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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
SPECTRAN CORPORATION
(NAME OF SUBJECT COMPANY)
------------------------
SPECTRAN CORPORATION
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, $.10 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
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847598109
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
CHARLES B. HARRISON
CHIEF EXECUTIVE OFFICER
SPECTRAN CORPORATION
50 HALL ROAD
STURBRIDGE, MASSACHUSETTS 01566
(508) 347-2261
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
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Copies to:
IRA S. NORDLICHT, ESQ.
NORDLICHT & HAND
645 FIFTH AVENUE
NEW YORK, NEW YORK 10022
(212) 421-6500
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This Amendment No. 1 amends and supplements the
solicitation/Recommendation Statement on Schedule 14D-9, dated July 21, 1999
(the "Schedule 14D-9") with respect to the tender offer by Lucent Technologies
Inc., a Delaware corporation ("Lucent"), and Seattle Acquisition Inc., a
Delaware corporation and wholly owned subsidiary of Lucent (the "Purchaser"), to
acquire all of the outstanding common stock, $.10 par value per share (the
"Shares"), of SpecTran Corporation (the "Company") at a price of $9.00 per
Share, upon the terms and conditions set forth in the Offer to Purchase, dated
July 21, 1999, and the related letter of transmittal. Capitalized terms used
herein and not defined shall have the meanings ascribed to them in the Schedule
14D-9.
The Schedule 14D-9 is hereby amended (a) by providing supplemental
information concerning the complaint entitled Chase v. Harrison, et al., C.A.
No. 17312-NC, including filing as an exhibit the Amended Class Action Complaint
filed July 29, 1999, (b) by filing as exhibits the complaint entitled Airmont
Associates et al., v. SpecTran Corporation et al., C.A. No. 17314-NC, and the
original complaint entitled Chase v. Harrison, et al., C.A. No. 17312-NC, both
of which were filed in Delaware Chancery Court on July 15, 1999 and were
described previously in Item 8 "Additional Information to be Furnished" in the
Schedule 14D-9, (c) by filing the Company's July 30, 1999 press release
entitled "SpecTran Reports Second Quarter/Six Months Results" and (d) by
providing information concerning expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Inprovements Act of 1976, as amended.
Item 8. Additional Information to be Furnished.
LITIGATION. On July 29, 1999, the plaintiff in Chase v. Harrison, et
al., Civil Action No. 17312-NC, filed an Amended Class Action Complaint (the
"Amended Complaint") in Delaware Chancery Court. In the Amended Complaint, the
plaintiff alleges, among other things, that (1) the proposed purchase price is
inadequate; (2) the Company's Solicitation/Recommendation Statement on Schedule
14D-9 is misleading and omits material information in that it fails to disclose
(a) the Company's financial results for the second fiscal quarter ended June 30,
1999, (b) why the Company's projected financial results, as announced by the
Company on May 28, 1999, did not warrant that a substantial premium be paid for
the Company relative to the existing market price, (c) information concerning
the identity of other bidders for the Company and the terms of any competing
bids or expressions of interest, (d) why the Company did not wait until after
its third quarter ended September 30, 1999 financial results were available to
determine whether Company C would make an offer to acquire the Company, (e) the
reasons for Lazard Freres & Co. LLC's determination that the merger was "fair",
(f) the total amount of benefits that each of the Company's executive officers
and directors will realize from the Merger, and (g) the value of the Company to
Lucent and the benefits Lucent will derive from the Merger, including the
equivalent amount that Lucent would have to spend to build the manufacturing
capacity that it will be buying from the Company and that Lucent had approved a
higher purchase price; and (3) the board of directors of the Company breached
its fiduciary duty to the stockholders of the Company to exercise due care,
loyalty and candor. The Amended Complaint further alleges that Lucent aided and
abetted the breach of fiduciary duty by the individual defendants. The
foregoing is qualified in its entirety by reference to the Amended Complaint,
acopy which is filed as Exhibit (c) (6) which is incorporated by reference
herein.
Concurrent with the filing of the Amended Complaint, the plaintiff in
Chase v. Harrison, et al. petitioned the Delaware Chancery Court for expedited
discovery and the scheduling of a hearing on a preliminary injunction. A
telephone conference call was held by the Delaware Chancery Court on July 30,
1999, at which time the court declined to permit expedited discovery and
declined to schedule a hearing on a preliminary injunction. Instead, the court
scheduled a hearing on August 13, 1999 to hear arguments as to whether an order
temporarily restraining consummation of the Merger should be issued. This
scheduled hearing was subsequently canceled when, by letter dated August 2,
1999, plaintiff's counsel withdrew plaintiff's application for a temporary
restraining order.
<PAGE> 3
SECOND QUARTER AND FIRST HALF 1999 PRELIMINARY FINANCIAL RESULTS. On
July 30, 1999, SpecTran released its preliminary results for the second fiscal
quarter and first half of 1999. A copy of the press release disclosing those
preliminary results is attached hereto.
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED
("HSR"). As of August 4, 1999 the waiting period under HSR relating to the
purchase of the Shares pursuant to the Offer had expired.
Item 9. Material to be filed as Exhibits.
(a)(1)* Offer to Purchase dated July 21, 1999.
(a)(2)* Letter of Transmittal.
(a)(3)* Press Release jointly prepared by Lucent and the Company and
issued by Lucent on July 15, 1999.
(a)(4)* Opinion of Lazard Freres & Co. LLC dated July 15, 1999.
(a)(5)* Letter to Stockholders, dated July 21, 1999, from Charles B.
Harrison, Chairman of the Board of Directors and President and Chief Executive
Officer of the Company.
(c)(1)* Agreement of Merger, dated as of July 15, 1999, among Lucent,
the Purchaser and the Company.
(c)(2)* The Company's Information Statement pursuant to Section 14(f)
of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder.
(c)(3)* Contractual Agreement between Lucent Technologies Inc. and
SpecTran Corporation, dated October 3, 1996. The Company has been granted
confidential treatment for portions of this Exhibit.
(c)(4)* Patent License Agreement between Lucent Technologies and
SpecTran Corporation dated as of October 30, 1998. The Company has been granted
confidential treatment for portions of this Exhibit.
(c)(5) Chase v. Harrison, et al., C.A. No. 17312-NC, Complaint, filed
in the Court of Chancery of the State of Delaware in and for New Castle County.
(c)(6) Chase v. Harrison, et al., C.A. No. 17312-NC, Amended Class
Action Complaint, filed in the Court of Chancery of the State of Delaware in and
for New Castle County.
(c)(7) Airmont Associates et al., v. SpecTran Corporation et al., C.A.
No. 17314-NC, Complaint, filed in the Court of Chancery of the State of Delaware
in and for New Castle County.
(c)(8) July 30, 1999 press release entitled "SpecTran Reports Second
Quarter/Six Months Results."
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*Previously Filed.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
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SPECTRAN CORPORATION
By: /s/ CHARLES B. HARRISON
-----------------------
Charles B. Harrison
President, Chief Executive Officer and
Chairman of the Board
Dated: August 4, 1999
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
_____________________________________________ X
:
RHONA CHASE, :
:
Plaintiff, :
:
-against- : C.A. No. 17312NC
:
CHARLES B. HARRISON, BRUCE A. CANNON, JOHN E. :
CHAPMAN, RICHARD M. DONOFRIO, RAYMOND E. :
JAEGER, LILY K. LAI, PAUL D. LAZAY, IRA S. :
NORDLICHT, ROBERT A. SCHMITZ, SPECTRAN :
CORPORATION, and LUCENT TECHNOLOGIES INC., :
:
Defendants. :
:
_____________________________________________ X
CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of shares of the common stock of
SpecTran Corporation ("SpecTran" or the "Company") since prior to the
transaction herein complained of and continuously to date.
2. SpecTran is a corporation duly organized and existing under the
laws of the State of Delaware. The Company is a leading manufacturer of
high-performance multi-mode and single-mode optical fiber for data
communications, telecommunications, CATV and industry applications world-wide.
<PAGE> 2
3. Defendant Lucent Technologies Inc. ("Lucent") is a corporation
organized under the laws of the State of Delaware. The company is one of the
world's leading manufacturers of fiber, with thirteen fiber and cable
manufacturing operations and joint ventures around the world.
4. Defendant Charles B. Harrison is Chairman, President, Chief
Executive Officer and a Director of the Company.
5. Defendants Bruce A. Cannon, John E. Chapman, Richard M. Donofrio,
Raymond E. Jaeger, Lily K. Lai, Paul D. Lazay, Ira S. Nordlicht, and Robert A.
Schmitz are Directors of SpecTran.
6. The Individual Defendants are in a fiduciary relationship with
plaintiff and the other public stockholders of SpecTran and owe them the
highest obligations of good faith, due care and fair dealing.
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action on her own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
8. This action is properly maintainable as a class action because:
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(a) The class is so numerous that joinder of all members is impracticable.
There are approximately 7 million shares of SpecTran common stock outstanding
owned by hundreds, if not thousands, of record and beneficial holders;
(b) There are questions of law and fact which are common to the class
including, inter alia, the following: (i) whether the individual defendants
----- ----
have breached their fiduciary and other common law duties owned by them to
plaintiff and the members of the class; and (ii) whether the class is entitled
to injunctive relief or damages as a result of the wrongful conduct committed
by defendants.
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the class and plaintiff
has the same interests as the other members of the class. Plaintiff will fairly
and adequately represent the class.
(d) Defendants have acted in a manner which affects plaintiff and all
members of the class alike, thereby making appropriate injunctive relief and/or
corresponding-declaratory relief with respect to the class as a whole.
(e) The prosecution of separate actions by individual members of the Class
would create a risk of inconsistent or varying adjudications with respect to
individual members of the Class, which would establish incompatible standards of
conduct for defendants, or adjudications with respect to individual members of
the Class which
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would, as a practical matter, be dispositive of the interests of other members
or substantially impair or impede their ability to protect their interests.
SUBSTANTIVE ALLEGATIONS
9. On July 15, 1999, before the markets opened, SpecTran and Lucent
announced that they had entered into a definitive merger agreement whereby
Lucent will acquire SpecTran in a transaction valued at $99 million. Under the
terms of the transaction, Lucent will commence a cash tender offer for all of
SpecTran's outstanding common shares at a price of $9.00 per share and will
assume $35 million in SpecTran debt. The tender offer will be followed by a
merger in which any untendered shares of SpecTran will be acquired for $9.00
per share in cash. The tender offer will commence on July 21, 1999 and is not
expected to close until the end of the quarter ending September 30, 1999.
10. By entering into the agreement with Lucent, the SpecTran Board has
initiated a process to sell the Company which imposes heightened fiduciary
responsibilities on its directors and requires enhanced scrutiny by the Court.
However, the terms of the proposed transaction were not the result of an
auction process or active market check; they were arrived at without a full and
thorough investigation by the Individual Defendants; and they are intrinsically
unfair and inadequate from the standpoint of the SpecTran shareholders.
11. The proposed purchase price is inadequate. It is substantially less
than the closing price of SpecTran just the day before ($11.50 per share) or
the price paid
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in similar transactions. The proposed purchase price is lower than any closing
price for SpecTran shares from June 21, 1999 until the announcement. Moreover,
in transactions of this type it is usual and customary to pay a premium for
achieving total control, which premium can be as much as or greater than 50% of
the current price. Here, the proposed transaction involves a discount from the
current market price. --------
12. The Individual Defendants failed to make an informed decision, as no
market check of the Company's value was obtained. In agreeing to the merger, the
Individual Defendants failed to properly inform themselves of SpecTran's highest
transactional value.
13. The Individual Defendants have violated their fiduciary duties owned
to the public shareholders of SpecTran. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the failure to auction the Company
and invite other bidders, and defendants' failure to provide a market check
demonstrate a clear absence of the exercise of due care and of loyalty to
SpecTran's public shareholders.
14. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
(a) Undertake an appropriate evaluation of SpecTran's net worth as a
merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an attempt
to obtain the best value for SpecTran's public shareholders.
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15. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with Lucent without making the requisite effort to obtain
the best offer possible.
16. Plaintiff and other members of the Class have been and will be damaged
in that they have not and will not receive their fair proportion of the value
of SpecTran's assets and business, and will be prevented from obtaining fair
and adequate consideration for their shares of SpecTran common stock.
17. The consideration to be paid to class members in the proposed merger
is unfair and inadequate because, among other things:
(a) The intrinsic value of SpecTran's common stock is materially in
excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash flow,
and profitability of the Company. Indeed, the amount offered is 22% ($2.50 per
share) less than the market price just the day before the announcement,
although a substantial premium to the current selling price is the norm;
(b) The merger price is not the result of an appropriate consideration
of the value of SpecTran because the SpecTran Board approved the proposed merger
without undertaking steps to accurately ascertain SpecTran's value through open
bidding or at least a "market check" mechanism; and
(c) By entering into the agreement with Lucent, the Individual
Defendants have allowed the price of SpecTran stock to be capped, thereby
depriving
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plaintiff and the Class of the opportunity to realize any increase in the value
of SpecTran stock.
18. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
19. Defendant Lucent has knowingly aided and abetted the breaches of
fiduciary duty committed by the other defendants to the detriment of SpecTran's
public shareholders. Indeed, the proposed merger could not take place without
the active participation of Lucent. Furthermore, Lucent and its shareholders
are the intended beneficiaries of the wrongs complained of and would be
unjustly enriched absent relief in this action. The market price of Lucent
stock rose $1.00 per share on the announcement of the merger.
20. Plaintiff and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff demands judgment against defendants as follows:
a. Declaring that this action is properly maintainable as a class action
and certifying plaintiff as the representative of the Class;
b. Preliminary and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under, in concert with, or for
them, from proceeding with, consummating, or closing the proposed
transaction;
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c. In the event that the proposed transaction is consummated, rescinding it
and setting it aside, or awarding rescissory damages to the Class;
d. Awarding the Class compensatory damages against defendants,
individually and severally, in an amount to be determined at trial,
together with pre-judgment and post-judgment and post-judgment interest
at the maximum rate allowable by law;
e. Awarding plaintiff her costs and disbursements and reasonable
allowances for fees of plaintiff's counsel and experts; and
f. Granting plaintiff and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By: /s/
--------------------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
RABIN & PECKEL LLP
275 Madison Avenue
New York, NY 10016
(212) 682-1818
<PAGE> 1
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
_______________________________________________X
RHONA CHASE, :
:
Plaintiff, :
:
-against- :
:
CHARLES B. HARRISON, BRUCE A. CANNON, JOHN : C.A. No. 17312 NC
E. CHAPMAN, RICHARD M. DONOFRIO, RAYMOND E. :
JAEGER, LILY K. LAI, PAUL D. LAZAY, IRA S. :
NORDLICHT, ROBERT A. SCHMITZ, SPECTRAN :
CORPORATION, and LUCENT TECHNOLOGIES INC., :
:
Defendants. :
_______________________________________________X
AMENDED CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon personal knowledge, as follows:
1. Plaintiff has been the owner of shares of the common stock of
SpecTran Corporation ("SpecTran" or the "Company") since prior to the
transaction herein complained of and continuously to date.
2. SpecTran is a corporation duly organized and existing under the laws
of the State of Delaware. The Company is a leading manufacturer of
high-performance multi-mode and single-mode optical fiber for data
communications, telecommunications, CATV and industry applications world-wide.
<PAGE> 2
3. Defendant Lucent Technologies Inc. ("Lucent") is a corporation
organized under the laws of the State of Delaware. The company is one of the
world's leading manufacturers of fiber, with thirteen fiber and cable
manufacturing operations and joint ventures around the world.
4. Defendant Charles B. Harrison is Chairman, President, Chief Executive
Officer and a Director of the Company.
5. Defendants Bruce A. Cannon, John E. Chapman, Richard M. Donofrio,
Raymond E. Jaeger, Lily K. Lai, Paul D. Lazay, Ira S. Nordlicht, and Robert A.
Schmitz (the "Individual Defendants") are Directors of SpecTran.
6. The Individual Defendants are in a fiduciary relationship with
plaintiff and the other public shareholders of SpecTran and owe them the
highest obligations of good faith, due care and fair dealing.
CLASS ACTION ALLEGATIONS
------------------------
7. Plaintiff brings this action on her own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all
common shareholders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
8. This action is properly maintainable as a class action because:
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(a) The class is so numerous that joinder of all members is impracticable.
There are approximately 7 million shares of SpecTran common stock outstanding
owned by hundreds, if not thousands, of record and beneficial holders;
(b) There are questions of law and fact which are common to the class
including, inter alia, the following: (i) whether the individual defendants have
----- ----
breached their fiduciary and other common law duties owed by them to plaintiff
and the members of the class; and (ii) whether the class is entitled to
injunctive relief or damages as a result of the wrongful conduct committed by
defendants;
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of other members of the class and plaintiff
has the same interests as the other members of the class. Plaintiff will fairly
and adequately represent the class;
(d) Defendants have acted in a manner which affects plaintiff and all
members of the class alike, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the class as a whole; and
(e) The prosecution of separate actions by individual members of the Class
would create a risk of inconsistent or varying adjudications with respect to
individual members of the Class, which would establish incompatible standards of
conduct for defendants, or adjudications with respect to individual members of
the
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Class which would, as a practical matter, be dispositive of the interests
of other members or substantially impair or impede their ability to protect
their interests.
SUBSTANTIVE ALLEGATIONS
-----------------------
THE TERMS OF THE MERGER
- -----------------------
9. On July 15, 1999, SpecTran and Lucent announced that they had
entered into a definitive merger agreement whereby Lucent, through its wholly
owned subsidiary, Seattle Acquisition, Inc. (collectively "Lucent"), will
acquire SpecTran in a transaction (the "Merger") valued at $99 million,
including the assumption of $35 million in SpecTran debt. Under the terms of
the transaction, Lucent has commenced a cash tender offer for all of SpecTran's
outstanding common shares at a price of $9.00 per share. The tender offer will
be followed by a second step merger in which any untendered shares of SpecTran
will be acquired for $9.00 per share in cash. The expiration date for the
tender offer is 12:00 Midnight, New York City time, on August 17, 1999.
10. The proposed purchase price is inadequate. It is substantially
less than the closing price of SpecTran shares just the day before, $11.50 per
share. The proposed purchase price is lower than any closing price for SpecTran
shares from June 21, 1999 until the announcement. Moreover, in transactions of
this type it is usual and customary to pay a premium over the market price.
Here, the proposed transaction involves a discount of nearly 25% from the
unaffected market price. --------
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DEFENDANTS DISCLOSURE VIOLATIONS
- --------------------------------
11. On July 21, 1999, the Individual Defendants caused to be filed
with the Securities and Exchange Commission a Solicitation/Recommendation
Statement on Schedule 14D-9, for dissemination to SpecTran's shareholders in
connection with Lucent's tender offer. The Schedule 14D-9 is wrongfully
misleading and omits material information in violation of the individual
defendants' duty of candor, in at least the following respects:
(a) The Schedule 14D-9 is designed to assuage investor concern and
create the misleading impression that the merger is necessary and
beneficial. Having chosen to speak, the Individual Defendants are required
to disclose material information so that shareholders can make an informed
decision as to the adequacy of the proposed below market price. In these
particular circumstances, where the offer is $2.50 per share lower than the
market price on the day preceding the offer, it is material to shareholders
to be informed of SpecTran's financial results for the second fiscal
quarter ended June 30, 1999. Without those financial results, the public
shareholders have no adequate basis upon which to make an informed decision
whether to tender their shares.
(b) Although the proposed Merger was announced on July 15, 1999 and
the Schedule 14D-9 was filed with the SEC on July 21, 1999, weeks after the
close of SpecTran's second fiscal quarter ending June 30, 1999, not even
preliminary financial results are provided to SpecTran's shareholders. The
expiration date for
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the Tender Offer is midnight on August 17, 1999, approximately the date that
SpecTran would be required to file its SEC Form 10-Q disclosing its financial
results for the quarter ending June 30, 1999. Shareholders will therefore have
no opportunity to review and consider those financial results before they must
decide whether to tender their shares.
(c) The absence of second quarter 1999 financial results is particularly
egregious given public statements made by defendant Harrison at SpecTran's
annual meeting on May 28, 1999 which were then disseminated by the Company in
the financial news media. At the annual meeting and in the press release,
defendant Harrison forecast SpecTran's 1999 net revenues to be more than $90
million, a 25% increase from 1998. In addition, defendant Harrison announced
that net sales were expected to increase at a compound annual rate of 12% to
15% through 2003, with earnings per share expected to grow at an equivalent or
faster rate. The market reaction was swift and positive, with the price per
share closing at $9.25 that very day, a 24% increase from the $7.44 closing
price just the day before. The Schedule 14D-9 does not explain why such stellar
financial results, especially given the market's reaction to their
announcement, did not warrant a substantial premium be paid for SpecTran.
(d) The Schedule 14D-9 also omits the most relevant of information
concerning other bidders for SpecTran, particularly, those identified as
"Company B" (the purchaser of the Company for stock) and "Company C" (the
purchaser of
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the Company for cash). Company C, on June 18, 1999, had deferred proceeding
with its bid until after the financial results for SpecTran's third quarter
ending September 30, 1999 were known. As defendant Harrison had, less than a
month before, on May 28, 1999, announced superior projected 1999 financial
results, such a delay would not be onerous and may be in the best interests of
the shareholders. No explanation for SpecTran's unwillingness to wait is
provided. Furthermore, Company C apparently expressed interest in acquiring
SpecTran at a price, or within a range, which was greater than the $9.00 per
share price offered by Lucent. However, there is no disclosure of the price, or
range, at which Company C expressed interest.
(e) The Schedule 14D-9 also reported that Company B's offer was rejected
because its stock was "highly illiquid, had limited institutional ownership and
no equity research coverage and should the Company's shareholders receive such
stock, and wish to liquidate their position, they may be unable to do so
without realizing a significant discount." But if the price were high enough
the shareholders might be willing to accept the risk of such a discount.
Company B expressed interest in acquiring SpecTran at a price, or within a
range, which was greater than $9.00 per share price offered by Lucent. At a
minimum, the price, or range, should have been disclosed along with the
acquiring company's identity.
(f) The Schedule 14D-9 omits any discussion of how Lazard Freres & Co. LLC
("Lazard"), SpecTran's financial advisor, determined that the Merger was
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"fair." Lazard's fairness opinion, an exhibit to the Schedule 14D-9, is bereft
of analysis. In addition, Lazard disclaims responsibility for whatever
information it used. Lazard also states that its opinion does not address the
relative merits of the Merger as compared to alternative business transactions
available to the Company (presumably offers from Company B and Company C).
Other than Lazard's "trust me" statement, the shareholders have been provided
with no information upon which to base a decision whether or not to tender
their shares.
(g) No clear understanding of the benefits to the Company's executive
officers and directors are provided other than that the merger will result in
the acceleration of benefits under the Company's Incentive Stock Option Plans,
Supplemental Retirement Agreements, and Retirement Plan for Outside Directors.
While some information is scattered throughout the Schedule 14D-9, nowhere can
a shareholder find the total amount that each of the directors and executive
officers will realize from the transaction. The amount is a measure of each
Individual Defendant's independence, and is easily calculated and easily
disclosed, yet it is omitted.
(h) Neither Lucent's Offer to Purchase or the Schedule 14D-9 discloses
how valuable SpecTran would be to Lucent and the benefits Lucent will derive
from the Merger. The documents fail to disclose that Lucent would have to spend
the equivalent of almost $20 per SpecTran share to build the manufacturing
capacity that it was buying from SpecTran for $9 per share. Importantly,
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defendants fail to disclose that Lucent had approved a purchase price of up to
$13 per SpecTran share.
THE SPECTRAN BOARD HAS NOT FULFILLED ITS REVLON DUTIES
- ------------------------------------------------------
12. By entering into the agreement with Lucent, the SpecTran Board has
initiated a process to sell the Company which imposes heightened fiduciary
responsibilities on its directors and requires enhanced scrutiny by the Court.
However, the terms of the proposed transaction are intrinsically unfair and
inadequate from the standpoint of the SpecTran shareholders.
13. The Individual Defendants have violated their fiduciary duties owed to
the public shareholders of SpecTran. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the misleading and deficient
Schedule 14D-9 disseminated by them demonstrate a clear absence of the exercise
of due care, loyalty and candor to SpecTran's public shareholders.
14. The consideration to be paid to class members in the proposed Merger
is unfair and inadequate because, among other things:
(a) The intrinsic value of SpecTran's stock is materially in excess of
the amount offered for those securities in the Merger giving due
consideration to the anticipated operating results, including the
forecasted results announced on May 28, 1999 at the annual meeting and
publicly reported by the Company. Indeed, the amount offered is 22% ($2.50
per share) less than the market price the day before
9
<PAGE> 10
the offer was announced in contrast to the norm of a substantial premium to
the unaffected market price in a takeover;
(b) By entering into the agreement with Lucent, the Individual
Defendants have allowed the price of SpecTran stock to be capped, thereby
depriving plaintiff and the Class of the opportunity to realize any
increase in the value of SpecTran stock;
(c) The individual defendants have agreed to the takeover by Lucent
on terms inferior to other offers. At the very least, the individual
defendants' lack of candor about other offers impairs the ability of
SpecTran's shareholders to decide the quality and merits of competing
proposals; and,
(d) The merger terms do not reflect the significant benefits and
synergies which Lucent will derive from the transaction.
SPECTRAN'S SHAREHOLDERS WILL BE IRREPARABLY INJURED
- ---------------------------------------------------
15. As a result of the individual defendants' breaches of their fiduciary
duties, plaintiff and the other members of the Class have been and will be
damaged in that they will be prevented from maximizing the value of their
investment in SpecTran and will be denied the right to make an informed
decision with respect to the Lucent transaction. By reason of the foregoing,
each member of the Class will suffer irreparable injury and damages absent
injunctive relief by this Court.
10
<PAGE> 11
AIDING AND ABETTING
- -------------------
16. Defendant Lucent has knowingly aided and abetted the breaches of
fiduciary duty committed by the individual defendants to the detriment of
SpecTran's public shareholders. Indeed, the proposed Merger could not take
place without the active participation of Lucent. Furthermore, Lucent and its
shareholders are the intended beneficiaries of the wrongs complained of and
would be unjustly enriched absent relief in this action.
17. Plaintiff and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff demands judgment against defendants as follows:
a. Declaring that this action is properly maintainable as a class action
and certifying plaintiff as the representative of the Class;
b. Preliminarily and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under, in concert with, or for
them, from proceeding with, consummating, or closing the proposed
transaction complained of herein;
c. In the event that the proposed transaction is consummated, rescinding
it and setting it aside, or awarding rescissory damages to the Class;
d. Awarding the Class compensatory damages against defendants,
individually and severally, in an amount to be determined at trial,
together with pre-judgment and post-judgment interest at the maximum
rate allowable by law;
11
<PAGE> 12
e. Awarding plaintiff her costs and disbursements and reasonable
allowances for fees of plaintiff's counsel and experts; and
f. Granting plaintiff and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By:
-----------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
RABIN & PECKEL LLP
275 MADISON AVENUE
NEW YORK, NY 10016
(212) 682-1818
12
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------
AIRMONT PLAZA ASSOCIATES and
RICHARD SCHATZ,
Plaintiffs,
-against-
SPECTRAN CORPORATION, JOHN E. C.A. No. 17314NC
CHAPMAN, CHARLES B. HARRISON, IRA
S. NORDLICHT, LILY K. LAI, ROBERT A. CLASS ACTION
SCHMITZ, RICHARD M. DONOFRIO, PAUL COMPLAINT
D. LAZAY and LUCENT TECHNOLOGIES ------------
INC.,
Defendants.
- -------------------------------------
Plaintiffs, by their attorneys, allege upon information and belief, except
as to paragraph 1 which plaintiff's allege upon knowledge, as follows:
1. Plaintiffs are and were, at all times relevant to this action,
shareholders of defendant SpecTran Corporation ("SpecTran" or the "Company").
2. SpecTran is a corporation duly existing and organized under the laws
of the State of Delaware. SpecTran develops, manufactures, and markets glass
optical fibers and value-added fiber optic products. The Company manufactures
standard fiber and cable, as well as special performance fiber and cable for
global communications markets. SpecTran's optical fiber and cable products also
serve industrial, military/aerospace, and medical markets worldwide.
3. Defendant Charles B. Harrison ("Harrison") is President, Chief
<PAGE> 2
Executive Officer and a director of the Company.
4. Defendant John E. Chapman ("Chapman") is a director and senior vice
president of the Company. He is also president of SpecTran Communication Fiber
Technologies, Inc., a wholly owned subsidiary of the Company.
5. Defendant Ira S. Nordlicht is a director of the Company. He is a
founding partner of the law firm which provides legal services to the Company.
6. Defendants Lily K. Lai, Robert A. Schmitz, Richard M. Donofrio and
Paul D. Lazay are directors of the Company.
7. Defendant Lucent Technologies Inc. ("Lucent") is a corporation duly
existing and organized under the laws of the State of Delaware. Lucent is one of
the world's leading manufacturers of fiber, with 13 fiber and cable
manufacturing operations and joint ventures around the world.
8. Each of the Individual Defendants has a fiduciary relationship and
responsibility to plaintiffs and the other public stockholders of SpecTran and
owes them the highest obligations of good faith, fair dealing and due care.
CLASS ACTION ALLEGATIONS
------------------------
9. Plaintiffs bring this action on their own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of SpecTran, or their successors in interest, who are or
will be threatened with the deprivation of their investment in SpecTran by
reason of the proposed transaction complained of herein (the "Class"). Excluded
from the Class are defendants herein and
2
<PAGE> 3
any person, firm, trust, corporation, or other entity related to or affiliated
with any of defendants.
10. This action is properly maintainable as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. There are hundreds of SpecTran stockholders of record who own
the approximately 7,000,000 SpecTran shares outstanding;
(b) There are questions of law and fact which are common to the
class and which predominate over questions affecting any individual class
members;
(c) Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. The claims
of plaintiffs are typical of the claims of the other members of the class and
plaintiffs have the same interests as the other members of the class.
Accordingly, plaintiffs are adequate representatives of the class and will
fairly and adequately protect the interests of the class.
SUBSTANTIVE ALLEGATIONS
-----------------------
11. On July 15, 1999, before the markets opened, SpecTran and Lucent
announced that they had entered into a definitive merger agreement whereby
Lucent will acquire SpecTran in a transaction valued at $99 million. Under the
terms of the transaction, Lucent will commence a cash tender offer for all of
SpecTran's outstanding common shares at a price of $9.00 per share and will
assume $35 million in SpecTran debt. The tender offer will be followed by a
merger in which any untendered shares of SpecTran will be acquired for $9.00
per share in cash. The tender offer will commence
3
<PAGE> 4
on July 21, 1999 and is not expected to close until the end of the quarter
ending September 30, 1999.
12. By entering into the agreement with Lucent, the SpecTran Board
has initiated a process to sell the Company which imposes heightened fiduciary
responsibilities on its directors and requires enhanced scrutiny by the Court.
However, the terms of the proposed transaction were not the result of an
auction process or active market check; they were arrived at without a full and
thorough investigation by the Individual Defendants; and they are intrinsically
unfair and inadequate from the standpoint of the SpecTran shareholders.
13. The proposed purchase price is inadequate. It is substantially
less than the closing price of SpecTran just the day before ($11.50 per share)
or the price paid in similar transactions. The proposed purchase price is lower
than any closing price for SpecTran shares from June 21, 1999 until the
announcement. Moreover, in transactions of this type it is usual and customary
to pay a premium for achieving total control, which premium can be as much as
or greater than 50% of the current price. Here, the proposed transaction
involves a discount from the current market price.
14. The Individual Defendants failed to make an informed decision, as
no market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of SpecTran's
highest transactional value.
4
<PAGE> 5
15. The Individual Defendants have violated their fiduciary duties owed to
the public shareholders of SpecTran. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the failure to auction the
Company and invite other bidders, and defendants' failure to provide a market
check demonstrate a clear absence of the exercise of due care and of loyalty to
SpecTran's public shareholders.
16. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
(a) Undertake an appropriate evaluation of SpecTran's net worth as a
merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an attempt to
obtain the best value for SpecTran's public shareholders.
17. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with Lucent without making the requisite effort to obtain the
best offer possible.
18. Plaintiffs and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of SpecTran's assets and business, and will be prevented from obtaining
fair and adequate consideration for their shares of SpecTran's common stock.
19. The consideration to be paid to class members in the proposed merger
is unfair and inadequate because, among other things:
(a) The intrinsic value of SpecTran's common stock is materially
5
<PAGE> 6
in excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash flow,
and profitability of the Company. Indeed, the amount offered is 22% ($2.50 per
share) less than the market price just the day before the announcement,
although a substantial premium to the current selling price is the norm;
(b) The merger price is not the result of an appropriate
consideration of the value of SpecTran because the SpecTran Board approved the
proposed merger without undertaking steps to accurately ascertain SpecTran's
value through open bidding or at least a "market check" mechanism; and
(c) By entering into the agreement with Lucent, the Individual
Defendants have allowed the price of SpecTran stock to be capped, thereby
depriving plaintiffs and the Class of the opportunity to realize any increase
in the value of SpecTran stock.
20. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
21. Defendant Lucent has knowingly aided and abetted the breaches of
fiduciary duty committed by the other defendants to the detriment of SpecTran's
public shareholders. Indeed, the proposed merger could not take place without
the active participation of Lucent. Furthermore, Lucent and its shareholders
are the intended beneficiaries of the wrongs complained of and would be unjustly
enriched absent relief in this action.
6
<PAGE> 7
22. Plaintiffs and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiffs demand judgment against defendants as follows:
A. Declaring that this action is properly maintainable as a class action
and certifying plaintiffs as representatives of the Class;
B. Preliminarily and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under, in concert with, or for them,
from proceeding with, consummating, or closing the proposed transaction;
C. In the event that the proposed transaction is consummated, rescinding
it and setting it aside, or awarding rescissory damages to the Class;
D. Awarding the Class compensatory damages against defendants,
individually and severally, in an amount to be determined at trial, together
with pre-judgment and post-judgment interest at the maximum rate allowable by
law;
E. Awarding plaintiffs their costs and disbursements and reasonable
allowances for fees of plaintiffs' counsel and experts; and
7
<PAGE> 8
F. Granting plaintiffs and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/
-----------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs
OF COUNSEL:
ABBEY GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
SCHATZ & NOBEL, P.C.
216 Main Street
Hartford, CT 06106-1817
(860) 493-6292
8
<PAGE> 1
FROM: L. B. STAUFFER, SR. VP
NICHOLAS PATRUNO, INVESTOR RELATIONS
PORTER, LEVAY & ROSE, INC.
(212) 564-4700
COMPANY GEORGE ROBERTS, CFO
CONTACT: (508) 347-2261
FOR IMMEDIATE RELEASE
SPECTRAN REPORTS SECOND QUARTER/SIX MONTHS RESULTS
STURBRIDGE, MA, JULY 30 -- SpecTran Corporation (NASDAQ, NM: SPTR),
which develops, manufactures and markets glass optical fibers and value-added
fiber optic products, today reported results for the second quarter and six
months ended June 30, 1999.
Second quarter revenues were $22,587,000, up 38 percent from revenues
of $16,358,000 for the same period a year ago. Operating income was $1,763,000,
up from the operating loss of $2,371,000 incurred during the same period in
1998. The 1998 operating loss included one-time charges, including inventory
write-downs at SpecTran Specialty. In the second quarter of 1999, due primarily
to tax losses associated with the sale of its interest in General Photonics, the
company's joint venture with General Cable, SpecTran incurred a net loss of
$621,000 or nine cents per share, compared with a net loss of $1,383,000 or
twenty cents per share for the same period a year ago.
- more -
<PAGE> 2
- 2 -
For the first six months of 1999, SpecTran incurred a net loss of
$389,000 or six cents per share compared with a net loss of $518,000 or seven
cents per share for the first half of 1998. Revenues for the first half of 1999
were $42,966,000, up 36 percent from the $31,471,000 achieved in the same period
in 1998.
Commenting on the company's results, SpecTran chairman and CEO, Charles
B. Harrison, said, "During the second quarter, SpecTran sold its interest in
General Photonics, SpecTran's joint venture with General Cable Corporation, to
BICC General Cable, Inc. for $2,367,200. As part of the transaction, General
Photonics repaid a loan to SpecTran for $325,000 and BICC General Cable
purchased approximately 30,000 kilometers of optical fiber from SpecTran's CFT
subsidiary. The sale resulted in an after-tax book loss of $237,000 on
SpecTran's interest in the joint venture and a one-time tax liability of
$1,099,000, both of which adversely affect this quarter's and the first half's
results. Other income, as compared to last year, was adversely affected by the
elimination of the Corning supply contract settlement at the end of 1998,
coupled with the increased interest expense in 1999 associated with servicing
our debt.
"On July 15, 1999 SpecTran announced it entered into an Agreement of
Merger with Lucent Technologies for $64 million or $9 a share, plus the
assumption by Lucent of $35 million of SpecTran's debt, in an all-cash tender
offer. Tender offer letters were mailed to SpecTran's shareholders of record on
July 21, 1999 and are valid until August 17, 1999, unless extended. It is
expected that the transaction will be completed by the end of the quarter ending
September 30, 1999. SpecTran's board of directors unanimously approved the
tender offer and the merger and determined that the terms of the tender offer
and the merger are fair to and in the best interests of SpecTran's stockholders
and unanimously recommends that all SpecTran stockholders accept the tender
offer and tender their shares to the purchaser pursuant to the terms of the
tender offer," Harrison concluded.
- more -
<PAGE> 3
-3-
SpecTran Corporation develops, manufactures and markets glass optical
fibers and value-added fiber optic products. For global communications markets,
SpecTran manufactures standard fiber and cable as well as special performance
fiber and cable. The company's application specific optical fiber and cable
products also serve industrial, aerospace and medical markets worldwide. For
additional information about SpecTran, visit the company's web site at
www.spectran.com.
NOTE: This press release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainties that may cause
results to differ materially from expectations, including without limitation,
the ability of the company to market and develop its products, general economic
conditions and competitive conditions in markets served by the company.
Forward-looking statements include, but are not limited to, global economic
conditions, product demand, competitive products and pricing, manufacturing
efficiencies, cost reductions, manufacturing capacity, facility expansions and
new plant start-up costs, the rate of technology change and other risks.
Although the company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this press release will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the company or any other person
that the objectives and plans of the company will be achieved.
- more -
<PAGE> 4
- 4 -
SPECTRAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
------------------------ --------------------------
6/30/99 6/30/98(a) 6/30/99 6/30/98(a)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $ 42,966 $ 31,471 $ 22,587 $ 16,358
Cost of Sales 31,547 23,806 16,489 13,805
-------- -------- -------- --------
Gross Profit 11,419 7,665 6,098 2,553
-------- -------- -------- --------
Selling and Administrative Expenses 6,749 6,653 3,666 3,518
Research and Development Costs 1,424 2,581 669 1,406
-------- -------- -------- --------
Income from Operations 3,246 (1,569) 1,763 (2,371)
-------- -------- -------- --------
Other income (Expense):
Interest Income 126 147 98 33
Interest Expense (1,475) (476) (739) (352)
Other, Net 41 1,583 53 741
-------- -------- -------- --------
Other Income (Expense), net (1,308) 1,254 (588) 422
-------- -------- -------- --------
Income before Income Taxes and
Equity in Joint Venture 1,938 (315) 1,175 (1,949)
Income Tax Expense Before Joint Venture 756 (136) 458 (775)
-------- -------- -------- --------
Net Income Before Joint Venture Sale 1,182 (179) 717 (1,174)
-------- -------- -------- --------
Joint Venture:
Equity in Loss of Joint Venture (385) (598) (3) (346)
Tax Benefit in Equity Loss 150 259 1 137
Book & Tax Loss on Sale of Joint Venture (1,336) -- (1,336) --
-------- -------- -------- --------
Net Loss on Joint Venture (1,571) (339) (1,338) (209)
-------- -------- -------- --------
Net Income $ (389) $ (518) $ (621) $ (1,383)
======== ======== ======== ========
Net Income Per Share of Common Stock:
Basic $ (.06) $ (.07) $ (.09) $ (.20)
Weighted Average Number of
Common Shares Outstanding:
Basic 7,004 7,002 7,005 7,002
</TABLE>
(a) Due to a change in accounting treatment of certain fiber sales, sales
and cost of sales for the second quarter and June year-to-date of 1998
were reduced by $674,000 and $789,000, respectively
<PAGE> 5
#####
1999
