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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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SPECTRAN CORPORATION
(NAME OF SUBJECT COMPANY)
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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)
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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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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9") relates to an offer by Seattle Acquisition Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Lucent
Technologies Inc., a Delaware corporation ("Lucent"), to purchase all of the
Shares (as defined below) of SpecTran Corporation, a Delaware corporation (the
"Company").
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is SpecTran Corporation. The address of the
principal executive office of the Company is 50 Hall Road, Sturbridge,
Massachusetts 01566. The title of the class of equity securities to which this
Schedule 14D-9 relates is the common stock of the Company, par value $.10 per
share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in
the Tender Offer Statement on Schedule 14D-1 dated July 21, 1999 (as amended or
supplemented, the "Schedule 14D-1") filed with the Securities and Exchange
Commission (the "Commission") by Lucent and the Purchaser, relating to an offer
by the Purchaser to purchase all outstanding Shares at a price of $9.00 per
Share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated July 21, 1999, a copy of which is filed as Exhibit (a)(1) hereto (the
"Offer to Purchase"), and the related Letter of Transmittal, a copy of which is
filed as Exhibit (a)(2) hereto. The principal executive offices of each of
Lucent and the Purchaser are located at 600 Mountain Avenue, Murray Hill, New
Jersey 07974.
The Offer is being made pursuant to an Agreement of Merger, dated as of
July 15, 1999 (the "Agreement of Merger"), among the Company, Lucent and the
Purchaser. A copy of the Agreement of Merger is filed as Exhibit (c)(1) hereto
and is hereby incorporated by reference. The Agreement of Merger provides that,
among other things, as soon as practicable after the purchase of Shares pursuant
to the Offer and the satisfaction of the other conditions set forth in the
Agreement of Merger and in accordance with the relevant provisions of the
General Corporation Law of the State of Delaware ("Delaware Law" or the "DGCL"),
the Purchaser will be merged with the Company (the "Merger"). Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a wholly owned
subsidiary of Lucent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares (i) owned or held in treasury by the Company, (ii) owned
by the Purchaser or Lucent, (iii) remaining outstanding held by any subsidiary
of the Company or Lucent or (iv) owned by stockholders who shall have demanded
properly and perfected appraisal rights, if any, under Delaware Law) will be
canceled and converted automatically into the right to receive the Offer Price
(the "Merger Consideration"). The Agreement of Merger is summarized in Section
12 of the Offer to Purchase.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context
otherwise requires, references to the Company in this Schedule 14D-9 are to the
Company and its subsidiaries, viewed as a single entity.
(b) Certain contracts, agreements, arrangements or understandings known to
the Company between the Company or its affiliates and (i) certain of the
Company's executive officers, directors or affiliates or (ii) certain of
Lucent's executive officers, directors or affiliates are described in the
Information Statement of the Company attached to this Schedule 14D-9 as Annex A
(the "Information Statement"). Other such contracts, arrangements and
understandings known to the Company are summarized in Item 4(b) below and are
incorporated herein by reference. The Information Statement is being furnished
to the Company's stockholders pursuant to Section 14(f) of the Securities
Exchange Act of 1934 (the "Exchange Act"), and Rule 14f-1 issued under the
Exchange Act in connection with the Purchaser's right (after consummation of
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the Offer) to designate persons to be appointed to the Board of Directors of the
Company other than at a meeting of the stockholders of the Company. The
Information Statement is hereby incorporated by reference herein.
The transactions discussed in this Schedule will result in an acceleration
of benefits to executive officers and directors and certain consultants and
employees under the Company's Incentive Stock Option Plans, Supplemental
Retirement Agreements and Retirement Plan for Outside Directors. In addition,
certain executive officers have certain benefits under employment agreements
although the executive officers have acknowledged that the consummation of the
Agreement of Merger will not constitute a Change in Control as defined in each
executive's employment agreement. For further information see in the attached
Information Statement the sections entitled "Employment Agreements and
Change-In-Control Arrangements," "Supplemental Retirement Benefits," "Incentive
Stock Option Plan" and "Retirement Plan for Outside Directors", and Section 6.5
of the Agreement of Merger requiring prior to completion of the Merger the
termination of, among other things, the Supplemental Retirement Agreement and
retirement plans including the Retirement Plan for Outside Directors, and the
payout of accrued benefits in accordance with procedures set forth therein.
The information contained under the caption "Purpose of the Offer; The
Merger Agreement" in Section 12 of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously approved the Offer
and the Merger and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the stockholders of the Company and
unanimously recommends that stockholders of the Company accept the Offer and
tender their Shares to the Purchaser pursuant to the terms of the Offer. This
recommendation is based in part upon an opinion of Lazard Freres & Co. LLC
("Lazard"), the Company's investment banker, that as of the date of the
Agreement of Merger the $9.00 per Share in cash to be received by the Company's
stockholders in the Offer and the Merger is fair to such stockholders from a
financial point of view (the "Fairness Opinion"). The Fairness Opinion contains
a description of the factors considered, the assumptions made, and the scope of
the review undertaken by Lazard in rendering its opinion. The full text of the
opinion of Lazard is attached hereto as Annex B to this Schedule 14D-9 and is
incorporated herein by reference. STOCKHOLDERS ARE URGED TO READ SUCH OPINION OF
LAZARD IN ITS ENTIRETY.
As set forth in the Agreement of Merger, the Purchaser will purchase Shares
tendered prior to the close of the Offer if the conditions to the Offer have
been satisfied (or waived).
Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the outstanding Shares (unless at least 90% of the
outstanding Shares are held by the Purchaser) are required to approve the
Merger. Accordingly, if the minimum condition of and the other conditions to the
Offer are satisfied, the Purchaser will have sufficient voting power to cause
the approval of the Merger without the affirmative vote of any other
stockholder. Under Delaware Law, if the Purchaser acquires, pursuant to the
Offer or otherwise, at least 90% of the then outstanding Shares, the Purchaser
will be able to approve and adopt the Agreement of Merger and the Merger,
without a vote of the Company's stockholders. Lucent, the Purchaser and the
Company have agreed to use their reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Offer, the Merger and the other transactions contemplated by the Agreement of
Merger. If the Purchaser does not acquire at least 90% of the then outstanding
Shares pursuant to the Offer or otherwise and a vote of the Company's
stockholders is required under Delaware Law, a longer period of time will be
required to effect the Merger.
The initial expiration date for the Offer is 12:00 Midnight, New York City
time, on August 17, 1999, unless the Purchaser extends the period of time for
which the Offer is open. Lucent and Purchaser have agreed that if the minimum
condition of and the other conditions to the Offer are not satisfied on any
scheduled
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expiration date of the Offer then, provided that all such conditions are
reasonably capable of being satisfied, Purchaser shall extend the Offer from
time to time until such conditions are satisfied or waived, provided that
Purchaser shall not be required to extend the Offer beyond September 30, 1999.
A copy of the press release jointly prepared by Lucent and Issuer and
released by Lucent on July 15, 1999 announcing the Merger and the Offer is filed
as Exhibit (a)(3) hereto and is incorporated herein by reference in its
entirety.
(B) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION.
Background of the Relationship.
The Company has a long-standing relationship with Lucent both as a supplier
of optical fiber to Lucent and a licensee of technology from Lucent.
Supply Relationship with Lucent
The Company and Lucent have a three-year supply agreement (the "Supply
Agreement") terminating December 31, 1999, under which Lucent is required to
make certain annual minimum purchases of optical fiber. Lucent has satisfied its
minimum annual purchase obligations under the Supply Agreement through and
including 1999. In 1998, Lucent purchased quantities of optical fiber in excess
of the required annual minimum. In September 1998, the Company and Lucent began
discussions regarding quantities of optical fiber Lucent anticipated purchasing
from the Company in 1999. In the course of these discussions, the parties
discussed the possibility of entering into a new supply agreement to replace the
Supply Agreement. Those discussions continued through January 1999 when Lucent
stated that it would not enter a new supply agreement but would (and did) make
additional purchases under the terms of the Supply Agreement on an as needed
basis. On June 1, 1999, Lucent advised the Company that, due to excess
inventories, for the remainder of the year Lucent would decrease significantly
the amount of optical fiber it would purchase from the Company. During the
calendar years ended December 31, 1998 and 1997, the Company sold (the Company
recognizes revenue when a product is shipped) approximately $26 million and $6.6
million, respectively, of optical fiber to Lucent. During the six month period
ended June 30, 1999, the Company sold approximately $9.5 million of optical
fiber to Lucent.
Licensee Relationship with Lucent
The Company has been a licensee of Lucent's and its predecessor companies'
optical fiber patents since 1981. From mid 1997 until October 30, 1998, the
Company and Lucent discussed the possibility of entering into a further patent
license agreement. On October 30, 1998, the Company and Lucent established a new
worldwide, non-exclusive license exchanging rights under their optical fiber
patents issued prior to January 1, 1998, and additional patents related to
multimode fiber based on applications filed through October 1998. The Company is
licensed by Lucent to make optical fiber at its existing factories for worldwide
use and sale and export from the United States. The license contains some
product limitations including certain exclusions to make or sell select
specialty fibers for some applications. Lucent receives non-exclusive,
royalty-free worldwide rights. The Company agreed to pay Lucent a $4.0 million
license fee in installments and, beginning in 2000, a royalty on sales. On
January 31, 1999, the Company paid the first license fee installment of $750,000
and will be making a further $500,000 payment on July 31, 1999. An additional
$1,000,000 is due in 2000, $1,000,000 in 2001 and $750,000 in 2002. Lucent has
the right to terminate the agreement if the Company is acquired by an optical
fiber manufacturer.
For the six months ended June 30, 1999, the Company made no royalty
payments to Lucent. For the fiscal years ending December 31, 1998, 1997 and
1996, the Company made aggregate royalty payments to Lucent of approximately
$60,000, $890,000 and $760,000, respectively. All such royalty payments were in
respect of sales by SpecTran Communication Fiber Technologies, Inc., a
subsidiary of the Company.
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Background of the Offer
The Company has been in the process of substantially expanding its capacity
at its manufacturing facilities and completing the development of and
implementing a new optical fiber manufacturing process, which has required
significantly more funds and more time than anticipated. In addition, there were
operational and inventory issues at a subsidiary in part related to its
relocation and expansion. Sales growth and gross profit in 1998 were adversely
affected by highly competitive market conditions and pricing pressures caused by
an industry-wide oversupply situation.
The Company has financed its capital and operational needs through a
combination of cash flow from operations and borrowings under its loan
agreements. The Company violated certain covenants contained in both its
revolving credit agreement and senior secured notes as a result of its second
quarter 1998 results.
In the third quarter of 1998, the Company entered negotiations with its
lenders to revise those covenants and began exploring various financial and
strategic alternatives including seeking additional capital or entering into
strategic alliances in an attempt to reduce its debt. During the fourth quarter
of 1998 the Company received an unsolicited proposal from a company (Company A)
seeking to make a minority equity investment in the Company at an unattractive
price coupled with substantial governance and management controls. The Company
determined to explore retaining expert advice to assist the Company in
evaluating this proposal as well as to explore other financial and strategic
alternatives.
In late November 1998, Mr. Robert A. Schmitz, a director of the Company,
who was also serving as a financial advisor to the Company, contacted Lazard and
suggested that Lazard meet with the Board of Directors of the Company.
In December 1998, the Company signed an agreement with its lenders to amend
certain covenants contained in both the revolving credit agreement and the
senior secured notes. In connection with the signing of that agreement, all
violations of the original agreements were waived. The Company has continued to
finance its capital and operational needs through a combination of cash flow
from operations and borrowings and expects to continue to do so, assuming the
Company continues to meet its lenders revised covenants. While the Company has
been in compliance with all the revised covenants, there continues to be no
assurance that the Company would be able to remain in compliance with all the
revised covenants.
On January 7, 1999, representatives of Lazard made a presentation to the
Board of Directors of the Company. After representatives of Lazard were excused,
the directors present voted unanimously to engage Lazard to explore and advise
the Board of Directors concerning financial and strategic alternatives for the
Company and on January 25, 1999, the Company entered into an agreement with
Lazard to do so.
On February 1, 1999, because of the Company's significant business
relationships with Lucent, a representative of Lazard and Mr. Charles B.
Harrison, President, Chief Executive Officer and Chairman of the Board of
Directors of the Company, pursuant to a confidentiality agreement later signed,
met with Mr. Robert Mohalley, Strategy Vice President for Lucent's Network
Products Group, and Mr. Denys Gounot, Chief Operating Officer of Lucent's
Network Products Group, to inform them that Lazard had been engaged to explore
financial and strategic alternatives for the Company.
In early February, at the request of the Company, Lazard began contacting
prospective strategic and financial partners and, during the months of February
and March, contacted 34 parties (including Lucent) and supplied a number of them
with non-public information pursuant to confidentiality and non-disclosure
agreements. During February, management and representatives of Lazard met with
some of the 34 contacted parties who expressed potential interest in pursuing
various types of transactions. On February 17, 1999, Lazard and management
provided to the Board of Directors a status report of their efforts to explore
financial and strategic alternatives for the Company.
In late February and early March, twelve interested parties submitted
non-binding preliminary indications of interest for a variety of proposed
transactions. These interested parties were invited to conduct detailed due
diligence reviews, including meetings with Company management, review of
additional non-public information and tours of the Company's facilities.
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In early March 1999, although Lucent stated it did not expect to submit a
proposal, Lucent indicated interest in meeting with senior management and
visiting the Company's facilities.
During March and April, management and representatives of Lazard met with
those companies who had given preliminary indications of interest in pursuing
various types of transactions.
On March 18, 1999, Lazard and management provided to the Board of Directors
a status report on their efforts to explore financial and strategic alternatives
for the Company.
On March 24 and 25, 1999, representatives from Lucent conducted due
diligence on the Company and visited the Company's facilities.
In late April and early May, the Company received second non-binding
indication of interest letters from six interested parties describing various
alternative transactions, including a supply agreement with warrants to purchase
common stock, cash purchase of different subsidiaries of the Company, a minority
cash investment with a supply agreement and substantial governance rights, a
merger of optical fiber assets and two proposals to acquire the Company, one for
stock and one for cash.
On April 21, 1999, Lazard and management provided to the Board of Directors
a status report on their efforts to explore financial and strategic alternatives
for the Company.
In late April, Lucent informed Lazard that it was not going to submit a
proposal, but might be interested under the right circumstances in pursuing a
supply agreement.
On May 10, 1999, a representative from Lucent (Mr. Mohalley) sent the
Company a letter stating that upon further review Lucent might be interested in
pursuing a transaction. On May 11, 1999, during a telephone conversation, Mr.
Mohalley asked Mr. Harrison for at least an additional two weeks to conduct more
due diligence before submitting an indication of interest letter.
On May 11, 1999, the Board of Directors of the Company met to discuss the
indication of interest letters and Lucent's request for additional time. All of
the Company's directors were present, as were representatives of Lazard. At the
meeting the directors discussed the non-binding proposals contained in those
letters and determined that each of the proposals had drawbacks. The proposed
minority investment from Company A was for an inadequate per share price coupled
with significant management and governance controls. The Board rejected the two
proposals to purchase only the specialty subsidiary since it was viewed as
having substantial growth potential, the prices were inadequate and stockholder
value was not adequately enhanced. One letter referred to a merger but Lazard
and the Company were unable to obtain a firm proposal. Regarding an offer for a
supply agreement with warrants, the supply agreement was at below current market
prices for optical fiber and the offer did not provide the capital infusion that
the Company desired. The Board directed the Company's management and Lazard to
continue to pursue a possible transaction with Lucent and further refine and
clarify the other two proposals, one involving the sale of the Company for cash
(Company C) and the other involving the sale of the Company for stock (Company
B).
On May 17-18, 1999, representatives of Lucent, including Mr. Terrence
Bentley, Director Corporate Development of Lucent, and Mr. Richard Sullivan,
Network Products Group Director Business Development of Lucent, visited the
Company to conduct further due diligence. Subsequently, there were a number of
calls among representatives of Lucent, the Company and Lazard to review various
due diligence items.
On May 19, 1999, senior management of the Company and representatives of
Lazard visited Company B to conduct due diligence on Company B. Subsequently,
there were a number of calls among representatives of Company B, the Company and
Lazard to review various items related to due diligence both by the Company on
Company B and by Company B on the Company.
On May 20-21, 1999, representatives of Company C visited the Company to
conduct further due diligence. Subsequently, there were a number of calls among
representatives of Company C, the Company and Lazard to review various due
diligence items.
On May 28, 1999, at the Annual Meeting of the Company's stockholders, the
Company publicly announced its 1999 projected net sales of more than $90 million
and projected growth rates of sales and
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earnings through 2003, information which had been shared under confidentiality
agreement with each of the prospective strategic and financial partners.
At a June 4, 1999, meeting of the Board of Directors, senior management of
the Company and representatives of Lazard reported on the status of their
efforts to explore financial and strategic alternatives for the Company,
including reviewing the non-binding proposals submitted to the Company and
reporting that there was serious interest being expressed by Lucent, but that
certain persons at Lucent believed the Company to be worth approximately $6 per
share if the value of Lucent's purchases of optical fiber from the Company were
eliminated.
On June 14, 1999, senior executives from Lucent visited the Company to meet
with senior management of the Company and to tour the facilities.
On June 15, 1999, Company C informed Lazard that Company C was withdrawing
from the process until after the Company's results for the quarter ended
September 30, 1999 were available and subject to additional discussions and
diligence.
On June 15, 1999, Company B sent a letter reducing its proposed exchange
ratio. On the same day, Mr. Bentley indicated to Mr. Harrison that Lucent would
be willing to offer $8.00 per Share in cash subject to due diligence.
Concurrently, a representative of Lucent reviewed different valuations of the
Company's stock.
On June 16, 1999, a representative of Lazard contacted Mr. Bentley and
suggested that Lucent submit a proposal in writing to acquire the Company for
Lucent stock at a price higher than $8.00 per Share.
On June 17, 1999, a representative of Lucent informed a representative of
Lazard that Lucent had completed its purchases of optical fiber from the Company
for the year. Later that day, Lucent submitted a non-binding indication of
interest letter for the acquisition of the Company for $8.00 - $8.75 per Share.
At a June 18, 1999 telephonic meeting of the Board of Directors, a
representative of Lazard reported that the Company had received a non-binding
indication of interest letter from Lucent for $8.00 - $8.75 per Share and that
Lucent had stated that it had completed its purchases of optical fiber from the
Company for the year. A representative of Lazard added that it was unclear if
Lucent's proposal contemplated stock or cash consideration. He then reported
that Company C had determined to defer proceeding further until after the
Company's results in the quarter ended September 30, 1999 were available and
subject to additional discussions and diligence. A representative of Lazard also
reported that Company B had reduced its stock offer. A representative of Lazard
observed that Company B's stock was highly illiquid, had limited institutional
ownership and no equity research coverage and should the Company's stockholders
receive such stock, and wish to liquidate their position, they may be unable to
do so without realizing a significant discount. In addition, Lazard informed the
Board of Directors that Lazard was unable to evaluate Company B, including its
market price, with any reasonable degree of assurance. The Board discussed the
Lucent proposal, expressed concern about the price and the strong desire that
any offer be for stock consideration.
On June 21, 1999, Mr. Harrison met with Mr. Bentley, indicated that
Lucent's offer was insufficient and that the Company strongly preferred a stock
transaction. During this meeting, the Company's auditors by telephone informed
Mr. Harrison and Mr. Bentley that any business combination in which the Company
was involved would not be eligible to be accounted for on a pooling of interests
basis. At the end of the meeting, Mr. Bentley indicated that Lucent would be
willing to increase its previous non-binding indication of interest to $9.00 per
Share in cash but did not want to pursue a stock transaction.
On June 21, 1999, the Board of Directors met by conference telephone call
in the evening (one director was unavailable) and discussed Mr. Harrison's
report of his meeting with Lucent. The Board directed Mr. Harrison to discuss a
possible stock transaction again with Mr. Bentley.
On June 22, 1999, the Company and Lucent executed a revised non-disclosure
agreement.
On the morning of June 22, 1999, Mr. Harrison spoke with Mr. Bentley. Mr.
Harrison reported again that the Company's Board strongly preferred a stock
transaction. Mr. Bentley reiterated that Lucent would not agree to a stock
transaction but would be interested in pursuing a $9 per Share cash transaction.
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On June 22, 1999 at 5:00 p.m., the Board of Directors of the Company met
and was updated by Mr. Harrison. The Board repeated its preference for a stock
transaction. The Board directed Mr. Harrison to attempt again to ascertain
whether Lucent would be willing to acquire the Company for stock, but also
authorized Mr. Harrison to proceed with discussions regarding a cash transaction
for $9 per Share or higher. Later that evening, Mr. Harrison raised the matter
of a stock transaction again with Mr. Bentley.
On June 23, 1999, Mr. Bentley informed Mr. Harrison that Lucent was
strongly disinclined to do a stock transaction for a number of reasons,
including added costs to Lucent in time and expense. Mr. Bentley stated that he
would consider discussing with the CFO of Lucent an acquisition of the Company
at a per Share price of $8 in Lucent stock but advised Mr. Harrison that he did
not believe such a transaction would be approved and that the environment for
obtaining such approval from Lucent's senior management was very unfavorable.
Mr. Harrison stated he would discuss the matter with the Company's directors and
advise Mr. Bentley. Mr. Harrison polled the Board and the unanimous sense was to
proceed with negotiations for a $9 per Share cash transaction. Mr. Harrison so
informed Mr. Bentley that same day.
On June 25, 1999, Company C sent a letter to the Company confirming in
writing its June 15, 1999 conversation with a representative of Lazard.
On June 28 and June 29, 1999, representatives from Lucent visited the
Company to meet with senior management of the Company, to tour the facilities
and to continue due diligence. On June 30, 1999, the parties agreed to proceed
on a non-binding basis.
From July 1 to July 14, 1999, representatives of Lucent conducted further
due diligence. The representatives also negotiated the Agreement of Merger with
representatives of the Company. During negotiations, the Company requested and
Lucent agreed to eliminate several deal protection measures including an option
to acquire up to 19.9% of the Company's Shares under certain conditions,
agreements from directors and officers to tender their Shares and vote in favor
of the Merger and a reduction in the break-up fee in the event the transaction
was not completed for certain reasons from $2.5 million to $2.0 million.
On July 14, 1999, the Board of Directors of the Company held a meeting to
consider the Offer, the Merger and the Agreement of Merger. At the meeting, the
Board of Directors reviewed the Offer, the terms of the Agreement of Merger with
its legal counsel and representatives of Lazard. The Board of Directors of the
Company heard presentations by its legal counsel with respect to the terms of
the proposed offer, the Merger and the Agreement of Merger, and legal counsel
advised the Board of Directors that the negotiations for the Agreement of Merger
were substantially complete. The Board of Directors also heard a presentation by
representatives of Lazard with respect to the financial terms of the Offer and
the Merger and Lazard's valuation analysis. The Board of Directors, with the
participation of the representatives of Lazard, reviewed again the alternatives
for the Company.
At the conclusion of the presentation, representatives of Lazard delivered
Lazard's oral opinion that, as of the date of the Agreement of Merger, and based
upon the procedures followed, matters considered, assumptions made and
limitations of the review undertaken in connection with such opinion, the $9.00
in cash per Share to be paid to the stockholders of the Company pursuant to the
Offer and the Merger was fair to such stockholders from a financial point of
view. Lazard subsequently delivered a written opinion dated the date of the
Agreement of Merger to the same effect.
Based upon such discussion, presentations and opinion, the Board of
Directors of the Company has unanimously approved the Offer and the Merger and
determined that the terms of the Offer and the Merger are fair to, and in the
best interests of, the stockholders of the Company and unanimously recommends
that stockholders of the Company accept the Offer and tender their Shares to the
Purchaser pursuant to the terms of the Offer.
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Reasons for the Recommendation.
In reaching its determination described above, the Board of Directors of
the Company considered a number of factors, including, without limitation, the
following:
(i) the possible alternatives to the Offer and the Merger (including
the possibility of continuing to operate the Company as an independent
entity), the range of possible benefits to the Company's stockholders of
such alternatives and the timing and the likelihood of accomplishing any of
such alternatives;
(ii) the Company's prospects if it were to remain independent, its
growth potential, the risks inherent in remaining independent, the
Company's existing debt and the need for capital to achieve its longer term
business plan;
(iii) the competitive advantage in the industry of large optical fiber
manufacturers and the competitive advantage of large integrated optical
fiber, optical cable and systems manufacturers, including Lucent, with
substantial financial resources;
(iv) the dependence of the Company for its sales of multimode optical
fiber on relatively few customers, some of whom, including Lucent, are
licensors and competitors of the Company. In particular, the Board
considered whether, in light of Lucent's decreased demand for fiber, if the
acquisition did not occur, Lucent would increase its own capacity to
manufacture current or new optical fiber designs itself;
(v) in view of the extensive efforts of both the Company and Lazard to
find financial and strategic partners and potential acquirors, that it was
highly unlikely that any other party would propose to enter into a more
favorable transaction to the Company and its stockholders;
(vi) the presentation of Lazard at the July 14, 1999 meeting of the
Board of Directors and the opinion of Lazard to the effect that, as of such
date, the $9 in cash per Share to be paid to the stockholders of the
Company pursuant to the Offer and in the Merger was fair to such
stockholders from a financial point of view. A copy of the written opinion
of Lazard, which sets forth the procedures followed, matters considered,
assumptions made and limitations of the review undertaken by Lazard, is
attached hereto as Annex B. STOCKHOLDERS ARE URGED TO READ THE OPINION
CAREFULLY IN ITS ENTIRETY;
(vii) current financial market conditions, volatility and trading
information with respect to the Shares of the Company and the historical
prices for the Shares, including the fact that, although the proposed
purchase price of $9 per Shares is less than recent NASDAQ National Market
closing prices for the Share, representing a discount of approximately
21.7% over the July 14, 1999 market price of $11.50 per Share and discounts
of approximately 14.0% and 4.0% over the one and two months average closing
prices of $10.46 and $9.37 per Share, respectively, the $9 per Share
purchase price represents: a premium of approximately 10.2% over the three
month average closing price of $8.17 per Share; a premium of approximately
38.2% over the six month average closing price of $6.51 per Share; a
premium of approximately 40.2% over the average closing price since January
1, 1999; and a premium of approximately 56.6% over the one year average
closing price of $5.75.
(viii) the likelihood that the proposed acquisition would be
consummated, in light of the experience, reputation and the financial
strength of Lucent and the absence of any financing condition in the Offer;
(ix) the financial and other terms and conditions of the Offer, the
Merger and the Agreement of Merger, including, without limitation, the fact
that the terms of the Agreement of Merger will not prevent other third
parties from making certain bona fide proposals subsequent to execution of
the Agreement of Merger, will not prevent the Board of Directors from
determining, in the exercise of its fiduciary duties in accordance with the
Agreement of Merger, to provide information to and engage in negotiations
with such third parties and will permit the Company, subject to the
non-solicitation provisions and the payment of the termination fee of $2.0
million, to enter into a transaction with a third party that would be more
favorable to the Company's stockholders than the Offer and the Merger; and
8
<PAGE> 10
(x) the anticipated benefits of the Merger to the Company's employees
and the communities in which the Company operates.
The foregoing discussion of the information and factors considered and
given weight by the Board of Directors is not intended to be exhaustive. The
Board did not assign relative weights to the above factors or determine that any
factor was of particular importance relative to other factors. Rather, the Board
viewed its position and recommendations as being based on the totality of the
information presented to and considered by it during the process followed by the
Board. In addition, it is possible that different members of the Board assigned
different weights to the different factors.
The Board recognized that there can be no assurance as to the level of
growth or profits to be attained by Company, if it remained independent, or by
the Surviving Corporation in the future.
It is expected that, if the Shares are not purchased by Lucent in
accordance with the terms of the Offer or if the Merger is not consummated, the
Company's current management, under the general direction of the Board, will
continue to manage the Company as an ongoing business.
THE FULL TEXT OF THE WRITTEN FAIRNESS OPINION OF LAZARD IS FILED AS EXHIBIT
(a)(4) TO THIS SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX B.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. SUCH
OPINION WAS PRESENTED FOR THE INFORMATION OF THE BOARD IN CONNECTION WITH THEIR
CONSIDERATION OF THE AGREEMENT OF MERGER AND IS DIRECTED ONLY TO THE FAIRNESS
(FROM A FINANCIAL POINT OF VIEW) OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS
OF SHARES (OTHER THAN LUCENT AND ITS AFFILIATES) PURSUANT TO THE OFFER AND THE
MERGER. SUCH OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS
TO WHETHER TO TENDER SHARES IN THE OFFER OR HOW TO VOTE WITH RESPECT TO THE
MERGER.
IN LIGHT OF THE FACTORS SET FORTH ABOVE, THE BOARD RESOLVED UNANIMOUSLY TO
APPROVE THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND
THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY AND RESOLVED UNANIMOUSLY TO RECOMMEND THAT STOCKHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
In connection with Lazard's services as investment banker to the Company,
the Company has paid Lazard a $250,000 retention fee and will pay Lazard a fee
equal to a customary percentage of the transaction value upon the consummation
of the Offer and the Merger.
The Company has agreed to reimburse Lazard for its reasonable out-of-pocket
expenses incurred in connection with rendering financial advisory services,
including fees and disbursements of its legal counsel. The Company also has
agreed to indemnify Lazard and its directors, officers, agents, employees and
controlling persons for certain costs, expenses and liabilities, including
certain liabilities under the federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer, except that such solicitations or
recommendations may be made by directors, officers or employees of the Company,
for which services no additional compensation will be paid.
9
<PAGE> 11
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, no transactions in Shares have been effected
by the Company or, to the Company's knowledge, by any of its executive officers,
directors, affiliates or subsidiaries, except as follows:
1. The Company has granted options to purchase Shares, and issued
Shares upon exercise of options held by, employees and consultants under
its stock plans.
2. In accordance with the Company's automatic payroll deduction
employee stock purchase plan, Charles B. Harrison purchased 241 Shares in
April 1999 for $3.875 per share, 238 Shares in May 1999 for $7.875 per
Share, 185 Shares in June 1999 at $10.125 per Share and 157 Shares in July
1999 at $11.9375 per Share.
3. The following executive officers of the Company were granted
options to purchase Shares on the dates and at the per Share exercise
prices set forth below:
<TABLE>
<CAPTION>
NAME EXERCISE PRICE GRANT DATE OPTION SHARES
- ---- -------------- ------------ -------------
<S> <C> <C> <C>
Charles Harrison.......................... $9.25 May 28, 1999 25,000
John Chapman.............................. $9.25 May 28, 1999 14,000
Martin Seifert............................ $9.25 May 28, 1999 14,000
</TABLE>
- ---------------
(b) To the Company's knowledge, all of the Company's executive officers and
directors who own Shares currently intend to tender all of their Shares
(other than Shares, if any, held by such person that, if tendered, could
cause such person to incur liability under the provisions of Section 16(b)
of the Exchange Act) pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Except as set forth above or in Item 3(b) or (c) or 4(a) above, no
negotiation is being undertaken or is underway by the Company in response to the
Offer which relates to or would result in: (i) an extraordinary transaction,
such as a merger or reorganization involving the Company or any subsidiary
thereof; (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary thereof; (iii) a tender offer for or other acquisition
of securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described above or in Item 3(b) or (c) or 4(a) above, there
are no transactions, Board of Directors resolutions, agreements in principle or
signed contracts in response to the Offer that relate to or would result in one
or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
LITIGATION. After the announcement of the Agreement of Merger by the
Company and Lucent on July 15, 1999, two putative class action lawsuits relating
to the Merger were filed in the Court of Chancery for the State of Delaware:
Chase v. Harrison et. al., C.A. No. 17312-NC and Airmont Associates et. al., v.
SpecTran Corporation et. al., C.A. No. 17314-NC.
The lawsuits were filed by plaintiffs claiming to be stockholders of the
Company, purportedly on behalf of all the Company's stockholders, against the
Company, members of the board of directors of the Company and Lucent. The
plaintiffs in both lawsuits allege, among other things, that the terms of the
proposed Merger were not the result of an auction process or active market
check, that the $9.00 per share price offered by Lucent is inadequate, and that
the Company's directors breached their fiduciary duties to the stockholders of
the Company in connection with the Agreement of Merger. Both lawsuits seek to
have the Merger enjoined or, if the Merger is completed, to have it rescinded
and to recover unspecified damages, fees and expenses. The Company and Lucent
intend to vigorously oppose these lawsuits.
10
<PAGE> 12
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)(1) 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)(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.
- ---------------
* Included in copies mailed to stockholders.
(1) Attached hereto as Annex B.
(2) Attached hereto as Annex A.
11
<PAGE> 13
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.
SPECTRAN CORPORATION
By: /s/ CHARLES B. HARRISON
------------------------------------
Charles B. Harrison
President, Chief Executive Officer
and
Chairman of the Board of Directors
Dated: July 21, 1999
12
<PAGE> 14
ANNEX A
SPECTRAN CORPORATION
SPECTRAN INDUSTRIAL PARK
50 HALL ROAD
STURBRIDGE, MASSACHUSETTS 01566
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about July 21, 1999, as a
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of SpecTran Corporation (the "Company") to the holders of
record of shares of Common Stock, par value $0.10 per share, of the Company (the
"Shares") at the close of business on or about July 21, 1999. You are receiving
this Information Statement in connection with the possible appointment following
consummation of the Offer (as defined below), of persons designated by the
Purchaser (as defined below) to a majority of the seats on the Board of
Directors of the Company.
On July 15, 1999, the Company, Lucent Technologies Inc., a Delaware
corporation ("Parent") and Seattle Acquisition Inc., a Delaware corporation and
wholly owned subsidiary of Parent (the "Purchaser"), entered into an Agreement
of Merger (the "Merger Agreement") in accordance with the terms and subject to
the conditions of which (i) Parent will cause the Purchaser to commence a tender
offer (the "Offer") for all outstanding Shares at a price of $9.00 per Share,
net to the seller in cash and without interest thereon and (ii) the Purchaser
will be merged with and into the Company (the "Merger"). As a result of the
Offer and the Merger, the Company will become a wholly owned subsidiary of
Parent.
The Merger Agreement requires the Company to cause the directors designated
by Parent to be elected to the Board of Directors under the circumstances
described therein. See "Board of Directors and Executive Officers of the
Company."
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action at this time. Capitalized terms used
herein and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on July
21, 1999. The Offer is scheduled to expire at 12:00 Midnight, New York City
time, on August 17, 1999, unless the Offer is extended.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of July 14, 1999, there were 7,040,930
Shares outstanding. The Company's Board of Directors currently consists of three
classes with seven (7) members. At each annual meeting of stockholders, all of
the directors in the class being voted upon are elected for three-year terms.
The officers of the Company serve at the discretion of the Board.
Pursuant to the Merger Agreement, upon the acceptance for payment of, and
payment for, Shares by Purchaser pursuant to the Offer, Purchaser will be
entitled to designate such number of directors on the Board of Directors of the
Company (the "Parent Designees"), as will give Purchaser, subject to compliance
with Section 14(f) of the Exchange Act, representation on the Company's Board of
Directors equal to the product of (i) the total number of directors on the
Company's Board of Directors and (ii) the percentage that the number of Shares
purchased by Purchaser in the Offer bears to the number of Shares outstanding,
and the Company will, at such time, cause the Parent Designees to be so elected
by its existing Board of Directors;
A-1
<PAGE> 15
provided, however, that in the event that the Parent Designees are elected to
the Board of Directors of the Company, until the Effective Time such Board of
Directors will have at least two directors who are directors of the Company on
the date of the Merger Agreement and who are not officers of the Company or any
of its subsidiaries (the "Independent Directors") and; provided, further that,
in such event, if the number of Independent Directors will be reduced below two
for any reason whatsoever, the remaining Independent Director shall designate a
person to fill such vacancy who shall be deemed to be an Independent Director
for purposes of the Merger Agreement or, if no Independent Directors then
remain, the other directors of the Company will designate two persons to fill
such vacancies who shall not be officers or affiliates of the Company or any of
its subsidiaries, or officers or affiliates of Parent or any of its
subsidiaries, and such persons will be deemed to be Independent Directors for
purposes of the Merger Agreement.
Parent has informed the Company that it will choose the Parent Designees
from persons listed below. Parent has informed the Company that each of the
Parent Designees has consented to act as a director, if so designated.
Biographical information concerning each of the Parent Designees is presented
below. The following biographical information provided herein regarding Parent,
the Purchaser, and any Parent Designees has been furnished by Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME FIVE YEAR EMPLOYMENT HISTORY
- ---- ---------------------------------------------
<S> <C>
William R. Spivey.................... Group President, Network Products Group
business unit of Parent since October 1997
and President of the Purchaser since June
1999. Previously Dr. Spivey was Vice
President, Systems and Components,
Microelectronics business unit of Parent.
Joined AT&T in 1994. Previously Dr. Spivey
was President of Tektronix Development
Company for Tektronix, Inc. based in Oregon.
He has also held senior management positions
for Honeywell, Inc. and General Electric in
various systems control, computer and
semiconductor units. Age: 53.
Carol E. Kirby....................... Corporate Counsel for the Network Products
Group of Parent since 1998 and Director and
Vice President of the Purchaser since June
1999. Corporate counsel for Parent and AT&T
Corp. since 1991. Age: 45.
Pamela F. Craven..................... Vice President -- Law of Parent since 1996
and Secretary of Parent since February 1999.
Director and Vice President of the Purchaser
since June 1999. Joined AT&T Corp. Law
Division in 1991. Age: 45.
Justin C. Choi....................... Corporate Counsel in the Mergers and
Acquisitions Law Group of Parent since 1997
and Director and Secretary of the Purchaser
since June 1999. Associate at Paul, Hastings,
Janofsky & Walker (law firm) (1990-1997).
Citizen of the Republic of Korea. Age: 33.
</TABLE>
None of the Parent Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any of the
directors or executive officers of the Company or (iii) to Parent's knowledge,
beneficially owns any securities (or rights to acquire any securities) of the
Company. The
A-2
<PAGE> 16
Company has been advised by Parent that, to Parent's knowledge, none of the
Parent Designees has been involved in any transaction with the Company or any of
its directors, executive officers or affiliates which is required to be
disclosed pursuant to the rules and regulations of the Commission, except as may
be disclosed herein or in the Schedule 14D-9.
Biographical information concerning each of the Company's current directors
and executive officers as of July 14, 1999 is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Charles B. Harrison................ 62 President, Chief Executive Officer
and Chairman of the Board of
Directors
George J. Roberts.................. 54 Senior Vice President, Chief
Financial Officer, Secretary and
Treasurer
John E. Chapman.................... 44 Senior Vice
President -- Technology, Director
and President, SpecTran
Communication Fiber Technologies,
Inc.
Ira S. Nordlicht................... 50 Assistant Secretary, Director
Dr. Paul D. Lazay.................. 60 Director
Richard M. Donofrio................ 61 Director
Dr. Lily K. Lai.................... 58 Director
Robert A. Schmitz.................. 58 Director
Martin F. Seifert.................. 40 Vice President, President of
SpecTran Specialty Optics Company
</TABLE>
Mr. Harrison was appointed President and Chief Executive Officer of the
Company April 13, 1998 and is also Chief Executive Officer and a Director of
each of the Company's wholly-owned subsidiaries. Mr. Harrison became Chairman of
the Board of Directors of the Company on January 1, 1999. Previously, Mr.
Harrison served as an Engineering and Management Consultant to Rockwell
International on a number of programs. Among other consulting assignments for
Rockwell, he served in Moscow from December 1995 to July 1996 as Senior
Executive of CIS affairs. Mr. Harrison retired from Rockwell International as
Corporate Vice President Engineering in April 1995. In the two years preceding
his retirement, Mr. Harrison served as Corporate Vice President Engineering,
having primary responsibility for engineering and research activities across
Rockwell's Aerospace and Defense operations with a special focus on identifying
opportunities and establishing joint U.S./Russian defense conversion projects.
From 1991 to 1993, he served as Vice President of Advanced Technology and
Engineering for Defense Electronics responsible for research, product
development, and large systems engineering contracts in Rockwell's five defense
related divisions. During this time, he also had the senior executive
responsibility for Rockwell's Electro Optics Center. From 1984-1991, he served
as Chief Technology Officer and as Vice President of the Network for Southern
New England Telephone (SNET) directing the conversion to all electronic
switching and fiber optic backbone and local transmission systems. He also
served for two years as President of Sonecor Systems for SNET. From 1968-1984 he
held increasingly responsible positions with Collins Radio/Rockwell
International concluding as Vice President and General Manager Switching Systems
Division. Mr. Harrison received a B.S. degree in Electrical Engineering from
Oklahoma State University, and a M.S. degree in Engineering from Southern
Methodist University.
Mr. Roberts joined the Company as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer as of April 1, 1999. From 1996 to that time he
served as Senior Vice President, Chief Financial Officer, Treasurer and Chief
Operation Officer for the Microelectronics & Computer Technology Corporation, a
unique consortium of 10 major U.S. corporations cooperating in the areas of
information technology to gain a sustainable competitive advantage over foreign
competition. For the preceding 30 years Mr. Roberts held a number of positions
at the General Electric Company, with his last position being Vice President,
Finance and Controller of Systems Support Services of GE Capital's Technology
Management Services Business. He has a B.S., Finance from Siena College and
completed Graduate Studies in Global Business Management at Insead Institute,
France.
A-3
<PAGE> 17
Mr. Chapman, appointed in October 1995 President of SpecTran Communication
Fiber Technologies, Inc., a wholly-owned subsidiary of the Company, is also
Senior Vice President -- Technology, SpecTran Corporation. 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 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 the Company's
wholly-owned subsidiaries, SpecTran Specialty Optics Company and SpecTran
Communication Fiber Technologies, Inc. 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. degree in Physics from the University of Lowell and a M.S. degree
in Electrical Engineering from Northeastern University.
Mr. Nordlicht is a partner in the law firm of Nordlicht & Hand, which
provides legal services to the Company. See "Compensation Committee Interlocks
and Insider Participation." 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, counsel to the U.S. Senate Foreign Relations
Subcommittee on Foreign Economic Policy and Senior Trial Attorney for the
Federal Trade Commission. From 1980-1982 he served as a Secretary of Energy
appointee to the National Petroleum Council. Mr. Nordlicht is also a Director of
the Company's wholly owned subsidiaries, SpecTran Specialty Optics Company and
SpecTran Communication Fiber Technologies, Inc. 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 School of Law. In June 1997, Mr. Nordlicht was named Legal
Advocate of the Year by the U.S. Small Business Administration for his work in
helping to create the Angel Capital Electronic Network, a means of financing
small businesses using the Internet. Mr. Nordlicht is also a Director of The
Fund for Peace, a non-profit foreign policy association.
Dr. Lazay is currently an advisor to and investor in technology based
companies. Prior to September 1997 he was the CEO and Director of Advanced
Telecommunications Modules, Ltd. of Cambridge, UK and Santa Clara, CA. From
April 1995 to December 1996 he was General Manager and Vice President of Cisco
Systems, responsible for its ATM Switching Division in Chelmsford, MA. Dr. Lazay
was a consultant to technology companies from October 1993 to April 1995. Prior
to this he served as President, Chief Executive Officer and Director to Telco
Systems, Inc., a designer 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 also a Director of the Company's wholly-owned subsidiaries SpecTran
Specialty Optics Company and SpecTran Communication Fiber Technologies, Inc. He
holds a B.S. degree from Trinity College and a Ph.D. degree in Physics from the
Massachusetts Institute of Technology.
Mr. Donofrio is a retired Senior Vice President of Southern New England
Telecommunications Corporation (SNET) based in New Haven, Connecticut. During
his 32 year career with SNET, as part of the Bell System, he served in
increasingly responsible operating and executive positions at SNET and AT&T
Corp. until his retirement in May 1993. At SNET, Mr. Donofrio served as Vice
President of Revenue Requirements and Regulatory, as well as Vice President of
Human Resources. During more recent years, he held a number of Senior and Group
Vice President positions, and served as President of SNET Diversified Group. He
also served a term as President of LIGHTNET, an SNET and CSX Corp. joint venture
which constructed and operated an extensive fiber optics telecom network in the
eastern half of the U.S. While at AT&T Corporate headquarters in New York, he
was a Division head in the Marketing Plans Dept. and in the Federal Relations
Dept. His other affiliations include: Past President of United Way of New Haven,
Board of Directors of the University of New Haven, Griffin Health Services Corp.
and National Engineering
A-4
<PAGE> 18
Consortium. Mr. Donofrio is also a Director of the Company's wholly-owned
subsidiaries, SpecTran Specialty Optics Company and SpecTran Communication Fiber
Technologies, Inc. Mr. Donofrio holds a B.S. degree in Economics from Norwich
University, and attended the M.B.A. program at the University of Hartford.
Dr. Lai is President and Chief Executive Officer of First American
Development Corporation, a management consulting and international business
development company, and a Board member of several companies and universities.
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 U.S. West
International from 1987 to 1989. Dr. Lai worked for AT&T from 1971 to 1987 in
various management 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 also a Director of the
Company's wholly-owned subsidiaries, SpecTran Specialty Optics Company and
SpecTran Communication Fiber Technologies, Inc. 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 a M.S. in Agricultural Economics from
the National Taiwan University and the University of Kentucky, respectively.
Mr. Schmitz has operated his own private investment firm since early 1998.
Prior to that time, he was managing director of Trust Company of the West, one
of the nation's largest investment counseling firms, serving five years as a
senior partner of TCW Capital, the firm's private equity group. In this
capacity, Mr. Schmitz was directly responsible for several new investments, led
two successful build-ups of existing portfolio companies and orchestrated
several restructurings and turnarounds. He also provided administrative
oversight for an investment portfolio of 22 companies. Mr. Schmitz served on the
Board of Directors of eleven companies at TCW Capital. Mr. Schmitz has also been
an advisor to a specialized investment firm that co-invests with Soros Fund
Management and as such helped the firm's founder identify and evaluate
investment opportunities in public and private companies. From 1983 to 1989, Mr.
Schmitz was chairman and chief executive officer of Richard D. Irwin, Inc. a
wholly-owned textbook publishing subsidiary of Dow Jones & Co. He also served as
a vice president of Dow Jones and a member of its management committee. At
McKinsey & Company from 1970 to 1982, Mr. Schmitz directed strategy,
organization and diversification assignments for CEOs of large companies in the
U.S. and overseas, and managed the firm's worldwide financial strategy practice.
He was elected a principal of the firm in 1976. Mr. Schmitz is also a Director
of the Company's wholly-owned subsidiary, SpecTran Specialty Optics Company. Mr.
Schmitz graduated from the University of Michigan in 1963 with a B.A. in
Economics and earned a M.S. in Business from the Sloan School of Management at
the Massachusetts Institute of Technology in 1965.
Mr. Seifert joined the Company and SpecTran Specialty Optics Company in his
current positions as of August 25, 1998. Most recently, Mr. Seifert served as
Chief Operating Officer of Schweitzer Engineering Labs, a privately owned
company that designs and makes relays, controls, software and communications
equipment for the electric power industry. Prior to joining Schweitzer in 1997,
he served with Rockwell International as Manager of Rockwell Automation's Power
Quality & Automation business and Global Marketing Manager of Rockwell's
Allen-Bradley Drives Division. Earlier in his business career, he was Manager of
Drives and Power Systems for Bucyrus-Erie Co., a mining equipment producer. He
graduated from the University of British Columbia in 1982 and speaks several
languages, including his native German.
BOARD MEETINGS AND COMMITTEES
There are three standing committees of the Board of Directors: the Audit
and Finance Committee, the Compensation and Incentive Stock Option Committee,
and the Nominating Committee.(1) The Audit and
- ---------------
(1) On May 29, 1998, the Finance Committee, composed of Dr. Raymond E. Jaeger
and Dr. Lily K. Lai, and Messrs. Bruce A. Cannon and Richard M. Donofrio,
and the Audit Committee, composed of all of the Company's outside Directors
(Drs. Lazay and Lai, and Messrs. Nordlicht and Donofrio), were consolidated
into the Audit and Finance Committee, composed solely of the outside
directors. Mr. Harrison had served
A-5
<PAGE> 19
Finance Committee, composed of all of the Company's current outside Directors,
Dr. Lazay, Chair of the Committee, Dr. Lai and Messrs. Nordlicht, Donofrio, and
Schmitz, confers with KPMG LLP, the Company's external auditors, regarding the
scope and results of their audits and any recommendations they may have with
respect to internal accounting controls and other matters related to accounting
and auditing, and advises the Board of Directors with regard to financial
matters referred to it from time to time by the Directors. The Company's outside
Directors, with Mr. Donofrio serving as Chair of the Committee, also comprise
the Compensation and Incentive Stock Option Committee which administers the
Company's Incentive Stock Option Plan, reviews and recommends executive
compensation and administers the Company's executive compensation plans.(2) The
Nominating Committee, the members of which are Drs. Lazay and Lai and Mr.
Donofrio(3), recommends persons for nomination by the Board of Directors for
Directorships. The Nominating Committee will consider candidates proposed by
security holders. Generally, candidates must be highly qualified and be both
willing and affirmatively desirous of serving on the Board. They should
represent the interests of all security holders and not those of a special
interest group. A security holder wishing to nominate a candidate should forward
the candidate's name and a detailed background of the candidate's qualifications
to the Secretary of the Company during the Company's last fiscal quarter.
During the year ended December 31, 1998, the Board of Directors met
thirteen times, the Audit Committee met once, the Finance Committee did not
meet, the Audit and Finance Committee met three times, the Nominating Committee
did not meet, and the Compensation and Incentive Stock Option Committee met
eight times. During 1998 each Director attended at least seventy-five percent of
the aggregate of (1) the total number of meetings of the Board of Directors and
(2) the total number of meetings held by all committees of the Board on which he
or she served.
COMPENSATION OF DIRECTORS
Each Director who is not an employee of the Company receives an annual
retainer of $6,000, payable quarterly, a fee of $300 for each Board meeting
attended and a fee of $400 for each committee meeting attended (except that no
fee is paid for those meetings of the Incentive Stock Option Committee or
Compensation and Incentive Stock Option Committee ("CISOC") relating solely to
the issuance of stock options) in addition to being reimbursed for reasonable
out-of-pocket travel expenses in connection with attendance at those meetings.
Each outside member of the Board of Directors on May 21, 1991 was automatically
granted a nonqualified option to purchase 5,000 shares at a per share purchase
price equal to the fair market value of the stock on that day. Thereafter, every
person who becomes an outside member of the Board of Directors, without any
action of the CISOC, receives an initial grant of a nonqualified option to
purchase, at the fair market value of the stock on the date the option is
granted, 5,000 shares on the last business day in December in the year in which
the outside Director was elected a Director by the stockholders for the first
time. Each such nonqualified option to purchase 5,000 shares becomes exercisable
one year after the date of grant, and continues in effect for ten years. In
addition, on the last business day of December in each year, each outside
Director then in office is to be granted, without any action by the CISOC, a
nonqualified option to purchase 1,000 shares at the fair market value of the
stock on that day. Such nonqualified options to purchase 1,000 shares become
exercisable in three equal annual installments beginning one year after the date
of grant and continue in effect for ten years from the date of the grant. All
options granted to an outside Director become exercisable (a) upon the
occurrence of a Change in Control of the Company (as defined in the Company's
Incentive Stock Option Plan) or (b) when such Director ceases to
- --------------------------------------------------------------------------------
on the Audit Committee until his appointment as President and Chief
Executive Officer of the Company on April 13, 1998. Mr. Schmitz became a
member of the Audit and Finance Committee in July 1998 after his appointment
as a Director of the Company.
(2) Mr. Harrison served on the Compensation and Incentive Stock Option
Committees until his appointment as President and Chief Executive Officer of
the Company on April 13, 1998. Mr. Schmitz became a member of the
Compensation and Incentive Stock Option Committee in July 1998 after his
appointment as a Director of the Company.
(3) Mr. Nordlicht served on the Nominating Committee until July 23, 1998.
A-6
<PAGE> 20
serve as a Director for any reason, except termination for cause, as long as
such Director has then served as a Director of the Company for two consecutive
years, including, for this purpose, time served as a Director before the
adoption of this Plan.
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
To attract and retain experienced and knowledgeable individuals to serve as
outside Directors of the Company and its affiliates, the Company implemented in
December 1995 a Retirement Plan For Outside Directors (the "Retirement Plan")
under which outside (non-management) Directors, after the completion of five
full calendar years of service as an outside Director, will be entitled to an
annual amount equal to the lesser of $1,000 for each year of service as an
outside Director or $10,000. The benefit is payable for ten years in monthly
installments, commencing upon the later of an outside Director's 65th birthday
or retirement from the Board. While any benefits are paid under the Retirement
Plan the former outside Director will be available to consult for the Company.
The benefit will be accelerated and discounted for present value if the outside
Director leaves the Board within 12 months of a Change in Control (as defined in
the Retirement Plan), or if the Company is acquired through merger or
consolidation or the sale of assets and the acquiring party does not agree to
assume the Corporation's obligations under the Retirement Plan. The benefit is
subject to forfeiture if the outside Director is removed for Cause (as defined
in the Retirement Plan) or, as described in the Retirement Plan, competes with
the Company. The Retirement Plan is not intended to be a Qualified Plan under
the Internal Revenue Code of 1986 as amended.
A-7
<PAGE> 21
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
Set forth below is the remuneration for all services in all capacities to
the Company for the fiscal year ended December 31, 1998 of (a) all individuals
serving as the Company's Chief Executive Officer or acting in a similar capacity
during the fiscal year ended December 31, 1998, regardless of compensation
level, and the two other most highly compensated executive officers of the
Company and its Subsidiaries who were serving as executive officers as of
December 31, 1998 and whose total annual salary and bonus exceeded $100,000, and
(b) one additional individual who, although no longer serving as an executive
officer of the Company or its Subsidiaries as of December 31, 1998, received an
annual salary and bonus in excess of $100,000 for the year and for whom
disclosure would have been provided had he been serving as an executive officer
as of December 31, 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(4)
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND ----------------------- OTHER ANNUAL OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) (#) ($)
- ------------------ ---- ------------ -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles B. Harrison......... 1998 173,418 0 30,000(9) 100,000 0
Chairman of the Board 1997 N/A N/A N/A N/A N/A
Chief Executive Officer 1996 N/A N/A N/A N/A N/A
and President(5)
Raymond E. Jaeger,.......... 1998 241,785 0 (3) 74,247 0(2)
Chairman of the Board 1997 212,792 92,860(6) (3) 16,000 9,034(2)
Chief Executive Officer 1996 198,967 123,388 (3) 16,000 6,000(2)
and President,
Consultant(5)
Bruce A. Cannon............. 1998 141,452 0 (3) 17,242 0(2)
Chief Financial Officer 1997 134,743 38,457(6) (3) 10,000 5,801(2)
SpecTran Corporation(7) 1996 122,122 59,102 (3) 8,000 5,394(2)
John E. Chapman............. 1998 192,567 8,652 (3) 31,650 0(2)
President, SpecTran 1997 182,786 77,080(6) (3) 14,000 8,051(2)
Communication Fiber 1996 166,112 100,932 (3) 10,000 6,000(2)
Technologies, Inc.
John Rogers................. 1998 145,168 0 (3) 0 0
Acting Chief Financial 1997 N/A N/A N/A N/A N/A
Officer SpecTran 1996 N/A N/A N/A N/A N/A
Corporation(8)
</TABLE>
- ---------------
(1) Included amounts deferred at officer's election pursuant to section 401(k)
of the Internal Revenue Code accrued during 1998, 1997 and 1996,
respectively, as follows: Mr. Harrison, $10,000, $0 and $0; Dr. Jaeger,
$10,000, $9,360 and $9,360; Mr. Cannon, $9,660, $9,500 and $9,500; and Mr.
Chapman, $9,480, $9,480, and $9,480.
(2) Company contributions to 401(k) and the defined contribution plan.
(3) The aggregate amount of perquisites and other person benefits did not exceed
the lesser of either $50,000 or 10% of the total of annual salary and bonus
reported for the named executive officer, and the named executive officer
had no additional "other annual compensation".
(4) As of December 31, 1998, none of the individuals named in the Summary
Compensation Table were awarded any shares of restricted stock of the
Company.
(5) Dr. Jaeger served as Chief Executive Officer and President until April 1998,
when Mr. Harrison assumed those positions. At that time Dr. Jaeger became a
consultant to the Company. Dr. Jaeger served as Chairman of the Board during
1998; Mr. Harrison became Chairman effective January 1, 1999. In March 1999,
Dr. Jaeger resigned as a director of the Company and its subsidiaries, while
remaining a consultant to the Company.
A-8
<PAGE> 22
(6) As per agreement with the Compensation and Incentive Stock Option Committee,
half of the bonus earned under the Key Employee Incentive Plan otherwise
payable in cash was instead paid in the form of a grant of incentive stock
options made in 1998.
(7) Mr. Cannon who had previously resigned from his executive positions, entered
into an agreement with the Company during the first quarter of 1999,
effective as of December 1, 1998, memorializing his resignation as an
officer and a director of the Company and its subsidiaries. Mr. Cannon
remains a consultant to the Company.
(8) Mr. Rogers served as Acting Chief Financial Officer of the Company from
November 1, 1998 through March 31, 1999 and had previously during 1998
provided financial consulting services to the Company. Mr. Rogers is an
employee of Primary, The One For Solutions ("Primary"), a consultant to the
Company. His services were provided pursuant to an agreement between the
Company and Primary. All payments attributed to Mr. Rogers in the Summary
Compensation Table were paid to Primary.
(9) Includes $30,000 in relocation expenses reimbursed by the Company.
INCENTIVE STOCK OPTION PLAN
Under the Company's 1991 Incentive Stock Option Plan, as amended (the
"Plan"), options to purchase up to 1,545,490 shares of Common Stock may be
granted to key employees of the Company who are deemed to be significant
contributors to the Company's operations or to directors who are not full-time
employees of the Company or any subsidiary ("outside directors"). Of these
shares, no more than 129,000 may be issued as nonqualified options. The
Compensation and Incentive Stock Option Committee (the "CISOC") of the Board of
Directors, which, except as described below with respect to grants to outside
directors, administers the Plan, is composed of Mr. Donofrio, Chair of the
Committee, Mr. Nordlicht, Dr. Lazay, Dr. Lai, and Mr. Schmitz. The award of an
option, when made by the CISOC, is made based in each case on an evaluation of
an employee's past or potential contribution to the Company. Approximately 67
employees of the Company and its subsidiaries are currently eligible to
participate in the Plan.
The stock options granted to key employees by the CISOC under the Plan may
be either incentive stock options conforming to the provisions of Section 422 of
the Internal Revenue Code, or nonqualified options. However, to the extent that
the aggregate fair market value (determined at the time an option is granted) of
stock with respect to which incentive stock options are exercisable for the
first time by an employee during any calendar year exceeds $100,000, such
options shall be treated as non-qualified options. The stock options to be
granted to outside directors must be nonqualified options.
With respect to options granted to key employees, the purchase price for
shares under each option (incentive or nonqualified) is determined by the CISOC,
but will not be less than 100% of the fair market value of the stock on the date
of the grant. Such options become exercisable in the manner determined by the
CISOC, or, if no schedule for exercise is established, in three equal annual
installments, beginning one year after the date of grant and continue in effect
for ten years. If an employee, at the time the option is granted, owns more than
10% of the Company's voting stock, the option price for incentive stock options
will be not less than 110% of the fair market value of the Common Stock on the
date of grant, and the option will continue in effect for not more than five
years.
Exercisable options may be exercised at any time an optionee is
continuously employed by the Company and for three months after termination of
employment (unless employment is terminated for cause involving personal
misconduct in the judgement of the CISOC). No options may be granted under the
Plan after ten years from the effective date of the Plan. With respect to all
options which may granted under the Plan, upon exercise of an option, the
exercise price must be paid in full either in cash or in shares of Common Stock
of the Company. Options are nontransferable, except by will or by the laws of
descent and distribution.
Each outside member of the Board of Directors on May 21, 1991 was
automatically granted a nonqualified option to purchase 5,000 shares at a per
share purchase price equal to the fair market value of the stock on that day.
Each person who subsequently becomes an outside member of the Board of
Directors, without any action of the CISOC, shall receive an initial grant of a
nonqualified option at the fair market value
A-9
<PAGE> 23
of the stock on the date the option is granted to purchase 5,000 shares on the
last business day in the year in which the outside director was elected a
director by the stockholders for the first time. Each such nonqualified option
for 5,000 shares becomes exercisable one year after the date of grant, and
continues in effect for ten years. In addition, on the last business day of
December in each year, each outside director then in office is to be granted,
without any action by the CISOC, a nonqualified option to purchase 1,000 shares.
Such nonqualified options to purchase 1,000 shares become exercisable in three
equal annual installments, beginning one year after the date of grant and
continue in effect for ten years. All options granted to an outside director
become exercisable when such director ceases to serve as a director for any
reason, except termination for cause, as long as such director has then served
as a director of the Company for two consecutive years, including, for this
purpose, time served as a director before the adoption of the Plan.
The Plan replaced the Company's prior incentive stock option plan (the "Old
Plan") under which options could no longer be granted after November 11, 1991.
As of July 14, 1999, options to purchase 7,636 shares remained outstanding under
the Old Plan at an average per share price of $3.38, and options to purchase
1,066,183 shares were outstanding under the Plan at an average per share price
of $9.56. As of July 14, 1999, 374,097 shares remained available for grant under
the Plan. As of July 14, 1999, the market value of a share underlying an option
granted under the Plan was $11.50, and the aggregate market value of all shares
reserved for the Plan was $16,563,220 on that date. The number of options to be
granted in 1999 and the value of such options are indeterminable at this time.
The Plan may be amended from time to time by the Board of Directors,
subject to the approval of the stockholders for certain types of amendments.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information regarding stock options granted
during the fiscal year ended December 31, 1998 with respect to (a) all
individuals serving as the Company's Chief Executive Officer or acting in a
similar capacity during the fiscal year ended December 31, 1998, regardless of
compensation level, and the two other most highly compensated executive officers
of the Company and its Subsidiaries who were serving as executive officers as of
December 31, 1998 and whose total annual salary and bonus exceeded $100,000, and
(b) one additional individual who, although no longer serving as an executive
officer of the Company or its Subsidiaries as of December 31, 1998, received an
annual salary and bonus in excess of
A-10
<PAGE> 24
$100,000 for the year and for whom disclosure would have been provided had he
been serving as an executive officer as of December 31, 1998. The Company has
never granted any stock appreciation rights.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM**
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------
NAME GRANTED(#)* YEAR PRICE($/SH) DATE 5%($) 10%($)
- ---- ----------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles B. Harrison............. 50,000 12.86% 7.25 4-13-08 199,850 492,250
25,000 6.43% 6.0465 10-13-08 5,163 86,463
25,000 6.43% 20.00 10-13-08 (343,675) (262,375)
Raymond E. Jaeger(1)............ 50,000 12.86% 8.125 6-1-08 223,950 551,650
24,247 6.24% 8.125 3-13-08 108,602 267,517
Bruce A. Cannon(2).............. 8,000 2.06% 8.125 6-1-08 35,832 88,264
9,242 2.40% 8.125 3-13-08 41,395 101,967
John E. Chapman................. 14,000 3.60% 8.125 6-1-08 62,706 154,462
17,650 4.54% 8.125 3-13-08 79,054 194,732
John Rogers(3).................. 0 0% N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Dr. Jaeger served as Chief Executive Officer and President until April 1998,
when Mr. Harrison assumed those positions. At that time Dr. Jaeger became a
consultant to the Company. Dr. Jaeger served as Chairman of the Board during
1998; Mr. Harrison became Chairman effective January 1, 1999. In March 1999,
Dr. Jaeger resigned as a director of the Company and its subsidiaries, while
remaining a consultant to the Company.
(2) Mr. Cannon who had previously resigned from his executive positions, entered
into an agreement with the Company during the first quarter of 1999,
effective as of December 1, 1998, memorializing his resignation as an
officer and a director of the Company and its subsidiaries. Mr. Cannon
remains a consultant to the Company.
(3) Mr. Rogers served as Acting Chief Financial Officer of the Company from
November 1, 1998 through March 31, 1999 and had previously during 1998
provided financial consulting services to the Company. Mr. Rogers is an
employee of Primary, The One For Solutions ("Primary"), a consultant to the
Company. His services were provided pursuant to an agreement between the
Company and Primary. All payments attributed to Mr. Rogers in the Summary
Compensation Table were paid to Primary.
* Except for the 25,000 options granted to Mr. Harrison at 150% of fair market
value and the 25,000 options granted to Mr. Harrison at an exercise price of
$20.00 per share, shown above, all options set forth were granted under the
Company's Stock Option Plan at 100% of the fair market value of the shares
at the time the options were granted are intended to be, and with few
exceptions, will be, incentive stock options. 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 the date of grant.
** The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the Securities and Exchange Commission and
are not intended to forecast future price appreciation of the Common Stock
of the Company. The gains reflect a future value based upon growth at these
prescribed rates. The Company did not use an alternative formula for a grant
date valuation, an approach which would state gains at present, and
therefore lower, value. The Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors.
A-11
<PAGE> 25
Options have value to the listed executives and to all option recipients
only if the stock price advances beyond the grant date price shown in the table
during the effective option period.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table shows information regarding stock options exercised
during the fiscal year ended December 31, 1998 with respect to (a) all
individuals serving as the Company's Chief Executive Officer or acting in a
similar capacity during the fiscal year ended December 31, 1998, regardless of
compensation level, and the two other most highly compensated executive officers
of the Company and its Subsidiaries who were serving as executive officers as of
December 31, 1998 and whose total annual salary and bonus exceeded $100,000, and
(b) one additional individual who, although no longer serving as an executive
officer of the Company or its Subsidiaries as of December 31, 1998, received an
annual salary and bonus in excess of $100,000 for the year and for whom
disclosure would have been provided had he been serving as an executive officer
as of December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END( ) AT FY-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles B. Harrison......... 0 0 333 100,667 0 0
Raymond E. Jaeger(1)........ 0 0 76,000 90,247 0 0
Bruce A. Cannon(2).......... 0 0 53,667 26,575 0 0
John E. Chapman............. 0 0 81,333 44,317 0 0
John Rogers(3).............. 0 0 0 0 0 0
</TABLE>
- ---------------
(1) Dr. Jaeger served as Chief Executive Officer and President until April 1998,
when Mr. Harrison assumed those positions. At that time Dr. Jaeger became a
consultant to the Company. Dr. Jaeger served as Chairman of the Board during
1998; Mr. Harrison became Chairman effective January 1, 1999. In March 1999,
Dr. Jaeger resigned as a director of the Company and its subsidiaries, while
remaining a consultant to the Company.
(2) Mr. Cannon who had previously resigned from his executive positions, entered
into an agreement with the Company during the first quarter of 1999,
effective as of December 1, 1998, memorializing his resignation as an
officer and a director of the Company and its subsidiaries. Mr. Cannon
remains a consultant to the Company.
(3) Mr. Rogers served as Acting Chief Financial Officer of the Company from
November 1, 1998 through March 31, 1999 and had previously during 1998
provided financial consulting services to the Company. Mr. Rogers is an
employee of Primary, The One For Solutions ("Primary"), a consultant to the
Company. His services were provided pursuant to an agreement between the
Company and Primary. All payments attributed to Mr. Rogers in the Summary
Compensation Table were paid to Primary.
PENSION PLAN TABLE
The Company has in effect a career average defined benefit plan (the
"Defined Benefit Plan") for employees of the Company and its subsidiaries.
Generally, after completing five years of participation in the Defined Benefit
Plan or upon normal retirement at age 65, whichever is earlier, a participant is
entitled to a pension under the Defined Benefit Plan based on the average annual
compensation received during the ten consecutive highest paid years in which he
was a plan participant, or such shorter period as he was employed by the
Company. The following table shows, as of December 31, 1998, estimated annual
benefits payable upon
A-12
<PAGE> 26
retirement under the Company's Defined Benefit Plan (including amounts
attributable to any defined benefit supplementary or excess pension award plan)
in specified compensation and years of service classifications:
YEARS OF SERVICE
<TABLE>
<CAPTION>
REMUNERATION 15 20 25 30 35
- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
125,000............................... 20,517 27,356 34,195 34,195 34,195
150,000............................... 25,767 34,356 42,945 42,945 42,945
175,000............................... 27,867 37,156 46,445 46,445 46,445
200,000............................... 27,867 37,156 46,445 46,445 46,445
225,000............................... 27,867 37,156 46,445 46,445 46,445
250,000............................... 27,867 37,156 46,445 46,445 46,445
275,000............................... 27,867 37,156 46,445 46,445 46,445
300,000............................... 27,867 37,156 46,445 46,445 46,445
400,000............................... 27,867 37,156 46,445 46,445 46,445
450,000............................... 27,867 37,156 46,445 46,445 46,445
500,000............................... 27,867 37,156 46,445 46,445 46,445
</TABLE>
A participant's eligible compensation for purposes of the Defined Benefit
Plan generally includes all of his annual cash compensation including amounts
deferred by the participant pursuant to the Company's 401(k) plan. The only
difference between the covered compensation covered by the Defined Benefit Plan
and the annual compensation reported in the Summary Compensation Table is the
timing of bonus payments.
The benefits listed in the table have been computed on a straight life
annuity basis and are not subject to any deduction for social security or other
offset amounts. As of December 31, 1998, Mr. Harrison, Dr. Jaeger and Messrs.
Cannon and Chapman had 1, 17, 15 and 14 years of credited service respectively.
In addition to the Company's Defined Benefit Plan, the Company has a
defined contribution plan under which annual contributions may be authorized by
the Compensation and Incentive Stock Option Committee of the Board for all
employees with at least one year of service (the "Defined Contribution Plan").
Contributions of 3% of annualized salary were authorized for 1996, including
$4,500 for Dr. Jaeger, $4,046 for Mr. Cannon and $4,500 for Mr. Chapman.
Contributions of 2% of annualized salary were authorized for 1997, including
$6,694 for Dr. Jaeger, $3,867 for Mr. Cannon and $5,681 for Mr. Chapman. No
Contributions were authorized for any executive officers for 1998.
Mr. Rogers who served as Acting Chief Financial Officer from November 1,
1998 through March 31, 1999, is an employee of Primary, The One For Solutions, a
consultant to the Company, and is not eligible for participation in the Defined
Benefit Plan or the Defined Contribution Plan.
SUPPLEMENTAL RETIREMENT BENEFITS
The Company has agreements with Dr. Jaeger, Mr. Cannon and Mr. Chapman,
which provide retirement benefits designed to be supplemental to other
retirement benefits payable to them. These payments are intended to compensate
these executives for restrictions imposed on highly compensated executives by
the Internal Revenue Code, the result of which is that the percentage of
spendable retirement income these executives are eligible to receive under the
Company's retirement programs relative to their current levels of compensation
is less then that of employees at lower salary levels. The amount of the
supplemental retirement benefit is calculated by multiplying the Executive's
average annual compensation (including 401(k) payments and bonus payments up to
a certain limitation) over a three year period when his compensation is highest
by a percentage based on the number of years the executive is employed by the
Company (the "Annual Percentage Amount"). The product is reduced by the amount
of other retirement benefits payable to the executive, resulting in the annual
supplemental retirement benefit payable to the executive. Under the agreements
with Messrs. Cannon and Chapman, the Annual Percentage Amount is 40% if the
executive works for the Company for 15-19 years; 60% if the executive works for
the Company for 20 to 24 years and 65% if the
A-13
<PAGE> 27
executive works for the Company for 25 years or more. Under the agreement with
Dr. Jaeger, the Annual Percentage Amount is 60% if Dr. Jaeger works for the
Company for 15 years with the Annual Percentage Amount increasing two percent
for each additional year he works for the Company up to a maximum of 70% for 20
or more years of service. In April 1999, in connection with the appointment of
Mr. Harrison as President and CEO of the Company, Dr. Jaeger's Supplemental
Retirement Agreement was amended to provide that a bonus paid in stock options
as opposed to cash, will be considered as if paid in cash for the purpose of
determining the amount of bonus payments he received in calculating his
supplemental retirement benefit. No benefit is payable under any of the
agreements if the executive works for the Company for less than 15 years, except
as described below. Under each of the agreements, the supplemental retirement
benefits are payable over 15 years in equal monthly installments after the
executive's retirement, which will normally occur upon his 65th birthday.
However, the executives, upon commencement of the agreements, have been given
the option to prospectively elect to have benefits commence upon their 60th
birthday if they elect early retirement. The supplemental retirement benefit is
subject to forfeiture if the executive is terminated for cause or competes with
the Company.
The Company has obtained corporate owned variable universal life insurance
policies on each of the executives which are being used to fund the supplemental
retirement benefits.
The following table shows for each executive the percentage of average
annual compensation, assuming bonus payments up to the limitation, that would be
paid under all retirement programs (including the Supplemental Retirement
Agreement) and under the Supplemental Retirement Agreements alone:
<TABLE>
<CAPTION>
AT AGE 60 AT AGE 65
------------------------------------- -------------------------------------
YEARS TOTAL SUPPLEMENTAL YEARS TOTAL SUPPLEMENTAL
OF RETIREMENT RETIREMENT OF RETIREMENT RETIREMENT
SERVICE % % SERVICE % %
------- ---------- ------------ ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Jaeger(1)............. 17 64.0% 39.0% 20 70.0% 51.7%
Mr. Cannon(2)............. 17 40.0% 9.4% 17 40.0% 9.4%
Mr. Chapman............... 32 65.0% 46.0% 37 65.0% 39.9%
</TABLE>
- ---------------
(1) Dr. Jaeger has entered into a Restated Employment Agreement with the Company
which provides, among other things, for him to render services through June
12, 2001 at which date Dr. Jaeger would have a total of twenty years of
service with the Company. That agreement is described more fully below in
the section entitled "Employment Agreements and Change-in-Control
Arrangements."
(2) Mr. Cannon has entered an agreement with the Company dated as of December 1,
1998 which provides, among other things, for him to render consulting
services through December 1, 2000 at which date Mr. Cannon would have a
total of seventeen full years of service with the Company. That agreement is
described more fully below in the section entitled "Employment Agreements
and Change-in-Control Arrangements."
Under each of the Supplemental Retirement Agreements, if the executive
leaves the Company in the 12 month period after a Change in Control, or an
entity which acquires the Company, through merger, consolidation or the purchase
of assets either does not retain the executive or does not agree to assume the
Company's obligations under these agreements, the executives who have at least
six years of service to the Company will be entitled to a supplemental
retirement benefit, with the Annual Percentage Amount to be 4% for six years of
service and increasing in increments of 4% for each additional year of service
up to 15 years, at which point the normal method of calculating the Annual
Percentage Amount is applied. In such circumstances, the payment of the
supplemental retirement benefit is accelerated and paid in a lump sum, subject
to a discount for the then present value of the benefit. Moreover, if the
supplemental retirement benefit paid under these circumstances is considered to
be a "Parachute Payment" and when combined with all other payments to be made to
the executive by the Company considered to be a Parachute Payment would result
in an Excess Parachute Payment under the Internal Revenue Code, the amount of
the supplemental retirement benefit will be reduced so that the total of all
Parachute Payments to the executive do not constitute an Excess Parachute
Payment; provided, however, that if the total Parachute Payments received by the
executive from the Company exceed 120% of the amount of all Parachute Payments
not including any amount that would be
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<PAGE> 28
considered an Excess Parachute Payment, the supplemental retirement will not be
reduced. Under IRS regulations, an Excess Parachute Payment results in the
Company being prohibited from taking a deduction for all Parachute Payments and
an excise tax of 20% of the payment is imposed upon the recipient of the
Parachute Payment.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has employment agreements with Mr. Harrison and Mr. Chapman.
Mr. Harrison, effective April 13, 1998, became President and Chief Executive
Officer of the Company and Chief Executive Officer of each of its wholly-owned
subsidiaries. He also became a Director of General Photonics, LLC, and,
effective January 1, 1999, Chairman of the Board of Directors of the Company.
Mr. Chapman is President of SpecTran Communication Fiber Technologies, Inc., a
wholly-owned subsidiary of the Company, and Senior Vice President-Technology of
the Company. Dr. Jaeger served as President and Chief Executive Officer of the
Company and Chief Executive Officer of each of its wholly owned subsidiaries
until April 13, 1998 when he became a consultant to the Company. He remained
Chairman of the Board of Directors of the Company through December 31, 1998. Dr.
Jaeger resigned from the Board of Directors of the Company and each of its
wholly owned subsidiaries and from the Board of General Photonics, LLC in March
1999. The Company's employment agreement with Dr. Jaeger was superceded on April
13, 1998 by a Restated Employment Agreement. Mr. Cannon was Senior Vice
President, Chief Financial Officer, Secretary and Treasurer of the Company and
Secretary and Treasurer of each of the Company's wholly owned subsidiaries until
he resigned from all of his positions with the Company during the last quarter
of 1998. The Company's employment agreement with Mr. Cannon was superceded by
another agreement entered into during the first quarter of 1999 effective as of
December 1, 1998 memorializing his resignation as an officer and director of the
Company and its subsidiaries.
The employment agreement with Mr. Harrison has a base term of one year from
April 13, 1998 to April 12, 1999. The base term for this agreement is
automatically renewed on a daily basis so that there is always a remaining term
of one year, unless the outside members of the Board of Directors terminate the
automatic renewal feature and set a termination date, which must be one year
from the Board's resolution to terminate. The Company has agreed to use its best
efforts to nominate Mr. Harrison for election to the Board of Directors. While
Mr. Harrison's employment agreement provides for an annual salary currently
equal to $250,000, with future increases as determined by the Board of
Directors, during the second half of 1998, Mr. Harrison voluntarily reduced his
salary by 10%, to $225,000 as part of the Company's cost control initiatives. In
accordance with Mr. Harrison's employment agreement, (a) at the first meeting of
the Compensation and Incentive Stock Option Committee after his first day as a
full time employee of the Corporation, he was granted stock options to purchase
fifty thousand shares of Common Stock of the Company at an exercise price equal
to market price on date of grant and, (b) six months later, he was granted
options to purchase up to an additional fifty thousand shares of Common Stock,
twenty five thousand of which to be at a per share exercise price equal to 150%
of the closing price on date of grant, with the second twenty five thousand at a
per share exercise price of $20.00. Mr. Harrison's employment agreement also
provides that at the Company's request, for a one year period following the
termination of his employment, Mr. Harrison, will not solicit any past, present
or future customers of the Company in any way relating to any business in which
the Company was engaged during the term of his employment or planned during the
term of his employment to enter, or induce or actively attempt to influence any
other employee or consultant to the Company to terminate his or her employment
or consulting with the Company. During such one year period, Mr. Harrison will
receive compensation at 75% of the level received during the last year of
employment with the Company and benefits paid or maintained in the same fashion
and in amounts not less than those received during his last year of employment
and will provide consulting services at the Company's request. Additional
provisions of Mr. Harrison's employment agreement are described below.
The employment agreement with Mr. Chapman has a base term of one year from
June 1, 1992 to May 31, 1993. The base term for this agreement is automatically
renewed on a daily basis so that there is always a remaining term of one year,
unless the outside members of the Board of Directors terminate the automatic
renewal feature and set a termination date, which must be one year from the
Board's resolution to
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<PAGE> 29
terminate. Mr. Chapman's employment agreement provides for an annual salary
currently equal to $196,464, with future increases as determined by the Board of
Directors. The employment agreement with Mr. Chapman provides that for one year
following the termination of employment, he will not solicit any customers of
the Company or induce any employee to leave the Company. Additional provisions
of Mr. Chapman's employment agreement are described below.
Under their employment agreements, Messrs. Harrison and Chapman are
eligible for annual bonuses to be awarded by the Board of Directors in its
discretion and are entitled to participate in any pension, profit-sharing,
insurance or other benefit plan of the Company if eligible under such plan or
program. They have agreed to transfer to the Company any interest in any
inventions developed while employed by the Company. Each of them also agreed not
to disclose any trade secrets of the Company. Each of their employment
agreements further provide that if the executive suffers a partial disability,
or a total disability that has continued for less than six months, that
executive continues to receive salary and benefits until the end of the
employment period. If his total disability continues for six months or more,
then he will be paid at the rate of 75% of his salary for so long during the
employment period as the total disability lasts, or one year, whichever is
longer. If the executive dies, one year's salary will be paid to his spouse or
estate. The employment agreements also provide that if the Company dismisses
either of them without cause, the Company will pay such executive his salary and
maintain his benefits for six months or the balance of the employment period,
whichever is longer and, if said executive takes other employment during the
six-month period, the Company's obligation to him is limited to salary alone for
the remainder of the six months. If either of them takes other employment later
than six months from dismissal by the Company but before the end of the
employment period, the Company's obligations to that executive then cease.
The employment agreements with Messrs. Harrison and Chapman further provide
that if there is a Change in Control and either (i) the executive is dismissed
without cause up to and including twelve months from such Change in Control, or
(ii) the executive voluntarily leaves the employ of the Company up to and
including twelve months from such Change in Control, then in either case the
Company will pay the executive his salary and maintain his benefits for twelve
months from his dismissal or voluntary departure. If, however, the executive
takes other employment during that twelve month period, the Company's obligation
to him is limited to salary alone. A "Change in Control" is defined as [A] the
date of public announcement that a person has become, without the approval of
the Company's Board of Directors, the beneficial owner of 20% or more of the
voting power of all securities of the Company then outstanding; [B] the date of
the commencement of a tender offer or tender exchange by any person, without the
approval of the Company's Board of Directors, if upon the consummation thereof
such person would be the beneficial owner of 20% or more of the voting power of
all securities of the Company then outstanding; or [C] the date on which
individuals who constituted the Board of Directors of the Company on the date
the employment agreement was adopted cease for any reason to constitute a
majority thereof, provided that any person becoming a Director subsequent to
such date whose election or nomination was approved by at least three quarters
of such incumbent Board of Directors shall be considered as though such person
were an incumbent Director. Messrs. Harrison and Chapman have acknowledged that
the consummation of the Merger Agreement will not constitute a Change in
Control, as defined above.
During 1998 Dr. Jaeger had two different employment agreements with the
Company: an Employment Agreement that had been in effect since 1992 (the
"Employment Agreement") covering the period January 1, 1998 through April 12,
1998; and a Restated Employment Agreement (the "Restated Employment Agreement")
covering the remainder of 1998, entered in conjunction with the appointment of
Mr. Harrison as President and CEO of the Company. The Employment Agreement
provided for an annual salary then equal to $217,000 with Dr. Jaeger being
eligible for annual bonuses to be awarded by the Board of Directors in its
discretion and being entitled to participate in any pension, profit-sharing,
insurance or other benefit plan of the Company if he were eligible under such
plan or program. Dr. Jaeger agreed to transfer to the Company any interest in
any inventions he developed while employed by the Company and agreed not to
disclose any trade secrets of the Company and not to solicit any customers of
the Company or induce any employee to leave the Company for one year following
termination of his employment. The Employment Agreement also had the same
provisions for death, disability, partial disability, dismissal without cause
and Change in Control as the
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<PAGE> 30
employment agreements (described above) with Messrs. Harrison and Chapman. Under
the Restated Employment Agreement, which supercedes the Employment Agreement and
extends from April 13, 1998 until June 12, 2001, Dr. Jaeger shall provide advice
and assistance to the Board of Directors and the Chief Executive Officer and
perform such projects as reasonably requested and mutually agreed, with it being
anticipated that he will take an active role in providing advice and counsel
with respect to the Company's patent and technology position and licensing
arrangements, including those with Corning Incorporated and Lucent Technologies
Inc., as well as consulting support for partnering and alliances with other
firms for strategic purposes. In addition, Dr. Jaeger will continue to serve as
the Company's representative to the International Wire and Cable Symposium
Committee, among other things. The Restated Employment Agreement provides that
Dr. Jaeger will have the same benefits as provided in the Employment Agreement
except that (a) he will be paid a fixed annual salary of $250,000 and (b) for
the 1998 calendar year only, Dr. Jaeger was eligible to participate in the
Company's Employee Profit Sharing Plan and was eligible for a target bonus of
25% of his base salary under the Company's Key Employee Incentive Plan, to be
awarded at the discretion of the Board of Directors based upon his performance
during 1998. Thereafter, Dr. Jaeger is not eligible to participate in the all
employee Profit Sharing Plan or the Key Employee Incentive Plan. In accordance
with the Restated Employment Agreement, Dr. Jaeger was also granted options to
purchase 50,000 shares of the Company's Common Stock under the Company's
Incentive Stock Option Plan. As in the Employment Agreement, the Restated
Employment Agreement provides that Dr. Jaeger agreed to transfer to the Company
any interest in any inventions he developed while employed by the Company and
agreed not to disclose any trade secrets of the Company and not to solicit any
customers of the Company or induce any employee to leave the Company for one
year following termination of his employment. The Restated Employment Agreement
contains the same provisions for death, disability, partial disability,
dismissal without cause and Change in Control as the employment agreements
described above with Messrs. Harrison and Chapman and also provides that Dr.
Jaeger will be covered under the Company's medical and dental insurance
programs, or provided with identical or substantially similar coverage, until
age 65.
During 1998 Mr. Cannon had two different employment agreements with the
Company: an Employment Agreement that had been in effect since 1992 (the "Cannon
Employment Agreement") covering the period January 1, 1998 through November 30,
1998; and an Agreement (the "Cannon Agreement") covering the remainder of 1998.
The Cannon Employment Agreement provided for an annual salary then equal to
$144,300 with Mr. Cannon being eligible for annual bonuses to be awarded by the
Board of Directors in its discretion and being entitled to participate in any
pension, profit-sharing, insurance or other benefit plan of the Company if he
were eligible under such plan or program. Mr. Cannon agreed to transfer to the
Company any interest in any inventions he developed while employed by the
Company and agreed not to disclose any trade secrets of the Company and not to
solicit any customers of the Company or induce any employee to leave the Company
for one year following termination of his employment. The Cannon Employment
Agreement also had the same provisions for death, disability, partial
disability, dismissal without cause and Change in Control as the employment
agreements (described above) with Messrs. Harrison and Chapman. Under the Cannon
Agreement, which supercedes the Cannon Employment Agreement and which extends
from December 1, 1998 to December 1, 2000, Mr. Cannon memorialized the terms of
his resignation as an officer and director of the Company and its subsidiaries
and agreed to provide advice and assistance to the Board of Directors, Chief
Executive Officer and/or Chief Financial Officer of the Corporation, to perform
such projects as reasonably requested and mutually agreed and to remain
available to act as a consultant to the Company. Mr. Cannon shall be paid annual
compensation at the rate of $86,589 during the term of the Cannon Agreement. Any
options previously granted to Mr. Cannon that have not yet vested will continue
to vest in their normal course, but any options not vested by December 1, 1999
shall expire as of such date. In addition, all options not exercised on or
before March 31, 2001 at 5:00 p.m. shall expire at such time. Mr. Cannon is not
entitled to any automobile allowance pursuant to the agreement, but the Cannon
Agreement otherwise provides for the same benefits contained in the Cannon
Employment Agreement. If Mr. Cannon elects to terminate the Cannon Agreement or
takes other employment on or before November 30, 1999, then Mr. Cannon shall
only be entitled to annual compensation and benefits earned up to the date of
his departure. If Mr. Cannon terminates the Cannon Agreement or takes other
employment on or after December 1, 1999, the Company will continue to pay Mr.
Cannon annual compensation but no benefits through the end of the term. If the
Company
A-17
<PAGE> 31
terminates the Cannon Agreement without cause, as defined therein, the Company
shall continue to provide Mr. Cannon with full compensation and benefits for the
remainder of the term. The Company may accelerate the payments under the Cannon
Agreement, in its discretion, but such acceleration does not affect Mr. Cannon's
eligibility to receive benefits for the remainder of the term. The Cannon
Agreement also provides that Mr. Cannon not solicit any customers of the Company
or induce any employees to leave the Company. In the event Mr. Cannon becomes
either partially or totally disabled during the term of the Cannon Agreement the
Company shall continue, during the term of the Cannon Agreement, to pay Mr.
Cannon his annual compensation and benefits. If Mr. Cannon dies, the payments of
annual compensation will be made to his spouse or estate. Unlike the Cannon
Employment Agreement, the Cannon Agreement does not contain a provision relating
to a termination of his employment in connection with a Change in Control of the
Company.
INDEPENDENT CONTRACTOR AGREEMENT
The Company was party to an Independent Contractor Agreement with Primary,
The One For Solutions ("Primary"), which, among other things, provided for John
Rogers, an employee of Primary to provide financial consulting services to the
Company and, beginning November 1, 1998, to serve as Acting Chief Financial
Officer of the Company. Mr. Rogers held that position from November 1, 1998
through March 31, 1999, at which time the Independent Contractor Agreement
expired. Under the Independent Contractor Agreement, for weeks in which Primary
provided services of less than 40 man hours, the Company paid Primary at the
rate of $200 per hour for each man hour worked. In weeks in which Primary
provided services in excess of 40 man hours but less than 55 man hours, Primary
was paid a fixed fee of $8,000 for the week. In weeks in which Primary provided
services in excess of 55 man hours, the Company paid Primary $8,000 plus $200
per hour for each hour worked during the week in excess of 55 man hours. In
addition, the Company reimbursed Primary for its reasonable expenses incurred in
connection with service performed for the Company. The Company and Primary each
agreed to treat the other party's proprietary information that was disclosed to
it as confidential. In addition, the Company and Primary each agreed that during
the term of the Agreement and for a period of two years thereafter, it would not
solicit, divert, take away, or attempt to solicit, divert or take away, any of
the other party's clients, customers, employees or independent contractors.
Primary will continue to provide transitional consulting services to the Company
on substantially similar terms as provided in the agreement through all or part
of April 1999 and may provide additional services as requested by the Company
and mutually agreed.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Incentive Stock Option Committee is currently composed
of the Company's outside (i.e., non-employee) Directors, Mr. Donofrio, Chair of
the Committee, Dr. Lazay, Mr. Nordlicht, Dr. Lai and Mr. Schmitz (Mr. Harrison
served on the Compensation and Incentive Stock Option Committee until his
appointment as President and Chief Executive Officer of the Company on April 13,
1998). None of the outside Directors is currently, or has ever been, an officer
or employee of the Company, or has had any relationship, or has been a party to
any transaction, with the Company as to which disclosure is required, except as
set forth in prior proxy statements or below.
Mr. Nordlicht is a member of the law firm of Nordlicht & Hand, which has
provided and continues to provide legal services to the Company. During 1998,
the Company paid Nordlicht & Hand legal fees for services rendered and
disbursements advanced in the amount of $164,960. Mr. Schmitz's Company, Quest
Capital was paid $40,132.58 by the Company for financial consulting services.
COMPENSATION AND INCENTIVE STOCK OPTION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Compensation and Incentive Stock Option Committee (the "Compensation
Committee") has been delegated responsibility for all matters relating to the
compensation of senior executives of the Company, such as the Chief Executive
Officer, Chief Financial Officer, Senior Vice Presidents and the Presidents of
the Company's operating subsidiaries, including establishing and administering
the Company's policies and plans governing annual and long-term compensation.
The Compensation Committee and its members also become involved in hiring,
retention and performance reviews of this senior executive group. It reports to
the Board of
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<PAGE> 32
Directors, which periodically reviews and approves or ratifies committee actions
where necessary or appropriate. The Committee is composed of the Company's
outside Directors, currently, Mr. Donofrio, Chair of the Committee, Dr. Lazay,
Mr. Nordlicht, Dr. Lai and Mr. Schmitz. Mr. Harrison served on the Compensation
and Incentive Stock Option Committee until his appointment as President and
Chief Executive Officer of the Company on April 13, 1998.
COMPENSATION PHILOSOPHY
The fundamental objective of the Company's executive compensation policy is
to increase shareholder value and to align executives' and shareholders'
interests both in the near and longer terms. Executives are compensated with
cash and stock options. The Company's goal is to pay competitive base salaries
coupled with performance based incentive compensation. Incentive compensation is
a function of three factors: the first and most heavily weighted is growth in
earnings before interest, taxes, depreciation and amortization (EBITDA),
essentially a cash flow calculation, less the Company's cost of capital; the
second and next most significant factor is the achievement of individual goals
and projects (or the achievement of a certain percentage of those goals and
projects if they are more than a year's duration) specifically identified at the
beginning of a year; the third factor is a discretionary element designed to
reward exceptional performance not recognized elsewhere, such as seizing an
unanticipated opportunity which provides substantial benefit to the Company not
foreseen at the beginning of the year. While maintaining primary focus on the
overall, consolidated results of the Company, the Committee believes that there
should be an element of reward for exceptional performance at the operating
subsidiary level under certain circumstances. The underlying philosophy is that
these elements will produce a stronger more economically successful company in
the near and longer-term which in turn will be reflected in the Company's stock
price. The Company has and will continue to grant stock options (at market price
or higher on date of grant); executives benefit only if the stock price rises.
COMPONENTS OF COMPENSATION, PROGRAMS AND PRACTICES
Overview. Executive compensation is composed of three elements: base
salary; incentive cash awards and stock options. The Company attempts to
structure its base salary so that it is competitive, meaning that base salaries
approximate the fiftieth percentile (50%) of the base salaries (not total
compensation) of comparable companies. Incentive cash awards and stock options
are used so that executives' total compensation is below the fiftieth percentile
for comparable companies if they have achieved less-than-desired-results, at or
about the fiftieth percentile for expected performance, and above the fiftieth
percentile for superior, excellent or outstanding performance.
Base Salaries. The Company generally attempts to establish annual base
salaries for executives, including the Chief Executive Officer, competitive with
base salaries for executives of similarly situated companies within the
industry. The objective is to pay to an executive who is fully competent and
meets normal expectations for performance in his or her position a base salary
at the fiftieth percentile level of the range of base salaries paid to
executives holding comparable positions at similarly situated companies. Base
salaries at approximately the fiftieth percentile level, in conjunction with the
balance of the compensation package, permits the Company to attract and retain
top quality people while meeting the Company's affordability requirements. In
determining executive compensation, the Company reviewed and analyzed reports
and surveys of executive compensation at comparably sized high technology
companies, including those in the electronics industry.
Incentive Cash Compensation. The Company has developed programs under
which key executives can earn bonus cash compensation, dependent upon
performance, that places them at less than, equal to or greater than the
fiftieth percentile level of compensation paid to similar executives in similar
companies. Key executives participate in two plans: the Employee Profit Sharing
Plan ("EPSP") in which all employees participate and the Key Employee Incentive
Plan ("Key Employee Plan"). Officers and selected director-level employees of
the Company and each of its subsidiaries participate in the Key Employee Plan
(although any employee may be eligible for an award under the discretionary
portion of the Key Employee Plan, as described below).
A-19
<PAGE> 33
The Employee Profit Sharing Plan ("EPSP"). All employees, including key
personnel, participate in the EPSP, which awards performance for operating
subsidiary employees based upon the results of their operating subsidiary and
for parent company employees based upon consolidated results. The Committee and
the Board believe that it is advisable for key personnel and all other employees
to share certain identical incentives. Employees of an operating subsidiary or
the parent company can earn a bonus equal to one percent (1%) of their salary if
the operating subsidiary that employs that person (or the consolidated corporate
results for parent company employees) produces at least an eight percent (8%)
return on net revenues ("ROR"). A nine percent (9%) ROR will result in a bonus
equal to two percent (2%) of salary. If the relevant entity produces an ROR
greater than nine percent (9%) then half of each additional percent is added to
the two percent (2%), up to a maximum bonus equal to ten percent (10%) of
salary. To achieve the maximum bonus, a subsidiary or the parent company, as
applicable, would need to generate approximate a twenty five percent (25%) ROR.
No bonuses will be paid to employees of an entity if it earns less than an eight
percent (8%) ROR. Bonuses can be paid out under the EPSP to employees of an
operating subsidiary which individually earns at least an eight percent (8%)
ROR, even if the Company's consolidated results or the results of other
subsidiaries produce an ROR of less than eight percent (8%) or a loss; the
underlying philosophical concept is to provide an award for employees for those
results that they can influence and control directly.
Key Employee Incentive Plan ("Key Employee Plan"). Under the Key Employee
Plan, a bonus pool is created by a specified percentage of the excess of the
Company's consolidated earnings before interest, taxes, depreciation and
amortization (EBITDA), essentially a cash flow calculation, over a cost of
capital charge. Participants are high level employees of the Company (currently
the Company's officers, Presidents and Vice Presidents of the operating
subsidiaries, and specified director-level employees of the Company or its
subsidiaries, totaling 15 individuals in 1998), with the exception of the
discretionary portion of the bonus pool (described below) which may be paid out
to any employee as determined by the Compensation Committee. The bonus pool will
be distributed among participants as follows. Seventy percent (70%) is
essentially dependent upon how much EBITDA exceeds the cost of capital. An
additional seventeen and one half percent (17.5%) is based upon the achievement
of individual goals and projects (or the achievement of a certain percentage of
those goals and projects if they are more than a year's duration) specifically
identified at the beginning of the year. The remaining twelve and one half
percent (12.5%) constitutes a pool to be used for discretionary bonuses, to be
awarded or not to any employee, whether a participant in the remainder of the
Key Employee Plan or not, if the Compensation Committee determines that such
employee made an exceptional contribution to the Company's performance not
recognized elsewhere. To determine how much each participant may be paid from
the bonus pool, he or she is assigned a target bonus percentage which will be
used in determining how much of the bonus pool is allocated to that individual,
which percentage will be adjusted downwards (including to zero) if specified
levels of EBITDA return on operating assets (for the operating subsidiary or the
Company, or a blend of the two, as appropriate for the individual) are not
achieved. While the intent of the Key Employee Plan is to permit participants to
earn total compensation potentially in excess of the fiftieth percentile when
compared to comparable employees in comparable companies as a result of
excellent performance, the Key Employee Plan establishes a maximum amount that
can be paid to any participant under the non-discretionary portions of the Key
Employee Plan to attempt to avoid excessive awards. The Key Employee Plan also
can result in total compensation at or less than the fiftieth percentile if
performance is not excellent. No payments will be made under the Key Employee
Plan unless the Company is profitable after the payments. There is no obligation
to pay out either the discretionary portion of the bonus pool or any remaining
balance if the total of all bonuses distributed is less than the total bonus
pool; disposition of such amounts will be determined by the Compensation
Committee.
Stock Options. Stock option grants are designed to create continued and
long-term incentives for executives and employees to attempt to increase equity
values consistent with the expectations and interests of public shareholders.
All stock option awards are granted under the Company's Incentive Stock Option
Plan. The exercise price of all options so granted is the market price or higher
on the date of grant, with options generally vesting annually in equal amounts
over three years. The amount of grants attempt to place recipients in
approximately the fiftieth percentile (50%) percentile when compared to
comparable employees in comparable companies for long-term compensation.
Recipients benefit only if the stock price rises after the date of grant and
after the options vest.
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<PAGE> 34
Chief Executive Officer Compensation. Dr. Raymond E. Jaeger served as
Chief Executive Officer until April 13, 1998 when Mr. Charles B. Harrison
assumed that position.
As described above, Dr. Jaeger had two different employment agreements with
the Company during 1998. Under the Restated Employment Agreement Dr. Jaeger was
eligible to participate in the Company's Employee Profit Sharing Plan and was
eligible for a target bonus of 25% of his base salary under the Company's Key
Employee Incentive Plan, to be awarded at the discretion of the Board of
Directors based upon his performance during 1998. Thereafter, Dr. Jaeger is not
eligible to participate in either of these two plans.
Mr. Harrison became Chief Executive Officer on April 13, 1998 and served in
that capacity through year-end (and currently) in accordance with an employment
agreement described above. While Mr. Harrison's employment agreement provides
for an annual salary currently equal to $250,000, with future increases as
determined by the Board of Directors, during the second half of 1998, Mr.
Harrison voluntarily reduced his salary by 10%, to $225,000 as part of the
Company's cost control initiatives.
In determining Chief Executive Officer compensation for 1998, the
Compensation and Incentive Stock Option Committee determined that the Company's
performance was below expectations and awarded no bonus or other incentive
compensation to either Dr. Jaeger or Mr. Harrison.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1,000,000
paid to its chief executive officer and its four other most highly compensated
executives. It is unlikely, at this point in the Company's history, that the
Company will pay executive compensation that might not be deductible under that
Section. Nevertheless, the Company continues to review this matter and whenever
it is advisable will take whatever steps it deems necessary in this regard.
Richard M. Donofrio, Chair
Paul D. Lazay
Ira S. Nordlicht
Lily K. Lai
Robert A. Schmitz
A-21
<PAGE> 35
STOCKHOLDER RETURN
In the graph set forth below, the yearly change for the last five fiscal
years in the Company's cumulative total stockholder return on its Common Stock
is compared with the cumulative total return as shown in the Russell 2000 index,
and in an index of peer issuers selected by the Company(1).
COMPARATIVE FIVE-YEAR TOTAL RETURNS(2)
SPECTRAN CORP., RUSSELL 2000, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/98)
COMPARATIVE FIVE-YEAR RETURNS GRAPH
<TABLE>
<CAPTION>
SPTR RUSSELL PEER GROUP
---- ------- ----------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 41.49 98.18 130.95
'1995' 46.81 126.10 137.59
'1996' 185.11 146.90 147.28
'1997' 81.92 179.75 125.22
'1998' 35.11 175.17 119.57
</TABLE>
Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in the Company's
Common Stock, RUSSELL 2000, and Peer Group.
- ---------------
(1) The peer group selected by the Company includes the following companies
engaged in the sale of optical fiber or related products: ADC
Telecommunications, Corning Incorporated, FiberCore, Inc., Galileo
Electro-Optics, Hitachi, Ltd., OptelCom, Optical Cable Company and Ortel
Corporation.
(2) Cumulative total return assumes reinvestment of dividends.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock on July 14, 1999 with respect to (a)
each person or group known to the Company to be the beneficial owner of more
than 5% of the outstanding shares of Common Stock, (b) each Director of the
Company, (c) each executive officer of the Company named in the following
section entitled "Compensation
A-22
<PAGE> 36
of Executive Officers and Directors" and (d) all such named executive officers
and Directors of the Company as a group. Except as set forth below, all of such
shares are held of record and beneficially.
<TABLE>
<CAPTION>
BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP COMMON STOCK(1)
- ---------------- ----------- ---------------
<S> <C> <C>
Wellington Management Company, LLP...................... 685,000 (2) 9.73%
75 State Street
Boston, Massachusetts 02109
Wellington Trust Company, N.A........................... 465,000 (3) 6.60%
75 State Street
Boston, Massachusetts 02109
EQSF Advisers, Inc. and Martin J. Whitman............... 490,600(4) 6.97%
767 Third Avenue
New York, New York 10017-2023
Dimensional Fund Advisors Inc........................... 402,500 (5) 5.72%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Dana H. and Doris B. Dalton............................. 368,100 (6) 5.23%
11800 Sunrise Valley Drive, 6th Floor
Reston, Virginia 20191
Raymond E. Jaeger....................................... 217,931 (7) 3.10%
25 Old Village Road
Sturbridge, Massachusetts 01566
Charles B. Harrison..................................... 57,821 (8) *
SpecTran Industrial Park
50 Hall Road
Sturbridge, Massachusetts 01566
Ira S. Nordlicht........................................ 17,332 (9) *
645 Fifth Avenue
New York, New York 10022
Paul D. Lazay........................................... 11,000 (10) *
1704 Oak Creek Drive
Palo Alto, California 94304
Bruce A. Cannon......................................... 68,414 (11) *
125 Adam Street
Holliston, Massachusetts 01746
Richard M. Donofrio..................................... 9,500 (12) *
93 Ansonia Road
Woodbridge, Connecticut 06525
John E. Chapman......................................... 114,883 (13) 1.63%
SpecTran Industrial Park
50 Hall Road
Sturbridge, Massachusetts 01566
Lily K. Lai............................................. 7,000 (14) *
50 Stonebridge Road
Summit, New Jersey 07901
</TABLE>
A-23
<PAGE> 37
<TABLE>
<CAPTION>
BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP COMMON STOCK(1)
- ---------------- ----------- ---------------
<S> <C> <C>
Robert A. Schmitz....................................... 0 (15) 0
Quest Capital
One Dock Street
Stamford, Connecticut 06902
John Rogers............................................. 0 0
SpecTran Industrial Park
50 Hall Road
Sturbridge, Massachusetts 01566
All Directors and executive officers as a group......... 528,217 (16) 7.50%
(ten persons)
</TABLE>
- ---------------
* Less than 1%
(1) Percentage of beneficial ownership is based on the 7,040,930 of shares of
Common Stock outstanding on July 14, 1999. Shares of Common Stock subject
to stock options and warrants that are exercisable within 60 days of July
14, 1999 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) This information is based upon information reported by Wellington
Management Company, LLP ("WMC") on a Schedule 13G dated December 31, 1998
and filed with the U.S. Securities and Exchange Commission as of February
10, 1999. WMC states that in its capacity as an investment adviser, it may
be deemed to have beneficial ownership of 685,000 shares of Common Stock
which are owned of record by its clients, including Wellington Trust
Company, NA.
(3) This information is based upon information reported by Wellington Trust
Company, NA ("WTC") on a Schedule 13G dated December 31, 1998 and filed
with the U.S. Securities and Exchange Commission as of February 11, 1999.
WTC states that in its capacity as an investment adviser, it may be deemed
to have beneficial ownership of 465,000 shares of Common Stock which are
owned of record by its clients, including Wellington Management Company,
LLP.
(4) This information is based upon information reported by EQSF Advisers, Inc.
("EQSF") and Martin J. Whitman (the Schedule is considered a joint filing
of both EQSF and Mr. Whitman) on a Schedule 13G dated February 12, 1999 and
filed with the U.S. Securities and Exchange Commission as of February 16,
1999 and amended on April 12, 1999. EQSF states that it beneficially owns
490,600 shares of Common Stock. Martin J. Whitman, the Chief Executive
Officer and controlling person of EQSF, disclaims beneficial ownership of
all such shares. Third Avenue Small-Cap Fund has the right to receive
dividends from and the proceeds from the sale of these 490,600 shares.
(5) This information is based upon information reported by Dimensional Fund
Advisors Inc. ("Dimensional") on a Schedule 13G dated February 12, 1999 and
filed with the U.S. Securities and Exchange Commission as of February 11,
1999. Dimensional states that in its role as investment advisor and
investment manager it possesses both voting and investment power over
402,500 shares of Common Stock, but disclaims beneficial ownership of such
securities.
(6) This information is based upon information reported by Dana H. and Doris B.
Dalton on a Schedule 13G dated March 25, 1999 and filed with the U.S.
Securities and Exchange Commission as of March 29, 1999.
(7) Includes 111,416 shares subject to options exercisable within 60 days. Does
not include 54,831 shares subject to options not exercisable within 60
days.
(8) Includes 47,000 shares subject to options exercisable within 60 days. Does
not include 109,000 shares subject to options not exercisable within 60
days.
(9) Includes 11,000 shares subject to options exercisable within 60 days. Does
not include 2,000 shares subject to options not exercisable within 60 days.
A-24
<PAGE> 38
(10) Includes 11,000 shares subject to options exercisable within 60 days. Does
not include 2,000 shares subject to options not exercisable within 60 days.
(11) Includes 65,414 shares subject to options exercisable within 60 days. Does
not include 14,828 shares subject to options not exercisable within 60
days.
(12) Includes 9,000 shares subject to options exercisable within 60 days. Does
not include 2,000 shares subject to options not exercisable within 60 days.
(13) Includes 114,883 shares subject to options exercisable within 60 days. Does
not include 25,767 shares subject to options not exercisable within 60
days.
(14) Includes 7,000 shares subject to options exercisable within 60 days. Does
not include 2,000 shares subject to options not exercisable within 60 days.
(15) Does not include 1,000 shares subject to options not exercisable within 60
days.
(16) Includes 401,713 shares subject to options exercisable within 60 days. Does
not include 188,426 shares subject to options not exercisable within 60
days.
CERTAIN TRANSACTIONS
The matters set forth elsewhere in this Information Statement and in Item 3
of the Schedule 14D-9 are hereby incorporated by reference.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on its review of the copies of such forms received by it to
date, or written representations from certain reporting persons that Forms 5
have been filed for such persons as required, the Company believes that, during
the year ended December 31, 1998, all reporting persons complied with Section
16(a) filing requirements applicable to them.
A-25
<PAGE> 39
ANNEX B
LAZARD FRERES LH
July 15, 1999
The Board of Directors
SpecTran Corporation
50 Hall Road
Sturbridge, Massachusetts 01566
Dear Members of the Board:
We understand that SpecTran Corporation (the "Company"), Lucent
Technologies Inc. (the "Acquiror") and its wholly-owned subsidiary, Seattle
Acquisition Inc. (the "Merger Subsidiary"), have entered into an Agreement of
Merger dated as of July 15, 1999 (the "Agreement"), pursuant to which the
Acquiror will commence an offer (the "Offer") to purchase all of the issued and
outstanding shares of the Company's common stock, $0.10 par value (the
"Shares"), at a price of $9.00 per Share net to the seller in cash. The
Agreement also provides that, following consummation of the Offer, Merger
Subsidiary will be merged with and into the Company in a transaction (the
"Merger") in which each remaining Share issued and outstanding prior to the
effective time of the Merger (other than shares to be cancelled, Shares owned by
any subsidiaries of either the Company or the Acquiror (other than the Merger
Subsidiary) and dissenting shares, as provided in the Agreement) will be
converted into the right to receive $9.00 in cash.
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of Shares (other than Merger Subsidiary and its
affiliates) of the $9.00 per Share in cash to be received by such holders in the
Offer and the Merger. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information
relating to the Company;
(iii) Reviewed various financial forecasts and other data provided to
us by the Company;
(iv) Held discussions with members of the senior management of the
Company with respect to the business and prospects of the Company
and its strategic objectives;
(v) Reviewed public information with respect to certain other
companies in lines of businesses we believe to be generally
comparable to the Company;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be
generally comparable to that of the Company, and in other
industries generally;
(vii) Reviewed the historical stock prices and trading volumes of the
Company's Shares; and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company or the Acquiror, or concerning
the solvency or fair value of either of the foregoing entities. With respect to
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of
B-1
<PAGE> 40
management of the Company as to the future financial performance of the Company.
We assume no responsibility for and express no view as to such forecasts or the
assumptions on which they are based.
Further, our opinion is necessarily based on accounting standards,
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In rendering our opinion, we have assumed that the Offer and the Merger
will be consummated on the terms described in the Agreement, without any waiver
of any material terms or conditions by the Company and that obtaining the
necessary regulatory approvals for the Offer and the Merger will not have an
adverse effect on the Company.
Our opinion does not address the relative merits of the transaction
contemplated by the Agreement as compared to any alternative business
transaction that might be available to the Company.
Lazard Freres & Co. LLC is acting as investment banker to the Board of
Directors of the Company in connection with the Offer and Merger and will
receive a fee for our services a substantial portion of which is contingent upon
the closing of the Offer and the Merger.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered to the Company's Board
of Directors in connection with its consideration of the transaction. This
opinion is not intended to and does not constitute a recommendation to any
holder of Shares as to whether such holder should tender such Shares in the
Offer or vote for the Merger. It is understood that this letter may not be
disclosed or otherwise referred to without our prior consent, except as may
otherwise be required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that as of the
date hereof the $9.00 per Share in cash to be received by the holders of Shares
(other than Merger Subsidiary and its affiliates) in the Offer and the Merger is
fair to such holders from a financial point of view.
Very truly yours,
LAZARD FRERES & CO. LLC
By James L. Kempner
------------------------------------
James L. Kempner
Managing Director
B-2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SPECTRAN CORPORATION
AT
$9.00 NET PER SHARE
BY
SEATTLE ACQUISITION INC.
A WHOLLY OWNED SUBSIDIARY OF
LUCENT TECHNOLOGIES INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, AUGUST 17, 1999, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF SPECTRAN CORPORATION HAS UNANIMOUSLY APPROVED THE
OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE TERMS OF THE
OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS
OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE OUTSTANDING SHARES
(DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS AND ANY
OTHER RIGHTS TO ACQUIRE SHARES ON THE DATE OF PURCHASE) AND (2) ANY WAITING
PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED, AND THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES
PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED.
IMPORTANT
If you wish to tender all or any portion of your Shares in SpecTran
Corporation, you must do one of the following:
- If you are the record holder of your Shares and hold certificates for
your Shares, (a) complete and sign the Letter of Transmittal (or a
facsimile copy) following the instructions in the Letter of Transmittal,
(b) have your signature on the Letter of Transmittal guaranteed if
required by Instruction 1 to the Letter of Transmittal, and (c) mail or
deliver the Letter of Transmittal (or a facsimile copy), the certificates
for your Shares and any other required documents to The Bank of New York
- If you are the record holder of your Shares and delivery of the Shares is
to be made by book-entry transfer, (a) transmit an agent's message (as
described in Section 2 below) and any other required documents, to The
Bank of New York and (b) deliver your Shares pursuant to the procedure
for book-entry transfer set forth in Section 2 below
- If your Shares are registered in the name of a broker, dealer, bank,
trust company or other nominee, you must contact and request your broker,
dealer, bank, trust company or other nominee to tender your Shares
If you desire to tender your Shares and your certificates for your Shares
are not immediately available or you cannot comply in a timely manner with the
procedures for book-entry transfer, or you cannot deliver all the required
documents to The Bank of New York prior to the expiration of the Offer, you may
tender your Shares by following the procedure for guaranteed delivery described
in Section 2.
If you have any questions or if you need assistance or additional copies of
this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery, please call Morrow & Co. at its address and telephone number set forth
on the back cover of this Offer to Purchase.
------------------------
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue
5th Floor
New York, NY 10022
July 21, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Introduction..................................................... 1
1. Terms of the Offer.......................................... 2
2. Procedure for Tendering Shares.............................. 4
3. Withdrawal Rights........................................... 6
4. Acceptance for Payment and Payment for Shares............... 7
5. Certain Federal Income Tax Consequences..................... 8
6. Price Range of the Shares; Dividends on the Shares.......... 9
7. Effect of the Offer on the Market for the Shares; Stock
Quotation; Exchange Act Registration; Margin Regulations.... 9
8. Certain Information Concerning the Company.................. 10
9. Certain Information Concerning the Purchaser and Parent..... 13
10. Source and Amount of Funds.................................. 14
11. Contacts with the Company; Background of the Offer.......... 14
12. Purpose of the Offer; The Merger Agreement.................. 17
13. Dividends and Distributions................................. 25
14. Certain Conditions of the Offer............................. 26
15. Certain Legal Matters....................................... 27
16. Fees and Expenses........................................... 29
17. Miscellaneous............................................... 29
</TABLE>
Schedule I -- Directors and Executive Officers of Parent and the Purchaser
i
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK
OF SPECTRAN CORPORATION:
INTRODUCTION
Seattle Acquisition Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Lucent Technologies Inc., a Delaware corporation
("Parent"), is offering to purchase all outstanding shares (the "Shares") of
Common Stock, par value $.10 per share ("Common Stock"), of SpecTran
Corporation, a Delaware corporation (the "Company"), at $9.00 per Share (the
"Offer Price"), net to the seller, in cash, upon the terms and subject to the
conditions set forth in this Offer to Purchase dated July 21, 1999 and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
If you have Shares registered in your name that you tender directly, you
will not be obligated to pay brokerage fees or commissions or, except as set
forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares pursuant to the Offer. If you hold your Shares through a
broker or bank, you should consult with them to determine if there are any fees
applicable to a tender of the Shares. The Purchaser will pay all fees and
expenses of The Bank of New York, which is acting as the Depositary (the
"Depositary") and Morrow & Co., Inc., which is acting as Information Agent (the
"Information Agent"), incurred in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER
AND THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF THE OFFER AND
THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES.
The Company has advised the Purchaser that Lazard Freres & Co. LLC
("Lazard") has delivered to the board of directors of the Company its written
opinion to the effect that, as of the date of such opinion, the $9.00 in cash
per Share to be received by the holders of Shares in the Offer and the Merger is
fair to such holders from a financial point of view. That opinion is set forth
in full as an exhibit to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to you with this
Offer to Purchase. YOU ARE URGED TO, AND SHOULD, READ SUCH OPINION CAREFULLY IN
ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING
STOCK OPTIONS AND ANY OTHER RIGHTS TO ACQUIRE SHARES ON THE DATE OF PURCHASE)
(THE "MINIMUM CONDITION") AND (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER
(THE "HSR ACT") APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER
HAVING EXPIRED OR BEEN TERMINATED. THE PURCHASER RESERVES THE RIGHT (SUBJECT TO
OBTAINING THE CONSENT OF THE COMPANY AND THE APPLICABLE RULES AND REGULATIONS OF
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")), WHICH IT PRESENTLY
HAS NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE THE MINIMUM CONDITION AND TO
ELECT TO PURCHASE, PURSUANT TO THE OFFER, LESS THAN THE NUMBER OF SHARES
REQUIRED TO SATISFY THE MINIMUM CONDITION. SEE SECTIONS 1 AND 14.
The Offer is being made pursuant to the Agreement of Merger, dated as of
July 15, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the
Company, pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger (as such, the
"Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger").
In the Merger, each Share issued and outstanding immediately prior to the Merger
(other than Shares (1) owned or held in treasury by the Company, (2) owned by
Parent or the Purchaser, (3) remaining outstanding held by any subsidiary of the
Company or Parent or (4) owned by stockholders, if any, who are entitled to and
who properly exercise dissenters' rights
1
<PAGE> 4
under Delaware law) will be converted into the right to receive in cash, without
interest, the per Share price paid in the Offer (the "Merger Consideration").
See Section 12.
The Merger is subject to a number of conditions, including approval by
stockholders of the Company, if such approval is required by applicable law. If
the Purchaser acquires 90% or more of the outstanding Shares pursuant to the
Offer or otherwise, the Purchaser will effect the Merger pursuant to the
short-form merger provisions of the Delaware General Corporation Law (the
"DGCL"), without prior notice to, or any action by, any other stockholder of the
Company. See Section 12.
Once the Minimum Condition has been satisfied and the Purchaser accepts for
payment Shares tendered pursuant to the Offer, the Purchaser will be able to
elect a majority of the members of the Company's board of directors and to
effect the Merger without the affirmative vote of any other stockholder of the
Company.
The Merger Agreement is more fully described in Section 12. Certain Federal
income tax consequences of the sale of Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 3. The term "Expiration Date" means 12:00 midnight, New
York City time, on Tuesday, August 17, 1999, unless the Purchaser shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Purchaser, shall expire.
Subject to the terms of the Merger Agreement (see Section 12) and the
applicable rules and regulations of the Commission, the Purchaser expressly
reserves the right, in its sole discretion, at any time and from time to time,
and regardless of whether or not any of the events set forth in Section 14
hereof shall have occurred or shall have been determined by the Purchaser to
have occurred, (1) to extend the period of time during which the Offer is open,
and thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (2) to
amend the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If by 12:00 midnight, New York City time, on Tuesday, August 17, 1999 (or
any other date or time then set as the Expiration Date), any or all conditions
to the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, (1) to terminate the Offer and not accept for payment any Shares and
return all tendered Shares to tendering stockholders, (2) to waive all the
unsatisfied conditions (other than the Minimum Condition and the condition that
any waiting period under the HSR Act shall have expired or been terminated) and,
subject to complying with the terms of the Merger Agreement and the applicable
rules and regulations of the Commission, accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn, (3) to extend the Offer and, subject to the right of stockholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered during the period or periods for which the Offer is extended or (4) to
amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer (other than as required by the Merger Agreement). Any
extension, waiver, amendment or termination will be followed as promptly as
practicable by public announcement. In the case of an extension, Rule 14e-l(d)
under the Securities Exchange Act of 1934 (the "Exchange Act"), requires that
the announcement be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date in accordance
with the public announcement requirements of Rule 14d-4(c) under the Exchange
Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act which require that any
2
<PAGE> 5
material change in the information published, sent or given to stockholders in
connection with the Offer be promptly disseminated to stockholders in a manner
reasonably designed to inform stockholders of such change), and without limiting
the manner in which the Purchaser may choose to make any public announcement,
the Purchaser currently intends to make such public announcement by issuing a
press release to the Dow Jones News Service and making any appropriate filing
with the Commission.
In the Merger Agreement, the Purchaser has agreed that it will not, without
the prior consent of the Company, extend the Offer, except that, without the
consent of the Company, the Purchaser may extend the Offer (1) if at the
Expiration Date any of the conditions to the Purchaser's obligations to accept
Shares for payment are not satisfied or waived, until such time as such
conditions are satisfied or waived, (2) for any period required by any rule,
regulation, interpretation or position of the Commission or the staff thereof
applicable to the Offer or any period required by applicable law and (3) on one
or more occasions for an aggregate period of not more than 10 business days
beyond the latest expiration date that would otherwise be permitted under clause
(1) or (2) of this sentence, if on such expiration date there shall not have
been tendered at least 90% of the outstanding Shares. The Merger Agreement
further provides that if all the conditions to the Offer are not satisfied on
any scheduled expiration date of the Offer then, provided that all such
conditions are reasonably capable of being satisfied, the Purchaser will extend
the Offer from time to time until such conditions are satisfied or waived,
provided that the Purchaser will not be required to extend the Offer beyond
September 30, 1999. For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or a federal holiday and consists of the time
period from 12:01 a.m. through 12:00 Midnight, New York City time.
In addition, the Purchaser has agreed in the Merger Agreement that it will
not, without the consent of the Company, (1) reduce the number of Shares subject
to the Offer, (2) reduce the Offer Price, (3) amend or add to the Offer
conditions any terms that are adverse to the holders of the Shares, (4) extend
the Offer, except as provided in the preceding paragraph, (5) change the form of
consideration payable in the Offer or (6) amend any other term of the Offer in
any manner adverse to the holders of the Shares.
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of or payment for Shares or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 3.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including, with the Company's consent, a waiver of the Minimum Condition), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-l under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to stockholders.
CONSUMMATION OF THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM
CONDITION, THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE
HSR ACT AND THE OTHER CONDITIONS SET FORTH IN SECTION 14. Subject to the terms
and conditions contained in the Merger Agreement, the Purchaser reserves the
right (but shall not be obligated) to waive any or all such conditions.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares
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<PAGE> 6
and will be furnished by the Purchaser to brokers, dealers, banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES.
VALID TENDER. For a stockholder to tender Shares validly pursuant to the
Offer, either (1) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or in
the case of a book-entry transfer, an Agent's Message (as defined in the second
succeeding paragraph), and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date
and either certificates for tendered Shares must be received by the Depositary
at one of such addresses or such Shares must be delivered pursuant to the
procedure for book-entry transfer set forth below (and a Book-Entry Confirmation
(as defined in the next paragraph) received by the Depositary), in each case,
prior to the Expiration Date, or (2) the tendering stockholder must comply with
the guaranteed delivery procedure set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents, must, in any case, be transmitted to,
and received by, the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedure described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at the Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL OR
ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if (1) the Letter of Transmittal is signed by the registered holder
(which term, for purposes of this Section, includes any participant in the
Book-Entry Transfer Facility's system whose name appears on a security position
listing as the owner of the Shares) of Shares tendered therewith unless such
registered holder has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal or (2) such Shares are tendered for the account of a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each of the foregoing being
referred to as an "Eligible
4
<PAGE> 7
Institution"). In all other cases, all signatures on the Letters of Transmittal
must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the
Letter of Transmittal. If the certificates for Shares are registered in the name
of a person other than the signer of the Letter of Transmittal, or if payment is
to be made or certificates for Shares not tendered or not accepted for payment
are to be issued to a person other than the registered holder of the
certificates surrendered, the tendered certificates must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instruction 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser is received by
the Depositary, as provided below, prior to the Expiration Date; and
(3) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other documents
required by the Letter of Transmittal, are received by the Depositary
within three trading days after the date of execution of such Notice of
Guaranteed Delivery. A "trading day" is any day on which the New York Stock
Exchange, Inc. (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (1) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (2) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (3) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations are actually
received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
APPOINTMENT. By executing a Letter of Transmittal, the tendering
stockholder will irrevocably appoint designees of the Purchaser as such
stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after July 15, 1999. All such proxies shall be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts for payment
Shares tendered by such stockholder as provided herein. Upon such acceptance for
payment, all prior powers of attorney, proxies and consents given by such
stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney, proxies
or consents may be given (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be
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<PAGE> 8
empowered to exercise all voting rights with respect to such Shares or other
securities or rights in respect of any annual, special or adjourned meeting of
the Company's stockholders, or otherwise, and may execute any written consent,
and may otherwise act as an attorney-in-fact and proxy concerning any matter as
they in their sole discretion deem proper. The Purchaser reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of such Shares, the Purchaser must
be able to exercise full voting rights with respect to such Shares and other
securities or rights, including voting at any meeting of stockholders then
scheduled.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of, or payment for, any Shares which acceptance or payment, in the
opinion of the Purchaser's counsel, may be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in any tender with
respect to any particular Shares, whether or not similar defects or
irregularities are waived in the case of other Shares. No tender of Shares will
be deemed to have been validly made until all defects or irregularities relating
thereto have been cured or waived. None of the Purchaser, Parent, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
BACKUP FEDERAL INCOME TAX WITHHOLDING. IN ORDER TO AVOID "BACKUP
WITHHOLDING" OF FEDERAL INCOME TAX ON PAYMENTS OF CASH PURSUANT TO THE OFFER, A
STOCKHOLDER SURRENDERING SHARES IN THE OFFER MUST, UNLESS AN EXEMPTION APPLIES,
PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION
NUMBER ("TIN") ON A SUBSTITUTE FORM W-9 AND CERTIFY UNDER PENALTY OF PERJURY
THAT SUCH TIN IS CORRECT AND THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP
WITHHOLDING. IF A STOCKHOLDER DOES NOT PROVIDE ITS CORRECT TIN OR FAILS TO
PROVIDE THE CERTIFICATIONS DESCRIBED ABOVE, THE INTERNAL REVENUE SERVICE ("IRS")
MAY IMPOSE A PENALTY ON SUCH STOCKHOLDER AND PAYMENT OF CASH TO SUCH STOCKHOLDER
PURSUANT TO THE OFFER MAY BE SUBJECT TO BACKUP WITHHOLDING OF 31%. ALL
STOCKHOLDERS SURRENDERING SHARES PURSUANT TO THE OFFER SHOULD COMPLETE AND SIGN
THE MAIN SIGNATURE FORM AND THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE
LETTER OF TRANSMITTAL TO PROVIDE THE INFORMATION AND CERTIFICATION NECESSARY TO
AVOID BACKUP WITHHOLDING (UNLESS AN APPLICABLE EXEMPTION EXISTS AND IS PROVEN IN
A MANNER SATISFACTORY TO THE PURCHASER AND THE DEPOSITARY). CERTAIN STOCKHOLDERS
(INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS AND
ENTITIES) ARE NOT SUBJECT TO BACKUP WITHHOLDING. NONCORPORATE FOREIGN
STOCKHOLDERS SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND A FORM W-8,
CERTIFICATE OF FOREIGN STATUS, A COPY OF WHICH MAY BE OBTAINED FROM THE
DEPOSITARY, IN ORDER TO AVOID BACKUP WITHHOLDING. SEE INSTRUCTION 9 TO THE
LETTER OF TRANSMITTAL.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after September 18, 1999.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must specify
the name of the person having tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in Section 2, any notice of withdrawal must also specify the name and
number of the account at the Book Entry Transfer Facility to be credited with
the withdrawn Shares and must otherwise comply with the Book Entry Transfer
Facility's
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<PAGE> 9
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for any
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 at any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and, promptly after the
Expiration Date, will pay for all Shares validly tendered prior to the
Expiration Date and not properly withdrawn in accordance with Section 3. Any
determination concerning the satisfaction of such terms and conditions will be
within the sole discretion of the Purchaser, and such determination will be
final and binding on all tendering stockholders. See Sections 1 and 14. The
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of or payment for Shares in order to comply with any
applicable law, including, without limitation, the HSR Act. Any such delays will
be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to
the Purchaser's obligation to pay for or return tendered Shares promptly after
the termination or withdrawal of the Offer).
Parent has filed a Notification and Report Form with respect to the Offer
under the HSR Act. The waiting period under the HSR Act with respect to the
Offer will expire at 11:59 p.m., New York City time, on the 15th calendar day
after such filing, unless early termination of the waiting period is granted. In
addition, the Antitrust Division of the Department of Justice (the "Antitrust
Division") or the Federal Trade Commission (the "FTC") may extend the waiting
period by requesting additional information or documentary material from Parent.
If such a request is made, such waiting period will expire at 11:59 p.m., New
York City time, on the 10th day after substantial compliance by Parent with such
request. See Section 15 for additional information concerning the HSR Act and
the applicability of the antitrust laws to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (1) certificates for
such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as
described in Section 2), (2) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
(3) any other documents required by the Letter of Transmittal. The per Share
consideration paid to any stockholder pursuant to the Offer will be the highest
per Share consideration paid to any other stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares. Any such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section 3.
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<PAGE> 10
If any tendered Shares are not purchased pursuant to the Offer because of
an invalid tender or otherwise, certificates for any such Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedure set forth
in Section 2, such Shares will be credited to an account maintained at the
Book-Entry Transfer Facility), as promptly as practicable after the expiration
or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to
the Offer. Any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The receipt of cash pursuant to the Offer or the Merger will constitute a
taxable transaction for Federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also constitute a taxable
transaction under applicable state, local, foreign and other tax laws. As a
result, a tendering stockholder will generally recognize gain or loss for
Federal income tax purposes in an amount equal to the difference between the
amount of cash received by the stockholder pursuant to the Offer or the Merger
and such stockholder's aggregate adjusted tax basis in the Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or
loss will be calculated separately for each block of Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). If
tendered Shares are held by a tendering stockholder as capital assets, any gain
or loss recognized by the tendering stockholder will constitute capital gain or
loss, and will constitute long-term capital gain or loss if the tendering
stockholder held the underlying Shares for more than 12 months as of the date of
disposition. There are limits on the deductibility of capital losses.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to backup withholding at a rate of 31% unless the stockholder
provides its correct TIN (or certifies that it is awaiting a TIN) and certifies
as to no loss of exemption from backup withholding and otherwise complies with
the applicable requirements of the backup withholding rules. A stockholder that
does not furnish its correct TIN in the prescribed manner or that does not
otherwise establish a basis for an exemption from backup withholding may be
subject to a penalty imposed by the IRS, and the gross proceeds of the Offer or
the Merger payable to such stockholder may be subject to backup withholding at a
rate of 31%. Each stockholder should complete and sign the Substitute Form W-9
included as part of the Letter of Transmittal so as to provide the information
and certification necessary to avoid backup withholding.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A
HOLDER OF SHARES IN LIGHT OF SUCH PERSON'S INDIVIDUAL CIRCUMSTANCES.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
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<PAGE> 11
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES.
The Shares are traded on The Nasdaq National Market System under the symbol
"SPTR." The following table sets forth, for each of the periods indicated, the
high and low reported sale prices per Share, as reported by the Nasdaq National
Market.
<TABLE>
<CAPTION>
SHARES
-------------
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1997
First Quarter............................................... $25 $12 5/8
Second Quarter.............................................. 21 11 1/4
Third Quarter............................................... 20 3/4 13 3/4
Fourth Quarter.............................................. 15 1/4 8 5/8
FISCAL YEAR ENDED DECEMBER 31, 1998
First Quarter............................................... $11 1/8 $ 6 7/8
Second Quarter.............................................. 10 1/4 6 15/16
Third Quarter............................................... 7 13/16 4 5/32
Fourth Quarter.............................................. 7 5/8 3 9/16
FISCAL YEAR ENDED DECEMBER 31, 1999
First Quarter............................................... $ 7 $ 3 1/4
Second Quarter.............................................. 12 7/8 3 1/2
Third Quarter (through July 20, 1999)....................... 12 8 5/8
</TABLE>
On July 14, 1999, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the reported last sale
price of the Shares on the Nasdaq National Market was $11 1/2 per Share. On July
20, 1999, the last full day of trading before the commencement of the Offer, the
reported last sale price of the Shares on the Nasdaq National Market was
$8 25/32 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THE SHARES.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (the "Form 10-K"), the Company has not paid cash
dividends on Common Stock to date and does not plan to pay cash dividends to its
stockholders in the foreseeable future.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS.
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
MARKET FOR SHARES. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in
the Nasdaq National Market (the top tier market of The Nasdaq Stock Market).
According to published guidelines for the Nasdaq National Market, the Shares
might no longer be eligible for quotation on the Nasdaq National Market if,
among other things, (1) either (a) the number of Shares publicly held was fewer
than 750,000, there were fewer than 400 holders of round lots, the aggregate
market value of publicly held Shares was less than $5,000,000, net tangible
assets were less than $4,000,000 and there were fewer than two registered and
active market makers for the Shares, or (b) the number of Shares publicly held
was fewer than 1,100,000, there were fewer than 400 holders of round lots and
the aggregate market value of publicly held Shares was less than $15,000,000,
(2) either (a) the Company's market capitalization was less than $50,000,000 or
(b) the total assets and total revenue of the Company for the most recently
completed fiscal year or two of the last three most recently completed fiscal
years was less than $50,000,000 or
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<PAGE> 12
(3) there were fewer than four registered and active market makers. If these
standards are not met, the Shares might nevertheless continue to be included in
The Nasdaq Stock Market with quotations published in the Nasdaq "additional
list" or in one of the "local lists," but if the number of holders of the Shares
were to fall below 300, or if the number of publicly held Shares were to fall
below 100,000 or there were not at least two registered and active market makers
for the Shares, the NASD's rules provide that the Shares would no longer be
"qualified" for Nasdaq Stock Market reporting and The Nasdaq Stock Market would
cease to provide any quotations. Shares held directly or indirectly by
directors, officers or beneficial owners of more than 10% of the Shares are not
considered as being publicly held for this purpose. According to the Company, as
of July 14, 1999, there were approximately 650 holders of record of Shares
(including one holder in "street name" representing approximately 5,240
stockholders) and 7,040,930 Shares were outstanding. If, as a result of the
purchase of Shares pursuant to the Offer, the Shares no longer meet the
requirements of the NASD for continued inclusion in The Nasdaq Stock Market or
the Nasdaq National Market, as the case may be, the market for Shares could be
adversely affected.
If the Shares no longer meet the requirements of the NASD for quotation
through any tier of The Nasdaq Stock Market, it is possible that the Shares
would continue to trade in the over-the-counter market and that price quotations
would be reported by other sources. The extent of the public market for the
Shares and the availability of such quotations would depend, however, upon the
number of holders of Shares remaining at such time, the interests in maintaining
a market in Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
shortswing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, may be impaired or eliminated. The Purchaser intends to seek to cause the
Company to apply for termination of registration of the Shares under the
Exchange Act as soon after the completion of the Offer as the requirements for
such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will cease to be reported on The Nasdaq Stock Market and the
registration of the Shares under the Exchange Act will be terminated following
the consummation of the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers. If registration of Shares under the Exchange Act were terminated,
the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
at 50 Hall Road, Sturbridge, Massachusetts 01566. According to the Form 10-K,
the Company operates through two wholly owned subsidiaries,
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<PAGE> 13
SpecTran Communication Fiber Technologies, Inc. ("SpecTran Communication") and
SpecTran Specialty Optics Company ("SpecTran Specialty"). The Company, through
its subsidiary SpecTran Communications, develops, manufactures and markets
multimode and single-mode optical fiber for data communications and
telecommunications applications and through its subsidiary SpecTran Specialty,
develops, manufactures and markets specialty multimode and single-mode fiber and
value-added fiber optic products for industrial, military/aerospace,
communication and medical applications.
Set forth below is certain selected consolidated financial information with
respect to the Company and its subsidiaries excerpted or derived from the
information contained in the Form 10-K or the Company's Form 10-Q for the
quarter ended March 31, 1999. More comprehensive financial information is
included in those reports and other documents filed by the Company with the
Commission, and the following summary is qualified in its entirety by reference
to those reports and such other documents and all the financial information
(including any related notes) contained therein. Those reports and such other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information."
11
<PAGE> 14
SPECTRAN CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------ ------------------
1999 1998 1998 1997
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales......................................... $20,380 $15,112 $70,856 $62,057
Cost of sales..................................... 15,059 10,001 51,976 38,781
------- ------- ------- -------
Gross profit.................................... 5,321 5,111 18,880 23,276
Selling and administrative expenses............... 3,082 3,134 13,818 13,966
Research and development costs.................... 755 1,176 5,493 3,289
------- ------- ------- -------
Income (loss) from operations..................... 1,484 801 (431) 6,021
------- ------- ------- -------
Other income (expense)
Interest income................................. 28 114 224 1,372
Interest expense................................ (736) (124) (1,419) (747)
Other net....................................... (12) 842 3,372 510
------- ------- ------- -------
Other income (expense), net..................... (720) 832 2,177 1,090
------- ------- ------- -------
Income before income taxes and equity in joint
venture......................................... 764 1,633 1,746 7,111
Loss from joint venture........................... (382) (252) (974) (287)
------- ------- ------- -------
Income before income taxes........................ 382 1,381 772 6,842
Income tax expense................................ 149 517 249 1,982
------- ------- ------- -------
Net income........................................ 233 864 523 4,842
------- ------- ------- -------
Other comprehensive income (loss)................. -- (11) (11) (6)
------- ------- ------- -------
Comprehensive income.............................. $ 233 $ 853 $ 512 $ 4,826
------- ------- ------- -------
Net earnings per common share
Basic........................................... $ .03 $ .12 $ .07 $ .72
Diluted......................................... $ .03 $ .12 $ .07 $ 68
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ -------------------
1999 1998 1997
------------ -------- -------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA
Total current assets...................................... $ 30,201 $ 26,106 $27,400
Investment in joint venture(1)............................ 2,857 3,239 4,213
Property, plant and equipment, net........................ 67,851 68,495 55,407
Total assets.............................................. 108,234 105,419 92,105
Long-term debt............................................ 31,800 30,800 24,000
Total stockholders' equity................................ 57,545 57,312 56,759
</TABLE>
- ---------------
(1) On June 30, 1999, the Company sold its interest in its joint venture with
General Cable Corporation, General Photonics, LLC, to BICC General Cable
Industries, Inc. for $2,367,200. General Photonics, LLC, which is a
manufacturer of optical fiber cables, was formed by the Company and General
Cable Corporation in 1996.
12
<PAGE> 15
AVAILABLE INFORMATION. The Company is subject to the reporting
requirements of the Exchange Act and, in accordance therewith, is required to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
stockholders and filed with the Commission. Such reports, proxy statements and
other information should be available for inspection at the public reference
facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located in the Northwestern
Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and
Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be
obtainable, by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. Such reports, proxy
and information statements and other information may be found on the
Commission's web site, the address of which is: http://www.sec.gov. Such
information should also be on file at The Nasdaq Stock Market, 1735 K Street,
N.W., Washington, D.C. 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and Parent do not have any
knowledge that any such information is untrue, neither the Purchaser nor Parent
takes any responsibility for the accuracy or completeness of such information or
for any failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.
The Purchaser, a Delaware corporation and a wholly owned subsidiary of
Parent, was organized to acquire the Company and has not conducted any unrelated
activities since its organization. The principal offices of the Purchaser are
located at 600 Mountain Avenue, Murray Hill, New Jersey, 07974. All outstanding
shares of capital stock of the Purchaser are owned by Parent.
Parent designs, builds and delivers a wide range of public and private
networks, communications systems and software, data networking systems, business
telephone systems and microelectronic components. Parent is a global leader in
the sale of public communications systems, and is a supplier of systems or
software to most of the world's largest network operators. Parent is also a
global leader in the sale of business communications systems and in the sale of
microelectronic components for communications applications to manufacturers of
communications systems and computers. Parent conducts its research and
development activities through Bell Laboratories, one of the world's foremost
industrial research and development organizations. Parent is a Delaware
corporation with its principal offices located at 600 Mountain Avenue, Murray
Hill, New Jersey, 07974.
Financial information with respect to Parent and its subsidiaries is
included in Parent's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998, as amended by Amendment No. 1 thereto filed on Form 10-K/A
on May 17, 1999, Parent's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1998 and March 31, 1999, Parent's Form 8-K filed on January 8,
1999, Parent's Form 8-K filed on March 5, 1999 as amended by Amendment 1 thereto
filed on Form 8-K/A on May 18, 1999, Parent's Form 8-K filed on June 28, 1999
and other documents filed by Parent with the Commission. Such reports and other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information."
Neither the Purchaser nor Parent (together, the "Corporate Entities") or,
to the best knowledge of the Corporate Entities, any of the persons listed in
Schedule I or any associate or majority-owned subsidiary of the Corporate
Entities or any of the persons so listed, beneficially owns any equity security
of the Company, and none of the Corporate Entities or, to the best knowledge of
the Corporate Entities, any of the other persons
13
<PAGE> 16
referred to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any equity
security of the Company during the past 60 days.
Except as described in this Offer to Purchase, (1) there have not been any
contacts, negotiations or transactions between the Corporate Entities, any of
their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand, that
are required to be disclosed pursuant to the rules and regulations of the
Commission and (2) none of the Corporate Entities or, to the best knowledge of
the Corporate Entities, any of the persons listed in Schedule I has any
contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company.
Except as described in this Offer to Purchase, during the last five years,
none of the Corporate Entities or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I (1) has been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
(2) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws. The name, business address, present principal occupation or
employment, five-year employment history and citizenship of each of the
directors and executive officers of the Purchaser and Parent are set forth in
Schedule I.
AVAILABLE INFORMATION. Parent is subject to the reporting requirements of
the Exchange Act and, in accordance therewith, is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
Parent's directors and officers, their remuneration, stock options granted to
them, the principal holders of Parent's securities and any material interest of
such persons in transactions with Parent is disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the Commission, and copies thereof should be obtainable from the
Commission, in the same manner as set forth with respect to information
concerning the Company in Section 8. Such material should also be available for
inspection at the library of the NYSE, 20 Broad Street, New York, New York
10005.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related to
the Offer and the Merger is estimated to be approximately $64.2 million. The
Purchaser plans to obtain all funds needed for the Offer and the Merger through
a capital contribution which will be made by Parent to the Purchaser.
Parent intends to provide to the Purchaser the funds required to consummate
the Offer and the Merger from its available cash, which includes revenues from
customers and the proceeds of short-term commercial paper issued to finance
current assets. Parent generally repays commercial paper out of cash flow
generated by Parent from operations and through the issuance of equity or
long-term debt when advantageous opportunities arise.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER.
The Company has a long-standing relationship with Parent both as a supplier
of optical fiber to Parent and a licensee of technology from Parent.
SUPPLY RELATIONSHIP WITH THE COMPANY. The Company and Parent have a
three-year supply agreement (the "Supply Agreement") terminating December 31,
1999, under which Parent is required to make certain annual minimum purchases of
optical fiber. Parent has satisfied its minimum annual purchase obligations
under the Supply Agreement through and including 1999. In 1998, Parent purchased
quantities of optical fiber in excess of the required annual minimum. For the
calendar years ending December 31, 1998 and 1997, Parent purchased from the
Company approximately $26.0 million and $6.6 million, respectively, of optical
fiber.
14
<PAGE> 17
From January 1, 1999 through June 30, 1999, Parent purchased from the Company
approximately $9.5 million of optical fiber.
In the fall of 1998, the Company and Parent's Network Products Group had
discussions regarding the quantities of optical fiber Parent would need in the
future. The Company was invited to respond to a request for quotes regarding
Parent's optical fiber needs for 1999 along with two other bidders. The
Company's bid was above the two other bidders and the Company was invited to
rebid but the Company's bid continued to remain above that of the two other
bidders.
Parent continued to purchase under the Supply Agreement during the first
two calendar quarters of 1999. On June 1, 1999, Parent advised the Company that,
due to excess inventories, Parent would decrease significantly the amount of
optical fiber it would purchase from the Company for the remainder of the year.
On June 17, 1999, a representative of Parent informed a representative of Lazard
that Parent had completed its purchases of optical fiber from the Company for
the year.
LICENSE AGREEMENTS WITH THE COMPANY. The Company has been a licensee of
Parent's and its predecessor company's optical fiber patents since 1981. Between
mid-1997 and October 30, 1998, the Company and Parent discussed the possibility
of entering into an additional patent license agreement. On October 30, 1998,
the Company and Parent established a new worldwide, non-exclusive license
exchanging rights under their optical fiber patents issued prior to January 1,
1998 and additional patents related to multimode fiber based on applications
filed through October 1998. The Company is licensed by Parent to make optical
fiber at its existing factories for worldwide use, sale and export from the
United States. The license contains some product limitations including certain
exclusions to make or sell select specialty fibers for some applications. Parent
receives non-exclusive, royalty-free worldwide rights to the licensed Company
patents. The Company agreed to pay Parent a $4.0 million license fee in
installments and, beginning in 2000, a royalty on sales. On January 31, 1999,
the Company paid the first license fee installment of $750,000 and will be
making a further $500,000 payment on July 31, 1999. An additional $1.0 million
is due in 2000, $1.0 million in 2001 and $750,000 in 2002. Parent has the right
to terminate the agreement if the Company is acquired by an optical fiber
manufacturer.
For the six months ended June 30, 1999, the Company made no royalty
payments to Parent. For the fiscal years ending December 31, 1998, 1997 and
1996, the Company made aggregate royalty payments to Parent of approximately
$60,000, $890,000 and $760,000, respectively. All such royalty payments were in
respect of sales by SpecTran Communication.
MERGER NEGOTIATIONS WITH THE COMPANY. In early 1999, Parent's Network
Products Group was contacted by Mr. Charles B. Harrison, President, Chief
Executive Officer and Chairman of the Board of the Company, as part of an
auction process conducted by Lazard, the Company's investment bank. Mr. Harrison
met with Mr. Denys Gounot, Chief Operating Officer of Parent's Network Products
Group, and Mr. Robert Mohalley, Strategy Vice President for Parent's Network
Products Group, at Parent's Network Products Group's offices in Atlanta, Georgia
on February 1, 1999.
The parties signed a non-disclosure agreement on March 5, 1999.
On March 24 and 25, 1999, representatives of Parent's Network Products
Group met at the Company's offices with Mr. Harrison, Mr. John Chapman,
President of SpecTran Communication, Mr. Martin Siefert, President of SpecTran
Specialty, and other managers of the Company, to review the Company and gather
initial due diligence information.
On April 20, 1999, Lazard, on behalf of the Company, corresponded with
Parent's Network Products Group to formally invite participation in an auction
of the Company and to forward to Parent the Offering Memorandum of the Company.
Parent informed Lazard that it was not going to submit a proposal, but that,
under the right circumstances, Parent might be interested in pursuing a supply
agreement with the Company.
On May 10, 1999, Mr. Mohalley sent the Company a letter stating that upon
further review Parent might be interested in pursuing a transaction. On May 11,
1999, during a telephone conversation, Mr. Mohalley
15
<PAGE> 18
asked Mr. Harrison for at least an additional two weeks to conduct more due
diligence before submitting an indication of interest letter.
On May 17 and 18, 1999, representatives of Parent, including Mr. Terence
Bentley, Director Corporate Development of Parent, and Mr. Richard Sullivan,
Network Products Group Director Business Development of Parent, visited the
Company's headquarters in Sturbridge, Massachusetts to conduct a preliminary due
diligence review of the Company. Messrs. Bentley and Sullivan also met with
Messrs. Harrison, Chapman, Siefert, and George Roberts, Chief Financial Officer
of the Company, to discuss a potential acquisition by Parent of the Company. Due
diligence by Parent continued throughout May and June.
On June 14, 1999, Mr. William Spivey, President of Parent's Network
Products Group, Mr. Gounot and Mr. Bentley visited the Company's manufacturing
facilities and met with managers of the Company.
On June 15, 1999, senior officers of Parent met and, after being briefed,
approved formal negotiation relating to the purchase of the Company. Mr. Bentley
indicated to Mr. Harrison of the Company that Parent would be willing to offer
$8.00 per Share in cash, subject to due diligence.
Parent and the Company executed a revised non-disclosure agreement on June
22, 1999.
On June 16 and 17, 1999, representatives of Parent, including Mr. Bentley,
the Company and Lazard had discussions regarding the form of consideration, the
structure of the transaction and other material terms relating to the
transaction, including human resources and real estate matters.
On June 17, 1999, Parent submitted a non-binding proposal to acquire the
Company for between $8.00 and $8.75 per Share.
On Monday, June 21, 1999, Mr. Bentley and Mr. Harrison met in Murray Hill,
New Jersey, to discuss various acquisition structures. Negotiations with respect
to structure, prices, form of consideration and other material terms continued
throughout the morning. Mr. Bentley indicated that Parent would be willing to
increase its previous proposal to $9.00 per Share in cash but did not want to
pursue a stock transaction.
On the evening of June 21, 1999, the board of directors of the Company met
by conference telephone call (one director was unavailable) and discussed Mr.
Harrison's report of his meeting with Parent. The Board directed Mr. Harrison to
discuss a possible stock transaction again with Mr. Bentley.
On the morning of June 22, 1999, Mr. Harrison spoke with Mr. Bentley and
reported that the Company's board of directors strongly preferred a stock
transaction. Mr. Bentley reiterated that Parent would not agree to a stock
transaction but would be interested in pursuing a $9.00 per Share cash
transaction.
On June 22, 1999 at 5:00 p.m., the board of directors of the Company met
and was updated by Mr. Harrison. The Board reiterated its interest in a stock
transaction. The board directed Mr. Harrison to attempt again to ascertain
whether Parent would be willing to acquire the Company for stock, but also
authorized Mr. Harrison to proceed with discussions regarding a cash transaction
for $9.00 per Share or higher. Later that evening Mr. Harrison raised the matter
of a stock transaction again with Mr. Bentley.
On June 23, 1999, Mr. Bentley informed Mr. Harrison that Parent was
strongly disinclined to enter into a stock transaction for a number of reasons,
including additional cost and time to complete the acquisition. Mr. Bentley
stated that he would consider discussing with Parent's Chief Financial Officer
an acquisition of the Company at a per Share price of $8.00 in Parent stock but
advised Mr. Harrison that he did not believe such a transaction would be
approved and that the environment for obtaining such approval from Parent's
senior management was very unfavorable. Mr. Harrison stated he would discuss the
matter with the Company's directors and advise Mr. Bentley. Mr. Harrison polled
the board and the unanimous sense was to proceed with negotiations for a $9.00
per Share cash transaction. Mr. Harrison so informed Mr. Bentley that same day.
On June 28 and June 29, 1999, a due diligence team from Parent visited the
Company to meet with management of the Company, to tour the Company's facilities
and to continue due diligence.
16
<PAGE> 19
From July 1 to July 14, 1999, representatives of Parent conducted further
due diligence. These representatives also negotiated the Merger Agreement with
representatives of the Company. During the negotiations, the Company requested
and Parent agreed to eliminate several measures designed to make it more likely
that a transaction would be completed if an agreement were reached, including
granting Parent an option to acquire up to 19.9% of the Company's Shares under
certain conditions and agreements from officers and directors to tender their
Shares and vote in favor of the Merger. The Company also requested, and Parent
agreed to, a reduction in the break-up fee payable to Parent in the event the
transaction was not completed for certain reasons from $2.5 million to $2.0
million.
On July 14, 1999, the board of directors of the Company held a meeting to
consider the Offer, the Merger and the Merger Agreement. At the meeting, the
board of directors of the Company heard presentations by its legal counsel with
respect to the terms of the proposed offer, the Merger and the Merger Agreement,
and legal counsel advised the board of directors that the negotiations for the
Merger Agreement were substantially complete. The board of directors also heard
a presentation by representatives of Lazard with respect to the financial terms
of the Offer and the Merger and Lazard's valuation analysis. The board of
directors, with the participation of the representatives of Lazard, reviewed
again the alternatives for the Company.
At the conclusion of the presentation, representatives of Lazard delivered
Lazard's oral opinion that, as of the date of the Merger Agreement, the $9.00 in
cash per Share to be paid to the stockholders of the Company pursuant to the
Offer and the Merger was fair to such stockholders from a financial point of
view. Lazard subsequently delivered a written opinion, dated the date of the
Merger Agreement, to the same effect. On July 15, 1999, Parent, the Purchaser
and the Company executed and delivered the Merger Agreement.
Based upon such discussion, presentations and opinion, the Board of
Directors of the Company has unanimously approved the Offer and the Merger and
determined that the terms of the Offer and the Merger are fair to, and in the
best interests of, the stockholders of the Company and unanimously recommends
that stockholders of the Company accept the Offer and tender their Shares to the
Purchaser pursuant to the terms of the Offer.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT.
PURPOSE OF THE OFFER. The purpose of the Offer is to enable Parent to
acquire control of, and the entire equity interest in, the Company. Following
the consummation of the Offer, the Purchaser and Parent intend to acquire any
remaining equity interest in the Company not acquired in the Offer by
consummating the Merger. The Offer is subject to certain terms and conditions.
Notwithstanding anything to the contrary set forth in the Offer to Purchase, any
determination concerning the satisfaction of such terms and conditions will be
within the reasonable discretion of the Purchaser.
THE MERGER AGREEMENT. The Merger Agreement provides that following the
satisfaction or waiver of the conditions described below under "Conditions to
the Merger," the Purchaser will be merged with and into the Company, and each
then outstanding Share (other than Shares (1) owned or held in treasury by the
Company, (2) owned by the Purchaser or Parent, (3) remaining outstanding held by
any subsidiary of the Company or Parent or (4) owned by stockholders, if any,
who are entitled to and who properly exercise dissenters' rights under Delaware
law), will be converted into the right to receive an amount in cash, without
interest, equal to the price per Share paid pursuant to the Offer.
VOTE REQUIRED TO APPROVE MERGER. The DGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the board of directors of the Company and, if the "short form"
merger procedure described below is not available, by the holders of a majority
of the Company's outstanding Shares. The board of directors of the Company has
approved the Offer, the Merger and the Merger Agreement; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval by such stockholders if the "short-form" merger procedure described
below is not available. Under the DGCL, the affirmative vote of holders of a
majority of the outstanding Shares (including any Shares owned by the
Purchaser), is generally required to approve the Merger. If the Purchaser
acquires, through the Offer or otherwise, voting power with respect to at least
a majority of the outstanding Shares (which would be the case if the Minimum
Condition were satisfied and the Purchaser were to accept
17
<PAGE> 20
for payment Shares tendered pursuant to the Offer), it would have sufficient
voting power to effect the Merger without the vote of any other stockholder of
the Company. However, the DGCL also provides that if a parent company owns at
least 90% of each class of stock of a subsidiary, the parent company can effect
a "short-form" merger with that subsidiary without the action of the other
stockholders of the subsidiary. Accordingly, if, as a result of the Offer or
otherwise, the Purchaser acquires or controls the voting power of at least 90%
of the outstanding Shares, the Purchaser could (and, under the Merger Agreement,
is required to) effect the Merger using the "short-form" merger procedures
without prior notice to, or any action by, any other stockholder of the Company.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the
respective obligations of Parent, the Purchaser and the Company to consummate
the Merger are subject to the satisfaction of each of the following conditions:
(1) if required by applicable law, the Merger Agreement having been approved and
adopted by the affirmative vote of holders of a majority of the outstanding
Shares, (2) no judgment, order, decree, statute, law, ordinance, rule or
regulation enacted, enforced or issued by any court or other governmental entity
of competent jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect, and there shall not be pending any suit,
action or proceeding by any governmental entity (a) preventing the consummation
of the Merger or (b) which is otherwise reasonably likely to have a material
adverse effect on the Company or Parent, as applicable, arising out of the
Merger Agreement or the transactions contemplated by the Merger Agreement;
provided, that each of the parties shall have used its reasonable best efforts
to prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered and (3) the Purchaser shall
have previously accepted for payment and paid for the Shares pursuant to the
Offer.
The obligations of Parent and Purchaser to consummate the Merger are also
subject to the fulfilment or satisfaction at or prior to the effective time of
the Merger that (1) the Company shall have performed and complied in all
material respects with all agreements and conditions contained in the Merger
Agreement that are required to be performed or complied with it prior to or at
the effective time of the Merger, (2) each of the representations and warranties
of the Company contained in the Merger Agreement that are qualified by material
adverse effect, shall be true and correct and each of the representations and
warranties of the Company to the extent it is not so qualified by material
adverse effect, shall be true and correct in all material respects, in each
case, on and as of the effective time of the Merger, (3) no event or events
shall have occurred that could reasonably be expected to have a material adverse
effect on the Company and (4) the Company shall have received all necessary
consents or waivers, in form and substance satisfactory to Parent and the
Purchaser, from the other parties to each contract, lease or agreement to which
the Company is a party, except where the failure to receive such consent would
not reasonably be expected, individually or in the aggregate, to have a material
adverse effect on the Company.
The obligations of the Company to consummate the Merger are also subject to
the fulfilment or satisfaction at or prior to the effective time of the Merger
that (1) Parent and Purchaser shall have performed and complied in all material
respects with all agreements and conditions contained in the Merger Agreement
that are required to be performed or complied with them prior to or at the
effective time of the Merger and (2) each of the representations and warranties
of the Purchaser and Parent contained in the Merger Agreement that are qualified
by material adverse effect shall be true and correct and each of the
representations and warranties of the Purchaser and Parent to the extent it is
not so qualified by material adverse effect, shall be true and correct in all
material respects, in each case, on and as of the effective time of the Merger.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated at any time prior to the effective time of the Merger (the "Effective
Time"), whether before or after approval and adoption of the Merger Agreement by
the stockholders of the Company or the stockholder of Purchaser (provided, that
if Shares are purchased pursuant to the Offer, neither Parent nor Purchaser may
in any event terminate the Merger Agreement), (1) by the agreement of each of
the boards of directors of Parent, the Purchaser and the Company, (2) by Parent,
the Purchaser or the Company if (a) the Purchaser has not accepted for payment
any Shares pursuant to the Offer prior to December 31, 1999, provided, that the
right to terminate the Merger Agreement pursuant to this clause (2)(a) will not
be available to any party whose failure to fulfill any
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obligation under the Merger Agreement has been the cause of, or resulted in, the
failure of the Purchaser to accept for payment any Shares on or before such
date, or (b) any court of competent jurisdiction in the United States or other
governmental authority shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger and such order, decree or ruling or other action has become final and
nonappealable, (3) by Parent, if the Company or any of its directors or officers
shall participate in discussions or negotiations in breach (other than an
immaterial breach) of the covenants of the Company described under "No
Solicitation by the Company; Takeover Proposals" in this Section 12, (4) by the
Company prior to the meeting of the stockholders of the Company to approve the
Merger ("Company Stockholders Meeting") if in response to a takeover proposal
which constitutes a Superior Proposal (as defined in "No Solicitation by the
Company; Takeover Proposals" in this Section 12 below) which was not solicited
by the Company and which did not otherwise result from a breach of the covenants
of the Company described under "No Solicitation by the Company; Takeover
Proposals" in this Section 12; (5) by the Company, in the event Parent or the
Purchaser materially breaches its obligations under the Merger Agreement, unless
such breach is cured within 15 days after notice to Parent by the Company, (6)
by Parent or the Purchaser, in the event the Company materially breaches its
obligations under the Merger Agreement, unless such breach is cured within 15
days after notice to the Company by Parent or the Purchaser, or (7) by Parent or
the Purchaser prior to the purchase of Shares pursuant to the Offer in the event
of a breach or failure to perform by the Company of any representation,
warranty, covenant or other agreement contained in the Merger Agreement which
(a) would give rise to the failure of a condition set forth below in paragraph
(4) or (5) described below in Section 14 and (b) cannot be cured, or has not
been cured within 15 days after the Company receives written notice from Parent
of such breach or failure to perform.
NO SOLICITATION BY THE COMPANY; TAKEOVER PROPOSALS. The Merger Agreement
provides that the Company will not, nor will it permit any of it subsidiaries
to, nor will it authorize or permit any of its, directors, officers or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly, (1) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any inquiries or
the making of any proposal which constitutes a Takeover Proposal (as defined
below) or (2) participate in any discussions or negotiations regarding any
Takeover Proposal. Notwithstanding the foregoing, if prior to the Company
Stockholders Meeting, the board of directors of the Company determines in good
faith, after consultation with outside counsel, that it is legally advisable to
do so in order to comply with its fiduciary duties to the Company's stockholders
under applicable law, the Company, in response to a Superior Proposal (as
defined below) which was not solicited by it or which did not result from a
breach by the Company of its non-solicitation obligations, and subject to
compliance with the Merger Agreement, may furnish information with respect to
the Company and its subsidiaries to any person making a Superior Proposal
pursuant to a customary confidentiality agreement and participate in discussions
or negotiations regarding such Superior Proposal.
For purposes of the Merger Agreement, a "Takeover Proposal" means any
inquiry, proposal or offer from any person (1) relating to any direct or
indirect acquisition or purchase of (a) a business that constitutes 15% or more
of the net revenues, net income or the assets of the Company and its
subsidiaries, taken as a whole, (b) 20% or more of any class of equity
securities of the Company or (c) any material equity interest in any subsidiary
of the Company, (2) relating to any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any material equity interest in any
of its subsidiaries, or (3) relating to any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement.
For purposes of the Merger Agreement, "Superior Proposal" means any
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the Shares then outstanding or all or substantially all
the assets of the Company and otherwise on terms which the board of directors of
the Company determines in its good faith judgment (based on the advice of a
financial advisor of
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nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the board of directors of
the Company, is reasonably capable of being obtained by such third party.
The Merger Agreement provides further that neither the board of directors
of the Company nor any committee thereof may (1) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such board of directors or such committee of the Offer, the
Merger or the Merger Agreement, (2) approve or recommend, or propose publicly to
approve or recommend, any Takeover Proposal or (3) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Takeover Proposal other than any such
agreement entered into concurrently with the termination of the Merger Agreement
by the Company to facilitate such action. See "Termination of the Merger
Agreement" in this Section 12.
The Merger Agreement provides that the Company must promptly advise Parent
orally and in writing of any Takeover Proposal or any request for information by
any person which the Company reasonably believes is in connection with the
preparation of a Takeover Proposal, the material terms and conditions of the
Takeover Proposal or the information requested by the person making the request
and the identity of the person making the Takeover Proposal or request for
information. The Company must promptly inform Parent of any change in the status
and material terms and conditions (including amendments or proposed amendments)
of any such Takeover Proposal or request for information.
The Merger Agreement provides that nothing contained therein will prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act
or from making any disclosure to the Company's stockholders if, in the good
faith judgment of the board of directors of the Company, after consultation with
outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law; provided, that, except as expressly permitted
by the Merger Agreement, neither the Company nor its board of directors nor any
committee thereof may withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to the Offer, the Merger Agreement or the
Merger or approve or recommend, or propose to approve or recommend, a Takeover
Proposal.
FEES AND EXPENSES; TERMINATION FEE. The Merger Agreement provides that all
fees and expenses incurred in connection with the Offer, the Merger, the Merger
Agreement and the transactions contemplated by the Merger Agreement will be paid
by the party incurring such fees or expenses, whether or not the Offer or the
Merger is consummated except that each of Parent and the Company shall bear and
pay one-half of (1) the cost and expenses incurred in connection with the
filing, printing and mailing of any proxy statement of the Company in connection
with any meeting of the stockholders of the Company to approve the merger
(including Commission filing fees) and (2) the filing fees for the pre-merger
notification and report forms under the HSR Act.
The Merger Agreement provides that the Company shall pay in same day funds
to Parent $2,000,000 under the circumstances and terms set forth below:
(1) A bona fide Superior Proposal shall have been made directly to the
stockholders of the Company generally or shall have otherwise become
publicly known or any Person shall have publicly announced an intention
(whether or not conditional) to make a Superior Proposal and thereafter the
Merger Agreement is terminated by any of Parent, the Purchaser or the
Company because the Purchaser shall not have accepted for payment any
Shares pursuant to the Offer prior to December 31, 1999, provided that the
$2,000,000 is only payable to Parent if, within twelve months of the
termination of the Merger Agreement, the Company or any of its subsidiaries
enters into any definitive agreement with respect to, or consummates, any
Superior Proposal;
(2) The Merger Agreement is terminated by Parent or the Purchaser
prior to the purchase of Shares pursuant to the Offer in the event of a
breach or a failure to perform by the Company of any representation,
warranty, covenant or other agreement contained in the Merger Agreement
which (a) would give rise to a failure of condition (4) or (5) as set forth
below in Section 14 and (b) cannot be
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cured, or has not been cured within 15 days after the Company receives
written notice from Parent of such breach or failure to perform;
(3) The Merger Agreement is terminated by the Company prior to the
Company Stockholder Meeting in response to a Superior Proposal which was
not solicited by the Company and which does not otherwise result from a
breach of the non-solicitation covenants of the Company described above
under "No Solicitation by the Company; Takeover Proposals" in this Section
12; or
(4) The Merger Agreement is terminated by Parent because the Company
or any of its directors or officers participated in discussions or
negotiations in breach (other than an immaterial breach) of the Company's
covenants described under "No Solicitation by the Company; Takeover
Proposals" in this Section 12.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that
until the consummation of the Merger, the Company will (and will cause each of
its Subsidiaries to):
(1) maintain its existence in good standing;
(2) maintain the general character of its business and properties and
conduct its business in the ordinary and usual manner consistent with past
practices, except as expressly permitted by the Merger Agreement;
(3) maintain business and accounting records consistent with past
practices; and
(4) use its reasonable best efforts (a) to preserve its business
intact, (b) to keep available to the Company the services of its present
officers and employees and (c) to preserve for the Company or such
subsidiary the goodwill of its suppliers, customers and others having
business relations with the Company or such subsidiary.
In addition, the Merger Agreement provides that unless provided for in the
Merger Agreement or approved by Parent in writing, until the consummation of the
Merger, the Company will not (and will not permit any of its Subsidiaries to):
(1) amend or otherwise change its certificate of incorporation or
by-laws;
(2) issue or sell or authorize for issuance or sale (other than any
issuance of Common Stock upon the exercise of any outstanding option or
warrant to purchase Common Stock which option or warrant was issued prior
to the date of the Merger Agreement in accordance with the terms of the
relevant stock option or warrant agreement), or grant any options or
warrants or make other agreements with respect to, any shares of its
capital stock or any other of its securities or warrants;
(3) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to
any of its capital stock;
(4) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(5) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except (a) short-term borrowings (including
borrowings under the Company's existing line of credit with Fleet National
Bank) incurred in the ordinary course of business (or to refinance existing
or maturing indebtedness) and (b) intercompany indebtedness between the
Company and any of its subsidiaries or between subsidiaries;
(6) (a) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets; (b) enter into any contract or agreement other
than in the ordinary course of business, consistent with past practice; (c)
authorize any capital commitment which is in excess of $50,000 or capital
expenditures which are, in the aggregate, in excess of $100,000, except as
otherwise disclosed in
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the Merger Agreement; or (d) enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the foregoing matters
described in these clauses (5) and (6);
(7) mortgage, pledge or subject to lien, any of its assets or
properties or agree to do so except for liens permitted by the Merger
Agreement;
(8) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets (including
securitizations), other than sales or licenses of finished goods in the
ordinary course of business consistent with past practice;
(9) assume, guarantee or otherwise become responsible for the
obligations of any other person or agree to so do;
(10) enter into or agree to enter into any employment agreement;
(11) except as otherwise disclosed in the Merger Agreement, take any
action, other than in the ordinary course of business and consistent with
past practice, with respect to accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivables);
(12) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(13) settle or compromise any pending or threatened suit, action or
claim which is material or which relates to any of the transactions
contemplated by the Merger Agreement;
(14) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the most recently audited balance sheet contained in
documents of the Company filed with the Commission or subsequently incurred
in the ordinary course of business and consistent with past practice;
(15) except in connection with the sale of the Company's products in
the ordinary course of business and consistent with past practice, sell,
assign, transfer, license, sublicense, pledge or otherwise encumber any of
the Company's intellectual property rights;
(16) except as required by law or contemplated hereby, enter into,
adopt or amend in any material respect or terminate any Company benefit
plan or any other agreement, plan or policy involving the Company or its
subsidiaries, and one or more of its directors, officers or employees, or
materially change any actuarial or other assumption used to calculate
funding obligations with respect to any pension plan, or change the manner
in which contributions to any pension plan are made or the basis on which
such contributions are determined;
(17) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of the Company or its
subsidiaries, or as contemplated by the Merger Agreement or by the terms of
any employment agreement in existence on the date of the Merger Agreement,
increase the cash compensation of any director, executive officer or other
key employee or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of the Merger Agreement to any such
Person; or
(18) announce an intention, commit or agree to do any of the
foregoing.
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, Shares by the Purchaser pursuant to
the Offer, the Purchaser will be entitled to designate such number of directors
on the board of directors of the Company as will give the Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, representation on the
Company's board of directors equal to the product of (1) the total number of
directors on the Company's board of directors and (2) the percentage that the
number of Shares purchased by the Purchaser in the Offer bears to the number of
Shares outstanding, and the Company will, at such time, cause the Purchaser's
designees to be selected by its existing
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board of directors. Subject to applicable law, the Company has agreed to take
all action requested by Parent necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Merger Agreement further provides that in the event that the
Purchaser's designees are elected to the board of directors of the Company,
until the effective time of the Merger, the board of directors of the Company
will have at least two independent directors who were directors on the date of
the Merger Agreement and who are not officers of the Company or any of its
subsidiaries. The Merger Agreement also provides that the Company will promptly,
at the option of Parent, either increase the size of the Company's board of
directors and/or obtain the resignation of such number of its current directors
as is necessary to enable the Purchaser's designees to be elected or appointed
to, and to constitute a majority of, the Company's board of directors as
provided above.
STOCK OPTIONS; WARRANTS. The Merger Agreement provides that the board of
directors of the Company (or, if appropriate, any committee administering the
Company stock plans) will adopt such resolutions and take such other actions as
may be required to terminate the Company stock plans as of the effective time of
the Merger and each then outstanding Company stock option granted under the
Company stock plans, whether vested or unvested, will be cancelled and converted
into a right to receive an amount in cash, without interest, equal to the
product of (1) the number of shares of Common Stock represented by such Company
stock option immediately prior to such cancellation and conversion multiplied by
(2) the excess, if any, by which the Offer Price exceeds the exercise price per
share with respect to such Company stock option (such payment to be net of all
applicable federal, state, local or foreign taxes). Prior to the effective time
of the Merger, the Company will obtain all necessary consents from, and provide
(in a form acceptable to Parent) any required notices to, holders of Company
stock options and amend the terms of the Company stock plans, in each case, as
is necessary to give effect to the immediately preceding sentence.
The Merger Agreement also provides that, prior to the effective time of the
Merger, the Company will take all actions to receive from each holder of an
outstanding warrant to purchase shares of Common Stock an agreement that, as of
the effective time of the Merger, such warrant will be converted into a right of
such holder to receive from the Depositary the consideration set forth in the
next sentence at the same time that each such holder is entitled to receive
payment for shares of Common Stock from the Surviving Corporation in connection
with the Merger. Each holder of a warrant will be entitled to receive from the
Depositary in respect of the shares of Common Stock to be issued upon the
exercise of such warrant, an amount in cash, without interest, equal to the
product of (1) the number of shares of Common Stock subject to such warrant
immediately prior to the effective time of the Merger and (2) the excess, if
any, by which the Offer Price exceeds the exercise price per share that was
applicable with respect to such warrant.
EMPLOYEE MATTERS. The Merger Agreement provides that as soon as
practicable after the Merger, Parent will provide, or cause to be provided,
employee benefit plans, programs and arrangements to employees of the Company
that are the same as those made generally available to non-represented employees
of Parent who are hired by Parent after December 31, 1998. Until then, Parent
will provide, or cause to be provided, the employee benefit plans, programs and
arrangements of the Company provided to employees of the Company as of the date
of the Merger Agreement.
The Merger Agreement also provides that with respect to each benefit plan,
program practice, policy or arrangement maintained by Parent in which employees
of the Company subsequently participate, for purposes of determining vesting and
entitlement to benefits, including for severance benefits and vacation
entitlement (but not for accrual of pension benefits), service with the Company
(or predecessor employers to the extent the Company provides past service
credit) will be treated as service with Parent, provided, that such service
shall not be recognized to the extent that such recognition would result in a
duplication of benefits. Such service also shall apply for purposes of
satisfying any waiting periods, evidence of insurability requirements, or the
application of any pre-existing condition limitations. Each Parent plan will
waive pre-existing condition limitations to the same extent waived under the
applicable Company benefit plan. Company employees will be given credit for
amounts paid under a corresponding benefit plan during the same period for
purposes of applying deductibles, copayments and out-of-pocket maximums as
though such amounts had been paid in accordance with the terms and conditions of
the Parent plan.
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The Merger Agreement provides that, prior to the Merger, the Company shall
take all necessary actions or agreements to terminate the retirement plan for
employees of the Company in accordance with its terms. The effective date of
such termination will in no event be later than the effective time of the
Merger. Prior to such termination, the Company shall file with respect thereto a
determination letter application on Form 5310 with the IRS. In connection with
such termination, the assets of such plan (including any excess assets), net of
expenses, will be allocated among participants based on the accrued benefit
obligation.
The Merger Agreement also provides that prior to the Merger, the Company
will terminate its supplemental retirement agreements. In connection therewith,
accrued benefits will be paid to each participant in such plan in accordance
with the procedures described in each such supplemental retirement agreement.
Also prior to the Merger, the Company will terminate its retirement plan for
outside directors in accordance with the terms of such plan. In connection
therewith, accrued benefits will be paid to each participant in the retirement
plan in accordance with the procedures described in that plan.
INDEMNIFICATION. From and after the consummation of the Offer, Parent
will, or will cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of the Company to indemnify each person who is or was a
director or officer (an "Indemnified Party") of the Company or any of its
subsidiaries pursuant to any indemnification provision of the Company's
certificate of incorporation or by-laws as each is in effect on the date of the
Merger Agreement. In addition, the Merger Agreement provides that, for a period
of six years after the consummation of the Offer, Parent shall cause to be
maintained in effect the current officers' and directors' liability insurance
maintained by the Company with respect to the Indemnified Parties (provided that
Parent may elect either (1) to require the Company to obtain prior to the Merger
coverage of the type contemplated by section 10 of the Company's existing
directors, officers and corporate liability insurance policy or (2) to
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are no less advantageous to the
Indemnified Parties than such existing insurance) covering acts or omissions
occurring prior to the effective time of the Merger.
REASONABLE BEST EFFORTS. Upon the terms and subject to the conditions set
forth in the Merger Agreement, Parent, the Purchaser and the Company have each
agreed to use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with each
other in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by the Merger Agreement, including (1) the
taking of all reasonable acts necessary to cause the conditions of the Offer to
be satisfied, (2) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from governmental entities and the making of all
necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any governmental entity, (3) the obtaining of all necessary
consents, approvals or waivers from third parties, (4) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging the Merger Agreement or the consummation of the transactions
contemplated by the Merger Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other governmental entity
vacated or reversed, and (5) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, the Merger Agreement. In connection with and
without limiting the foregoing, but subject to the terms and conditions of the
Merger Agreement, the Company and its board of directors will (1) take all
action necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger Agreement,
and (2) if any state takeover statute or similar statute or regulation becomes
applicable to the Offer, the Merger, the Merger Agreement or any other
transaction contemplated by the Merger Agreement, take all action necessary to
ensure that the Offer, the Merger, the Merger Agreement and the other
transactions contemplated by the Merger Agreement may be consummated as promptly
as practicable on the terms contemplated by the Offer and the Merger Agreement
and otherwise to minimize the effect of such statute or regulation on the Offer,
the Merger, the Merger Agreement and the other transactions contemplated by the
Merger Agreement.
The Merger Agreement further provides that the Company will give prompt
notice to Parent, and Parent will give prompt notice to the Company, of (1) the
occurrence, or non-occurrence, of any event which would
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be likely to cause any representation or warranty contained in the Merger
Agreement to be untrue or inaccurate in any material respect or any covenant,
condition or agreement contained in the Merger Agreement not to be complied with
or satisfied or (2) any failure of the Company, Parent or the Purchaser to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under the Merger Agreement; provided that no such
notification will limit or otherwise affect the remedies available to the party
receiving the notice.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties.
The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit (c)(1)
to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed with the
Commission on the date hereof (the "Schedule 14D-1") and incorporated by
reference herein. The Merger Agreement should be read in its entirety for a more
complete description of the matters summarized above.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, holders of Shares will have
certain rights pursuant to the provisions of Section 262 of the DGCL to dissent
and demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. If the statutory procedures were complied with, such rights could
lead to a judicial determination of the fair value required to be paid in cash
to such dissenting holders for their Shares. In determining the fair value of
the Shares, the court is required to take into account all relevant factors.
Accordingly, any such judicial determination of the fair value of Shares could
be based upon considerations other than or in addition to the Offer Price or the
market value of the Shares, including the asset value and investment value of
the Shares. The value so determined could be more or less than the Offer Price
or the Merger Consideration.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his right to appraisal, as
provided in the DGCL, the Shares of such stockholder will be converted into the
Merger Consideration in accordance with the Merger Agreement.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any
applicable Federal law operative at the time of its consummation. Rule 13e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the termination of the
Offer. If applicable, Rule 13e-3 would require, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the Merger and the consideration offered to minority
stockholders be filed with the Commission and disclosed to minority stockholders
prior to consummation of the Merger.
OTHER MATTERS. Except as otherwise described in this Offer to Purchase,
the Purchaser and Parent have no current plans or proposals that would relate
to, or result in, any extraordinary corporate transaction involving the Company
or any of its subsidiaries, such as a merger, reorganization or liquidation
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries, any change
in the present board of directors of the Company or management of the Company,
any material change in the Company's capitalization or dividend policy or any
other material change in the Company's business, corporate structure or
personnel.
13. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the next paragraph, and nothing
herein shall constitute a waiver by the Purchaser or
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Parent of any of its rights under the Merger Agreement or a limitation of
remedies available to the Purchaser or Parent for any breach of the Merger
Agreement, including termination thereof.
If, on or after the date of the Merger Agreement, any stock split,
combination, reclassification or stock dividend with respect to the outstanding
Shares, any change or conversion of outstanding shares of Common Stock into
other securities or any other dividend or distribution with respect to the
outstanding Shares should occur, appropriate and proportionate adjustments shall
be made to the Merger Consideration.
14. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to pay
for any Shares tendered pursuant to the Offer unless (1) the Minimum Condition
shall have been satisfied and (2) any waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall have expired or
been terminated. Furthermore, the Purchaser will not be required to accept for
payment or, subject as aforesaid, to pay for any Shares not theretofore accepted
for payment or paid for, and may, in accordance with the provisions of the
Merger Agreement described in the subsection entitled "Termination of the Merger
Agreement" in Section 12 above, terminate the Merger Agreement or amend the
Offer with the consent of the Company, if, upon the scheduled expiration date of
the Offer (as extended, if required, pursuant to the provisions discussed in the
fifth paragraph of Section 1 above), any of the following conditions exists and
is continuing and does not result principally from the breach by Parent or the
Purchaser of any of their obligations under the Merger Agreement:
(1) there shall be instituted or pending by any governmental entity
any suit, action or proceeding (a) challenging the acquisition by Parent or
the Purchaser of any Shares under the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement or seeking to obtain from the Company, Parent or the Purchaser
any damages that are material in relation to the Company and its
subsidiaries as a whole, (b) seeking to prohibit or materially limit the
ownership or operation by the Company, Parent or any of Parent's
subsidiaries of all or a portion of the business or assets of the Company
or Parent and its subsidiaries, taken as a whole, or to compel the Company
or Parent and its subsidiaries to dispose of or hold separate all or a
portion of the business or assets of the Company or Parent and their
subsidiaries, taken as a whole, in each case as a direct result of the
Offer or any of the other transactions contemplated by the Merger
Agreement, (c) seeking to impose material limitations on the ability of
Parent or the Purchaser to acquire or hold, or exercise full rights of
ownership of, any Shares to be accepted for payment pursuant to the Offer,
including, without limitation, the right to vote such Shares on all matters
properly presented to the stockholders of the Company, (d) seeking to
prohibit Parent or any of its subsidiaries from effectively controlling in
any material respect any material portion of the business or operations of
the Company, (e) that could reasonably be expected to require the
divestiture by Parent or the Purchaser of Shares, in the case of any of the
foregoing in clauses (b), (c) or (d), which could reasonably be expected,
individually or in the aggregate, to have a material adverse effect on the
businesses of the Company and its subsidiaries, or (f) that could
reasonably be expected to result in a material adverse effect on the
Company or Parent;
(2) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, by any governmental entity or court, other than
the application to the Offer or the Merger of applicable waiting periods
under the HSR Act, that would result in any of the consequences referred to
in clauses (a) through (f) of paragraph (1) above;
(3) there shall have occurred any events or changes which have had or
which could reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Company;
26
<PAGE> 29
(4) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case, at the date of the Merger Agreement and at the scheduled or extended
expiration of the Offer;
(5) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any
material agreement or material covenant of the Company to be performed or
complied with by it under the Merger Agreement, which failure to perform or
comply cannot be cured, or has not been cured within 15 business days after
the Company receives written notice from Parent of such breach or failure
to perform;
(6) the Merger Agreement shall have been terminated in accordance with
its terms;
(7) any consent (other than the filing of the Certificate of Merger or
Company Stockholder Approval if required by the DGCL) required to be filed,
occurred or been obtained by the Company or any of its Subsidiaries in
connection with the execution and delivery of the Merger Agreement, the
Offer and the consummation of the transactions contemplated by the Merger
Agreement shall not have been filed or obtained or shall not have occurred,
except where the failure to obtain such consent could not reasonably be
expected to have, individually or in the aggregate, a material adverse
effect on the Company;
(8) the Company's board of directors (a) shall have withdrawn, or
modified or changed in a manner adverse to Parent or the Purchaser
(including by amendment of the Schedule 14D-9) its recommendation of the
Offer, the Merger Agreement or the Merger, (b) shall have recommended a
Superior Proposal, (c) shall have adopted any resolution to effect any of
the foregoing or (d) upon request of Parent or the Purchaser, shall fail to
reaffirm its approval of recommendation of the Offer, the Merger Agreement
or the Merger; or
(9) any person or "group" (within the meaning of Section 13(d)(3) of
the Exchange Act), other than Parent, the Purchaser or their affiliates or
any group of which any of them is a member, shall have acquired or
announced its intention to acquire beneficial ownership (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of the Shares;
and, in the good faith judgment of Parent or the Purchaser, in its sole
discretion, make it inadvisable to proceed with such acceptance of Shares for
payment or the payment therefor.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of Parent and the Purchaser and (except for the Minimum Condition),
subject to the terms of the Merger Agreement, may be waived by Parent and the
Purchaser in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or the Purchaser at any time to exercise any
of the foregoing rights will not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances will
not be deemed a waiver with respect to any other facts and circumstances and
each such right will be deemed an ongoing right that may be asserted at any time
and from time to time.
15. CERTAIN LEGAL MATTERS.
Based on a review of publicly available filings made by the Company with
the Commission and other publicly available information concerning the Company,
neither the Purchaser nor Parent is aware of any license or regulatory permit
that appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the Purchaser's
acquisition of Shares as contemplated herein or of any approval or other action,
except as otherwise described in this Section 15, by any governmental entity
that would be required for the acquisition or ownership of Shares by the
Purchaser as contemplated herein. Should any such approval or other action be
required, the Purchaser and Parent currently contemplate that such approval or
other action will be sought, except as described below under "State Takeover
Laws". Except as otherwise expressly described in this Section 15, while the
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other
27
<PAGE> 30
action, if needed, would be obtained or would be obtained without substantial
conditions or that failure to obtain any such approval or other action might not
result in consequences adverse to the Company's business or that certain parts
of the Company's business might not have to be disposed of if such approvals
were not obtained or such other actions were not taken or in order to obtain any
such approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Shares tendered. See Section 14 for certain
conditions to the Offer.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, stockholders, executive offices or places or business in such states. In
Edgar v. MITE Corp., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS Corp.
v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law, and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders; provided that such laws were applicable
only under certain conditions.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined
generally as any beneficial owner of 15% or more of the outstanding voting stock
of the corporation) unless, among other things, the corporation's board of
directors has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company's board of directors has approved the Merger Agreement
and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore,
Section 203 of the DGCL is inapplicable to the Offer and the Merger.
Based on information supplied by the Company, the Purchaser does not
believe that any other state takeover statutes purport to apply to the Offer,
the Merger or the Merger Agreement. Neither the Purchaser nor Parent has
currently complied with any state takeover statute or regulation. The Purchaser
reserves the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer, the Merger or the Merger Agreement and
nothing in this Offer to Purchase or any action taken in connection with the
Offer, the Merger or the Merger Agreement is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer,
the Merger or the Merger Agreement and if an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer, the Merger
or the Merger Agreement, the Purchaser might be required to file certain
information with, or to receive approvals from, the relevant state authorities,
and the Purchaser might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer, or be delayed in consummating the Offer or the
Merger. In such case, the Purchaser may not be obliged to accept for payment or
pay for any Shares tendered pursuant to the Offer.
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer,
the purchase of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by Parent of
a Notification and Report Form with respect to the Offer, unless Parent receives
a request for additional information or documentary material from the Antitrust
Division or the FTC or unless early termination of the waiting period is
granted. Parent is in the process of making such filing. If, within the initial
15-day waiting period, either the Antitrust Division or the FTC requests
additional information or material from Parent concerning the Offer, the waiting
period will be extended and would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance by Parent with
such request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Parent. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or the
FTC raises substantive issues in connection with a proposed transaction, the
parties frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue.
28
<PAGE> 31
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of Parent or
its subsidiaries, or the Company or its subsidiaries. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer on antitrust grounds will not
be made or, if such a challenge is made, of the results thereof.
LITIGATION. After the announcement of the Merger Agreement by Parent and
the Company on July 15, 1999, two putative class action lawsuits relating to the
Merger were filed in the Court of Chancery for the State of Delaware: Chase v.
Harrison et. al., C.A. No. 17312-NC and Airmont Plaza Associates et. al. v.
SpecTran Corporation et. al., C.A. No. 17314-NC.
The lawsuits were filed by plaintiffs claiming to be stockholders of the
Company, purportedly on behalf of all the Company's stockholders, against the
Company, members of the board of directors of the Company and Parent. The
plaintiffs in both lawsuits allege, among other things, that the terms of the
proposed Merger were not the result of an auction process or active market
check, that the $9.00 per share price offered by Parent is inadequate, and that
the Company's directors breached their fiduciary duties to the stockholders of
the Company in connection with the Merger Agreement. Both lawsuits seek to have
the Merger enjoined or, if the Merger is completed, to have it rescinded and to
recover unspecified damages, fees and expenses. The Company and Parent intend to
vigorously oppose these lawsuits.
16. FEES AND EXPENSES.
The Purchaser has retained Morrow & Co., Inc. to act as the Information
Agent and The Bank of New York to serve as the Depositary in connection with the
Offer. The Information Agent and the Depositary each will receive reasonable and
customary compensation for their services, be reimbursed for certain reasonable
out-of-pocket expenses and be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
Federal securities laws.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent and the
Depositary) in connection with the solicitation of tenders of Shares pursuant to
the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the
Purchaser upon request for customary mailing and handling expenses incurred by
them in forwarding materials to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither the Purchaser or Parent is aware of any jurisdiction in
which the making of the Offer or the tender of Shares in connection therewith
would not be in compliance with the laws of such jurisdiction. To the extent the
Purchaser or Parent becomes aware of any state law that would limit the class of
offerees in the Offer, the Purchaser will amend the Offer and, depending on the
timing of such amendment, if any, will extend the Offer to provide adequate
dissemination of such information to holders of Shares prior to the expiration
of the Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
29
<PAGE> 32
The Purchaser or Parent has filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act
setting forth its recommendation with respect to the Offer and the reasons for
such recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Sections 8 and 9 (except that they will not be available at the regional offices
of the Commission).
SEATTLE ACQUISITION INC.
July 21, 1999
30
<PAGE> 33
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address,
present principal occupation or employment and five-year employment history of
each of the directors and executive officers of Parent are set forth below.
Unless otherwise indicated, the business address of each such director and each
such executive officer is 600 Mountain Avenue, Murray Hill, New Jersey 07974.
Except as set forth below, the directors and executive officers listed below are
citizens of the United States.
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR
NAME AND BUSINESS ADDRESS EMPLOYEE 5-YEAR EMPLOYMENT HISTORY
------------------------- ----------------------------------
<S> <C>
Paul A. Allaire...................... Director of Parent since 1996. Chairman of the Board of
Xerox Corporation Xerox Corporation (document processing services and
800 Long Ridge Road products) since 1991. Chief Executive Officer of Xerox
P.O. Box 1600 Corporation (1990-April 1999). Director of Sara Lee Corp.,
Stamford, CT 06904 SmithKline Beecham p.l.c., J.P. Morgan & Co., Inc. and
Priceline.com Incorporated. Committees: Member of the Audit
and Finance and Corporate Governance and Compensation
Committees. Age: 61.
Carla A. Hills....................... Director of Parent since 1996. Chairman of the Board and
Hills & Company Chief Executive Officer of Hills & Company (international
1200 Nineteenth St., N.W. consultants) since 1993 and United States Trade
Washington, DC 20036 Representative (1989-1993). Director of American
International Group, Inc., Chevron Corp. and Time Warner
Inc. Committees: Member of the Corporate Governance and
Compensation Committee. Age: 65.
Drew Lewis........................... Director of Parent since 1996. Retired Chairman of the Board
Box 70 and Chief Executive Officer of Union Pacific Corporation
Lederach, PA 19450 (1987-1996). Director of Aegis Communications Group, Inc.,
American Express Company, FPL Group, Inc., Gannett Co.,
Inc., Millennium Bank, Union Pacific Resources Group Inc.
and Gulfstream Aerospace Corporation. Committees: Member of
the Audit and Finance and Corporate Governance and
Compensation Committees. Age: 67.
Richard A. McGinn.................... Chairman of the Board and Chief Executive Officer of Parent
since February 1998, Chief Executive Officer and President
of Parent since October 1997 and Director of Parent since
1996. President and Chief Operating Officer of Parent
(1996-1997). Executive Vice President of AT&T and Chief
Executive Officer of the AT&T Network Systems Group
(1994-1996) and President and Chief Operating Officer of the
AT&T Network Systems Group (1993-1994). Director of Oracle
Corporation and American Express Company. Age: 52.
Paul H. O'Neill...................... Director of Parent since 1996. Chairman of the Board of
ALCOA Alcoa Inc. (production of aluminum) since 1987. Chief
201 Isabella Street Executive Officer of Alcoa Inc. (1987-May 1999). Chairman of
Pittsburgh, PA 15212-5858 the Rand Corporation. Director of Eastman Kodak Company, the
National Association of Securities Dealers, Inc., the Gerald
R. Ford Foundation and Manpower Demonstration Research
Corporation. Committees: Member of the Audit and Finance and
Corporate Governance and Compensation Committees. Age: 63.
</TABLE>
I-1
<PAGE> 34
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR
NAME AND BUSINESS ADDRESS EMPLOYEE 5-YEAR EMPLOYMENT HISTORY
------------------------- ----------------------------------
<S> <C>
Donald S. Perkins.................... Director of Parent since 1996. Retired Chairman of the Board
One First National Plaza and Chief Executive Officer of Jewel Companies, Inc.
21 South Clark Street (diversified retailer) (1970-1980). Non-Executive Chairman
Chicago, IL 60603-2006 of Kmart Corp. (1995). Director of Aon Corp., LaSalle Hotel
Properties and Nanophase Technologies Corporation.
Committees: Chairman of the Audit and Finance Committee and
Member of the Corporate Governance and Compensation
Committee. Age: 72.
Donald K. Peterson................... Executive Vice President and Chief Financial Officer of
Parent since 1996. Joined AT&T in 1995 as Vice President and
Chief Financial Officer of AT&T's Communications Services
Group. Joined Northern Telecom, Inc. in 1976 and served in
various executive positions there including President of
Nortel Communications Systems, Inc. (1993-1995). Age: 49.
Richard J. Rawson.................... Senior Vice President and General Counsel of Parent since
1996. Secretary of Parent from 1996 to February 1999. Joined
AT&T Law Division in 1984 and was appointed Vice President,
Law -- AT&T Network Systems Group in 1992. Age: 46.
Patricia F. Russo.................... Executive Vice President, Strategy, Business Development and
Corporate Operations of Parent since 1998. Executive Vice
President, Corporate Staff Operations of Parent (1997-1998),
Executive Vice President, Chief Staff Officer of Parent
(1996-1997) and President, Business Communications Systems
business unit of Parent (1996). President, Global Business
Communications Systems of AT&T (1993-1996). Age: 46.
Henry B. Schacht..................... Director of Parent since 1996. Chairman of the Board of
E.M. Warburg, Pincus & Parent (1996-1998). Chief Executive Officer of Parent
Co., LLC (1996-1997). Director and Senior Advisor of E.M. Warburg,
466 Lexington Avenue Pincus & Co., LLC since March 1999 (global venture capital
New York, NY 10017 company). Chairman (1977-1995) and Chief Executive Officer
(1973-1994) of Cummins Engine Company, Inc. (designer and
manufacturer of diesel engines). Director of The Chase
Manhattan Corporation and The Chase Manhattan Bank, N.A.,
Alcoa Inc., Cummins Engine Company, Inc., Johnson & Johnson,
Knoll, Inc. and the New York Times Co. Age: 64.
Daniel C. Stanzione.................. Executive Vice President and Chief Operating Officer of
Parent since 1997, President, Broadband Networks Group of
Parent (since January 1999), Bell Laboratories (since 1996)
and Network Systems business unit of Parent (1996-1997).
President, AT&T Bell Laboratories (1995-1996) and President,
Global Public Networks (1994-1995) and Switching Systems
(1993-1994), both units of the AT&T Network Systems Group.
Age: 53.
Franklin A. Thomas................... Director of Parent since 1996. Consultant to the TFF Study
TFF Study Group Group since 1996 (a non-profit initiative assisting
Fuller Building development in southern Africa). Retired President of The
595 Madison Avenue Ford Foundation (1979-1996). Director of Alcoa Inc.,
New York, NY 10022 Citigroup N.A., Cummins Engine Company, Inc. and PepsiCo,
Inc. Committees: Chairman of the Corporate Governance and
Compensation Committee and Member of the Audit and Finance
Committee. Age: 65.
</TABLE>
I-2
<PAGE> 35
<TABLE>
<CAPTION>
POSITION WITH PARENT;
PRINCIPAL OCCUPATION OR
NAME AND BUSINESS ADDRESS EMPLOYEE 5-YEAR EMPLOYMENT HISTORY
------------------------- ----------------------------------
<S> <C>
Ben J. M. Verwaayen.................. Executive Vice President and Chief Operating Officer of
Parent since 1997 and Executive Vice President-President
International (1997). President of PTT Telecom (national
telecommunications operator of the Netherlands) from 1988
through September 1997. Co-founder of Unisource
(pan-European alliance of Telia of Sweden, Swiss Telecom and
PTT Telecom). Citizen of The Netherlands. Age: 47.
John A. Young........................ Director of Parent since 1996. Vice Chairman of Novell, Inc.
Hewlett-Packard Co. since 1997 (provider of directory-enabled networking
3200 Hillview Avenue software). Retired President and Chief Executive Officer of
Palo Alto, CA 94304 Hewlett-Packard Company (manufacturer of measurement and
computation products) (1978-1992). Director of Wells Fargo
Bank, Wells Fargo & Co., Chevron Corp., International
Integration Incorporated, SmithKline Beecham p.l.c.,
Affymetrix, Inc. and Novell, Inc. Committees: Member of the
Corporate Governance and Compensation Committee. Age: 67.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business
address, present principal occupation or employment and five-year employment
history of each of the directors and executive officers of the Purchaser are set
forth below. The business address of the directors and executive officers listed
below is 600 Mountain Avenue, Murray Hill, New Jersey 07974. Except as set forth
below, the directors and executive officers listed below are citizens of the
United States.
<TABLE>
<CAPTION>
POSITION WITH THE PURCHASER;
PRINCIPAL OCCUPATION OR
NAME EMPLOYEE 5-YEAR EMPLOYMENT HISTORY
- ---- ----------------------------------
<S> <C>
William R. Spivey.................... Group President, Network Products Group of Parent since
October 1997 and President of the Purchaser since June 1999.
Previously Dr. Spivey was Vice President, Systems and
Components, Microelectronics business unit of Parent. Joined
AT&T in 1994. Previously Dr. Spivey was President of
Tektronix Development Company for Tektronix, Inc. based in
Oregon. He has also held senior management positions for
Honeywell, Inc. and General Electric in various systems
control, computer and semiconductor units. Age: 53.
Carol E. Kirby....................... Corporate Counsel for the Network Products Group of Parent
since 1998 and Director and Vice President of the Purchaser
since June 1999. Corporate counsel for Parent and AT&T Corp.
since 1991. Age: 45.
Pamela F. Craven..................... Vice President -- Law of Parent since 1996 and Secretary of
Parent since February 1999. Director and Vice President of
the Purchaser since June 1999. Joined AT&T Corp. Law
Division in 1991. Age: 45.
Justin C. Choi....................... Corporate Counsel in the Mergers and Acquisitions Law Group
of Parent since 1997 and Director and Secretary of the
Purchaser since June 1999. Associate at Paul, Hastings,
Janofsky & Walker (law firm) (1990-1997). Citizen of the
Republic of Korea. Age: 33.
</TABLE>
I-3
<PAGE> 36
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand/Overnight Courier:
(for Eligible Institutions
Tender & Exchange Department only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Delivery Window
New York, New York 10286-1248 Confirm by Telephone New York, New York 10286
1-800-507-9357
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A stockholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue
5th Floor
New York, NY 10022
Banks and Brokerage Firms call:
(800) 662-5200
Shareholders please call:
(800) 566-9061
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SPECTRAN CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 21, 1999
BY
SEATTLE ACQUISITION INC.
A WHOLLY OWNED SUBSIDIARY OF
LUCENT TECHNOLOGIES INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, AUGUST 17, 1999 UNLESS EXTENDED.
The Depositary for the Offer is:
THE BANK OF YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight Courier:
Tender & Exchange Department (For Eligible Institutions Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 Confirmation by Telephone: New York, New York 10286
1-800-507-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
- ------------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described herein are being tendered. See Instruction
4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase (as defined below)) is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at the Book-Entry Transfer Facility (as
defined in and pursuant to the procedures set forth in Section 2 of the Offer to
Purchase). Stockholders who deliver Shares by book-entry transfer are referred
to herein as "Book-Entry Stockholders" and other Stockholders are referred to
herein as "Certificate Stockholders." Stockholders whose certificates for Shares
are not immediately available or who cannot deliver either the certificates for,
or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase)
with respect to, their Shares and all other documents required hereby to the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase) must tender their Shares in accordance with the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
The Depository Trust Company Account Number
Transaction Code Number
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s)
Date of Execution of Notice of Guaranteed Delivery
If delivered by book-entry transfer check box: [ ]
The Depository Trust Company Account Number
Transaction Code Number
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Seattle Acquisition Inc., a Delaware
corporation (the "Purchaser") which is a wholly owned subsidiary of Lucent
Technologies Inc., a Delaware corporation ("Parent"), the above-described shares
of Common Stock, par value $.10 per share (the "Shares"), of SpecTran
Corporation, a Delaware corporation (the "Company"), upon the terms and subject
to the conditions set forth in the Purchaser's Offer to Purchase dated July 21,
1999 (the "Offer to Purchase"), and this Letter of Transmittal (which, together
with any amendments or supplements thereto or hereto, collectively constitute
the "Offer"), receipt of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, the Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities or rights issued or issuable in respect thereof on or after July 15,
1999), and irrevocably constitutes and appoints The Bank of New York (the
"Depositary"), the true and lawful agent and attorney-in-fact of the
undersigned, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to the full extent
of the undersigned's rights with respect to such Shares (and any such other
Shares or securities or rights), (a) to deliver certificates for such Shares
(and any such other Shares or securities or rights) or transfer ownership of
such Shares (and any such other Shares or securities or rights) on the account
books maintained by the Book-Entry Transfer Facility together, in any such case,
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Purchaser, (b) to present such Shares (and any such other Shares
or securities or rights) for transfer on the Company's books and (c) to receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other Shares or securities or rights), all in accordance
with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Shares (and any and all other shares or other securities or rights issued or
issuable in respect of such Shares on or after July 15, 1999) and, when the same
are accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances, and
the same will not be subject to any adverse claim. The undersigned, upon
request, will execute any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the tendered Shares (and any and all such other Shares or securities
or rights).
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Justin C. Choi and Carol E.
Kirby, and each of them, and any other designees of the Purchaser, the
attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote at any annual, special or adjourned meeting of the
Company's stockholders or otherwise in such manner as each such attorney-in-fact
and proxy or his substitute shall in his or her sole discretion deem proper with
respect to, to execute any written consent concerning any matter as each such
attorney-in-fact and proxy or his or her substitute shall in his or her sole
discretion deem proper with respect to, and to otherwise act as each such
attorney-in-fact and proxy or his or her substitute shall in his or her sole
discretion deem proper with respect to, the Shares tendered hereby that have
been accepted for payment by the Purchaser prior to the time any such action is
taken and with respect to which the undersigned is entitled to vote (and any and
all other Shares or other securities or rights issued or issuable in respect of
such Shares on or after July 15, 1999). This appointment is effective when, and
only to the extent that, the Purchaser accepts for payment such Shares as
provided in the Offer to Purchase. This power of attorney and proxy are
irrevocable and are granted in consideration of the acceptance for payment of
such Shares in accordance with the terms of the Offer. Upon such acceptance for
payment, all prior powers of attorney, proxies and consents given by the
undersigned with respect to such Shares (and any such other Shares or securities
or rights) will, without further action, be revoked and no
3
<PAGE> 4
subsequent powers of attorney, proxies, consents or revocations may be given
(and, if given, will not be deemed effective) by the undersigned.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the check
for the purchase price and/or return any certificates for Shares not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Shares
Tendered." In the event that both "Special Delivery Instructions" and "Special
Payment Instructions" are completed, please issue the check for the purchase
price and/or return any certificates for Shares not tendered or accepted for
payment (and any accompanying documents, as appropriate) in the name of, and
deliver such check and/or return such certificates (and any accompanying
documents, as appropriate) to, the person or persons so indicated. Please credit
any Shares tendered herewith by book-entry transfer that are not accepted for
payment by crediting the account at the Book-Entry Transfer Facility. The
undersigned recognizes that the Purchaser has no obligation pursuant to "Special
Payment Instructions" to transfer any Shares from the name of the registered
holder thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Shares represented by the lost or destroyed certificates:
__________.
4
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than
the undersigned.
Issue: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(EMPLOYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned,
or to the undersigned at an address other than that above.
Mail: [ ] Check [ ] Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(EMPLOYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
------------------------------------------------------------
5
<PAGE> 6
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S))
Dated:
- --------------------------- , 1999
(Must be signed by registered holder(s) as name(s) appear(s) on the
certificate(s) for the Shares or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.
- ----------------------------------------------------------------------------
Employer Identification or Social Security Number
- ----------------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.
- ----------------------------------------------------------------------------
Dated:
- --------------------------- , 1999
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS
AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in the Book-Entry Transfer Facility's system whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
herewith, unless such registered holder(s) has completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by stockholders either if certificates are to be forwarded herewith or, unless
an Agent's Message (as defined below) is utilized, if delivery of Shares is to
be made pursuant to the procedures for book-entry transfer set forth in Section
2 of the Offer to Purchase. For a stockholder to validly tender Shares pursuant
to the Offer, either (a) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and either certificates
for tendered Shares must be received by the Depositary at one of such addresses
or such Shares must be delivered pursuant to the procedures for book-entry
transfer set forth herein (and a Book-Entry Confirmation received by the
Depositary), in each case prior to the Expiration Date, or (b) the tendering
stockholder must comply with the guaranteed delivery procedures set forth below
and in Section 2 of the Offer to Purchase.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date, such stockholder's tender may be effected by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase.
Pursuant to such procedures, (a) such tender must be made by or through an
Eligible Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Purchaser, must
be received by the Depositary prior to the Expiration Date and (c) the
certificates for all tendered Shares in proper form for transfer (or a
Book-Entry Confirmation with respect to all such Shares), together with a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and any other required documents, must be received
by the Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery as provided in Section 2 of the Offer to Purchase.
A "trading day" is any day on which the New York Stock Exchange, Inc. is open
for business.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT
7
<PAGE> 8
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (Applicable to Certificate Stockholders Only). If
fewer than all the Shares evidenced by any certificate submitted are to be
tendered, fill in the number of Shares that are to be tendered in the box
entitled "Number of Shares Tendered." In any such case, new certificate(s) for
the remainder of the Shares that were evidenced by the old certificate(s) will
be sent to the registered holder, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the acceptance
for payment of, and payment for, the Shares tendered herewith. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
to, a person other than the registered owner(s). Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any person(s) other than the registered owner(s), or
if tendered certificates are registered in the name(s) of any person(s) other
than the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered owner(s) or such person(s))
payable on account of the transfer to such person(s) will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not accepted for payment are to
be returned to, a person other than the signer of this
8
<PAGE> 9
Letter of Transmittal or if a check is to be sent and/or such certificates are
to be returned to a person other than the signer of this Letter of Transmittal
or to an address other than that shown above, the appropriate boxes on this
Letter of Transmittal should be completed.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its
sole discretion to waive any of the specified conditions of the Offer, in whole
or in part, in the case of any Shares tendered, except for the condition that
such number of Shares representing a majority of the outstanding Shares
(determined on a fully diluted basis for all outstanding stock options and any
other rights to acquire Shares on the date of the purchase) be validly tendered
and not withdrawn prior to the expiration of the Offer, which condition may not
be waived without the prior written consent of the Company.
9. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of
Federal income tax on payments of cash pursuant to the Offer, a stockholder
surrendering Shares in the Offer must, unless an exemption applies, provide the
Depositary with such stockholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 below in this Letter of Transmittal and certify
under penalty of perjury that such TIN is correct and that such stockholder is
not subject to backup withholding. If a stockholder does not provide such
stockholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a penalty on such
stockholder and the payment of cash to such stockholder pursuant to the Offer
may be subject to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the U.S. federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the stockholder upon filing an
income tax return.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at its address set forth below.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost. The stockholder will then be instructed as to the steps that must
be taken in order to replace the certificate. This Letter of Transmittal and
related documents cannot be processed until the procedures for replacing lost or
destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH ANY
REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY
TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST
BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER
CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY
OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY
TRANSFER, IN EACH CASE, PRIOR TO THE EXPIRATION DATE, OR THE
TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED
DELIVERY.
9
<PAGE> 10
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder is required to provide the
Depositary such stockholder's TIN (i.e., social security number or employer
identification number) on Substitute Form W-9 (or otherwise establish a basis
for exemption from backup withholding) and certify under penalty of perjury that
such TIN is correct and that such stockholder is not subject to backup
withholding. If the Shares are held in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report. If the Depositary is not provided with a
stockholder's correct TIN, the stockholder or other payee may be subject to a
penalty imposed by the Internal Revenue Service. In addition, any amounts
payable to such stockholder in connection with the Offer may be subject to
backup withholding at a 31% rate.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
10
<PAGE> 11
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: THE BANK OF NEW YORK
- ----------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT -------------------------------
FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE OR
PAYER'S REQUEST FOR -------------------------------
TAXPAYER IDENTIFICATION Employer Identification
NUMBER (TIN) Number(s)
-----------------------------------------------------------------------------------------
PART 2 -- Certification -- Under penalties of
perjury, I certify that: PART 3 --
(1) the number shown on this form is my correct Awaiting TIN
Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and [ ]
(2) I am not subject to backup withholding because ---------------------------------
(a) I am exempt from backup withholding or (b) I have
not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding PART 4 --
as a result of a failure to report all interest Exempt TIN
or dividends or (c) the IRS has notified me that
I am no longer subject to backup withholding. [ ]
-----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 above if you have
been notified by the IRS that you are subject to backup withholding because of under
reporting interest or dividends on your tax returns. However, if after being notified by
the IRS that you were subject to backup withholding you received another notification
from the IRS stating that you are no longer subject to backup withholding, do not cross
out such item (2). If you are exempt from backup withholding, check the box in Part 4
above.
- ----------------------------------------------------------------------------------------------------------------------------
Signature
--------------------------------------------------------------------------------------------------------------------------- Date
--------------------------------------------------------------------------------------------------------------------------------- ,
1999
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand
that, if I do not provide a taxpayer identification number to the Depositary by
the time of payment, 31% of all reportable payments made to me thereafter will
be withheld until I provide a properly certified taxpayer identification number
to the Depositary.
<TABLE>
<S> <C>
- ------------------------------------------------------------ -------------------------------,
1999
Signature Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
<PAGE> 12
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue
5th Floor
New York, NY 10022
Banks and Brokerage Firms
please call:
(800) 662-5200
Shareholders please call:
(800) 566-9061
<PAGE> 1
News Release
[LUCENT LOGO]
<TABLE>
<S> <C> <C>
Bill Price Roger Frizzell Michael Polyviou
Lucent Technologies Lucent Technologies Porter, LeVay & Rose, Inc.
908-582-4820 (office) 972-745-4831 (office) (For Spectran)
973-515-5038 (home) 972-539-6653 (home) 212-564-4700
</TABLE>
LUCENT TECHNOLOGIES TO PURCHASE SPECTRAN CORPORATION, A LEADING MANUFACTURER OF
WORLD-CLASS OPTICAL FIBER AND FIBER OPTIC PRODUCTS
FOR IMMEDIATE RELEASE: THURSDAY, JULY 15, 1999
MURRAY HILL, N.J. - Lucent Technologies (NYSE:LU) today announced it
has signed an agreement to acquire SpecTran Corporation (NASDAQ, NM:SPTR), an
industry leader in the design and manufacture of specialty optical fibers and
fiber optic products, for about $64 million or $9 a share, plus the assumption
of $35 million in SpecTran debt, in an all-cash tender offer.
SpecTran, based in Sturbridge, Mass., employs approximately 500 people
in two divisions. The first, SpecTran Communication Fiber Technologies in
Sturbridge, manufactures high-performance optical fiber for premises data
communications and telecommunications applications. SpecTran Specialty Optics
Company, located in Avon, Conn., develops custom-engineered fiber solutions and
cable components for industrial automation, data communications,
military/aerospace and medical applications.
Lucent and SpecTran are building off an established relationship. Last
year, the two companies signed an agreement giving SpecTran rights to certain
Lucent fiber patents for use in the company's manufacturing operations. In
addition, Lucent has been one of SpecTran's major customers.
The transaction is expected to be completed by the end of the quarter
ending Sept. 30, 1999. The impact of the purchase on earnings is expected to be
immaterial.
"The communications revolution is fueling strong worldwide demand for
optical fiber," said Bill Spivey, president of the Network Products Group for
Lucent Technologies. "Our acquisition of SpecTran will support continued growth
in our business by providing us with new fiber products, additional expertise
and new market niches within the optical fiber industry."
"SpecTran and Lucent have a number of important synergies that should
make this match successful," said Charles B. Harrison, president and chief
executive officer of SpecTran. "Working with Lucent and the unmatched technical
capabilities of Bell Labs, we have the opportunity to deliver world-class fiber
solutions."
Harrison intends to stay with Lucent for a transition period to ensure
a successful integration of the businesses.
Under the terms of the definitive agreement, which has been approved by
SpecTran's board of directors, Lucent will begin a cash tender offer for all
outstanding shares of SpecTran common stock for $9 a share. The offer is
expected to commence on July 21. Any shares not purchased in the offer will be
acquired for the same price in cash, in a second-step merger. The offer and
merger are subject to the purchase of the majority of the outstanding shares of
SpecTran. Lazard Freres & Co. LLC has acted as investment banker to SpecTran
Corporation.
<PAGE> 2
Lucent's Optical Fiber Business
Lucent Technologies is one of the world's leading manufacturers of
fiber, with 13 fiber and cable manufacturing operations and joint ventures
around the world. Earlier this year, Lucent announced a joint venture in Russia
with SviaStroy-1 to produce optical fiber cable. In addition, Lucent has a $350
million expansion program underway at its manufacturing facility in Atlanta, as
well as expansion programs under way at other sites in Denmark and China.
Lucent's extensive fiber product line is designed by the company's
research and development organization, Bell Laboratories, which holds more than
1,600 patents in optical networking. Lucent's Bell Labs invented
nonzero-dispersion (NZDF) fiber with its award-winning TrueWave(R) fiber
offering. Lucent remains the industry leader in providing fiber for
high-capacity networks. To date, Lucent has produced more than 6 billion meters
of its TrueWave fiber -- enough fiber to wrap around the world 150 times.
About SpecTran Corporation
SpecTran Corporation is a leading manufacturer of high-performance
multimode and single-mode optical fiber for data communications,
telecommunications, CATV and industry applications worldwide. Founded in 1981,
the company's application-specific optical fiber and cable products also serve
industrial, aerospace and medical markets. For additional information about
SpecTran, visit the company's web site at http://www.spectran.com.
About Lucent Technologies
Lucent Technologies designs, builds and delivers a wide range of public
and private networks, communications systems and software, data networking
systems, business telephone systems and microelectronics components. Bell Labs
is the research and development arm for the company. More information about
Lucent Technologies, headquartered in Murray Hill, N.J., is available on its Web
site at http://www.lucent.com.
<PAGE> 1
SpecTran Letterhead
LETTER TO STOCKHOLDERS DATED JULY 21, 1999
TO THE STOCKHOLDERS OF SPECTRAN CORPORATION
Dear Stockholder:
I am pleased to report that on July 15, 1999, SpecTran Corporation
("SpecTran") entered into a Agreement of Merger with Lucent Technologies Inc., a
Delaware corporation ("Lucent"), and its wholly owned subsidiary, Seattle
Acquisition Inc., a Delaware corporation ("Purchaser"), that provides for the
acquisition of all of the common stock, par value $.10 per share (the "Shares"),
of SpecTran by Purchaser at a price of $9 per Share in cash, net to the seller,
without interest. Under the terms of the proposed transaction, Purchaser has
commenced a tender offer (the "Tender Offer") for all outstanding shares of
SpecTran Common Stock at $9 per Share. The Tender Offer is currently scheduled
to expire at 12:00 Midnight, New York City time, on August 17, 1999.
Following the successful completion of the Tender Offer, upon approval by
stockholder vote, if required, Purchaser will be merged with and into SpecTran
(the "Merger"), and all Shares not purchased in the Tender Offer will be
converted into the right to receive $9 per Share in cash, net to the seller,
without interest.
YOUR BOARD OF DIRECTORS HAS 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 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.
The recommendation of the Board of Directors is described in the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
filed by SpecTran with the Securities and Exchange Commission and enclosed with
this letter. In arriving at its recommendation, the Board of Directors gave
careful consideration to a number of factors. These factors included the opinion
of Lazard Freres & Co. LLC, investment banker to SpecTran, a copy of which is
attached as an annex to the Schedule 14D-9. We urge you to read carefully the
Schedule 14D-9 in its entirety so that you will be more informed as to the
Board's recommendation.
A copy of the Offer to Purchase and related materials, including a Letter
of Transmittal for use in tendering Shares, accompanies this letter. These
documents set forth the terms and conditions of the Tender Offer and provide
instructions as to how to tender your Shares. We urge you to read each of the
enclosed materials carefully.
The management and the Board of Directors of SpecTran thank you for the
support you have given the Company.
Sincerely,
Charles Harrison Signature
--------------------------------------
Charles B. Harrison
President, Chief Executive Officer and
Chairman of the Board of Directors
<PAGE> 1
EXHIBIT (c)(1)
CONFORMED COPY
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AGREEMENT OF MERGER
BY AND AMONG
LUCENT TECHNOLOGIES INC.,
SEATTLE ACQUISITION INC.,
AND
SPECTRAN CORPORATION
-------------------------------------------
Dated as of July 15, 1999
-------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. The Offer......................................................................... -2-
1.1. The Offer................................................................ -2-
1.2. Company Actions.......................................................... -4-
2. The Merger........................................................................ -4-
2.1. General.................................................................. -4-
2.2. Certificate of Incorporation............................................. -5-
2.3. By-Laws.................................................................. -5-
2.4. Directors and Officers................................................... -5-
2.5. Conversion of Securities................................................. -6-
2.6. Adjustment of the Merger Consideration................................... -6-
2.7. Dissenting Shares........................................................ -6-
2.8. Surrender of Shares; Stock Transfer Books................................ -7-
2.9. No Further Ownership Rights in Company Capital Stock..................... -9-
2.10. Return of Payment Fund................................................... -9-
2.11. Further Assurances....................................................... -9-
3. Representations and Warranties of the Company..................................... -9-
3.1. Organization............................................................. -10-
3.2. Subsidiaries............................................................. -10-
3.3. Capital Structure........................................................ -10-
3.4. Authority................................................................ -12-
3.5. No Conflict.............................................................. -12-
3.6. SEC Documents; Undisclosed Liabilities................................... -13-
3.7. Schedule 14D-9; Company Proxy Statement.................................. -14-
3.8. Absence of Certain Changes............................................... -14-
3.9. Properties............................................................... -16-
3.10. Leases................................................................... -16-
3.11. Contracts................................................................ -17-
3.12. Absence of Default....................................................... -18-
3.13. Litigation............................................................... -18-
3.14. Compliance with Law...................................................... -19-
3.15. Intellectual Property; Year 2000......................................... -19-
3.16. Taxes.................................................................... -20-
3.17. Benefit Plans............................................................ -21-
3.18. ERISA Compliance......................................................... -21-
3.19. Employment Matters....................................................... -23-
3.20. Environmental Laws....................................................... -24-
</TABLE>
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<TABLE>
<S> <C> <C>
3.21. Accounts Receivable; Inventory........................................... -24-
3.22. Customers and Suppliers.................................................. -24-
3.23. Voting Requirements...................................................... -25-
3.24. State Takeover Statutes.................................................. -25-
3.25. Brokers.................................................................. -25-
3.26. Opinion of Financial Advisor............................................. -26-
3.27. Complete Copies of Materials............................................. -26-
3.28. Disclosure............................................................... -26-
4. Representations and Warranties of Lucent and Acquisition.......................... -26-
4.1. Organization, Standing and Corporate Power............................... -26-
4.2. Authority................................................................ -26-
4.3. No Conflict.............................................................. -27-
4.4. Information Supplied..................................................... -27-
4.5. Brokers.................................................................. -28-
5. Conduct Pending Closing........................................................... -28-
5.1. Conduct of Business Pending Closing...................................... -28-
5.2. Prohibited Actions Pending Closing....................................... -38-
5.3. Other Actions............................................................ -30-
6. Additional Agreements............................................................. -31-
6.1. Access; Documents; Supplemental Information.............................. -31-
6.2. No Solicitation by the Company........................................... -32-
6.3. Preparation of the Company Proxy Statement;
Company Stockholders Meeting............................................. -34-
6.4. Reasonable Best Efforts.................................................. -35-
6.5. Stock Options; Warrants.................................................. -35-
6.6. Employee Benefit Plans; Existing Agreement............................... -36-
6.7. Indemnification.......................................................... -37-
6.8. Directors................................................................ -37-
6.9. Fees and Expenses........................................................ -38-
6.10. Public Announcements..................................................... -39-
6.11. Stockholder Litigation................................................... -39-
7. Conditions Precedent.............................................................. -39-
7.1. Conditions Precedent to Each Party's Obligation to Effect the Merger..... -39-
7.2. Conditions Precedent to Obligations of Acquisition and Lucent............ -40-
7.3. Conditions Precedent to the Company's Obligations........................ -41-
8. Non-Survival of Representation and Warranties..................................... -41-
8.1. Representations and Warranties........................................... -41-
</TABLE>
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<TABLE>
<S> <C>
9. Contents of Agreement; Parties in Interest; etc................................... -41-
10. Assignment and Binding Effect..................................................... -42-
11. Termination....................................................................... -42-
12. Definitions....................................................................... -43-
13. Notices........................................................................... -45-
14. Amendment......................................................................... -46-
15. Extensions; Waiver................................................................ -47-
16. Governing Law..................................................................... -47-
17. No Benefit to Others.............................................................. -47-
18. Severability...................................................................... -47-
19. Section Headings.................................................................. -47-
20. Schedules and Exhibits............................................................ -48-
21. Counterparts...................................................................... -48-
Glossary of Defined Terms.................................................................. i
</TABLE>
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<PAGE> 5
AGREEMENT OF MERGER
AGREEMENT OF MERGER ("Agreement") dated as of July 15, 1999 by and
among LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"), SEATTLE
ACQUISITION INC., a Delaware corporation ("Acquisition"), and SPECTRAN
CORPORATION, a Delaware corporation (the "Company").
BACKGROUND
A. The Company is a Delaware corporation with its registered office
located at 9 East Lockerman Street, Dover, Delaware 19901 and has authorized
20,000,000 shares of common stock with voting rights, par value $.10 per share
(the "Company Voting Common Stock"), of which 7,040,930 shares of Company Voting
Common Stock are issued and outstanding, and 250,000 shares of common stock with
no voting rights, par value $.10 per share (the "Company Non-Voting Common
Stock" and together with the Company Voting Common Stock, the "Company Common
Stock"), of which no shares of Company Non-Voting Common Stock are issued and
outstanding. The Company is engaged principally in the design, development,
production, marketing, distribution, maintenance and support of multi-mode and
single-mode optical fiber for data communications and telecommunications
applications.
B. Lucent is a Delaware corporation with its registered office located
at 1013 Centre Road, Wilmington, Delaware.
C. Acquisition is a wholly-owned subsidiary of Lucent and was formed to
merge with and into the Company so that, as a result of the merger, the Company
will survive and become a wholly-owned subsidiary of Lucent. Acquisition is a
Delaware corporation with its registered office located at 1013 Centre Road,
Wilmington, Delaware and has authorized an aggregate of 1,000 shares of common
stock, no par value per share (the "Acquisition Common Stock").
D. In furtherance of the acquisition of the Company by Lucent on the
terms and subject to the conditions set forth in this Agreement, Lucent proposes
to cause Acquisition to make a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "Offer") to purchase all the
outstanding shares of Company Common Stock (the "Shares"), at a purchase price
of $9.00 per Share (the "Offer Price"), net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in this
Agreement.
E. The Board of Directors of each of Lucent, Acquisition and the
Company has determined that the Offer, this Agreement and the merger of
Acquisition with and into the Company (the "Merger") in accordance with the
provisions of the Delaware General Corporation Law, as amended (the "DGCL"),
and, subject to the terms and conditions of this Agreement, is advisable and in
the best interests of Lucent, Acquisition and the Company and their respective
<PAGE> 6
stockholders. The Board of Directors of each of Lucent, Acquisition and the
Company have approved the Offer, this Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
1. The Offer.
1.1. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Lucent and the Company of this
Agreement, Acquisition shall, and Lucent shall cause Acquisition to, commence
the Offer. The initial expiration date for the Offer shall be the 20th business
day following the commencement of the Offer. The obligation of Acquisition to
accept for payment, and pay for, any Shares tendered pursuant to the Offer shall
be subject only to the conditions set forth in Exhibit A (the "Offer
Conditions") (any of which may be waived in whole or in part by Acquisition in
its sole discretion; provided that, without the prior written consent of the
Company, Acquisition shall not waive the Minimum Condition (as defined in
Exhibit A)) and to the terms and conditions of this Agreement. Acquisition
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Acquisition shall not (i) reduce the number
of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) amend or add
to the Offer Conditions any terms that are adverse to the holders of the Shares,
(iv) except as provided in the next sentence, extend the Offer, (v) change the
form of consideration payable in the Offer or (vi) amend any other term of the
Offer in any manner adverse to the holders of the Shares. Notwithstanding the
foregoing, Acquisition may, without the consent of the Company, (A) extend the
Offer, if at the scheduled or extended expiration date of the Offer any of the
Offer Conditions shall not be satisfied or waived, until such time as such
conditions are satisfied or waived, (B) extend the Offer for any period required
by any rule, regulation, interpretation or position of the Securities and
Exchange Commission (the "SEC") or the staff thereof applicable to the Offer or
any period required by applicable law and (C) extend the Offer on one or more
occasions for an aggregate period of not more than 10 business days beyond the
latest expiration date that would otherwise be permitted under clause (A) or (B)
of this sentence, if on such expiration date there shall not have been tendered
at least 90% of the outstanding Shares. Lucent and Acquisition agree that if all
the Offer Conditions are not satisfied on any scheduled expiration date of the
Offer then, provided that all such conditions are reasonably capable of being
satisfied, Acquisition shall extend the Offer from time to time until such
conditions are satisfied or waived; provided that Acquisition shall not be
required to extend the Offer beyond September 30, 1999. Subject to the terms and
conditions of the Offer and this Agreement, Acquisition shall, and Lucent shall
cause Acquisition to, accept for payment, and pay for, all Shares validly
tendered and not withdrawn pursuant to the Offer that Acquisition becomes
obligated to accept for payment and pay for, pursuant to the Offer as promptly
as practicable after the expiration of the Offer.
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<PAGE> 7
(b) On the date of commencement of the Offer, Lucent and
Acquisition shall file with the SEC a Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1") with respect to the Offer, which shall contain an offer
to purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents included therein pursuant to which the Offer
shall be made, together with any supplements or amendments thereto, the "Offer
Documents"). Lucent and Acquisition agree that the Offer Documents shall comply
as to form in all material respects with the Securities Exchange Act of 1934
(the "Exchange Act"), and the rules and regulations promulgated thereunder and
the Offer Documents, on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is made by
Lucent or Acquisition with respect to information supplied by the Company or any
of its stockholders specifically for inclusion or incorporation by reference in
the Offer Documents. Each of Lucent, Acquisition and the Company agree promptly
to correct any information provided by it for use in the Offer Documents if and
to the extent that such information shall have become false or misleading in any
material respect, and Lucent and Acquisition further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to the
Company's stockholders, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given reasonable
opportunity to review and comment upon the Offer Documents prior to their filing
with the SEC or dissemination to the stockholders of the Company. Lucent and
Acquisition agree to provide the Company and its counsel any comments Lucent,
Acquisition or their counsel may receive from the SEC or its staff with respect
to the Offer Documents promptly after the receipt of such comments.
(c) Lucent shall provide or cause to be provided to
Acquisition on a timely basis the funds necessary to accept for payment, and pay
for, any Shares that Acquisition becomes obligated to accept for payment, and
pay for, pursuant to the Offer.
1.2. Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
at a meeting duly called and held, duly and unanimously adopted resolutions
approving this Agreement, the Offer and the Merger, determining, as of the date
of such resolutions, that the terms of the Offer and the Merger are fair to, and
in the best interests of, the Company's stockholders, recommending that the
Company's stockholders accept the Offer, tender their shares pursuant to the
Offer and approve this Agreement (if required) and approving the acquisition of
Shares by Acquisition pursuant to the Offer and the other transactions
contemplated by this Agreement. The Company has been advised by each of its
directors and executive officers who owns Shares (each of whom is listed in Item
1.2(a) of the Company Disclosure Schedule) that such person currently intends to
tender all Shares (other than Shares, if any, held by such person that, if
tendered, could cause such person to incur liability under the provisions of
Section 16(b) of the Exchange Act) owned by such person pursuant to the Offer.
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<PAGE> 8
(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as supplemented
or amended from time to time, the "Schedule 14D-9") containing, subject to the
terms of this Agreement, the recommendation described in paragraph (a) and shall
mail the Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9
shall comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation or
warranty is made by the Company with respect to information supplied by Lucent
or Acquisition specifically for inclusion in the Schedule 14D-9. Each of the
Company, Lucent and Acquisition agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to amend or supplement
the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented
to be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by applicable federal securities laws. Lucent
and its counsel shall be given reasonable opportunity to review and comment upon
the Schedule 14D-9 prior to its filing with the SEC or dissemination to
stockholders of the Company. The Company agrees to provide Lucent and its
counsel any comments the Company or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
(c) In connection with the Offer and the Merger, the Company
shall cause its transfer agent to furnish Acquisition promptly with mailing
labels containing the names and addresses of the record holders of Shares as of
a recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Acquisition such information and assistance (including updated lists
of stockholders, security position listings and computer files) as Lucent may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Lucent and Acquisition and each of their agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will deliver, and will use
their reasonable efforts to cause their agents to deliver, to the Company all
copies and any extracts or summaries from such information then in their
possession or control.
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<PAGE> 9
2. The Merger.
2.1. General. (a) Upon the terms and subject to the conditions
of this Agreement and in accordance with the DGCL, at the Effective Time, (i)
Acquisition shall be merged with and into the Company, (ii) the separate
corporate existence of Acquisition shall cease and (iii) the Company shall be
the surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Acquisition in accordance with the
DGCL. At the election of Lucent, to the extent that any such action would not
cause a failure of a condition to the Offer or the Merger, any direct or
indirect wholly owned Subsidiary of Lucent may be substituted for and assume all
of the rights and obligations of Acquisition as a constituent corporation in the
Merger. In either such event, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect the foregoing.
(b) The Merger shall become effective at the time of filing of
the certificate of merger with the Secretary of State of the State of Delaware
substantially in the form of Exhibit B attached hereto (the "Certificate of
Merger") in accordance with the provisions of Section 251 of the DGCL or such
later time as may be stated in the Certificate of Merger or such later date as
the parties may mutually agree (the "Effective Time"). Subject to the terms and
conditions of this Agreement, the Company and Acquisition shall duly execute and
file the Certificate of Merger with the Secretary of State of the State of
Delaware at the time of the Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Sidley & Austin, 875 Third Avenue, New York,
N.Y. at 10:00 A.M., two business days after the date on which the last of the
conditions set forth in Article 7 shall have been satisfied or waived, or on
such other date, time and place as the parties may mutually agree (the "Closing
Date").
(c) At the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and
Acquisition shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
2.2. Certificate of Incorporation. The certificate of
incorporation of Acquisition, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided therein and by law except that Article I of
such certificate of incorporation shall be amended to read as follows:
"The name of the Corporation is: SpecTran Corporation."
2.3. By-Laws. The by-laws of Acquisition, as in effect
immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation until thereafter amended as provided therein and by law.
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<PAGE> 10
2.4. Directors and Officers. From and after the Effective
Time, (a) the directors of Acquisition immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the certificate of incorporation and by-laws of the Surviving
Corporation, and (b) the officers of Acquisition immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case, until their respective successors are duly elected or appointed and
qualified.
2.5. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Lucent, Acquisition,
the Company or the holders of any of the following securities:
(a) Each issued and outstanding share of common stock of
Acquisition shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock, $.10 par value per share, of the Surviving
Corporation;
(b) Each Share that is owned or held in treasury by the
Company and each Share that is owned by Acquisition or Lucent shall
automatically be canceled and retired and shall cease to exist without any
conversion thereof and no payment or distribution shall be made with respect
thereto. Each Share that is owned by any Subsidiary of either the Company or
Lucent (other than Acquisition) shall remain outstanding without change; and
(c) Subject to the provisions of Section 2.6, each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares to be canceled or to remain outstanding in accordance with Section 2.5(b)
and other than Dissenting Shares) shall be converted into the right to receive
from the Surviving Corporation in cash, without interest, the price per share
paid in the Offer (the "Merger Consideration"). As of the Effective Time, all
such Shares shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of record of a certificate
representing any such Shares shall cease to have any rights with respect thereto
other than the right to receive the Merger Consideration, without interest.
2.6. Adjustment of the Merger Consideration. In the event
that, subsequent to the date of this Agreement but prior to the Effective Time,
any stock split, combination, reclassification or stock dividend with respect to
the outstanding shares of Company Common Stock, any change or conversion of
outstanding shares of Company Common Stock into other securities or any other
dividend or distribution with respect to the outstanding shares of Company
Common Stock should occur, appropriate and proportionate adjustments shall be
made to the Merger Consideration, and thereafter all references to the Merger
Consideration shall be deemed to be to the Merger Consideration as so adjusted.
2.7. Dissenting Shares. (a) Notwithstanding any provision of
this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall not have voted in favor of the
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<PAGE> 11
Merger or consented thereto in writing and who shall have demanded properly in
writing appraisal for such shares in accordance with Section 262 of the DGCL
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the consideration set forth in Section 2.5(c). Such
stockholders shall instead be entitled to receive such consideration as is
determined to be due with respect to such Dissenting Shares in accordance with
the provisions of Section 262, except that all Dissenting Shares held by such
stockholders who shall have failed to perfect or who effectively shall have
withdrawn their demand for appraisal or lost their rights to appraisal of such
shares under Section 262, after the Effective Time, shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration in Section 2.5(c),
without any interest thereon, upon surrender, in the manner provided in Section
2.8, of the certificate or certificates that formerly evidenced by such
Dissenting Shares.
(b) The Company shall give Lucent (i) prompt notice of any
demands for appraisal of Shares received by the Company, withdrawals of such
demands, and any other instruments served pursuant to the DGCL and received by
the Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Lucent,
make any payment with respect to any demands for appraisal or offer to settle or
settle any such demands.
2.8. Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Lucent shall designate The
Bank of New York, or another bank or trust company designated by Lucent, to act
as paying agent in the Merger (the "Paying Agent"), and, from time to time, on,
prior to or after the Effective Time, Lucent shall make available, or cause the
Surviving Corporation to make available, to the Paying Agent cash in the amounts
and at the times necessary for the prompt payment of the Merger Consideration
upon surrender of certificates representing outstanding shares of Company Common
Stock (the "Certificates") as part of the Merger pursuant to Section 2.5, and
such amounts as and when so made available shall hereinafter be referred to as
the "Payment Fund" (it being understood that any and all interest earned on
funds deposited with the Paying Agent pursuant to this Agreement shall be turned
over to Lucent).
(b) As soon as practicable after the Effective Time, Lucent
shall use its reasonable best efforts to cause the Paying Agent to send to each
Person who was, at the Effective Time, a holder of record of Certificates, a
letter of transmittal which (i) shall specify that delivery shall be effected
and risk of loss and title to such Certificates shall pass, only upon actual
delivery thereof to the Paying Agent and (ii) shall contain instructions for use
in effecting the surrender of the Certificates. Upon surrender to the Paying
Agent of Certificates for cancellation, together with such letter of transmittal
duly completed and validly executed in accordance with the instructions thereto
and such other documents as the Paying Agent may reasonably require, such holder
shall be entitled to receive in exchange therefor the applicable
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<PAGE> 12
Merger Consideration, and the Certificates so surrendered shall then be
canceled. Such Merger Consideration shall be mailed as promptly as practicable
after the satisfaction by such holder of the foregoing. Subject to Section
2.8(c), until surrendered as contemplated by this Section 2.8(b), each
Certificate, from and after the Effective Time, shall be deemed to represent
only the right to receive, upon such surrender, the Merger Consideration. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate.
(c) If payment of any portion of the Merger Consideration is
to be made to any Person other than the registered holder of the Certificate
surrendered in exchange therefor, it shall be a condition to such payment that
such surrendered Certificate shall be properly endorsed and otherwise in proper
form for transfer and such Person either (i) shall pay to the Paying Agent any
transfer or other taxes required as a result of the payment of the Merger
Consideration to such Person or (ii) shall establish to the satisfaction of the
Surviving Corporation that such taxes have been paid or are not applicable.
Lucent, Acquisition or the Paying Agent, as the case may be, shall be entitled
to deduct and withhold from the Merger Consideration or Company Stock Option
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock or holder of Company Stock Options such amounts
as are required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Lucent, Acquisition or the Paying
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of shares of Company Common Stock or holder of
Company Stock Options, in respect of which such deduction and withholding was
made by Lucent, Acquisition or the Paying Agent. All amounts in respect of taxes
received or withheld by Lucent, Acquisition or the Paying Agent shall be
disposed of by Lucent, Acquisition or the Paying Agent in accordance with the
Code or such state, local or foreign tax law, as applicable.
(d) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and subject to such other
conditions as the Board of Directors of the Surviving Corporation may impose,
the Paying Agent shall pay in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect of such Certificate
as determined in accordance herewith. When authorizing such payment of the
Merger Consideration in exchange for such Certificate, the Board of Directors of
the Surviving Corporation (or any authorized officer thereof) may, in its
reasonable discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to deliver to
the Surviving Corporation a bond in such sum as the Surviving Corporation may
reasonably require as indemnity against any claim that may be made against
Lucent, the Surviving Corporation or the Paying Agent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(e) At the close of business on the day on which the Effective
Time occurs, the stock transfer books of the Company shall be closed and
thereafter there shall be no further
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<PAGE> 13
registration of transfers of shares of Company Common Stock on the records of
the Company. From and after the Effective Time, the holders of shares of Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares except as otherwise provided herein
or by applicable law.
(f) Neither Lucent nor the Company shall be liable to any
former holder of Company Capital Stock for any Merger Consideration which is
delivered to a public official pursuant to an official request under any
applicable abandoned property, escheat or similar law.
2.9. No Further Ownership Rights in Company Capital Stock. The
Merger Consideration shall be deemed to have been delivered (and paid) in full
satisfaction of all rights pertaining to the Company Common Stock previously
represented by such surrendered Certificates.
2.10. Return of Payment Fund. Any portion of the Payment Fund
which remains undistributed to the former holders of Company Common Stock for
six months after the Effective Time shall be delivered to Lucent, upon its
request, and any such former holders who have not theretofore surrendered to the
Paying Agent their Certificates in compliance herewith shall thereafter look
only to Lucent for payment of their claim for their portion of the Payment Fund.
Neither Lucent, Acquisition, the Paying Agent or the Company shall be liable to
any former holder of Company Common Stock for any portion of the Payment Fund
which is delivered to a public official pursuant to an official request under
any applicable abandoned property, escheat or similar law.
2.11. Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either the Company or Acquisition or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either the Company or Acquisition, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Acquisition, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Acquisition, as applicable, and otherwise to carry out the purposes of this
Agreement.
3. Representations and Warranties of the Company.
Except as set forth on the Disclosure Schedule delivered by
the Company to Lucent prior to the execution of this Agreement (the "Company
Disclosure Schedule") and making reference to the particular subsection of this
Agreement to which exception is being taken, the Company represents and warrants
to Lucent and Acquisition as follows:
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<PAGE> 14
3.1. Organization. Each of the Company and its Subsidiaries is
a corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite power and authority and all necessary governmental
approval to carry on its business as it has been and is now being conducted.
Except as set forth in Item 3.1 of the Company Disclosure Schedule, each of the
Company and its Subsidiaries is duly qualified or licensed as a foreign
corporation to do business and is in good standing (with respect to
jurisdictions which recognize such concept) in each jurisdiction where the
nature of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing, would not have a Material Adverse
Effect. The Company has made available to Lucent prior to the execution of this
Agreement complete and correct copies of its certificate of incorporation and
by-laws and the charter documents for each of its Subsidiaries in each case, as
amended to the date hereof.
3.2. Subsidiaries. Item 3.2 of the Company Disclosure Schedule
contains (i) the name and jurisdiction of incorporation of each Subsidiary of
the Company, (ii) the total number of shares of each class of capital stock of
(or other equity interests in) each Subsidiary authorized, the number of shares
(or other equity interests) outstanding and the number of shares (or other
equity interests) owned by the Company or any other Subsidiary of the Company
and (iii) a complete list of the directors and officers of the Company and each
Subsidiary. All the issued and outstanding capital stock of (or other equity
interests in) each Subsidiary have been duly and validly authorized and issued
and are fully paid, nonassessable and free of pre-emptive rights. None of the
outstanding capital stock of (or other equity interests in) any Subsidiary has
been issued in violation of the preemptive rights of any equity holder of such
Subsidiary. The capital stock of (or other equity interests in) each Subsidiary
were issued in compliance in all material respects with all applicable federal
and state securities laws and regulations, are owned free and clear of all Liens
(except as set forth in Item 3.2 of the Company Disclosure Schedule) and are
free of any restriction on the right to vote, sell or otherwise dispose of such
capital stock or other equity interest.
3.3. Capital Structure. (a) The authorized capital stock of
the Company consists of 20,000,000 shares of Company Voting Common Stock and
250,000 shares of Company Non-Voting Common Stock. At the close of business on
July 14, 1999, (i) 7,040,930 shares of Company Voting Common Stock were issued
and outstanding; (ii) no shares of Company Non-Voting Common Stock were issued
and outstanding; (iii) no shares of Company Common Stock were held by the
Company in its treasury; (iv) 150,000 shares of Company Common Stock were
reserved for issuance upon exercise of the Warrants; and (v) 1,411,836 shares of
Company Common Stock were reserved for issuance pursuant to the SpecTran
Corporation 1991 Incentive Stock Option Plan and the SpecTran Corporation
Incentive Stock Option Plan (collectively, the "Company Stock Plans") (of which
1,037,739 shares are subject to outstanding Company Stock Options as of July 14,
1999).
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<PAGE> 15
(b) Except as set forth in paragraph (a), at the close of
business on July 14, 1999, no shares of capital stock or other voting securities
of the Company were issued, reserved for issuance or outstanding. There are no
outstanding stock appreciation rights ("SARs") or rights (other than outstanding
stock options or other rights to purchase or receive Company Common Stock
granted under the Company Stock Plans (collectively, "Company Stock Options"))
to receive shares of Company Common Stock on a deferred basis granted under the
Company Stock Plans or otherwise and no warrants to purchase shares of capital
stock of the Company at any time or upon the occurrence of any stated event. The
Company has delivered to Lucent a complete and correct list, as of June 30,
1999, of the number of shares of Company Common Stock subject to Company Stock
Options and the exercise prices thereof.
(c) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote are issued or
outstanding. All outstanding shares of capital stock of the Company are, and all
shares which may be issued upon the exercise of the Warrants will be, when
issued, duly authorized, validly issued, fully paid and nonassessable, not
subject to preemptive rights and were issued in compliance in all material
respects with all applicable federal and state securities laws.
(d) Except as set forth in this Section 3.3 and except for
changes since July 14, 1999 resulting from the issuance of shares of Company
Common Stock pursuant to Company Stock Options outstanding as of July 14, 1999,
there are not issued, reserved for issuance or outstanding (i) any shares of
capital stock or other voting securities of the Company, (ii) any securities of
the Company convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company, (iii) any warrants, calls,
options or other rights to acquire from the Company or any Subsidiary, and no
obligation of the Company or any Subsidiary to issue, any capital stock, voting
securities or securities convertible into or exchangeable or exercisable for
capital stock or voting securities of the Company. Except as set forth in this
Section 3.3, on the date hereof there are not any outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities. The Company is not a party to any voting agreement
with respect to the voting of any such securities.
(e) There are no outstanding (i) securities of the Company or
any Subsidiary convertible into or exchangeable or exercisable for shares of
capital stock or other voting securities or ownership interests in any
Subsidiary, (ii) warrants, calls, options or other rights to acquire from the
Company or any Subsidiary, and no obligation of the Company or any Subsidiary to
issue, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable or exercisable for any capital
stock, voting securities or ownership interests in, any such Subsidiary or (iii)
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any such outstanding securities of such Subsidiaries or to issue,
deliver or sell, or cause to be issued, delivered or sold, any such
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<PAGE> 16
securities. Except for the Company's ownership of the Subsidiaries, the Company
does not, directly or indirectly, have any ownership or other interest in, or
control of, any Person, nor is the Company or any Subsidiary controlled by or
under common control with any Person.
3.4. Authority. The Company has all requisite corporate power
and authority to enter into this Agreement and, subject to Company Stockholder
Approval, to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company, and
except, in the case of this Agreement, for (i) Company Stockholder Approval and
(ii) the filing and recordation of appropriate merger documents as required by
the DGCL, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the transactions contemplated by this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
3.5. No Conflict. (a) Except as set forth in Item 3.5 of the
Company Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries under, (i) the certificate of incorporation or by-laws of
the Company or the comparable organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license or similar authorization applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in paragraph (b), any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect on
the Company.
(b) No consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any federal,
state, local or foreign government, any court, administrative, regulatory or
other governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority (each a "Governmental Entity")
is required by or with respect to the Company or any of its Subsidiaries in
connection
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<PAGE> 17
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this Agreement,
except for (i) the filing of a premerger notification and report form by the
Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and any applicable filings and approvals under similar
foreign antitrust laws and regulations; (ii) the filing with the SEC and The
Nasdaq National Market ("Nasdaq") of (A) the Schedule 14D-9, (B) a proxy
statement relating to the Company Stockholders Meeting for the approval by the
stockholders of the Company of the Merger (such proxy statement, as amended or
supplemented from time to time, the "Company Proxy Statement"), and (C) such
reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement; (iii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business;
and (iv) such consents, approvals, orders or authorizations which if not made or
obtained, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company.
3.6. SEC Documents; Undisclosed Liabilities. Except as set
forth in Item 3.6 of the Company Disclosure Schedule, the Company has filed with
the SEC since January 1, 1997 or, with respect to the Offer, will file with the
SEC all required registration statements, reports, schedules, forms, statements,
proxy or information statements and other documents (including exhibits and all
other information incorporated therein) (the "Company SEC Documents"). As of
their respective dates, the Company SEC Documents complied or, with respect to
those not yet filed, will comply in all material respects with the requirements
of the Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as
the case may be, and, in each case, the rules and regulations of the SEC
promulgated thereunder and, except to the extent that information contained in
any Company SEC Document has been revised and superseded by a later filed
Company SEC Document, did not or, with respect to those not yet filed, will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company SEC
Documents comply as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). Except for liabilities (i)
reflected in such financial statements or in the notes thereto, (ii) incurred in
the ordinary course of business consistent with past practice since the date of
the most recent audited financial statements included in the Company SEC
Documents filed and publicly available prior to the date of this Agreement (as
amended to the date of this Agreement, the "Company Filed
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<PAGE> 18
SEC Documents"), (iii) incurred in connection with this Agreement or the
transactions contemplated hereby, or (iv) disclosed in Item 3.6 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company.
3.7. Schedule 14D-9; Company Proxy Statement. None of the
information supplied or to be supplied by the Company specifically for inclusion
or incorporation by reference in (i) the Offer Documents, (ii) the Schedule
14D-9, (iii) the information to be filed by the Company in connection with the
Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement") or (iv) the Company Proxy Statement, if any, will, in
the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the Company's stockholders, or, in the case of the Company Proxy
Statement, if any, at the date the Company Proxy Statement is first mailed to
the Company's stockholders and at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Schedule 14D-9, the Information Statement and the Company Proxy
Statement, if any, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Lucent specifically for inclusion or incorporation by reference
therein.
3.8. Absence of Certain Changes. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and except as disclosed in the Company Filed SEC Documents, since
December 31, 1998, the Company and its Subsidiaries have conducted their
business only in the ordinary course, and there has not been:
(a) any event or occurrence which could reasonably be expected
to have a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of the Company's capital stock;
(c) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution, for shares of
the Company's capital stock, except for issuances of Company Common Stock upon
the exercise of Company Stock Options under the Company Stock Plans, in each
case awarded prior to the date hereof in accordance with their present terms;
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<PAGE> 19
(d) (i) Except as set forth in Item 3.8(d)(i) of the Company
Disclosure Schedule, any granting by the Company or any of its Subsidiaries to
any current or former director, executive officer or other key employee of the
Company or its Subsidiaries of any increase in compensation, bonus or other
benefits, except for normal increases in cash compensation in the ordinary
course of business consistent with past practice or as was required under any
employment agreements in effect as of the date of the most recent audited
financial statements included in the Company Filed SEC Documents, (ii) any
granting by the Company or any of its Subsidiaries to any such current or former
director, executive officer or key employee of any increase in severance or
termination pay, except in the ordinary course of business consistent with past
practice, (iii) except as set forth in Item 3.8(d)(iii) of the Company
Disclosure Schedule, any entry by the Company or any of its Subsidiaries into,
or any amendments of, any employment, deferred compensation, consulting,
severance, termination or indemnification agreement with any such current or
former director, executive officer or key employee, or (iv) any amendment to, or
modification of, any Company Stock Option;
(e) except insofar as may have been required by a change in
generally accepted accounting principles, any change in accounting methods,
principles or practices by the Company;
(f) any tax election that individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect on the Company or
any of its tax attributes or any settlement or compromise of any material income
tax liability;
(g) any impairment, damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking which could
reasonably be expected to have a Material Adverse Effect on the Company;
(h) any issuance, delivery or agreement (conditionally or
unconditionally) to issue or deliver any bonds, notes or other debt securities,
or the incurrence of or agreement to incur any indebtedness for borrowed money,
other than in the ordinary course of business consistent with past practice or
the entry into any lease the obligations of which, in accordance with GAAP,
would be capitalized;
(i) any material amendment or termination of any agreement to
which the Company or any of its Subsidiaries is a party and is or should be set
forth on Item 3.11 of the Company Disclosure Schedule;
(j) except as set forth in Item 3.8(j) of the Company
Disclosure Schedule, any undertaking or commitment to undertake capital
expenditures exceeding $100,000 for any single project or related series of
projects;
(k) except as set forth in Item 3.8(k) of the Company
Disclosure Schedule, any sale, lease (as lessor), transfer or other disposition
of, mortgage, pledge, or imposition of any
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<PAGE> 20
Lien on, any of the assets reflected on the Company's most recent audited
financial statement included in the Company Filed SEC Documents or any assets
acquired by the Company or any of its Subsidiaries after the date of such
audited financial statement, except for inventory and personal property sold or
otherwise disposed of for fair value in the ordinary course of its business
consistent with past practice and except for Permitted Liens;
(l) cancellation of any debts owed to or claims held by the
Company or any of its Subsidiaries (including the settlement of any claims or
litigation) other than in the ordinary course of its business consistent with
past practice;
(m) except as set forth in Item 3.8(m) of the Company
Disclosure Schedule, acceleration or delay in collection of accounts receivable
in advance of or beyond their regular due dates or the dates when the same would
have been collected in the ordinary course of its business consistent with past
practice;
(n) acceleration or delay in payment of any account payable or
other liability beyond or in advance of its due date or the date when such
liability would have been paid in the ordinary course of its business consistent
with past practice; and
(o) entry into or commitment to enter into any other material
transaction except in the ordinary course of business.
3.9. Properties. (a) Each of the Company and its Subsidiaries
has good and valid title to or a valid leasehold interest in all its properties
and assets reflected on the most recently audited balance sheet contained in the
Company Filed SEC Documents or acquired after the date thereof except for (i)
properties and assets sold or otherwise disposed of in the ordinary course of
business since the date of such balance sheet, (ii) properties and assets the
loss of which individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect on the Company and (iii) properties and assets
sold in connection with the transaction referred to in Item 3.8(k) of the
Company Disclosure Schedule.
(b) Except as set forth in Item 3.9(b) of the Company
Disclosure Schedule, neither the Company nor any or its Subsidiaries owns any
real property.
3.10. Leases. Item 3.10 of the Company Disclosure Schedule
lists all outstanding leases, both capital and operating, or licenses, pursuant
to which the Company or any of its Subsidiaries has (i) obtained the right to
use or occupy any real or tangible personal property under arrangements where
the remaining obligation is more than $50,000, inclusive of any renewal rights
or (ii) granted to any other Person the right to use any material item of
machinery, equipment, furniture, vehicle or other personal property of the
Company or any of its Subsidiaries having an original cost of $50,000 or more.
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<PAGE> 21
3.11. Contracts. Item 3.11 of the Company Disclosure Schedule
lists any of the following not otherwise listed on any other item of the Company
Disclosure Schedule:
(a) each written contract or commitment which creates an
obligation on the part of the Company or any of its Subsidiaries in excess of
$100,000;
(b) each written debt instrument, including, without
limitation, any loan agreement, line of credit, promissory note, security
agreement or other evidence of indebtedness, where the Company or any of its
Subsidiaries is a lender, borrower or guarantor, in a principal amount in excess
of $100,000;
(c) each written contract or commitment restricting the
Company or any of its Subsidiaries from engaging in any industry or in any line
of business in any location;
(d) each written contract or commitment in excess of $10,000
to which the Company or any of its Subsidiaries is a party for any charitable
contribution;
(e) each written joint venture or partnership agreement to
which the Company or any of its Subsidiaries is a party;
(f) each written agreement in excess of $25,000 to which the
Company or any of its Subsidiaries is a party with respect to any assignment,
discounting or reduction of any receivables of the Company or such Subsidiary;
(g) each written distributorship, sales agency, sales
representative, reseller or marketing agreement to which the Company or any of
its Subsidiaries is a party, and each sales representative agreement is
substantially identical to the form previously delivered to Lucent;
(h) each value added reseller, original equipment
manufacturing, technology transfer, source code license or other license or each
other agreement containing the right to sublicense software and/or technology,
in each case, to which the Company or any of its Subsidiaries is a party, other
than "off-the-shelf" software;
(i) each agreement, option or commitment or right with, or
held by, any third party to acquire any assets or properties, or any interest
therein, of the Company or any of its Subsidiaries, having a value in excess of
$100,000, except for contracts for the sale of inventory, machinery or equipment
in the ordinary course of business;
(j) each written employment contract entered into by the
Company or any of its Subsidiaries; and
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(k) each supply agreement to which the Company or any of its
Subsidiaries is a party that the Company or such Subsidiary could not readily
replace without a Material Adverse Effect on the Company.
There are (i) no oral contracts or commitments of the types
described in this Section 3.11 which create an obligation on the part of the
Company or any of its Subsidiaries in excess of $25,000, (ii) no contracts or
commitments between the Company or any of its Subsidiaries and any Affiliate
(other than a wholly-owned Subsidiary) and (iii) no contracts or commitments
which would create rights to any Person against Lucent or any of its Affiliates
(other than rights against the Company and its Subsidiaries as in effect on the
Closing Date).
3.12. Absence of Default. Except as set forth in Item 3.12 of
the Company Disclosure Schedule, each of the leases, contracts and other
agreements listed or required to be listed in Items 3.10 and 3.11 of the Company
Disclosure Schedule that create obligations on any Person in excess of $100,000
constitutes a valid and binding obligation of the parties thereto and is in full
force and effect and will continue in full force and effect after the Effective
Time, in each case, without breaching the terms thereof or resulting in the
forfeiture or impairment of any rights thereunder and without the consent,
approval or act of, or the making of any filing with, any other Person. Each of
the Company and its Subsidiaries has fulfilled and performed in all material
respects its obligations under each such lease, contract or other agreement to
which it is a party to the extent such obligations are required by the terms
thereof to have been fulfilled or performed through the date hereof (except for
any such lease, contract or other agreement which, by its terms, will expire
prior to the Effective Time) and neither the Company nor any such Subsidiary is,
and, neither the Company nor any such Subsidiary is alleged in writing to be, in
breach or default under, nor is there or is there alleged in writing to be any
basis for termination of, any such lease, contract or other agreement. To the
best knowledge of the Company, no other party to any such lease, contract or
other agreement has breached or defaulted thereunder. No event has occurred and
no condition or state of facts exists which, with the passage of time or the
giving of notice or both, would constitute such a default or breach by the
Company or, to the best knowledge of the Company, by any such other party. The
Company is not currently renegotiating any such lease, contract or other
agreement or paying liquidated damages in lieu of performance thereunder.
Complete and correct copies of each such lease, contract or other agreement and
any amendments thereto have heretofore been delivered to Lucent.
3.13. Litigation. Item 3.13 of the Disclosure Schedule sets
forth (i) any actions, suits, arbitrations, legal or administrative proceedings
or investigations pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries; (ii) any judgment, order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
as to which any of the assets, properties or business of the Company or any of
its Subsidiaries is subject; and (iii) any actions, suits, arbitrations or
proceedings as to which the Company or any such Subsidiary is the plaintiff or
the Company or any such Subsidiary is contemplating commencing legal action
against any other Person. None of the matters, if any,
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listed on Item 3.13 of the Disclosure Schedule could reasonably be expected to
have a Material Adverse Effect on the Company.
3.14. Compliance with Law.
(a) Each of the Company and its Subsidiaries has complied in
all material respects with, and is not in violation of, in any material respect,
any law, ordinance or governmental rule or regulation (collectively, "Laws") to
which it or its business is subject;
(b) Each of the Company and its Subsidiaries has obtained all
licenses, permits, certificates or other governmental authorizations
(collectively "Authorizations") necessary for the ownership or use of its assets
and properties or the conduct of its business other than Authorizations (i)
which are ministerial in nature and which the Company or such Subsidiary has no
reason to believe would not be issued in due course and (ii) which, the failure
of the Company or such Subsidiary to possess, would not subject the Company and
its Subsidiaries to penalties other than fines not to exceed $50,000 in the
aggregate ("Immaterial Authorizations"); and
(c) Neither the Company nor any of its Subsidiaries has
received notice of violation of, or knows of any violation of, any Laws to which
it or its business is subject or any Authorization necessary for the ownership
or use of its assets and properties or the conduct of its business (other than
Immaterial Authorizations).
3.15. Intellectual Property; Year 2000. (a) Except as set
forth in Item 3.15 of the Company Disclosure Schedule, the Company and its
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trade secrets, trade names, service
marks, copyrights and other proprietary intellectual property rights and
computer programs (the "Intellectual Property Rights") which are material to the
conduct of the business of the Company and its Subsidiaries as presently
conducted.
(b) To the Company's best knowledge, neither the Company nor
any of its Subsidiaries has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property Rights or other
proprietary information of any other Person. Neither the Company nor any of its
Subsidiaries has received any written charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation or violation
(including any claim that the Company or any such Subsidiary must license or
refrain from using any Intellectual Property Rights or other proprietary
information of any other Person) which has not been settled or otherwise fully
resolved. To the Company's best knowledge, no other Person has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights or other proprietary information of the Company or
any of its Subsidiaries.
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<PAGE> 24
(c) Assuming that Lucent continues to operate the business of
the Company and its Subsidiaries as presently conducted and proposed to be
conducted by the Company then, to the Company's best knowledge, Lucent's use of
the Intellectual Property Rights or other proprietary information which is
material to the conduct of the business of the Company and its Subsidiaries,
taken as a whole, will not interfere with, infringe upon, misappropriate or
otherwise come into conflict with the Intellectual Property Rights or other
proprietary information of any other Person.
(d) Each employee, agent, consultant or contractor who has
materially contributed to or participated in the creation or development of any
copyrightable, patentable or trade secret material on behalf of the Company, any
of its Subsidiaries or any predecessor in interest thereto either: (i) is a
party to a "work-for-hire" agreement under which the Company or such Subsidiary
is deemed to be the original owner/author of all property rights therein; or
(ii) has executed an assignment or an agreement to assign in favor of the
Company, such Subsidiary or such predecessor in interest, as applicable all
right, title and interest in such material.
(e) The Company has taken all necessary steps reasonably to
assure that the year 2000 date change will not adversely affect its operations
or the systems and facilities that support the operations of the Company and its
Subsidiaries, except as could not reasonably be expected to have a Material
Adverse Effect on the Company.
3.16. Taxes. (a) Each of the Company and its Subsidiaries has
filed all material tax returns and reports required to be filed by it and all
such returns and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely filed,
granted and have not expired, except to the extent that such failures to file,
to be complete or correct or to have extensions granted that remain in effect
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. The Company and each of its Subsidiaries has paid (or
the Company has paid on its behalf) all Taxes shown as due on such returns, and
the most recent financial statements contained in the Company Filed SEC
Documents reflect an adequate reserve for all taxes payable by the Company and
its Subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements.
(b) No deficiencies for any taxes have been proposed, asserted
or assessed against the Company or any of its Subsidiaries that are not
adequately reserved for, except for deficiencies that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect on
the Company.
(c) The Company Benefit Plans and other Company employee
compensation arrangements in effect as of the date of this Agreement have been
designed so that the disallowance of a material deduction under Section 162(m)
of the Code for employee remuneration will not apply to any amounts paid or
payable by the Company or any of its Subsidiaries under any such plan or
arrangement and, to the best knowledge of the Company, no
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<PAGE> 25
fact or circumstance exists that could reasonably be expected to cause such
disallowance to apply to any such amounts.
(d) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock qualifying for tax-free treatment under Section 355 of
the Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(e) Neither the Company nor any of its Subsidiaries is a party
(other than as an investor) to any outstanding industrial development bond.
3.17. Benefit Plans. (a) Item 3.17 of the Company Disclosure
Schedule contains a list and brief description of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (sometimes referred to as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
(sometimes referred to as "Welfare Plans") and all other Benefit Plans (together
with the Pension Plans and Welfare Plans, the "Company Benefit Plans")
maintained, or contributed to, by the Company, any of its Subsidiaries or any
Person that, together with the Company or any of its Subsidiaries, is treated as
a single employer under Section 414(b), (c), (m) or (o) of the Code (the
Company, such Subsidiaries and each such other Person, a "Commonly Controlled
Entity") for the benefit of any current or any former employees, officers or
directors of the Company. The Company has made available to Lucent true,
complete and correct copies of (i) each Company Benefit Plan (or, in the case of
any unwritten Company Benefit Plans, descriptions thereof), (ii) the most recent
annual report on Form 5500 filed with the Internal Revenue Service (the "IRS")
with respect to each Company Benefit Plan (if any such report was required),
(iii) the most recent summary plan description for each Company Benefit Plan for
which such summary plan description is required, (iv) each trust agreement and
group annuity contract relating to any Company Benefit Plan and (v) all
correspondence with the IRS or the United States Department of Labor relating to
any outstanding controversy or audit.
(b) Since the date of the most recent audited financial
statements included in the Company Filed SEC Documents, there has not been any
adoption or amendment in any material respect by the Company, any of its
Subsidiaries or any Commonly Controlled Entity of any Company Benefit Plans, or
any material change in any actuarial or other assumption used to calculate
funding obligations with respect to any Pension Plans of the Company, or any
change in the manner in which contributions to any Pension Plans of the Company
are made or the basis on which such contributions are determined.
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<PAGE> 26
3.18. ERISA Compliance. (a) With respect to the Company
Benefit Plans, no event has occurred and, to the best knowledge of the Company,
there exists no condition or set of circumstances, in connection with which the
Company or any of its Subsidiaries could be subject to any liability under
ERISA, the Code or any other applicable law that individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect under
ERISA, the Code or any other applicable law.
(b) Each Benefit Plan has been administered in accordance with
its terms, except for any failures so to administer any Benefit Plan that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect on the Company. The Company, its Subsidiaries and all
the Company Benefit Plans are in compliance with the applicable provisions of
ERISA, the Code, all regulations promulgated thereunder, all other applicable
laws, regulations and other pronouncements, and the terms of all applicable
collective bargaining agreements, except for any failures to be in such
compliance that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. Each Benefit Plan that is intended
to be qualified under Section 401(a) or 401(k) of the Code has received a
favorable determination letter from the IRS that it is so qualified and each
trust established in connection with any Company Benefit Plan that is intended
to be exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that such trust is so exempt. To
the best knowledge of the Company, no fact or event has occurred since that date
of any determination letter from the IRS which could reasonably be expected to
affect adversely the qualified status of any such Benefit Plan or the exempt
status of any such trust. There are no pending or, to the best knowledge of the
Company, threatened lawsuits, claims, grievances, investigations or audits of
any Benefit Plan that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any Company Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, could subject it to a tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA.
(c) Neither the Company nor any of its Subsidiaries has
incurred any liability under Title IV of ERISA (other than liability for
premiums to the Pension Benefit Guaranty Corporation arising in the ordinary
course). No Benefit Plan has incurred an "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the Code) whether
or not waived. To the best knowledge of the Company, there are no facts or
circumstances that could reasonably be expected to materially change the funded
status of any Benefit Plan that is a "defined benefit" plan (as defined in
Section 3(35) of ERISA) since the date of the most recent actuarial report for
such plan. No notice of a "reportable event", within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived has
been required to be filed within the 12-month period ending on the date hereof.
No Benefit Plan is a "multiemployer plan" within the meaning of Section 3(37) of
ERISA.
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<PAGE> 27
(d) Under each Benefit Plan that is a "defined benefit" plan
(as defined in Section 3(35) of ERISA) as of the last day of the most recent
plan year ended prior to the date hereof, the actuarially determined present
value of all "benefit liabilities", within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions contained in such
plan's most recent actuarial valuation), did not exceed the then current value
of the assets of such plan.
(e) Except as set forth in Item 3.18(e) of the Company
Disclosure Schedule, no employee of the Company will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Benefit Plan as a result of the transactions contemplated by
this Agreement. Except as set forth in Item 3.18(e) of the Company Disclosure
Schedule, no amount payable, or economic benefit provided, by the Company or its
Subsidiaries (including any acceleration of the time of payment or vesting of
any benefit) could be considered an "excess parachute payment" under Section
280G of the Code as a result of the transactions contemplated by this Agreement.
No Person is entitled to receive any additional payment from the Company or its
Subsidiaries or any other Person (a "Parachute Gross-Up Payment") in the event
that the excise tax of Section 4999 of the Code is imposed on such Person. The
Board of Directors of the Company or any of its Subsidiaries has not granted to
any Person any right to receive any Parachute Gross-Up Payment.
(f) Except as set forth in Item 3.18(f) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
liability or obligation under any "employee welfare benefit plans" (as defined
in Section 3(1) of ERISA) to provide life insurance or medical benefits after
termination of employment to any employee or dependent other than as required by
Part 6 of Title I of ERISA.
3.19. Employment Matters. (a) Each of the Company and its
Subsidiaries has complied in all material respects with all applicable laws,
rules and regulations respecting employment and employment practices, terms and
conditions of employment, wages and hours, and neither the Company nor any of
its Subsidiaries is liable for any arrears of wages or any taxes or penalties
for failure to comply with any such laws, rules or regulations; (b) the Company
believes that the Company's and its Subsidiaries' relations with their
respective employees is satisfactory; (c) there are no controversies pending or,
to the best knowledge of the Company, threatened between the Company or any of
its Subsidiaries and any of their respective employees, which controversies have
or could have a Material Adverse Effect on the Company; (d) neither the Company
nor any Subsidiary is a party to any collective bargaining agreement or other
labor union contract applicable to Persons employed by the Company or any such
Subsidiary, nor, to the best knowledge of the Company, are there any activities
or proceedings of any labor union to organize any such employees; (e) there are
no unfair labor practice complaints pending against the Company or any of its
Subsidiaries before the National Labor Relations Board or any current union
representation questions involving employees of the Company or any of its
Subsidiaries; (f) there is no strike, slowdown, work stoppage or lockout
existing, or, to the best knowledge of the Company, threatened, by or with
respect to any employees of the
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Company or any of its Subsidiaries; (g) except as set forth in Item 3.19(g) of
the Company Disclosure Schedule, no charges are pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices with respect to
the Company or any of its Subsidiaries; (h) there are no claims pending against
the Company or any of its Subsidiaries before any workers' compensation board
which could reasonably be expected to have a Material Adverse Effect on the
Company; and (i) neither the Company nor any of its Subsidiaries has received
notice that any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws intends to conduct an investigation of
or relating to the Company or any of its Subsidiaries and, to the best knowledge
of the Company, no such investigation is in progress.
3.20. Environmental Laws. The Company has not received any
notice or claim (and is not aware of any facts that would form a reasonable
basis for any claim), or entered into any negotiations or agreements with any
other Person, and, to the best knowledge of the Company, neither the Company nor
any of its Subsidiaries is the subject of any investigation by any governmental
or regulatory authority, domestic or foreign, relating to any material or
potentially material liability or remedial action under any Environmental Laws.
There are no pending or, to the best knowledge of the Company, threatened,
actions, suits or proceedings against the Company, any of its Subsidiaries or
any of their respective properties, assets or operations asserting any such
material liability or seeking any material remedial action in connection with
any Environmental Laws.
3.21. Accounts Receivable; Inventory. (a) Except as set forth
in Item 3.21(a) of the Company Disclosure Schedule, all accounts receivable of
the Company and its Subsidiaries (i) have arisen from bona fide transactions by
the Company or its Subsidiaries in the ordinary course of its business and
represent and will represent bona fide claims against debtors for sales and
other charges and (ii) are not subject to discount except for normal cash and
immaterial trade discount. The amount carried for doubtful accounts and
allowances accrued on the books of the Company and its Subsidiaries is
sufficient to provide for any losses that may be sustained on realization of the
accounts receivable of the Company and its Subsidiaries.
(b) The inventories (and any reserves established with respect
thereto) of the Company and its Subsidiaries as of December 31, 1998 are
described in Item 3.21(b) of the Company Disclosure Schedule. All such
inventories (net of any such reserves) are properly reflected on the Company's
most recent audited financial statement included in the Company Filed SEC
Documents in accordance with GAAP and, to the best knowledge of the Company, are
of such quality as to be useable and saleable in the ordinary course of business
(subject, in the case of work-in-process inventory, to completion in the
ordinary course of business) and are reflected in the books and records of the
Company or its Subsidiaries at the lower of cost (based on a first-in-first-out
basis) or market value. Such inventories are located at the locations set forth
in Item 3.21(b) of the Company Disclosure Schedule.
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<PAGE> 29
3.22. Customers and Suppliers. Neither the Company's nor any
of its Subsidiaries' customers which individually accounted for more than 5% of
the Company's or such Subsidiary's gross revenues during the 12-month period
preceding the date hereof has terminated any agreement with the Company or such
Subsidiary. Except as set forth in Item 3.22 of the Company Disclosure Schedule,
as of the date hereof, no material supplier of the Company or any of its
Subsidiaries has notified the Company in writing that it will stop, or decrease
the rate of, supplying materials, products or services to the Company or such
Subsidiary. Neither the Company nor any of its Subsidiaries has knowingly
breached, so as to provide a benefit to the Company or any of its Subsidiaries
that was not intended by the parties, any agreement with, or engaged in any
fraudulent conduct with respect to, any customer or supplier of the Company or
any of its Subsidiaries.
3.23. Voting Requirements. Pursuant to the provisions of the
DGCL, the certificate of incorporation of the Company, the by-laws of the
Company and any other applicable law, the affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Company Common Stock
at the Company Stockholders Meeting to adopt this Agreement (the "Company
Stockholder Approval") is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve and adopt the Merger, this
Agreement and the transactions contemplated by this Agreement. The Board of
Directors of the Company (at a meeting duly called and held) has (i) unanimously
approved the Offer, this Agreement and the transactions contemplated by this
Agreement, (ii) determined that the Offer and the Merger are fair to and in the
best interests of the Company's stockholders, (iii) resolved (subject to Section
6.2) to recommend this Agreement, the Offer and the Merger to such holders for
approval and adoption and (iv) directed (subject to Section 6.2) that this
Agreement be submitted to the Company's stockholders. The Company hereby agrees
to the inclusion in the Schedule 14D-9 and the Company Proxy Statement of the
recommendation of such Board of Directors.
3.24. State Takeover Statutes. The Board of Directors of the
Company (including the disinterested directors thereof) has unanimously approved
the Offer, this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement and such approval is sufficient to
render inapplicable to the Offer, the Merger, this Agreement and the
transactions contemplated by this Agreement the provisions of Chapter 203 of the
DGCL. To the Company's knowledge, no other state takeover statute is applicable
to the Offer, the Merger, this Agreement or the transactions contemplated by
this Agreement and no provision of the certificates of incorporation, by-laws or
other governing instruments of the Company or any of its Subsidiaries would,
directly or indirectly, restrict or impair the ability of Lucent to vote, or
otherwise exercise the rights of a stockholder with respect to, shares of
capital stock or other equity interest of the Company and its Subsidiaries that
may be acquired or controlled by Lucent as contemplated by this Agreement.
3.25. Brokers. No broker, investment banker, financial advisor
or other Person, other than Lazard Freres & Co. LLC, the fees and expenses of
which will be paid by the
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<PAGE> 30
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company. The
Company has furnished to Lucent true and complete copies of all agreements under
which any such fees or expenses are payable and all indemnification and other
agreements related to the engagement of the Persons to whom such fees are
payable.
3.26. Opinion of Financial Advisor. The Company has received
the opinion of Lazard Freres & Co. LLC, dated the date of this Agreement, to the
effect that, as of such date, the consideration to be received in the Offer and
the Merger by the Company's stockholders is fair from a financial point of view
to the Company's stockholders (other than Lucent and its Affiliates), a signed
copy of which opinion has been or will promptly be delivered to Lucent.
3.27. Complete Copies of Materials. The Company has delivered
or made available to Lucent true and complete copies of each material document
related to the Company or its business in connection with their legal and
accounting review of the Company.
3.28. Disclosure. None of the representations or warranties of
the Company contained herein, none of the information contained in the Company
Disclosure Schedule, and none of the other information or documents furnished or
to be furnished to Lucent or Acquisition by the Company or any of its
Subsidiaries or pursuant to the terms of this Agreement, when taken as a whole,
contains, or at the Effective Time will contain, any untrue statement of a
material fact or omits, or at the Effective Time will omit, to state a material
fact required to be stated herein or therein necessary to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading in any material respect.
4. Representations and Warranties of Lucent and Acquisition.
Except as set forth on the Disclosure Schedule delivered by
Lucent to the Company prior to the execution of this Agreement (the "Lucent
Disclosure Schedule") and making reference to the particular subsection of this
Agreement to which exception is being taken, Lucent and Acquisition represent
and warrant to the Company as follows:
4.1. Organization, Standing and Corporate Power. Each of
Lucent and Acquisition is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now being conducted,
except for those jurisdictions where the failure to be so organized, existing or
in good standing individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect on Lucent. Each of Lucent and
Acquisition is duly qualified or licensed to do business and is in good standing
(with respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions where
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<PAGE> 31
the failure to be so qualified or licensed or to be in good standing
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect on Lucent.
4.2. Authority. Each of Lucent and Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Lucent and Acquisition and the consummation by
Lucent and Acquisition of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Lucent and
Acquisition. This Agreement has been duly executed and delivered by Lucent and
Acquisition and, constitutes the legal, valid and binding obligation of Lucent
and Acquisition, enforceable against each of them in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
4.3. No Conflict. (a) The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated by this
Agreement and the compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Lucent or Acquisition or any of Lucent's other Subsidiaries under, (i) the
charter documents of Lucent or Acquisition, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to Lucent or
Acquisition or any of Lucent's other Subsidiaries or their respective properties
or assets or (iii) subject to the governmental filings and other matters
referred to in Section 4.3(b), any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Lucent or any of its Subsidiaries or
their respective properties or assets, other than, in the case of paragraph (b),
any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect on Lucent.
(b) No consent, approval, order or authorization of, action
by, or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Lucent or Acquisition in
connection with the execution and delivery of this Agreement by Lucent and
Acquisition or the consummation by Lucent and Acquisition of the transactions
contemplated by this Agreement, except for (i) the filing of a premerger
notification and report form by Lucent under the HSR Act and any applicable
filings and approvals under similar foreign antitrust laws and regulations; (ii)
the filing with the SEC of (A) the Offer Documents and (B) such reports under
Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement; (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which Lucent is qualified to do business; and
(iv) such consents, approvals, orders or authorizations the failure
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of which to be made or obtained individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect on Lucent.
4.4. Information Supplied. None of the information supplied or
to be supplied by Lucent specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Company Proxy Statement, if any, will, in the
case of the Offer Documents, the Schedule 14D-9 and the Information Statement,
at the respective times the Offer Documents, the Schedule 14D-9 and the
Information Statement are filed with the SEC or first published, sent or given
to the Company's stockholders, or, in the case of the Company Proxy Statement,
if any, at the date the Company Proxy Statement is first mailed to the Company's
stockholders and at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Offer Documents
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Lucent or Acquisition with respect to
statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
therein.
4.5. Brokers. No broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Lucent.
5. Conduct Pending Closing.
5.1. Conduct of Business Pending Closing. From the date hereof
until the Closing, the Company shall (and shall cause each of its Subsidiaries
to):
(a) maintain its existence in good standing;
(b) maintain the general character of its business and
properties and conduct its business in the ordinary and usual manner consistent
with past practices, except as expressly permitted by this Agreement;
(c) maintain business and accounting records consistent with
past practices; and
(d) use its reasonable best efforts (i) to preserve its
business intact, (ii) to keep available to the Company the services of its
present officers and employees, and (iii) to preserve for the Company or such
Subsidiary the goodwill of its suppliers, customers and others having business
relations with the Company or such Subsidiary.
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5.2. Prohibited Actions Pending Closing. Unless otherwise
provided for herein or approved by Lucent in writing, from the date hereof until
the Closing, the Company shall not (and shall not permit any of its Subsidiaries
to):
(a) amend or otherwise change its certificate of incorporation
or by-laws;
(b) issue or sell or authorize for issuance or sale (other
than any issuance of Company Common Stock upon the exercise of any outstanding
option or warrant to purchase Company Common Stock which option or warrant was
issued prior to the date hereof in accordance with the terms of the relevant
stock option or warrant agreement), or grant any options or warrants or make
other agreements with respect to, any shares of its capital stock or any other
of its securities or warrants;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person, or make any
loans or advances, except (i) short-term borrowings (including borrowings under
the Company's existing line of credit with Fleet National Bank) incurred in the
ordinary course of business (or to refinance existing or maturing indebtedness)
and (ii) intercompany indebtedness between the Company and any of its
Subsidiaries or between Subsidiaries;
(f) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets; (ii) enter into any contract or agreement other than in the ordinary
course of business, consistent with past practice; (iii) authorize any capital
commitment which is in excess of $50,000 or capital expenditures which are, in
the aggregate, in excess of $100,000, except as contemplated in Item 3.8(j) of
the Company Disclosure Schedule; or (iv) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter set forth in
Section 5.2(e) or this Section 5.2(f);
(g) mortgage, pledge or subject to Lien, any of its assets or
properties or agree to do so except for Permitted Liens;
(h) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
(including securitizations), other than sales or licenses of finished goods in
the ordinary course of business consistent with past practice;
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(i) assume, guarantee or otherwise become responsible for the
obligations of any other Person or agree to so do;
(j) enter into or agree to enter into any employment
agreement;
(k) except as set forth in Item 5.2(k) of the Company
Disclosure Schedule, take any action, other than in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivables);
(l) make any Tax election or settle or compromise any material
federal, state, local or foreign income Tax liability;
(m) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to any of the transactions
contemplated by this Agreement;
(n) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or reserved
against in the most recently audited balance sheet contained in the Company SEC
Documents or subsequently incurred in the ordinary course of business and
consistent with past practice;
(o) except in connection with the sale of the Company's
products in the ordinary course of business and consistent with past practice,
sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of
the Intellectual Property Rights;
(p) except as required by law or contemplated hereby, enter
into, adopt or amend in any material respect or terminate any Company Benefit
Plan or any other agreement, plan or policy involving the Company or its
Subsidiaries, and one or more of its directors, officers or employees, or
materially change any actuarial or other assumption used to calculate funding
obligations with respect to any pension plan, or change the manner in which
contributions to any pension plan are made or the basis on which such
contributions are determined;
(q) except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of the Company or its Subsidiaries,
or as contemplated hereby or by the terms of any employment agreement in
existence on the date hereof, increase the cash compensation of any director,
executive officer or other key employee or pay any benefit or amount not
required by a plan or arrangement as in effect on the date of this Agreement to
any such Person; or
(r) announce an intention, commit or agree to do any of the
foregoing.
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5.3. Other Actions. The Company shall not take any action that
would reasonably be expected to result in (i) any of the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the Offer Conditions not being satisfied.
6. Additional Agreements.
6.1. Access; Documents; Supplemental Information. (a) From and
after the date hereof until the Closing, the Company shall afford, shall cause
its Subsidiaries to afford and, with respect to clause (ii) below, shall use its
reasonable best efforts to cause the independent certified public accountants
for the Company to afford, (i) to the officers, independent certified public
accountants, counsel and other representatives of Acquisition and Lucent, upon
reasonable advance notice, free and full access at all reasonable times to the
properties, books and records including tax returns filed and those in the
process of being prepared by the Company or any of its Subsidiaries and the
right to consult with the officers, employees, accountants, counsel and other
representatives of the Company or any of its Subsidiaries in order that
Acquisition and Lucent may have full opportunity to make such investigations as
they shall reasonably desire to make of the operations, properties, business,
financial condition and prospects of the Company and its Subsidiaries, (ii) to
the independent certified public accountants of Acquisition and Lucent, upon
reasonable advance notice, free and full access at all reasonable times to the
work papers and other records of the accountants relating to the Company and its
Subsidiaries, and (iii) to Acquisition and Lucent and their representatives,
such additional financial and operating data and other information as to the
properties, operations, business, financial condition and prospects of the
Company and its Subsidiaries as Acquisition and Lucent shall from time to time
reasonably require.
(b) From the date of this Agreement through and including the
Closing, Acquisition, Lucent and the Company agree to furnish to each other
copies of any notices, documents, requests, court papers, or other materials
received from any governmental agency or any other third party with respect to
the transactions contemplated by this Agreement, except where it is obvious from
such notice, document, request, court paper or other material that the other
party was already furnished with a copy thereof.
(c) Except as required by law, the Company and Lucent shall
not, and shall not permit any of their respective Subsidiaries to, voluntarily
take any action that would, or that could reasonably be expected to, result in
(i) any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue at the Effective
Time, (ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect at the Effective Time, or (iii) any of
the conditions to the Merger set forth in Article 7 not being satisfied.
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(d) The Company shall give prompt notice to Lucent, and Lucent
shall give prompt notice to the Company, of (a) the occurrence, or
non-occurrence, of any event which would be likely to cause (i) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied; and (b) any
failure of the Company, Lucent or Acquisition, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided that the delivery of any notice pursuant to
this Section 6.1(d) shall not limit or otherwise affect the remedies available
to the party receiving such notice.
(e) The Company shall notify Lucent of any filing made by the
Company with the SEC under the Exchange Act, including, without limitation, any
Form 10-Q, 8-K or 10-K, not later than five business days after the date of such
filing.
6.2. No Solicitation by the Company. (a) The Company shall
not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or
permit any of its directors, officers or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its Subsidiaries to, directly or indirectly through another Person,
(i) solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making of
any proposal which constitutes a Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Takeover Proposal;
provided, that if, at any time prior to the date of the Company Stockholders
Meeting (the "Applicable Period"), the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
legally advisable to do so in order to comply with its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response to a
Superior Proposal (as defined below) which was not solicited by it or which did
not otherwise result from a breach of this Section 6.2, and subject to providing
prior written notice of its decision to take such action to Lucent (a "Section
6.2 Notice") and complying with Section 6.2(c), (A) furnish information with
respect to the Company and its Subsidiaries to any Person making a Superior
Proposal pursuant to a customary confidentiality agreement (as determined by the
Company after consultation with its outside counsel) and (B) participate in
discussions or negotiations regarding such Superior Proposal. For purposes of
this Agreement, a "Takeover Proposal" means any inquiry, proposal or offer from
any Person (i) relating to any direct or indirect acquisition or purchase of (A)
a business that constitutes 15% or more of the net revenues, net income or the
assets of the Company and its Subsidiaries, taken as a whole, (B) 20% or more of
any class of equity securities of the Company or (C) any material equity
interest in any Subsidiary of the Company (i.e., in excess of 20% of the
outstanding capital stock of such Subsidiary), (ii) relating to any tender offer
or exchange offer that if consummated would result in any Person beneficially
owning 20% or more of any class of equity securities of the Company or any
material equity interest in any of its Subsidiaries, or (iii) relating to any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement.
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(b) Except as expressly permitted by this Section 6.2, neither
the Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Lucent, the approval or recommendation by such Board of Directors or
such committee of the Offer, the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Takeover Proposal,
or (iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Takeover Proposal, other than any such
agreement entered into concurrently with a termination pursuant to the next
sentence in order to facilitate such action. Notwithstanding the foregoing,
during the Applicable Period, in response to a Superior Proposal which was not
solicited by the Company and which did not otherwise result from a breach of
Section 6.2(a), the Board of Directors of the Company may (subject to this and
the following sentences) terminate this Agreement (and concurrently with or
after such termination, if it so chooses, cause the Company to enter into any
Acquisition Agreement with respect to any Superior Proposal), but only at a time
that is during the Applicable Period and is after the third business day
following Lucent's receipt of written notice advising Lucent that the Board of
Directors of the Company is prepared to accept a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal. For purposes of this Agreement, a
"Superior Proposal" means any proposal made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of Company
Common Stock then outstanding or all or substantially all the assets of the
Company and otherwise on terms which the Board of Directors of the Company
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) to be more favorable to the
Company's stockholders than the Merger and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the Board of
Directors of the Company, is reasonably capable of being obtained by such third
party.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.2, the Company shall promptly advise
Lucent orally and in writing of any Takeover Proposal or any request for
information by any Person which the Company reasonably believes is in connection
with the preparation of a Takeover Proposal, the material terms and conditions
of such Takeover Proposal or the information requested by any such Person and
the identity of the Person making such Takeover Proposal or request for
information. The Company will promptly inform Lucent of any change in the status
and material terms and conditions (including amendments or proposed amendments)
of any such Takeover Proposal or request for information.
(d) Nothing contained in this Section 6.2 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board of Directors of the Company, after
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consultation with outside counsel, failure so to disclose would be inconsistent
with its obligations under applicable law; provided, that, except as expressly
permitted by this Section 6.2, neither the Company nor its Board of Directors
nor any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to the Offer, this Agreement or
the Merger or approve or recommend, or propose publicly to approve or recommend,
a Takeover Proposal.
6.3. Preparation of the Company Proxy Statement; Company
Stockholders Meeting. (a) If the Company Stockholder Approval is required by
law, the Company shall, as soon as practicable following the expiration of the
Offer, prepare and file with the SEC a preliminary Company Proxy Statement and
shall use its reasonable best efforts to respond to any comments of the SEC or
its staff and to cause the Company Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the staff. No filing of, or amendment or supplement to, the
Company Proxy Statement will be made by the Company without providing Lucent the
opportunity to review and comment thereon. The Company shall notify Lucent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Company
Proxy Statement or for additional information and will supply Lucent with copies
of all correspondence between the Company or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Company Proxy Statement or the Merger. If at any time prior to the Company
Stockholders Meeting there shall occur any event or information that should be
set forth in an amendment or supplement to the Company Proxy Statement, so that
the Company Proxy Statement would not include any misstatement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, the
Company shall notify Lucent and shall promptly prepare and mail to its
stockholders and file with the SEC an appropriate amendment or supplement
describing such information. The Company shall not mail any Company Proxy
Statement or any amendment or supplement thereto, to which Lucent reasonably
objects.
(b) If the Company Stockholder Approval is required by law,
the Company shall, as soon as practicable following the expiration of the Offer,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders Meeting") for the purpose of obtaining the Company
Stockholder Approval and shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of the Offer, this Agreement, the Merger
and the other transactions contemplated hereby. Without limiting the generality
of the foregoing but subject to its rights to terminate this Agreement pursuant
to Section 6.2(b), the Company agrees that its obligations pursuant to the first
sentence of this Section 6.3(b) shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Takeover Proposal. Notwithstanding the foregoing, if Acquisition or any other
Subsidiary of Lucent shall acquire at least 90% of the outstanding Shares, the
parties shall take all necessary and appropriate action to cause the Merger to
become effective as soon as
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practicable after the expiration of the Offer without a Stockholders Meeting in
accordance with Section 253 of the DGCL.
(c) Lucent agrees to cause all Shares purchased pursuant to
the Offer and all other Shares owned by Lucent or any Subsidiary of Lucent to be
voted in favor of the Merger, this Agreement and the transactions contemplated
hereby.
6.4. Reasonable Best Efforts. (a) Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by this Agreement, including (i) the taking
of all reasonable acts necessary to cause the Offer Conditions to be satisfied,
(ii) the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (v) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
(b) In connection with and without limiting the foregoing, the
Company and its Board of Directors shall (i) take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to the Offer, the Merger, this Agreement or any of the other
transactions contemplated by this Agreement and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to the Offer, the
Merger, this Agreement or any other transaction contemplated by this Agreement,
take all action necessary to ensure that the Offer, the Merger, this Agreement
and the other transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by the Offer and this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Offer, the Merger or this Agreement and the other transactions contemplated
by this Agreement.
6.5. Stock Options; Warrants. (a) The Board of Directors of
the Company (or, if appropriate, any committee administering the Company Stock
Plans) shall adopt such resolutions and take such other actions as may be
required to terminate the Company Stock Plans as of the Effective Time and each
then outstanding Company Stock Option granted under the Company Stock Plans,
whether vested or unvested, shall be cancelled and converted into a right of the
holder thereof to receive in respect of such Company Stock Option an amount in
cash, without interest (the "Company Stock Option Consideration"), equal to the
product of (i) the
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number of shares of Company Common Stock represented by such Company Stock
Option immediately prior to such cancellation and conversion multiplied by (ii)
the excess, if any, by which the Offer Price exceeds the exercise price per
share with respect to such Company Stock Option (such payment to be net of all
applicable federal, state, local or foreign taxes).
(b) Prior to the Effective Time, the Company shall (i) obtain
all necessary consents from, and provide (in a form acceptable to Lucent) any
required notices to, holders of Company Stock Options and (ii) amend the terms
of the Company Stock Plans, in each case, as is necessary to give effect to the
provisions of Section 6.5(a).
(c) Prior to the Effective Time, the Company shall take all
actions to receive from each holder of an outstanding warrant (each, a
"Warrant") to purchase shares of Company Common Stock an agreement that, as of
the Effective Time, such Warrant shall be converted into a right of such holder
to receive from the Paying Agent the consideration set forth in the next
sentence at the same time that each such holder is entitled to receive payment
for shares of Company Common Stock from the Surviving Corporation in connection
with the Merger. Each holder of a Warrant shall be entitled to receive from the
Paying Agent in respect of the shares of Company Common Stock to be issued upon
the exercise of such Warrant, an amount in cash, without interest (the "Warrant
Consideration"), equal to the product of (i) the number of shares of Company
Common Stock subject to such Warrant immediately prior to the Effective Time and
(ii) the excess, if any, by which the Offer Price exceeds the exercise price per
share that was applicable with respect to such Warrant.
6.6. Employee Benefit Plans; Existing Agreement. (a) As soon
as practicable after the Effective Time (the "Benefits Date"), Lucent shall
provide, or cause to be provided, employee benefit plans, programs and
arrangements to employees of the Company that are the same as those made
generally available to non-represented employees of Lucent who are hired by
Lucent after December 31, 1998. From the Effective Time to the Benefits Date
(which the parties acknowledge may occur on different dates with respect to
different plans, programs or arrangements of the Company) (the "Continuation
Period"), Lucent shall provide, or cause to be provided, the employee benefit
plans, programs and arrangements of the Company provided to employees of the
Company as of the date hereof.
(b) With respect to each benefit plan, program practice,
policy or arrangement maintained by Lucent (the "Lucent Plans") in which
employees of the Company subsequently participate, for purposes of determining
vesting and entitlement to benefits, including for severance benefits and
vacation entitlement (but not for accrual of pension benefits), service with the
Company (or predecessor employers to the extent the Company provides past
service credit) shall be treated as service with Lucent; provided, that such
service shall not be recognized to the extent that such recognition would result
in a duplication of benefits. Such service also shall apply for purposes of
satisfying any waiting periods, evidence of insurability requirements, or the
application of any pre-existing condition limitations. Each Lucent Plan shall
waive pre-existing condition limitations to the same extent waived under the
applicable Company Benefit Plan.
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Company Employees shall be given credit for amounts paid under a corresponding
benefit plan during the same period for purposes of applying deductibles,
copayments and out- of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the Lucent Plan.
(c) Prior to the Effective Time, the Company shall take all
necessary actions or agreements to terminate the retirement plan for employees
of the Company in accordance with its terms. The effective date of such
termination shall in no event be later than the Effective Time. Prior to such
termination, the Company shall file with respect thereto a determination letter
application on Form 5310 with the IRS. In connection with such termination, the
assets of such plan (including any excess assets), net of expenses, shall be
allocated among participants based on the accrued benefit obligation.
(d) Prior to the Effective Time, the Company shall terminate
its supplemental retirement agreements. In connection therewith, accrued
benefits shall be paid to each participant in such plan in accordance with the
procedures described in Section 10.2 of each such supplemental retirement
agreement.
(e) Prior to the Effective Time, the Company shall terminate
its retirement plan for outside directors in accordance with the terms of such
plan. In connection therewith, accrued benefits shall be paid to each
participant in such plan in accordance with the procedures described in Section
16 of such plan.
6.7. Indemnification. (a) From and after the consummation of
the Offer, Lucent shall, or shall cause the Surviving Corporation to, fulfill
and honor in all respects the obligations of the Company to indemnify each
Person who is or was a director or officer (an "Indemnified Party") of the
Company or any of its Subsidiaries pursuant to any indemnification provision of
the Company's certificate of incorporation or by-laws as each is in effect on
the date hereof.
(b) For a period of six years after the consummation of the
Offer, Lucent shall cause to be maintained in effect the current officers' and
directors' liability insurance maintained by the Company with respect to the
Indemnified Parties; provided that Lucent may elect either (i) to require the
Company to obtain prior to the Effective Time coverage of the type contemplated
by Section 10 of the Company's existing directors, officers and corporate
liability insurance policy or (ii) to substitute therefor policies of at least
the same coverage and amounts (containing terms and conditions which are no less
advantageous to the Indemnified Parties than such existing insurance) covering
acts or omissions occurring prior to the Effective Time. The current annual
premium paid by the Company for its existing coverage is set forth in Item
6.7(b) of the Company Disclosure Schedule.
(c) This Section 6.7 shall survive the closing of all the
transactions contemplated hereby, is intended to benefit the Indemnified Parties
and their respective heirs and
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personal representative (each of which shall be entitled to enforce this Section
6.7 against Lucent and the Surviving Corporation, as the case may be, as a
third-party beneficiary of this Agreement), and shall be binding on all
successors and assigns of Lucent and the Surviving Corporation.
6.8. Directors. Promptly upon the acceptance for payment of,
and payment for, Shares by Acquisition pursuant to the Offer, Acquisition shall
be entitled to designate such number of directors on the Board of Directors of
the Company as will give Acquisition, subject to compliance with Section 14(f)
of the Exchange Act, representation on the Company's Board of Directors equal to
the product of (i) the total number of directors on the Company's Board of
Directors and (ii) the percentage that the number of Shares purchased by
Acquisition in the Offer bears to the number of Shares outstanding, and the
Company shall, at such time, cause Acquisition's designees to be so elected by
its existing Board of Directors; provided, that in the event that Acquisition's
designees are elected to the Board of Directors of the Company, until the
Effective Time such Board of Directors shall have at least two directors who are
directors of the Company on the date of this Agreement and who are not officers
of the Company or any of its Subsidiaries (the "Independent Directors") and;
provided further that, in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, the remaining Independent
Director shall designate a person to fill such vacancy who shall be deemed to be
an Independent Director for purposes of this Agreement or, if no Independent
Directors then remain, the other directors of the Company on the date hereof
shall designate two persons to fill such vacancies who shall not be officers or
affiliates of the Company or any of its Subsidiaries, or officers or affiliates
of Lucent or any of its Subsidiaries, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. Subject to applicable law,
the Company shall take all action requested by Lucent necessary to effect any
such election, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Acquisition shall have
provided to the Company on a timely basis all information required to be
included in the Information Statement with respect to Acquisition's designees).
In connection with the foregoing, the Company will promptly, at the option of
Lucent, either increase the size of the Company's Board of Directors and/or
obtain the resignation of such number of its current directors as is necessary
to enable Acquisition's designees to be elected or appointed to, and to
constitute a majority of the Company's Board of Directors as provided above.
6.9. Fees and Expenses; Termination Fee. (a) Except as
provided in this Section 6.9, all fees and expenses incurred in connection with
the Offer, the Merger, this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the Offer or the Merger is consummated, except that each of Lucent and the
Company shall bear and pay one-half of (i) the costs and expenses incurred in
connection with the filing, printing and mailing of the Company Proxy Statement
(including SEC filing fees) and (ii) the filing fees for the pre-merger
notification and report forms under the HSR Act.
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(b) In the event that (i) a bona fide Superior Proposal shall
have been made directly to the stockholders of the Company generally or shall
have otherwise become publicly known or any Person shall have publicly announced
an intention (whether or not conditional) to make a Superior Proposal and
thereafter this Agreement is terminated by any of Lucent, Acquisition or the
Company pursuant to Section 11(b)(i), or (ii) this Agreement is terminated (A)
by Lucent or Acquisition pursuant to Section 11(g), (B) by the Company pursuant
to Section 11(d) or (C) by Lucent pursuant to Section 11(c), then the Company
shall promptly, but in no event later than the date of such termination, pay
Lucent a fee equal to $2,000,000 (the "Termination Fee"), payable by wire
transfer of same day funds; provided, that no Termination Fee shall be payable
to Lucent pursuant to clause (i) of this Section 6.9(b) unless within twelve
(12) months of such termination the Company or any of its Subsidiaries enters
into any definitive agreement with respect to, or consummates, any Superior
Proposal. The Company acknowledges that the agreements contained in this Section
6.9(b) are an integral part of the transactions contemplated by this Agreement
and that, without these agreements, Lucent would not enter into this Agreement.
Accordingly, if the Company fails promptly to pay the amount due pursuant to
this Section 6.9(b), and, in order to obtain such payment, Lucent commences a
suit which results in a final, non-appealable judgment against the Company for
the fee set forth in this Section 6.9(b), the Company shall pay to Lucent its
costs and expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
6.10. Public Announcements. Lucent and the Company will
consult with each other before issuing, and provide each other the opportunity
to review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as either party may
determine is required by applicable law (including Rule 14d-9 promulgated under
the Exchange Act), court process or by obligations pursuant to any listing
agreement with any national securities exchange or national trading system or as
contemplated or provided elsewhere herein. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties.
6.11. Stockholder Litigation. The Company agrees that it shall
not settle any litigation commenced after the date hereof against the Company or
any of its directors by any stockholder of the Company relating to the Offer,
the Merger or this Agreement without the prior written consent of Lucent, which
consent shall not be unreasonably withheld. The Company shall give Lucent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement. In addition, the Company shall not voluntarily
cooperate with any third party that may hereafter seek to restrain or prohibit
or otherwise oppose the Offer, the Merger or the transactions contemplated by
this Agreement and shall cooperate with Lucent and Acquisition to
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resist any such effort to restrain or prohibit or otherwise oppose the Offer,
the Merger or the transactions contemplated by this Agreement.
7. Conditions Precedent.
7.1. Conditions Precedent to Each Party's Obligation to Effect
the Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the fulfillment or satisfaction, prior to or on the Closing
Date of the following conditions:
(a) Stockholder Approval. If required by applicable law, the
Company Stockholder Approval shall have been obtained.
(b) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect,
and there shall not be pending any suit, action or proceeding by any
Governmental Entity (i) preventing the consummation of the Merger or (ii) which
otherwise is reasonably likely to have a Material Adverse Effect on the Company
or Lucent, as applicable, arising out of this Agreement or the transactions
contemplated hereby; provided, that each of the parties shall have used its
reasonable best efforts to prevent the entry of any such Restraints and to
appeal as promptly as possible any such Restraints that may be entered.
(c) Purchases of Shares. Acquisition shall have previously
accepted for payment and paid for Shares pursuant to the Offer.
7.2. Conditions Precedent to Obligations of Acquisition and
Lucent. All obligations of Acquisition and Lucent under this Agreement are
subject to the fulfillment or satisfaction, prior to or on the Closing Date, of
each of the following conditions precedent:
(a) Performance of Obligations. The Company shall have
performed and complied in all material respects with all agreements and
conditions contained in this Agreement that are required to be performed or
complied with by it prior to or at the Closing.
(b) Representations and Warranties. Each of the Company's
representations and warranties contained in Section 3 of this Agreement to the
extent it is qualified by Material Adverse Effect shall be true and correct and
each of the Company's representations and warranties to the extent it is not so
qualified by Material Adverse Effect, shall be true and correct in all material
respects, in each case, on and as of the Closing with the same effect as though
such representations and warranties were made on and as of the Closing, except
for changes permitted by this Agreement and except to the extent that such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be as of such earlier date.
Lucent and Acquisition shall have received a certificate dated the Closing
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Date and signed by the Chairman, President or a Vice-President of the Company,
certifying that, the conditions specified in clauses (a) and (b) of this Section
7.2 have been satisfied.
(c) No Material Adverse Change. No event or events shall have
occurred that could reasonably be expected to have a Material Adverse Effect on
the Company, and Lucent shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer and Chief Financial Officer to such
effect.
(d) Consents. The Company shall have received all necessary
consents or waivers, in form and substance satisfactory to Lucent and
Acquisition, from the other parties to each contract, lease or agreement to
which the Company is a party, except where the failure to receive such consent
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Company.
7.3. Conditions Precedent to the Company's Obligations. All
obligations of the Company under this Agreement are subject to the fulfillment
or satisfaction, prior to or on the Closing Date, of each of the following
conditions precedent:
(a) Performance of Obligations. Acquisition and Lucent shall
have performed and complied in all material respects with all agreements and
conditions contained in this Agreement that are required to be performed or
complied with by them prior to or at the Closing.
(b) Representations and Warranties. Each of the
representations and warranties of Acquisition and Lucent contained in Section 4
of this Agreement to the extent it is qualified by Material Adverse Effect shall
be true and correct and each of the representations and warranties of
Acquisition and Lucent to the extent it is not so qualified by Material Adverse
Effect shall be true and correct in all material respects, in each case, on and
as of the Closing with the same effect as though such representations and
warranties were made on and as of the Closing except for changes permitted by
this Agreement and except to the extent that such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall be as of such earlier date. The Company shall have received
certificates dated the Closing Date and signed by the President or a
Vice-President of Acquisition and an authorized signatory of Lucent, certifying
that the conditions specified in clauses (a) and (b) of this Section 7.3 have
been satisfied.
8. Non-Survival of Representation and Warranties.
8.1. Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time or, in the case of
the Company, shall survive the acceptance of payment for, Shares by Acquisition
pursuant to the Offer. This Section shall not limit any covenant or agreement by
the parties which contemplates performance after the Effective Time.
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9. Contents of Agreement; Parties in Interest; etc.
This Agreement and the agreements referred to or contemplated
herein and the letter agreement dated June 18, 1999, concerning confidentiality
(the "Confidentiality Agreement") set forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby, and, except
as set forth in this Agreement, such other agreements and the Exhibits hereto
and the Confidentiality Agreement, there are no representations or warranties,
express or implied, made by any party to this Agreement with respect to the
subject matter of this Agreement and the Confidentiality Agreement. Except for
the matters set forth in the Confidentiality Agreement, any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement and the
agreements referred to or contemplated herein.
10. Assignment and Binding Effect.
This Agreement may not be assigned by either party hereto
without the prior written consent of the other party; provided, that Acquisition
may assign its rights and obligations under this Agreement to any directly or
indirectly wholly-owned Subsidiary of Lucent, upon written notice to the Company
if the assignee shall assume the obligations of Acquisition hereunder and Lucent
shall remain liable for its obligations hereunder. All the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
11. Termination.
This Agreement may be terminated, and the Merger may be
abandoned at any time prior to the Effective Time whether before or after the
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company or the stockholder of Acquisition (provided
that if the Shares are purchased pursuant to the Offer, neither Lucent nor
Acquisition may in any event terminate this Agreement):
(a) by the agreement of each of the Board of Directors of
Lucent, Acquisition and the Company;
(b) by Lucent, Acquisition or the Company if (i) Acquisition
shall not have accepted for payment any Shares pursuant to the Offer prior to
December 31, 1999; provided that the right to terminate this Agreement under
this Section 11(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of Acquisition to accept for payment any Shares on or before
such date; or (ii) any court of competent jurisdiction in the United States or
other United States governmental authority shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the acceptance for payment of, or payment for, Shares pursuant to the Offer or
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable;
(c) by Lucent, if the Company or any of its directors or
officers shall participate in discussions or negotiations in breach (other than
an immaterial breach) of Section 6.2;
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(d) by the Company in accordance with Section 6.2(b); provided
that, in order for the termination of this Agreement pursuant to this paragraph
(d) to be deemed effective, the Company shall have complied with all provisions
of Section 6.2, including the notice provisions therein, and with applicable
requirements, including the payment of the Termination Fee;
(e) by the Company, in the event Lucent or Acquisition
materially breaches its obligations under this Agreement, unless such breach is
cured within 15 days after notice to Lucent by the Company;
(f) by Lucent or Acquisition, in the event the Company
materially breaches its obligations under this Agreement unless such breach is
cured within 15 days after notice to Company by Lucent or Acquisition; or
(g) by Lucent or Acquisition prior to the purchase of Shares
pursuant to the Offer in the event of a breach or failure to perform by the
Company of any representation, warranty, covenant or other agreement contained
in this Agreement which (i) would give rise to the failure of a condition set
forth in paragraph (d) or (e) of Exhibit A and (ii) cannot be cured, or has not
been cured within 15 days after the Company receives written notice from Lucent
of such breach or failure to perform.
12. Definitions.
As used in this Agreement the terms set forth below shall have
the following meanings:
(a) "Affiliate" of a Person means any other Person who
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, such Person. As used in this
definition, "control" means the possession of the power, directly or indirectly,
to direct or cause the direction of the management and policies of a Person
whether through the ownership of voting securities, by contract or otherwise.
(b) "Benefit Plan" shall mean any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other material plan,
arrangement or understanding (whether or not legally binding) providing material
benefits to any current or former employee, officer or director of the Company.
(c) "best knowledge" of any Person which is not an individual
means, with respect to any specific matter, the knowledge, after due inquiry, of
such Person's executive officers and any other officer or persons having primary
responsibility for such matter.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Environmental Laws" shall mean all applicable federal,
state, local or foreign laws, rules and regulations, orders, decrees, judgments,
permits, filings and licenses
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relating (i) to protection and clean-up of the environment and activities or
conditions related thereto, including those relating to the generation,
handling, disposal, transportation or release of Hazardous Substances and (ii)
the health or safety of employees in the workplace environment, all as amended
from time to time, and shall also include any common law theory based on
nuisance, trespass, negligence or other tortious conduct.
(f) "GAAP" shall mean generally accepted accounting
principles.
(g) "Hazardous Substances" shall mean any and all hazardous
and toxic substances, wastes or materials, any pollutants, contaminants, or
dangerous materials (including, but not limited to, polychlorinated biphenyls,
PCBs, friable asbestos, volatile and semi-volatile organic compounds, oil,
petroleum products and fractions, and any materials which include hazardous
constituents or become hazardous, toxic, or dangerous when their composition or
state is changed), or any other similar substances or materials which are
included under or regulated by any Environmental Laws.
(h) "Liens" shall mean any mortgage, pledge, lien, security
interest, conditional or installment sale agreement, encumbrance, charge or
other claims of third parties of any kind.
(i) "Material Adverse Effect" on a Person shall mean (unless
otherwise specified) any condition or event that: (i) has a material adverse
effect on the assets, business, financial condition, operations or prospects of
such Person and its Subsidiaries, taken as a whole, other than any condition or
event (A) relating to the economy in general, (B) relating to the industries in
which such party operates in general, (C) arising out of or resulting from
actions contemplated by the parties in connection with, or which is attributable
to, the announcement of this Agreement and the transactions contemplated hereby
(including loss of personnel, customers or suppliers or the delay or
cancellation of orders for products) or (D) in the case of the Company,
litigation brought or threatened against the Company or any member of its Board
of Directors in respect of this Agreement; (ii) materially impairs the ability
of such Person to perform its obligations under this Agreement; or (iii)
prevents or materially delays the consummation of transactions contemplated
under this Agreement.
(j) "Permitted Liens" shall mean (i) Liens for taxes,
assessments, or similar charges, incurred in the ordinary course of business
that are not yet due and payable or are being contested in good faith; (ii)
pledges or deposits made in the ordinary course of business; (iii) Liens of
mechanics, materialmen, warehousemen or other like Liens securing obligations
incurred in the ordinary course of business that are not yet due and payable or
are being contested in good faith; and (iv) similar Liens and encumbrances which
are incurred in the ordinary course of business and which do not in the
aggregate materially detract from the value of such assets or properties or
materially impair the use thereof in the operation of such business.
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(k) "Person" shall mean any individual, corporation,
partnership, limited partnership, limited liability company, trust, association
or entity or government agency or authority.
(l) "reasonable best efforts" shall mean prompt, substantial
and persistent efforts as a prudent Person desirous of achieving a result would
use in similar circumstances; provided that the Company, Lucent or Acquisition,
as applicable, shall be required to expend only such resources as are
commercially reasonable in the applicable circumstances.
(m) "Subsidiary" of a Person shall mean any corporation,
partnership, joint venture or other entity in which such Person (i) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or (ii) is a general partner.
(n) "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") shall include all (i) federal, state, local or foreign net income,
gross income, gross receipts, windfall profit, severance, property, production,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or
environmental tax, or any other tax, custom, duty, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount imposed by any governmental
authority, (ii) liability for the payment of any amounts described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group and (iii) liability for the payment of any amounts as a result of being
party to any tax sharing agreement or as a result of any express or implied
obligation to indemnify any other Person with respect to the payment of any
amounts of the type described in clause (i) or (ii).
(o) "Tax Return" shall mean any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
13. Notices.
Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by facsimile transmission (promptly
followed by a hard-copy delivered in accordance with this Section 13) or by
registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:
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If to Acquisition or Lucent:
Lucent Technologies Inc.
2000 Northeast Expressway
Norcross, Georgia 30071
Att: President, NPG
Telephone No: separately supplied
Facsimile No: separately supplied
with copies to:
Lucent Technologies Inc.
600 Mountain Avenue
Room 6A 311
Murray Hill, NJ 07974
Att: Pamela F. Craven
Vice President-Law
Telephone No: separately supplied
Facsimile No: separately supplied
If to the Company:
SpecTran Corporation
50 Hall Road
Sturbridge, MA 01566
Att: President
Telephone No: separately supplied
Facsimile No: separately supplied
with a copy to:
Nordlicht & Hand
645 Fifth Avenue
New York, New York 10022
Att: Ira S. Nordlicht, Esq.
Telephone No: separately supplied
Facsimile No: separately supplied
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other
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<PAGE> 51
communication will be deemed to have been given as of the date so delivered,
telegraphed or mailed.
14. Amendment.
This Agreement may be amended, modified or supplemented at any
time before or after obtaining the Company Stockholder Approval, provided that
(i) after any such approval, there shall not be made any amendment that by Law
requires further approval by the stockholders of the Company or the approval of
the stockholders of Lucent without the further approval of such stockholders and
(ii) after the purchase of the Shares pursuant to the Offer, there shall not be
made any amendment which decreases the Merger Consideration. Any amendment,
modification or revision of this Agreement and any waiver of compliance or
consent with respect hereto shall be effective only by a written instrument
executed by each of the parties hereto. Following the election or appointment of
Acquisition's designees pursuant to Section 6.8 and prior to the Effective Time,
the affirmative vote of a majority of the Independent Directors then in office
shall be required by the Company to (i) amend or terminate this Agreement by the
Company, (ii) exercise or waive any of the Company's rights or remedies under
this Agreement, (iii) extend the time for performance of Lucent and
Acquisition's respective obligations under this Agreement or (iv) take any
action to amend or otherwise modify the Company's certificate of incorporation
or by-laws (or similar governing instruments of the Company's Subsidiaries) in
violation of Section 6.7.
15. Extensions; Waiver.
At any time prior to the Effective Time, a party may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
14, waive compliance by the other party with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
shall not constitute a waiver of such rights.
16. Governing Law.
This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of Delaware as applied to
contracts made and fully performed in such state.
17. No Benefit to Others.
The representations, warranties, covenants and agreements
contained in this Agreement are for the sole benefit of the parties hereto, and
their respective successors and assigns, and they shall not be construed as
conferring, and are not intended to confer, any rights on any other Person.
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18. Severability.
If any term or other provision of this Agreement is determined
to be invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of the Agreement shall remain in
full force and effect. Upon such determination, the parties hereto shall
negotiate in good faith to modify this Agreement so as to give effect to the
original intent of the parties to the fullest extent permitted by applicable
law.
19. Section Headings.
All section headings are for convenience only and shall in no
way modify or restrict any of the terms or provisions hereof.
20. Schedules and Exhibits.
All Schedules and Exhibits referred to herein are intended to
be and hereby are specifically made a part of this Agreement.
21. Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and the Company, Acquisition and
Lucent may become a party hereto by executing a counterpart hereof. This
Agreement and any counterpart so executed shall be deemed to be one and the same
instrument.
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<PAGE> 53
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have duly executed this Agreement as of the date first
above written.
LUCENT TECHNOLOGIES INC.
By: /s/ William R. Spivey
________________________________
Name: William R. Spivey
Title: Group President,
Networks Products Group
SEATTLE ACQUISITION INC.
By: /s/ William R. Spivey
________________________________
Name: William R. Spivey
Title: President
SPECTRAN CORPORATION
By: /s/ Charles B. Harrison
________________________________
Name: Charles B. Harrison
Title: President, Chief Executive
Officer and Chairman of
the Board of Directors
<PAGE> 54
EXHIBIT A
Conditions of the Offer:
Notwithstanding any other term of the Offer or this Agreement,
Acquisition shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Acquisition's obligation to pay for or return tendered
Shares after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer unless (i) there shall have been validly tendered
and not withdrawn prior to the expiration of the Offer such number of Shares
that would constitute at least a majority of the outstanding Shares (determined
on a fully diluted basis for all outstanding stock options and any other rights
to acquire Shares on the date of purchase) (the "Minimum Condition") and (ii)
any waiting period under the HSR Act applicable to the purchase of Shares
pursuant to the Offer shall have expired or been terminated. Furthermore,
Acquisition shall not be required to accept for payment or, subject as
aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may, in accordance with Section 11, terminate this Agreement or amend
the Offer with the consent of the Company, if, upon the scheduled expiration
date of the Offer (as extended, if required, pursuant to the second to the last
sentence of Section 1.1(a)), any of the following conditions exists and is
continuing and does not result principally from the breach by Lucent or
Acquisition of any of their obligations under this Agreement:
(a) there shall be instituted or pending by any Governmental
Entity any suit, action or proceeding (i) challenging the acquisition by Lucent
or Acquisition of any Shares under the Offer, seeking to restrain or prohibit
the making or consummation of the Offer or the Merger or the performance of any
of the other transactions contemplated by this Agreement or seeking to obtain
from the Company, Lucent or Acquisition any damages that are material in
relation to the Company and its Subsidiaries taken as a whole, (ii) seeking to
prohibit or materially limit the ownership or operation by the Company, Lucent
or any of Lucent's Subsidiaries of all or a portion of the business or assets of
the Company or Lucent and its Subsidiaries, taken as a whole, or to compel the
Company or Lucent and its Subsidiaries to dispose of or hold separate all or a
portion of the business or assets of the Company or Lucent and their
Subsidiaries, taken as a whole, in each case as a direct result of the Offer or
any of the other transactions contemplated by this Agreement or (iii) seeking to
impose material limitations on the ability of Lucent or Acquisition to acquire
or hold, or exercise full rights of ownership of, any Shares to be accepted for
payment pursuant to the Offer including, without limitation, the right to vote
such Shares on all matters properly presented to the stockholders of the
Company; (iv) seeking to prohibit Lucent or any of its Subsidiaries from
effectively controlling in any material respect any material portion of the
business or operations of the Company; (v) that could reasonably be expected to
require the divestiture by Lucent or Acquisition of Shares, in the case of any
of the foregoing in clauses (ii), (iii) or (iv), which could reasonably be
expected, individually or in the aggregate, to have a material adverse effect on
the businesses of the Company and its Subsidiaries; or (vi) that could
reasonably be expected to result in a Material Adverse Effect on the Company or
Lucent;
<PAGE> 55
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger, by any Governmental Entity or court, other than the
application to the Offer or the Merger of applicable waiting periods under the
HSR Act, that would result in any of the consequences referred to in clauses (i)
through (vi) of paragraph (a) above;
(c) there shall have occurred any events or changes which have
had or which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company;
(d) any of the representations and warranties of the Company
set forth in this Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each case at
the date of this Agreement and at the scheduled or extended expiration of the
Offer;
(e) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect with any
material agreement or material covenant of the Company to be performed or
complied with by it under this Agreement, which failure to perform or comply
cannot be cured, or has not been cured within 15 days after the Company receives
written notice from Lucent of such breach or failure to perform;
(f) this Agreement shall have been terminated in accordance
with its terms;
(g) any consent (other than the filing of the Certificate of
Merger or Company Stockholder Approval if required by the DGCL) required to be
filed, occurred or been obtained by the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement, the Offer and the
consummation of the transactions contemplated by this Agreement shall not have
been filed or obtained or shall not have occurred, except where the failure to
obtain such consent could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company;
(h) the Company's Board of Directors (i) shall have withdrawn,
or modified or changed in a manner adverse to Lucent or Acquisition (including
by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement or the Merger, (ii) shall have recommended a Superior Proposal, (iii)
shall have adopted any resolution to effect any of the foregoing or (iv) upon
request of Lucent or Acquisition, shall fail to reaffirm its approval of
recommendation of the Offer, the Merger Agreement or the Merger; or
(i) any Person or "group" (within the meaning of Section
13(d)(3) of the Exchange Act), other than Lucent, Acquisition or their
Affiliates or any group of which any of them is a member, shall have acquired or
announced its intention to acquire beneficial ownership
-ii-
<PAGE> 56
(as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of the Shares.
and, in the good faith judgment of Lucent or Acquisition, in its sole
discretion, make it inadvisable to proceed with such acceptance of Shares for
payment or the payment therefor;
The foregoing conditions are for the sole benefit of Lucent
and Acquisition and (except for the Minimum Condition), subject to the terms of
this Agreement, may be waived by Lucent and Acquisition in whole or in part at
any time and from time to time in their sole discretion. The failure by Lucent
or Acquisition at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts and circumstances and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time. Terms used but not
defined herein shall have the meanings assigned to such terms in the Agreement
to which this Exhibit A is a part.
-iii-
<PAGE> 57
GLOSSARY OF DEFINED TERMS
Defined Term Location of Definition
- ------------ ----------------------
Acquisition........................................... Preamble
Acquisition Agreement................................. Section 6.2(b)
Acquisition Common Stock ............................. Recitals
Affiliate............................................. Section 12(a)
Agreement............................................. Preamble
Applicable Period..................................... Section 6.2(a)
Authorizations........................................ Section 3.14(b)
Benefit Plan.......................................... Section 12(b)
Benefits Date ........................................ Section 6.6
best knowledge........................................ Section 12(c)
Certificate of Merger................................. Section 2.1(b)
Certificates.......................................... Section 2.8(a)
Closing............................................... Section 2.1(b)
Closing Date.......................................... Section 2.1(b)
Code.................................................. Section 12(d)
Commonly Controlled Entity............................ Section 3.17(a)
Company............................................... Preamble
Company Benefit Plans................................. Section 3.17(a)
Company Common Stock.................................. Recitals
Company Disclosure Schedule........................... Section 3
Company Filed SEC Documents........................... Section 3.6
Company Non-Voting Common Stock....................... Recitals
Company Proxy Statement............................... Section 3.5(b)
Company SEC Documents................................. Section 3.6
Company Stockholder Approval.......................... Section 3.23
Company Stockholders Meeting.......................... Section 6.3(b)
Company Stock Options................................. Section 3.3(b)
Company Stock Option Consideration.................... Section 6.5(a)
Company Stock Plans................................... Section 3.3(a)
Confidentiality Agreement............................. Section 9
Continuation Period................................... Section 6.6(a)
DGCL.................................................. Recitals
Dissenting Shares..................................... Section 2.7(a)
Effective Time........................................ Section 2.1(b)
Environmental Laws.................................... Section 12(e)
ERISA................................................. Section 3.17(a)
Exchange Act.......................................... Section 1.1(b)
GAAP.................................................. Section 12(f)
Governmental Entity................................... Section 3.5(b)
-i-
<PAGE> 58
Hazardous Substances.................................. Section 12(g)
HSR Act............................................... Section 3.5(b)
Immaterial Authorizations............................. Section 3.14(b)
Indemnified Party..................................... Section 6.7(a)
Information Statement................................. Section 3.7
Intellectual Property Rights.......................... Section 3.15(a)
IRS................................................... Section 3.17(a)
Laws.................................................. Section 3.14(a)
Liens................................................. Section 12(h)
Lucent................................................ Preamble
Lucent Disclosure Schedule............................ Section 4
Lucent Plans.......................................... Section 6.6(b)
Material Adverse Effect............................... Section 12(i)
Merger................................................ Recitals
Merger Consideration.................................. Section 2.5(c)
Minimum Condition..................................... Exhibit A
Nasdaq................................................ Section 3.5(b)
Offer................................................. Recitals
Offer Conditions...................................... Section 1.1(a)
Offer Documents....................................... Section 1.1(b)
Offer Price........................................... Recitals
Parachute Gross-Up Payment............................ Section 3.18(e)
Paying Agent.......................................... Section 2.8(a)
Pension Plans......................................... Section 3.17(a)
Permitted Liens....................................... Section 12(j)
Person................................................ Section 12(k)
reasonable best efforts............................... Section 12(l)
Restraints............................................ Section 7.1(b)
SARs.................................................. Section 3.3(b)
Schedule 14D-1........................................ Section 1.1(b)
Schedule 14D-9........................................ Section 1.2(b)
SEC................................................... Section 1.1(a)
Section 6.2 Notice.................................... Section 6.2(a)
Shares................................................ Recitals
Securities Act........................................ Section 3.6
Subsidiary............................................ Section 12(m)
Superior Proposal..................................... Section 6.2(b)
Surviving Corporation................................. Section 2.1(a)
Takeover Proposal..................................... Section 6.2(a)
Tax................................................... Section 12(n)
Tax Return............................................ Section 12(o)
Termination Fee....................................... Section 6.9(b)
Warrant............................................... Section 6.5(c)
-ii-
<PAGE> 59
Warrant Consideration................................. Section 6.5(c)
-iii-
<PAGE> 1
EXHIBIT (c)(3)
CONTRACTUAL AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC.
AND
SPECTRAN CORPORATION
<PAGE> 2
pg 1 of 2
<TABLE>
<CAPTION>
INDEX
<S> <C>
ARTICLE PAGE
INTRODUCTION 1
1.0 MATERIAL 1
2.0 ORDERING COMPANIES 1
3.0 TERM 1
4.0 OPTION TO EXTEND 1
5.0 PRODUCT SPECIFICATION 2
6.0 PACKAGING SPECIFICATION 2
7.0 QUANTITIES 2
8.0 SCHEDULE 2
9.0 * 3
10.0 F.O.B. 3
11.0 TERMS OF PAYMENT 3
12.0 PRICE 3
13.0 * 3
14.0 BANKRUPTCY AND TERMINATION FOR FINANCIAL SECURITY 4
15.0 * 4
16.0 ASSIGNMENT AND SUBCONTRACTING 5
17.0 CFC PACKAGING 5
18.0 CHANGES 5
19.0 CHOICE OF LAW 5
20.0 COMPLIANCE WITH LAWS 5
21.0 FORCE MAJEURE 5
22.0 GOVERNMENT CONTRACT PROVISIONS 6
23.0 HEAVY METALS IN PACKAGING 6
24.0 INDEMNITY 6
25.0 IDENTIFICATION 6
26.0 IMPLEADER 7
27.0 INFRINGEMENT 7
28.0 GRANT OF "HAVE MADE" RIGHTS 7
29.0 INSPECTION 7
30.0 INSURANCE 8
31.0 INVOICING 8
32.0 MEDIATION 8
33.0 NOTICES 8
34.0 OZONE DEPLETING SUBSTANCES LABELING 9
35.0 PAYMENT TERMS 9
36.0 PRODUCT CONFORMANCE 9
37.0 RELEASES VOID 9
38.0 RIGHT OF ENTRY AND PLANT RULES 9
</TABLE>
<PAGE> 3
pg 2 of 2
<TABLE>
<CAPTION>
<S> <C>
39.0 SHIPPING 9
40.0 SURVIVAL OF OBLIGATIONS 9
41.0 TAXES 10
42.0 TITLE AND RISK OF LOSS 10
43.0 USE OF INFORMATION 10
44.0 WAIVER 10
45.0 WARRANTY 10
46.0 WORK DONE BY OTHERS 10
47.0 TOOLS AND EQUIPMENT 10
48.0 ENTIRE AGREEMENT 11
</TABLE>
<PAGE> 4
PAGE 1 OF 11
ACCEPTANCE SHALL BE
INDICATED BY SIGNING AND
RETURNING ORIGINAL TO:
SPECTRAN CORP. LUCENT TECHNOLOGIES INC.
Attn: Ray Jaeger Attn: Global Procurement
50 Hall Road 2000 Northeast Expressway
Sturbridge, Ma. 01566 Norcross, Georgia 30071
Lucent Technologies Inc. ("Company") agrees to purchase and SpecTran Corp. or
any affiliated corporation, partnership or venture of SpecTran Corp.
("Supplier") agrees to sell in accordance with the terms and conditions stated
within this Agreement, and Attachments A and B and C, which are attached hereto
and made part of this Agreement. Notwithstanding the foregoing, SpecTran Corp.
shall be responsible for all MATERIAL provided under this Agreement. The term
"MATERIAL" in this Agreement includes the * and any modifications to these
specifications which may be made from time to time in accordance with the
PRODUCT SPECIFICATION AND PACKAGING clauses below, or derivatives of these
specifications which are minor modifications to the Specifications.
The Attachments noted above are listed and described below:
*
Attachment C - Non-Disclosure Agreement Dated 10/21/92.
1.0 MATERIAL--MATERIAL shall be Multimode Optical Fiber manufactured to *
2.0 ORDERING COMPANIES--Lucent Technologies Inc. or any affiliated corporation,
partnership, or venture, as may be designated in writing by Lucent Technologies
Inc. may order under this Agreement. For the purpose of this Agreement, the term
"Company" shall mean the corporation or other entity which enters into or issues
an Order under this Agreement. An affiliated corporation, partnership, or
venture is an entity, a majority of whose voting stock or ownership interest is
owned directly or indirectly by Lucent Technologies Inc. Any Order issued under
this Agreement shall be a contractual relationship between the ordering Company
and Supplier, and Supplier shall look only to the ordering Company for
performance of Company's obligations under such Order.
3.0 TERM--Agreement shall begin on 9/1/96 and end on 12/31/99.
4.0 OPTION TO EXTEND--Company shall have the right to extend the period
specified in the clause TERM for up to one (1) year by giving Supplier written
notice a minimum of six (6) months prior to the expiration of the contract. At
the time of the request to extend this Agreement, pricing for the agreed upon
quantities shall be negotiated and agreed upon by both parties.
______
* An asterisk, whenever appearing in this document, indicates redacted
material filed separately with Commission, for which confidential treatment
has been granted.
<PAGE> 5
Page 2 of 11
5.0 PRODUCT SPECIFICATION--
Multimode Optical Fiber. Any changes to the current specifications set forth in
this Agreement can only be made with the consent and agreement of both parties
6.0 PACKAGING SPECIFICATION--
Any changes to the current specification set forth in this Agreement can only be
made with the consent and agreement of both parties.
7.0 QUANTITIES
(a) *
(b) *
(c) *
(d) *
8.0 SCHEDULE *
<PAGE> 6
Page 3 of 11
9.0 *
10.0 F.O.B.--Destination--Supplier shall be responsible for all transportation
cost for MATERIAL shipped to any U.S. destination.
11.0 TERMS OF PAYMENT--Net thirty (30) days for MATERIAL from date of receipt of
invoice.
12.0 PRICE--Pricing for MATERIAL shall be as follows: *
13.0 *
<PAGE> 7
Page 4 of 11
14.0 BANKRUPTCY AND TERMINATION FOR FINANCIAL SECURITY--Either party may
terminate this Agreement by notice in writing:
1. If the other party makes an assignment for the benefit of creditors
(other than solely an assignment of monies due); or
2. If the other party evidences an inability to pay debts as they become
due, unless adequate assurances of such ability to pay is provided within thirty
(30) days of such notice.
If a proceeding is commenced under any provisions of the United States
Bankruptcy Code, voluntary or involuntary, by or against either party, and this
Agreement has not been terminated, the non-debtor party may file a request with
the bankruptcy court to have the court set a date within sixty (60) days after
the commencement of the case, by which the debtor party will assume or reject
this Agreement, and the debtor party shall cooperate and take whatever steps
necessary to assume or reject the Agreement by such date.
15.0 *
<PAGE> 8
Page 5 of 11
16.0 ASSIGNMENT AND SUBCONTRACTING - Company or Supplier shall not assign any
right or interest under this Agreement (excepting monies due or to become due)
or delegate or subcontract the manufacture of MATERIAL or other obligation to be
performed or owed under this Agreement without the prior written consent of the
other. Any attempted assignment, delegation or subcontracting in contravention
of the above provisions shall be void and ineffective except for (1) Supplier, a
wholly-owned subsidiary whose primary business is the manufacture of fiber, or
(2) for either party in a successor in ownership of all or substantially all of
the assigning party's operations. In case of any such assignment, the assigning
party fully guarantees the performance hereunder of its assignee. Any assignment
of monies shall be void and ineffective to the extent that (1) Supplier shall
not have given Company at least thirty (30) days prior written notice of such
assignment or (2) such assignment attempts to impose upon Company obligations to
the assignee additional to the payment of such monies, or to preclude Company
from dealing solely and directly with Supplier in all matters pertaining to this
Agreement including the negotiation of amendments or settlements of charges due.
All Work performed by Supplier's subcontractor(s) at any tier shall be deemed
Work performed by Supplier.
17.0 CFC PACKAGING - Supplier warrants that all packaging materials furnished
under this Agreement and all packaging associated with material furnished under
this Agreement were not manufactured using and do not contain
chlorofluorocarbons. "Packaging" means all bags, wrapping, boxes, cartons and
any other packing materials used for packaging. Supplier shall indemnify and
hold Company harmless for any liability, fine or penalty incurred by Company to
any third party or governmental agency arising out of Company's good faith
reliance upon said warranty.
18.0 CHANGES - Company may at any time during the manufacture of MATERIAL
require additions to or alterations of or deductions or deviations (all
hereinafter referred to as a "Change") from the MATERIAL called for by the
specifications as required by Industry Standards. No Change shall be considered
as an addition or alteration to or deduction or deviation from the MATERIAL
called for by the specifications nor shall Supplier be entitled to any
compensation for MATERIAL manufactured pursuant to or in contemplation of a
Change, unless made pursuant to a written Change Order issued by Company. Within
ten (10) days after a request for a Change, Supplier shall submit a proposal to
Company which includes any increases or decreases in Supplier's cost or changes
in the MATERIAL schedule necessitated by the Change. Company shall, within ten
(10) days of receipt of the proposal, either (i) accept the proposal, in which
event Company shall issue a written Change Order directing Supplier to perform
the Change or (ii) advise Supplier not to perform the Change in which event
Supplier shall proceed with the original MATERIAL.
19.0 CHOICE OF LAW - The construction, interpretation and performance of this
Agreement and all transactions under it shall be governed by the laws of the
State of New Jersey excluding its choice of laws rules and excluding the
Convention for the International Sale of Goods. The parties agree that the
provisions of the New Jersey Uniform Commercial Code apply to this Agreement and
all transactions under it, including agreements and transactions relating to the
furnishing of services, the lease or rental of equipment or material, and the
license of software. Supplier agrees to submit to the jurisdiction of
<PAGE> 9
any court wherein an action is commenced against Company based on a claim for
which Supplier has agreed to indemnify Company under this Agreement.
20.0 COMPLIANCE WITH LAWS - Supplier and all persons furnished by Supplier shall
comply at their own expense with all applicable federal, state, local and
foreign laws, ordinances, regulations and codes, including those relating to the
use of chlorofluorocarbons, and including the identification and procurement of
required permits, certificates, licenses, insurance, approvals and inspections
in performance under this Agreement. Supplier agrees to indemnify, defend (at
Company's request) and save harmless Company, its affiliates, its and their
customers and each of their officers, directors and employees from and against
any losses, damages, claims, demands, suits, liabilities, fines, penalties and
expenses (including reasonable attorney's fees) that arise out of or result from
any failure to do so.
21.0 FORCE MAJEURE - If the performance of this Agreement or of any obligation
hereunder, other than the payment of any money, is prevented, restricted or
interfered with by reason of any act of God, civil disorder, strike,
<PAGE> 10
Page 6 of 11
governmental act, war or, without limiting the foregoing, by any other cause not
within the control of a party hereto, then the party so affected, upon giving
prompt notice to the other party, shall be excused from such performance to the
extent of such prevention, restriction or interference; provided that the party
so affected shall use its best reasonable efforts to avoid or remove such causes
for nonperformance and shall continue performance hereunder with the utmost
dispatch whenever such causes are removed. If a party's performance hereunder is
continued to be delayed due to such force majeure so that contract objectives
hereunder are not being carried out, then both parties shall use their best
reasonable efforts to remove the ramifications of the force majeure so that the
parties' performances hereunder may continue.
22.0 GOVERNMENT CONTRACT PROVISIONS - The following provisions regarding equal
opportunity, and all applicable laws, rules, regulations and executive orders
specifically related thereto, including applicable provisions and clauses from
the Federal Acquisition Regulation and all supplements thereto are incorporated
in this Agreement as they apply to work performed under specific U.S. Government
contracts: 41 CFR 60-1.4, Equal Opportunity; 41 CFR 60-1.7, Reports and Other
Required Information; 41 CFR 60-1.8, Segregated Facilities; 41 CFR 60-250.4,
Affirmative Action For Disabled Veterans and Veterans of the Vietnam Era (if in
excess of $10,000); and 41 CFR 60-741.4, Affirmative Action for Disabled Workers
(if in excess of $2,500), wherein the terms "contractor" and "subcontractor"
shall mean "Supplier". In addition, orders placed under this Agreement
containing a notation that the material or services are intended for use under
Government contracts shall be subject to such other Government provisions
printed, typed or written thereon, or on the reverse side thereof, or in
attachments thereto.
23.0 HEAVY METALS IN PACKAGING - Supplier warrants to Company that no lead,
cadmium, mercury or hexavalent chromium have been intentionally added to any
packaging or packaging component (as defined under applicable laws) to be
provided to Company under this Agreement. Supplier further warrants to Company
that the sum of the concentration levels of lead, cadmium, mercury and
hexavalent chromium in the package or packaging component provided to Company
under this Agreement does not exceed 100 parts per million. Upon request,
Supplier shall provide to Company Certificates of Compliance certifying that the
packaging and/or packaging components provided under this Agreement are in
compliance with the requirements set forth above in this clause. Supplier shall
indemnify and hold Company harmless for any liability, fine or penalty incurred
by Company to any third party or governmental agency arising out of Company's
good faith reliance upon said warranties or any Certificates of Compliance.
24.0 INDEMNITY - All persons furnished by Supplier shall be considered solely
Supplier's employees or agents, and Supplier shall be responsible for payment of
all unemployment, social security and other payroll taxes, including
contributions when required by law. Supplier agrees to indemnify, defend and
save harmless Company, its affiliates and its and their customers and each of
their officers, directors, employees, successors and assigns (all hereinafter
referred to in this clause as "Company") from and against any losses, damages,
claims, demands, suits, liabilities, fines, penalties and expenses (including
reasonable attorney's fees) that arise out of or result
<PAGE> 11
from: (1) injuries or death to persons or damage to property, including theft,
in any way arising out of or occasioned by, caused or alleged to have been
caused by or on account of the performance of the Work or services performed by
Supplier or persons furnished by Supplier; (2) assertions under Workers'
Compensation or similar acts made by persons furnished by Supplier or by any
subcontractor or by reason of any injuries to such persons for which Company
would be responsible under Workers' Compensation or similar acts if the persons
were employed by Company; (3) any failure on the part of Supplier to satisfy all
claims for labor, equipment, materials and other obligations relating directly
or indirectly to the performance of the Work; or (4) any failure by Supplier to
perform Supplier's obligations under this clause or the INSURANCE clause.
Supplier agrees to defend Company, at Company's request against any such claim,
demand or suit. Company agrees to notify Supplier in a timely manner of any
written claims or demands against Company for which Supplier is responsible
under this clause.
25.0 IDENTIFICATION - Supplier shall not, without Company's prior written
consent, engage in advertising, promotion or publicity related to this
Agreement, or make public use of any identification in any circumstances related
<PAGE> 12
Page 7 of 11
to this Agreement, "Identification" means any copy or semblance of any trade
name, trademark, service mark, insignia, symbol, logo, or any other product,
service or organization designation, or any specification or drawing of Lucent
Technologies, or its affiliates, or evidence of inspection by or for any of
them. Supplier shall remove or obliterate any Identification prior to any use or
disposition of any material rejected or not purchased by Company, and, shall
indemnify, defend (at Company's request) and save harmless Lucent Technologies
and its affiliates and each of their officers, directors and employees from and
against any losses, damages, claims, demands, suits, liabilities, fines,
penalties and expenses (including reasonable attorneys' fees) arising out of
Supplier's failure to so remove or obliterate.
26.0 IMPLEADER - Supplier shall not implead or bring an action against Company
or its customers or the employees of either based on any claim by any person for
personal injury or death to an employee of Company or its customers occurring in
the course or scope of employment and that arises out of material or services
furnished under this Agreement.
27.0 INFRINGEMENT - *
28.0 GRANT OF "HAVE MADE" RIGHTS - *
29.0 INSPECTION - Company's Representatives shall have with reasonable prior
notice access to the Work for the purpose of inspection or a Quality Review and
Supplier shall provide safe and proper facilities for such purpose.
<PAGE> 13
Page 8 of 11
30.0 INSURANCE - Supplier shall maintain and cause Supplier's subcontractors to
maintain during the term of this Agreement: (1) Worker's Compensation insurance
as prescribed by the law of the state or nation in which the Work is performed;
(2) employer's liability insurance with limits of at least $300,000 for each
occurrence; (3) comprehensive automobile liability insurance if the use of motor
vehicles is required, with limits of at least $1,000,000 combined single limit
for bodily injury and property damage for each occurrence; (4) Commercial
General Liability ("CGL") insurance, including Blanket Contractual Liability and
Broad Form Property Damage, with limits of at least $1,000,000 combined single
limit for bodily injury and property damage for each occurrence; and (5) if the
furnishing to Company (by sale or otherwise) of products or material is
involved, CGL insurance endorsed to include products liability and completed
operations coverage in the amount of $5,000,000 for each occurrence. All CGL and
automobile liability insurance shall designate Lucent Technologies, its
affiliates, and each of their officers, directors and employees (all hereinafter
referred to in this clause as "Company") as an additional insured. All such
insurance must be primary and required to respond and pay prior to any other
available coverage. Supplier agrees that Supplier, Supplier's insurer(s) and
anyone claiming by, through, under or in Supplier's behalf shall have no claim,
right of action or right of subrogation against Company and its customers based
on any loss or liability insured against under the foregoing insurance. Supplier
and Supplier's subcontractors shall furnish prior to the start of Work
certificates or adequate proof of the foregoing insurance including, if
specifically requested by Company, copies of the endorsements and insurance
policies. Company shall be notified in writing at least thirty (30) days prior
to cancellation of or any change in the policy.
31.0 INVOICING - Supplier shall: (1) render original invoice, or as otherwise
specified in this Agreement, showing Agreement and order number, through routing
and weight; (2) render separate invoices for each shipment within twenty-four
(24) hours after shipment; and (3) mail invoices with copies of bills of lading
and shipping notices to the address shown on this Agreement or order. If
prepayment of transportation charges is authorized, Supplier shall include the
transportation charges from the FOB point to the destination as a separate item
on the invoice stating the name of of the carrier used.
32.0 MEDIATION - If a dispute arises out of or relates to this Agreement, or its
breach, and the parties have not been successful in resolving such dispute
through negotiation, the parties agree to attempt to resolve the dispute through
mediation by submitting the dispute to a sole mediator selected by the parties
or, at any time at the option of a party, to mediation by the American
Arbitration Association ("AAA"). Each party shall bear its own expenses and an
equal share of the expenses of the mediator and the fees of the AAA. The
parties, their representatives, other participants and the mediator shall hold
the existence, content and result of the mediation in confidence. If such
dispute is not resolved by such mediation, the parties shall have the right to
resort to any remedies permitted by law. All such defenses based on passage of
time shall be tolled pending the termination of the mediation. Nothing in this
clause shall be construed to preclude any party from seeking injunctive relief
in order to protect its
<PAGE> 14
rights pending mediation. A request by a party to a court for such injunctive
relief shall not be deemed a waiver of the obligation to mediate.
33.0 NOTICES - Any notice or demand which under the terms of this Agreement or
under any statute must or may be given or made by Supplier or Company shall be
in writing and shall be given or made by telegram, tested telex, confirmed
facsimile, or similar communication or by certified or registered mail addressed
to the respective parties as follows:
To Company: Lucent Technologies Inc.
Attention: Purchasing Representative, Suite C110
2000 Northeast Expressway
Norcross, Ga. 30071
To Supplier: SpecTran Corp.
Attention: Ray Jaeger
50 Hall Road
Sturbridge, Ma. 01566
<PAGE> 15
Page 9 of 11
Such notice or demand shall be deemed to have been given or made when sent by
telegram, telex, or facsimile, or other communication or when deposited postage
prepaid in the U.S. mail. The previous addresses may be changed at any time by
giving prior written notice as above provided.
34.0 OZONE DEPLETING SUBSTANCES LABELING - Supplier warrants and certifies that
all products, including packaging and packaging components, provided to Company
under this Agreement have been accurately labeled, in accordance with the
requirements of 40 CFR, Part 82 entitled "Protection of Stratospheric Ozone,
Subpart E - The Labeling of Products Using Ozone Depleting Substances." Supplier
agrees to indemnify, defend and save harmless Company, its officers, directors
and employees from and against any losses, damages, claims, demands, suits,
liabilities, fines, penalties and expenses (including reasonable attorneys'
fees) that may be sustained by reason of Supplier's noncompliance with such
applicable law or the terms of this warranty and certification.
35.0 PAYMENT TERMS *
36.0 PRODUCT CONFORMANCE - Supplier shall be responsible for providing to
Company all Certified Test Data and any other information requested by Company
to verify that MATERIAL meets Company's specifications. Supplier shall be
responsible for sending the Certified Test Data information to Company's
Representative or others as may be delegated in writing prior to MATERIAL being
received by Company. Company's Representative shall be R. J. (Ron) Smith, Member
of Technical Staff.
37.0 - RELEASES VOID - Neither party shall require (i) waivers or releases of
any personal rights or (ii) execution of documents which conflict with the terms
of this Agreement, from employees, representatives or customers of the other in
connection with visits to its premises and both parties agree that no such
releases, waivers or documents shall be pleaded by them or third persons in any
action or proceeding.
38.0 RIGHT OF ENTRY AND PLANT RULES - Each party shall have the right to enter
the premises, with reasonable prior notice, of the other party during normal
business hours with respect to the performance of this Agreement, subject to all
plant rules and regulations, security regulations and procedures and U.S.
Government clearance requirements if applicable.
39.0 SHIPPING - Supplier shall: (1) ship the material covered by this Agreement
or Purchase Order complete unless instructed otherwise (partial shipments will
be accepted, but not preferred); (2) ship to the destination designated in the
Agreement or order; (3) ship according to routing instructions given by Company;
(4) place the Agreement and order number on all subordinate documents; (5)
enclose a packing memorandum with each shipment and, when more than one package
is shipped, identify the package containing the memorandum; and (6) mark the
Agreement number and order number on all packages and shipping papers. Adequate
protective packing shall be furnished at no additional charge. Shipping and
routing instructions may be furnished or altered by Company without a writing.
<PAGE> 16
If Supplier does not comply with the terms of the FOB clause of the Agreement or
order or with Company's shipping or routing instructions, Supplier authorizes
Company to deduct from any invoice of Supplier (or to charge back to Supplier),
any increased cost incurred by Company as a result of Supplier's noncompliance.
40.0 SURVIVAL OF OBLIGATIONS - The obligations of the parties under this
Agreement which by their nature would continue beyond the termination,
cancellation or expiration of this Agreement, including, by way of illustration
only and not limitation, those in the clauses COMPLIANCE WITH LAWS,
IDENTIFICATION, IMPLEADER, INFRINGEMENT, RELEASES VOID, USE OF INFORMATION and
WARRANTY (and INSURANCE and INDEMNITY if included in this Agreement), shall
survive termination, cancellation or expiration of this Agreement.
<PAGE> 17
Page 10 of 11
41.0 TAXES - Company shall reimburse Supplier only for the following tax
payments with respect to transactions under this Agreement unless Company
advises Supplier that an exemption applies: state and local sales and use taxes,
as applicable. Taxes payable by Company shall be billed as separate items on
Supplier's invoices and shall not be included in Supplier's prices. Company
shall have the right to have Supplier contest any such taxes that Company deems
improperly levied at Company's expense and subject to Company's direction and
control.
42.0 TITLE AND RISK OF LOSS - Title and risk of loss and damage to material
purchased by Company under this Agreement shall vest in Company when the
MATERIAL has been delivered at the FOB point. If this Agreement or order issued
pursuant to this Agreement calls for additional services including, but not
limited to, unloading, installation, or testing, to be performed after delivery,
Supplier shall retain title and risk of loss and damage to the MATERIAL until
the additional services have been performed. Notwithstanding the foregoing
sentence, if Supplier is expressly authorized to invoice Company for MATERIAL
upon shipment or prior to the performance of additional services, title to such
MATERIAL shall vest in Company upon payment of the invoice, but risk of loss and
damage shall pass to Company as provided in the foregoing sentence.
43.0 USE OF INFORMATION - In accordance with the Non-Disclosure Agreement dated
10/21/92, Supplier shall view as Company's property any idea, data, program,
technical, business or other intangible information, however conveyed, and any
document, print, tape, disk, tool, or other tangible information-conveying or
performance-aiding article owned or controlled by Company, and provided to, or
acquired by, Supplier under or in contemplation of this Agreement (Information).
Supplier shall, at no charge to Company, and as Company directs, destroy or
surrender to Company promptly at its request any such article or any copy of
such Information. Supplier shall keep Information confidential and use it only
in performing under this Agreement and obligate its employees, subcontractors
and others working for it to do so, provided that the foregoing shall not apply
to information previously known to Supplier free of obligation, or made public
through no fault imputable to Supplier.
44.0 WAIVER - The failure of either party at any time to enforce any right or
remedy available to it under this Agreement or otherwise with respect to any
breach or failure by the other party shall not be construed to be a waiver of
such right or remedy with respect to any other breach or failure by the other
party.
45.0 WARRANTY *
<PAGE> 18
46.0 WORK DONE BY OTHERS - If any of the manufacture of MATERIAL is dependent
on work done by others, Supplier shall inspect and promptly report to Company's
Representative any defect that renders such other work unsuitable for Supplier's
proper performance. Supplier's silence shall constitute approval of such work as
fit and suitable for Supplier's performance.
47.0 TOOLS AND EQUIPMENT - Unless otherwise specifically provided in this
Agreement, Supplier shall provide all labor, tools and equipment (the "tools")
for performance of this Agreement. Should Supplier actually use any tools owned
or rented by Company or its customer, Supplier acknowledges that Supplier
accepts the tools "as is, where is," that neither Company nor its customer have
any responsibility for the condition or state of repair of the tools and that
<PAGE> 19
Page 11 of 11
Supplier shall have risk of loss and damage to such tools. Supplier agrees not
to remove the tools from Company's or its customer's premises and to return the
tools to Company or its customer upon completion of use, or at such earlier time
as Company or its customer may request, in the same condition as when received
by Supplier, reasonable wear and tear expected. Any special tooling, special
test equipment, designs or other facilities which are acquired, produced or used
within proprietary processes by Supplier in connection with this Agreement shall
remain the property of Supplier, notwithstanding anything to the contrary found
elsewhere in this Agreement.
48.0 ENTIRE AGREEMENT - The typed or written provisions on Company's orders
issued pursuant to this Agreement shall be subject to this Agreement and its
Attachments and together shall constitute the entire agreement between the
parties with respect to the subject matter of this Agreement and the order(s)
and shall not be modified or rescinded except by a writing signed by Supplier
and Company. All references of these terms and conditions to this Agreement or
to work services material, equipment, products, software or information
furnished under, in performance or pursuant or in contemplation of this
Agreement shall also apply to any orders issued pursuant to this Agreement.
Printed provisions on the reverse side of Company's orders (except as specified
otherwise in this Agreement) and all provisions on Supplier's forms shall be
deemed deleted. Additional or different terms inserted in the Agreement by
Supplier, or deletions thereto whether by alterations, addenda or otherwise
shall be of no force in effect, unless expressly consented to by Company in
writing. Estimates or forecasts furnished by Company shall not constitute
commitments. The provisions of this Agreement supersede all contemporaneous oral
agreements and all prior oral and written quotations, communications, agreements
and understandings of the parties with respect to the subject matter of this
Agreement.
SPECTRAN CORP. LUCENT TECHNOLOGIES INC.
By /s/ R. E. Jaeger By /s/ E. J. Tracy
------------------------- ---------------------------
Name R. Jaeger Name E. J. Tracy
------------------------- ---------------------------
Title President Title Vice President
Global Procurement Organization
----------------------- ---------------------------------
Date 10-3-96 Date 9/27/96
----------------------- ---------------------------------
<PAGE> 20
Page 1 of 7
LUCENT TECHNOLOGIES NETWORK SYSTEMS
MATERIAL SPECIFICATION
*
Lucent TECHNOLOGIES Proprietary
Not for use or disclosure outside Lucent TECHNOLOGIES
except under written agreement
<PAGE> 21
Page 2 of 7
*
Lucent TECHNOLOGIES Proprietary
Not for use or disclosure outside Lucent TECHNOLOGIES
except under written agreement
<PAGE> 22
Page 3 of 7
*
Lucent TECHNOLOGIES Proprietary
Not for use or disclosure outside Lucent TECHNOLOGIES
except under written agreement
<PAGE> 23
Page 4 of 7
*
Lucent TECHNOLOGIES Proprietary
Not for use or disclosure outside Lucent TECHNOLOGIES
except under written agreement
<PAGE> 24
Page 5 of 7
*
Lucent TECHNOLOGIES Proprietary
Not for use or disclosure outside Lucent TECHNOLOGIES
except under written agreement
<PAGE> 25
Page 6 of 7
*
Lucent TECHNOLOGIES Proprietary
Not for use or disclosure outside Lucent TECHNOLOGIES
except under written agreement
<PAGE> 26
Page 7 of 7
*
Lucent TECHNOLOGIES Proprietary
Not for use or disclosure outside Lucent TECHNOLOGIES
except under written agreement
<PAGE> 27
LAK412D ATTACHMENT B
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<PAGE> 32
LAK412D
Attachment C
NON-DISCLOSURE AGREEMENT
THIS AGREEMENT is made and entered into effective 10/21/1992, by and between
SPECTRAN CORPORATION, a Delaware corporation, with offices located at 50 Hall
Road Sturbridge, MA. 01566, and AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New
York corporation, with offices located at 32 Avenue of the Americas, New York,
New York 10013-2412 ("AT&T"), for itself and its affiliated companies.
WHEREAS, both parties, for their mutual benefit, desire to disclose to the
other certain specifications, designs, plans, drawings, software, data,
prototypes, or other business and/or technical information related to the
manufacturing and inspection of optical fiber and optical fiber preforms
("INFORMATION") which is proprietary to the disclosing party or its' affiliated
companies.
NOW, THEREFORE, the parties agree as follows:
1. The receiving party, for 5 years after the disclosure of such INFORMATION,
shall hold such INFORMATION in confidence, shall use such INFORMATION only for
the purpose of the Corporation's preparation and AT&T's evaluation of a proposal
for potential business arrangements between the Corporation and AT&T regarding
the manufacturing and inspection of optical fiber and optical fiber preforms,
shall reproduce such INFORMATION only to the extent necessary for such purpose,
shall restrict disclosure of such INFORMATION to its employees (and in the case
of AT&T, employees of its affiliated companies) with a need to know (and advise
such employees of the obligations assumed herein), and shall not disclose such
INFORMATION to any third party without prior written approval of the other
party.
Each party agrees to protect such INFORMATION disclosed to it by the other
party with at least the same degree of care as it normally exercises to protect
its own proprietary information of a similar nature.
These restrictions on the use or disclosure of INFORMATION shall not apply to
any INFORMATION:
i. which is independently developed by the receiving party or its affiliated
company or lawfully received free of restriction from another source having the
right to so furnish such INFORMATION; or
<PAGE> 33
-2-
II. after it has become generally available to the public
without breach of this Agreement by the receiving party or its
affiliated company; or
III. which at the time of disclosure to the receiving party
was known to such party or its affiliated company free of restriction
as evidenced by documentation in such party's possession; or
IV. which the disclosing party agrees in writing is free of
such restrictions.
2. INFORMATION shall be subject to the restrictions of paragraph 1, if it is in
writing or other tangible form, only if clearly marked as proprietary when
disclosed to the receiving party or, if not in tangible form, only if summarized
in a writing so marked and delivered to the receiving party within thirty (30)
days of such summary disclosure, in which case the INFORMATION contained in such
(not information contained solely in the non-tangible disclosure) shall be
subject to the restrictions herein. Each party hereto shall endeavor to keep to
a minimum the amount of INFORMATION that is furnished to the other upon which
restrictions are imposed.
Information, other than proprietary INFORMATION identified as provided
above, shall not be subject to any restriction by the transmitting party as to
the receiving party's disclosure or use thereof.
3. No license to a party, under any trademark, patent, copyright, mask work
protection right or any other intellectual property right, is either granted or
implied by the conveying of INFORMATION to such party. None of the INFORMATION
which may be disclosed or exchanged by the parties shall constitute any
representation, warranty, assurance, guarantee or inducement by either party to
the other of any kind, and, in particular, with respect to the non-infringement
of trademarks, patents, copyrights, mask work protection rights or any other
intellectual property rights, or other rights of third persons or of either
party.
4. Neither this Agreement nor the disclosure or receipt of INFORMATION shall
constitute or imply any promise or intention to make any purchase of products or
services by either party or its affiliated companies or any commitment by either
party or its affiliated companies with respect to the present or future
marketing of any product or service.
5. All INFORMATION shall remain the property of the transmitting party and shall
be returned upon written request or upon the receiving party's determination
that it no longer has a need for such INFORMATION.
<PAGE> 34
-3-
6. Each party hereby assures the other that it does not intend to and will not
knowingly, without the prior written consent, if required, of the Office of
Export Administration of the U. S. Department of Commerce, P.O. Box 273,
Washington, D.C. 20044, transmit directly or indirectly:
I. any information received from the other hereunder; or
II. any immediate product (including processes and services)produced
directly by the use of such information; or
III. any commodity produced by such immediate product if the immediate
product of such information is a plant or a major component of a
plant;
to (1) Iraq, Afghanistan, the People's Republic of China or any Group Q,
S, W, Y or Z country specified in Supplement No. 1 to Part 770 of the Export
Administration Regulations issued by the U.S. Department of Commerce or (2) any
citizen or resident of any of the aforementioned countries.
Each party agrees that it will not, without the prior written consent of
the other, transmit, directly or indirectly, the INFORMATION received from the
other hereunder or any portion thereof to any country outside of the United
States.
7. Each party agrees that all of its obligations undertaken herein as a
receiving party shall survive and continue after any termination of this
Agreement.
8. This Agreement constitutes the entire understanding between the parties
hereto as to the INFORMATION and merges all prior discussions between them
relating thereto.
9. No amendment or modification of this Agreement shall be valid or binding on
the parties unless made in writing and signed on behalf of each of the parties
by their respective duly authorized officers or representatives.
10. The parties are familiar with the principles of New York commercial law, and
desire and agree that the law of New York shall apply in any dispute arising
with respect to this agreement.
<PAGE> 35
-4-
IN WITNESS WHEREOF, the parties have executed this Agreement on the respective
dates entered below.
AMERICAN TELEPHONE AND SPECTRAN CORPORATION
TELEGRAPH COMPANY
By: J. F. Watson By: C. L. Cutts
-------------------------- --------------------------
(Signature) (Signature)
J. F. Watson Crawford. L. Cutts
- - ------------------------------ ------------------------------
(Name) (Name)
Manager, Optical Fiber &
Cable Manufacturing and
Maintenance V.P. - Business Development
- - ------------------------------ ------------------------------
(Title) (Title)
October 21, 1992 November 4, 1992
- - ------------------------------ ------------------------------
(Date Signed) (Date Signed)
<PAGE> 36
EXHIBIT (c)(4)
PATENT LICENSE AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC.
AND
SPECTRAN CORPORATION
EFFECTIVE UPON SIGNING
RELATING TO OPTICAL FIBER
<PAGE> 37
TABLE OF CONTENTS
ARTICLE I - GRANTS OF LICENSES
1.01 Grant
1.02 Duration
1.03 Scope
1.04 Exclusions and Limitations
1.05 Ability to Provide Licenses
1.06 Joint Inventions
1.07 Publicity
ARTICLE II - ROYALTY AND PAYMENTS
2.01 Royalty Calculation and Payments
2.02 Records and Adjustments
2.03 Reports and Payments
ARTICLE III - TERMINATION
3.01 Breach or Acquisition
3.02 Voluntary Termination
3.03 Survival
ARTICLE IV - MISCELLANEOUS PROVISIONS
4.01 Disclaimer
4.02 Nonassignability
4.03 Addresses
4.04 Taxes
4.05 Choice of Law
4.06 Integration
4.07 Outside the United States
4.08 Dispute Resolution
4.09 Releases
4.10 Counterparts
DEFINITIONS APPENDIX
APPENDIX A
<PAGE> 1
PATENT LICENSE AGREEMENT
Effective as of the date of execution by the last party to execute ("Effective
Date"), Lucent Technologies Inc. ("LUCENT"), a Delaware corporation having an
office at 600 Mountain Avenue, Murray Hill, New Jersey 07974, and SpecTran
Corporation ("SpecTran"), a Delaware corporation having an office at 50 Hall
Road, Sturbridge, MA 01566, agree as follows*:
ARTICLE I
GRANTS OF LICENSES
1.01 GRANT
(a) LUCENT grants to SpecTran under LUCENT's PATENTS worldwide, personal,
nonexclusive and, subject to Sections 1.03(c) and 4.02, non-transferable
licenses, with limitations as provided herein, for:
OPTICAL FIBER
(b) SpecTran grants to LUCENT under SpecTran's PATENTS worldwide, personal,
nonexclusive, royalty-free and, subject to Sections 1.03(c) and 4.02,
non-transferable licenses, with limitations as provided herein, for:
OPTICAL FIBER
1.02 DURATION
All licenses granted herein under any patent shall continue for the entire
unexpired term of such patent.
1.03 SCOPE
(a) Subject to the exclusions and limitations referred to in this Agreement,
the licenses granted herein to SpecTran are licenses to (i) make, use,
lease, offer to sell, sell, import subject to Section 1.04(d) and export
LICENSED PRODUCTS; (ii) make, have made, use and import machines, tools,
materials and other instrumentalities, insofar as such machines, tools,
materials and other instrumentalities are involved in or incidental to the
development, manufacture, testing or repair of LICENSED PRODUCTS which are
or have been made, used, leased, owned, sold or imported by the grantee of
such license; and (iii) convey to any customer of the grantee, with respect
to any LICENSED PRODUCT which is sold or leased by such grantee to such
customer, rights to use and resell such LICENSED PRODUCT as sold or leased
by such grantee (whether or not as part of a larger combination); provided,
however, that no rights may be conveyed to customers with respect to any
invention which is directed to (1) a combination of such LICENSED PRODUCT
(as sold or leased) with any other product, (2) a method or process which
is other than the inherent use of such LICENSED PRODUCT itself (as sold or
leased), or (3) a method or
- --------
*Any term in capital letters which is defined in the Definitions Appendix shall
have the meaning specified therein.
<PAGE> 2
process involving the use of a LICENSED PRODUCT to manufacture (including
associated testing) any other product.
(b) The licenses granted herein to LUCENT are licenses to (i) make, have made,
use, lease, sell and import LICENSED PRODUCTS; (ii) make, have made, use
and import machines, tools, materials and other instrumentalities, insofar
as such machines, tools, materials and other instrumentalities are involved
in or incidental to the development, manufacture, testing or repair of
LICENSED PRODUCTS which are or have been made, used, leased, owned, sold or
imported by the grantee of such license; and (iii) convey to any customer
of the grantee, with respect to any LICENSED PRODUCT which is sold or
leased by such grantee to such customer, rights to use and resell such
LICENSED PRODUCT as sold or leased by such grantee (whether or not as part
of a larger combination); provided, however, that no rights may be conveyed
to customers with respect to any invention which is directed to (1) a
combination of such LICENSED PRODUCT (as sold or leased) with any other
product, (2) a method or process which is other than the inherent use of
such LICENSED PRODUCT itself (as sold or leased), or (3) a method or
process involving the use of a LICENSED PRODUCT to manufacture (including
associated testing) any other product.
(c) The grant of each license hereunder includes the right to grant sublicenses
within the scope of such license to a Party's RELATED COMPANIES for so long
as they remain its RELATED COMPANIES, subject to Section 4.02(b). Any such
sublicense may be made effective retroactively, but not prior to the
effective date hereof, nor prior to the sublicensee's becoming a RELATED
COMPANY of such Party.
1.04 EXCLUSIONS AND LIMITATIONS
(a) No rights whatsoever are granted to SpecTran under any LUCENT PATENT to
make, have made, use, offer to sell, sell or import the following products
and processes: [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION;
CONFIDENTIAL TREATMENT GRANTED]
(b) No rights whatsoever are granted to SpecTran under Section 1.04(a)(ii)
above for [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL
TREATMENT GRANTED]
(c) Subject to the exclusions and limitations in this Agreement (including
Section 2.01(b) and 2.01(c), SpecTran's rights hereunder include the rights
(i) within the United States only to make at its existing factories and
(ii) abroad to make at factories of its foreign SUBSIDIARIES; provided,
however that the combined domestic and foreign production of NZDF does not
exceed the limitations of clause (iv) below unless the additional royalties
are paid in accordance with Section 2.01(b) and (iii) subject to Section
2.01(c):
(i) offer to sell, sell and export worldwide multimode OPTICAL FIBER;
<PAGE> 3
(ii) offer to sell, sell and export worldwide NON-PREMIUM OPTICAL
FIBER;
(iii) offer to sell, sell and export worldwide rare earth-doped
optical fiber and Raman fiber for medical, military and distributed
sensor applications; provided, however, no rights are granted for
[REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL
TREATMENT GRANTED]; and
(iv) Subject to Section 2.01(b) and (c), offer to sell and sell within
the United States the following quantity of NZDF in each year, and to
export for sale an equal quantity each year outside the United States,
as follows:
YEAR QUANTITY( kilo-kilometers per year) [REDACTED MATERIAL FILED
SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]
Prior to January 1, 2000, SpecTran's rights hereunder are limited to [REDACTED
MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]
(d) The Parties agree that no right is provided to SpecTran and/or its
SUBSIDIARIES to import into the United States or for any SpecTran foreign
SUBSIDIARY to directly or indirectly (e.g., through other countries)
export to the United States under this Agreement.
1.05 ABILITY TO PROVIDE LICENSES
(a) It is recognized that certain actions of the Parties to this Agreement
may limit their ability to provide licenses hereunder without
constituting a breach. In particular, (i) prior to the earliest filing of
a patent application disclosing an invention of a Party or its RELATED
COMPANY, such Party or RELATED COMPANY may assign to a third party the
title to patents on such invention, or (ii) prior to the execution of
this Agreement, a Party or its RELATED COMPANY may have limited by
contract its ability to provide licenses hereunder with respect to
certain patents or technologies.
(b) Each Party agrees to disclose to the other Party, promptly upon receipt
of a written request for such disclosure, any such assignment or other
contractual limitation with respect to any patent licensed hereunder and
which is specifically identified in such request.
(c) A Party's failure to meet any obligation hereunder, due to the assignment
of title to any invention or patent, or the granting of any licenses, to
the United States Government or any agency or designee thereof pursuant
to a statute or regulation of, or contract with, such Government or
agency, shall not constitute a breach of this Agreement.
<PAGE> 4
1.06 JOINT INVENTIONS
(a) There are countries (not including the United States) which require the
express consent of all inventors or their assignees to the grant of
licenses or rights under patents issued in such countries for joint
inventions.
(b) Each Party shall give such consent, or shall obtain such consent from its
RELATED COMPANIES, its employees or employees of any of its RELATED
COMPANIES, as required to make full and effective any such licenses and
rights respecting any joint invention granted to the grantee hereunder by
such Party and by another licensor of such grantee.
(c) Each Party shall take steps which are reasonable under the circumstances
to obtain from third parties whatever other consents are necessary to
make full and effective such licenses and rights respecting any joint
invention purported to be granted by it hereunder. If, in spite of such
reasonable efforts, such Party is unable to obtain the requisite consents
from such third parties, the resulting inability of such Party to make
full and effective its purported grant of such licenses and rights shall
not be considered to be a breach of this Agreement.
1.07 PUBLICITY
(a) Nothing in this Agreement shall be construed as conferring upon either
Party or its RELATED COMPANIES any right to include in advertising,
packaging or other commercial activities related to a LICENSED PRODUCT,
any reference to the other Party (or any of its RELATED COMPANIES), its
trade names, trademarks or service marks or to indicate that such
LICENSED PRODUCT is in any way certified by the other Party hereto or its
RELATED COMPANIES.
(b) Except as required by law and regulation, the terms, but not the
existence, of this Agreement shall be treated as confidential
information, and neither Party shall disclose such terms to any third
party without the prior written consent of the other Party; provided,
however, that either Party may represent to suppliers and customers that
such Party is licensed for the products and patents provided by this
Agreement, to the extent required for a specific commercial transaction
with that supplier or customer. Where required by law and regulation, the
Party in need of making such disclosure of certain terms of the agreement
will seek the written consent of the other Party which will not be
unreasonably withheld.
<PAGE> 5
ARTICLE II
ROYALTY AND PAYMENTS
2.01 ROYALTY CALCULATION AND PAYMENTS
SpecTran shall make payments to LUCENT at the address specified in Section
4.03(b), as follows:
(a) In consideration for purchasing the rights to obtain the licenses granted
herein, SpecTran shall pay to Lucent a total upfront fee totaling four
million United States dollars (U.S. $ 4,000,000.00) to be paid as follows
(A) the sum of seven hundred fifty thousand United States dollars (U.S. $
750,000.00) within ninety (90) days after execution of this Agreement;
(B) six semiannual payments each for the sum of five hundred thousand
United States dollars (U.S. $500,000.00) within thirty (30) days of June
30 and December 31 beginning with the first installment date of June 30,
1999 and ending with the final $500,000.00 installment on December 31,
2001, and (C) the sum of two hundred fifty thousand United States dollars
(U.S. $250,000.00) within thirty days of June 30, 2002.
The parties agree that the payment obligation of Section 2.01(a) of four
million United Stated dollars (U.S. $ 4,000,000.00) including the
semiannual payments shall survive any termination of this Agreement by
SpecTran and are not refundable or creditable to any other payments
required hereunder.
(b) For the rights granted to SpecTran in each semi-annual period beginning
in 2000, SpecTran shall make the following additional semi-annual royalty
payments to LUCENT in United States dollars based upon a royalty that
shall accrue in such semi-annual period and shall be payable on a
semiannual basis within thirty days of June 30 and December 31 for the
preceding semiannual period. In each instance in this Agreement,
reference to SpecTran's total gross revenues includes SpecTran's and its
RELATED COMPANIES' total gross revenues excluding sales to LUCENT and
excluding packing costs, costs of insurance and transportation, and
import, export, excise, sales and value added taxes and customs duties
associated with such sales. SpecTran shall pay LUCENT the lesser of:
(i) a sum calculated at a royalty rate of [REDACTED MATERIAL FILED
SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]. In
addition to any other fees payable by SpecTran hereunder, SpecTran
shall pay to LUCENT a royalty of [REDACTED MATERIAL FILED SEPARATELY
WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] in excess of the
quantity limits specified in Section 1.04(c)(iv); or
(ii) the combined royalty of [REDACTED MATERIAL FILED SEPARATELY WITH
COMMISSION; CONFIDENTIAL TREATMENT GRANTED]
In addition to any other fees payable by SpecTran hereunder, SpecTran shall
pay to LUCENT an additional royalty of [REDACTED MATERIAL FILED SEPARATELY
WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] in excess of the
quantity limits specified in Section 1.04(iv)(c).
<PAGE> 6
(c) The parties agree that [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION;
CONFIDENTIAL TREATMENT GRANTED].
(d) Subject to the exclusions and limitations referred to in this Agreement,
royalties payable hereunder are for all of LUCENT's PATENTS.
(e) Overdue payments hereunder shall be subject to a late payment charge
calculated at an annual rate of three percent (3%) over the prime rate or
successive prime rates (as posted in New York City) during delinquency. If
the amount of such late payment charge exceeds the maximum permitted by
law, such charge shall be reduced to such maximum.
(f) Notwithstanding any other provisions hereunder, royalty shall accrue and be
payable only to the extent that enforcement of SpecTran's obligation to pay
such royalty would not be prohibited by applicable law.
2.02 RECORDS AND ADJUSTMENTS
(a) SpecTran shall keep full, clear and accurate records with respect to all
LICENSED PRODUCTS and shall furnish any information which LUCENT may
reasonably prescribe from time to time to enable LUCENT to ascertain the
proper royalty due hereunder on account of products sold, leased and put
into use by SpecTran or any of its RELATED COMPANIES. SpecTran shall retain
such records with respect to each LICENSED PRODUCT for at least seven (7)
years from the sale, lease or putting into use of such LICENSED PRODUCT.
LUCENT shall have the right through its accredited auditors to make an
examination, once annually, during normal business hours, of all records
and accounts bearing upon the amount of royalty payable to it hereunder and
will not use such information except to verify royalty payable. Prompt
adjustment shall be made to compensate for any errors or omissions
disclosed by such examination.
(b) Independent of any such examination, LUCENT will credit to SpecTran the
amount of any overpayment of royalties made in error which is identified
and fully explained in a written notice to LUCENT delivered within twelve
(12) months after the due date of the payment which included such alleged
overpayment, provided that LUCENT is able to verify, to its own
satisfaction, the existence and extent of the overpayment.
(c) No refund, credit or other adjustment of royalty payments shall be made by
LUCENT except as provided in this Section 2.02. Rights conferred by this
Section 2.02 shall not be affected by any statement appearing on any check
or other document, except to the extent that any such right is expressly
waived or surrendered by a Party having such right and signing such
statement.
2.03 REPORTS AND PAYMENTS
(a) Within thirty (30) days after June 30 and December 31 of each year,
SpecTran shall furnish to LUCENT at the address specified in Section 4.03
<PAGE> 7
a statement certified by a responsible official of SpecTran showing, in a
manner acceptable to LUCENT, the following disclosures with respect all
licensed sales made by SpecTran and its RELATED COMPANIES in the preceding
semiannual period for such calendar year and make all payments required
hereunder if not specified as payable on other dates:
(i) all LICENSED PRODUCTS which were sold, leased or put into use
during the preceding semi-annual period for such calendar year;
(ii) the FAIR MARKET VALUES of such LICENSED PRODUCTS; and
(iii) the amount of royalty payable thereon.
If no LICENSED PRODUCT has been so sold, leased or put into use, the
statement shall show that fact.
(b) Within thirty (30) days of June 30 and December 31 of each calendar year,
SpecTran shall pay in United States dollars to LUCENT at the address
specified in Section 4.03 the royalties payable in accordance with such
statement.
(c) Overdue payments hereunder shall be subject to a late payment charge
calculated at an annual rate of three percentage points (3%) over the
prime rate or successive prime rates (as posted in New York City) during
delinquency. If the amount of such charge exceeds the maximum permitted
by law, such charge shall be reduced to such maximum.
(d) When a company ceases to be a RELATED COMPANY of SpecTran, royalties
which have accrued with respect to any products of such company, but
which have not been paid, shall become payable with SpecTran's next
scheduled royalty payment.
ARTICLE III
TERMINATION
3.01 BREACH OR ACQUISITION
(a) In the event of a material breach of this Agreement by either Party, the
other Party may, in addition to any other remedies that it may have, at
any time terminate all licenses and rights granted by it hereunder by not
less than two (2) months' written notice specifying such breach, unless
within the period of such notice all breaches specified therein shall
have been remedied.
(b) In the event of a material breach of this Agreement by LUCENT or its
SUBSIDIARIES, or of any loss or injury to the CORPORATION arising out of
this Agreement, for which LUCENT or its SUBSIDIARIES is liable to
SpecTran, LUCENT's and its SUBSIDIARIES' total cumulative liability to
SpecTran for all such breaches, losses and injuries shall be the lesser
<PAGE> 8
of (i) the actual value of the injury or loss to the CORPORATION or (ii)
the total royalties paid to LUCENT.
(c) The Parties agree that if SpecTran is acquired by an OPTICAL FIBER
manufacturer, this Agreement may be immediately terminated by LUCENT.
(d) If SpecTran is acquired by other than an OPTICAL FIBER manufacturer and
continues operation as a separately identifiable business, then the
licenses granted hereunder to SpecTran under licensed patents which have
been first filed prior to the date of such acquisition may continue, but
only (i) for the duration and term of licenses as specified in this
Agreement; (ii) to the extent and for the time that SpecTran functions as
a separately identifiable business, and (iii) for products and services
of the kind provided by SpecTran prior to its acquisition and not to any
products or services of any entity which acquires SpecTran.
3.02 VOLUNTARY TERMINATION
By written notice to the other Party, either Party may voluntarily terminate all
or a specified portion of the licenses and rights granted to it hereunder. Such
notice shall specify the effective date (not more than six (6) months prior to
the giving of said notice) of such termination and shall clearly specify any
affected patent, invention or product.
3.03 SURVIVAL
(a) If a company ceases to be a RELATED COMPANY of a Party, licenses and
rights granted hereunder with respect to patents of such company on
inventions made prior to the date of such cessation, shall not be
affected by such cessation.
(b) Any termination of licenses and rights of a Party under the provisions of
this Article III shall not affect such Party's licenses, rights and
obligations with respect to any LICENSED PRODUCT made prior to such
termination, and shall not affect the other Party's licenses and rights
(and obligations related thereto) hereunder.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.01 DISCLAIMER
NEITHER PARTY NOR ANY OF ITS SUBSIDIARIES MAKES ANY REPRESENTATIONS, EXTENDS ANY
WARRANTIES OF ANY KIND, ASSUMES ANY RESPONSIBILITY OR OBLIGATIONS WHATEVER, OR
CONFERS ANY RIGHT BY IMPLICATION, ESTOPPEL OR OTHERWISE, OTHER THAN THE
LICENSES, RIGHTS AND WARRANTIES HEREIN EXPRESSLY GRANTED.
4.02 NONASSIGNABILITY
(a) The Parties hereto have entered into this Agreement in contemplation of
personal performance, each by the other, and intend that the licenses and
<PAGE> 9
rights granted hereunder to a Party not be extended to entities other than
such Party's RELATED COMPANIES without the other Party's express written
consent. All of LUCENT's right, title and interest in this Agreement and
any licenses and rights granted to it hereunder may be assigned to any
direct or indirect successor to the business of LUCENT pertaining to this
Agreement, which successor shall thereafter be deemed substituted for
LUCENT as the Party hereto, effective upon such assignment; but neither
this Agreement nor any licenses or rights hereunder shall be otherwise
assignable or transferable (in insolvency proceedings, by reason of a
corporate merger, or otherwise) by either Party without the express written
consent of the other Party.
(b) Notwithstanding the foregoing, if any of the Parties divests all or a
portion of its business and such divested business continues operation as a
separately identifiable business, then the licenses granted hereunder to
the divesting Party under licensed patents which have been first filed
prior to the date of such divestiture may be sublicensed to such divested
separate business, but only (i) for the duration and term of licenses as
specified in this Agreement; (ii) to the extent and for the time the
divested business functions as a separately identifiable business, and
(iii) for products and services of the kind provided by the divested
business prior to its divestiture and not to any products or services of
any entity which acquires the divested business. This subsection shall
apply regardless of whether the business is divested by a sale of assets or
as a sale of a legal entity (e.g., sale of a SUBSIDIARY). If the Party
divesting such business is required to make royalty payments or provide
other compensation under this Agreement, it shall continue to be obligated
to do so for itself and, if and to the extent a sublicense is granted, for
the divested business. The sublicensing rights specified herein shall not
apply to any business other than a RELATED COMPANY the acquisition of which
by a party is subsequent to the effective date of this Agreement.
(c) Notwithstanding any other provision herein:
(i) SpecTran may not [REDACTED MATERIAL FILED SEPARATELY WITH
COMMISSION; CONFIDENTIAL TREATMENT GRANTED]
(ii) If LUCENT, in its sole discretion [REDACTED MATERIAL FILED
SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]
4.03 ADDRESSES
(a) Any notice or other communication hereunder shall be sufficiently given
to SpecTran when sent by certified mail (or an equivalent means that
provides a return receipt) addressed to SpecTran at the above address or
to LUCENT when sent by certified mail addressed to Contract
Administrator, Intellectual Property Division, Lucent Technologies Inc.,
Suite 105, 14645 Northwest 77th Avenue, Miami Lakes, Florida 33014,
United States of America. Changes in such addresses may be specified by
written notice.
<PAGE> 10
(b) Payments by SpecTran shall be made to Lucent at Sun Trust, P.O. Box
913021, Orlando, Florida, 32891-3021, United States of America.
Alternatively, payments to Lucent may be made by bank wire transfers to
LUCENT's account: Lucent Technologies Licensing, Account No.[REDACTED
MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT
GRANTED], at Chase Manhattan Bank, N.A., Four Chase Metrotech Center,
Brooklyn, New York, 11245, United States of America. Changes in such
address or account may be specified by written notice.
4.04 TAXES
SpecTran shall pay any tax, duty, levy, customs fee, or similar charge
("taxes"), including interest and penalties thereon, however designated, imposed
as a result of the operation or existence of this Agreement, including taxes
which SpecTran is required to withhold or deduct from payments to LUCENT, except
(i) net income taxes imposed upon LUCENT by any governmental entity within the
United States (the fifty (50) states and the District of Columbia), and (ii) net
income taxes imposed upon LUCENT by jurisdictions outside the United States
which are allowable as a credit against the United States Federal income tax of
LUCENT or any of its SUBSIDIARIES. In order for the exception in (ii) to be
effective, SpecTran must furnish to LUCENT evidence sufficient to satisfy the
United States taxing authorities that such taxes have been paid.
4.05 CHOICE OF LAW
The Parties are familiar with the principles of New York commercial law, and
agree that the patent laws of the United States or the patent laws of any other
country as may be appropriate, and in so far as not pre-empted by U.S. patent
law, the law of New York shall apply in any dispute arising with respect to this
Agreement.
4.06 INTEGRATION
This Agreement sets forth the entire Agreement and understanding between the
Parties as to the subject matter hereof and merges all prior discussions between
them. Neither of the Parties shall be bound by any warranties, understandings or
representations with respect to such subject matter other than as expressly
provided herein or in a writing signed with or subsequent to execution hereof by
an authorized representative of the Party to be bound thereby.
4.07 OUTSIDE THE UNITED STATES
(a) There are countries in which the owner of an invention is entitled to
compensation, damages or other monetary award for another's unlicensed
manufacture, sale, lease, use or importation involving such invention prior
to the date of issuance of a patent for such invention but on or after a
certain earlier date, hereinafter referred to as the invention's
"protection commencement date" (e.g., the date of publication of allowed
claims or the date of publication or "laying open" of the filed patent
application). In some instances, other conditions precedent must also be
<PAGE> 11
fulfilled (e.g., knowledge or actual notification of the filed patent
application). The Parties agree that (i) an invention which has a
protection commencement date in any such country may be used in such
country pursuant to the terms of this Agreement on and after any such date,
and (ii) all such conditions precedent are deemed satisfied by this
Agreement.
(b) There may be countries in which a Party hereto may have, as a consequence
of this Agreement, rights against infringers of the other Party's patents
licensed hereunder. Each Party hereby waives any such right it may have
by reason of any third Party's infringement or alleged infringement of
any such patents.
(c) SpecTran hereby agrees to register or cause to be registered, to the
extent required by applicable law, and without expense to LUCENT or any
of its RELATED COMPANIES, any agreements wherein sublicenses are granted
by it under LUCENT's PATENTS. SpecTran hereby waives any and all claims
or defenses, arising by virtue of the absence of such registration, that
might otherwise limit or affect its obligations to LUCENT.
4.08 DISPUTE RESOLUTION
(a) If a dispute arises out of or relates to this Agreement, or the breach,
termination or validity thereof, the Parties agree to submit the dispute
to a sole mediator selected by the Parties or, at any time at the option
of a Party, to mediation by the American Arbitration Association ("AAA").
If not thus resolved, it shall be referred to a sole arbitrator selected
by the Parties within thirty (30) days of the mediation, or in the
absence of such selection, to AAA arbitration which shall be governed by
the United States Arbitration Act.
(b) Any award made (i) shall be a bare award limited to a holding for or
against a Party and affording such remedy as is deemed equitable, just
and within the scope of the Agreement; (ii) shall be without findings as
to issues (including but not limited to patent validity and/or
infringement) or a statement of the reasoning on which the award rests;
(iii) may in appropriate circumstances (other than patent disputes)
include injunctive relief; (iv) shall be made within four (4) months of
the appointment of the arbitrator; and (v) may be entered in any court.
(c) The requirement for mediation and arbitration shall not be deemed a
waiver of any right of termination under this Agreement and the
arbitrator is not empowered to act or make any award other than based
solely on the rights and obligations of the Parties prior to any such
termination.
(d) The arbitrator shall be knowledgeable in the legal and technical aspects
of this Agreement and shall determine issues of arbitrability but may not
limit, expand or otherwise modify the terms of the Agreement.
<PAGE> 12
(e) The Agreement shall be interpreted in accordance with the patent laws of
the United States or the patent laws of any other country as may be
appropriate, and in so far as not pre-empted by U.S. patent law, the laws
of the State of New York exclusive of its conflict of laws provisions and
the place of mediation and arbitration shall be New York City.
(f) Each Party shall bear its own expenses but those related to the
compensation and expenses of the mediator and arbitrator shall be borne
equally.
(g) A request by a Party to a court for interim measures shall not be deemed
a waiver of the obligation to mediate and arbitrate.
(h) The arbitrator shall not have authority to award punitive or other
damages in excess of compensatory damages and each Party irrevocably
waives any claim thereto.
(i) Except as required by law, the Parties, their representatives, other
participants and the mediator and arbitrator shall hold the existence,
content and result of mediation and arbitration in confidence.
4.09 RELEASES
(a) Subject to Section 4.09(c) and for good and valuable consideration, LUCENT,
for itself and for its present RELATED COMPANIES, hereby irrevocably
releases SpecTran, its present RELATED COMPANIES and all customers
(purchasers and users) of LICENSED PRODUCTS as of the effective date hereof
to SpecTran, from all claims, demands and rights of action which LUCENT or
any of its present RELATED COMPANIES may have on account of any
infringement or alleged infringement of any patent issued in any country of
the world by reason of the manufacture or any past or future use, lease,
sale, offer for sale or importation of any of such products which, prior to
the effective date hereof, were manufactured by or for, or sold or used or
furnished or imported by SpecTran or any of its present RELATED COMPANIES.
(b) Subject to Section 4.09(c), and for good and valuable consideration,
SpecTran, for itself and for its present RELATED COMPANIES, hereby
irrevocably releases LUCENT (for the purposes of this Section 4.09(b)
"LUCENT" means Lucent Technologies Inc. as it presently exists and as it
formerly existed as a part of AT&T Corp.), its present RELATED COMPANIES,
and all customers (purchasers and users) of LICENSED PRODUCTS as of the
effective date hereof to LUCENT, from all claims, demands and rights of
action which SpecTran or any of its present RELATED COMPANIES may have on
account of any infringement or alleged infringement of any patent issued in
any country of the world by reason of the manufacture or any past or future
use, lease, sale, offer for sale or importation of any of such products
which, prior to the effective date hereof, were manufactured by or for, or
used, furnished or imported by, LUCENT or any of its present RELATED
COMPANIES.
<PAGE> 13
(c) With respect to customers (purchasers and users) of a grantee, such
releases shall not extend to any patent which is directed to (i) a
combination of a product of the kind herein licensed as of the effective
date hereof with any other product; (ii) a method or process which is
other than the inherent use of a product of the kind herein licensed (as
furnished to such customers); or (iii) a method or process involving the
use of a product of the kind herein licensed as of the effective date
hereof to manufacture (including associated testing) any other product.
4.10 COUNTERPARTS
This Patent License Agreement may be executed by the Parties in any number of
identical counterparts, all of which together shall constitute the final
agreement. The Parties further agree that this Patent License Agreement shall be
of no force or effect until the date of the last execution by any Party, and
that the executed counterparts may be exchanged by facsimile transmission.
<PAGE> 14
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
in duplicate originals by its duly authorized representatives on the respective
dates entered below.
LUCENT TECHNOLOGIES INC.
By: s/s M.R. Greene
------------------------------------
M. R. Greene
Vice President - Intellectual Property
Date: 10-30-98
------------------------------------
SpecTran CORPORATION
By: s/s Charles B. Harrison
------------------------------------
Date: October 30, 1998
------------------------------------
THIS AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY IN ANY MANNER
UNLESS DULY EXECUTED BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES.
<PAGE> 15
DEFINITIONS APPENDIX
CLASSIC TRUE WAVE FIBER means OPTICAL FIBER which is NON ZERO DISPERSION FIBER
having an [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL
TREATMENT REQUESTED PORTION FILED SEPARATELY - CONFIDENTIAL TREATMENT GRANTED].
FAIR MARKET VALUE means, with respect to any OPTICAL FIBER sold, leased or put
into use, the greater of (i) the selling price which a seller would realize from
an unaffiliated buyer in an arm's length sale of an identical product in the
same quantity and at the same time and place as such sale, lease or putting into
use; or (ii) the selling price actually obtained for such OPTICAL FIBER in the
form in which it is sold.
In determining "selling price" the following shall be excluded:
(a) packing costs;
(b) costs of insurance and transportation; and
(c) import, export, excise, sales and value added taxes
and customs duties.
LICENSED PRODUCT means, as to any grantee, any product (including any specified
combination of other products) listed for such grantee in Section 1.01 excluding
those products listed in Section 1.04.
LUCENT'S PATENTS means all patents (including utility models but excluding
design patents and design registrations) owned and controlled by LUCENT or its
wholly-owned SUBSIDIARIES (including patents which LUCENT and its RELATED
COMPANIES do not own but have a right to license),
(1) claiming:
(i) an OPTICAL FIBER
(ii) a method of or an apparatus for making (including quality control
and testing) an OPTICAL FIBER, or (iii) a material used in the
manufacture of or forming a part of an OPTICAL FIBER; and
(2) issued prior to January 1, 1998 in any country of the world, and any
patent issuing from an application claiming priority from any such
issued patents (except as below) with respect to which and to the
extent that LUCENT or its wholly-owned SUBSIDIARIES has a right, as of
the date of execution of this Agreement, to grant the licenses granted
herein; provided, however, the term means and includes applications
resulting in patents claiming multimode OPTICAL FIBER filed prior to
the Effective Date of this Agreement.
The term LUCENT's PATENTS shall exclude any and all patents and patent rights
excluded in Section 1.04, including but not limited to:
(1) [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL
TREATMENT GRANTED];
(2) related to a method or means to introduce dispersion compensation into
a
<PAGE> 16
transmission system using one or more OPTICAL FIBERS, [REDACTED
MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT
GRANTED];
(3) related to a method or means for [REDACTED MATERIAL FILED SEPARATELY
WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]; and
(4) claiming [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION;
CONFIDENTIAL TREATMENT GRANTED].
Subject to all of the restrictions, exclusions and limitations herein, the term
LUCENT's PATENTS includes but is not limited to OPTICAL FIBER patents listed in
Appendix A, their foreign counterparts and any reissues, reexaminations or
extensions thereof.
NON-PREMIUM OPTICAL FIBER means an OPTICAL FIBER other than PREMIUM OPTICAL
FIBER including but not limited to what is commonly known in the industry as:
conventional standard matched clad single mode fibers, multimode optical fibers,
conventional dispersion shifted fibers (but not including any form of non-zero
dispersion fiber), dispersion flattened fibers and polarization maintaining
fiber.
NON ZERO DISPERSION FIBER (NZDF) means an OPTICAL FIBER designed to [REDACTED
MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED].
OPTICAL FIBER means optical transmission fiber drawn from an optical fiber
preform made by vapor phase methods, including but not limited to MCVD, OVD, and
VAD methods or combinations thereof, and/or in combination with rod-in-tube
overcladding methods. OPTICAL FIBER includes, but is not limited to, single mode
optical fiber, multimode optical fiber, dispersion shifted fiber (including but
not limited to NON-ZERO DISPERSION FIBER), and polarization maintaining fiber.
PREMIUM OPTICAL FIBER means those OPTICAL FIBERS commonly referred to in the
industry as [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL
TREATMENT GRANTED].
RELATED COMPANIES of a company are SUBSIDIARIES of the company and any other
company so designated as agreed to in writing by LUCENT and SpecTran.
SPECTRAN'S PATENTS means all patents (including utility models but excluding
design patents and design registrations) owned and controlled by SpecTran or its
wholly-owned SUBSIDIARIES (including patents which SpecTran and its RELATED
COMPANIES do not own but have a right to license),
(1) claiming:
(i) an OPTICAL FIBER
(ii) a method of or an apparatus for making (including quality control
and testing) an OPTICAL FIBER, or
(iii) a material used in the manufacture of or forming a part of an
OPTICAL FIBER; and
<PAGE> 17
(2) issued prior to January 1, 1998 in any country of the world,
and any patent issuing from an application claiming priority from
any such issued patents with respect to which and to the extent
that SpecTran or its wholly-owned SUBSIDIARIES has a right, as of
the date of execution of this Agreement, to grant the licenses
granted herein; provided, however, the term means and includes
applications resulting in patents claiming multimode OPTICAL
FIBER filed prior to October 1, 1998.
SUBSIDIARY of a company means a corporation or other legal entity (i) the
majority of whose shares or other securities entitled to vote for election of
directors (or other managing authority) is now or hereafter controlled by such
company either directly or indirectly; or (ii) which does not have outstanding
shares or securities but the majority of whose ownership interest representing
the right to manage such corporation or other legal entity is now or hereafter
owned and controlled by such company either directly or indirectly; but any such
corporation or other legal entity shall be deemed to be a SUBSIDIARY of such
company only as long as such control or ownership and control exists. The term
does not mean or include, without limitation, General Photonics, LLC.
<PAGE> 18
APPENDIX A
SELECT LUCENT OPTICAL FIBER PATENTS
- -------------------------------------------------------------------------------
U.S. PATENT AUTHOR FILING DATE ISSUE DATE
# TITLE
- -------------------------------------------------------------------------------
[REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT
GRANTED]
