrialized countries that
23
<PAGE> 26
are aggressively upgrading their communication infrastructures, such as the
Pacific Rim countries, India and Latin American countries. The single-mode fiber
market in these countries is projected to grow at annual rates well in excess of
the growth anticipated for the single-mode market as a whole. The Company also
intends to continue increasing its international sales by aggressive marketing
of its specialty fiber optic products. Domestically, the Company is seeking to
expand distribution through the General Photonics joint venture.
Leverage Core Technologies. The Company has substantial experience and
know-how in manufacturing optical fiber, optical cable and fiber optic specialty
products. This expertise has facilitated the continual enhancement of existing
products and the development of new products. In addition, the Company has
lowered manufacturing costs through process improvements, including advances in
manufacturing equipment. The Company is also developing new technology for the
manufacture of fiber. The Company expects to continue directing research and
development efforts toward the development of new products and product
enhancements and improving its manufacturing technology and know-how in order to
increase its sales and profitability.
Acquire Complementary Products, Technologies or Companies. The Company
seeks to enhance its growth, improve its gross margins and capitalize on
emerging markets and technologies by pursuing selected acquisitions. For
example, the Company added higher gross margin, value-added products and
vertically integrated through the acquisition of SpecTran Specialty in February
1994. The Company entered the fiber optic cable market in May 1995 by the
acquisition of APD in order to vertically integrate and to participate more
extensively in the rapid growth of the data communications market, the principal
end market of multimode fiber. The Company intends to continue to review
potential acquisitions and will pursue those opportunities which it believes
will accelerate its growth, improve its profitability or enhance its competitive
position. There are currently no binding agreements or understandings with
respect to any future acquisitions.
24
<PAGE> 27
PRODUCTS
The following table describes the Company's and General Photonics'
principal product areas and the markets they serve:
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
PRODUCTS APPLICATIONS TARGET CUSTOMERS
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
SpecTran Communications
- -------------------------------------------------------------------------------------------------------
Data communication grade Data communications, including Integrated cablers (e.g., Lucent,
multimode fiber: 50, 62.5 and FDDI and fast Ethernet; LANs; Chromatic Technologies);
100 micrometer core diameters video; CCTV; computer peripherals independent cablers (e.g.,
channel attachment Optical Cable Corporation,
CommScope, General Photonics)
- -------------------------------------------------------------------------------------------------------
Telephone grade single-mode Telephony (principally in Independent data communications
fiber emerging economies); high-speed domestic cablers; international
short-distance data telecommunications cablers
communication, including Fibre (e.g., India, China, Mexico)
Channel and FDDI
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
SpecTran Specialty
- -------------------------------------------------------------------------------------------------------
Step and graded index multimode Factory LANs and PLC Factory, transportation and
fiber and cable: polymer interconnects; mobile video; medical OEMs; systems designers
clad/glass core, high numerical avionics; high-speed ground-based and integrators; geophysical
aperture, radiation tolerant, transportation; geophysical exploration companies; US
power delivery and high exploration and monitoring; government and military;
temperature fiber; avionics sensing; power transmission, utilities; telecom and
cable; high dielectric strength including laser surgery; blood supercomputer OEMs; systems
cable; tether cables gas monitoring; radiation designers and integrators
resistant links; high-speed,
short-distance telecom
interconnects (e.g., telephone
switching systems and PBXs);
supercomputer links
- -------------------------------------------------------------------------------------------------------
Specialty single-mode fiber and Metallized pigtails, couplers, Telecommunications;
cable: photo-sensitive, amplifiers, geophysical optoelectronic manufacturers;
rare-earth, delay line and exploration and monitoring; well-logging companies and system
fatigue resistant fiber; gyroscopes; wave- length division integrators; defense contractors
avionics cable; tether cables multiplexers
- -------------------------------------------------------------------------------------------------------
Components and assemblies: crimp Industrial automation; OEMs; systems designers and
and cleave connectors; pigtails; environmental monitoring; integrators; facilities managers;
fiber optic arrays; specialty customer premises networking; utilities; optoelectronic device
and hybrid interconnects; tool military spec and high manufacturers; defense
kits reliability assemblies; high contractors
power laser delivery; sensing;
illumination; spectroscopy
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
General Photonics
- -------------------------------------------------------------------------------------------------------
Indoor cable: tight buffered Building backbones; riser and Networking systems and LAN OEMs;
distribution and breakout plenum installation systems designers and
designs integrators; installers;
facilities managers
- -------------------------------------------------------------------------------------------------------
Outdoor cable: loose tube; Customer premises backbones, Networking systems and LAN OEMs;
gel-filled; direct burial; including densely populated systems designers and
aerial; armored; figure eight buildings and campuses; Fibre integrators; installers;
Channel; FDDI; bypass telecom facilities managers
- -------------------------------------------------------------------------------------------------------
Cable accessories: pulling Customer premises systems and LAN Installers; system integrators;
devices; breakout, splitter and installation and repair LAN OEM's; utilities
restoration kits; cable
terminations
- -------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 28
CUSTOMERS AND MARKETING
The Company sells its multimode and single-mode optical fibers to various
cable manufacturers, domestically and internationally, which assemble them into
cables for resale in configurations of their own design. Specialty fiber
products are sold directly to a large number of OEMs, product development
groups, international distributors and manufacturers' representatives,
installers, universities and governmental agencies, primarily for use in the
industrial, medical, military, aerospace, transportation and telecommunications
and data communications markets. Optical fiber cable and cable accessories,
manufactured by General Photonics, are sold largely to distributors, system
integrators and installers primarily for use in the customer premises market in
the United States, Canada and Mexico.
The Company markets its multimode and single-mode data communications and
telecommunications optical fiber products principally through a direct sales
force in the United States and through a network of manufacturer's
representatives internationally. Specialty fiber products are marketed
domestically through a direct technical field sales force and internationally
through a network of technical distributors and sales representatives. Optical
fiber cable and cable components produced by General Photonics are marketed
primarily through General Cable's direct sales force and sales representatives.
Marketing, technical support and some direct sales and customer support are
provided by General Photonics personnel. The Company advertises in trade
publications, distributes brochures and other material to its mailing list of
potential customers worldwide and participates at trade shows, technical
symposia and standards committees.
As a result of its diversification efforts and broader product offering,
the Company has significantly increased its customer base over the last three
years and plans to continue to expand this base aggressively within its targeted
markets. The Company's international sales have increased from approximately 11%
of the Company's net sales in 1994 to approximately 22% in 1995 and
approximately 25% in the first nine months of 1996. The Company has more than
500 customers in over 25 countries. For the year ended December 31, 1995, sales
of the Company's optical fiber products to each of Chromatic Technologies, Inc.
and Optical Cable Corporation were equal to 10% percent or more of the Company's
revenues. These two companies together accounted for 24% of the Company's
revenues in 1995. For the nine months ended September 30, 1996, only Optical
Cable Corporation accounted for more than 10% of the Company's revenues.
MANUFACTURING AND QUALITY CONTROL
The basic raw materials required for the manufacture of the Company's
optical fiber products are high quality glass tubes and rods, various chemicals
and gases and certain polymers. The Company believes that its sources of supply
of these raw materials are adequate and that alternative sources are available.
The Company typically manufactures optical fibers by introducing vapors and
gases of varying chemical compositions into a special glass tube in a clean,
controlled environment. In the modified chemical vapor deposition ("MCVD")
process, an inside vapor deposition process used by the Company, the glass tube,
which forms all or a portion of the optical cladding, and the introduced vapors
and gases are simultaneously heated, and oxide particles, formed through a
reaction of chemical vapors with oxygen, are deposited on and adhere to the
inside of the tube. As the particles attach to the tube wall, they are fused to
create a layer of high purity glass. Succeeding layers of glass of the same or
different compositions are deposited in this fashion to permit the transmission
of light in accordance with the desired specifications. The Company believes
that the MCVD process is more flexible than other processes in the production of
optical fiber and uses it to produce both multimode and single-mode fiber. The
other main process for making optical fiber is the outside vapor deposition
process which, the Company believes, is less flexible overall, but more cost
effective for producing single-mode fiber. As part of its acquisition of
SpecTran Specialty, the Company acquired the rights to a patented outside vapor
deposition process known as hybrid vapor deposition ("HVD") which it is
continuing to develop for possible use in conjunction with its single-mode fiber
production process.
In the MCVD process, once deposition is completed, the glass tube is then
collapsed into a rod, or primary preform, consisting of a deposited core, in
certain instances some deposited cladding and cladding provided by the glass
tube itself. In most cases, additional cladding is added to this primary
preform. The rod
26
<PAGE> 29
is then placed at the top of a fiber drawing tower, heated until it softens and
drawn into a fiber of predetermined diameter.
The majority of the Company's specialty products use a proprietary polymer
clad glass core fiber drawn from manufactured or purchased silica rod. This
fiber is either sold to third parties or cabled and/or combined with assemblies
and sold. The Company owns certain hard polymer cladding, coating and fiber
termination technology known as "crimp/cleave," which facilitates attachment of
optical fibers to connectors and other components and has certain proprietary
technology used for the cabling of optical fiber. The Company has developed
proprietary technology related to the processing of a wide variety of polymeric
compounds for the manufacture of optical fiber cable. General Photonics
purchases fiber from the Company and protectively covers and bundles the fibers
into cable. Certain of General Photonics' technology enables the manufacture of
nonflammable, low smoke, low toxicity cables for use both outdoors and inside
buildings, which the Company believes provides a significant competitive
advantage.
The Company believes that its quality control programs are essential to its
success. The Company's quality control programs are designed to maintain strict
tolerances during the manufacturing process and to assure performance standards
of its products. The Company performs quality control testing on all of its
products. The Company designs and builds much of the equipment it uses to
manufacture and test its optical fiber products. In November 1995, SpecTran
Communication's facility in Sturbridge, Massachusetts became certified under ISO
9001, an internationally recognized manufacturing standard designed to ensure
process consistency. SpecTran Specialty's Avon, Connecticut facility became ISO
9001 certified in March 1996. All of the Company's operations utilize internal
testing procedures based on the internationally recognized "Fiber Optic Test
Procedures" and have in place and continue to develop specialized proprietary
testing systems and procedures to support the requirements of their respective
customers.
ENVIRONMENTAL MATTERS
The Company uses certain hazardous materials in its research and
manufacturing operations. As a result, the Company is subject to federal, state
and local governmental regulations. The Company believes that it has complied
with all regulations and has all permits necessary to conduct its business. See
"Risk Factors -- Environmental Regulations."
PROPRIETARY RIGHTS
The Company considers its proprietary know-how with respect to the
development and manufacture of flexible glass fibers and value-added optical
fiber products to be a valuable asset. This know-how includes formulation of new
glass compositions, development of special fiber coatings, coating applications,
fiber designs, preform fabrication, fiber drawing, optical fiber cabling
methods, fiber cleaving, polishing and end finishing techniques, proprietary
testing capabilities, development and implementation of manufacturing processes
and quality control techniques, and design and construction of manufacturing and
quality control equipment. Product and application knowledge are also considered
to be valuable assets of the Company.
Corning License. The Company has a limited, non-assignable, non-exclusive,
royalty-bearing license from Corning to make, use and sell fiber under certain
of Corning's United States patents with a filing date prior to January 1, 1996,
in the field of optical fiber. The license contains certain annual quantity
limitations. The limitations are not applicable to sales made directly or
indirectly to certain customers such as Corning, Lucent and the United States
Government. The quantities that can be manufactured under the license increase
annually through the year 2000. The license has a term equal to the life of the
last to expire of the Corning or Company patents licensed under the agreement.
Corning has the right to terminate the license in the event that more than 30%
of the Company's voting stock is acquired, directly or indirectly, by another
manufacturing company. The Company granted back to Corning a non-exclusive
royalty-free license for any of its patents with a filing date prior to January
1, 1996, in the field of optical fiber.
Lucent License. The Company has a non-assignable, non-exclusive,
unlimited, royalty-bearing license from Lucent under all patents covering
optical fiber and optical fiber cable owned by Lucent or which Lucent and its
affiliates had the right to license on or before August 15, 1986. The Company
granted back to Lucent a non-exclusive, royalty-free license under patents the
Company may obtain relating to optical fiber inventions
27
<PAGE> 30
made on or before August 15, 1986. The license extends for the life of the last
to expire of the patents licensed under the agreement.
Sales Subject to Corning and Lucent License Agreements. Approximately 43%
of the Company's net sales during 1995 were subject to the Corning license and
61% subject to the Lucent license. These license agreements required aggregate
royalty payments by the Company of approximately 8.5% of net sales of the
Company's products manufactured under the agreements during 1995. Approximately
40% of the Company's net sales during the nine months ended September 30, 1996
were subject to the Corning license and approximately 62% of net sales were
subject to the Lucent license. The Company believes that certain Corning
patents, which may have been relevant to the Company's single-mode fiber,
including patents covered by a non-exclusive license from Corning to the
Company, have expired in many countries (including the United States).
Therefore, the Company believes that manufacturing and sale of its single-mode
fiber is not subject to the Corning license and has been marketing its
single-mode fiber without payment of royalties to Corning and without regard to
the annual quantity limitations of the Corning license since 1993. The Company
presently does not expect to need the Corning license for the manufacture of its
multimode fiber after 1999 because the Company believes that a Corning United
States patent with relevancy to its multimode fiber will expire in 1999.
Patents and Trademarks. The Company and its subsidiaries own 24 U.S.
patents relating to products, processes and equipment in the fields of optical
fibers, optical connectors, coatings and cleaving tools. The Company believes
that its patents afford it certain competitive advantages. Under the terms of
the Corning and Lucent license agreements, the optical fiber patents are
required to be made available royalty-free to Corning and certain of those
patents are also be required to be made available royalty-free to Lucent.
The Company is using its trademark SPECTRAGUIDE(R) for its commercial grade
optical fiber and for certain of its value added fiber products. It also uses
the trademarks HCS(R) (Hard Clad Silica), Avioptics(TM), Flightguide(TM),
Ultrasil(TM), PYROCOAT(TM), V-System(TM) and V-Pin(TM).
RESEARCH AND DEVELOPMENT
Research and development activities to develop and improve products
employing both existing and new technology are important to the Company. During
the fiscal years ended December 31, 1993, 1994 and 1995, the Company spent
approximately $1.0 million, $2.0 million and $2.8 million, respectively, or
approximately 3.7%, 7.3% and 7.3%, respectively, of its net sales on research
and development. The Company expects to continue to increase the annual dollar
amount of its research and development expenditures. During the nine months
ended September 30, 1996, the Company spent $2.3 million, or approximately 5.2%
of its net sales, on research and development. The Company has continued to
invest in programs to reduce manufacturing cost and improve product performance
in both the single-mode and multimode product lines, to develop new optical
fiber products and to develop alternative process technologies. The Company's
personnel conduct substantially all of its research and development activities.
BACKLOG
As of December 31, 1996, the Company's backlog of orders was approximately
$54.4 million as compared to a backlog of $9.5 million as of December 31, 1995.
Approximately $26.8 million of this backlog is expected to be delivered during
1997.
COMPETITION
The Company produces and sells optical fibers and value added optical fiber
components and assemblies for data communications, telecommunications and
specialized applications. The Company also sells optical fiber cable and cable
components through General Photonics. While there may be less competition in the
specialized markets, all of the markets served by the Company and General
Photonics are very competitive. The Company's main competitors for its fibers
for data communications and telecommunications are its licensors, Corning and
Lucent, to whom the Company pays royalties and who have substantially greater
resources and operating experience than the Company. The Company's main
competitors for its specialty fibers generally have been smaller operations, but
some of those competitors are part of companies with substantially greater
resources than the Company. General Photonics' main competitors for its optical
fiber
28
<PAGE> 31
cable products are large companies with substantially greater resources and
operating experience than the Company and General Photonics, some of which may
also be customers of SpecTran Communications. The Company competes for sales
based upon its ability to fill orders promptly at competitive prices, product
performance, product features, unique proprietary products, flexibility, quality
and service.
The Company believes that optical fibers offer a number of advantages over
and compete favorably with other means of transmitting information, such as
copper wire, satellite and other line of sight transmissions (e.g., microwaves)
despite increased interest in wireless communications in the marketplace and
enhancements to the existing copper wire telephony infrastructure. Many
companies offering such other means of transmitting information have
substantially greater resources and operating experience than the Company. The
Company often competes with both mature existing technology and new technology,
some of which have cost advantages over optical fiber for certain applications.
The number of participants in the optical fiber industry is to some extent
limited by patents covering the fundamental optical fiber technology, the need
for substantial capital investment and the availability of highly specialized
equipment and personnel with the requisite technical expertise. The Company
believes that certain Corning patents, which may have been relevant to the
Company's single-mode fiber, including patents covered by a non-exclusive
license from Corning to the Company, have expired in many countries (including
the United States). The Company further believes that a certain Corning United
States patent, covered by this non-exclusive license, with relevance to the
Company's multimode fiber, expires in 1999. In addition, the Company believes
that a certain Lucent patent licensed to the Company relating to its multimode
and single-mode fiber expires in 1997. The expiration of these patents may or
may not reduce the patent barrier to entry by other participants. The Company
estimates that the initial investment required for a turn-key manufacturing
facility capable of producing 200,000 kilometers of world-class multimode
optical fiber annually is between $50 million and $100 million.
EMPLOYEES
As of December 31, 1996, the Company employed 381 persons, of whom 101 were
employed in technology, 171 were employed in manufacturing operations and 109
provided marketing, administrative, management and other support services. These
numbers do not include 58 employees of General Photonics previously employed by
APD. The Company's employees are not represented by a labor union. The Company
believes its employee relations are good.
PROPERTIES
The Company's administrative offices and the offices and production
facilities of SpecTran Communication are located in an approximately 50,000
square foot building which the Company is in the process of expanding to
approximately 100,000 square feet. The building is situated on approximately 43
acres of land owned by the Company in Sturbridge, Massachusetts. The Company
also owns an approximately 5,000 square foot office building used for offices
that is next to this manufacturing facility.
SpecTran Specialty leases approximately 33,000 square feet under three
leases in Avon, Connecticut for its office and production facilities. Each of
the leases is for a term of three years expiring February 18, 1997, two of which
have been extended through August 18, 1997. On October 31, 1996, SpecTran
Specialty purchased a 42,000 square foot building and approximately 14 acres on
which it is located in Avon, Connecticut. During 1997 the Company expects to
expand the facility to approximately 58,000 square feet and consolidate all of
SpecTran Specialty's operations in that facility.
General Photonics has assumed APD's lease for offices and production
facilities in an approximately 45,000 square foot facility located in Danielson,
Connecticut with a term of two years expiring January 14, 1998, subject to
General Photonics' right to renew the lease for two consecutive one year renewal
terms. General Photonics has also assumed APD's lease for offices and production
facilities in a 36,410 square foot facility located in Dayville, Connecticut
under a lease expiring February 6, 2001, which is subject to a three year
renewal option, followed by a second renewal option for an additional two years.
LEGAL PROCEEDINGS
There are no material actions currently pending against the Company.
29
<PAGE> 32
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
The executive officers and directors of the Company are as follows:
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Raymond E. Jaeger(1)............... 58 Chairman of the Board of Directors and
Director
Glenn E. Moore(1).................. 45 President, Chief Executive Officer and
Director
Bruce A. Cannon(1)................. 50 Senior Vice President, Chief Financial
Officer, Secretary, Treasurer and Director
John E. Chapman.................... 41 President of SpecTran Communication;
Senior Vice President -- Technology and
Director of SpecTran
Crawford L. Cutts.................. 45 President, General Photonics (as of
December 23, 1996; previously President
of APD)
William B. Beck.................... 44 President of SpecTran Specialty
Ira S. Nordlicht(2)(3)(4).......... 47 Director
Paul D. Lazay(2)(3)(4)............. 57 Director
Richard M. Donofrio(1)(2)(3)(4).... 58 Director
Lily K. Lai(1)(2)(3)............... 55 Director
<FN>
- ---------------
(1) Member of the Finance Committee
(2) Member of the Audit Committee
(3) Member of the Compensation and Incentive Stock Option Committee
(4) Member of the Nominating Committee
</TABLE>
DR. JAEGER has been Chairman of the Board of Directors of the Company since
April 1981 and also is Chairman of the Board of each of its wholly-owned
subsidiaries and a Director of General Photonics. He assisted in the formation
of the Company and served as President and Chief Executive Officer of the
Company from the inception of the Company through December 1995. Prior to
joining the Company, Dr. Jaeger was Director of Research and Development and
then Vice President, Corporate Research and Development of Galileo
Electro-Optics Corporation from 1976 to 1981. Dr. Jaeger was employed by Bell
Telephone Laboratories from 1959 until 1976. At that company, he was engaged in
research and development of fiber optic materials and processes. Dr. Jaeger is
named as the inventor or co-inventor on 16 patents assigned to either Western
Electric Company, Incorporated, or the Company, and has written numerous
articles for technical and trade publications. Dr. Jaeger holds a B.S., an M.A.
and a Ph.D. in Ceramics from Rutgers University.
MR. MOORE joined the Company in January 1996, as President and Chief
Executive Officer of the Company. He is also a Director of the Company and the
Chief Executive Officer and a Director of each of its wholly-owned subsidiaries
and a Director of General Photonics. Prior to joining the Company, he was
employed from 1976 to 1995 at AMP, Incorporated in various management positions
including from 1985 to 1995 as Product Manager, Business Manager and Division
Manager of the Electro-Optics Division and Division Manager and General Manager
of the Optical Connectors and Assemblies Division. From 1982 to 1985 he
supported the U.S.-based operation of AMP as Manager, Computer Integrated
Manufacturing Systems, building on his computer and communication experience
from 1972 to 1982. Mr. Moore holds a B.A. in Mathematics from Lebanon Valley
College and an M.B.A. from Harvard Graduate School of Business Administration.
30
<PAGE> 33
MR. CANNON joined the Company in May 1983 as Controller and was appointed
Vice President, Finance, and Controller in May 1985. He was appointed Treasurer
in 1986, Secretary and Director in March 1987 and Senior Vice President and
Chief Financial Officer in December 1987. Mr. Cannon is also Secretary,
Treasurer and a Director of each of the Company's wholly-owned subsidiaries. He
was employed by SCA Services, Inc. from 1972 through 1982 in various financial
and accounting positions, including as Division Controller and Assistant
Corporate Controller. Mr. Cannon was a Certified Public Accountant and was
previously employed by Arthur Andersen & Co., an international public accounting
firm. He holds a B.S. in Accounting from Eastern Kentucky University.
MR. CHAPMAN, appointed President of SpecTran Communication in October,
1995, is also Senior Vice President -- Technology of SpecTran. Mr. Chapman
joined the Company in July 1983 as a Project Leader working on the development
of automated test equipment. In July 1985 he assumed the position of Director of
Equipment Technology and in October 1986 became the Director of Quality
Assurance and Management Information Systems. Mr. Chapman was appointed Director
of Manufacturing and then Vice President of Manufacturing and Engineering in
December 1987, and in May 1990 was appointed Senior Vice President of
Manufacturing and Technology. Mr. Chapman was appointed Chief Operating Officer,
Executive Vice President and Director of the Company in January 1994. After the
reorganization of the Company in 1995, Mr. Chapman was appointed to the
positions he holds presently. Mr. Chapman is also a Director of each of the
Company's wholly-owned subsidiaries. Prior to joining the Company he was
employed by Valtec Corporation, an optical fiber manufacturer and cabler, from
March 1979 in various engineering positions related to the design of optical
fiber and the development of special optical measurement equipment. Mr. Chapman
holds a B.S. in Physics from the University of Lowell and an M.S. in Electrical
Engineering from Northeastern University.
MR. NORDLICHT, a Director of the Company since February 1986, is a partner
in the law firm of Hackmyer & Nordlicht which provides legal services to the
Company. Prior to entering the private practice of law, Mr. Nordlicht served as
Counsel and Foreign Policy Advisor to the Chairman, U.S. Senate Foreign
Relations Committee (1978-1979), counsel to the U.S. Senate Foreign Relations
Subcommittee on Foreign Economic Policy (1975-1978) and Senior Trial Attorney
for the Federal Trade Commission (1972-1975). From 1980-1982 he also served as a
Secretary of Energy appointee to the National Petroleum Counsel. Mr. Nordlicht
is a Director of each of the Company's wholly-owned subsidiaries. He holds a
B.A. in Economics from Harpur College (State University of New York at
Binghamton) and a J.D. from New York University.
DR. LAZAY, a Director of the Company since March 1987, is a business
consultant for technology companies. Previously he served from April through
June 1995 as General Manager and Vice President of Cisco Systems, a data
networks company, and prior to that, from October 1993 he was a business
consultant for technology companies. He served as President, Chief Executive
Officer and a Director for Telco Systems, Inc., a designer and manufacturer of
high speed digital fiber optic transmission terminals and multiplexing equipment
until October 1993. Prior to joining Telco Systems in May 1986 as Vice President
of Engineering, Dr. Lazay spent four years with ITT's Electro-Optical Products
Division, first as Director of Fiber Optic Development and then as Vice
President, Director of Engineering. From 1969 until 1982 he worked for Bell
Telephone Laboratories, assuming a number of increasingly responsible positions
at its Material Research Laboratory. Dr. Lazay is a Director of each of the
Company's wholly-owned subsidiaries. He holds a Ph.D. in Physics from the
Massachusetts Institute of Technology.
MR. DONOFRIO, a Director of the Company since May 1993, is a co-owner and
has been employed as Executive Vice President of Leeverall, Inc. since his
retirement from SNET in May 1993, where he had served as one of three Senior
Vice Presidents reporting to the President and CEO. Continuously employed by
SNET since 1961, during the five years prior to his retirement he held a number
of Senior and Group Vice President positions and served as the President of SNET
Diversified Group, Inc. Mr. Donofrio is a member of the Board of Directors of
the University of New Haven, the National Engineering Consortium, Griffin Health
Services Corp., Griffin Hospital Corp. and the Greater New Haven United Way. Mr.
Donofrio is a Director of each of the Company's wholly-owned subsidiaries and
General Photonics. Mr. Donofrio holds a B.S. in Business Administration from
Norwich University and attended the M.B.A. program at the University of
Hartford.
31
<PAGE> 34
DR. LAI, a Director of the Company since March 1995, is President of First
American Development Corporation, a management consulting and international
business development company. Previously, Dr. Lai headed the Corporate Planning
and Development Department at Pitney Bowes, Inc. from 1989 to 1993. She was the
Chief Financial and Planning Officer and the Vice President of Asia/Pacific
Operations at US West International from 1987 to 1989. Dr. Lai worked for AT&T
from 1971 to 1987 in various corporate positions including Director of Corporate
Strategy and Development (1983-1986), responsible for AT&T's global business
development activities, and Director of International Public Affairs and Public
Relations (1986-1987), responsible for managing AT&T's relationships with all
international constituents (governments, partners, trade associations, presses,
advertising agencies, employees, etc.). Dr. Lai is a Director of each of the
Company's wholly-owned subsidiaries. Dr. Lai is an MIT Sloan Fellow and holds a
Ph.D. and an M.A. in Economics from the University of Wisconsin-Madison, as well
as a B.S. and an M.S. in Agricultural Economics from National Taiwan University
and the University of Kentucky, respectively.
MR. CUTTS was appointed President and a Director of General Photonics, the
Company's joint venture with General Cable, as of December 23, 1996. Previously,
since October 1995, he had served as President and a Director of APD. He joined
the Company in April 1991, as Vice President, Business Development, responsible
for marketing, sales and corporate development activities. Prior to joining the
Company he was employed by Norton Company from February 1978 to March 1991 in
various management positions in several divisions, including Market Manager,
Advanced Ceramics, responsible for the electronics market and Manager, Corporate
Development, responsible for mergers and acquisitions. From 1976 until 1977 he
was employed by Owens-Corning Fiberglass. Mr. Cutts holds both a B.A. in
Mathematics and Economics and a M.S. in Industrial Administration from Union
College.
MR. BECK, appointed President and a Director of SpecTran Specialty in
October 1995, joined the Company in February 1994, as Vice President and General
Manager of SpecTran Specialty following the acquisition of SpecTran Specialty by
the Company. Prior to joining SpecTran Specialty he was employed by
Ensign-Bickford Optics Company and/or Ensign-Bickford Optical Technologies from
July 1984 in various management positions, including President, General Manager
and Sales Marketing Manager. Mr. Beck holds a B.A. in Geography and Economics
from Dartmouth College and a M.A. in Business Administration from Rensselaer
Polytechnic Institute.
32
<PAGE> 35
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information as of December 31, 1996
(except as otherwise specified herein), regarding the beneficial ownership of
Common Stock of the Company by (i) each person who is known to the Company to
beneficially own more than 5% of the outstanding shares of Common Stock of the
Company, (ii) each director and executive officer of the Company and (iii) all
directors and executive officers of the Company as a group. The table also sets
forth information regarding such beneficial ownership by each such person or
group after adjustment for the offering, assuming no exercise of the
over-allotment option granted to the Underwriters. Of the 1,800,000 shares of
Common Stock offered hereby, 350,000 are being sold by Allen & Company
Incorporated (the "Selling Stockholder"), a principal stockholder of the
Company, representing all of the shares beneficially owned by the Selling
Stockholder on December 31, 1996. These shares will be acquired by the Selling
Stockholder upon exercise of a warrant issued to it in November 1990 (which
incorporated warrants issued in August 1986 and August 1981), in conjunction
with an equity investment and the conversion into equity of certain funds the
Selling Stockholder had loaned to the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE
BENEFICIAL OWNERSHIP OF BENEFICIAL
PRIOR TO OFFERING OWNERSHIP AFTER OFFERING
------------------------ NUMBER ------------------------
NUMBER OF OF SHARES NUMBER OF
SHARES OF PERCENT OF TO BE SHARES OF PERCENT OF
NAME AND ADDRESS OF COMMON COMMON SOLD IN COMMON COMMON
BENEFICIAL OWNER STOCK STOCK(1) OFFERING STOCK STOCK(2)
- ------------------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Raymond E. Jaeger.................... 185,967(3) 3.3% -- 185,967 2.5%
Allen & Company Incorporated......... 350,000(4) 6.1% 350,000 -- --
Dimensional Fund Advisors Inc. ...... 361,100(5) 6.7% -- 361,100 5.0%
Ira S. Nordlicht..................... 14,331(6) * -- 14,331 *
Paul D. Lazay........................ 8,999(7) * -- 8,999 *
Bruce A. Cannon...................... 51,667(8) * -- 51,667 *
Richard M. Donofrio.................. 7,499(9) * -- 7,499 *
John E. Chapman...................... 56,667(10) 1.0% -- 56,667 1.0%
Lily K. Lai.......................... 333(11) * -- 333 *
Glenn E. Moore....................... 16,667(12) * -- 16,667 *
Crawford L. Cutts.................... 46,666(13) * -- 46,666 *
William B. Beck...................... 20,000(14) * -- 20,000 *
All directors and executive officers
as a group (10 persons)............ 408,796(15) 7.2% -- 408,796 5.4%
</TABLE>
- ---------------
* Less than 1%
(1) Percentage of beneficial ownership is based on the 5,400,071 shares of
Common Stock outstanding on December 31, 1996. Shares of Common Stock
subject to stock options and warrants that are exercisable within 60 days
of December 31, 1996 are deemed outstanding for computing the percentage of
the person or group holding such options or warrants, but are not deemed
outstanding for computing the percentage of any other person or group.
(2) Percentage of beneficial ownership is based on the 7,200,071 shares of
Common Stock to be outstanding after giving effect to the sale of the
shares of Common Stock to the public offered by the Company hereby, the
exercise by the Selling Stockholder of its warrant to purchase 350,000
shares of Common Stock and assuming no exercise of outstanding options or
other issuance of shares after December 31, 1996.
(3) Includes 86,667 shares subject to options exercisable within 60 days. Does
not include 29,333 shares subject to options not exercisable within 60
days.
33
<PAGE> 36
(4) Shares underlying the currently exercisable warrant which is being
exercised to acquire 350,000 shares of Common Stock of the Company being
offered by the Selling Stockholder. Allen & Company Incorporated's address
is 711 Fifth Avenue, New York, New York 10022.
(5) This information is based upon information provided by Dimensional Fund
Advisors, Inc. on January 7, 1997. Dimensional Fund Advisors Inc.'s address
is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(6) Includes 8,999 shares subject to options exercisable within 60 days. Does
not include 2,001 shares subject to options not exercisable within 60 days.
(7) Includes 8,999 shares subject to options exercisable within 60 days. Does
not include 2,001 shares subject to options not exercisable within 60 days.
(8) Includes 51,667 shares subject to options exercisable within 60 days. Does
not include 21,333 shares subject to options not exercisable within 60
days.
(9) Includes 6,999 shares subject to options exercisable within 60 days. Does
not include 2,001 shares subject to options not exercisable within 60 days.
(10) Includes 56,667 shares subject to options exercisable within 60 days. Does
not include 23,333 shares subject to options not exercisable within 60
days.
(11) Includes 333 shares subject to options exercisable within 60 days. Does not
include 6,667 shares subject to options not exercisable within 60 days.
(12) Includes 16,667 shares subject to options exercisable within 60 days. Does
not include 33,333 shares subject to options not exercisable within 60
days.
(13) Includes 46,666 shares subject to options exercisable within 60 days. Does
not include 23,001 shares subject to options not exercisable within 60
days.
(14) Includes 20,000 shares subject to options exercisable within 60 days. Does
not include 18,000 shares subject to options not exercisable within 60
days.
(15) Includes 303,664 shares subject to options exercisable within 60 days. Does
not include 161,003 shares subject to options not exercisable within 60
days.
34
<PAGE> 37
DESCRIPTION OF SECURITIES
GENERAL
The following description of the capital stock of the Company and certain
provisions of the Company's Restated Certificate of Incorporation (the
"Certificate") and Amended and Restated By-Laws (the "By-Laws") is a summary of
and is qualified in its entirety by the provisions of the Certificate and the
By-Laws.
COMMON STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
voting Common Stock, $.10 par value, and 250,000 shares of Non-Voting Common
Stock, $.10 par value. Except with respect to voting rights, shares of
Non-Voting Common Stock are identical in all respects to shares of voting Common
Stock. Holders of all outstanding shares are entitled to such dividends as may
be declared by the Board of Directors and, in the event of liquidation,
dissolution or winding up of the affairs of the Company, are entitled to
receive, on a pro-rata basis, all assets of the Company remaining after
satisfaction of all liabilities. Holders have no preemptive rights to purchase
additional shares of any class of the Company's capital stock. The issued and
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be, when offered and sold, duly authorized, validly issued, fully
paid and nonassessable. The shares have no conversion rights, are not subject to
redemption and are not subject to calls, assessments or liabilities. Each
outstanding share of the voting Common Stock is entitled to one vote, either in
person or by proxy, on all matters which may be voted upon by the holders
thereof at meetings of the stockholders. The Non-Voting Common Stock has no
vote.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND BY-LAWS
Certain provisions of the Company's Certificate and By-Laws and Delaware
law could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
the Company. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of Common Stock. The Certificate and
the By-Laws provide for a classified Board of Directors, divided into three
classes, with directors in each class elected for a three-year term. The By-Laws
impose various procedural and other requirements that could make it more
difficult for stockholders to effect certain corporate actions. The Certificate
and the By-Laws require stockholder action to be taken at a meeting and do not
permit stockholder action by written consent. By requiring stockholder action to
be taken at a meeting, matters requiring a stockholder vote are subject to
notice, the solicitation of proxies, and the consideration of all of the
stockholders of the Company. This provision will make it more difficult and time
consuming for a substantial stockholder to gain control of the Board by
effecting a sudden change in its composition, and will provide the Board with an
opportunity to review any proposal from a substantial stockholder as well as
appropriate alternatives thereto. The Certificate contains an "other
constituencies" provision which will enable the Board, in the face of an
acquisition proposal, to exercise its business judgment over the full range of
factors which affect the ongoing business of the Company. The Certificate
contains an anti-greenmail provision providing that no short-term (less than two
years) holder of 5% or more of the shares of Common Stock of the Company can
secure for itself the repurchase of its shares at a price not available to the
other stockholders. Of the 20,250,000 shares of Common Stock (including 250,000
shares of Non-Voting Common Stock) which the Company is authorized to issue,
only 8,080,214 will be outstanding or reserved for issuance after the offering
and none of the Non-Voting Common Stock will be outstanding. See "Shares
Available for Future Sale." The authorized but unissued shares of Common Stock
could be used to make a change in control of the Company more difficult. Under
certain circumstances such shares could be used to create voting impediments or
to frustrate persons seeking to effect a takeover or otherwise gain control of
the Company or could be privately placed with purchasers who might side with the
Board in opposing a hostile takeover bid and could be used to dilute the stock
ownership of a person or entity seeking to obtain control of the Company. The
Company has also not opted out of certain protections of the Delaware Business
Corporation Law discussed below.
35
<PAGE> 38
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by (x) persons who are directors and also
officers and (y) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or (iii) on or subsequent to
such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
The Company may opt out of the effect of Section 203 by amendment of the
Certificate or By-Laws approved by holders of a majority of the shares entitled
to vote, provided that such amendment would not take effect until 12 months
after its adoption and would not affect any business combinations with
interested stockholders effected during such 12 months. To date, the Company has
not opted out of Section 203.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust Company, New York, New York.
36
<PAGE> 39
SHARES AVAILABLE FOR FUTURE SALE
As of December 31, 1996, 5,400,071 shares of Common Stock of the Company
were outstanding, and 1,230,143 shares were reserved for issuance pursuant to
the exercise of stock options under the Company's Incentive Stock Option Plans
and the warrant of the Selling Stockholder, leaving 13,369,076 shares of Common
Stock available for issuance from time to time by the Board of Directors, as the
interests of the Company may require.
Upon completion of this offering, the Company will have 7,200,071 shares of
Common Stock outstanding based on shares of Common Stock outstanding as of
December 31, 1996. Of such shares of Common Stock, 6,950,495 shares will be
freely tradeable without restriction or further registration under the
Securities Act of of 1933 as amended, (the "Securities Act"), unless purchased
by "affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. The remaining 249,576 shares are held by persons who may be
deemed affiliates of the Company or are "restricted securities" under Rule 144
and will be eligible for sale on the date of this Prospectus subject to the
restrictions of Rule 144.
Without the prior written consent of Tucker Anthony Incorporated, the
Company has agreed that it will not, for a period of 180 days from the date of
this Prospectus, offer, sell or otherwise dispose of any of the Company's equity
securities (except that the Company may grant additional options to purchase
shares of Common Stock, and issue shares, under its Incentive Stock Option
Plans), and the Company's directors and executive officers, holding an aggregate
of 408,796 shares of Common Stock and options exercisable within 60 days of
December 31, 1996 to acquire shares of Common Stock have agreed that they will
not, for a period of 90 days from the date of this Prospectus, offer, sell or
otherwise dispose of any of the Company's equity securities that they
beneficially own or control other than gifts (up to 5,000 shares in the
aggregate) or transfers by will or intestacy to immediate family members,
provided that the transferee agrees to these same limitations.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), who has beneficially owned restricted securities
within the meaning of Rule 144 for the required time periods, is entitled to
sell within any three-month period a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of the Company's Common Stock
(approximately 72,001 shares after the offering) or (ii) the average weekly
trading volume of the Company's Common Stock in the over the counter market
during the four calendar weeks preceding the date on which notice of the sale is
filed with the Securities and Exchange Commission (the "Commission"). Sales
under Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who owns shares within the definition of "restricted
securities" under Rule 144 that were purchased from the Company (or any
affiliate) at least three years previously, will be entitled to sell such shares
under Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
As of December 31, 1996, options to purchase 650,703 shares of Common Stock
were issued and outstanding under the Company's Incentive Stock Option Plans.
The Company has filed registration statements under the Securities Act covering
in the aggregate approximately 880,143 shares of Common Stock reserved for
issuance under its Incentive Stock Option Plans. Shares registered under such
registration statements are, subject to Rule 144 volume limitations applicable
to affiliates, available for sale in the open market, except to the extent that
such shares are subject to vesting restrictions with the Company and the lock-up
arrangements described above.
37
<PAGE> 40
UNDERWRITING
<TABLE>
The Underwriters named below, acting through Tucker Anthony Incorporated
and Raymond James & Associates, Inc. as Representatives, have agreed, subject to
the terms and conditions of the Underwriting Agreement, to purchase from the
Company and the Selling Stockholder, and the Company and the Selling Stockholder
have agreed to sell to the Underwriters, the number of shares of Common Stock
set forth opposite their names below:
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Tucker Anthony Incorporated................................
Raymond James & Associates, Inc. ..........................
---------
Total............................................ 1,800,000
=========
</TABLE>
The Underwriters will purchase all shares of Common Stock offered hereby,
other than over-allotment shares, if any of such shares are purchased. The
Underwriting Agreement provides that the obligations of the several Underwriters
are subject to conditions precedent specified therein. In the event of a default
by an Underwriter, the commitment set forth above of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Company and the Selling Stockholder have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. Such dealers may reallow a concession of not in excess of
$ per share to certain other dealers. After the public offering, the
offering price, concession and reallowance to dealers may be changed by the
Underwriters.
The Company has granted to the Underwriters an option, exercisable by the
Underwriters not later than 30 days after the effective date of this Prospectus,
to purchase up to 270,000 additional shares of Common Stock at the public
offering price, less the underwriting discount set forth on the cover page of
this Prospectus. The Underwriters may exercise such option, in whole or in part,
only to cover over-allotments made in connection with the sale of the shares of
Common Stock offered hereby. To the extent that Underwriters exercise such
option, each Underwriter will become obligated, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
of Common Stock to be purchased by it shown in the above table bears to the
total shown, and the Company will be obligated, pursuant to the option, to sell
such shares to the Underwriters.
In connection with this offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Common Stock on
the Nasdaq National Market immediately prior to the commencement of sales in
this offering, in accordance with Rule 10b-6A under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Passive market making consists of
displaying bids on the Nasdaq National Market limited by the bid prices of
independent market makers and purchases limited by such prices and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the Common Stock during a specified period and must be
discontinued when such limit is reached. Passive market making may stabilize the
market price of the Common Stock at a level above that which might otherwise
prevail and, if commenced, may be discontinued at any time.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to certain payments that the Underwriters may
be required to make.
Without the prior written consent of Tucker Anthony Incorporated, the
Company has agreed that it will not, for a period of 180 days from the date of
this Prospectus, offer, sell or otherwise dispose of any of the Company's equity
securities (except that the Company may grant additional options to purchase
shares of Common Stock, and issue shares, under its Incentive Stock Option
Plans), and the Company's directors
38
<PAGE> 41
and executive officers, holding an aggregate of 408,796 shares of Common Stock
and options exercisable within 60 days of December 31, 1996 to acquire shares of
Common Stock have agreed that they will not, for a period of 90 days from the
date of this Prospectus, offer, sell or otherwise dispose of any of the
Company's equity securities that they beneficially own or control other than
gifts (up to 5,000 shares in the aggregate) or transfers by will or intestacy to
immediate family members, provided that the transferee agrees to these same
limitations.
LEGAL MATTERS
The validity of the shares of Common Stock of the Company offered hereby
will be passed upon for the Company by Hackmyer & Nordlicht, New York, New York.
Ira S. Nordlicht, a partner in the law firm of Hackmyer & Nordlicht, is a
Director of the Company and beneficially owns 14,331 shares of Common Stock.
Certain legal matters in connection with the offering will be passed upon for
the Underwriters by Peabody & Brown (a partnership including professional
corporations), Boston, Massachusetts.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1994 and 1995, and for each of the years in the three-year period ended December
31, 1995 included or incorporated by reference in this Prospectus and
Registration Statement, have been included or incorporated by reference in
reliance on the reports of KPMG Peat Marwick LLP, independent certified public
accountants, given upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street NW, Room 1024, Washington, D.C. 20549, and at the Regional Offices of the
Commission at Room 1400, 75 Park Place, New York, New York 10007, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and copies of such
materials can be obtained from the Public Reference Section of the Commission at
the above address in Washington, D.C. at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
commission. The address of such Web site is http://www.sec.gov. The Company's
securities are listed on the Nasdaq National Market and the Company's reports,
proxy statements and other information can be inspected at the offices of Nasdaq
at 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all of the information set forth
in the Registration Statement. For further information with respect to the
Company and the shares of Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits filed as a part thereof. Statements
contained herein concerning the provisions of documents which are a part of the
Registration Statement but which are not a part of this Prospectus are summaries
of such documents, and each such statement herein is qualified in its entirety
by reference to the copy of the applicable document filed with the Commission.
Copies of the Registration Statement and the exhibits thereto are on file at the
Commission and may be obtained upon payment of the prescribed fee or may be
examined without charge at the public reference facilities of the Commission.
39
<PAGE> 42
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, the Company's Current Report on Form 8-K dated December 31, 1996 reporting
the senior debt financing and refinancing of existing bank loans, the Company's
Current Report on Form 8-K dated January 8, 1997 reporting the formation of
General Photonics, LLC, the Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1996, June 30, 1996 and September 30, 1996 and
the Company's Proxy Statement for the Annual Meeting of Stockholders held on May
31, 1996 have been filed with the Commission pursuant to Sections 13 and 14 of
the Exchange Act, and, together with the Company's Registration Statement on
Form 8-A, are incorporated herein by reference except as supplemented or
modified herein. All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Common Stock being offered
hereunder shall be deemed to be incorporated herein by reference and shall be a
part hereof from the date of filing of such documents. Any statements contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statements so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
that have been incorporated herein by reference (other than exhibits thereto,
unless such exhibits are specifically incorporated by reference into such
documents). Written requests for such copies should be directed to Bruce A.
Cannon, Chief Financial Officer, SpecTran Corporation, 50 Hall Road, Sturbridge,
Massachusetts 01566. Telephone inquiries may be directed to Mr. Cannon at (508)
347-2261.
40
<PAGE> 43
<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1994 and 1995 and
(Unaudited) September 30, 1996....................................... F-3
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1994 and 1995 and (Unaudited) for the Nine Months Ended
September 30, 1995 and 1996.......................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 and (Unaudited) for the Nine Months Ended
September 30, 1995 and 1996.......................................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and (Unaudited) for the Nine Months
Ended September 30, 1996............................................. F-6
Notes to Consolidated Financial Statements.............................. F-7 through F-20
Pro Forma Financial Information (Unaudited)............................. F-21 through F-23
</TABLE>
F-1
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
SpecTran Corporation:
We have audited the consolidated financial statements of SpecTran
Corporation as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SpecTran
Corporation as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 2, 1996
F-2
<PAGE> 45
SPECTRAN CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
-------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets (Note 8):
Cash and Cash Equivalents................................ $ 477 $ 1,625 $ 2,174
Current Portion of Marketable Securities (Note 2)........ 2,563 4,088 972
Trade Accounts Receivable, net of allowance for doubtful
accounts of $124, $265 and $280 in 1994, 1995 and
1996.................................................. 6,184 7,799 10,201
Inventories (Note 3)..................................... 4,100 7,415 8,967
Income Taxes Receivable.................................. 502 -- --
Current Deferred Income Taxes, net (Note 10)............. 303 588 685
Prepaid Expenses and Other Current Assets................ 268 513 567
------- ------- -------
Total Current Assets.................................. 14,397 22,028 23,566
Property, Plant and Equipment, net (Notes 4 and 8)......... 9,416 10,290 14,702
Other Assets (Note 8):
Long-term Marketable Securities (Note 2)................. 3,275 1,133 1,422
License Agreements, net (Note 5)......................... 1,205 1,004 854
Deferred Income Taxes, net (Note 10)..................... 1,702 1,652 974
Goodwill, net (Notes 6 and 14)........................... 1,107 4,156 3,935
Other Long-term Assets (Note 13)......................... 260 102 1,108
------- ------- -------
Total Other Assets.................................... 7,549 8,047 8,293
------- ------- -------
Total Assets..................................... $31,362 $40,365 $46,561
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable......................................... $ 751 $ 2,762 $ 2,727
Income Taxes Payable..................................... -- 225 231
Accrued Defined Benefit Pension Liability (Note 13)...... 66 118 799
Accrued Liabilities (Note 7)............................. 2,201 2,964 3,641
------- ------- -------
Total Current Liabilities........................ 3,018 6,069 7,398
Long-term Debt (Note 8).................................... 5,240 10,000 12,000
Stockholders' Equity (Note 9):
Common Stock, voting, $.10 par value; authorized
20,000,000 shares; outstanding 5,207,409 shares,
5,353,686 shares and 5,396,963 shares in 1994, 1995
and 1996, respectively................................ 520 535 539
Common Stock, non-voting, $.10 par value; authorized
250,000 shares; no shares outstanding................. -- -- --
Paid-in Capital.......................................... 26,028 26,443 26,745
Net Unrealized Gain/(Loss) on Marketable Securities...... (242) (22) 15
Retained Earnings (Deficit).............................. (3,202) (2,660) (136)
------- ------- -------
Total Stockholders' Equity............................ 23,104 24,296 27,163
------- ------- -------
Total Liabilities and Stockholders' Equity....... $31,362 $40,365 $46,561
======= ======= =======
</TABLE>
See accompanying notes to these consolidated financial statements.
F-3
<PAGE> 46
SPECTRAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net Sales (Note 11).............................. $25,578 $26,926 $38,581 $27,035 $44,915
Cost of Sales.................................... 15,963 19,303 25,520 17,941 28,621
------- ------- ------- ------- -------
Gross Profit................................... 9,615 7,623 13,061 9,094 16,294
Selling and Administrative Expenses.............. 3,293 6,319 9,669 6,698 9,909
Research and Development Costs................... 954 1,974 2,827 2,103 2,321
------- ------- ------- ------- -------
Income (Loss) from Operations.................... 5,368 (670) 565 293 4,064
------- ------- ------- ------- -------
Other Income (Expense):
Interest Income................................ 246 327 328 240 166
Interest Expense............................... (37) (303) (626) (434) (528)
Other, Net..................................... 52 159 510 358 122
------- ------- ------- ------- -------
Other Income (Expense), net.................... 261 183 212 164 (240)
------- ------- ------- ------- -------
Income (Loss) before Income Taxes................ 5,629 (487) 777 457 3,824
Income Tax Expense (Note 10)..................... 1,974 -- 235 187 1,300
------- ------- ------- ------- -------
Net Income (Loss)................................ $ 3,655 $ (487) $ 542 $ 270 $ 2,524
------- ------- ------- ------- -------
Net Income (Loss) per Common Share............... $ .67 $ (.09) $ .10 $ .05 $ .43
======= ======= ======= ======= =======
Weighted Average Number of Common Shares
Outstanding.................................... 5,488 5,203 5,583 5,410 5,930
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 47
SPECTRAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- -------- ------- -------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)............................. $ 3,655 $ (487) $ 542 $ 270 $ 2,524
Reconciliation of net income (loss) to net
cash provided by operating activities:
Depreciation and amortization......... 1,025 1,686 2,338 1,688 2,189
Loss (gain) on sale of assets......... (50) 4 8 4 --
Loss on sale of marketable
securities.......................... -- -- 17 -- 19
Changes in valuation accounts......... (100) 265 (632) (150) (242)
Change in long-term deferred income
taxes............................... 1,651 (1,384) 576 -- 832
Change in other long-term assets...... -- (6) (110) 18 (1,019)
Changes in assets and liabilities, net of
effects from purchase of businesses:
Current deferred income taxes.............. 4 967 (339) -- 23
Accounts receivable........................ (2,007) (467) (409) (481) (2,508)
Inventories................................ (809) 1,137 (2,501) (1,501) (1,479)
Prepaid expenses and other current
assets................................... 61 87 (260) (451) (54)
Income taxes payable/receivable............ 402 (695) 716 455 6
Accounts payable and accrued liabilities... 133 (59) 1,854 233 1,323
------- ------- ------- ------- -------
Net Cash Provided by Operating Activities....... 3,965 1,048 1,800 85 1,614
------- ------- ------- ------- -------
Cash Flows from Investing Activities:
Acquisition of businesses, net of cash
acquired................................... (307) (6,662) (3,822) (3,818) --
Acquisition of property, plant and
equipment.................................. (1,342) (2,500) (2,540) (1,552) (6,209)
Purchase of marketable securities............. (8,882) (3,178) (10,894) (6,494) (7,380)
Proceeds from sale/maturity of marketable
securities................................. 2,832 3,137 11,839 7,496 10,218
Proceeds from sale of equipment............... -- -- 5 -- --
------- ------- ------- ------- -------
Net Cash Used in Investing Activities........... (7,699) (9,203) (5,412) (4,368) (3,371)
------- ------- ------- ------- -------
Cash Flows from Financing Activities:
Borrowings of long-term debt.................. -- 5,240 4,760 4,760 2,000
Reduction of debt............................. (67) (367) -- -- --
Tax effect of disqualifying disposition of 150
shares..................................... (106) 120 -- -- --
Proceeds from exercise of stock options and
warrants................................... 56 101 -- -- 306
------- ------- ------- ------- -------
Net Cash Provided by (Used in) Financing
Activities.................................... (117) 5,094 4,760 4,760 2,306
------- ------- ------- ------- -------
Increase (Decrease) in Cash and Cash
Equivalents................................... (3,851) (3,061) 1,148 477 549
Cash and Cash Equivalents at Beginning of
Period........................................ 7,389 3,538 477 477 1,625
------- ------- ------- ------- -------
Cash and Cash Equivalents at End of Period...... $ 3,538 $ 477 $ 1,625 $ 954 $ 2,174
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 48
SPECTRAN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
COMMON STOCK ON RETAINED TOTAL
-------------------- PAID-IN MARKETABLE EARNINGS STOCKHOLDERS'
SHARES PAR VALUE CAPITAL SECURITIES (DEFICIT) EQUITY
--------- --------- ------- ----------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992............ 5,140,573 $ 514 $25,865 $ -- $ (6,370) $20,009
Exercise of Warrants (Note 9)......... 20,000 2 38 -- -- 40
Exercise of Stock Options............. 4,502 1 15 -- -- 16
Tax Effect of Disqualifying
Disposition of ISO Shares (Note
10)................................ -- -- (106) -- -- (106)
Net Income............................ -- -- -- -- 3,655 3,655
--------- ---- ------- ----- ------- -------
Balance at December 31, 1993............ 5,165,075 517 25,812 -- (2,715) 23,614
Exercise of Stock Options (Note 9).... 42,334 3 96 -- -- 99
Tax Effect of Disqualifying
Disposition of ISO Shares (Note
10)................................ -- -- 120 -- -- 120
Unrealized Loss on Marketable
Securities......................... -- -- -- (242) -- (242)
Net Loss.............................. -- -- -- -- (487) (487)
--------- ---- ------- ----- ------- -------
Balance at December 31, 1994............ 5,207,409 520 26,028 (242) (3,202) 23,104
Exercise of Stock Options (Note 9).... 1,833 -- 7 -- -- 7
Issuance of Shares in Connection with
Acquisition (Note 14).............. 144,444 15 408 -- -- 423
Unrealized Gain on Marketable
Securities......................... -- -- -- 220 -- 220
Net Income............................ -- -- -- -- 542 542
--------- ---- ------- ----- ------- -------
Balance at December 31, 1995............ 5,353,686 535 26,443 (22) (2,660) 24,296
Exercise of Stock Options (Note 9).... 43,277 4 302 -- -- 306
Unrealized Gain on Marketable
Securities......................... -- -- -- 37 -- 37
Net Income............................ -- -- -- -- 2,524 2,524
--------- ---- ------- ----- ------- -------
Balance at September 30, 1996
(Unaudited)........................... 5,396,963 $ 539 $26,745 $ 15 $ (136) $27,163
========= ==== ======= ===== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 49
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 IS
UNAUDITED)
1 -- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
SpecTran develops, manufactures and markets a wide range of fiber optic
products. These include multimode and single-mode optical fiber and cable for
use in data communications and telecommunications applications. The Company also
develops special performance fibers, coatings, cables, cable assemblies and
other value-added products for use in a variety of specialty markets.
PRINCIPLES OF CONSOLIDATION AND BASIS OF ACCOUNTING
The consolidated financial statements include the accounts of SpecTran
Corporation (the "Company") and all wholly owned subsidiaries: SpecTran
Communication Fiber Technologies, Inc., SpecTran Specialty Optics Company, and
Applied Photonic Devices, Inc. All significant intercompany balances and
transactions have been eliminated. For related event subsequent to these
financial statements see "Note 15 -- Subsequent Event (unaudited)."
Management uses estimates and assumptions in preparing the financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities
and the reported revenue and expenses. Actual results may vary from the
estimates.
Certain 1993 and 1994 balances have been reclassified to be consistent with
the 1995 presentation.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of and for the nine months ended
September 1995 and 1996 are unaudited; however, they include all adjustments
(consisting of normal recurring adjustments) considered necessary by management
for a fair presentation of the financial position and the results of operations
for these periods. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for the entire year.
REVENUE RECOGNITION
Sales revenues are recognized upon shipment of goods. Customers generally
have the right to return for replacement any goods which do not meet the
customer's purchase order specifications. Sales revenues and cost of sales as
reported in the consolidated statements of operations are adjusted to reflect
estimated returns and warranty costs.
MARKETABLE SECURITIES
Marketable securities are classified as available-for-sale and reported at
fair value, with unrealized gains and losses excluded from earnings and reported
as a separate component of stockholders' equity, net of estimated income taxes.
Gains and losses on the sale of marketable securities are recognized at the time
of sale on a specific identification basis.
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined by the first-in, first-out method.
F-7
<PAGE> 50
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with original maturities of three
months or less to be cash equivalents.
Supplemental disclosure of cash flow information includes cash paid during
the periods for (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER ENDED
31, SEPTEMBER 30,
---------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest...................................... $ 34 $239 $510 $342 $575
Income Taxes.................................. 372 560 100 10 692
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Machinery and equipment
assembled by the Company are valued at the cost of component parts purchased,
plus the approximate labor and overhead costs to the Company. Significant
renewals and betterments are capitalized. The cost of maintenance and repairs is
charged to income as incurred. Repairs and maintenance costs amounted to
$625,000, $697,000 and $1 million in 1993, 1994 and 1995, respectively, and
$653,000 and $1.1 million for the nine months ended September 30, 1995 and 1996,
respectively.
Depreciation is provided by the straight-line method. The principal annual
rates of depreciation are:
Buildings and building improvements...........................4%
Machinery and equipment...........................20% to 33 1/3%
Depreciation expense of property, plant and equipment amounted to $806,000,
$1.4 million and $1.9 million in 1993, 1994 and 1995, respectively, and $1.4
million and $1.8 million for the nine months ended September 30, 1995 and 1996,
respectively.
COST IN EXCESS OF NET ASSETS ACQUIRED AND OTHER INTANGIBLES
The Company monitors its cost in excess of net assets acquired (goodwill)
and its other intangibles to determine whether any impairment of these assets
has occurred. In making such determination with respect to goodwill, the Company
evaluates the performance, on an undiscounted basis, of the underlying
businesses which gave rise to such amount. Amortization of goodwill is recorded
on a straight-line basis over the estimated useful life of 15 years.
With respect to other intangibles, which include the cost of license
agreements and patents, the Company bases its determination of impairment on the
performance, on an undiscounted basis, of the related products.
LICENSE AGREEMENT AND OTHER ASSETS
The total cost of the license agreement obtained in 1991 is being amortized
and charged to expense based on a ten year life. Amortization expense amounted
to $201,000 for 1993, 1994 and 1995 and $151,000 for both the nine months ended
September 30, 1995 and 1996. Deferred financing costs are amortized and charged
to expense over the lives of the related debt. Patents are being amortized over
a seventeen year life.
F-8
<PAGE> 51
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SINGLE-MODE FIBER MANUFACTURING DEVELOPMENT COSTS
Manufacturing development costs are expensed as incurred. In addition to
Research and Development expenses for single-mode fiber, there were
manufacturing development costs relating to single-mode fiber of approximately
$2 million in 1994 and $1.8 million in 1995 that were included in cost of sales.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
INCOME (LOSS) PER SHARE OF COMMON STOCK
Income (loss) per share of common stock as computed is based on the
weighted average number of shares outstanding during the periods, including
common stock equivalents of stock purchase warrants and stock options. For 1994,
the stock purchase warrants and stock options have not been included in the
computation of loss per share since the effect would be antidilutive. Fully
diluted income per share approximates primary income per share for all periods
presented.
FINANCIAL INSTRUMENTS
Financial instruments of the Company consist of cash and cash equivalents,
marketable securities, accounts receivable, accounts payable and its bank loans.
The carrying amounts of these financial instruments approximate their fair
value.
F-9
<PAGE> 52
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2 -- MARKETABLE SECURITIES
A summary of marketable securities available for sale at December 31, 1994,
1995 and September 30, 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
QUOTED
PURCHASE AMORTIZED UNREALIZED UNREALIZED MARKET
PRICE COST GAINS LOSSES VALUE
-------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
1994
Mutual Funds.................................. $ 500 $ 500 $ -- $ -- $ 500
U.S. Government and Agency Obligations........ 5,582 5,580 -- 242 5,338
------ ------ --- ---- ------
Total................................. $6,082 $ 6,080 $ -- $242 $5,838
====== ====== === ==== ======
1995
Mutual Funds.................................. $1,190 $ 1,190 $ -- $ -- $1,190
U.S. Government and Agency Obligations........ 3,925 3,923 2 32 3,893
Corporate Equities............................ 130 130 8 -- 138
------ ------ --- ---- ------
Total................................. $5,245 $ 5,243 $ 10 $ 32 $5,221
====== ====== === ==== ======
1996
Mutual Funds.................................. $ 380 $ 380 $ -- $ -- $ 380
U.S. Government and Agency Obligations........ 902 903 -- 17 886
Corporate Debt Securities..................... 981 966 -- 5 961
Corporate Equities............................ 130 130 37 -- 167
------ ------ --- ---- ------
Total................................. $2,393 $ 2,379 $ 37 $ 22 $2,394
====== ====== === ==== ======
</TABLE>
The Company received 5,119 shares of stock, with a value of $130,000, as a
result of the conversion of State Mutual Life Assurance Company of America, the
Company's health insurer, from a mutual company to a stock company in November
1995.
The amortized cost and estimated market value of debt securities are shown below
(in thousands).
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1994 1995 SEPTEMBER 30, 1996
------------------------ ------------------------ ------------------------
AMORTIZED QUOTED AMORTIZED QUOTED AMORTIZED QUOTED
COST MARKET VALUE COST MARKET VALUE COST MARKET VALUE
--------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Expected Maturities:
Within one year............ $ 2,166 $2,063 $ 2,917 $2,894 $ 660 $ 656
One to five years.......... 3,414 3,275 1,006 999 1,209 1,191
</TABLE>
Proceeds from sales of marketable securities during 1995 were $1.5 million.
Proceeds from the sales of marketable securities for the nine months ended
September 30, 1995 and 1996 were $1.5 million and $1 million, respectively.
Pretax losses of $17,000 for 1995 and the nine months ended September 30, 1995
and $19,000 for the nine months ended September 30, 1996 were recognized on
these sales.
F-10
<PAGE> 53
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3 -- INVENTORIES
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Raw Materials............................................ $ 1,752 $ 3,132 $ 4,142
Work in Process.......................................... 779 1,508 2,211
Finished Goods........................................... 1,569 2,775 2,614
------ ------ ------
$ 4,100 $ 7,415 $ 8,967
====== ====== ======
</TABLE>
4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Land and Land Improvements................................. $ 395 $ 408 $ 497
Buildings and Improvements................................. 3,266 3,729 3,803
Machinery and Equipment.................................... 14,613 17,229 19,437
Construction in Progress................................... 1,625 1,641 5,478
------- ------- -------
19,899 23,007 29,215
Less: Accumulated Depreciation............................. 10,483 12,717 14,513
------- ------- -------
Property, Plant and Equipment, net......................... $ 9,416 $10,290 $14,702
======= ======= =======
</TABLE>
5 -- LICENSE AGREEMENTS
In February, 1983, the Company obtained from Corning, Incorporated
("Corning") a limited, non-assignable, non-exclusive royalty-bearing license to
make, use and sell optical fiber under certain of Corning's United States
patents owned or filed for on or before January 1, 1988. The Company granted to
Corning a non-exclusive royalty-free license for any United States patents filed
for on or before January 1, 1988 related to the subject matter of the Corning or
Company patents licensed under the agreement.
In January, 1991, the Company entered into a new fiber manufacturing
license agreement with Corning which expanded and extended the original 1983
agreement. The new agreement gives SpecTran the ability to increase
substantially its fiber production using Corning's United States patents,
providing for an immediate considerable increase in licensed fiber eligible for
manufacture by SpecTran in 1991, with further annual increases through the year
2000. The Company paid a $2 million fee for the new license agreement in four
semiannual installments of $500,000, beginning in January, 1991. The license
obtained from Corning is limited, non-assignable, non-exclusive and
royalty-bearing, to make, use and sell optical fiber under certain of Corning's
United States patents owned or filed for on or before January 1, 1996. The
Company granted to Corning a non-exclusive royalty-free license for any United
States patents filed for on or before January 1, 1996 related to optical fiber.
The Company believes that its manufacturing and sale of single-mode fiber is not
subject to the Corning license agreement.
At September 30, 1996, the Company or its subsidiaries had a
non-assignable, non-exclusive, unlimited, royalty-bearing license from Lucent
Technologies Inc. ("Lucent"), formerly AT&T Technologies, Inc. and a
non-exclusive, royalty-bearing license granted by Sumitomo Electric Industries,
Ltd. to make, use and sell optical fibers under certain patents owned by those
companies. No payments are required under these licenses other than royalty
payments.
F-11
<PAGE> 54
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1995, approximately 43% and 61% of the Company's net sales,
respectively, were subject to the Corning and Lucent licenses. During the nine
months ended September 30, 1996, approximately 40% and 62% of the Company's net
sales, respectively, were subject to the Corning and Lucent licenses. The
Corning license contains certain annual quarterly limitations which increase
annually through the year 2000.
Total royalties expensed during the years ended December 31, 1993, 1994 and
1995 were $1.6 million, $1.5 million and $1.6 million, respectively, and for the
nine months ended September 30, 1995 and 1996 were $1.2 million and $1.7
million, respectively.
6 -- GOODWILL
Goodwill consisted of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Goodwill............................................. $1,182 $4,435 $ 4,435
Less Accumulated Amortization........................ (75) (279) (500)
------ ------ ------
$1,107 $4,156 $ 3,935
====== ====== ======
</TABLE>
7 -- ACCRUED LIABILITIES
Accrued liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Salaries and Wages................................... $ 227 $ 436 $ 875
Royalties............................................ 809 889 618
Health Insurance..................................... 258 411 477
Incentive Compensation............................... 318 503 1,010
Other................................................ 589 725 661
------ ------ ------
$2,201 $2,964 $ 3,641
====== ====== ======
</TABLE>
8 -- LONG-TERM DEBT
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------ ------- -------------
<S> <C> <C> <C>
Revolving credit loan facility at the lower of prime
or LIBOR plus 1.5%, repaid in April 1996.......... $5,240 $10,000 $ --
Revolving credit loan facility at the lower of prime
or LIBOR plus 1.5% at an average rate of 7.16%.... -- -- 10,000
Term loan facility at the lower of prime or LIBOR
rate plus 1.5% at an average rate of 6.99%........ -- -- 2,000
------ ------- -------
Total..................................... $5,240 $10,000 $12,000
====== ======= =======
</TABLE>
On April 25, 1996 and subsequently amended on September 4, 1996, SpecTran
Corporation and its subsidiaries entered into a new Loan and Security Agreement
with Fleet National Bank ("Fleet Bank") pursuant to which the Company can borrow
up to $22,000,000, subject to certain limitations based on the Company's
accounts receivable and inventory and the appraisal value of certain machinery,
equipment and real property owned by the Company. The loan consists of a
$14,500,000 revolving note which is payable
F-12
<PAGE> 55
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
April 1, 1999, a $4,000,000 term note which is payable in quarterly installments
commencing January 1, 1997 and maturing on April 1, 2001 and a $3,500,000
mortgage note which is payable in quarterly installments commencing July 1, 1997
and maturing on April 1, 2006. Interest on each note is payable quarterly
commencing July 1, 1996. The Company has the option from time to time to select
the interest rate on the notes at either Fleet Bank's prime rate or the LIBOR
rate plus 1.5%, provided that under certain circumstances, Fleet Bank may deem
that the LIBOR rate is not available. The loans are secured by all of the
Company's assets, including real property.
At September 30, 1996, the Company had outstanding $10 million under the
revolving credit agreement and $2 million under the term loan agreements with
Fleet.
The revolving credit agreement, as well as the other loan agreements,
provides for among other things, maintaining specified tangible net worth and
earnings levels and additionally imposes limitations on indebtedness. As of
September 30, 1996, the Company was in compliance with all its covenants.
For related subsequent events "See Note 15 -- Subsequent Events."
9 -- STOCKHOLDERS' EQUITY
(a) Warrants
As part of an agreement entered into in September, 1990 with Allen &
Company, Incorporated (Allen), warrants to purchase 350,000, 30,000 and 20,000
shares of SpecTran voting Common Stock at an exercise price of $2.00 through
August 14, 1999, were issued to Allen, Richard A.M.C. Johnson, a former director
of the Company, and Patrick E. Brake, a former director of the Company,
respectively. If the entire Allen warrant were exercised, as of September 30,
1996, Allen would own approximately 6.1% of the Company's outstanding stock. In
June, 1992 the Johnson warrant was exercised and in January, 1993 the Brake
warrant was exercised.
(b) Stock Options
Pursuant to the Company's Incentive Stock Option Plan adopted in November,
1981, as amended, incentive and nonqualified options may be granted to purchase
up to an aggregate of 455,000 shares of the Company's voting Common Stock, $.10
par value, at prices not less than 100% of the fair market value of the shares
at the time the options are granted. Currently, all options are exercisable in
full three years from the date of grant in cumulative annual installments of
33 1/3% commencing one year after the date of grant, and expire ten years after
grant.
Under its provisions, no options were to be issued under the Incentive
Stock Option Plan adopted in November, 1981 (Old Plan) after the plan reached
its tenth anniversary. During the year ended December 31, 1991, a new Incentive
Stock Option Plan (New Plan) was adopted. The terms of the New Plan are
identical to those of the Old Plan except that (1) the number of shares eligible
for issuance shall be 625,490, (2) provision is made for the non-discretionary
grant of nonqualified options to directors who are not full-time employees of
the Company or any subsidiary ("outside directors") and (3) provision is made
for all outstanding options to vest upon the occurrence of a change in control
(as defined in the New Plan).
At the Company's Annual Meeting in 1996, the holders of Common Stock
approved an amendment to the New Plan increasing the number of shares of Common
Stock reserved for issuance by 250,000.
F-13
<PAGE> 56
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Activity in the plans for the years ended December 31, 1993, 1994 and 1995
and September 30, 1996 is summarized below:
<TABLE>
<CAPTION>
SHARES SHARES UNDER OPTION
AVAILABLE --------------------- AMOUNT
FOR OPTION SHARES PRICE (IN THOUSANDS)
---------- ------- --------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992............ 239,758 235,608 $ 1.188 - $22.250 $1,934
Options Granted....................... (117,900) 117,900 $ 8.000 - $11.750 1,038
Options Exercised..................... -- (4,502) $ 3.370 (16)
Options Forfeited..................... 1,767 (1,767) $ 3.375 - $22.250 (21)
--------- ------- ------ ------- ------
Balance at December 31, 1993............ 123,625 347,239 $ 1.188 - $22.250 2,935
Increase in Shares Reserved........... 255,000 -- -- -- --
Options Granted....................... (125,600) 125,600 $ 4.750 - $ 8.870 831
Options Exercised..................... -- (42,334) $ 1.375 - $ 3.370 (101)
Options Forfeited..................... 19,234 (19,234) $ 3.375 - $22.250 (228)
--------- ------- ------ ------- ------
Balance at December 31, 1994............ 272,259 411,271 $ 1.188 - $22.250 3,437
Options Granted....................... (139,750) 139,750 $ 5.375 - $ 5.500 733
Options Exercised..................... -- (1,833) $ 3.375 - $ 4.750 (6)
Options Forfeited..................... 5,700 (5,700) $ 6.000 - $22.250 (57)
--------- ------- ------ ------- ------
Balance at December 31, 1995............ 138,209 543,488 $ 3.375 - $22.250 4,107
Increase in Shares Reserved........... 250,000 -- -- -- --
Options Granted....................... (155,500) 155,500 $ 5.500 - $22.250 2,381
Options Exercised..................... -- (43,277) $ 1.375 - $15.750 (306)
Options Forfeited..................... 11,900 (11,900) $ 3.375 - $11.750 (100)
--------- ------- ------ ------- ------
Balance at September 30, 1996........... 244,609 643,811 $ 3.375 - $22.250 $6,082
========= ======= ====== ======= ======
</TABLE>
As of December 31, 1995, options for 280,789 shares were vested and
exercisable at an aggregate exercise amount of $2.4 million ($8.68 per share).
As of September 30, 1996, options for 339,225 shares were vested and
exercisable at an aggregate exercise amount of $2.8 million ($8.28 per share).
F-14
<PAGE> 57
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10 -- INCOME TAXES
Income tax expense attributable to income (loss) from operations differs
from the computed expected tax expense (benefit) determined by applying the
federal income tax rate of 34 percent as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1993 1994 1995 1996
------ ----- ----- -------------
<S> <C> <C> <C> <C>
Computed expected tax expense (benefit) at 34%...... $1,914 $(165) $ 264 $ 1,300
State income taxes, net of federal effect and
change in valuation allowance.................. 366 (31) 81 230
Research and experimentation credits.............. -- (244) 244 --
Goodwill amortization............................. -- -- 50 --
Increase (decrease) in valuation allowance for
deferred income taxes.......................... (350) 417 (437) (274)
Other............................................. 44 23 33 44
------ ----- ----- ------
$1,974 $ -- $ 235 $ 1,300
====== ===== ===== ======
</TABLE>
Total income tax expense (benefit) was allocated as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1993 1994 1995 1996
------ ----- ----- -------------
<S> <C> <C> <C> <C>
Income tax expense (benefit) attributable to:
Income from operations............................ $1,868 $ -- $ 235 $ 1,300
Stockholders' equity, for compensation expense for
tax purposes from the disqualifying disposition
of stock options............................... 106 (120) -- --
------ ----- ----- ------
$1,974 $(120) $ 235 $ 1,300
====== ===== ===== ======
</TABLE>
F-15
<PAGE> 58
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) attributable to income from operations
consisted of (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
Year ended December 31, 1993:
Federal................................................ $ 226 $1,193 $1,419
State.................................................. 549 6 555
---- ------ ------
$ 775 $1,199 $1,974
==== ====== ======
Year ended December 31, 1994:
Federal................................................ $ -- $ 27 $ 27
State.................................................. -- (27) (27)
---- ------ ------
$ -- $ -- $ --
==== ====== ======
Year ended December 31, 1995:
Federal................................................ $ 277 $ (120) $ 157
State.................................................. 158 (80) 78
---- ------ ------
$ 435 $ (200) $ 235
==== ====== ======
Nine Months ended September 30, 1996:
Federal................................................ $ 582 $ 441 $1,023
State.................................................. 137 140 277
---- ------ ------
$ 719 $ 581 $1,300
==== ====== ======
</TABLE>
The significant components of deferred income tax expense (benefit)
attributable to income from operations are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1993 1994 1995 1996
------ ----- ----- -------------
<S> <C> <C> <C> <C>
Deferred tax expense (benefit) (exclusive of the
effects of other components listed below)......... $1,549 $(417) $ 237 $ 855
Increase (decrease) in valuation allowance for
deferred income taxes............................. (350) 417 (437) (274)
------ ----- ----- -----
Deferred income tax expense (benefit) attributable
to income from operations......................... $1,199 $ -- $(200) $ 581
====== ===== ===== =====
</TABLE>
F-16
<PAGE> 59
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable.............................. $ 54 $ 115 $ 119
Inventories...................................... 91 433 402
Accrued liability -- compensation related
expense....................................... 99 122 116
Accrued liability -- pension benefits............ 8 121 158
Other nondeductible reserves and accruals........ 188 (49) (49)
Fixed assets..................................... 79 (27) --
Net operating loss carryforward benefit.......... 1,283 998 26
Credit carryforwards benefit..................... 1,748 1,657 1,643
------ ------ ------
Total gross deferred tax assets............... 3,550 3,370 2,415
Less valuation allowance...................... (1,467) (1,030) (756)
------ ------ ------
Net deferred tax assets....................... 2,083 2,340 1,659
Deferred tax liabilities........................... (78) (100) --
------ ------ ------
Net deferred tax assets............................ 2,005 2,240 1,659
Less current portion............................... 303 588 685
------ ------ ------
Long-term deferred tax asset....................... $ 1,702 $ 1,652 $ 974
------ ------ ------
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1995 and
September 30, 1996 were $1 million and $756,000, respectively. Based on the
Company's level of net income and projected future earnings, the Company
believes that it is more likely than not that a portion of the deferred tax
asset will be realized in the future. In 1995, the portion of the deferred tax
asset which is expected to be realized increased from 1994; therefore, the
Company reduced its valuation allowance by $437,000. The remaining valuation
allowance relates primarily to the risk that a portion of the tax credit
carryforwards will not be used before they expire.
At December 31, 1995, the Company had the following net operating loss
carryforwards available to offset future taxable income and income tax credits
available to offset future income taxes (in thousands):
<TABLE>
<CAPTION>
AMOUNT EXPIRES
------ ---------
<S> <C> <C>
Net Operating Loss Carryforward................................ $2,521 2001-2009
Federal Research and Experimentation Tax Credits............... 290 1996-2001
Federal Investment Tax Credits................................. 879 1996-2001
Alternative Minimum Tax Credit................................. 487 Indefinite
</TABLE>
11 -- MAJOR CUSTOMERS
The approximate net product sales by the Company to customers accounting
for 10% or more of total net annual sales are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS
-------------------------------------------------------- ENDED
SEPTEMBER 30,
1993 1994 1995 1996
-------------- -------------- -------------- --------------
CUSTOMER AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------------------ ------ --- ------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A.............. $3,492 14 $4,034 15 $5,040 13 $6,306 14
B.............. 5,178 20 5,077 19 4,153 11
C.............. 7,591 30 2,592 10
</TABLE>
F-17
<PAGE> 60
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Substantially all of the Company's business is to customers in the
telecommunications and data communications industries. International sales,
primarily in Asia and Europe, accounted for 22% of total sales in 1995 and 25%
of total sales for the nine months ended September 30, 1996.
12 -- COMMITMENTS
SpecTran Specialty Optics Company leases office and production facilities
under leases through February 18, 1997 two of which have been extended through
April 18, 1997. Applied Photonic Devices, Inc. leases office and production
facilities under a lease through January 14, 1998 with a right to renew for two
consecutive one-year renewal terms. Applied Photonic Devices, Inc. also leases
additional office and production facilities under a lease through February 6,
2001 with a right to renew for one three-year renewal term, followed by a second
right to renew for an additional two years. The scheduled rental payments
required under these operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
1996....................................................... $314 $ 406
1997....................................................... 74 174
1998....................................................... 2 102
---- ----
Total............................................ $390 $ 682
==== ====
</TABLE>
Total rent expense for the years ended December 31, 1994 and 1995 and the
nine months ended September 30, 1995 and 1996 was $242,000, $364,000, $269,000
and $287,000, respectively. There was no rent expense in 1993.
13 -- EMPLOYEE BENEFIT PLANS
(a) Defined Benefit Pension Plan
The Company sponsors a defined benefit pension plan covering substantially
all of its employees. The benefits are based on years of service and an average
of the employee's highest ten consecutive years of earnings. The Company's
funding policy is, to the extent possible, to contribute annually the maximum
amount that can be deducted for federal income tax purposes. Contributions are
intended to provide not only for benefits attributed to service to date, but
also for those expected to be earned in the future.
The Company's unrecognized net loss in 1995 was due to a change in the
discount rate to 7.0% from 8.5% in the prior year as a result of declining
interest rates. This was partially offset by investment gains in excess of
actuarially assumed returns. This is the primary reason for the increase in the
projected benefit obligation for 1995. The following table sets forth the plan's
funded status and amounts recognized in the Company's consolidated balance
sheets at December 31, 1994 and 1995.
F-18
<PAGE> 61
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
Actuarial present value of benefit obligations (in thousands):
<CAPTION>
1994 1995
----- ------
<S> <C> <C>
Vested benefit obligation............................. $ 349 $ 613
----- ------
Accumulated benefit obligation........................ $ 395 $ 751
----- ------
Projected benefit obligation.......................... $ 772 $1,437
Plan assets at fair value -- primarily mutual funds...... 604 912
----- ------
Projected benefit obligation in excess of plan assets.... 168 525
Unrecognized net gain (loss)............................. 162 (163)
Unrecognized net obligation at January 1, 1991 being
recognized over 17.4 years............................ (264) (244)
----- ------
Accrued pension cost..................................... $ 66 $ 118
===== ======
</TABLE>
<TABLE>
Net pension cost for 1994 and 1995 included the following components (in
thousands):
<CAPTION>
1994 1995
----- ------
<S> <C> <C>
Service cost -- benefits earned during period.............. $ 134 $ 151
Interest cost on projected benefit obligation.............. 59 66
Actual return on assets.................................... (36) (186)
Net amortization and deferral.............................. 15 146
----- -----
Net pension cost........................................... $ 172 $ 177
===== =====
</TABLE>
<TABLE>
Assumptions used in the accounting as of December 31 were as follows:
<CAPTION>
1994 1995
----- ------
<S> <C> <C>
Discount rate.............................................. 8.5% 7.0%
Rates of increase in compensation levels................... 5.0% 5.0%
Expected long-term rate of return on assets................ 8.5% 8.5%
</TABLE>
(b) Directors Retirement Plan
In December, 1995 the Company adopted a Directors Retirement Plan which
provides for retirement benefits for all outside directors with five full
calendar years of service as of the later of age 70 or the date of actual
retirement as a director. The Company expensed $100,000 in 1995 to provide for
past service costs.
(c) Defined Contribution Pension Plan
The Company sponsors a defined contribution pension plan covering
substantially all of its employees. Contributions to the plan are discretionary
and amounted to $97,000, $114,000 and $83,000 in 1993, 1994 and 1995,
respectively.
(d) Supplementary Retirement Agreements
The Company entered into supplemental retirement agreements with five
executive officers in 1996. These agreements provide benefits based on years of
service and average eligible pay for executives.
The Company's liability for prior service costs related to these agreements
was approximately $715,000. This amount has been recorded as another long-term
asset and as accrued defined benefit pension liability.
F-19
<PAGE> 62
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(e) Bonus Plans
The Company sponsors an Employee Profit Sharing Plan covering all
employees. The Company also sponsored a transitional plan covering key employees
in 1995 and adopted a Key Employee Incentive Plan in 1996 which replaced an
Income Growth Incentive Plan in 1994 and 1993. These plans provide for the
payment of bonuses if certain performance objectives are obtained. Bonuses of
$456,000, $331,000 and $380,000, respectively, were charged to operations in
1993, 1994 and 1995 and $259,000 and $1 million, respectively, for the nine
months ended September 30, 1995 and 1996.
14 -- ACQUISITIONS
(a) Applied Photonic Devices, Inc.
On May 23, 1995 the Company purchased all the outstanding capital stock of
Applied Photonic Devices, Inc. ("APD") for cash and common stock worth
approximately $3.9 million. The Company also retired approximately $600,000 of
APD bank debt. APD, located in Danielson, Connecticut, manufactures and sells
fiber optic cable and related components.
The purchase method of accounting was used and the results of operations of
APD are included in the consolidated financial statements from May 23, 1995.
Goodwill of $3,255,000 resulted from the purchase and is being amortized
over 15 years. Amortization expense amounted to $127,000 and $163,000 in fiscal
1995 and the nine months ended September 30, 1996.
(b) Ensign-Bickford Acquisitions
On February 18, 1994 the Company purchased substantially all assets of
Ensign-Bickford Optics Company ("EBOC") and Ensign-Bickford Optical
Technologies, Inc. ("EBOT"), wholly owned subsidiaries of Ensign-Bickford
Industries, Inc., for approximately $7 million. EBOC, renamed SpecTran Specialty
Optics Company, manufactures and sells optical fibers, cables and related
components. The operations of EBOT, which were conducted in Van Nuys,
California, were moved to Sturbridge, Massachusetts.
The purchase method of accounting was used and the results of operations of
SpecTran Specialty Optics Company are included in the consolidated financial
statements from February 18, 1994.
15 -- SUBSEQUENT EVENTS (UNAUDITED)
In December 1996, the Company announced the formation of General Photonics,
a 50-50 joint venture between the Company and General Cable, a subsidiary of
Wassall plc. General Cable purchased certain assets of the Company's optical
fiber cable subsidiary, APD, for approximately $6.3 million and then contributed
them to General Photonics for a 50% equity interest. APD contributed its
remaining assets to General Photonics in exchange for its 50% equity interest.
See -- "Pro Forma Financial Information."
Also in December 1996, the Company sold $24 million of senior secured notes
(the "Notes") and concurrently replaced its existing borrowing arrangements with
its principal bank with a $20 million revolving credit agreement. The Company
used approximately $14 million of the money raised from the sale of the Notes to
retire its existing indebtedness to its principal bank, thus making available
for borrowing the entire $20.0 million of the revolving credit agreement.
F-20
<PAGE> 63
SPECTRAN CORPORATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
In December 1996, the Company formed General Photonics, a 50-50 joint
venture between the Company and General Cable, a subsidiary of Wassall plc.
General Cable purchased certain assets of the Company's optical fiber cable
subsidiary, Applied Photonics Devices, for approximately $6.3 million and then
contributed them to General Photonics for a 50% equity interest. Applied
Photonics Devices contributed its remaining assets to General Photonics in
exchange for its 50% equity interest. The Company will account for its interest
in the joint venture under the equity method.
The following pro forma condensed consolidated balance sheet at September
30, 1996 and pro forma condensed consolidated statements of operations for the
year ended December 31, 1995 and nine months ended September 30, 1996 present
the condensed consolidated balance sheet and results of operations of the
Company as if the joint venture with General Photonics existed as of January 1,
1995 and as if the December 1996 sale of $24.0 million of senior notes to
investors and the restructuring of bank loan agreements occurred as of September
30, 1996. See "Recent Developments -- Senior Debt Financing and Refinancing of
Existing Bank Loans."
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents........................ $ 2,174 $18,483(1)(2)(3) $20,657
Current Portion of Marketable Securities......... 972 -- 972
Trade Accounts Receivable, net................... 10,201 (2,252)(1) 7,949
Inventories...................................... 8,967 (3,511)(1) 5,456
Prepaid Expenses and Other Current Assets........ 1,252 (12)(1) 1,240
------- ------- -------
Total Current Assets.......................... 23,566 12,708 36,274
Investment in Joint Venture........................ -- 2,448(1)(4) 2,448
Property, Plant and Equipment, net................. 14,702 (893)(1) 13,809
Other Assets:
Long-term Marketable Securities.................. 1,422 -- 1,422
Other Long-Term Assets........................... 6,871 (2,978)(1) 3,893
------- ------- -------
Total Other Assets............................ 8,293 (2,978) 5,315
------- ------- -------
Total Assets............................. $46,561 $11,285 $57,846
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Total Current Liabilities........................ $ 7,398 $ (913)(1) $ 6,485
Long-term Debt..................................... 12,000 12,000(2)(3) 24,000
Stockholders' Equity:
Common Stock, voting............................... 539 -- 539
Common Stock, non-voting........................... -- -- --
Paid-In Capital.................................... 26,745 -- 26,745
Net Unrealized Gain (Loss) on Marketable
Securities....................................... 15 -- 15
Retained Earnings (Deficit)........................ (136) 198(4)(10) (62)
------- ------- -------
Total Stockholders' Equity.................... 27,163 198 27,361
------- ------- -------
Total Liabilities and Stockholders'
Equity................................. $46,561 $11,285 $57,846
======= ======= =======
</TABLE>
See accompanying notes to pro forma financial statements.
F-21
<PAGE> 64
SPECTRAN CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1995
----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net Sales........................................ $38,581 $(3,499)(5)(10) $35,082
Cost of Sales.................................... 25,520 (2,010)(5)(10) 23,510
------- ------- -------
Gross Profit..................................... 13,061 (1,489) 11,572
Operating Expenses............................... 12,496 (1,033)(6) 11,463
------- ------- -------
Income from Operations........................... 565 456 109
Other Income..................................... 212 330(7) 542
Equity in Earnings of Joint Venture.............. -- 179(8) 179
------- ------- -------
Income before Income Taxes....................... 777 53 830
Income Tax Expense............................... 235 (104)(9) 131
------- ------- -------
Net Income.................................. $ 542 $ 157 $ 699
======= ======= =======
Net Income (Loss) per Share of Common
Stock..................................... $0.10 $0.13
======= =======
Weighted Average shares outstanding.............. 5,583 5,583
======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net Sales........................................ $44,915 $(7,043)(5)(10) $37,872
Cost of Sales.................................... 28,621 (4,727)(5)(10) 23,894
------- ------- -------
Gross Profit..................................... 16,294 (2,316) 13,978
Operating Expenses............................... 12,230 (1,659)(6) 10,571
------- ------- -------
Income from Operations........................... 4,064 (657) 3,407
Other Income (Expense)........................... (240) 270(7) 30
Equity in Earnings of Joint Venture.............. -- 220(8) 220
------- ------- -------
Income before Income Taxes....................... 3,824 (167) 3,657
Income Tax Expense............................... 1,300 (208)(9) 1,092
------- ------- -------
Net Income.................................. $ 2,524 $ 41 $ 2,565
======= ======= =======
Net Income (Loss) per Share of Common
Stock..................................... $0.43 $0.43
======= =======
Weighted Average shares outstanding.............. 5,930 5,930
======= =======
</TABLE>
See accompanying notes to pro forma financial statements.
F-22
<PAGE> 65
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AND STATEMENTS OF OPERATIONS
(1) To record the receipt of $6.3 million cash in exchange for certain assets
of Applied Photonic Devices purchased by General Cable and to record the
contribution of the remaining Applied Photonic Devices assets and
liabilities to General Photonics in return for half the equity in the joint
venture.
(2) To record the elimination of $2.2 million of outstanding debt incurred with
the original purchase of Applied Photonic Devices.
(3) To record the receipt of $24 million cash from the issuance of senior
secured notes on December 30, 1996 and the repayment of outstanding
borrowings from the proceeds of the notes.
(4) To record the investment in the new joint venture, General Photonics, and
related earnings for the period from January 1, 1995.
(5) To eliminate sales and cost of sales of Applied Photonic Devices, net of
intercompany sales and gross profit between subsidiaries.
(6) To eliminate operating expenses of Applied Photonic Devices.
(7) To increase interest income on the $4.1 million cash increase and decrease
interest expense for the $2.2 million repayment of debt.
(8) To record SpecTran's 50% share of the after-tax earnings of the
unconsolidated joint venture, General Photonics.
(9) To record the tax effect of the above adjustments.
(10) To eliminate the intercompany profit in ending inventory of General
Photonics.
F-23
<PAGE> 66
(Inside Back Cover Captions)
Corporate logo on the top of the page with the text immediately below
"Innovation in optical fiber"
1. Picture of technician treating a glass preform with chemicals.
Text to the right of the picture "SpecTran uses proprietary technology to
manufacture preforms, the first step in optical fiber production. SpecTran's
design innovations enable the company to produce the broadest range of fibers
for specialty applications, in addition to standard fibers for communication
applications."
2. Picture of a technician on a platform monitoring a draw tower.
Text above the picture "SpecTran engineers and technicians closely monitor
every stage of the production process. Continuous improvements are implemented
to ensure SpecTran's products remain competitive in the dynamic fiber optic
market."
3. Picture of a technician viewing a screen while testing the fiber.
Text below the picture "Large volumes of optical fiber are evaluated by the
quality control department each day. Automated equipment, like this high speed
tester, ensure testing is both efficient and accurate."
4. Picture of technician with a microscope viewing the fiber core.
Text to the right of the picture "The optical fiber industry demands close
attention to quality. In addition to being ISO 9001 registered, SpecTran's
manufacturing processes produce optical fibers that meet the stringent
specifications demanded by cable manufacturers throughout the world."
<PAGE> 67
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............. 3
Risk Factors................... 6
Recent Developments............ 10
Use of Proceeds................ 12
Price Range of Common Stock and
Dividend Policy............. 12
Capitalization................. 13
Selected Consolidated Financial
Data........................ 14
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.................. 15
Business....................... 21
Management..................... 30
Principal and Selling
Stockholders................ 33
Description of Securities...... 35
Shares Available for Future
Sale........................ 37
Underwriting................... 38
Legal Matters.................. 39
Experts........................ 39
Additional Information......... 39
Incorporation of Certain
Information by Reference.... 40
Index to Consolidated Financial
Statements.................. F-1
</TABLE>
------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
================================================================================
1,800,000 SHARES
[SPECTRAN LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
, 1997
TUCKER ANTHONY
INCORPORATED
RAYMOND JAMES &
ASSOCIATES, INC.
================================================================================
<PAGE> 68
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions,
are estimated as follows:
<S> <C>
SEC Registration Fee......................................... $ 15,000
Legal Fees and Expenses...................................... 207,000
Accounting Fees.............................................. 100,000
NASD Filing Fee.............................................. 5,000
Nasdaq National Market Listing Fee........................... 17,000
Blue Sky Fees and Expenses (including Legal Fees)............ $ 20,000
Printing..................................................... 60,000
Transfer Agent's and Registrar's Fees and Expenses........... 3,000
Miscellaneous................................................ 50,000
--------
Total................................................... 460,000
========
</TABLE>
Allen & Company Incorporated, the Selling Stockholder, has agreed to
reimburse the Company for approximately 19% up to a maximum of $60,000 of such
total expenses. The other expenses incurred by the Company in connection with
the offering reflected above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law sets forth provisions
with respect to indemnification of a corporation's directors, officers,
employees and agents. The Certificate of Incorporation of the Company provides
for indemnification of directors from breaches of fiduciary duty under certain
limited circumstances.
The Registrant maintains officers' and directors' liability insurance.
The Underwriting Agreement, filed as Exhibit 1.1 to this Registration
Statement, provides for indemnification and contribution by the Underwriters
with respect to certain liabilities of directors and officers of the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or arrangements, such provisions
or arrangements may be limited by the Registrant's undertaking set forth in the
fourth paragraph of Item 17 of this Registration Statement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
1.1 Proposed Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended. (Incorporated by
reference to Registrant's Annual Report on Form 10-K for its fiscal year ended
December 31, 1991.)
3.2 By-Laws of the Registrant, as amended. (Incorporated by reference to Registrant's
Annual Report on Form 10-K for its fiscal year ended December 31, 1991.)
4.5 Form of Stock Certificate for Voting Common Stock. (Incorporated by reference to
Registrant's Registration Statement on Form S-1 (Reg. No. 2-83172) effective June
2, 1983.)
5.1 Opinion of Hackmyer & Nordlicht. (To be filed by amendment)
10.1 Registrant's 1991 Incentive Stock Option Plan. (Incorporated by reference to the
Registrant's Proxy Statement dated April 9, 1991.)
</TABLE>
II-1
<PAGE> 69
<TABLE>
<S> <C>
10.7 License Agreement dated August 15, 1981 between the Registrant and Western Electric
Company, Incorporated. (Incorporated by reference to Registrant's Registration
Statement on Form S-1 (Reg. No. 2-83172) effective June 2, 1983.) (Registrant has
been granted confidential treatment of portions of this Exhibit.)
10.46 Common Stock Purchase Warrant issued to Allen & Company Incorporated. (Incorporated
by reference to the Registrant's Annual Report on Form 10-K for its fiscal year
ended December 31, 1990.)
10.49 License Agreement dated as of the first day of January 1991 by and between the
Registrant and Corning Incorporated. (Registrant has been granted confidential
treatment of portions of this Exhibit.) (Incorporated by reference to Registrant's
Annual Report on Form 10-K for its fiscal year ended December 31, 1991.)
10.53 Asset Purchase Agreement between Ensign-Bickford Optics Company and SpecTran
Specialty Optics Company dated February 18, 1994. (Incorporated by reference to the
Registrant's Report on Form 8-K dated March 3, 1994.)
10.54 Stock Purchase Agreement between Ensign-Bickford Optical Technologies, Inc. and
EBOT Acquisition Corp. dated February 18, 1994. (Incorporated by reference to the
Registrant's Report on Form 8-K dated March 3, 1994.)
10.55 Lease between 150 Fisher Associates Limited Partnership and SpecTran Specialty
Optics Company dated February 18, 1994. (Incorporated by reference to the
Registrant's Report on Form 10-K dated March 30, 1994.)
10.56 Lease between Avon Park Properties and SpecTran Specialty Optics Company dated
February 18, 1994. (Incorporated by reference to the Registrant's Report on Form
10-K dated March 30, 1994.)
10.57 Lease between Avon Park Properties and SpecTran Specialty Optics Company dated
February 18, 1994. (Incorporated by reference to the Registrant's Report on Form
10-K dated March 30, 1994.)
10.61 Stock Purchase Agreement among APD Acquisition Corp. and Irving N. Dwyer, David P.
DaVia, The Irving N. Dwyer and Annette M. Dwyer Charitable Remainder Trust and The
DaVia Charitable Remainder Trust. (Incorporated by reference to the Registrant's
Report on Form 10-K dated March 31, 1995)
10.62 Directors Retirement Plan dated December 27, 1995 (Incorporated by reference to the
Registrant's Report on Form 10-K dated March 29, 1996)
10.63 Registrant's Employee Profit Sharing Plan as revised and adopted effective January
1, 1995 (Incorporated by reference to the Registrant's Report on Form 10-K dated
March 29, 1996)
10.64 Lease between Mark C. Yellin and Applied Photonic Devices, Inc. dated January 15,
1996. (Incorporated by reference to the Registrant's Report on Form 10-K dated
March 29, 1996)
10.65 Lease between Fabrilock, Inc. and Applied Photonic Devices, Inc. dated February 6,
1996. (Incorporated by reference to the Registrant's Report on Form 10-K dated
March 29, 1996)
10.69 Supplemental Retirement Agreement between Spectran Corporation and Raymond E.
Jaeger dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated August 9, 1996)
10.70 Supplemental Retirement Agreement between SpecTran Corporation and Bruce A. Cannon
dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated August 9, 1996)
10.71 Supplemental Retirement Agreement between SpecTran Corporation and Crawford L.
Cutts dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated August 9, 1996)
10.72 Supplemental Retirement Agreement between SpecTran Corporation and William B. Beck
dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated August 9, 1996)
10.73 Supplemental Retirement Agreement between SpecTran Corporation and John E. Chapman
dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated August 9, 1996)
</TABLE>
II-2
<PAGE> 70
<TABLE>
<S> <C>
10.74 Lease between CRJ Realty Trust and SpecTran Communication Fiber Technologies, Inc.
dated July 22, 1996. (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated August 9, 1996)
10.75 Contractual Agreement Between Lucent Technologies Inc. and SpecTran Corporation
dated October 3, 1996. (Registrant has applied for confidential treatment for
portions of this Exhibit) (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated November 13, 1996)
10.76 Three Year Multimode Optical Fiber Supply Contract between Corning Incorporated and
SpecTran Corporation dated as of January 1, 1996. (Registrant has applied for
confidential treatment for portions of this Exhibit) (Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q dated November 13, 1996)
10.79 Key Employee Incentive Plan effective as of January 1, 1996. (Incorporated by
reference to the Registrant's Quarterly Report on Form 10-Q dated November 13,
1996)
10.80 Employment Agreement between SpecTran Corporation and Raymond E. Jaeger dated as of
December 14, 1992. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.81 Employment Agreement between SpecTran Corporation and Bruce A. Cannon dated as of
December 14, 1992. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.82 Employment Agreement between SpecTran Corporation and John E. Chapman dated as of
December 14, 1992. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.83 Employment Agreement between SpecTran Corporation and Crawford L. Cutts dated as of
January 1, 1996. (Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q dated November 13, 1996)
10.84 Employment Agreement between SpecTran Corporation and William B. Beck dated as of
February 18, 1994. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.85 Employment Agreement between SpecTran Corporation and Glenn E. Moore dated as of
December 1995. (Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q dated November 13, 1996)
10.86 Note Purchase Agreement between SpecTran Corporation and Massachusetts Mutual Life
Insurance Company dated as of December 1, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 31, 1996)
10.87 Note Purchase Agreement between SpecTran Corporation and CM Life Insurance Company
dated as of December 1, 1996. (Incorporated by reference to the Registrant's
Current Report on Form 8-K dated December 31, 1996)
10.88 Note Purchase Agreement between SpecTran Corporation and The Mutual Life Insurance
Company of New York dated as of December 1, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 31, 1996)
10.89 Note Purchase Agreement between SpecTran Corporation and Atwell & Co. dated as of
December 1, 1996. (Incorporated by reference to the Registrant's Current Report on
Form 8-K dated December 31, 1996)
10.90 Security Agreement among SpecTran Corporation, SpecTran Communication Fiber
Technologies, Inc., SpecTran Specialty Optics Company, Applied Photonic Devices,
Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.91 Trademark Security Agreement among SpecTran Corporation, SpecTran Communication
Fiber Technologies, Inc, SpecTran Specialty Optics Company, Applied Photonic
Devices, Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
</TABLE>
II-3
<PAGE> 71
<TABLE>
<S> <C>
10.92 Patent Collateral Assignment among SpecTran Corporation, SpecTran Communication
Fiber Technologies, Inc, SpecTran Specialty Optics Company, Applied Photonic
Devices, Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.93 Pledge Agreement among SpecTran Corporation, SpecTran Communication Fiber
Technologies, Inc, SpecTran Specialty Optics Company, Applied Photonic Devices,
Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.94 Mortgage, Assignment of Rents and Security Agreement by SpecTran Communication
Fiber Technologies, Inc. to Fleet National Bank, as Trustee, dated as of December
1, 1996. (Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 31, 1996)
10.95 Open-End Mortgage, Assignment of Rents and Security Agreement by SpecTran Specialty
Optics Company to Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.96 Guaranty Agreement dated as of December 1, 1996 by SpecTran Communication Fiber
Technologies, Inc., SpecTran Specialty Optics Company and Applied Photonic Devices,
Inc. in favor of Massachusetts Mutual Life Insurance Company, CM Life Insurance
Company, The New York Mutual Life Insurance Company and Atwell & Co. (Incorporated
by reference to the Registrant's Current Report on Form 8-K dated December 31,
1996)
10.97 Loan Agreement among SpecTran Corporation, SpecTran Communication Fiber
Technologies, Inc., SpecTran Specialty Optics Company, Applied Photonic Devices,
Inc. and Fleet National Bank dated as of December 1, 1996. (Incorporated by
reference to the Registrant's Current Report on Form 8-K dated December 31, 1996)
10.98 Limited Liability Company Agreement of General Photonics, LLC between Applied
Photonic Devices, Inc. and General Cable Industries, Inc. dated as of December 23,
1996. (Registrant has applied for confidential treatment for portions of this
Exhibit) (Incorporated by reference to the Registrant's Current Report on Form 8-K
dated January 8, 1997)
10.99 Asset Purchase Agreement among Applied Photonic Devices, Inc., SpecTran
Corporation, General Cable Corporation and General Cable Industries, Inc. dated as
of December 23, 1996. (Incorporated by reference to the Registrant's Current Report
on Form 8-K dated January 8, 1997)
10.100 Investor's Representations, Contribution Agreement and Subscription Agreement among
Applied Photonic Devices, Inc., SpecTran Corporation and General Photonics, LLC
dated as of December 23, 1996. (Incorporated by reference to the Registrant's
Current Report on Form 8-K dated January 8, 1997)
10.101 Non-Competition Agreement among General Cable Industries, Inc., General Cable
Corporation, Applied Photonic Devices, Inc., SpecTran Corporation and General
Photonics, LLC dated December 23, 1996. (Registrant has applied for confidential
treatment for portions of this Exhibit) (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated January 8, 1997)
10.102 Standstill Agreement among General Cable Industries, Inc., General Cable
Corporation and SpecTran Corporation dated as of December 23, 1996. (Registrant has
applied for confidential treatment for portions of this Exhibit) (Incorporated by
reference to the Registrant's Current Report on Form 8-K dated January 8, 1997)
10.103 Letter amendment to Three Year Multimode Optical Fiber Supply Contract between
Corning Incorporated and SpecTran Corporation dated as of January 1, 1996.
(Registrant has applied for confidential treatment for portions of this Exhibit.)
(Incorporated by reference from Registrant's Current Report on Form 8-K dated
January 8, 1997)
10.104 Letter amendment to Employment Agreement between SpecTran Specialty Optics Company
and William B. Beck dated April 18, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated January 8, 1997)
10.105 Cross-Indemnity Agreement between SpecTran Corporation and Allen & Company
Incorporated (to be filed by amendment).
23.1 Report and Consent of KPMG Peat Marwick.
</TABLE>
II-4
<PAGE> 72
<TABLE>
<S> <C>
23.2 Consent of Hackmyer & Nordlicht. (To be filed by amendment)
24.0 Power of Attorney. (See page II-6)
</TABLE>
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be the initial bona fide offering thereof.
2. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
3. The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement certificates
in such denomination and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
4. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-3 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Sturbridge, State of Massachusetts, on January 9, 1997.
SPECTRAN CORPORATION
/S/ RAYMOND E. JAEGER, PH.D.
By:.................................
RAYMOND E. JAEGER, PH.D.
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 has been signed by the following persons
in the capacities and on the dates indicated. Each person whose signature
appears below hereby authorizes each of Raymond E. Jaeger, Glenn E. Moore and
Bruce A. Cannon, as attorney-in-fact, to sign and file on his or her behalf,
individually and in each capacity stated below, any pre-effective or
post-effective amendment hereto or any registration statement relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, as amended.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DR. RAYMOND E. JAEGER Chairman of the Board of January 9, 1997
........................................ Directors (principal
DR. RAYMOND E. JAEGER executive officer)
/s/ GLENN E. MOORE President, Chief Executive January 9, 1997
........................................ Officer and Director
GLENN E. MOORE
/s/ BRUCE A. CANNON Senior Vice President, Chief January 9, 1997
........................................ Financial Officer,
BRUCE A. CANNON Secretary, Treasurer and
Director (principal
financial officer and
principal accounting
officer)
/s/ JOHN E. CHAPMAN Senior Vice President -- January 9, 1997
........................................ Technology and Director
JOHN E. CHAPMAN
/s/ IRA S. NORDLICHT Director January 9, 1997
........................................
IRA S. NORDLICHT
/s/ DR. PAUL D. LAZAY Director January 9, 1997
........................................
DR. PAUL D. LAZAY
/s/ RICHARD M. DONOFRIO Director January 9, 1997
........................................
RICHARD M. DONOFRIO
Director January , 1997
........................................
DR. LILY K. LAI
</TABLE>
II-6
<PAGE> 74
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
1.1 Proposed Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended. (Incorporated by
reference to Registrant's Annual Report on Form 10-K for its fiscal year ended
December 31, 1991.)
3.2 By-Laws of the Registrant, as amended. (Incorporated by reference to Registrant's
Annual Report on Form 10-K for its fiscal year ended December 31, 1991.)
4.5 Form of Stock Certificate for Voting Common Stock. (Incorporated by reference to
Registrant's Registration Statement on Form S-1 (Reg. No. 2-83172) effective June
2, 1983.)
5.1 Opinion of Hackmyer & Nordlicht. (To be filed by amendment)
10.1 Registrant's 1991 Incentive Stock Option Plan. (Incorporated by reference to the
Registrant's Proxy Statement dated April 9, 1991.)
10.7 License Agreement dated August 15, 1981 between the Registrant and Western Electric
Company, Incorporated. (Incorporated by reference to Registrant's Registration
Statement on Form S-1 (Reg. No. 2-83172) effective June 2, 1983.) (Registrant has
been granted confidential treatment of portions of this Exhibit.)
10.46 Common Stock Purchase Warrant issued to Allen & Company Incorporated pursuant to
the Conversion Agreement listed as Exhibit 10.45. (Incorporated by reference to the
Registrant's Annual Report on Form 10-K for its fiscal year ended December 31,
1990.)
10.49 License Agreement dated as of the first day of January 1991 by and between the
Registrant and Corning Incorporated. (Registrant has been granted confidential
treatment of portions of this Exhibit.) (Incorporated by reference to Registrant's
Annual Report on Form 10-K for its fiscal year ended December 31, 1991.)
10.53 Asset Purchase Agreement between Ensign-Bickford Optics Company and SpecTran
Specialty Optics Company dated February 18, 1994. (Incorporated by reference to the
Registrant's Report on Form 8-K dated March 3, 1994.)
10.54 Stock Purchase Agreement between Ensign-Bickford Optical Technologies, Inc. and
EBOT Acquisition Corp. dated February 18, 1994. (Incorporated by reference to the
Registrant's Report on Form 8-K dated March 3, 1994.)
10.55 Lease between 150 Fisher Associates Limited Partnership and SpecTran Specialty
Optics Company dated February 18, 1994. (Incorporated by reference to the
Registrant's Report on Form 10-K dated March 30, 1994.)
10.56 Lease between Avon Park Properties and SpecTran Specialty Optics Company dated
February 18, 1994. (Incorporated by reference to the Registrant's Report on Form
10-K dated March 30, 1994.)
10.57 Lease between Avon Park Properties and SpecTran Specialty Optics Company dated
February 18, 1994. (Incorporated by reference to the Registrant's Report on Form
10-K dated March 30, 1994.)
10.61 Stock Purchase Agreement among APD Acquisition Corp. and Irving N. Dwyer, David P.
DaVia, The Irving N. Dwyer and Annette M. Dwyer Charitable Remainder Trust and The
DaVia Charitable Remainder Trust. (Incorporated by reference to the Registrant's
Report on Form 10-K dated March 31, 1995)
10.62 Directors Retirement Plan dated December 27, 1995 (Incorporated by reference to the
Registrant's Report on Form 10-K dated March 29, 1996)
10.63 Registrant's Employee Profit Sharing Plan as revised and adopted effective January
1, 1995 (Incorporated by reference to the Registrant's Report on Form 10-K dated
March 29, 1996)
10.64 Lease between Mark C. Yellin and Applied Photonic Devices, Inc. dated January 15,
1996. (Incorporated by reference to the Registrant's Report on Form 10-K dated
March 29, 1996)
10.65 Lease between Fabrilock, Inc. and Applied Photonic Devices, Inc. dated February 6,
1996. (Incorporated by reference to the Registrant's Report on Form 10-K dated
March 29, 1996)
10.69 Supplemental Retirement Agreement between Spectran Corporation and Raymond E.
Jaeger dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated August 9, 1996)
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
10.70 Supplemental Retirement Agreement between SpecTran Corporation and Bruce A. Cannon
dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated August 9, 1996)
10.71 Supplemental Retirement Agreement between SpecTran Corporation and Crawford L.
Cutts dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated August 9, 1996)
10.72 Supplemental Retirement Agreement between SpecTran Corporation and William B. Beck
dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated August 9, 1996)
10.73 Supplemental Retirement Agreement between SpecTran Corporation and John E. Chapman
dated May 8, 1996. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated August 9, 1996)
10.74 Lease between CRJ Realty Trust and SpecTran Communication Fiber Technologies, Inc.
dated July 22, 1996. (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated August 9, 1996)
10.75 Contractual Agreement Between Lucent Technologies Inc. and SpecTran Corporation
dated October 3, 1996. (Registrant has applied for confidential treatment for
portions of this Exhibit) (Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q dated November 13, 1996)
10.76 Three Year Multimode Optical Fiber Supply Contract between Corning Incorporated and
SpecTran Corporation dated as of January 1, 1996. (Registrant has applied for
confidential treatment for portions of this Exhibit) (Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q dated November 13, 1996)
10.79 Key Employee Incentive Plan effective as of January 1, 1996. (Incorporated by
reference to the Registrant's Quarterly Report on Form 10-Q dated November 13,
1996)
10.80 Employment Agreement between SpecTran Corporation and Raymond E. Jaeger dated as of
December 14, 1992. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.81 Employment Agreement between SpecTran Corporation and Bruce A. Cannon dated as of
December 14, 1992. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.82 Employment Agreement between SpecTran Corporation and John E. Chapman dated as of
December 14, 1992. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.83 Employment Agreement between SpecTran Corporation and Crawford L. Cutts dated as of
January 1, 1996. (Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q dated November 13, 1996)
10.84 Employment Agreement between SpecTran Corporation and William B. Beck dated as of
February 18, 1994. (Incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q dated November 13, 1996)
10.85 Employment Agreement between SpecTran Corporation and Glenn E. Moore dated as of
December 1995. (Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q dated November 13, 1996)
10.86 Note Purchase Agreement between SpecTran Corporation and Massachusetts Mutual Life
Insurance Company dated as of December 1, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 31, 1996)
10.87 Note Purchase Agreement between SpecTran Corporation and CM Life Insurance Company
dated as of December 1, 1996. (Incorporated by reference to the Registrant's
Current Report on Form 8-K dated December 31, 1996)
10.88 Note Purchase Agreement between SpecTran Corporation and The Mutual Life Insurance
Company of New York dated as of December 1, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 31, 1996)
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
10.89 Note Purchase Agreement between SpecTran Corporation and Atwell & Co. dated as of
December 1, 1996. (Incorporated by reference to the Registrant's Current Report on
Form 8-K dated December 31, 1996)
10.90 Security Agreement among SpecTran Corporation, SpecTran Communication Fiber
Technologies, Inc., SpecTran Specialty Optics Company, Applied Photonic Devices,
Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.91 Trademark Security Agreement among SpecTran Corporation, SpecTran Communication
Fiber Technologies, Inc, SpecTran Specialty Optics Company, Applied Photonic
Devices, Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.92 Patent Collateral Assignment among SpecTran Corporation, SpecTran Communication
Fiber Technologies, Inc, SpecTran Specialty Optics Company, Applied Photonic
Devices, Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.93 Pledge Agreement among SpecTran Corporation, SpecTran Communication Fiber
Technologies, Inc, SpecTran Specialty Optics Company, Applied Photonic Devices,
Inc. and Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.94 Mortgage, Assignment of Rents and Security Agreement by SpecTran Communication
Fiber Technologies, Inc. to Fleet National Bank, as Trustee, dated as of December
1, 1996. (Incorporated by reference to the Registrant's Current Report on Form 8-K
dated December 31, 1996)
10.95 Open-End Mortgage, Assignment of Rents and Security Agreement by SpecTran Specialty
Optics Company to Fleet National Bank, as Trustee, dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996)
10.96 Guaranty Agreement dated as of December 1, 1996 by SpecTran Communication Fiber
Technologies, Inc., SpecTran Specialty Optics Company and Applied Photonic Devices,
Inc. in favor of Massachusetts Mutual Life Insurance Company, CM Life Insurance
Company, The New York Mutual Life Insurance Company and Atwell & Co. (Incorporated
by reference to the Registrant's Current Report on Form 8-K dated December 31,
1996)
10.97 Loan Agreement among SpecTran Corporation, SpecTran Communication Fiber
Technologies, Inc., SpecTran Specialty Optics Company, Applied Photonic Devices,
Inc. and Fleet National Bank dated as of December 1, 1996. (Incorporated by
reference to the Registrant's Current Report on Form 8-K dated December 31, 1996)
10.98 Limited Liability Company Agreement of General Photonics, LLC between Applied
Photonic Devices, Inc. and General Cable Industries, Inc. dated as of December 23,
1996. (Registrant has applied for confidential treatment for portions of this
Exhibit) (Incorporated by reference to the Registrant's Current Report on Form 8-K
dated January 8, 1997)
10.99 Asset Purchase Agreement among Applied Photonic Devices, Inc., SpecTran
Corporation, General Cable Corporation and General Cable Industries, Inc. dated as
of December 23, 1996. (Incorporated by reference to the Registrant's Current Report
on Form 8-K dated January 8, 1997)
10.100 Investor's Representations, Contribution Agreement and Subscription Agreement among
Applied Photonic Devices, Inc., SpecTran Corporation and General Photonics, LLC
dated as of December 23, 1996. (Incorporated by reference to the Registrant's
Current Report on Form 8-K dated January 8, 1997)
10.101 Non-Competition Agreement among General Cable Industries, Inc., General Cable
Corporation, Applied Photonic Devices, Inc., SpecTran Corporation and General
Photonics, LLC dated December 23, 1996. (Registrant has applied for confidential
treatment for portions of this Exhibit) (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated January 8, 1997)
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
10.102 Standstill Agreement among General Cable Industries, Inc., General Cable
Corporation and SpecTran Corporation dated as of December 23, 1996. (Registrant has
applied for confidential treatment for portions of this Exhibit) (Incorporated by
reference to the Registrant's Current Report on Form 8-K dated January 8, 1997)
10.103 Letter amendment to Three Year Multimode Optical Fiber Supply Contract between
Corning Incorporated and SpecTran Corporation dated as of January 1, 1996.
(Registrant has applied for confidential treatment for portions of this Exhibit.)
(Incorporated by reference from Registrant's Current Report on Form 8-K dated
January 8, 1997)
10.104 Letter amendment to Employment Agreement between SpecTran Specialty Optics Company
and William B. Beck dated April 18, 1996. (Incorporated by reference to the
Registrant's Report on Form 8-K dated January 8, 1997)
10.105 Cross-Indemnity Agreement between SpecTran Corporation and Allen & Company
Incorporated (to be filed by amendment).
23.1 Report and Consent of KPMG Peat Marwick.
23.2 Consent of Hackmyer & Nordlicht. (To be filed by amendment)
24.0 Power of Attorney. (See page II-6)
</TABLE>
<PAGE> 1
SPECTRAN CORPORATION
COMMON STOCK
(PAR VALUE $.10 PER SHARE)
UNDERWRITING AGREEMENT
Boston, Massachusetts
January , 1997
TUCKER ANTHONY INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
As Representatives of the
Several Underwriters
c/o Tucker Anthony Incorporated
One Beacon Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
SpecTran Corporation, a Delaware corporation (the "Company"), and the
stockholder of the Company named in Schedule B hereto (the "Selling
Stockholder") confirm their agreement with Tucker Anthony Incorporated ("Tucker
Anthony") and Raymond James & Associates, Inc. ("Raymond James"), and each of
the other underwriters, if any, named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Tucker Anthony and Raymond James
are acting as representatives (in such capacity, Tucker Anthony and Raymond
James are herein called the "Representatives"), with respect to the sale by the
Company and the Selling Stockholder and the purchase by the Underwriters, acting
severally and not jointly, of an aggregate of 1,800,000 shares of the common
stock, $.10 par value per share, of the Company ("Common Stock"), of which
1,450,000 shares are to be sold by the Company and 350,000 shares are to be sold
by the Selling Stockholder (collectively, the "Firm Shares"), and with respect
to the grant by the Company to the Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase from the
Company all or any part of 270,000 additional shares of Common Stock for the
purpose of covering over-allotments, if any. The Firm Shares and all or any part
of the shares of Common Stock subject to the option described in Section 2(b)
hereof (the "Option Shares") are hereinafter collectively referred to as the
"Shares."
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING STOCKHOLDER.
I. The Company represents and warrants to, and agrees with, each of the
Underwriters as of the date hereof, and as of the Closing Date, as defined in
Section 2(c) hereof, and the Option Closing Date, as defined in Section 2(b)
hereof, if any, as follows:
(a) A registration statement on Form S-3 (File No. ) with
respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable Rules
and Regulations (as defined below) of the Securities and Exchange
Commission (the "Commission") and has been filed with the Commission; such
amendments to such registration statement, and such amended prospectuses
subject to completion, as may have been required prior to the date hereof
have been similarly prepared and filed with the Commission; and the Company
will file such additional amendments to such registration statement, and
such amended prospectuses subject to completion, as may hereafter be
required. Copies of such registration statement and each such amendment,
each such related prospectus subject to completion (collectively, the
"Preliminary Prospectuses" and individually, a "Preliminary Prospectus"),
each document incorporated by reference therein and each exhibit thereto
<PAGE> 2
have been delivered to you. For purposes hereof, "Rules and Regulations"
means the rules and regulations adopted by the Commission under either the
Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
If the registration statement has been declared effective under the
Act by the Commission, the Company will prepare and promptly file with the
Commission, pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules
and Regulations under the Act or as part of a post-effective amendment to
the registration statement (including a final form of prospectus), the
information omitted from the registration statement pursuant to Rule
430A(a) of the Rules and Regulations under the Act. If the registration
statement has not been declared effective under the Act by the Commission,
the Company will prepare and promptly file a further amendment to the
registration statement, including a final form of prospectus. The term
"Registration Statement" as hereinafter used in this Agreement shall mean
such registration statement, including financial statements, schedules and
exhibits in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the
registration statement pursuant to Rule 430A(a) of the Rules and
Regulations under the Act, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations under the Act) and, in the event of
any amendment thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended, together with any
registration statement filed by the Company pursuant to Rule 462(b) under
the Act. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares as included in such registration
statement at the time it became or becomes, as the case may be, effective,
except that if any revised prospectus shall be provided to the Underwriters
by the Company for use in connection with the offering of the Shares that
differs from the Prospectus on file with the Commission at the time the
registration statement became or becomes, as the case may be, effective
(whether or not such revised prospectus is required to be filed with the
Commission pursuant to Rule 424(b)(3) of the Rules and Regulations under
the Act), the term "Prospectus" shall refer to such revised prospectus from
and after the time it is first provided to the Underwriters for such use,
together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Any reference herein
to the Registration Statement, the Prospectus, any amendment or supplement
thereto or any Preliminary Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein, and any reference
herein to the terms "amend," "amendment" or "supplement" with respect to
the Registration Statement or Prospectus shall be deemed to refer to and
include the filing of any document with the Commission deemed to be
incorporated by reference therein.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, at the time of filing thereof, or instituted proceedings for
that purpose, and each such Preliminary Prospectus, at the time of filing
thereof, has conformed in all material respects to the requirements of the
Act and the Rules and Regulations and, at the time of filing thereof, has
not included any untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein not misleading
and at the time the Registration Statement became or becomes, as the case
may be, effective and at all times subsequent thereto up to and including
the Closing Date (as hereinafter defined) and any Option Closing Date (as
hereinafter defined), and during such longer period as the Prospectus may
be required to be delivered in connection with sales by an Underwriter or a
dealer, (i) the Registration Statement and Prospectus, and any amendments
or supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations
and conformed and will conform in all material respects to the requirements
of the Act and the Rules and Regulations, and (ii) neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto
included or will include any untrue statement of a material fact or omitted
or will omit to state any material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances
under which they were made not misleading. The documents incorporated by
reference in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any Preliminary Prospectus, when they became or
become effective under the Act or were or are filed with the Commission
under the Exchange Act, as the case may be,
2
<PAGE> 3
conformed or will conform in all material respects with the requirements of
the Act or the Exchange Act, as applicable, and the Rules and Regulations,
and as of the date any such document was or is filed with the Commission
under the Exchange Act such document did not, and on Closing Date and on
any Option Closing Date will not, omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware. Each
of the subsidiaries of the Company (collectively, the "Wholly-Owned
Subsidiaries" and individually, a "Wholly-Owned Subsidiary") has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware. General Photonics LLC, the joint venture
between the Company and General Cable Industries, Inc. ("GCI") (the "Joint
Venture"), has been duly organized and is validly existing as a limited
liability company in good standing under the laws of the State of Delaware.
(The Wholly-Owned Subsidiaries and the Joint Venture are herein called
collectively, the "Subsidiaries" and individually, a "Subsidiary.") The
Company and each of the Subsidiaries are duly qualified and licensed and in
good standing as foreign corporations or as a foreign limited liability
company, as the case may be, in each jurisdiction in which their respective
ownership or leasing of any properties or the character of their respective
operations requires such qualification or licensing, except where the
failure to be so qualified would not have a material adverse effect on the
condition, financial or otherwise, or on the business affairs, position,
prospects, value, operation, properties, business or results of operation
of the Company and the Subsidiaries taken as a whole whether or not arising
in the ordinary course of business (a "Material Adverse Effect"). The
Company and each of the Subsidiaries have all requisite power and authority
(corporate and as a limited liability company, as appropriate), and have
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, the United
States Environmental Protection Agency and those other officials and bodies
having jurisdiction over similar matters), to own or lease their respective
properties and conduct their respective businesses as described in the
Prospectus (collectively, "Government Approvals"), except where the failure
to so obtain any such Government Approval would not have a Material Adverse
Effect; the Company and each of the Subsidiaries are and have been doing
business in compliance with all such Government Approvals, except where the
failure to so comply would not have a Material Adverse Effect; and neither
the Company nor any of the Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Government Approvals. All of the outstanding shares of capital stock of
each of the Wholly-Owned Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are owned by the Company free
and clear of all liens, encumbrances and security interests, except that
all of the outstanding shares of capital stock of the Wholly-Owned
Subsidiaries are pledged as security for the Company's aggregate principal
amount of $24 million Senior Secured Notes and $20 million revolving credit
facility from Fleet National Bank; 50 percent of the ownership interests in
the Joint Venture have been duly acquired and are owned by Applied Photonic
Devices, Inc., a Wholly-Owned Subsidiary ("APD"), free and clear of all
liens, encumbrances and security interests and the other 50 percent of the
ownership interests are owned by GCI; and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into, or exchange any securities for,
shares of capital stock of or ownership interests in any of the
Subsidiaries are outstanding, except for certain rights held by GCI to
acquire the ownership interests of APD in the Joint Venture in the event of
the bankruptcy of the Company or APD or a material breach by APD, the
Company or any of the Company's affiliates of any of the agreements related
to the formation and operations of the Joint Venture.
(d) On September 30, 1996, the Company had the duly authorized, issued
and outstanding capitalization set forth in the Prospectus under
"Capitalization" based upon the assumptions set forth therein and would
have had the pro forma as adjusted capitalization set forth therein based
upon the assumptions set forth therein, and the Company is not a party to
or bound by any instrument, agreement or other arrangement (except for
stock options and underlying shares of Common Stock under the Company's
Incentive Stock Option Plan and shares of Common Stock underlying warrants
held by the
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<PAGE> 4
Selling Stockholder described in the Prospectus) providing for it to issue
any capital stock, rights, warrants, options or other securities, except
for this Agreement. The Shares and all other securities issued or issuable
by the Company conform in all material respects to all statements with
respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable
and were not issued in violation of any preemptive rights or other rights
to subscribe for or purchase securities. The Shares have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and are
not and will not be subject to any preemptive or other rights to subscribe
for or purchase securities; the holders thereof will not be subject to any
liability solely as such holders; and the certificates representing the
Shares will be in due and proper form as previously authorized by the
Company.
(e) The audited and unaudited consolidated financial statements of the
Company and the Wholly-Owned Subsidiaries, together with the notes and
schedules thereto, included or incorporated by reference in the
Registration Statement, each Preliminary Prospectus and the Prospectus
fairly present the financial position and the results of operations,
changes in cash flows and changes in stockholders' equity of the Company at
the respective dates and for the respective periods to which they apply;
and each of such audited consolidated financial statements has been
prepared in conformity with generally accepted accounting principles and
the Rules and Regulations, consistently applied throughout the periods
involved, all adjustments necessary for a fair presentation of results for
such periods have been made and such unaudited consolidated financial
statements have been prepared on a basis substantially consistent with that
of such audited consolidated financial statements. Except as described in
the Prospectus, there has been no change or development involving a
Material Adverse Effect since the date of the consolidated financial
statements included or incorporated by reference in any of the Preliminary
Prospectuses, the Prospectus and the Registration Statement, and the
outstanding debt, the property, both tangible and intangible, and the
business of the Company and each of the Subsidiaries conform in all
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. The summary and selected financial and
statistical consolidated data included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with the
unaudited and audited consolidated financial statements included or
incorporated by reference therein. The Company's internal accounting
controls are sufficient to cause the Company to comply with the Foreign
Corrupt Practices Act of 1977, as amended. Neither the Company nor any of
the Subsidiaries has any material contingent obligation which is not
disclosed in the Registration Statement.
(f) KPMG Peat Marwick LLP ("KPMG"), whose reports are filed with the
Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(g) (i) The Company and each of the Subsidiaries has paid all federal,
state, local and foreign taxes for which they are respectively liable and
which are due and payable, including, but not limited to, withholding taxes
and amounts payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986, as amended, and (ii) none of the Company or any Subsidiary
has any tax deficiency or claims outstanding, proposed or assessed against
it.
(h) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Shares, (ii) the purchase by the Underwriters of the Shares,
or (iii) the consummation by the Company and the Selling Stockholder of any
of their respective obligations under this Agreement.
(i) The Company and each of the Subsidiaries maintain insurance of the
types and in the amounts which the Company reasonably believes to be
adequate for their respective businesses, all of which insurance is in full
force and effect.
(j) There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding, domestic or foreign, pending or, to
the Company's knowledge, threatened against (or currently existing or
4
<PAGE> 5
previously occurring facts or circumstances that provide a basis for the
same), or involving the properties or business of the Company or any of the
Subsidiaries that (i) questions the validity of the capital stock of the
Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, (ii) is required
to be disclosed in the Registration Statement that is not so disclosed (and
such proceedings, if any, as are summarized in the Registration Statement
are accurately summarized in all material respects), (iii) would have a
Material Adverse Effect or (iv) relates to or affects the Company or
processes or products which the Company designed, developed, licenses,
uses, manufactures or markets which, if adversely determined, would have a
Material Adverse Effect.
(k) The Company has full legal right, power and authority to enter
into this Agreement and to consummate the transactions provided for herein;
and this Agreement has been duly authorized, executed and delivered by the
Company. This Agreement, assuming it has been duly authorized, executed and
delivered by the Underwriters, constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and
the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by
applicable law), and none of the Company's execution or delivery of this
Agreement, its performance hereunder, its consummation of the transactions
contemplated herein or the conduct of its business and that of each of the
Subsidiaries as described in the Registration Statement, the Prospectus and
any amendments or supplements thereto conflicts with or will conflict with
in any material respect or results or will result in any breach or
violation of any of the material terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction on equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company or any of the Subsidiaries,
pursuant to the terms of (i) the corporate charter, operating agreement or
by-laws of the Company or any of the Subsidiaries, (ii) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company or any of the Subsidiaries is
a party or by which any of them is or may be bound or to which any of their
respective properties or assets (tangible or intangible) is or may be
subject or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of the Subsidiaries of any arbitrator,
court, regulatory body or administrative agency or other governmental
agency or body, domestic or foreign, having jurisdiction over the Company
or any of the Subsidiaries or any of their respective activities or
properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic
or foreign, is required for the issuance of the Shares pursuant to the
Prospectus and the Registration Statement, or the performance of this
Agreement and the transactions contemplated hereby, except such as have
been or may be obtained under the Act or may be required under state
securities or Blue Sky laws in connection with the Underwriters' purchase
and distribution of the Shares.
(m) All executed agreements or copies of executed agreements filed or
incorporated by reference as exhibits to the Registration Statement to
which the Company or any of the Subsidiaries is a party or by which any of
them may be bound or to which any of their respective assets, properties or
businesses may be subject have been duly and validly authorized, executed
and delivered by the Company and such Subsidiaries, and, assuming due
authorization, execution and delivery by the other parties thereto,
constitute the legal, valid and binding agreements of the Company and such
Subsidiaries enforceable against the Company and such Subsidiaries in
accordance with their respective terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement
of creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law). The descriptions in the
Registration Statement of contracts and other
5
<PAGE> 6
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by Form S-3, and
there are no contracts or other documents that are required by the Act to
be described in the Registration Statement or filed or incorporated by
reference as exhibits to the Registration Statement that are not described
or filed or incorporated by reference as required, and the exhibits that
have been filed or incorporated by reference are complete and correct
copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the
Company nor any of the Subsidiaries has (i) issued any securities or
incurred any liability or obligation, direct or contingent, for borrowed
money (except for (A) the issuance by the Company of shares of Common Stock
upon the exercise of previously granted stock options, and (B) borrowings
made pursuant to the Company's and the Subsidiaries' existing credit
agreements), (ii) entered into any transaction which would have a Material
Adverse Effect or (iii) declared or paid any dividend or made any other
distribution on or in respect of its capital stock.
(o) No material default exists in the due performance and observance
of any term, covenant or condition of any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries
may be bound or to which any of the property or assets (tangible or
intangible) of the Company or any of the Subsidiaries is subject or
affected.
(p) The Company and each of the Subsidiaries have a generally
satisfactory employer-employee relationship with their respective employees
and are in compliance with all federal, state, local, and, where
applicable, foreign, laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and
hours, except where the failure to so comply would not have a Material
Adverse Effect. To the Company's knowledge, there are no pending
investigations involving the Company or any of the Subsidiaries by the
United States Department of Labor or any other governmental agency
responsible for the enforcement of such federal, state, local or foreign
laws and regulations. To the Company's knowledge, there is no unfair labor
practice charge or complaint against the Company or any of the Subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of the Subsidiaries, and no such strike,
picketing, boycott, dispute, slowdown or stoppage has ever occurred. No
representation question exists respecting the employees of the Company or
any of the Subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of
the Subsidiaries. There are no expired or existing collective bargaining
agreements of the Company or any of the Subsidiaries.
(q) Neither the Company nor any of the Subsidiaries has incurred any
material liability arising under or as a result of the application of the
provisions of the Act.
(r) Neither the Company nor any of the Subsidiaries maintains,
sponsors or contributes to any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" (collectively, the "ERISA Plans") as such terms are
defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). With respect
to any "defined benefit plan," as defined in Section 3(35) of ERISA, that
the Company or any of the Subsidiaries, now or at any time previously,
maintains or contributes to, all applicable federal laws and regulations
have been complied with, except for such instances of noncompliance which,
either singly or in the aggregate, would not have a Material Adverse
Effect. Neither the Company nor any of the Subsidiaries has ever completely
or partially withdrawn from a "multiemployer plan."
(s) The Company is in compliance with all applicable existing federal,
state, local and foreign laws and regulations relating to the protection of
human health or the environment or imposing liability or
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<PAGE> 7
requiring standards of conduct concerning any Hazardous Materials
("Environmental Laws"), except for such instances of noncompliance which,
either singly or in the aggregate, would not have a Material Adverse
Effect. The term "Hazardous Material" means (i) any "hazardous substance"
as defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended, (iii) any petroleum
or petroleum product, (iv) any polychlorinated biphenyl and (v) any
pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the meaning of any
other Environmental Law.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(u) The Company has filed a notice with Nasdaq of intent to issue and
has paid the required fee to have the Shares listed on the Nasdaq National
Market.
(v) The Company has not distributed and will not distribute (within
the meaning of Rule 140 of the Rules and Regulations under the Act) any
offering material in connection with the offering and sale of the Shares,
other than the Prospectus, any Preliminary Prospectus, the Registration
Statement and other materials permitted by the Act.
(w) No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the
Company have the right to include any securities issued by the Company in
the Registration Statement or any registration statement to be filed by the
Company within 180 days of the date hereof or to require the Company to
file a registration statement under the Act during such 180-day period.
(x) The Company has not taken and will not take, directly or
indirectly (except for any action that may be taken by the Underwriters),
any action designed to or which has constituted or which might reasonably
be expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares or otherwise.
(y) Except to the extent disclosed in the Prospectus, (i) the Company
and each of the Subsidiaries own or possess, or have a license or other
right to use, the patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
technology, trademarks, service marks and trade names, together with all
applications for any of the foregoing, currently used or held for use by
them in connection with their respective businesses, (ii) neither the
Company nor any of the Subsidiaries has received any notice of infringement
of or conflict with asserted rights of others with respect to any of the
foregoing and (iii) except as set forth in the Registration Statement,
neither the Company nor any of the Subsidiaries is obligated or under any
liability whatsoever to make any material payments by way of royalties,
fees or otherwise to any owner or licensee of, or other claimant to, any
patent, patent right, license, invention, trademark, service mark, trade
name, copyright, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), technology or other intangible asset, with respect to the use
thereof or in connection with the conduct of its business or otherwise.
(z) The Company and each of the Subsidiaries have good and marketable
title to, or valid and enforceable leasehold estates in, all items of real
and personal property stated in the Prospectus (including the financial
statements included or incorporated by reference therein) to be owned or
leased by them, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or
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<PAGE> 8
other restrictions on equity of any kind whatsoever, other than (i) those
referred to in the Prospectus (including such financial statements), (ii)
liens for taxes not yet due and payable and (iii) mechanics, materialmen,
warehouse and other statutory liens arising in the ordinary course of
business which, either individually or in the aggregate, do not have a
Material Adverse Effect.
(aa) Except as described in the Prospectus under "Underwriting" and on
the cover page thereof, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Shares hereunder or any
other arrangements, agreements, understandings, payments or issuance with
respect to the Company or any of the Subsidiaries or any of their
respective officers, directors, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(bb) Quotations and last sale data with respect to the Company's
Common Stock are reported on the National Association of Securities Dealers
Automated Quotation National Market System (the "NASDAQ-NMS") under the
symbol "SPTR" and the Company knows of no currently existing reason or set
of facts which is likely to result in the inability or refusal to quote the
Common Stock or the Shares.
(cc) The Company is not an "investment company" or an "affiliated
person" or "promoter" of, or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), or subject to regulation under the 1940 Act.
(dd) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' Counsel (as
hereinafter defined) shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(ee) The Company has delivered to the Representatives written
agreements, in form and substance satisfactory to the Representatives, with
each of its directors and executive officers who own Common Stock (each
such person is named in Schedule C hereto), to the effect that, among other
things, such director or officer will not, for a period ending 90 days
after the date of the Prospectus, directly or indirectly, offer, sell,
assign, transfer, encumber, contract to sell, grant an option to purchase
or otherwise sell or dispose of shares of Common Stock or other capital
stock of the Company, any options, rights or warrants to purchase shares of
Common Stock or other capital stock of the Company or any securities
convertible into or exchangeable or exercisable for shares of Common Stock
or other capital stock of the Company now owned by such person or
subsequently acquired (or as to which such person now or hereafter has the
right to direct the disposition of) otherwise than hereunder or with the
prior written consent of Tucker Anthony; provided, however, that such
agreements may contain an exception providing that such officers and
directors during such period may, without such consent, convey shares of
Common Stock (i) by gift to immediate family members to the extent that the
total of the number of shares of Common Stock which are or have been the
subject of all such conveyances by all such officers and directors during
such period is less than or equal to 5,000 shares of Common Stock
(including in such calculation all shares of Common Stock which are the
subject of any transaction pending during such period) and (ii) by will or
intestacy to immediate family members provided in both cases that such
transferees enter into agreements for the benefit of the Underwriters
containing all of the restrictions set forth in this Section 1.I(ee) with
respect to such shares of Common Stock.
II. The Selling Stockholder represents and warrants to, and agrees with,
each of the Underwriters and the Company as of the date hereof and as of the
Closing Date, as defined in Section 2(c) hereof, that:
(a) The Selling Stockholder as of the Closing Date will have valid
marketable title to such of the Shares as are to be sold by the Selling
Stockholder, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than pursuant to this
Agreement; the Selling Stockholder has full right, power and authority to
sell, assign, transfer and deliver the Shares to be sold by the Selling
Stockholder hereunder; and upon delivery of such Shares and payment of the
purchase price as herein contemplated, each of the Underwriters will obtain
valid marketable title to the Shares purchased by it from the Selling
Stockholder, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest.
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(b) The Selling Stockholder has duly authorized, executed and
delivered, in the form heretofore furnished to the Representatives, a Power
of Attorney (the "Power of Attorney") appointing Raymond E. Jaeger and
Bruce A. Cannon as attorneys-in-fact (collectively, the "Attorneys" and
individually, an "Attorney") and a Custody Agreement (the "Custody
Agreement") with Hackmyer & Nordlicht named therein, as custodian (the
"Custodian"); each of the Power of Attorney and the Custody Agreement
constitutes a valid and binding agreement of the Selling Stockholder,
enforceable in accordance with its terms, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or affecting
enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law; and each of
such Attorneys approved by the Selling Stockholder, acting alone, is
authorized to execute and deliver this Agreement and the certificate
referred to in Section 6(j) hereof on behalf of the Selling Stockholder, to
determine the purchase price to be paid by the several Underwriters to the
Selling Stockholder as provided in Section 2 hereof, to exercise the
Selling Stockholder Warrants (as defined in paragraph (e) of this Section
1.II), to authorize the delivery of the Shares as are to be sold by the
Selling Stockholder under this Agreement and to duly endorse (in blank or
otherwise) the certificate or certificates representing such Shares or a
stock power or powers with respect thereto, to accept payment therefor (net
of the aggregate exercise price for full exercise of the Selling
Stockholder Warrants) and otherwise to act on behalf of the Selling
Stockholder in connection with this Agreement and to pay all expenses in
connection therewith.
(c) All authorizations, approvals, consents and orders necessary for
the execution and delivery on behalf of the Selling Stockholder of the
Power of Attorney and the Custody Agreement, the execution and delivery on
behalf of the Selling Stockholder of this Agreement, the exercise of the
Selling Stockholder Warrants and the sale and delivery of the Shares as are
to be sold by the Selling Stockholder under this Agreement (other than, at
the time of the execution hereof (if the Registration Statement has not yet
been declared effective by the Commission), the issuance of the order of
the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state or
other securities or Blue Sky laws) have been obtained and are in full force
and effect; and the Selling Stockholder has full right, power and authority
to enter into and perform its obligations under the Power of Attorney and
the Custody Agreement and this Agreement, to exercise the Selling
Stockholder Warrants and to sell, assign, transfer and deliver the Shares
to be sold by the Selling Stockholder under this Agreement.
(d) Other than the Selling Stockholder Warrants and the Shares to be
sold by the Selling Stockholder under this Agreement, the Selling
Stockholder does not beneficially own any shares of Common Stock or other
capital stock of the Company, any options, rights or warrants to purchase
shares of Common Stock or other capital stock of the Company or any
securities convertible into or exchangeable or exercisable for shares of
Common Stock or other capital stock of the Company, nor does the Selling
Stockholder have any right or arrangement to acquire any capital stock,
options, rights, warrants or other securities of the Company.
(e) A warrant certificate (the "Warrant Certificate") in the name of
the Selling Stockholder representing warrants to purchase 350,000 shares of
Common Stock of the Company at a purchase price of $2.00 per share (the
"Selling Stockholder Warrants"), together with a form of subscription duly
executed in blank and a stock power(s) duly endorsed in blank by the
Selling Stockholder with respect to the 350,000 Shares to be acquired upon
exercise of the Selling Stockholder Warrants, have been, and as of the
Closing Date certificates in negotiable form for all Shares to be sold by
the Selling Stockholder under this Agreement will have been, placed in
custody with the Custodian for the purpose of effecting delivery of such
Shares hereunder.
(f) This Agreement has been duly executed and delivered by or on
behalf of the Selling Stockholder and is a valid and binding agreement of
the Selling Stockholder, enforceable in accordance with its terms, except
as the indemnification and contribution provisions hereunder may be limited
by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization,
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<PAGE> 10
moratorium or other laws of general application relating to or affecting
enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable; and the performance of this
Agreement and the consummation of the transactions herein contemplated will
not result in a breach of or default under any bond, debenture, note or
other evidence of indebtedness, or any contract, indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or instrument to which
the Selling Stockholder is a party or by which the Selling Stockholder or
any Shares as are to be sold by the Selling Stockholder hereunder may be
bound or result in any violation of any law, order, rule, regulation, writ,
injunction or decree of any court or governmental agency or body.
(g) The Selling Stockholder has not taken and will not take, directly
or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in stabilization or manipulation of the price
of the Common Stock to facilitate the sale or resale of the Shares.
(h) The Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of the Selling
Stockholder relating to the Selling Stockholder and the Shares as are to be
sold by the Selling Stockholder that is contained in the representations
and warranties of the Selling Stockholder in the Selling Stockholder's
Power of Attorney or set forth in the Registration Statement and the
Prospectus is, and on the Closing Date will be, true, correct and complete,
and does not, and on the Closing Date will not, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(j) The Selling Stockholder will review the Prospectus and will comply
with all agreements and satisfy all conditions on its part to be complied
with or satisfied pursuant to this Agreement on or prior to the Closing
Date, including full exercise of the Selling Stockholder Warrants to
acquire 350,000 Shares, and will advise one of its Attorneys prior to the
Closing Date if any statement to be made on behalf of the Selling
Stockholder in the certificate contemplated by Section 6(j) would be
inaccurate if made of the Closing Date.
(k) The Selling Stockholder does not have any preemptive right,
co-sale right or right of first refusal or other similar right to purchase
any of the Shares that are to be sold by the Company to the Underwriters
pursuant to this Agreement.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, and subject to the terms and conditions herein
set forth, the Company agrees to sell 1,450,000 Firm Shares to the several
Underwriters, the Selling Stockholder agrees to sell to the several
Underwriters the number of Firm Shares set forth on Schedule B opposite the
name of the Selling Stockholder, and each Underwriter, severally and not
jointly, agrees to purchase that number of Firm Shares set forth in
Schedule A opposite its name plus any additional number of Firm Shares that
such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
The Warrant Certificate in the name of the Selling Stockholder
representing the Selling Stockholder Warrants to purchase 350,000 shares of
Common Stock of the Company at a purchase price of $2.00 per share,
together with a form of subscription duly executed in blank and a stock
power(s) duly endorsed in blank by the Selling Stockholder with respect to
the 350,000 Shares to be acquired upon exercise of the Selling Stockholder
Warrants, have been, and as of the Closing Date certificates in negotiable
form for the total number of Shares to be sold hereunder by the Selling
Stockholder will have been, placed in custody with the Custodian pursuant
to the Custody Agreement executed by the Selling Stockholder for delivery
of all Shares to be sold hereunder by the Selling Stockholder. The Selling
Stockholder specifically agrees that the Selling Stockholder Warrants
represented by the Warrant Certificate and the Shares represented by the
certificates held and to be held in custody for the Selling Stockholder
under the Custody Agreement are subject to the interests of the
Underwriters hereunder, that the arrangements
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made by the Selling Stockholder for such custody and the full exercise of
the Selling Stockholder Warrants are to that extent irrevocable, and that
the obligations of the Selling Stockholder hereunder shall not be
terminable by any act or deed of such Selling Stockholder (or by any other
person, firm or corporation including the Company, the Custodian or the
Underwriters) or by operation of law (including without limitation, the
bankruptcy, insolvency, dissolution, liquidation or termination of the
Selling Stockholder) or by the occurrence of any other event or events,
except as set forth in the Custody Agreement. If any such event should
occur prior to the delivery to the Underwriters of the Shares hereunder,
the Selling Stockholder Warrants shall be exercised in full and
certificates for the Shares shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as if such event
has not occurred, regardless of whether or not the Custodian shall have
received notice of such event. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares to be held by it
upon full exercise of the Selling Stockholder Warrants (net of the
aggregate exercise price for the full exercise of the Selling Stockholder
Warrants) against delivery of such Shares.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained and upon not less than two
business days' notice from the Representatives of the Underwriters, for a
period of thirty days from the effective date of this Agreement, the
Company grants to the Underwriters an option to purchase up to 270,000
Option Shares. Such option is granted solely for the purpose of covering
over-allotments in the sale of Firm Shares and is exercisable as provided
in Section 4 hereof. Option Shares shall be purchased severally for the
account of the Underwriters in proportion to the number of Firm Shares set
forth opposite the name of such Underwriters in Schedule A hereto. (The
time and date of delivery of any of the Option Shares is herein called the
"Option Closing Date.") The respective purchase obligations of each
Underwriter with respect to the Option Shares may be adjusted by the
Representatives so that no Underwriter shall be obligated to purchase
Option Shares other than in 100 share increments. The price of both the
Firm Shares and any Option Shares shall be $ per share.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Shares and the Option Shares shall be made on each of the
Closing Date and the Option Closing Date, respectively, at the
Representatives' election by certified or bank cashier's check(s) in New
York Clearing House funds, payable to the order of the Company and (on the
Closing Date) the Custodian, as applicable, at the offices of Tucker
Anthony at One Beacon Street, Boston, Massachusetts, or at such other place
as shall be agreed upon by the Representatives, the Company and (with
respect to the Closing Date) the Selling Stockholder or, if mutually agreed
to by the Company and the Representatives, by wire transfer, upon delivery
of certificates (in form and substance satisfactory to the Representatives)
representing such securities to the Representatives. Delivery and payment
for the Firm Shares shall be made at 10:00 a.m. (Eastern Time) on the third
business day following the public offering, or at such other time and date
as shall be agreed upon by the Representatives and the Company. (The time
and date of payment for and delivery of the Firm Shares is herein called
the "Closing Date.") In the event that any or all of the Option Shares are
purchased by the Underwriters, the date and time at which certificates for
Option Shares are to be delivered shall be determined by the
Representatives and the Company but shall not be earlier than three nor
later than ten full business days after the exercise of such option, nor in
any event prior to the Closing Date. Certificates for the Firm Shares and
the Option Shares, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Representatives may request in writing at
least two (2) business days prior to the Closing Date or the Option Closing
Date, as the case may be. The certificates for the Firm Shares and the
Option Shares, if any, shall be made available to the Representatives at
such office or such other place as the Representatives may designate for
inspection and packaging not later than 9:30 a.m. (Eastern Time) on the
last business day prior to the Closing Date or the Option Closing Date, as
the case may be.
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3. PUBLIC OFFERING OF THE SHARES.
As soon after the Registration Statement becomes effective as the
Representatives deem advisable, the Underwriters shall make a public offering of
the Shares at the price and upon the other terms set forth in the Prospectus.
4. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDER.
I. The Company agrees with each of the Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date
that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; it will notify the
Representatives, promptly after it shall receive notice thereof, of the
time when the Registration Statement or any subsequent amendment to the
Registration Statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a), the Company will provide evidence satisfactory
to the Representatives that the Prospectus contains such information and
has been filed, within the time period prescribed, with the Commission
pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations under the Act or as part of a post-effective amendment to such
Registration Statement as originally declared effective which is declared
effective by the Commission; if for any reason the filing of the final form
of Prospectus is required under Rule 424(b)(3) of the Rules and Regulations
under the Act, it will provide evidence satisfactory to the Representatives
that the Prospectus contains such information and has been filed with the
Commission within the time period prescribed; it will notify the
Representatives promptly of any request by the Commission for the amending
or supplementing of the Registration Statement or the Prospectus or for
additional information; promptly upon the Representatives' request, it will
prepare and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of counsel for
the several Underwriters ("Underwriters' Counsel"), may be necessary or
advisable so as to comply with all applicable laws and regulations
(including, without limitation, Section 11 under the Act and Rule 10b-5
under the Exchange Act) in connection with the distribution of the Shares
by the Underwriters; it will promptly prepare and file with the Commission,
and promptly notify the Representatives of the filing of, any amendments or
supplements to the Registration Statement or Prospectus which may be
necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the
Act, any event shall have occurred as a result of which the Prospectus or
any other prospectus relating to the Shares as then in effect would include
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; in case any Underwriter is
required so as to comply with all applicable laws and regulations
(including, without limitation, Section 11 under the Act and Rule 10b-5
under the Exchange Act) to deliver a prospectus nine months or more after
the effective date of the Registration Statement in connection with the
sale of the Shares, it will prepare promptly upon request, but at the
expense of such Underwriter, such amendment or amendments to the
Registration Statement and such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of
the Act; and it will file no amendment or supplement to the Registration
Statement or Prospectus (other than any document required to be filed under
the Exchange Act that upon filing is deemed incorporated therein by
reference) which shall not previously have been submitted to the
Representatives a reasonable time prior to the proposed filing thereof or
to which you shall reasonably object in writing or which is not in
compliance with the Act and the Rules and Regulations under the Act. The
Company will furnish to the Representatives at or prior to the filing
thereof a copy of any document that upon filing is deemed to be
incorporated by reference in the Registration Statement or Prospectus.
(b) The Company will advise the Representatives, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of the
Registration Statement or of the initiation or threat of any proceeding for
that purpose; and it will
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promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as the
Representatives may designate and to continue such qualifications in effect
for so long as may be required for purposes of the distribution of the
Shares, except that the Company shall not be required in connection
therewith or as a condition thereof to qualify as a foreign corporation or
to execute a general consent to service of process in any jurisdiction. In
each jurisdiction in which the Shares shall have been qualified as above
provided, the Company will make and file such statements and reports in
each year as are or may be reasonably required by the laws of such
jurisdiction.
(d) The Company will furnish to each of the Underwriters, as soon as
available, copies of the Registration Statement (three of which, to be
delivered to the Representatives, will be manually signed and which will
include all exhibits), each Preliminary Prospectus, the Prospectus and any
amendment or supplements to such documents, including any prospectus
prepared to permit compliance with Section 10(a)(3) of the Act, all in such
quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its stockholders as
soon as practicable, but in any event not later than the 45th day following
the end of the fiscal quarter first occurring after the first anniversary
of the effective date of the Registration Statement, an earning statement
(which will be in reasonable detail but need not be audited) complying with
the provisions of Section 11(a) of the Act and covering a twelve-month
period beginning after the effective date of the Registration Statement.
(f) During a period of five years after the date hereof, the Company
will furnish to its stockholders, to the extent required by applicable laws
or the Rules and Regulations, as soon as practicable after the end of each
respective period, annual reports (including financial statements audited
by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal
year, and will furnish to you and each of the Underwriters, upon written
request (i) concurrently with furnishing to its stockholders, statements of
operations of the Company for each of the first three quarters in the form
furnished to the Company's stockholders; (ii) concurrently with furnishing
to its stockholders, a balance sheet of the Company as of the end of such
fiscal year, together with statements of operations, cash flows and
stockholders' equity of the Company for such fiscal year, accompanied by a
copy of the certificate or report thereon of independent certified public
accountants; (iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders; (iv) as soon as they are
available, copies of all reports and financial statements furnished to or
filled with the Commission, any securities exchange or the NASD; (v) every
material press release and every material news item or article in respect
of the Company or its affairs which was released or prepared by the Company
or any of the Subsidiaries; and (vi) any additional information of a public
nature concerning the Company or any of the Subsidiaries, or their
respective businesses which you may reasonably request. During such five
year period the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of the Company and the Subsidiaries
are consolidated, and shall be accompanied by similar financial statements
for any Subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be
the same entity as the transfer agent) for its Common Stock.
(i) The Company will use its best efforts to cause the transfer agent
for the Common Stock to register the transfer of the Shares upon their
presentation in proper form for transfer by the Selling Stockholder and to
have certificates representing the Shares available to you as required
hereunder; provided, that the Company shall not be required to take any
action unless the Registration Statement is then effective under the Act.
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(j) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company or
the Selling Stockholder to perform any agreement on its part to be
performed hereunder or to fulfill any condition of the Underwriters'
obligations hereunder, or if the Company shall terminate this Agreement
under Section 10(a), the Company will reimburse the several Underwriters
for all reasonable out-of-pocket expenses (including reasonable fees and
disbursements of Underwriters' Counsel) incurred by the Underwriters in
investigating, preparing to market and marketing the Shares.
(k) If at any time during the 90-day period after the Registration
Statement becomes effective, any publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price of the Common Stock has been or is likely to be materially
affected (regardless of whether such publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after
written notice from the Representatives advising the Company to the effect
set forth above, forthwith prepare, consult with the Representatives
concerning the substance of, and disseminate a press release or other
public statement, reasonably satisfactory to the Representatives,
responding to or commenting on such publication or event.
(l) For a period ending 180 days from the date of the Prospectus, the
Company will not, without your prior written consent, issue, sell, offer or
agree to sell, or otherwise dispose of, directly or indirectly, any Common
Stock, any options, rights or warrants with respect to any shares of Common
Stock or any securities convertible into, exercisable for or exchangeable
for Common Stock other than the sale of the Shares and the Option Shares to
be sold by the Company hereunder, the Company's issuance of shares of
Common Stock pursuant to the exercise of currently outstanding stock
options and warrants and the grant of options currently authorized under
the Company's 1991 Incentive Stock Option Plan.
II. The Selling Stockholder agrees with each of the Underwriters and the
Company that in order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, the Selling Stockholder shall
deliver to you prior to or on the Closing Date a properly completed and executed
United States Treasury Department Form W-9 or Form W-8 (or other applicable form
or statement specified by Treasury Department regulations in lieu thereof).
5. PAYMENT OF EXPENSES.
(a) The Company agrees to pay on each of the Closing Date and the
Option Closing Date (to the extent not paid on the Closing Date) all
expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iii), (v) and (vii) below) incident to the performance of the
obligations of the Company and the Selling Stockholder under this Agreement
(provided that as between the Company and the Selling Stockholder their
relative obligations to pay shall be in such a manner as the Company and
the Selling Stockholder have agreed or shall agree), including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing (including the filing fees of
the Commission), mailing (including postage with respect thereto) and
delivery of the Registration Statement, the Preliminary Prospectuses and
the Prospectus and any amendments and supplements thereto, including the
cost of all copies thereof supplied to the Underwriters in quantities as
hereinabove stated, (iii) all costs and expenses incurred in connection
with the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements, the Agreement Among Underwriters, Underwriters'
Questionnaires, Underwriters' Powers of Attorney, the Selling Stockholder's
Power of Attorney and Custody Agreement and related documents, including
the cost of all copies thereof supplied to the Underwriters in quantities
as hereinabove stated, (iv) the printing, engraving, issuance and delivery
of the Shares, including any transfer or other taxes payable thereon, (v)
the qualification of the Shares under state or foreign securities or Blue
Sky laws, including the costs or printing and mailing a Blue Sky Memorandum
and any supplements or amendments thereto and disbursements and fees of
Peabody & Brown, Underwriters' Counsel, in connection therewith, (vi) fees
and expenses of the Company's transfer agent, (vii) fees and expenses
incurred in connection with the review by the NASD of certain of the
matters set forth in this
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<PAGE> 15
Agreement, and (viii) the fees and expenses incurred in connection with the
listing of the Shares on the NASDAQ-NMS and any other exchange.
(b) If this Agreement is terminated by the Representatives in
accordance with the provisions of Section 6, Section 10(b) or Section 12,
unless the basis upon which the Representatives terminate this Agreement
results from the default or omission of any Underwriter, the Company shall
reimburse and indemnify the Underwriters for all of their reasonable
out-of-pocket expenses (provided that as between the Company and the
Selling Stockholder their relative obligations to pay shall be in such a
manner as the Company and the Selling Stockholder have agreed or shall
agree), including the fees and disbursements of Peabody & Brown,
Underwriters' Counsel, and the Blue Sky fees and expenses identified in
Section 5(a)(v) above.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS.
The obligations of the Underwriters hereunder shall be subject to the
continuing accuracy of the representations and warranties of the Company and the
Selling Stockholder herein as of the date hereof and as of the Closing Date and
(with respect to the Company) the Option Closing Date, if any, as if they had
been made on and as of the Closing Date or the Option Closing Date, as the case
may be; the accuracy on and as of the Closing Date or Option Closing Date, if
any, of the statements of officers of the Company made pursuant to the
provisions hereof; and the performance by the Company and the Selling
Stockholder on and as of the Closing Date and (with respect to the Company) the
Option Closing Date, if any, of its respective covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m.., Eastern Time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Representatives,
and, at the Closing Date and the Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied
with to the satisfaction of Underwriters' Counsel. If the Company has
elected to rely upon Rule 430A of the Rules and Regulations under the Act,
the price of the Shares and any other information previously omitted from
the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of
the Rules and Regulations under the Act within the prescribed time period,
and, prior to the Closing Date, the Company shall have provided evidence
satisfactory to the Representatives of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements
of Rule 430A of the Rules and Regulations under the Act.
(b) The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact that, in the Representatives' opinion or in the opinion
of Underwriters' Counsel, is material, or omits to state a fact that, in
the Representatives' opinion or in the opinion of Underwriters' Counsel, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact that, in the
Representatives' opinion or in the opinion of Underwriters' Counsel, is
material, or omits to state a fact that, in the Representatives' opinion or
in the opinion of Underwriters' Counsel, is material and is required to be
stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) On the Closing Date and the Option Closing Date, if any, the
Representatives shall have received the opinion of Peabody & Brown,
Underwriters' Counsel, dated the Closing Date and the Option Closing Date,
if any, addressed to the Representatives, to the effect that:
(i) the capital stock of the Company, including, without
limitation, the Common Stock, conforms in all material respects to the
description thereof contained in the Prospectus;
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<PAGE> 16
(ii) the Registration Statement is effective under the Act, and if
applicable, the filing of all pricing and other information has been
timely made in the appropriate form under Rule 430A of the Rules and
Regulations, and, to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued, and no
proceedings for that purpose have been instituted or threatened by the
Commission. Such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company,
counsel for the Company, representatives of the independent certified
public accountants for the Company and the Representatives, at which
conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed, and, although such
counsel is not passing upon and does not assume any responsibility for,
nor has such counsel independently verified, the accuracy, completeness
or fairness of the statements contained in the Registration Statement
and Prospectus (except as to matters referred to in subparagraph (i)
above of this Section 6(c)), no facts have come to the attention of such
counsel (relying as to materiality to a large extent upon the opinions
of officers and other representatives of the Company) that lead them to
believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or
any Preliminary Prospectus (other than information omitted pursuant to
Rule 430A) or the Prospectus or any amendment or supplement thereto as
of the date of such opinion contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading (it being understood that such counsel need express no view
with respect to the financial statements and schedules and other
financial and statistical data included in any Preliminary Prospectus,
the Registration Statement (including any exhibit thereto) or the
Prospectus or any amendment or supplement thereto);
(iii) each of the Preliminary Prospectuses, the Registration
Statement and the Prospectus and any amendments or supplements thereto
(other than the financial statements and schedules and other financial
and statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations; and
(iv) this Agreement has been duly authorized, executed and
delivered by the Company.
The opinion of Underwriters' Counsel to be dated the Option Closing
Date, if any, may confirm as of the Option Closing Date the statements made
by such counsel in their opinion delivered on the Closing Date.
(d) On the Closing Date and the Option Closing Date, if any, the
Underwriters shall have received the favorable opinion of Hackmyer &
Nordlicht, counsel to the Company, dated the Closing Date and the Option
Closing Date, if any, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company and each of the Subsidiaries (A) are duly organized
and validly existing as corporations or, with respect to the Joint
Venture, as a limited liability company, in good standing under the laws
of the State of Delaware, and (B) are duly qualified and licensed and in
good standing as foreign corporations or as a foreign limited liability
company, as the case may be, in each jurisdiction in which their
respective ownership or leasing of any properties or the character of
their respective operations require such qualification or licensing,
except where the failure to be so qualified, considering all such cases
in the aggregate, does not involve a material risk to the businesses,
properties, financial position or results of operations of the Company
and the Subsidiaries taken as a whole; all of the outstanding shares of
capital stock of each of the Wholly-Owned Subsidiaries have been duly
authorized and validly issued and are fully-paid and non-assessable,
and, according to the stock ledger of each Wholly-Owned Subsidiary, all
of the outstanding shares of capital stock of the Wholly-Owned
Subsidiaries are owned of record by the Company; and 50 percent of the
ownership interests in the Joint Venture are owned by the Company and
the other 50 percent of such ownership interests are owned by General
Cable Industries, Inc. To such counsel's
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knowledge, relying solely on the stock ledger, stock transfer ledger and
minute books of the Wholly-Owned Subsidiaries and the Joint Venture and
certificates of the Company's officers, and without making any other
investigation, independent or otherwise, the outstanding shares of
capital stock of the Wholly-Owned Subsidiaries owned by the Company and
the 50 percent ownership interests in the Joint Venture owned by APD are
owned free and clear of all liens, encumbrances and security interests,
except that all of the outstanding shares of capital stock of the
Wholly-Owned Subsidiaries are pledged as security for the Company's
aggregate principal amount of $24 million Senior Secured Notes and $20
million revolving credit facility from Fleet National Bank, and no
options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into, or
exchange any securities for, any shares of capital stock of or ownership
interests in any of the Subsidiaries are outstanding, except for certain
rights held by GCI to acquire the interests of APD in the Joint Venture
in certain circumstances;
(ii) the Company and each of the Subsidiaries have the corporate or
other power to own, lease and operate their respective properties and to
conduct their respective businesses as described in the Prospectus;
(iii) the authorized and outstanding capital stock of the Company
as of September 30, 1996, is as set forth in the Prospectus under the
heading "Capitalization," subject to the assumptions set forth therein,
and, except as provided for in this Agreement and as described in the
Prospectus, to such counsel's knowledge the Company is not a party to or
bound by any instrument, agreement or other arrangement providing
(except for stock options and underlying shares of Common Stock under
the Company's 1991 Incentive Stock Option Plan and shares of Common
Stock underlying the warrants held by the Selling Stockholder described
in the Prospectus) for it to issue any capital stock, rights, warrants,
options or other securities. All shares of Common Stock of the Company
issued and outstanding on the date hereof prior to the issuance of the
Shares have been duly authorized and validly issued and are fully paid
and non-assessable; and to such counsel's knowledge, none of such shares
were issued in violation of any preemptive right, co-sale right, right
of first refusal or other similar right; and the capital stock of the
Company, including, without limitation, the Common Stock, conforms in
all material respects to the description thereof contained in the
Prospectus. To such counsel's knowledge, the Firm Shares and the Option
Shares are not and will not be subject to any preemptive rights or other
rights to subscribe for or purchase securities. The Firm Shares and the
Option Shares have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable; and the certificates representing the
Shares are in due and proper form. To such counsel's knowledge, no
holders of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company exercisable
for or convertible or exchangeable for securities of the Company have
the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the
Company within 180 days of the date hereof or to require the Company to
file a registration statement under the Act during such 180-day period;
(iv) the Registration Statement is effective under the Act, and, if
applicable, the filing of all pricing and other information has been
timely made in the appropriate form under Rule 430A of the Rules and
Regulations under the Act, and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for that purpose have been
instituted or to such counsel's knowledge, threatened by the Commission;
(v) each of the Preliminary Prospectuses, the Registration
Statement and the Prospectus and any amendment or supplement thereto
(other than the financial statements and schedules, related notes and
other financial and statistical data included therein, as to which no
opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations under the
Act; and the documents incorporated by reference in the Registration
Statement and the Prospectus and any amendments or supplements thereto,
when they became effective under the Act or were filed with the
Commission under the Exchange Act, as the case may
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be, complied as to form in all material respects with the requirements
of the Act or the Exchange Act, as applicable, and the Rules and
Regulations. Such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company
and representatives of the independent certified public accountants for
the Company, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed, and,
although such counsel is not passing upon and does not assume any
responsibility for, nor has such counsel independently verified, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as to matters referred to
in subparagraph (xii) (insofar as they relate to statements in the
Prospectus under the heading "DESCRIPTION OF SECURITIES") and in the
third clause of the second sentence of subparagraph (iii) of this
Section 6(d)), no facts have come to the attention of such counsel that
lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment
became effective or any Preliminary Prospectus (other than information
omitted pursuant to Rule 430A) or the Prospectus or any amendment or
supplement thereto as of the date of such opinion contained or contains
any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; further, no facts have come to the
attention of such counsel to cause it to believe that any document
incorporated by reference in the Registration Statement, the Prospectus,
any amendment or supplement thereto or any Preliminary Prospectus, as of
the date of the filing thereof with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and no facts have come to the attention of such
counsel that cause it to believe that on the Closing Date or the Option
Closing Date, as the case may be, such incorporated documents taken as a
whole contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such counsel
need express no view with respect to the financial statements and
schedules, related notes, and other financial and statistical data
included or incorporated by reference in any Preliminary Prospectus, the
Registration Statement (including any exhibit thereto) or the Prospectus
or any amendment or supplement thereto). In addition, such counsel shall
state that they know of no contracts, leases or other documents of a
character required to be described in the Registration Statement or
Prospectus or to be filed or incorporated by reference as exhibits to
the Registration Statement which are not described or filed or
incorporated by reference as required;
(vi) (A) to such counsel's knowledge, there is not pending or
threatened against the Company or any of the Subsidiaries, or involving
any of their respective properties or businesses, any action, suit,
proceeding, inquiry, investigation, litigation or governmental
proceeding, domestic or foreign, that (x) is required to be disclosed in
the Registration Statement and is not so disclosed (and such proceedings
as are summarized in the Registration Statement are accurately
summarized in all respects), (y) questions the validity of the capital
stock of the Company or this Agreement or of any action taken or to be
taken by the Company pursuant to or in connection with this Agreement,
or (z) except as may be disclosed in the Registration Statement, may
have a Material Adverse Effect; and (B) no statute or regulation or
legal or governmental proceeding required to be described in the
Prospectus is not described as required;
(vii) such counsel is not aware of any claim of infringement on the
part of any third party of the patents or patent applications of the
Company or any of the Subsidiaries, patents licensed to the Company or
any of the Subsidiaries or trademarks, trade secrets, know-how or other
proprietary rights of the Company or any of the Subsidiaries;
(viii) the Company has full legal right, power and authority to
enter into this Agreement and to consummate the transactions provided
for herein; and this Agreement has been duly authorized, executed and
delivered by the Company. None of the Company's execution or delivery of
this Agreement, its performance hereunder or its consummation of the
transactions contemplated herein conflicts with or will conflict with or
results or will result in any breach or violation of any of the
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<PAGE> 19
material terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction on equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company or any of the
Subsidiaries pursuant to the terms of (A) the corporate charter,
operating agreement or by-laws or other governing instrument of the
Company or any of the Subsidiaries, (B) any voting trust agreement or
any stockholders agreement, or any indenture, mortgage, deed of trust,
note, loan or credit agreement or other agreement or instrument known
to such counsel to which the Company or any of the Subsidiaries is a
party or by which any of them is or may be bound or to which any of
their respective properties or assets (tangible or intangible) is or
may be subject, or (C) any statute, rule or regulation or, to such
counsel's knowledge, any judgment, decree or order applicable to the
Company or any of the Subsidiaries of any arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body having jurisdiction over the Company or any of the
Subsidiaries or any of their respective activities or properties, the
violation of which would have a Material Adverse Effect;
(ix) no consent, approval, authorization or order, and no filing
with, any federal or state court, regulatory body, government agency
or other body (other than such as have been effected under the Act and
such as may be required under Blue Sky or state securities laws or the
rules of the NASD in connection with the purchase and distribution of
the Shares by the Underwriters, as to which no opinion need be
rendered) is required in connection with the issuance of the Shares
pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement and the transactions contemplated
hereby;
(x) neither the Company nor any of the Subsidiaries is in
violation of any term or provision of its corporate charter, operating
agreement, or by-laws or other governing instrument;
(xi) the statements in the Prospectus under the captions
"BUSINESS-Proprietary Rights" and "DESCRIPTION OF SECURITIES" have
been reviewed by such counsel, and insofar as they refer to statements
of law, descriptions of statutes, contracts, licenses, rules or
regulations or legal conclusions, are correct in all material
respects;
(xii) the Company is not an "investment company" or an
"affiliated person" or "promoter" of, or "principal underwriter" for,
an "investment company," as defined in the 1940 Act or subject to
regulation under such Act; and
(xiii) to such counsel's knowledge, no person, corporation,
trust, partnership, association or other entity has the right to
include and/or register any securities of the Company in the
Registration Statement or to require the Company to file any
registration statement.
In rendering such opinions, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and the Subsidiaries and
certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and the Subsidiaries, provided
that copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested and may rely on opinions of Pennie and
Edmonds, patent counsel of the Company, for matters relating to
intellectual property provided that such opinion shall be delivered to
Underwriters' Counsel.
For purposes of any of the opinions to be rendered by such counsel
pursuant to this subsection (d) of Section 6, the term "to such counsel's
knowledge" shall mean, to the extent that such opinion relates to a factual
issue or to a mixed questions of law and fact, that after examination of
documents in such counsel's files and considering the actual knowledge of
the individual attorneys in such counsel's firm who have given substantive
attention to matters on behalf of the Company or his or her role as
counsel, such counsel finds no reason to believe that any of such opinions
is factually incorrect, and that no further investigation, independent or
otherwise, has been undertaken by such counsel.
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<PAGE> 20
The opinion of Hackmyer & Nordlicht, counsel to the Company, to be
dated the Option Closing Date, if any, may confirm as of the Option Closing
Date the statements made by such counsel in their opinion delivered on the
Closing Date.
(e) On the Closing Date, the Underwriters shall have received the
favorable opinion of , counsel to the Selling Stockholder,
dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Power of Attorney and the Custody Agreement of the Selling
Stockholder have been duly authorized, executed and delivered on behalf
of the Selling Stockholder and are valid instruments legally sufficient
for the purposes intended;
(ii) the Selling Stockholder has full right, power and authority to
enter into and to perform its obligations under this Agreement and to
sell, transfer, assign and deliver the Shares to be sold by the Selling
Stockholder hereunder;
(iii) this Agreement has been duly authorized, executed and
delivered on behalf of the Selling Stockholder;
(iv) upon the delivery of and payment for the Shares as
contemplated in this Agreement, and upon registration of the Shares in
the names of the Underwriters, the Underwriters will have acquired good
and valid title to the Shares being sold by the Selling Stockholder free
of any pledge, lien, security interest, encumbrance, claim or equitable
interest, including any lien in favor of the Company or any restriction
on transfer imposed by the Company; and the owner of the Shares being
sold by the Selling Stockholder hereunder, if other than the Selling
Stockholder, is precluded from asserting against the Underwriters the
ineffectiveness of any unauthorized endorsement.
(f) On the Closing Date and the Option Closing Date, if any, the
Underwriters shall have received the favorable opinion of Pennie and
Edmonds, patent counsel to the Company, dated the Closing Date and the
Option Closing Date, if any, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the License Agreement (the "Corning Agreement") dated as of
January 1, 1991 between Corning Incorporated ("Corning") and the Company
licenses the Company to make, use and sell optical fiber under U.S.
patents owned by Corning during the term of the Corning Agreement which
relate to optical fiber and which have filing dates prior to January 1,
1996.
(ii) the Patent License Agreement between Lucent Technologies, Inc.
("Lucent") (successor to American Telephone and Telegraph Company and
Western Electric Company, Incorporated (collectively, "AT&T")) and the
Company dated August 15, 1981 licenses the Company to make, use and sell
optical fiber and optical fiber cables under U.S. and foreign patents
issued at any time for inventions made prior to August 14, 1986 and
owned or controlled by AT&T or its subsidiaries.
(iii) the Company has been granted "have made" license rights such
that the Company may manufacture optical fiber for Corning and Lucent
using its current processes without accruing royalties to Corning or
Lucent and without regard to quantity limitations set forth in the
Corning Agreement.
(iv) based on assumptions set forth in the opinion, the Company's
manufacture, use and sale of single-mode optical fiber has not been
restricted by U.S. patents of Corning or subject to the Corning
Agreement since 1993 and the Company's manufacture, use and sale of
multimode optical fiber will not be restricted by U.S. patents of
Corning or be subject to the Corning Agreement after 1999. A certain
identified U.S. patent of Lucent relating to Company's single-mode and
multimode fiber expires in 1997.
(v) to the extent not disclosed in the Prospectus, the Company is
listed in the records of the U.S. Patent Office and Trademark Office as
the holder of record of the patents and patent applications set forth in
a schedule to such opinion, and such counsel knows of no unrecorded
claims
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<PAGE> 21
of third parties to any ownership interest or lien with respect to any
of such patents or patent applications;
(vi) the statements in the Prospectus under the caption
"BUSINESS-Proprietary Rights" (the "Intellectual Property Portion"), to
the best of such counsel's knowledge, insofar as such statements
constitute a summary of the Company's patents and patent applications,
the expiration of certain patents owned by Corning and Lucent, licenses
granted to the Company to make, use and sell optical fiber, "have made"
license rights granted to the Company by Corning and Lucent and sales to
the United States government, are in all material respects accurate
summaries and fairly summarize such matters in all material respects,
insofar as they refer to legal matters, documents and proceedings
relating to such matters;
(vii) such counsel is not aware that any of the Company's patents
is invalid or that any patent issued in respect of any of the Company's
patent applications would be invalid;
(viii) such counsel is not aware that any valid patent, including
any patent relating to the manufacture of optical fiber or optical fiber
cable, is infringed by the activities of the Company described in the
Prospectus;
(ix) such counsel is not aware of any material defects or form in
the preparation or filing of patent applications on behalf of the
Company. Such patent applications have been diligently pursued by the
Company;
(x) such counsel is not aware of any pending or threatened action,
suit, proceeding or claim by others that the Company is infringing or
otherwise violating any patents, trademarks, trade secrets, know-how or
other proprietary rights;
(xi) except as specifically disclosed in the Prospectus, such
counsel is not aware of any pending or threatened action, suit,
proceeding, or claim by others challenging the validity or scope of the
patent applications or the patents held by or licensed to the Company;
(xii) according to such counsel's records, the Company is listed or
is in the process of being listed in the records of the appropriate
foreign office as the sole holder of record of the foreign patents and
foreign patent applications set forth in a schedule of such opinion.
Such counsel knows of no claims of third parties to any ownership
interest or lien with respect to any of such patents or patent
applications.
Such counsel shall also state that since at least 1982 it has
represented the Company in the prosecution of all of its patents and that
such counsel has participated in conferences with employees of the Company
at which the Company's patents, patent applications and the contents of the
Intellectual Property Portion of the Registration Statement were discussed,
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement (except as to matters referred to
in subparagraph (vi) of this Section 6(f)), on the basis of such
conferences and such representation of the Company, nothing has come to the
attention of such counsel which leads them to believe that the Intellectual
Property Portion of the Registration Statement or any amendment thereto, at
the time such Registration Statement or amendment became effective, and
such portion of the Prospectus or any amendment or supplement thereto, on
the date such Prospectus or amendment or supplement thereto was filed
pursuant to Rule 424(b), and such portion of the Registration Statement and
the Prospectus, or any amendment or supplement thereto, as of the date of
such opinion contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
For purposes of any of the opinions to be rendered by such counsel
pursuant to this subsection (f) of Section 6, the term "to the best of such
counsel's knowledge" shall mean, to the extent that such opinion relates to
a factual issue or to a mixed questions of law and fact, that after
examination of documents in such counsel's files and considering the actual
knowledge of the individual attorneys in such counsel's
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<PAGE> 22
firm who have given substantive attention to matters on behalf of the
Company, such counsel finds no reason to believe that any of such opinions
is factually incorrect.
The favorable opinion of Pennie and Edmonds, patent counsel to the
Company, to be dated the Option Closing Date, if any, may confirm as of the
Option Closing Date the statements made in their opinion delivered on the
Closing Date.
(g) On or prior to each of the Closing Date and the Option Closing
Date, if any, Underwriters' Counsel shall have been furnished such
customary documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in subsection (c) of this Section 6, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions of the Company, the Selling Stockholder or herein
contained.
(h) Prior to each of the Closing Date and the Option Closing Date, if
any, (i) from the respective dates as of which information is set forth in
the Registration Statement and Prospectus, there shall have been no
developments that, individually or in the aggregate, have had a Material
Adverse Effect; (ii) there shall have been no transaction, not in the
ordinary course of business, entered into by the Company or any of the
Subsidiaries, from the latest date as of which the financial condition of
the Company and the Subsidiaries is set forth in the Registration Statement
and Prospectus, that, individually or in the aggregate, has had a Material
Adverse Effect; (iii) neither the Company nor any of the Subsidiaries shall
be in default under any provision of any instrument relating to any of
their respective outstanding indebtedness; (iv) no material amount of the
assets of the Company or any of the Subsidiaries shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus
(including the exhibits to the Registration Statement); (v) no action, suit
or proceeding, at law or in equity, shall have been pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries, or affecting any of their respective properties or businesses
before or by any court or federal, state or foreign commission, board or
other administrative agency wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect; and (vi) no stop order shall
have been issued under the Act and no proceedings therefor shall have been
initiated, or, to the Company's knowledge, threatened or contemplated by
the Commission.
(i) At each of the Closing Date and the Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial officer of the
Company, dated the Closing Date or Option Closing Date, as the case may be,
to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date
or the Option Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at
or prior to such Closing Date or Option Closing Date, as the case may
be;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of such officer, are
threatened under the Act;
(iii) none of the Registration Statement, the Prospectus nor any
amendment or supplement thereto includes any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
neither the Preliminary Prospectus or any supplement thereto included
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and
(iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, neither the
Company nor any of the Subsidiaries have incurred up to
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<PAGE> 23
and including the Closing Date or the Option Closing Date, as the case
may be, other than in the ordinary course of their respective
businesses, any material liabilities or obligations, direct or
contingent; the Company has not paid or declared any dividends or other
distributions on its capital stock; neither the Company nor any of the
Subsidiaries has entered into any transactions not in the ordinary
course of business; and there has not been any material change in the
capital stock or long-term debt or any material increase in the
short-term borrowings of the Company or any of the Subsidiaries; neither
the Company nor any of the Subsidiaries has sustained any material loss
or damage to its property or assets, whether or not insured; there is no
litigation that is pending or, to the knowledge of such officers,
threatened against the Company or any of the Subsidiaries that is
required to be set forth in an amended or supplemented Prospectus that
has not been set forth; and there has occurred no event required to be
set forth in an amended or supplemented Prospectus that has not been set
forth.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the
date of such certificate.
(j) At the Closing Date, the Underwriters shall have received a
certificate of the Selling Stockholder dated the Closing Date to the effect
that the representations and warranties of the Selling Stockholder in this
Agreement are true and correct, as if made on and as of the Closing Date,
and the Selling Stockholder has complied with all agreements and covenants
and satisfied all conditions contained in this Agreement on its part to be
performed or satisfied at or prior to the Closing Date.
(k) On the date of this Agreement, the Representatives shall have
received a letter in form and substance satisfactory to the Underwriters
and the Underwriters' Counsel addressed to the Underwriters and dated the
date of this Agreement from KPMG and signed by such firm with respect to
such matters as shall have been specified to such firm by the
Representatives prior to the date hereof. At the Closing Date and the
Option Closing Date, if any, the Underwriters shall have received from KPMG
a letter, dated as of the Closing Date or the Option Closing Date, as the
case may be, reaffirming the statements made in the letter furnished by
KPMG to the Underwriters concurrently with the execution of this Agreement,
each such reaffirming letter to be in form and substance satisfactory to
the Underwriters and the Underwriters' Counsel.
(l) On each of the Closing Date and the Option Closing Date, if any,
there shall have been duly tendered to the Representatives for the several
Underwriters' accounts the appropriate number of Shares.
(m) No order suspending the sale of the Shares in any jurisdiction
designated by the Representatives pursuant to subsection (c) of Section 4
hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or to the knowledge of the Representatives or the Company shall
be contemplated.
(n) The Underwriters shall have received the written agreements of the
officers and directors referred to in Section 1.I(ee) hereof.
(o) The Shares delivered on the Closing Date or the Option Closing
Date shall have been duly listed, subject to notice of official issuance,
on the Nasdaq National Market.
If any condition to the Underwriters' obligations thereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representatives may
terminate this Agreement or, if the Representatives so elect, they may
waive any such conditions that have not been fulfilled or extend the time
for their fulfillment.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise,
specifically including but not limited to losses, claims, damages or
liabilities related to negligence on the part of any Underwriter, insofar
as such losses, claims, damages or liabilities (or actions
23
<PAGE> 24
in respect thereof) arise out of or are based upon any breach of any
representation, warranty, agreement or covenant of the Company herein
contained or any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were
made, not misleading; and agrees to reimburse each Underwriter for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, such
Preliminary Prospectus or the Prospectus, or any such amendment or
supplement, in reliance upon and in strict conformity with written
information furnished with respect to any Underwriter by such Underwriter
expressly for use in the Registration Statement, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, provided that
such written information or omissions only pertain to disclosures in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto directly relating to the transactions
effected by the Underwriters in connection with this offering, and provided
further that the foregoing indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) if such untrue
statement or omission or alleged untrue statement or omission made in any
Preliminary Prospectus is eliminated or remedied in the Prospectus and a
copy of the Prospectus has not been furnished to the person asserting any
such loss, claim, damage or liability at or prior to the written
confirmation of the sale of such Shares to such person.
The indemnity agreement in this Section 7(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of each
person, if any, who controls any Underwriter within the meaning of the Act.
This indemnity agreement shall be in addition to any liabilities which the
Company or the Selling Stockholder may otherwise have.
(b) The Selling Stockholder agrees to indemnify and hold harmless each
Underwriter to the same extent as the foregoing indemnity from the Company
to the Underwriters but only with respect to statements or omissions, if
any, made in the Registration Statement, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto made in reliance upon,
and in strict conformity with, written information furnished with respect
to the Selling Stockholder by the Selling Stockholder expressly for use in
the Registration Statement, any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto, provided that such written information
or omissions only pertain to disclosures in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto directly relating to the transactions effected by the Selling
Stockholder in connection with this offering.
The indemnity agreement in this Section 7(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of each
person, if any, who controls any Underwriter within the meaning of the Act.
This indemnity agreement shall be in addition to any liabilities which the
Company or the Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and the Selling Stockholder to the same
extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in the
Registration Statement, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto made in reliance upon, and in strict
conformity with, written information furnished with respect to any
Underwriter by such Underwriter expressly for use in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, provided that such written information or omissions
only pertain to disclosures in the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto
directly relating to the transactions effected by the Underwriters in
connection with this offering.
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<PAGE> 25
The indemnity agreement in this Section 7(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
officer and director of the Company who has signed the Registration
Statement, the Selling Stockholder and each person, if any, who controls
the Company or the Selling Stockholder within the meaning of the Act. This
indemnity agreement shall be in addition to any liabilities which each
Underwriter may otherwise have. For purposes of this Section 7, the Company
and the Selling Stockholder acknowledge that the statements with respect to
the public offering of the Shares set forth under the heading
"UNDERWRITING" and the stabilization legend in the Prospectus and the last
paragraph on the outside front cover page of the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the
only information furnished in writing by or on behalf of the Underwriters
for inclusion in the Prospectus.
(d) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party under this Section 7 (except to the extent that the omissions of such
notice causes actual prejudice to the indemnifying party), or otherwise
than under this Section 7. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
parties and the indemnifying party and counsel for the indemnified party
shall have reasonably concluded that there may be legal defenses available
to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel reasonably
satisfactory to the indemnifying party or parties to assume such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from
the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 7 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel approved by the indemnifying
party, representing all the indemnified parties under Section 7(a), 7(b) or
7(c) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the
indemnifying party shall have approved the terms of such settlement;
provided however that such consent shall not be unreasonably withheld.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this
Section 7 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time
to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact
that this Section 7 provides for indemnification in such case, all the
parties hereto shall contribute to the aggregate loses, claims, damages or
liabilities to which they may be subject (after contribution from others)
in such proportion so that, except as set forth in Section 7(f) hereof, the
Underwriters are responsible pro rata for the portion represented by the
percentage that the underwriting discount bears to the initial public
offering price, and the Company and the Selling Stockholder are responsible
for the remaining portion, provided, however, that (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter, and (ii)
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<PAGE> 26
no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to a contribution from any
person who is not guilty of such fraudulent misrepresentation. This
subsection (e) shall not be operative as to any Underwriter to the extent
that the Company or the Selling Stockholder has received indemnity payments
from such Underwriter under this Section 7 which are not required to be
returned pursuant to the order of any court of competent jurisdiction.
(f) The liability of the Selling Stockholder under the representations
and warranties contained in Section 1 hereof and under the indemnity
agreements contained in the provisions of this Section 7 shall be limited
in the aggregate to an amount equal to the initial public offering price of
the Shares sold by the Selling Stockholder to the Underwriters minus the
amount of the underwriting discount paid thereon to the Underwriters by the
Selling Stockholder. The Company and the Selling Stockholder may agree, as
between themselves and without limiting the rights of the Underwriters
under this Agreement, as to the respective amounts of such liability for
which they each shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including without limitation
the provisions of this Section 7, and are fully informed regarding such
provisions. They further acknowledge that the provisions of this Section 7
fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required
by the Act and the Exchange Act. The parties are advised that federal or
state public policy, as interpreted by the courts in certain jurisdictions,
may be contrary to certain of the provisions of this Section 7, and the
parties hereto hereby expressly waive and relinquish any right or ability
to assert such public policy as a defense to a claim under this Section 7
and further agree not to attempt to assert any such defense.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement
or contained in certificates of officers of the Company submitted pursuant
hereto shall be deemed to be representations, warranties and agreements at the
Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements, and the indemnity and contribution
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company, the Selling Stockholder or any controlling person, and
shall survive termination of this Agreement or the issuance or sale and delivery
of the Shares to the Underwriters.
9. EFFECTIVE DATE.
This Agreement shall become effective at 9:30 a.m., Eastern Time, on the
date hereof, or at such earlier time after the Registration Statement becomes
effective as the Representatives, in their sole discretion, shall release the
Shares for the sale to the public, provided, however that the provisions of
Sections 5, 7 and 9 of this Agreement shall at all times be effective. For
purposes of this Section 9, the Shares to be purchased hereunder shall be deemed
to have been so released upon the earlier of dispatch by the Representatives of
telegrams to securities dealers releasing such Shares for offering or the
release by the Representatives for publication of the first newspaper
advertisement that is subsequently published relating to the Shares.
10. TERMINATION.
(a) Subject to subsection (d) of this Section 10, the Company may at
any time before this Agreement becomes effective in accordance with Section
9, terminate this Agreement.
(b) Subject to subsection (d) of this Section 10, the Representatives
shall have the right to terminate this Agreement, (i) if any calamitous
domestic or international event or act or occurrence has materially
disrupted, or in the Representatives' opinion will in the immediate future
materially disrupt, general securities markets in the United States; or
(ii) if trading on the New York Stock Exchange, the American Stock Exchange
or in the over-the-counter market shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have
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<PAGE> 27
been required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iii)
if the United States shall have become involved in a war or major
hostilities; or (iv) if a banking moratorium has been declared by New York
State, the Commonwealth of Massachusetts or any federal authority; or (v)
if a moratorium in foreign exchange trading has been declared; or (vi) if
the Company shall have sustained a loss material or substantial to the
Company by fire, flood, accident, hurricane, earthquake, theft, sabotage or
other calamity or malicious act that, whether or not such loss shall have
been insured, will, in the Representatives' reasonable opinion, make it
inadvisable to proceed with the delivery of the Shares; or (vii) if there
shall have been a Material Adverse Effect.
(c) If any party hereto elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10,
such party shall notify, on the same day as such election is made, the
other parties hereto in accordance with the provisions of Section 13
hereof.
(d) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 11 and 12 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Sections 5, 7 and 9 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. SUBSTITUTION OF THE UNDERWRITERS.
If one or more of the Underwriters shall fail (otherwise than for a reason
sufficient to justify the termination of this Agreement under the provisions of
Section 6, Section 10 or Section 12 hereof) to purchase the Shares that it or
they are obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representatives shall use their best efforts within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24 hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Shares and arrangements satisfactory to the Representatives
for the purchase of the Defaulted Securities are not made within 36 hours,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriters. The Company or the Selling Stockholder may
assist the Representatives in making such arrangements by procuring another
party satisfactory to the Representatives to purchase the Defaulted
Securities on the terms set forth herein.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default that does not result in a termination of
this Agreement, the Representatives shall have the right to postpone the Closing
Date for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
12. DEFAULT BY THE COMPANY OR THE SELLING STOCKHOLDER.
If the Company or the Selling Stockholder, as applicable, shall fail at the
Closing Date or the Option Closing Date, as applicable, to sell and deliver the
number of Shares that it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Shares to be purchased on the Option Closing Date, the Underwriters may
at the Representatives' option, by
27
<PAGE> 28
notice from the Representatives to the Company, terminate the Underwriters'
several obligations to purchase Shares from the Company on such date) without
any liability on the part of any non-defaulting party other than pursuant to
Section 5 and Section 7 hereof. No action taken pursuant to this Section shall
relieve the Company or the Selling Stockholder from liability, if any, in
respect of such default.
13. NOTICES.
All notices and communications hereunder may be mailed or transmitted by
any standard form of telecommunication and, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given when delivered to a notice party hereto at the address specified herein or
at the address subsequently communicated in writing to the notice parties.
Notices to the Underwriters shall be directed to the Representatives c/o Tucker
Anthony Incorporated, One Beacon Street, Boston, Massachusetts 02108, Attention
Mark L. Bono, Senior Vice President, with a copy to Peabody & Brown, 101 Federal
Street, Boston, Massachusetts 02110, Attention William C. Lance, Esq. Notices to
the Company shall be directed to SpecTran Corporation, 50 Hall Road, Sturbridge,
Massachusetts 01566, Attention Raymond E. Jaeger, Chairman, with a copy to
Hackmyer & Nordlicht, 645 Fifth Avenue, 11th Floor, New York, New York 10022,
Attention Ira S. Nordlicht, Esq. Notices to the Selling Stockholder shall be
directed to Allen & Company Incorporated, 711 Fifth Avenue, New York, New York,
10022, Attention William F. Leimkuhler, Esq. In each case a notice party may
change its address for notice hereunder by a written communication to the other
notice parties.
14. PARTIES.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriters, the Selling Stockholder, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Shares from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
15. CONSTRUCTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW OR CONFLICT OF LAWS PRINCIPLES.
16. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which taken together shall be
deemed to be one and the same instrument.
17. ENTIRE AGREEMENT.
This Agreement and the Schedules hereto contain the entire agreement
between the parties hereto in connection with the subject matter hereof and
supersede all prior agreements, written or oral, with respect to such subject
matter.
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<PAGE> 29
18. AMENDMENT.
This Agreement and the Schedules hereto may not be amended, modified or
altered without the written agreement of the Company, the Selling Stockholder
and the Representatives.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
SPECTRAN CORPORATION
By:.................................
RAYMOND E. JAEGER
TITLE: CHAIRMAN
SELLING STOCKHOLDER LISTED ON
SCHEDULE B HERETO
By:.................................
, ATTORNEY-IN-FACT
CONFIRMED AND ACCEPTED AS OF
THE DATE FIRST ABOVE WRITTEN
TUCKER ANTHONY INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
By: TUCKER ANTHONY INCORPORATED
By:.................................
Title:..............................
For themselves and on behalf of and
as the
Representatives of the other
Underwriters
named in Schedule A hereto.
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<PAGE> 30
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
NAME FIRM SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Tucker Anthony Incorporated......................................................
Raymond James & Associates, Inc..................................................
</TABLE>
30
<PAGE> 31
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF
NAME FIRM SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Allen & Company Incorporated..................................................... 350,000
</TABLE>
31
<PAGE> 32
SCHEDULE C
<TABLE>
<CAPTION>
NAME
- ---------------------------------------------------------------------------------
<S> <C>
Raymond E. Jaeger
Glenn E. Moore
Bruce A. Cannon
John E. Chapman
Crawford L. Cutts
William B. Beck
Ira S. Nordlicht
Paul D. Lazay
Richard M. Donofrio
Lily K. Lai
</TABLE>
32
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Spectran Corporation:
We consent to the use of our reports included herein and incorporated by
reference and to the reference to our firm under the headings "Selected
Consolidated Financial Data" and "Experts" in the prospectus.
KPMG Peat Marwick LLP
Boston, Massachusetts
January 8, 1997
