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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the fiscal year ended December 31, 1998 [ X ]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE
SECURITIES ACT OF 1934
For the transition period from ...................to .........................
Commission file number 0-12489
SPECTRAN CORPORATION
.........................................................................
(Exact name of the registrant as specified in its charter)
Delaware 04-2729372
..................................... ................................
State or other jurisdiction of (I.R.S. Employer Identification
No.)
incorporation or organization
50 Hall Road, Sturbridge, Massachusetts 01566
...................................................... .......................
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (508) 347-2261
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None Not Applicable
................................................................................
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, $.10 par value
................................................................................
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes: X No: __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
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The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price of such stock, on
February 26, 1999: $36.3 million.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date: 7,003,850 shares of common stock, $.10
par value, outstanding on February 26, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
The information required for Part III hereof is incorporated by reference from
the Registrant's Proxy Statement for its 1999 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission within 120 days after the
end of the Registrant's fiscal year.
PART I
Item 1. BUSINESS.
SpecTran Corporation ("SpecTran," the "Company" or the "Registrant")
operates through two wholly-owned subsidiaries, SpecTran Communication Fiber
Technologies, Inc. ("SpecTran Communication") and SpecTran Specialty Optics
Company ("SpecTran Specialty"), and through General Photonics, LLC ("General
Photonics"), a joint venture with General Cable Corporation ("General Cable").
In December 1996, the Company sold certain of the assets of its wholly-owned
subsidiary, Applied Photonic Devices, Inc. ("APD"), and then contributed the
remaining assets of APD to General Photonics for a 50% equity interest. (See
Note 14 to the Consolidated Financial Statements - "Acquisitions/Joint
Venture"). SpecTran Communication develops, manufactures and markets multimode
and single-mode optical fiber for data communications and telecommunications
applications. SpecTran Specialty, acquired in February 1994, develops,
manufactures and markets specialty multimode and single-mode fiber and
value-added fiber optic products for industrial, military/aerospace,
communication and medical applications. General Photonics develops, manufactures
and markets communications-grade fiber optic cable primarily for the customer
premises market in the United States, Canada and Mexico.
Technology
Fiber optic technology utilizing glass as a communications medium was
developed in the 1970s and offers numerous technical advantages over traditional
media such as copper. Optical fibers are hair-thin solid strands of high quality
glass usually combined in cables for transmitting information in the form of
light pulses. An optical fiber consists of a core of high purity glass, which
transmits light with little signal loss. This core is typically encased within a
covering layer of high purity glass or plastic polymer referred to as optical
cladding, which reduces signal loss through the side walls of the fiber. The
information to be transmitted is converted from electrical impulses into light
waves by a laser or light emitting diode. At the point of reception, the light
waves are commonly converted back into electrical impulses by a photo-detector.
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Optical fiber's advantages include its high bandwidth, which permits
reliable transmission of complex signals such as multiple high-quality audio and
video channels and high-speed data formats such as Fiber Distributed Data
Interface (FDDI), Asynchronous Transfer Mode (ATM), Gigabit Ethernet Synchronous
Optical Network (SONET) and other communications protocols. Compared to
traditional copper cable used in telephony, optical fiber has thousands of times
the information carrying capacity, occupies less space and operates over greater
distances with significantly less attenuation. This high capacity and
reliability makes optical fiber systems well suited for interactive
applications, allowing digitally encoded voice, data and video signals to be
transmitted in large volumes at high speed. Furthermore, optical fiber is immune
to electrical surges (including from lightning strikes) and electromagnetic
interference which cause static or failure in copper wire transmission and
wireless communication. Optical fiber has technical advantages over wireless
communications media such as transmission quality and signal reliability.
Optical fiber is also a safer choice in flammable environments because it does
not conduct electricity. Additionally, communicating through optical fiber is
more secure than copper and wireless communications because tapping into fiber
optic cable without detection is more difficult.
Optical fiber quality is measured by several performance
characteristics and is reflected in the price of the fiber. These performance
characteristics include bandwidth, attenuation (signal loss over distance),
tensile strength, geometry and the dimensional and optical uniformity of the
fiber. Optical fiber users and manufacturers have established specifications and
standards for both multimode and single-mode fiber.
Products
The following table describes the Company's and General Photonics'
principal product areas and the markets they serve:
<TABLE>
<CAPTION>
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Products Applications Target Customers
- --------------------------------------- ------------------------------------- --------------------------------------
- --------------------------------------- ------------------------------------- --------------------------------------
SpecTran Communication
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<S> <C> <C>
Data Communication grade multimode Data Communications, including Integrated cablers (e.g., Lucent,
fiber: 50, 62.5 and 100 micrometer FDDI and fast Ethernet; LANs; video Chromatic Technologies); independent
core diameters CCTV; computer peripherals channel cablers (e.g., Optical Cable
attachment Corporation, CommScope, General
Photonics)
- --------------------------------------- ------------------------------------- --------------------------------------
Telecommunication grade single-mode Telephony (principally in emerging Independent data communications
fiber economies); high-speed domestic cablers; international
short-distance data communication, telecommunications cablers
including Fibre Channel and FDDI (e.g., India, China, Mexico)
- --------------------------------------- ------------------------------------- --------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
- --------------------------------------- ------------------------------------- --------------------------------------
Products Applications Target Customers
- --------------------------------------- ------------------------------------- --------------------------------------
SpecTran Specialty
- --------------------------------------- ------------------------------------- --------------------------------------
<S> <C> <C>
Step & graded index multimode fiber & Factory LANs and PLC interconnects; Factory, transportation and medical
cable: Polymer clad/glass core, high mobile video: avuibucs; high-speed OEMs; systems designers and
numerical aperture, radiation ground-basedd transportation; integrators; geophysical exploration
tolerant, power delivery an high geophysical exploration and companies; US government and
temperature fiber; avionics cable monitoring; sensing; power military: utilities; telecom and
high dielectric strength cable transmission, including laser supercomputer OEMs; systems
tether cables surgery; blood gas monitoring; designers and integrators
including laser supercomputer OEMs; radiation resistant links; high-
monitoring; designers and integrators speed, short-distance telecom
interconnects (e.g., telephone
switching systems andPBXs);
supercomputer links
- --------------------------------------- ------------------------------------- --------------------------------------
- --------------------------------------- ------------------------------------- --------------------------------------
Specialty single-mode fiber and Metalized pigtails, couplers, Telecommunications; optoelectronic
cable: photo-sensitive, rare-earth amplifiers, geophysical exploration manufacturers; well-logging
delay line, fatique resistant fiber; and monitoring; gyroscopes; companies and system integrators;
avionics cable; tether cables wave-length division multiplexers defense contracts
- --------------------------------------- ------------------------------------- --------------------------------------
- --------------------------------------- ------------------------------------- --------------------------------------
Components and assemblies: crimp and Industrial automation; OEMs; systems designers and
cleave connectors; pigtails; fiber environmental monitoring; customer integrators; facilities managers;
optic arrays; specialty and hybrid premises networking; military spec utilities; optoelectronic devices
interconnects; tool kits and high reliablitity assemblies; manufacturers; defense contractors
high power laser delivery; sensing;
illumination; spectroscopy
- --------------------------------------- ------------------------------------- --------------------------------------
General Photonics
- --------------------------------------- ------------------------------------- --------------------------------------
Indoor cable: tight buffered Building backbones; riser and Networking systems and LAN OEMs;
distribution and breakout designs plenum installation systems designers and integrators;
installers; facilities managers
- --------------------------------------- ------------------------------------- --------------------------------------
- --------------------------------------- ------------------------------------- --------------------------------------
Outdoor cable: loose tube; Customer premises backbones, Networking systems and LAN OEMs;
gel-filled; direct burial; aerial; including densely populated systems designers and integrators;
armored; figure eight buildings and campuses; Fibre installers; facilities managers
Channel; FDDI; bypass telecom
- --------------------------------------- ------------------------------------- --------------------------------------
- --------------------------------------- ------------------------------------- --------------------------------------
Cable accessories: pulling devices; Customer premises systems and LAN Installers; system integrators; LAN
breakout, splitter and restoration installation & repair OEMs; utilities
kits; cable terminations
- --------------------------------------- ------------------------------------- --------------------------------------
</TABLE>
Types of products produced by SpecTran Communication and SpecTran Specialty
accounted for approximately 72% and 28%, respectively, of 1998 consolidated
revenue and 73% and 27%, respectively, of 1997 consolidated revenue. In 1996,
types of products by SpecTran Communication, SpecTran Specialty and APD
accounted for approximately 59%, 21% and 20%, respectively, of consolidated
revenue.
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Customers and Marketing
The Company sells its communication multimode and single-mode optical
fibers to various cable manufacturers, domestically and internationally, which
assemble them into cables for resale in configurations of their own design.
Specialty fiber products are sold directly to a large number of OEMs, by
developing specialty applications for customers, and to product development
groups, international distributors and manufacturers' representatives,
installers, universities and governmental agencies, primarily for use in the
industrial, medical, military, aerospace, transportation and telecommunications
and data communications markets. Optical fiber cable and cable accessories,
manufactured by General Photonics, are sold largely to distributors, systems
integrators and installers primarily for use in the customer premises market in
the United States, Canada and Mexico.
The Company markets its multimode and single-mode data communications
and telecommunications optical fiber products principally through a direct sales
force in the United States and through a network of manufacturers'
representatives internationally. Specialty fiber products are marketed
domestically through a direct technical field sales force and internationally
through a network of technical distributors and sales representatives. Optical
fiber cable and cable components produced by General Photonics are marketed
primarily through General Cable's direct sales force and sales representatives,
whose principal customers are largely distributors and end users. Marketing,
technical support and some direct sales and customer support are provided by
General Photonics personnel. The Company advertises in trade publications,
brochures and other material to its mailing list of potential customers
worldwide and participates at trade shows, technical symposia and standards
committees.
As a result of its diversification efforts and broader product offering,
the Company has increased its customer base over the last three years and plans
to continue to expand this base within its targeted markets. International
sales, primarily Asia and Europe, accounted for approximately 15%, 20% and 18%
of total sales in 1998, 1997 and 1996, respectively. See Note 16 to the
Consolidated Financial Statements - "Business Segements". For the year ended
December 31, 1998, sales to each of Optical Cable Corporation and Lucent
Technologies were equal to 10% or more of the Company's revenues. The loss of
either Optical Cable Corporation or Lucent Technologies would have a material
adverse affect on the Company.
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Manufacturing and Quality Control
The basic raw materials required for the manufacture of the Company's
optical fiber products are high quality glass tubes and rods, various chemicals,
gases and certain polymers. The Company believes that its sources of supply of
these raw materials are adequate and that alternative sources are available. The
Company typically manufactures optical fibers by introducing vapors and gases of
varying chemical compositions into a special glass tube located in a clean,
controlled environment. In the modified chemical vapor deposition ("MCVD")
process, an inside vapor deposition process used by the Company, the glass tube,
which forms all or a portion of the optical cladding, and the introduced vapors
and gases are simultaneously heated, and oxide particles, formed through a
reaction of chemical vapors with oxygen, are deposited on and adhere to the
inside of the tube. As the particles attach to the tube wall, they are fused to
create a layer of high purity glass. Succeeding layers of glass of the same or
different compositions are deposited in this fashion to permit the transmission
of light in accordance with the desired specifications. The Company believes
that the MCVD process is well suited to the production of multimode fiber but
that it is not presently the most cost-effective process for making single-mode
fiber. As part of the acquisition of Ensign Bickford Optical Technologies the
Company acquired the patent rights to a process known as hybrid vapor deposition
("HVD"). Since its acquisition, the HVD process has been refined and engineered
for production and the Company expects it will be used in 1999 for the
manufacture of single-mode fiber.
In the MCVD process, once deposition is completed, the glass tube is
then collapsed into a rod, or primary preform, consisting of a deposited core,
in certain instances some deposited cladding and cladding provided by the glass
tube itself. In most cases, additional cladding is added to this primary
preform. The rod is then placed at the top of a fiber drawing tower, heated
until it softens and drawn into a fiber of predetermined diameter. The HVD
process does not use a glass starting tube but rather deposits glass soot on the
end of a target rod to produce the central portion of the fiber. After this
material has been fused into clear glass, additional soot is deposited to
increase the cladding volume. The deposited material is also fused into clear
glass and resulting rod or preform is subsequently drawn into fiber using the
same basic technology as with MCVD fiber draw.
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The majority of the Company's specialty products use a proprietary
polymer clad glass core fiber drawn from manufactured or purchased silica rod.
This fiber is either sold to third parties or cabled and/or combined with
assemblies and sold. The Company owns certain hard polymer cladding, coating and
fiber termination technology known as "crimp/cleave," which facilitates
attachment of optical fibers to connectors and other components and has certain
proprietary technology used for the cabling of optical fiber. The Company has
developed proprietary technology related to the processing of a wide variety of
polymeric compounds for the manufacture of optical fiber cable. General
Photonics purchases fiber from the Company and protectively covers and bundles
the fibers into cable.
The Company believes that its quality control programs are essential to its
success. The Company's quality control programs are designed to maintain strict
tolerances during the manufacturing process and to assure performance standards
of its products. The Company performs quality control testing on all of its
products. The Company designs and builds much of the equipment it uses to
manufacture and test its optical fiber products. SpecTran Communication's
facility in Sturbridge, Massachusetts and SpecTran Specialty's facility in Avon,
Connecticut are ISO 9001 certified. All of the Company's operations utilize
internal testing procedures based on the internationally recognized "Fiber Optic
Test Procedures" and have in place and continue to develop specialized
proprietary testing systems and procedures to support the requirements of their
respective customers.
Environmental Matters
The Company uses certain hazardous materials in its research and
manufacturing operations. As a result, the Company is subject to federal, state
and local governmental regulations. During 1998, the Company invested $500,000
for the purchase and installation of additional air pollution control equipment
at SpecTran Communication's production facility in Sturbridge, Massachusetts.
There is no material spending pertaining to environmental compliance planned for
1999. The Company believes that it has complied with all regulations and has all
permits necessary to conduct its business.
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Proprietary Rights
The Company and its subsidiaries consider its proprietary know-how with
respect to the development and manufacture of flexible glass fibers and
value-added optical fiber products to be a valuable asset. This know-how
includes formulation of new glass compositions, development of special fiber
coatings, coating applications, fiber designs, preform fabrication, fiber
drawing, optical fiber cabling methods, fiber cleaving, polishing and end
finishing techniques, proprietary testing capabilities, development and
implementation of manufacturing processes and quality control techniques, and
design and construction of manufacturing and quality control equipment. Product
and application knowledge are also considered to be valuable assets of the
Company and its subsidiaries.
Corning License. The Company has a limited, non-assignable,
non-exclusive, royalty-bearing license from Corning to make, use and sell fiber
under certain of Corning's United States patents with a filing date prior to
January 1, 1996 in the field of optical fiber. The license contains certain
annual quantity limitations. The Corning license is not applicable to sales made
directly or indirectly to certain customers such as Corning, Lucent and the
United States Government. The quantities that can be manufactured under the
license increase annually through the year 2000. The license has a term equal to
the life of the last to expire of the Corning or Company patents licensed under
the agreement. Corning has the right to terminate the license in the event that
more than 30% of the Company's voting stock is acquired, directly or indirectly,
by another manufacturing company. The Company granted back to Corning a
non-exclusive royalty-free license for any of its patents with a filing date
prior to January 1, 1996 in the field of optical fiber.
Lucent Licenses. The Company has a non-assignable, non-exclusive,
unlimited, royalty-bearing license from Lucent under all patents covering
optical fiber and optical fiber cable owned by Lucent or which Lucent and its
affiliates had the right to license on or before August 15, 1986. The Company
granted back to Lucent a non-exclusive, royalty-free license under patents the
Company may obtain relating to optical fiber inventions made on or before August
15, 1986. The license extends for the life of the last to expire of the patents
licensed under the agreement.
In October 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. SpecTran is licensed by Lucent
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
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applications. Lucent receives non-exclusive, royalty-free worldwide rights.
SpecTran agreed to pay Lucent a $4.0 million license fee in installments and,
beginning in 2000, a royalty on sales. Lucent has the right to terminate the
agreement if the Company is acquired by an optical fiber manufacturer.
Sales Subject to Corning and Lucent License Agreements. Approximately 22%
of the Company's net sales during 1998, all of which were SpecTran Communication
sales, were subject to license requiring aggregate royalty payments by the
Company of approximately 5% of net sales of the Company's products manufactured
under license during 1998. The Company believes that certain Corning patents,
which may have been relevant to the Company's single-mode fiber, including
patents covered by a non-exclusive license from Corning to the Company, have
expired in many countries (including the United States). Therefore, the Company
believes that manufacturing and sale of its single-mode fiber is not subject to
the Corning license and has been marketing its single-mode fiber without
payments of royalties to Corning and without regard to the annual quantity
limitations of the Corning license since 1993. The Company presently does not
expect to need the Corning license for the manufacture of its multimode fiber
after 1999 because the Company believes that a Corning United States patent with
relevancy to its multimode fiber will expire in 1999.
Patents and Trademarks. The Company and its subsidiaries own 22 U.S.
patents relating to products, processes and equipment in the fields of optical
fibers, optical connectors, coatings and cleaving tools. The Company believes
that its patents afford it certain competitive advantages. Under the terms of
the Corning and Lucent license agreements, generally its optical fiber patents
are required to be made available royalty-free to Lucent and Corning.
The Company is using its trademark SPECTRAGUIDE(R) for its commercial
grade optical fiber and for certain of its value added fiber products. It also
uses the trademarks HCS(R) (Hard Clad Silica), Avioptics(TM), Flightguide(TM),
PYROCOAT(TM), V-System(TM), V-Pin(TM) and GigaGuideTM.
Research and Development
Research and development activities and the Company's ability to develop
and improve products employing both existing and new technology, are important
to the Company. During the fiscal years ended December 31, 1998, 1997 and 1996,
the Company spent $5.5 million, $3.3 million and $3.1 million, respectively, or
7.8%, 5.3% and 5.1%, respectively, of its net sales on research and development.
The Company has continued to invest in programs to reduce manufacturing cost and
improve product performance in both the single-mode and multimode product lines,
to develop new optical fiber products and to develop alternative process
technologies. The Company's personnel conduct substantially all of its research
and development activities. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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Backlog
As of January 31, 1999, the Company's backlog of orders was approximately
$16.6 million (approximately 42% of which was SpecTran Communication backlog),
as compared to a backlog of $35.2 million as of January 31, 1998. All of the
January 31, 1999 backlog is expected to be delivered during 1999.
Competition
The Company produces and sells optical fibers and value added optical
fiber components and assemblies for data communications, telecommunications and
specialized applications. Optical fiber cable and cable components are also sold
through General Photonics. While there may be less competition in the
specialized markets, all of the markets served by the Company and General
Photonics are very competitive. The Company's main competitors for its fibers
for data communications and telecommunications are its licensors, Corning and
Lucent, to whom the Company pays royalties and who have substantially greater
resources and operating experience than the Company. The Company also competes
with Alcatel, Plasma Optical Fibres, Yangzee Optical Fiber Corp., FiberCore and
other fiber producers throughout the world. The Company's main competitors for
its specialty fibers generally have been smaller operations, but some of those
competitors are part of companies with substantially greater resources than the
Company. General Photonics' main competitors for its optical fiber cable
products are large companies with substantially greater resources and operating
experience than the Company and General Photonics, some of which may also be
customers of SpecTran Communication. The Company competes for sales based upon
its ability to fill orders promptly at competitive prices, by developing
specialty applications for customers, product performance, product features,
unique proprietary products, flexibility, quality and service.
The Company believes that optical fibers offer a number of advantages
over and compete favorably with other means of transmitting information, such as
copper wire, radio frequency (RF) wireless, satellite and other line of sight
transmissions (e.g., microwaves). Many companies offering such other means of
transmitting information have substantially greater resources and operating
experience than the Company. The Company often competes with both mature
existing technology and new technology, some of which have cost advantages over
optical fiber for certain applications.
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Competition may also result from technological innovation in the optical
fiber industry. New optical fiber designs could provide an advantage to
competitors of the Company. New single-mode dense wavelength division
multiplexing fibers produced by Lucent and Corning may, particularly in the
future, as, among other things, the cost of electronic connections decrease,
provide a competitive advantage to those companies, although the Company has
access to certain of Lucent's patents in this area through its 1998 license
agreement with Lucent.
The number of participants in the optical fiber industry is to some
extent limited by patents covering the fundamental optical fiber technology, the
need for substantial capital investment and the availability of highly
specialized equipment and personnel with the requisite technical expertise. The
Company believes that certain Corning patents, which may have been relevant to
the Company's single-mode fiber, including patents covered by a non-exclusive
license from Corning to the Company, have expired in many countries (including
the United States). The Company further believes that a certain Corning United
States patent, covered by this non-exclusive license, with relevance to the
Company's multimode fiber, expires in 1999. In addition, the Company believes
that a certain Lucent patent licensed to the Company relating to its multimode
and single-mode fiber expired in 1997. The expiration of these patents may or
may not reduce the patent barrier to entry by other companies.
Employees
As of December 31, 1998, the Company employed 531 persons, of whom 195
were employed in technology, 242 were employed in manufacturing operations and
94 provided marketing, administrative, management and other support services.
These numbers do not include 49 employees of General Photonics. The Company's
employees are not represented by a labor union. The Company believes its
employee relations are good.
Item 2. PROPERTIES.
The Company's administrative offices and the offices and production
facilities of SpecTran Communication are located in an approximately 98,000
square foot building. The building is situated on approximately 43 acres of land
owned by SpecTran Communication in Sturbridge, Massachusetts. SpecTran
Communication owns these buildings and land as well as a 5,000 square foot
office building, used for offices, that is next to this manufacturing facility.
SpecTran Specialty's offices and production facilities are located in
an approximately 54,000 square foot building situated on approximately 14 acres
of land located in Avon, Connecticut. This property is owned by the Company.
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General Photonics has assumed APD's lease for offices and production
facilities in a 50,000 square foot facility located in Dayville, Connecticut
under a lease expiring February 6, 2001, which is subject to a three year
renewal option, followed by a two year renewal option.
Item 3. LEGAL PROCEEDINGS.
On November 6, 1998, the Company announced that it would contest a
complaint filed in the United States District Court in Boston, MA on October 2,
1998, purportedly as a class action suit. Titled Cruise v. Cannon, et al., the
complaint alleges that the Company and three of its current or former officers
and directors violated securities laws by misrepresenting the Company's
financial condition and financial results during 1998. The suit purports to be a
class action on behalf of all individuals who purchased the Company's stock on
the open market from February 25, 1998 to July 17, 1998. The suit alleges, among
other things, that there were public misrepresentations or failures to disclose
material facts during that period which allegedly artificially inflated the
price of the Company's common stock in the marketplace. The complaint seeks an
undisclosed amount of compensatory damages and costs and expenses, including
plaintiff's attorney's fees and such further relief as the Court may deem just
and proper. The Company believes the action is totally without merit, believes
that it has highly meritorious defenses and it intends to defend itself
vigorously.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded on the NASDAQ National Market
System under the symbol "SPTR." Set forth below is high and low sales price
information for the Company's Common Stock for the periods indicated as reported
on the NASDAQ National Market:
Price
Fiscal Year Fiscal Quarter Ended High Low
1997 March 31, 1997 25 12-5/8
June 30, 1997 21 11-1/4
September 30, 1997 20-3/4 13-3/4
December 31, 1997 15-1/4 8-5/8
1998 March 31, 1998 11-1/8 6-7/8
June 30, 1998 10-1/4 6-15/16
September 30, 1998 7-13/16 4-5/32
December 31, 1998 7-5/8 3-9/16
On March 26 1999, the closing price of Common Stock as reported on the
NASDAQ National Market System was $4. The approximate number of
shareholders of record of the Company's Common Stock as of January 31, 1999 was
755 which includes all shares held in nominee names by brokerage firms and
financial institutions as one stockholder. It is estimated that shares held in
street name are held for approximately 5,602 stockholders.
The Company has not paid any cash dividends and does not intend to pay
cash dividends in the foreseeable future.
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Item 6. SELECTED CONSOLIDATED FINANCIAL DATA.
<TABLE>
<CAPTION>
Years Ended December 31
(in thousands, except per share data)
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OPERATING RESULTS 1998 1997 1996 1995 1994
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $ 70,856 $ 62,057 $ 61,571 $38,581 $26,926
Gross Profit 18,880 23,276 22,375 13,061 7,623
Income (Loss) Before Income Taxes and
Equity in Joint Venture 1,746 7,111 5,537 777 (487)
Net Income (Loss) 523 4,842 3,655 542 (487)
Earnings per Common Share-Basic .07 .72 .68 .10 (.09)
Earnings per Common Share-Diluted .07 .68 .61 .10 (.09)
Weighted Average Shares Outstanding 7,003 6,724 5,374 5,298 5,203
Weighted Average Shares Outstanding
Assuming Conversion 7,103 7,148 5,962 5,582 5,203
FINANCIAL POSITION
Total Assets 105,419 92,105 62,456 40,365 31,362
Long-Term Debt 30,800 24,000 24,000 10,000 5,240
Stockholders' Equity 57,312 56,759 28,403 24,296 23,104
</TABLE>
See also Note 16 to the Consolidated Financial Statements - "Business
Segements".
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Overview
Currently, SpecTran develops, manufactures, and markets high quality
optical fiber, optical fiber cables and value-added optical fiber components and
assemblies. Prior to 1993, the Company had a narrow customer base and was
focused on the production of multimode fiber for the domestic market. In 1993
the Company began to implement a strategic plan to diversify its products,
markets and customer base. As part of this plan, the Company reintroduced
single-mode fiber in 1993 and began marketing it internationally. In 1994 the
Company acquired Ensign-Bickford's specialty fiber operations (which later
became SpecTran Specialty), allowing the Company to become a worldwide leader in
fiber optic specialty applications. The Company entered the fiber optic cable
market in May 1995 by acquiring APD in order to participate more extensively in
the rapid growth of the data communications market, the principal end market of
multimode fiber. In December 1996 the Company formed General Photonics, a joint
venture with General Cable, to develop, manufacture and market fiber optic
cable.
Results of Operations
The following table sets forth, for the periods indicated, certain
financial data as a percentage of net sales:
<TABLE>
Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Sales 100.00% 100.0% 100.0%
Cost of Sales 73.4% 62.5% 63.7%
----- ----- -----
Gross Profit 26.6% 37.5% 36.3%
Selling and Administrative Expenses 19.5% 22.5% 22.1%
Research and Development Cost 7.8% 5.3% 5.1%
---- ---- ----
Income (Loss) from Operations (0.6)% 9.7% 9.1%
Other Income (Expense), net 3.1% 1.8% (.1)%
---- ---- -----
Income before Income Taxes and Equity in Joint Venture 2.5% 11.5% 9.0%
Income (Loss) from Joint Venture (1.4)% (0.5)% --%
------ ------ ---
Income before Income Taxes 1.1% 11.0% 9.0%
Income Tax Expense .4% 3.2% 3.1%
--- ---- ----
Net Income .7% 7.8% 5.9%
=== ==== ====
</TABLE>
15
<PAGE>
Net Sales
Net sales increased $8.8 million, or 14.2% from $62.1 million in 1997
to $70.9 million in 1998. The increase was due to record annual revenues at both
SpecTran Communication, resulting from higher sales volume made possible by the
multimode expansion completed earlier in 1998, and at SpecTran Specialty. Sales
growth continued to be adversely affected by lower unit selling prices for both
multimode and single-mode fiber due to the highly competitive market conditions
caused by an industry-wide oversupply situation.
Gross Profit
Gross profit decreased $4.4 million, or 18.9% from $23.3 million in
1997 to $18.9 million in 1998. As a percentage of net sales, the gross profit
decreased to 26.6% for the year ended December 31, 1998, from 37.5% for the year
ended December 31, 1997. The decrease in gross profit was primarily due to
continued industry pricing pressures for standard communication fiber products
and to operational problems and inventory write-downs at SpecTran Specialty.
Selling & Administrative
As a percentage of net sales, selling and administrative expenses
decreased to 19.5% for the year ended December 31, 1998, from 22.5% for the year
ended December 31, 1997. Selling and administrative expense decreased $85,000,
or .6% from $14.0 million in 1997 to $13.8 million in 1998. The decrease is
primarily due to lower Incentive Compensation in 1998.
Research and Development
Research and development costs increased $2.2 million, or 67.0% from
$3.3 million in 1997 to $5.5 million in 1998. The Company in 1998 increased its
investment in programs to improve manufacturing costs and product performance in
both multimode and single-mode product lines, to develop new special performance
fiber products and to develop alternative process technologies.
16
<PAGE>
Other Income (Expense), net
Other income (expense), net favorably increased $1.1 million, or 99.8%
from net other income of $1.1 million in 1997 to net other income of $2.2
million in 1998. Interest income decreased $1.1 million, or 83.1% from $1.3
million in 1997 to $200,000 in 1998 due to a lower level of cash available for
investment. Net interest expense increased $672,000, or 90.1% from $747,000 in
1997 to $1.4 million in 1998 primarily due to a higher level of borrowings under
the Company's revolving credit agreement and to a lower level of capitalized
interest associated with the Company's capacity expansion programs. Other net,
increased favorably $2.9 million, or 561.2% from $510,000 in 1997 to $3.4
million in 1998 due to the Company's settlement of a multi-year supply contract
with Corning.
Income Taxes
A tax provision of 32.0% of pre-tax income was provided for the year
ended December 31, 1998, compared to a tax provision of 29.0% for the year ended
December 31, 1997. The lower effective tax rate for 1997 was due to the Company
benefiting from tax credit carryforwards and low state income taxes as a result
of a high level of investment tax credits due to the capacity expansions.
Income From Equity in Joint Venture
The Company realized a loss of $974,000 and $287,000 for the years
ended 1998 and 1997 respectively, from its investment in General Photonics. This
joint venture was formed in December 1996 with General Cable. The loss in 1998
was primarily due to lower than anticipated revenues and gross profit due to
continued soft demand in the cable premise market, combined with continued price
declines for cable.
Net Income
Net income decreased $4.3 million, or 89.2% from $4.8 million in 1997 to
$523,000 in 1998. The decrease in earnings is due to reduced gross profit from
SpecTran Communication, primarily related to continued industry pricing
pressures for standard communication fiber products, to operational issues and
inventory write-downs at SpecTran Specialty and the loss from the Company's
equity in General Photonics.
17
<PAGE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net Sales
Net sales increased $486,000, or .8%, from $61.6 million in 1996 to
$62.1 million in 1997. Net sales in 1997 did not include those of General
Photonics, whereas sales for 1996 included the sales of Applied Photonic
Devices, Inc. (APD), certain assets of which were sold in December 1996 to form
General Photonics, a joint venture with General Cable. On a comparative basis,
including General Photonics sales in 1997 would have resulted in an 18.4%
increase compared with 1996. Net sales increased at both SpecTran Communication
and SpecTran Specialty in 1997 as compared to 1996 due to continued market
demand. This was partially offset by industry pricing pressure for standard
communication fiber products experienced during the second half of 1997.
Gross Profit
Gross profit increased $901,000, or 4.0%, from $22.4 million in 1996 to
$23.3 million in 1997. As a percentage of net sales, the gross profit increased
to 37.5% for the year ended December 31, 1997, from 36.3% for the year ended
December 31, 1996. The increase in gross profit was primarily due to lower
production costs for the Company's standard communication fiber products
resulting from manufacturing process and yield improvements. This was partially
offset by lower margins at SpecTran Specialty, primarily due to greater than
planned costs incurred in connection with the consolidation and expansion into a
new facility.
As a percentage of net sales, royalties decreased from 3.7% in 1996 to
3.0% in 1997. This decrease in royalties as a percentage of net sales was
primarily due to an increase in 1997 in the net sales not subject to royalties.
Selling & Administrative
Selling and administrative expenses increased $325,000, or 2.4%, from
$13.6 million in 1996 to $14.0 million in 1997. This increase was primarily due
to costs associated with the Company's one-time management reorganization and
training costs slightly offset by a lower provision for incentive compensation
in 1997. As a percentage of net sales, selling and administrative expenses
slightly increased to 22.5% for the year ended December 31, 1997 from 22.2% for
the year ended December 31, 1996.
18
<PAGE>
Research & Development
Research and development costs increased $157,000, or 5.0%, from $3.1
million in 1996 to $3.3 million in 1997. As a percentage of net sales, research
and development costs increased from 5.1% for the year ended December 31, 1996
to 5.3% for the year ended December 31, 1997. The Company continues to invest in
programs to improve manufacturing costs and product performance in both
multimode and single-mode product lines, to develop new special performance
fiber products and to develop alternative process technologies. The Company
intends to approximately double its research and development spending in 1998.
Other Income (Expense), net
Other income (expense), net favorably increased by $1.2 million to net
other income of $1.1 million in 1997 compared with net other expense of $65,000
in 1996. Interest income increased $1.1 million, or 487.2%, from $226,000 in
1996 to $1.3 million in 1997 due to a higher level of cash available for
investment as a result of the Company's secondary public offering in February
1997. Interest expense, net of capitalized interest, increased $276,000, or
58.6%, from $471,000 in 1996 to $747,000 in 1997 due to the increase in debt
related to the Company's capacity expansion.
Income Taxes
The effective tax rate declined from 34.0% in 1996 to 29.0% in 1997
primarily due to a lower provision for state income taxes in 1997 as a result of
investment tax credits associated with capacity expansion. The effective tax
rates for 1997 and 1996 were lower than the statutory combined federal and state
tax rates due primarily to a reduction of $300,000 in 1997 and $400,000 in 1996
in the valuation allowance for deferred tax assets due to the Company's belief
that it is more likely than not that the additional deferred tax assets will be
realized through the utilization of operating loss and tax credit carryforwards.
See Note 10 of "Notes to the Consolidated Financial Statements."
Income From Equity in Joint Venture
The Company realized a loss of $287,000, from its equity in General
Photonics, the joint venture formed in December 1996 with General Cable. The
loss in 1997, was primarily due to lower than anticipated revenues. In 1996, the
results of Applied Photonic Devices, Inc., the predecessor to General Photonics,
were included in the consolidated results.
Net Income (Loss)
Net income increased $1.2 million, or 32.5%, from $3.7 million in 1996
to $4.8 million for the year ended in 1997. The increase was primarily due to
improved operating results at Communication Fiber and higher interest income.
19
<PAGE>
Liquidity and Capital Resources
As of December 31, 1998, the Company had approximately $1.7 million of
cash. In addition, the Company has a $20.0 million revolving credit agreement
with its principal bank maturing in April 2000. As of December 31, 1998, the
Company had borrowed $10.0 million against the revolving credit agreement.
The Company has a scheduled debt principal repayment of $3.2 million
on December 21, 1999.
The Company's net working capital position at December 31, 1998, was
approximately $11.8 million with a current ratio of 1.8 to 1.
During 1998 the Company used $10.0 million in cash provided from financing
activities, primarily from net borrowings under its revolving credit agreement,
$6.5 million of proceeds from the sale of marketable securities and positive
cash flow from operations of $3.0 million, to fund its capacity expansion.
The Company is continuing its capacity expansion, which will require
approximately $1 million in capital expenditures during 1999, resulting in total
expenditures for capacity expansion since 1996 of approximately $44 million for
SpecTran Communication and approximately $12 million for SpecTran Specialty,
including equipment purchases. When fully operational, expected in the second
quarter of 1999, the expansion at SpecTran Communication will increase its
capacity by more than 100% from 1996 levels. The expansion at SpecTran
Specialty increased capacity by more than 50%.
The Company intends to continue to finance its capital and operational
needs for the remainder of the year through a combination of cash flow from
operations and borrowings, assuming the Company continues to meet its lenders
revised covenants. The Company had violated certain covenants contained in both
the revolving credit agreement and the senior secured notes triggered by its
second quarter 1998 results. In December 1998, the Company signed an agreement
to amend these covenants under its loan agreements with its principal bank and
the senior secured noteholders. With the signing of that agreement, the Company
remedied all violations under the original agreements. While the Company is
presently in compliance with all the revised covenants, there can be no
assurance that the Company,will in the future, be able to remain in compliance
with all the revised covenants.
The Company is exploring various financing alternatives, including seeking
additional capital or entering into strategic alliances in an attempt to reduce
its debt. The Company believes that successful completion of one or more of
these alternatives and/or renewal or extension of its revolving credit agreement
is necessary to meet its longer term cash requirements.
20
<PAGE>
The Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
information technology systems (which the Company relies on to monitor and
manage its operations, accounting, sales and administrative functions), such as
computers, servers, networks, and software ("IT Systems") and other systems that
use embedded microchip technology ("Non-IT Systems") that are date sensitive may
recognize a date using "00" as the year 1900 rather than the Year 2000. This
could result in system failure or miscalculations causing disruption of
operations. Similarly, the date-sensitive IT Systems and Non-IT Systems of third
party suppliers or customers with whom the Company has material relationships
could experience similar malfunctions which could, in turn, have a material
adverse impact on the Company.
The Company has completed an enterprise-wide assessment of all mission
critical IT Systems and Non-IT Systems to evaluate the state of its preparedness
for the Year 2000. The Company has established teams by business unit to address
the Year 2000 issue. The Company has completed a significant portion of the
Non-IT Systems remediation in connection with the recent capacity expansion at
both facilities. A significant portion of production equipment was replaced or
upgraded as part of this expansion. The Company has revised its estimate for
Year 2000 spending down to $1.2 million from $1.5 million. This includes
$222,000 for software which will be expensed in 1999. The plan calls for
remediation to be complete on all systems critical to operate the business by
July 1999, with the remediation of the remaining non-critical systems expected
to be complete by the end of the third quarter. The Company estimates that it is
50% complete with its remediation efforts for the Year 2000. The costs of the
project and the date the Company plans to complete Year 2000 modifications are
based on management's best estimates. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those plans. The Company presently believes that with modifications to existing
software and conversions to new software, the Year 2000 issue can be mitigated.
However, if such modifications and conversions are not made or are not
completely timely, the Year 2000 issue could have a material adverse impact on
the operations of the Company. The Company is developing contingency plans in
case its remediation efforts are unsuccessful. The Company expects to complete
the contingency plans in July 1999 in conjunction with the implementation and
testing of the critical business systems.
21
<PAGE>
The Company has initiated formal communications with a substantial
majority of its significant customers and suppliers to determine their plans to
address the Year 2000 issue. While the Company expects a successful resolution
of all issues there can be no guarantee that the systems of other companies on
which the Company relies will be completed in a timely manner or that these
issues would not have a material adverse effect on the Company.
Subsequent Events
In March 1999, Dr. Raymond E. Jaeger, who was Chairman of the Board of
Directors until December 31, 1998, resigned from his position as a director of
the Company and its subsidiaries. Dr. Jaeger remains a consultant to the
Company. Mr. Bruce A. 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.
Recent Accounting Pronouncements
Effective January 1, 1998, the Company adopted: (1) Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income." The
statement requires the corporation to report "comprehensive income" as defined
therein. (2) Statement of Financial Accounting Standards No. 131, "Disclosure
about Segments of an enterprise and Related Information." The Statement changes
the criteria used to determine the segments for which the Company must report
information. This item is discussed herein; please also see the Notes to
Consolidated Financial Statements for more information; and (3) Statement of
Financial Accounting Standards No. 132, "Employers' Disclosure about Pension and
Other Postretirement Benefits." The Statement requires additional disclosures on
changes in the benefit obligations and fair values of plan assets during the
year. (4) Statement of Position 98-1 "Accounting for the Costs of Computer
Software Developed or obtained for Internal Use". The statement of position
provides guidance on accounting for the costs of computer software developed or
obtained for internal use. The adoption of this statement did not have a
material affect to the financial position or results of operations. (5)
Statement of Position 98-5 "Reporting on the Costs of Start-up Activities". The
adoption of this statement did not have a material affect to the financial
position or results of operations. Please refer to the Notes to Consolidated
Financial Statements for more information.
Other
This document contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, in Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward-looking statements involve risks and uncertainties that may cause
results to differ materially from expectations, including without limitation,
the ability of the Company to market and develop its products, general economic
conditions and competitive conditions in markets served by the Company.
Forward-looking statements include, but are not limited to, global economic
conditions, product demand, competitive products and pricing, manufacturing
efficiencies, cost reductions, manufacturing capacity, facility expansions and
new plant start-up costs, the rate of technology change, and other risks.
Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this filing will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the company or any person that the
objectives and plans of the Company will be achieved.
22
<PAGE>
Item 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company's cash is invested in short-term dollar-denominated money
market funds. The Company does not engage in trading of these investments and
believes that they may present minimal market risk.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The response to this Item is submitted as a separate section of
this Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
23
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information to be contained under the heading "Election of
Directors" in the Company's proxy statement relating to the 1999 Annual Meeting
of Shareholders (the "Proxy Statement") is hereby incorporated herein by
reference.
Item 11. EXECUTIVE COMPENSATION.
The information with respect to compensation of certain executive
officers and all executive officers of the Company as a group to be contained
under the heading "Compensation of Executive Officers and Directors" in the
Proxy Statement is hereby incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information with respect to ownership of the Company's Common Stock
by management and by certain other beneficial owners to be contained under the
heading "Principal Stockholders and Other Information" in the Proxy Statement is
hereby incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related transactions
to be contained under the heading "Compensation and Incentive Stock Committee
Interlocks and Insider Participation " in the Proxy Statement is hereby
incorporated herein by reference.
24
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. & 2. Financial Statements and Financial Statement Schedules:
The response to this portion of Item 14 is submitted as a
separate section of this Form 10-K.
3. Exhibits:
See Exhibit Index on Pages 27 through 32 of this Form 10-K.
(b) Reports on Form 8-K filed during the final quarter of fiscal 1998: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: SPECTRAN CORPORATION
March 27, 1999 By: /s/ Charles B. Harrison
------------------------
Charles B. Harrison
President,
Chief Executive Officer and
Chairman of the Board of Directors
March 27, 1999 By: /s/ John T. Rogers
-------------------
John T. Rogers
Acting Chief Financial Officer
Principal Accounting Officer
25
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Charles B. Harrison President, Chief Executive Officer March 27, 1999
- ------------------------------ and Chairman of the Board of
Charles B. Harrison Directors (principal executive
officer)
/s/ John T. Rogers Acting Chief Financial Officer March 27, 1999
- ------------------------------ (principal accounting officer)
John T. Rogers
/s/ John E. Chapman Senior Vice President - Technology March 27, 1999
- -------------------------------
John E. Chapman and Director
/s/ Ira S. Nordlicht Director March 27, 1999
- -----------------------------------
Ira S. Nordlicht
/s/ Paul D. Lazay Director March 27, 1999
- ---------------------------------
Paul D. Lazay
/s/ Richard M. Donofrio Director March 27, 1999
- ----------------------------------
Richard M. Donofrio
/s/ Lily K. Lai Director March 27, 1999
- -------------------------------------
Lily K. Lai
/s/ Robert A. Schmitz Director March 27, 1999
- -------------------------------------
Robert A. Schmitz
</TABLE>
26
<PAGE>
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3.1 Certificate of Incorporation of the Registrant, as amended.
(Incorporated by reference to Registrant's Annual Report on Form 10-K
for its fiscal year ended December 31, 1991.)
3.2 By-Laws of the Registrant, as amended. (Incorporated by reference to
Registrant's Annual Report on Form 10-K for its fiscal year ended
December 31, 1991.)
4.5* Form of Stock Certificate for Voting Common Stock.
10.7* License Agreement dated August 15, 1981, between the Registrant and
Western Electric Company, Incorporated. (Registrant has been granted
confidential treatment of portions of this Exhibit.)
10.49 License Agreement dated as of the first day of January 1991 by and
between the Registrant and Corning, Incorporated. (Registrant has
been granted confidential treatment of portions of this Exhibit.)
(Incorporated by reference to Registrant's Annual Report on Form 10-K
for its fiscal year ended December 31, 1991.)
10.61 Stock Purchase Agreement among APD Acquisition Corp. and Irving N.
Dwyer, David P. DaVia, The Irving N. Dwyer and Annette M. Dwyer
Charitable Remainder Trust and the DaVia Charitable Remainder Trust.
(Incorporated by reference to the Registrant's Report on Form 8-K
filed June 7, 1995.)
10.62 Directors Retirement Plan dated December 27, 1995. (Incorporated by
reference to the Registrant's Report on Form 10-K dated March 29,
1996.)
10.63 Registrant's Employee Profit Sharing Plan as revised and adopted
effective January 1, 1995. (Incorporated by reference to the
Registrant's Report on Form 10-K dated March 29, 1996).
10.65 Lease between Fabrilock, Inc. and Applied Photonic Devices,
Inc. dated February 6, 1996. (Incorporated by reference to the
Registrant's Report on Form 10-K dated March 29, 1996).
10.69 Supplemental Retirement Agreement between SpecTran Corporation and
Raymond E. Jaeger dated May 8, 1996. (Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)
10.70 Supplemental Retirement Agreement between SpecTran Corporation and
Bruce A. Cannon dated May 8, 1996. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)
27
<PAGE>
10.71 Supplemental Retirement Agreement between SpecTran Corporation and
Crawford L. Cutts dated May 8, 1996. (Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.
10.73 Supplemental Retirement Agreement between SpecTran Corporation and
John E. Chapman dated May 8, 1996. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)
10.74 Lease between CRJ Realty Trust and SpecTran Communication Fiber
Technologies, Inc. dated July 22, 1996. (Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)
10.75 Contractual Agreement Between Lucent Technologies Inc. and SpecTran
Corporation dated October 3, 1996. (Registrant has been granted
confidential treatment for portions of this Exhibit.) (Incorporated
by reference to the Registrant's Quarterly Report on Form 10-Q dated
November 13, 1996.)
10.79 Key Employee Incentive Plan effective as of January 1, 1996.
(Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q dated November 13, 1996.)
10.80 Employment Agreement between SpecTran Corporation and Raymond E.
Jaeger dated as of December 14, 1992. (Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q dated November 13,
1996.)
10.81 Employment Agreement between SpecTran Corporation and Bruce A. Cannon
dated as of December 14, 1992. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)
10.82 Employment Agreement between SpecTran Corporation and John E. Chapman
dated as of December 14, 1992. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)
10.83 Employment Agreement between SpecTran Corporation and Crawford L.
Cutts dated as of January 1, 1996. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)
28
<PAGE>
10.84 Employment Agreement between SpecTran Corporation and William B. Beck
dated as of February 18, 1994. (Incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)
10.86 Note Purchase Agreement between SpecTran Corporation and
Massachusetts Mutual Life Insurance Company dated as of December 1,
1996. (Incorporated by reference to the Registrant's Current Report
on Form 8-K dated December 31, 1996.)
10.87 Note Purchase Agreement between SpecTran Corporation and CM Life
Insurance Company dated as of December 1, 1996. (Incorporated by
reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996.)
10.88 Note Purchase Agreement between SpecTran Corporation and The Mutual
Life Insurance Company of New York dated as of December 1, 1996.
(Incorporated by reference to the Registrant's Current Report on Form
8-K dated December 31, 1996.)
10.89 Note Purchase Agreement between SpecTran Corporation and Atwell & Co.
dated as of December 1, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 31, 1996.)
10.90 Security Agreement among SpecTran Corporation, SpecTran Communication
Fiber Technologies, Inc., SpecTran Specialty Optics Company, Applied
Photonic Devices, Inc. and Fleet National Bank, as Trustee, dated as
of December 1, 1996. (Incorporated by reference to the Registrant's
Current Report on Form 8-K dated December 31, 1996.)
10.91 Trademark Security Agreement among SpecTran Corporation, SpecTran
Communication Fiber Technologies, Inc., SpecTran Specialty Optics
Company, Applied Photonic Devices, Inc. and Fleet National Bank, as
Trustee, dated as of December 1, 1996. (Incorporated by reference to
the Registrant's Current Report on Form 8-K dated December 31, 1996.)
10.92 Patent Collateral Assignment among SpecTran Corporation, SpecTran
Communication Fiber Technologies, Inc., SpecTran Specialty Optics
Company, Applied Photonic Devices, Inc. and Fleet National Bank, as
Trustee, dated as of December 1, 1996. (Incorporated by reference to
the Registrant's Current Report on Form 8-K dated December 31, 1996.)
10.93 Pledge Agreement among SpecTran Corporation, SpecTran Communication
Fiber Technologies, Inc., SpecTran Specialty Optics Company, Applied
Photonic Devices, Inc. and Fleet National Bank, as Trustee, dated as
of December 1, 1996. (Incorporated by reference to the Registrant's
Current Report on Form 8-K dated December 31, 1996.)
10.94 Mortgage, Assignment of Rents and Security Agreement by SpecTran
Communication Fiber Technologies, Inc. to Fleet National Bank, as
Trustee, dated as of December 1, 1996. (Incorporated by reference to
the Registrant's Current Report on Form 8-K dated December 31, 1996.)
10.95 Open-End Mortgage, Assignment of Rents and Security Agreement by
SpecTran Specialty Optics Company to Fleet National Bank, as Trustee,
dated as of December 1, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated December 31, 1996.)
29
<PAGE>
10.96 Guaranty Agreement dated as of December 1, 1996 by SpecTran
Communication Fiber Technologies, Inc., SpecTran Specialty Optics
Company and Applied Photonic Devices, Inc. in favor of Massachusetts
Mutual Life Insurance Company, CM Life Insurance Company, The New
York Mutual Life Insurance Company and Atwell & Co. (Incorporated by
reference to the Registrant's Current Report on Form 8-K dated
December 31, 1996.)
10.97 Loan Agreement among SpecTran Corporation, SpecTran Communication
Fiber Technologies, Inc., SpecTran Specialty Optics Company, Applied
Photonic Devices, Inc. and Fleet National Bank dated as of December
1, 1996. (Incorporated by reference to the Registrant's Current
Report on Form 8-K dated December 31, 1996.)
10.98 Limited Liability Company Agreement of General Photonics, LLC between
Applied Photonic Devices, Inc. and General Cable Industries, Inc.
dated as of December 23, 1996. (Incorporated by reference to the
Registrant's Current Report on Form 8-K dated January 8, 1997.)
10.99 Asset Purchase Agreement among Applied Photonic Devices, Inc.,
SpecTran Corporation, General Cable Corporation and General Cable
Industries, Inc. dated as of December 23, 1996. (Incorporated by
reference to the Registrant's Current Report on Form 8-K dated
January 8, 1997.)
10.100 Investor's Representations, Contribution Agreement and Subscription
Agreement among Applied Photonic Devices, Inc., SpecTran Corporation
and General Photonics, LLC dated as of December 23, 1996.
(Incorporated by reference to the Registrant's Current Report on Form
8-K dated January 8, 1997.)
10.101 Non-Competition Agreement among General Cable Industries, Inc.,
General Cable Corporation, Applied Photonic Devices, Inc., SpecTran
Corporation and General Photonics, LLC dated December 23, 1996.
(Registrant has been granted confidential treatment for portions of
this Exhibit.) (Incorporated by reference to the Registrant's Current
Report on Form 8-K dated January 8, 1997.)
10.102 Standstill Agreement among General Cable Industries, Inc., General
Cable Corporation and SpecTran Corporation dated as of December 23,
1996. (Incorporated by reference to the Registrant's Current Report
on Form 8-K dated January 8, 1997.)
10.104 Letter amendment to Employment Agreement between SpecTran Specialty
Optics Company and William B. Beck dated April 18, 1996.
(Incorporated by reference to the Registrant's Current Report on Form
8-K dated January 8, 1997.)
30
<PAGE>
10.105 Cross-Indemnity Agreement between SpecTran Corporation and Allen &
Company Incorporated. (Incorporated by reference to the
Registrant's Registration Statement on Form S-3 (Reg. No. 333-19449)
effective February 12, 1997.)
10.106 Common Stock Purchase Warrant issued to Allen & Company Incorporated.
(Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.)
10.107 Settlement Agreement dated February 13, 1998, between Corning
Incorporated and SpecTran Corporation. (Incorpated by reference
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.)
10.108 Employment Agreement between SpecTran Corporation and Charles B.
Harrison dated as of April 1, 1998. (Incorpated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal year
ended May 15, 1998.)
10.109 Employment Agreement between SpecTran Corporation and William B.
Beck dated as of June 20, 1998. (Incorpated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal year
ended August 14, 1998.)
10.110 Employment Agreement between SpecTran Corporation and Raymond E.
Jaeger dated as of April 13, 1998. (Incorpated by reference to the
Registrant's Quarterly Report on Form 10-Q for the fiscal year
ended August 14, 1998.)
10.111 Patent License Agreement between Lucent Technologies, Inc. and
SpecTran Corporation dated October 30, 1998.(Incorpated by reference
to the Registrant's Current Report on Form 8-K for the fiscal year
ended February 11, 1998.)(Registrant has been granted confidential
treatment for portions of this Exhibit.)
10.112 Agreement between SpecTran Corporation and Bruce A. Cannon dated as
of December 1,1998.
10.113 Employment Termination Agreement and Release between SpecTran
Corporation and William B. Beck dated as of October 7, 1998.
10.114 Employment Agreement between SpecTran Corporation and Martin Seifert
dated as of August 25, 1998.
31
<PAGE>
10.115 Registrant's 1991 Incentive Stock Option Plan, as amended
10.116 First Amendment to Loan Agreement among SpecTran Corporation,
SpecTran Communication Fiber Technologies, Inc., SpecTran Specialty
Optics Company, Applied Photonic Devices, Inc. and Fleet National
Bank dated as of September 30, 1998.
10.117 First Amendment to Note Purchase Agreement by and among SpecTran
Corporation, and each of the purchasers listed on the signature page
thereto dated as of September 30, 1998.
10.118 First Amendment to Trademark Security Agreement among SpecTran
Corporation, SpecTran Communication Fiber Technology Inc., SpecTran
Specialty Optics Company, Applied Photonic Devices, Inc., and State
Street Bank and Trust Company, as Trustee, dated as of September 30,
1998.
10.119 First Amendment to Patent Collateral Assignment among SpecTran
Corporation, SpecTran Communication Fiber Technologies, Inc.,
SpecTran Specialty Optics Company, Applied Photonic Devices, Inc. and
State Street Bank and Trust Company, as Trustee, dated as of
September 30, 1998.
10.120 Modification Agreement between SpecTran Communication Fiber
Technologies, Inc. to State Street Bank and Trust Company, as
Trustee, dated as of September 30, 1998.
10.121 Modification Agreement between SpecTran Specialty Optics Company to
State Street Banks and Trust Company, as Trustee, dated as of
September 30, 1998.
10.122 General Photonics audited Financial Statements. (In compliance with
Regulation SX13, General Photonics' Financial Statements for period
ending December 31, 1998 will follow as an amendment. They are
currently unavailable.)
21.0 Subsidiaries.
- ------------------------------
* Incorporated by reference to Registrant's Registration Statement on Form
S-1 (Reg. No. 2-83172) effective June 2, 1983
32
<PAGE>
SpecTran Corporation
Form 10-K
Items 8, 14 (a) (1) and (2)
Index to Consolidated Financial Statements and Schedule
The following consolidated financial statements of the registrant required to be
included in Item 8 and 14 (a) (1) are listed below:
<TABLE>
Page
<S> <C>
Independent Auditors' Report F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the Years Ended December 31,
1998,
1997 and 1996 F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998,
1997 and 1996 F-5
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7 through F-32
The following financial statement schedule of the registrant is included
pursuant to Item 14 (a) (2):
Financial Statement Schedule Page
I. Valuation and Qualifying Accounts F-32
Schedules other than those mentioned above are omitted because the conditions
requiring their filing do not exist or because the required information is
presented in the consolidated financial statements, including the notes thereto.
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
SpecTran Corporation:
We have audited the consolidated financial statements of SpecTran Corporation as
of December 31, 1998 and 1997, and the related statements of operations and
comprehensive income, stockholders' equity and cash flows for each of the years
in the three year period ended December 31, 1998. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SpecTran Corporation
as of December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule I is presented for the purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinio, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 12, 1999
F-2
<PAGE>
SpecTran Corporation
Consolidated Balance Sheets
Dollars in thousands
<TABLE>
ASSETS (NOTE 8 AND 15)
1998 1997
---- ----
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 1,690 $ 445
Current Portion of Marketable Securities (Note 2) -- 5,535
Trade Accounts Receivable, net of allowance for doubtful
accounts of $523 and $389 in 1998 and 1997, respectively 12,568 8,622
Inventories (Note 3) 8,279 9,666
Income Taxes Receivable 644 --
Deferred Income Taxes, net (Note 11) 1,889 1,189
Prepaid Expenses and Other Current Assets 1,036 1,943
---------- ----------
Total Current Assets 26,106 27,400
---------- ----------
Investment in Joint Venture (Note 15) 3,239 4,213
Property, Plant and Equipment, net (Note 4) 68,495 55,409
Other Assets:
Long-term Marketable Securities (Note 2) -- 996
License Agreements, net (Notes 5 & 13) 4,335 603
Deferred Income Taxes, net (Note 11) -- 412
Goodwill, net (Note 6) 793 872
Other Long-Term Assets (Note 14) 2,451 2,200
---------- ----------
Total Other Assets 7,579 5,083
---------- ----------
Total Assets $ 105,419 $ 92,105
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities (Note 15):
Current Maturities of Long-term Debt (Note 8) $ 3,200 $ --
Current Portion of License Fees Payable (Note 13) 1,250 --
Accounts Payable 4,410 4,758
Income Taxes Payable -- 573
Accrued Defined Benefit Pension Liability (Note 14) 1,902 1,716
Deferred Income Taxes, net (Note 11) 478 --
Accrued Liabilities (Note 7) 3,317 4,299
---------- ----------
Total Current Liabilities 14,557 11,346
---------- ----------
Long-term portion of License Fee Payable (Notes 5 & 13) 2,750 --
Long-term Debt (Note 8) 30,800 24,000
---------- ----------
Stockholders' Equity (Note 9 ):
Common Stock, voting, $.10 par value; authorized 20,000,000 shares;
outstanding 7,003,850 shares and 7,000,634 shares in 1998 and
1997, respectively 700 700
Common Stock, non-voting, $.10 par value;
authorized 250,000 shares, no shares outstanding -- --
Paid-in Capital 50,252 50,223
Accumulated Other Comprehensive Income (Loss) -- (1)
Retained Earnings 6,360 5,837
---------- ----------
Total Stockholders' Equity 57,312 56,759
---------- ----------
Total Liabilities and Stockholders' Equity $ 105,419 $ 92,105
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SpecTran Corporation
Consolidated Statements of Operations and Comprehensive Income
Dollars in thousands except per share amounts
<TABLE>
Years Ended December 31,
---------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Sales (Note 12) $ 70,856 $ 62,057 $ 61,571
Cost of Sales 51,976 38,781 39,196
---------- ---------- ----------
Gross Profit 18,880 23,276 22,375
Selling and Administrative Expenses 13,818 13,966 13,641
Research and Development Costs 5,493 3,289 3,132
---------- ---------- ----------
Income (Loss) from Operations (431) 6,021 5,602
---------- ---------- ----------
Other Income (Expense):
Interest Income 224 1,327 226
Interest Expense (1,419) (747) (471)
Other Net (Note 5) 3,372 510 180
---------- ---------- ----------
Other Income (Expense), net 2,177 1,090 (65)
---------- ---------- ----------
Income before Income Taxes and Equity in Joint Venture 1,746 7,111 5,537
Loss from Joint Venture (Note 15) (974) (287) --
---------- ---------- ----------
Income before Income Taxes 772 6,824 5,537
Income Tax Expense (Note 11) 249 1,982 1,882
---------- ---------- ----------
Net Income 523 4,842 3,655
---------- ---------- ----------
Other Comprehensive Income,
Net of Tax:
Unrealized Gains on Securities:
Unrealized Holdings Gains
Arising During the Period 1 11 4
Less Reclassification Adjustment
For (Gains)/Losses Included
In Net Income (12) (17) 13
---- -------- ----------
Other Comprehensive Income (Loss) (11) (6) 17
---- -------- ----------
Comprehensive Income $ 512 $ 4,836 3,672
========== ========== =========
Net earnings per Common Share (Note 10):
Basic $ .07 $ .72 $ .68
========== ============ ==========
Diluted $ .07 $ .68 $ .61
========== ============= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SpecTran Corporation
Consolidated Statements of Cash Flows
Dollars in thousands
Years Ended December 31,
<TABLE>
1998 1997 1996
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 523 $ 4,842 $ 3,655
Reconciliation of net income to net cash provided by operating
activities:
Depreciation and amortization 6,665 3,969 3,071
Loss (gain) on sale of marketable securities (18) (24) 19
Loss on disposition of equipment 178 61 --
Changes in valuation accounts 1,126 (532) (380)
Investment in joint venture 974 (78) (354)
Change in long-term deferred income taxes 1,221 402 1,118
Change in other long-term assets (4,349) (409) (344)
Changes in assets and liabilities:
Current deferred income taxes (700) (398) (83)
Accounts receivable (4,079) (1,172) (2,136)
Inventories 65 (1,709) (3,742)
Prepaid expenses and other current assets 894 (639) (50)
Income taxes payable/receivable (1,218) 273 (150)
Accounts payable and accrued liabilities 2,855 1,021 3,606
--------- --------- ---------
Net Cash Provided by Operating Activities 4,137 5,607 4,230
--------- --------- ---------
Cash Flows from Investing Activities:
Sale of Assets of Applied Photonic Devices -- -- 5,278
Acquisition of property, plant and equipment (19,471) (41,157) (11,100)
Purchase of marketable securities (9,652) (254,437) (29,658)
Proceeds from sale/maturity of marketable securities 16,202 263,368 19,439
--------- --------- ---------
Net Cash Used in Investing Activities (12,921) (32,226) (16,041)
--------- --------- ---------
Cash Flows from Financing Activities:
Borrowings of long-term debt 10,000 -- 28,000
Repayment of long-term debt -- -- (14,000)
Issuance of common stock, net -- 23,082 --
Tax effect of disqualifying disposition of ISO shares -- 43 117
Proceeds from exercise of stock options and warrants 29 374 329
Deferred financing costs -- -- (695)
--------- --------- ---------
Net Cash Provided by Financing Activities 10,029 23,499 13,751
--------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents 1,245 (3,120) 1,940
Cash and Cash Equivalents at Beginning of Year 445 3,565 1,625
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 1,690 $ 445 $ 3,565
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SpecTran Corporation
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1998, 1997 and 1996
Dollars in thousands
<TABLE>
<CAPTION>
Accumulated
Other Retained Total
Common Stock Paid-in Comprehensive Earnings Stockholders'
Shares Par Value Capital Income (Loss) (Deficit) Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 5,353,686 $535 $26,443 $(22) $(2,660) $24,296
Exercise of Stock
Options (Note 9) 46,385 5 324 -- -- 329
Issuance of Shares in
Connection with
Acquisition (Note 15) -- -- 117 -- -- 117
Unrealized Gain on
Marketable Securities -- -- -- 6 -- 6
Net Income -- -- -- -- 3,655 3,655
--------- ------ -------- ------ -------- -----
Balance at December 31, 1996 5,400,071 540 26,884 (16) 995 28,403
Exercise of Stock
Options 100,563 10 364 -- -- 374
(Note 9)
Issuance of Shares in
Connection with Stock
Offering (Note 9) 1,500,000 150 22,932 -- -- 23,082
Tax Effect of Disqualifying
Disposition of ISO -- -- 43 -- -- 43
shares(Note 10)
Unrealized Gain on
Marketable Securities -- -- -- 15 -- 15
Net Income -- -- -- -- 4,842 4,842
--------- ------ -------- ------ -------- -----
Balance at December 31, 1997 7,000,634 700 50,223 (1) 5,837 56,759
Exercise of Stock Options
(Note 9) 3,216 -- 29 -- -- 29
Unrealized Gain on
Marketable Securities -- -- -- 1 -- 1
Net Income -- -- -- -- 523 523
--------- ------ -------- ------ -------- ---
Balance at December 31, 1998 7,003,850 $700 $50,252 $ -- $6,360 $57,312
========= ====== ======== ====== ======= =======
</TABLE>
See accompanying notes to consolidated financia statements.
F-6
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997 and 1996
1 - Nature of Business and Summary of Significant Accounting Policies
Nature of Business
SpecTran Corporation (the "Company") develops, manufactures and markets
a wide range of fiber optic products. These include multimode and single-mode
optical fiber and cable for use in data communications and telecommunications
applications. The Company also develops special performance fibers, coatings,
cables, cable assemblies and other value-added products for use in a variety of
specialty markets.
Principles of Consolidation and Basis of Accounting
The consolidated financial statements include the accounts of the Company
and all wholly owned subsidiaries: SpecTran Communication Fiber Technologies,
Inc. ("SpecTran Communication"), SpecTran Specialty Optics Company ("SpecTran
Specialty") and Applied Photonic Devices, Inc. ("APD") which holds the Company's
investment in General Photonics, LLC, a 50-50 joint venture between the Company
and General Cable Corporation ("General Cable"). In December 1996, the Company
sold certain of the assets of APD to General Cable and then contributed the
remaining non-cash assets of APD to General Photonics for a 50% equity interest
(See Note 15). The investment in General Photonics is accounted for under the
equity method of accounting pursuant to which the Company records its 50%
interest in General Photonics' net operating results. Prior to the formation of
General Photonics, APD's results of operations, including net sales and
expenses, were consolidated with those of the Company. All significant
intercompany balances and transactions have been eliminated.
Management uses estimates and assumptions in preparing the financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities
and the reported revenue and expenses. Actual results may vary from the
estimates.
Certain 1997 and 1996 balances have been reclassified to be consistent with
the current year's presentation.
Revenue Recognition
Sales revenues are recognized upon shipment of goods. Customers generally
have the right to return for replacement any goods which do not meet the
customer's purchase order specifications. Sales revenues and cost of sales as
reported in the consolidated statements of operations and comprehensive income
are adjusted to reflect estimated returns and warranty costs.
F-7
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
Marketable Securities
Marketable securities are classified as available-for-sale and reported
at fair value, with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity, net of estimated
income taxes. Gains and losses on the sale of marketable securities are
recognized at the time of sale on a specific identification basis.
Inventories
Inventories are stated at the lower of cost or market value. Cost is
determined by the first-in, first-out method.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with original maturities of three
months or less to be cash equivalents.
Supplemental disclosure of cash flow information includes cash paid during
the year for (in thousands):
1998 1997 1996
---- ---- ----
Interest $2,590 $2,120 $ 780
Income Taxes 1,316 2,159 1,044
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Machinery and equipment
assembled by the Company are valued at the cost of component parts purchased,
plus the approximate labor and overhead costs to the Company. Significant
renewals and betterments are capitalized. The cost of maintenance and repairs is
charged to expense as incurred. Repairs and maintenance costs amounted to $1.8
million, $1.6 million and $1.5 million in 1998, 1997 and 1996, respectively.
Depreciation is provided by the straight-line method. The principal
annual rates of depreciation are:
Buildings and building improvements..................4%
Machinery and equipment.......................14% to 33-1/3%
In 1997 the Company changed the rate of depreciation for all machinery and
equipment put in service after January 1, 1997, from 5 to 7 years, to more
accurately reflect the economic life of these assets.
Depreciation expense of property, plant and equipment amounted to $6.2
million, $3.6 million and $2.5 million in 1998, 1997 and 1996, respectively.
F-8
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
Cost in Excess of Net Assets Acquired and Other Intangibles
The Company monitors its cost in excess of net assets acquired
(goodwill) and its other intangibles to determine whether any impairment of
these assets has occurred. In making such determination with respect to
goodwill, the Company evaluates the performance, on an undiscounted basis, of
the underlying businesses which gave rise to such amount. Amortization of
goodwill is recorded on a straight-line basis over the estimated useful life of
15 years.
With respect to other intangibles, which include the cost of license
agreements and patents, the Company bases its determination of impairment on the
performance, on an undiscounted basis, of the related products.
License Agreements and Other Assets
The total cost of the license agreements obtained in 1991 and 1998 are
being amortized and charged to expense based on a ten year life. Amortization
expense amounted to $267,000 in 1998 and $201,000 for 1997 and 1996. Deferred
financing costs are amortized and charged to expense over the lives of the
related debt. Patents are being amortized over a ten year life.
Income Taxes
The Company accounts for income taxes using the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-9
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
Financial Instruments
Financial instruments of the Company consist of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable,
accrued expenses, bank loan and senior secured notes. The carrying amounts of
these financial instruments approximate their fair value.
Stock-Based Compensation
Statement of Financial Accounting Standards Number 123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion Number
25, "Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.
Comprehensive Income
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." This statement
establishes rules for the reporting of comprehensive income and its components.
The Company's comprehensive income consists of net earnings and unrealized gains
or losses on marketable securities and is presented in the Consolidated
Financial Statements. The adoption of SFAS 130 had no impact on net earnings or
on total shareholders' equity. Prior year financial statements have been
reclassified to conform to the SFAS 130 requirements.
F-10
<PAGE>
2 - Marketable Securities
The Company had no marketable securities available for sale at December
31, 1998. A summary of marketable securities available for sale for the year
ended December 31, 1997 is as follows (in thousands):
<TABLE>
Quoted
Purchase Amortized Unrealized Unrealized Market
Price Cost Gains Losses Value
1997
<S> <C> <C> <C> <C> <C>
Money Market $ 88 $ 88 $ -- $ -- $ 88
U.S. Government and
Agency Obligations -- -- -- -- --
Corporate Debt Securities 4,451 4,446 -- 2 4,444
Commercial Paper 1,998 1,998 1 -- 1,999
---------- -------- ----- ------- ----------
Total $ 6,537 $ 6,532 $ 1 $ 2 $ 6,531
========== ======== ===== ======= ==========
</TABLE>
The amortized cost and estimated market value of debt securities are shown below
(in thousands): 1997
Amortized Quoted
Cost Market Value
Expected Maturities:
Within one year $3,448 $3,448
One to five years 1,167 1,156
Proceeds from sales of marketable securities, prior to maturity, during
1998 and 1997 were $6.5 million and $4.8 million, respectively. Gains of $18,000
for 1998 and $24,000 for 1997 were recognized on these sales.
3 - Inventories
<TABLE>
Inventories consisted of (in thousands):
December 31,
-------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Raw Materials $ 3,096 $ 4,036
Work in Process 1,277 1,010
Finished Goods 3,906 4,620
---------- ----------
$ 8,279 $ 9,666
========== ==========
</TABLE>
F-11
<PAGE>
4 - Property, Plant and Equipment
Property, plant and equipment consisted of (in thousands):
<TABLE>
December 31,
-----------------------------------------
1998 1997
---- ----
<S> <C> <C>
Land and Land Improvements $ 978 $ 978
Buildings and Improvements 24,909 10,453
Machinery and Equipment 48,983 33,567
Construction in Progress 16,220 27,694
---------- ----------
91,090 72,692
Less: Accumulated Depreciation 22,595 17,283
---------- ----------
Property, Plant and Equipment, net $ 68,495 $ 55,409
========== ==========
</TABLE>
The Company is continuing its capacity expansion, which will require
approximately $1 million in capital expenditures during 1999, resulting in total
expenditures for capacity expansion since 1996 of approximately $44 million for
SpecTran Communication and approximately $12 million for SpecTran Specialty,
including equipment purchases. When fully operational, expected in the second
quarter of 1999, the expansion at SpecTran Communication will increase its
capacity by more than 100% from 1996 levels. The expansion at SpecTran Specialty
increased capacity by more than 50%.
In 1998 and 1997 the Company recorded approximately $1.4 million in
capitalized interest in each year related to the expansions.
5 - License Agreements
The Company has a limited, non-assignable non-exclusive royalty-bearing
license from Corning to make, use and sell optical fiber under certain of
Corning's United States patents with filing date prior to January 1, 1996 in the
field of optical fiber. The license contains annual quantity limitations. The
Corning license is not applicable to sales made directly or indirectly to
certain customers such as Corning, Lucent and the United States government. The
quantities that can be manufactured under the license increase annually through
the year 2000. The license has a term equal to the life of the last to expire of
the Corning or Company patents licensed under the agreement. Corning has the
right to terminate the license in the event that more than 30% of the Company's
voting stock is acquired, directly or indirectly, by another manufacturing
company. The Company granted to Corning a non-exclusive royalty-free license for
any of its patents with a filing date prior to January 1, 1996 in the field
of optical fiber.
The Company has a non-assignable, non-exclusive, unlimited, royalty-bearing
license from Lucent under all patents covering optical fiber and optical fiber
cable owned by Lucent or which Lucent and its affiliates had the right to
license on or before August 15, 1986. The Company granted back to Lucent a
non-exclusive, royalty-free license under patents the Company may obtain
relating to optical fiber inventions made on before August 15, 1986. The license
extends for the life of the last to expire of the patents licensed under the
agreement.
In October 1998, the Company and Lucent Technologies Inc. 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. SpecTran is
licensed by Lucent 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. Lucent receives non-exclusive, royalty-free worldwide
rights. SpecTran agreed to pay Lucent a $4.0 million license fee in installments
and, beginning in 2000, a royalty on sales. Lucent has the right to terminate
the agreement if the Company is acquired by an optical fiber manufacturer.
Approximately 22% of the Company's net sales during 1998, all of which were
SpecTran Communication sales, were subject to license requiring aggregate
royalty payments by the Company of approximately 5% of net sales of the
Company's products manufactured under license during 1998. The Company
believes that certain Corning patents, which may have been relevant to the
Company's single-mode fiber, including patents covered by a non-exclusive
license from Corning to the Company, have expired in many countries (including
the United States). Therefore, the Company believes that manufacturing and sale
of its single-mode fiber is not subject to the Corning license and has been
marketing its single-mode fiber without payments of royalties to Corning and
without regard to the annual quantity limitations of the Corning license since
1993. The Company presently does not expect to need the Corning license for the
manufacture of its multimode fiber after 1999 because the Company believes that
a Corning United States patent with relevancy to its multimode fiber will expire
in 1999.
Total royalties expensed during the years ended December 31, 1998, 1997 and
1996 were $.7 million, $1.9 million and $2.3 million, repectively.
F-12
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
6 - Goodwill
<TABLE>
Goodwill consisted of (in thousands):
December 31,
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
Goodwill $ 1,181 $ 1,181
Less Accumulated Amortization (388) (309)
-------- --------
$ 793 $ 872
======== ========
</TABLE>
7 - Accrued Liabilities
<TABLE>
Accrued liabilities consisted of (in thousands):
December 31,
--------------------------------------------
1998 1997
---- ----
<S> <C> <C>
Salaries and Wages $ 534 $ 612
Royalties 507 885
Health Insurance 682 486
Incentive Compensation 614 1,492
Interest Expense 254 50
Other 726 774
------- -------
$ 3,317 $ 4,299
======= =======
</TABLE>
F-13
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
8 - Long-Term Debt
Long-term debt consisted of (in thousands):
<TABLE>
December 31,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Revolving credit loan facility at the lower of prime or LIBOR
plus 1.5% $ 10,000 $ --
Series A Senior Secured Notes at 9.24% interest 16,000 16,000
Series B Senior Secured Notes at 9.39% interest 8,000 8,000
---------- ----------
34,000 24,000
Less Current Maturities 3,200 --
---------- ----------
$ 30,800 $ 24,000
========== ==========
</TABLE>
In December 1996, the Company sold to a limited number of selected
institutional investors an aggregate principal amount of $24.0 million of senior
secured notes (the "Notes"), consisting of $16.0 million of 9.24% interest
Series A Senior Secured Notes due December 26, 2003 (the "Series A Notes") and
$8.0 million of 9.39% interest Series B Senior Secured Notes due December 26,
2004 (the "Series B Notes"). Interest on the Notes is payable semi-annually,
with five equal annual principal repayments required beginning December 26, 1999
for Series A Notes and December 26, 2000 for Series B Notes. The Notes
constitute senior secured debt of the Company secured by a first priority
security interest in substantially all of the assets of the Company and all
current and hereinafter created or acquired subsidiaries, a pledge by the
Company of the issued and outstanding stock of its subsidiaries and mortgages on
real estate owned by the Company's subsidiaries. The Company's obligations are
also guaranteed by the Company's subsidiaries and rank on an equal basis with
all other senior secured indebtedness of the Company. The Notes also provide for
certain financial and non-financial covenants usual for this type of
transaction. During 1996 Company used approximately $14.0 million from the sale
of the Notes to repay all outstanding indebtedness and restructured its existing
$22.0 million of total borrowing capacity with its principal bank, composed of a
$14.5 million revolving credit agreement and $7.5 million in equipment and real
estate term loans, into a $20.0 million revolving credit agreement, maturing
December 1999, with the same security interest in the Company's assets as the
Notes. During 1996, the Company has the option to select from time to time the
interest rate on the revolving credit agreement at either the LIBOR rate plus
1.5% or Fleet Bank's prime rate provided that, under certain circumstances,
Fleet Bank may deem that the LIBOR rate is not available.
F-14
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
At both June 30, 1998 and September 30, 1998, the Company was in
violation of certain covenants. In December 1998 the Company signed an agreement
to amend the financial covenants under its loan agreements with its principal
bank and the senior secured noteholder. With the signing of this agreement
SpecTran remedied all violations under the original agreements and also extended
the maturing date of the revolving credit agreement to April 2000.
As of December 31, 1998 the Company had borrowed $10.0 million against
the revolving credit agreements.
9 - Stockholders' Equity
(a) Warrants
As part of an agreement entered into in September 1990 with Allen &
Company, Incorporated ("Allen"), warrants to purchase 350,000, 30,000 and 20,000
shares of SpecTran voting common stock at an exercise price of $2.00 through
August 14, 1999, were issued to Allen, Richard A.M.C. Johnson, who retired as a
director of the Company in 1996, and Patrick E. Brake, a former director of the
Company, respectively. In conjunction with the Company's public offering in
February 1997, Allen exercised warrants to purchase 200,000 shares and sold them
in the offering. At December 31, 1998 Allen owned none of the Company's
outstanding stock; if the remainder of the Allen warrant were exercised, Allen
would own approximately 2.1% of the Company's outstanding stock. In June 1992
the Johnson warrant was exercised and in January 1993 the Brake warrant was
exercised.
(b) Stock Options
Pursuant to the Company's Incentive Stock Option Plan adopted in November,
1981, as amended, incentive and nonqualified options may be granted to purchase
up to an aggregate of 455,000 shares of the Company's voting Common Stock, $.10
par value, at prices not less than 100% of the fair market value of the shares
at the time the options are granted. As of December 31, 1998, all options were
exercisable in full three years from the date of grant in cumulative annual
installments of 33 1/3% commencing one year after the date of grant, and expire
ten years after grant.
Under its provisions, no options were to be issued under the Incentive
Stock Option Plan adopted in November 1981 ("Old Plan") after the plan reached
its tenth anniversary. During the year ended December 31, 1991, a new Incentive
Stock Option Plan ("New Plan") was adopted. The terms of the New Plan are
identical to those of the Old Plan except that (1) the number of shares eligible
for issuance, upon adoption of the plan, was 160,490, (2) provision is made for
the non-discretionary grant of nonqualified options to directors who are not
full-time employees of the Company or any subsidiary ("outside directors") and
(3) provision is made for all outstanding options to vest upon the occurrence of
a change in control (as defined in the New Plan). Subsequent to December 31,
1998, the New Plan was amended to permit the committee discretion in
establishing the vesting schedule options. At the Company's Annual meeting in
1992, 1994, 1996 and 1998 the holders of Common Stock approved an amendment to
the New Plan increasing the number of shares of Common Stock reserved for
issuance by 210,000, 255,000, 250,000 and 325,000, respectively.
F-15
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
Activity in the plans for the years ended December 31, 1998, 1997 and
1996 is summarized below (dollars in thousands except per share amounts):
<TABLE>
Shares Shares
Available Options Under Option
for Option Outstanding Price
---------- ----------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 138,209 543,488 $1.375- $22.250
Increase in Shares Reserved 250,000 -- -- --
Options Granted (165,500) 165,500 $5.500- $21.750
Options Exercised -- (46,385) $1.37 - $15.250
Options Forfeited 11,900 (11,900) $3.375- $15.250
------ ------- ------ -------
Balance at December 31, 1996 234,609 650,703 $1.375- $22.250
Options Granted (123,450) 123,450 $10.875- $14.187
Options Exercised -- (100,563) $1.188- $8.875
Options Forfeited 3,668 (3,668) $5.500- $21.125
----- ------ ------ -------
Balance at December 31, 1997 114,827 669,922 $3.375- $22.250
Increase in Shares Reserved 325,000 -- -- --
Options Granted (388,533) 388,533 $4.125- $9.625
Options Exercised -- (3,216) $5.500- $6.000
Options Forfeited 110,302 (112,919) $3.375- $22.250
------- -------- ------ -------
Balance at December 31, 1998 161,596 942,320 $3.375- $22.250
======= ======= ====== =======
</TABLE>
F-16
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
The following table summarizes information about fixed stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS OPTIONS EXERCISABLE
----------------------------------------- --------------------------
Number Weighted Average Number of
Range of Outstanding at Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices 12/31/98 Contractual Life Exercise Price At 12/31/98 Exercise Price
<S> <C> <C> <C> <C> <C>
3.375-5.063 60,937 8.190 4.278 20,937 4.362
5.064-7.595 223,999 7.530 6.055 146,398 5.658
7.596-11.394 362,384 7.853 8.324 117,183 8.654
11.395-17.093 180,250 6.143 13.993 113,744 14.096
17.094-22.250 114,750 7.478 20.899 60,749 21.166
</TABLE>
As of December 31, 1998, options for 459,011 shares were vested and
exercisable at an aggregate exercise amount of $4.8 million ($10.48 per share).
The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized for its fixed stock options plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under the plan consistent with the
provisions of FASB Statement 123, the Company's net income and earnings per
share for the years ended December 31, 1998, 1997 and 1996 would have been
reduced to the pro forma amounts indicated as follows:
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (in thousands):
As reported $523 $4,842 $3,655
Pro forma $158 $4,594 $3,640
Net income per share:
As reported $.07 $.68 $.61
Pro forma $.02 $.64 $.56
</TABLE>
The fair value of options granted under the Company's fixed stock
option plan during 1998, 1997 and 1996 were estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used: no dividend yield, expected volatility 67% for 1998, 63% for
1997 and 64% for 1996, risk free interest rate of 7%, and expected life of five
years.
F-17
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
(c) Secondary Stock Offering
On February 18, 1997, the Company completed a secondary public offering
of 1,500,000 shares of common stock at a price of $19.00 per share. Of the
1,500,000 shares, 1,300,000 were sold by the Company and 200,000 by Allen and
Company, Incorporated, a selling stockholder.
10 - Computation of Earnings per Common Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings per Share" (SFAS 128) which has changed
the method of computing and presenting earnings per common share. All prior
periods presented have been restated in accordance with SFAS 128. This
restatement had an immaterial impact on the prior periods' earnings per common
share amounts calculated under previous standard.
Under SFAS 128, a primary earnings per common share has been replaced
with basic earnings per common share. The basic earnings per share computation
is based on the earnings applicable to common stock divided by the weighted
average number of shares of common stock outstanding in 1998, 1997 and 1996.
F-18
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
Fully diluted earnings per common share has been replaced with diluted
earnings per common share. The diluted earnings per common share computation
includes the common stock equivalency of options granted to employees under the
stock incentive plan. Excluded from the diluted earnings per common share
calculation are options granted to employees that are anti-dilutive based on the
average stock price for the year.
<TABLE>
(dollars and shares in thousands:)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Earnings per common share-basic
Earnings applicable to common stock $ 523 $ 4,842 $ 3,655
====== ======== =========
Weighted average shares outstanding 7,003 6,724 5,374
====== ======== =========
Earnings per common share-basic $ .07 $ .72 $ .68
====== ========= =========
Earnings per common share-diluted
Earnings applicable to common share $ 523 $ 4,842 $ 3,655
====== ======== =========
Weighted average shares outstanding 7,003 6,724 5,374
Plus shares issuable on:
Exercise of dilutive options 100 424 588
====== ======== =========
Weighted average shares outstanding
assuming conversion 7,103 7,148 5,962
====== ======== =========
Earnings per common share-diluted $ .07 $ .68 $ .61
======= ========= =========
</TABLE>
F-19
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
11 - Income Taxes
Income tax expense attributable to income (loss) from operations
differs from the computed expected tax expense (benefit) determined by applying
the federal income tax rate of 34 percent as follows (in thousands):
<TABLE>
1998 1997 1996
---- ----- ----
<S> <C> <C> <C>
Computed expected tax expense at 34% $ 262 $ 2,320 $ 1,883
State income taxes, net of federal effect and change in
valuation allowance 189 14 298
Goodwill amortization -- -- 74
Decrease in valuation allowance for deferred income taxes
(230) (300) (400)
Other 28 (52) 27
--------- ---------- ---------
$ 249 $ 1,982 $ 1,882
========= ========= =========
</TABLE>
Total income tax expense (benefit) for the years ended December 31,
1998, 1997 and 1996 was allocated as follows (in thousands):
<TABLE>
1998 1997 1996
---- ----- ----
<S> <C> <C> <C>
Income tax expense attributable to:
Income from operations $ 249 $ 1,982 $ 1,882
Stockholders' equity, for
compensation expense for tax purposes from the
disqualifying disposition of stock options
0 (43) (117)
----------- --------- ---------
$ 249 $ 1,939 $ 1,765
======= ========= =========
</TABLE>
Income tax expense (benefit) attributable to income from continuing
operations consists of (in thousands):
<TABLE>
Current Deferred Total
<S> <C> <C> <C>
Year ended December 31, 1998:
Federal $ (149) $ 87 $ (62)
State 208 103 311
-------- -------- --------
$ 59 $ 190 $ 249
======== ======== ========
Year ended December 31, 1997:
Federal $ 1,577 $ 165 $ 1,742
State 401 (161) 240
-------- -------- --------
$ 1,978 $ 4 $ 1,982
======== ======== ========
Year ended December 31, 1996:
Federal $ 687 $ 668 $ 1,355
State 560 (33) 527
-------- -------- --------
$ 1,247 $ 635 $ 1,882
======== ======== ========
</TABLE>
F-20
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
The significant components of deferred income tax expense (benefit)
attributable to income from operations for the years ended December 31, 1998,
1997 and 1996 are as follows (in thousands):
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Deferred tax expense (exclusive of the effects of
other components listed below)
$ 420 $ 304 $ 1,035
Decrease in valuation allowance for deferred income
taxes (230) (300) (400)
-------- --------- --------
Deferred income tax expense attributable to income
from operations $ 190 $ 4 $ 635
======== ======== ========
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable $ 228 $ 169
Inventories 1,248 694
Accrued liability - compensation related expense 152 168
Accrued liability - pension 498 338
Other nondeductible reserves and accruals 9 9
Investment in Joint Venture 373 215
Net operating loss carryforward benefit 323 230
Credit carryforwards benefit 1,200 716
--------- ---------
Total gross deferred tax assets 4,031 2,539
Less valuation allowance (100) (330)
--------- ---------
Net deferred tax assets 3,931 2,209
Deferred tax liabilities (2,520) (608)
--------- ---------
Net deferred tax assets $ 1,411 $ 1,601
========= =========
</TABLE>
F-21
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
The valuation allowance for deferred tax assets as of December 31, 1998
and 1997 was $100,000 and $330,000, respectively. Based on the Company's level
of net income and projected future earnings, the Company believes that it is
more likely than not that a portion of the deferred tax asset will be realized
in the future. During 1998, the portion of the deferred tax asset which is
expected to be realized increased from 1997; therefore, the Company reduced its
valuation allowance by $230,000. The remaining valuation allowance relates
primarily to the risk that a portion of the tax credit carryforwards and state
operating loss carryforwards will not be used before they expire.
At December 31, 1998, the Company had the following income tax credit
available to offset future income taxes (in thousands):
Amount Expires
Alternative Minimum Tax Credit $1,037 Indefinite
12 - Major Customers
The approximate net product sales by the Company to customers
accounting for 10% or more of total net annual sales are as follows (in
thousands):
1998 1997 1996
---- ---- ----
Customer Amount % Amount % Amount %
-------- ------ - ------ - ------ -
A 25,959 37 6,601 11
B 6,932 10 8,906 14
C $9,522 15 $7,902 13
Substantially all of the Company's business is to customers in the
telecommunications and data communications industries. International sales,
primarily in Asia and Europe, accounted for 15%, 20% and 18% of total sales in
1998, 1997 and 1996, respectively.
In 1998 due to the Company's settlement of a multi-year suppply contract
with Corning, the Company recognized other income of $3.5 million in 1998 and
$.5 million in 1997.
F-22
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
13 - Commitments
In October 1998, the Company entered into a new license agreement with
Lucent Technologies Inc. where by the Company is obligated to pay Lucent $4.0
million in four installments: $1,250,000 in 1999, $1,000,000 in 2000, $1,000,000
in 2001 and $750,000 in 2002.
All of the Company's leases are on a month to month basis. The Company has
no lease commitments for 1999 and 2000.
Total rent expense for the years ended December 31, 1998, 1997 and 1996 was
$58,000, $301,000 and $634,000, respectively.
14 - Employee Benefit Plans
a) Defined Benefit Pension Plan
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 132 (SFAS 132), "Employers' Disclosures about Pensions
and Other Post-retirement Benefits," which requires additional disclosures on
changes in the benefit obligation and fair value of plan assets during the year.
All prior periods presented have been restated in accordance with SFAS 132.
The Company sponsors a defined benefit pension plan covering substantially
all of its employees. The benefits are based on years of service and an average
of the employee's highest ten consecutive years of earnings. The Company's
funding policy has been to contribute annually the maximum amount that can be
deducted for federal income tax purposes. Contributions are intended to provide
not only for benefits attributed to service to date, but also for those expected
to be earned in the future.
F-23
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheets at December 31, 1998 and
1997.
Actuarial present value of benefit obligations (in thousands):
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 2,229 $ 1,740
Service cost 375 285
Interest cost 167 130
Actuarial gain 360 74
Benefits paid (3) --
--------- ---------
Benefit obligation at end of year $ 3,128 $ 2,229
--------- ---------
Change in plan assets
Fair value of assets at beginning of year $ 1,848 $ 1,195
Actuarial return on plan assets 493 302
Employer contribution 252 350
Fair value of plan assets at end of year $ 2,593 $ 1,847
---------- ----------
Funded status $ (535) $ (382)
Unrecognized net actuarial loss 148 137
Unrecognized prior service cost (23) (25)
---------- ----------
Accrued pension cost $ (410) $ (270)
========== ==========
</TABLE>
Net pension cost for 1998, 1997 and 1996 included the following
components:
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during period $ 375 $ 285 $ 289
Interest cost on projected benefit obligation 167 130 103
Actual return on assets (166) (302) (129)
Net amortization and deferral 17 213 65
--------- --------- ---------
Net pension cost $ 393 $ 326 $ 328
========= ========= =========
</TABLE>
Assumptions used in the accounting as of December 31 were as follows:
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Discount rate 7.0% 7.5%
Rates of increase in compensation levels 5.0% 5.0%
Expected long-term rate of return on assets 8.5% 8.5%
</TABLE>
F-24
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
b) Supplemental Retirement Agreements
The Company entered into supplemental retirement agreements with five
executive officers in 1996. These agreements provide benefits based on years of
service and average eligible pay for executives. The following table sets forth
the funded status of the agreements and amounts recognized in the Company's
consolidated balance sheets at December 31, 1998 and 1997.
Actuarial present value of benefit obligations (in thousands):
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 1,526 $ 1,325
Service cost 113 111
Interest cost 107 90
-------- ---------
Benefit obligation at end of year $ 1,746 $ 1,526
-------- --------
Funded status $ (1,746) $ (1,526)
Unrecognized net actuarial loss (76) (76)
Unrecognized prior service cost 892 994
--------- ----------
Accrued pension cost $ (930) $ (608)
========= ==========
</TABLE>
Net pension cost for 1998, 1997 and 1996 included the following
components:
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned during period $ 113 $ 111 $ 116
Interest cost on projected benefit obligation 107 90 84
Net amortization and deferral 102 102 2
------- ------- -------
Net pension cost $ 322 $ 303 $ 202
======= ======= =======
</TABLE>
Assumptions used in the accounting as of December 31 were as follows:
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Discount rate 7.0% 7.0%
Rates of increase in compensation levels 5.0% 5.0%
Expected long-term rate of return on assets 8.5% 8.5%
COLA increase 3.5% 3.5%
</TABLE>
F-25
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
c) Defined Contribution Pension Plan
The Company sponsors a defined contribution pension plan covering
substantially all of its employees. Employer contributions to the plan are
discretionary and amounted to $300,000 and $361,000 in 1997 and 1996,
respectively. No contribution was provided for during 1998.
d) Directors Retirement Plan
In December 1995 the Company adopted a Directors Retirement Plan which
provides for retirement benefits for all outside directors with five full
calendar years of service as of the later of age 70 or the date of actual
retirement as a director. There was no expense in 1998, 1997 or 1996 to provide
for past service costs. During 1998, the plan was funded with $51,000.
e) Bonus Plans
The Company sponsors an Employee Profit Sharing Plan covering all
employees. This plans provide for the payment of bonuses if certain performance
objectives are obtained. Bonuses of $554,000, $1.367 million and $1.448 million,
respectively, were charged to operations in 1998, 1997 and 1996.
15 - Acquisitions/Joint Venture
a) Applied Photonic Devices, Inc.
On May 23, 1995 the Company purchased all the outstanding capital stock
of Applied Photonic Devices, Inc. ("APD") for cash and common stock worth
approximately $3.9 million. The Company also retired approximately $600,000 of
APD bank debt. The purchase method of accounting was used and the results of
operations of APD are included in the consolidated financial statements from May
23, 1995. Goodwill of $3.3 million resulted from the purchase and was being
amortized over 15 years. Amortization expense amounted to $217,000 in 1996.
In December 1996, the Company announced the formation of General Photonics,
a 50-50 joint venture between the Company and General Cable. General Cable
purchased certain assets of the Company's optical fiber cable subsidiary, APD,
for approximately $5.8 million and then contributed them to General Photonics
for a 50% equity interest. APD contributed its remaining assets to General
Photonics in exchange for its 50% equity interest. The net assets, including
goodwill, of General Photonics totaled $10.2 million at December 31, 1996. The
Company accounts for its interest in the joint venture under the equity method
and no gain or loss was recognized as a result of this transaction.
b) General Phontonics, LLC.
The following is summarized financial information for the Company's joint
venture.
<TABLE>
1998 1997
---- ----
<S> <C> <C>
Current Assets $ 4,600 $ 7,006
Other Assets 4,480 3,908
Current Liablities 1,853 1,640
Total Revenues $ 9,507 $12,583
Net Income $(2,047) $ ( 708)
</TABLE>
F-26
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
The following pro forma statement of operations for the year ended
December 31, 1996 presents the results of operations as if the Company had
entered into the joint venture as of January 1, 1996 (in thousands):
Statement of Operations (unaudited)
<TABLE>
1996
----
<S> <C>
Sales $51,413
Net Income $ 3,716
-------
Net income per Share of Common Stock $ .63
=======
</TABLE>
16 - Business Segments
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information" which has changed the method of reporting
information about its businesses. Based upon the criteria described in SFAS 131,
the Company now reports three business segments, Optical Fiber, Specialty
Products and Cable. All prior periods presented have been restated in accordance
with SFAS 131.
The Company conducts its operations through two business segments - Optical
Fiber and Specialty Products. A third segment, Cabling, was sold in December
1996 in conjuction with the formation of General Photonics. SpecTran retains a
50% equity interest in General Photonics and SpecTran's share of General
Photonics financial results for 1997 and 1998 is reported on the equity method.
Optical Fiber develops, manufactures and markets specialty multimode
and single-mode fiber for data communications and telecommunications
applications.
Specialty Products develops, manufactures and markets specialty
multimode and single-mode fiber and value-added fiber optic products for
industrial, transportation, communication, medical applications and geophysical.
F-27
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
Cabling developed, manufactured and marketed communications-grade fiber
optic cable primarily for the customer premises market.
Summarized Financial information by business segment is as follows (in
thousands):
REVENUES
1998 1997 1996
---- ---- ----
Optical Fiber 50,801 44,871 34,274
Specialty Products 20,055 17,186 13,879
Cable -- -- 13,418
--------- --------- ------
70,856 62,057 61,571
====== ====== ======
INCOME (LOSS) FROM OPERATIONS
1998 1997 1996
---- ---- ----
Optical Fiber 6,276 10,357 7,684
----- ------ -----
Specialty Products (1,553) 234 1,752
------ ------- -----
Corporate (5,154) (4,570) (3,834)
------ -------- ------
(431) 6,021 5,602
====== ====== =====
F-28
<PAGE>
ASSETS
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Optical Fiber 72,447 51,645 23,379
Specialty Products 19,953 22,867 10,760
Cable (APD) -- -- 5,277
Cable (Investment in JV) 3,458 4,420 --
Corporate 9,561 13,173 23,039
-------- -------- ----------
105,419 92,105 62,455
======== ======== ==========
</TABLE>
DEPRECIATION
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Optical Fiber 3,817 1,650 1,359
Specialty Products 1,630 1,209 914
Cable -- -- 142
Corporate 760 716 124
----------- ---------- ---------
6,207 3,575 2,539
========== ========= =========
</TABLE>
CAPITAL EXPENDITURES
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Optical Fiber 17,423 29,394 6,461
Specialty Products 868 11,379 2,725
Cable -- -- 761
Corporate 1,180 384 1,153
------------ ------------ ----------
19,471 41,157 11,100
=========== =========== ==========
</TABLE>
The following table presents revenues by country based on the location
of the use of the product or services (in thousands):
<TABLE>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
United States $ 60,321 $ 49,337 $ 50,481
Taiwan 12 1,352 1,737
Switzerland 1,221 1,272 2,406
Netherlands 1,372 180 130
Malaysia -- 1,488 111
Japan 1,138 642 225
Israel 1,675 100 142
India 415 998 577
Germany 845 770 1,112
China 954 2,825 2,030
Total Other 2,903 3,093 2,620
Total $ 70,856 $ 62,057 $ 61,571
</TABLE>
F-29
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
17 - Quarterly Financial Information (unaudited)
In thousands of dollars except per share data
<TABLE>
Quarters First Second Third Fourth
- --------------------------- ------------------ ------------------ ------------------ -----------------
1998
<S> <C> <C> <C> <C>
Net Sales (See A) $15,112 $16,358 $19,288 $20,098
Gross Profit 5,111 2,553 5,414 5,801
Net Income 864 (1,393) 504 536
Earnings per Common
Share-Basic .12 .20 .07 .08
Earnings per Common
Share-Diluted .12 (.20) .07 .08
1997
Net Sales $16,228 $15,881 $15,638 $14,310
Gross Profit 6,542 6,162 5,777 4,795
Net Income 1,122 1,330 1,151 1,239
Earnings per Common
Share-Basic .18 .19 .17 .18
Earnings per Common
Share-Diluted .17 .18 .16 .17
</TABLE>
A) Due to a change in accounting treatment of certain fiber sales, sales and
cost of sales for the first three quarters of 1998 were reduced by
$115,000, $674,000 and $775,000 respectively. This change had no effect on
previously reported net income or earnings per share.
F-30
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
18 - Contingencies
On November 6, 1998, the Company announced that it would contest a
complaint filed in the United States District Court in Boston, MA on October 2,
1998, purportedly as a class action suit. Titled Cruise v. Cannon, et al., the
complaint alleges that the Company and three of its current or former officers
and directors violated securities laws by misrepresenting the Company's
financial condition and financial results during 1998. The suit purports to be a
class action on behalf of all individuals who purchased the Company's stock on
the open market from February 25, 1998 to July 17, 1998. The suit alleges, among
other things, that there were public misrepresentations or failures to disclose
material facts during that period which allegedly artificially inflated the
price of the Company's common stock in the marketplace. The complaint seeks an
undisclosed amount of compensatory damages and costs and expenses, including
plaintiff's attorney's fees and such further relief as the Court may deem just
and proper. The Company believes the action is totally without merit, believes
that it has highly meritorious defenses and it intends to defend itself
vigorously.
19 - Related Parties
The Company paid approximately $158,000, in 1998 for legal fees to a firm
having a member who is also a director of the Company.
The Company paid approximately $38,000, in 1998 for consulting fees to a
firm having a member who is also a director of the Company.
F-31
<PAGE>
SPECTRAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, 1997 and 1996
Schedule I - Valuation and Qualifying Accounts
For the Years Ended December 31, 1998, 1997 and 1996
Dollars in Thousands
<TABLE>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Balance at Additions Balance
Beginning Charged to at End
Description of Period Expenses Deductions of Period
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1998:
Allowance - Net Deferred Tax Asset $ 330 $ -- $ 230 $ 100
============== =========== ============ =============
Allowance for Doubtful Accounts $ 389 $ 624 $ 490 $ 523
============== =========== ============ =============
Allowance for Obsolete Inventory $ 976 $ 1,322 $ -- $ 2,298
============== =========== ============ =============
For the Year Ended December 31, 1997:
Allowance - Net Deferred Tax Asset $ 630 $ -- $ 300 $ 330
============== =========== ============ =============
Allowance for Doubtful Accounts $ 218 $ 171 $ -- $ 389
============== =========== ============ =============
Allowance for Obsolete Inventory $ 273 $ 703 $ -- $ 976
============== =========== ============ =============
For the Year Ended December 31, 1996:
Allowance - Net Deferred Tax Asset $ 1,030 $ -- $ 400 $ 630
============== =========== ============= =============
Allowance for Doubtful Accounts $ 265 $ -- $ 47 $ 218
============== =========== ============ =============
Allowance for Obsolete Inventory $ 467 $ -- $ 194 $ 273
============== =========== ============ =============
</TABLE>
F-32
Exhibit 10.112
AGREEMENT
AGREEMENT, executed as of December 1, 1998 between SpecTran
Corporation, a Delaware corporation (hereinafter referred to as the
"Corporation"), and Bruce A. Cannon (hereinafter referred to as "Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Corporation are parties to an Employment
Contract dated as of December 14, 1992 (the "1992 Employment Contract");
WHEREAS, the Executive has resigned from his positions with the
Corporation and its subsidiaries effective December 1, 1998; and
WHEREAS, the Corporation recognizes the effort and skill Executive has
contributed to the operation of the Corporation during his long tenure with the
Corporation and both the Executive and the Corporation wish to provide for an
orderly transition and enter into this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree with each other as follows:
1. Termination of 1992 Employment Contract. This Agreement supercedes
and replaces the 1992 Employment Contract, which shall be deemed terminated as
of the date first written above.
2. Resignation as Director. Upon the execution of this Agreement,
Executive hereby resigns as a Director of the Corporation and each of its
subsidiaries on whose Boards he is serving.
3. Employment. The Corporation agrees to and does hereby employ
Executive, and Executive agrees to and does hereby accept employment by the
Corporation, subject to the direction of its President and Chief Executive
Officer, Chief Financial Officer and/or Board of Directors, for the period
commencing on the date of this Agreement and ending at midnight on December 1,
2000 (the "Termination Date," and collectively the "Base Term"). The Base Term
shall not be renewable except by written amendment signed by both parties to
this Agreement. The Base Term and any amendments or extensions shall be referred
to hereinafter as the "Employment Period."
<PAGE>
4. Scope of Duties. Executive agrees that he shall provide advice and
assistance to the Board of Directors, Chief Executive Officer and/or Chief
Financial Officer of the Corporation and shall perform such projects as
reasonably requested and mutually agreed. Executive agrees that he will be
available to act in the capacity of a consultant to the Corporation and that in
the event that Executive is so called upon he will devote such time and effort
to the performance of his duties as a consultant to the Corporation as Executive
and Corporation shall mutually consider appropriate.
5. Employment Period - Annual Compensation/Stock Options.
(a) As of the date of this Agreement, for the services and duties for
which Executive agrees to be available to perform during the Employment Period,
the Corporation agrees to pay Executive annual compensation at the rate of
Eighty Six Thousand Five Hundred Eighty Nine Dollars and no cents ($86,589.00)
per year (this annual amount to be referred to as "Annual Executive
Compensation"). Annual Executive Compensation shall be payable in equal
semi-monthly installments. The Corporation shall reimburse Executive for all
expenses reasonably and necessarily incurred in connection with his employment
by the Corporation, including traveling expenses while absent, on the
Corporation's business, from his business headquarters.
(b) Any options to purchase the Company's common stock that have
previously been granted to Executive pursuant to the Company's 1991 Incentive
Stock Option Plan (the "Plan") and have not yet vested will continue to vest in
their normal course pursuant to the Plan through December 1, 1999. Any options
to purchase the Company's common stock granted to Executive which do not vest by
December 1, 1999 shall expire as of such date. In addition, all vested options
to purchase the Company's common stock granted to Executive which are not
exercised on or before March 31, 2001 at 5:00 p.m. (EST) will expire at 5:00
p.m. (EST) on March 31, 2001.
<PAGE>
6. Secrets. Executive agrees that any trade secrets or any other
proprietary information (whether in written, verbal or any other form) relating
to the existing or contemplated business and/or field of interest of the
Corporation or any of its affiliates (for the purpose of this Agreement, an
affiliate of the Corporation shall be deemed to be any corporation or other
legal entity which controls the Corporation, which is controlled by the
Corporation, one which is under common control with the Corporation), or of any
corporation or other legal entity in which the Corporation or any of its
affiliates has an ownership interest of more than twenty-five percent (25%), and
any proprietary information (whether in written, verbal or any other form) of
any of the Corporation's customers, suppliers, licensor or licensees, including,
but not limited to, information relating to inventions, disclosures, processes,
systems, methods, formulae, patents, patent applications, machinery, materials,
notes, drawings, research activities and plans, costs of production, contract
forms, prices, volume of sales, promotional methods, list of names or classes or
customers, which he has heretofore acquired during his employment by the
Corporation or any of its affiliates or which he may hereafter acquire during
his employment with the Corporation or any of its affiliates, in both cases
whether during or outside business hours, whether or not on the Corporation's
premises, as the result of any disclosures to him, or in any other way, shall be
regarded as held by him in a fiduciary capacity solely for the benefit of the
Corporation, its successors or assigns, and shall not at any time, either during
the term of this Agreement or thereafter, be disclosed, divulged, furnished, or
made accessible by him to anyone, or be otherwise used by him, except in the
regular course of business of the Corporation or its affiliates. Upon
termination of his employment, Executive shall return or deliver to the
Corporation all tangible forms of such information in his possession or control,
and shall retain no copies thereof. Information shall, for purposes of this
Agreement, be considered to be secret if not known by the trade generally, even
though such information may have been disclosed to one or more third parties
pursuant to any business discussion or agreement, including distribution
agreements, joint research agreements or other agreements entered into by the
Corporation or any of its affiliates.
<PAGE>
7. Patents. Executive agrees to and does hereby sell, assign, transfer
and set over to the Corporation, its successors, assigns, or affiliates, as the
case may be, all his right, title, and interest in and to any inventions,
improvements, processes, patents or applications for patents which he develops
or conceives individually or in conjunction with others during his employment by
the Corporation, or, having possibly conceived same prior to his employment, may
complete while in the employ of the Corporation or any of its affiliates, in
both cases whether during or outside business hours, whether or not on the
Company's premises, which inventions, improvements, processes, patents or
applications for patents are (i) in connection with any matters within the scope
of the existing or contemplated business of the Corporation or any of its
affiliates, or (ii) aided by the use of time, materials, facilities or
information paid for or provided by the Corporation, all of the foregoing to be
held and enjoyed by the Corporation, its successors, assigns or affiliates, as
the case may be, to the full extent of the term for which any Letters Patent may
be granted and as fully as the same would have been held by Executive, had this
Agreement, sale or assignment not been made. Executive will make, execute and
deliver any and all instruments and documents necessary to obtain patents for
such inventions, improvements and processes in any and all countries. Executive
hereby irrevocably appoints the Corporation to be his attorney in fact in the
name of and on behalf of Executive to execute all such instruments and do all
such things and generally to use the Executive's name for the purposes of
assuring to the Corporation (or its nominee) the full benefit of its rights
under the provisions of Articles 6 and 7.
8. Disability and Death. In the event Executive becomes either
partially or totally disabled during the term of this Agreement then the
Corporation shall continue, during the term of this Agreement, to pay Executive
at the rate of his Annual Executive Compensation as set forth in Article 5(a)
and continue the benefits provided for him in Article 9 hereof. In the event of
Executive's death, the payments of Annual Executive Compensation provided herein
will be made to the wife of Executive, or if no wife shall survive Executive, to
his Estate.
<PAGE>
9. Employee Benefits.
(a) For the term of this Agreement, Executive may participate in any
pension plan, life insurance, hospitalization or surgical program, or insurance
program presently in effect or hereafter adopted by the Corporation, to the
extent, if any, that he may be eligible to do so under the provisions of such
plan or program. The Corporation may terminate, modify, or amend any such plan
or program, in the manner and to the extent permitted therein, and the rights of
Executive under any such plan or program shall be subject to any such right of
termination, modification, or amendment. To the extent any payments under any
such plan or program are made to Executive because he is disabled, such amounts
shall be credited against amount due to Executive under Article 8. Executive is
not entitled to any automobile allowance.
(b) For the sake of clarification, and notwithstanding any other
provision of this Agreement, it is understood and agreed that all benefits
provided to Executive under this Agreement shall be provided to the extent that
they exceed any employee benefit provided to Executive other than specifically
through this Agreement, such as the programs, plans, etc. referred to in Article
9(a) above. The benefits provided under this Agreement shall be supplemental to
benefits provided otherwise to Executive by the Corporation, and shall not be
provided to the extent that they are duplicative.
10. Covenant Not to Solicit Employees. During the term of this
Agreement, Executive agrees that he will not (a) solicit any past, present or
future customers of the Corporation in any way relating to any business in which
the Corporation was engaged during the term of his employment, or which the
Corporation planned during the term of his employment, to enter, or (b) induce
or actively attempt to influence any other employee or consultant of the
Corporation to terminate his or her employment or consultancy with the
Corporation. In the event that Executive violates any provision of this Article
10, then in addition to any other remedies available to the Corporation, the
Corporation shall have the right immediately to terminate any payments or
benefits provided or to be provided to Executive under this Agreement.
<PAGE>
11. Assignment. This Agreement may be assigned by the Corporation as
part of the sale of substantially all of its business; provided, however, that
the purchaser shall expressly assume all obligations of the Corporation under
this Agreement. Further, this Agreement may be assigned by the Corporation to an
affiliate, provided that any such affiliate shall expressly assume all
obligations of the Corporation under this Agreement, and provided further that
the Corporation shall then fully guarantee the performance of the Agreement by
such affiliate. Executive agrees that if this Agreement is so assigned, all the
terms and conditions of this Agreement shall remain between such assignee and
himself with the same force and effect as if said Agreement had been made with
such assignee in the first instance.
12. Termination.
(a) Survival. The provisions of Articles 6, 7, 10, 12, 13 and 14 shall
survive the termination of this Agreement.
(b) Termination by Executive. If at any time during the period of
December 1, 1998 through November 30, 1999, Executive elects to terminate his
employment with the Corporation or takes other employment, then the
<PAGE>
Corporation's obligations to Executive under this Agreement shall be limited to
the Annual Executive Compensation and benefits earned up to the date of
Executive's departure. If Executive elects to terminate his employment with the
Corporation or takes other employment during the period beginning December 1,
1999 through the end of the Base Term, the Corporation will continue to pay
Annual Executive Compensation to Executive for the remainder of the Base Term,
but Executive will forfeit all of his rights to other benefits provided for in
this Agreement
(c) Termination Without Cause.
(i) In the event the Corporation terminates this
Agreement without Cause, the Corporation shall continue to
fulfill its obligations under this Agreement until the end of
the Employment Period.
(ii) If Executive takes other employment before the
end of the Employment Period, the Corporation's obligations to
Executive under this Agreement will be treated the same as
under Section 12(b) hereof.
(iii) Notwithstanding anything to the contrary in
this Agreement, the Corporation, in its sole and absolute
discretion, may accelerate the payment of any amounts payable
under Article 12(c) hereof to Executive, provided, however,
that accelerating such payments does not affect Executive's
eligibility to continue his insurance benefits on the same
basis (both with respect to coverage and contributions) as the
Corporation's active employees until such time as he would
have received the last amount payable under Article 12(c)
hereof had payment thereof not been accelerated pursuant to
this Article 12(c)(iii).
(iv) "Cause" shall mean [A] breach of Executive's
obligations under Article 6, 7 or 10 of this Agreement, [B]
stealing from the Corporation or [C] Executive's conviction of
a felony.
(d) Executive agrees not to apply for or receive unemployment insurance
benefits while receiving any benefits under this contract.
<PAGE>
13. Notices. All notices required or permitted to be given hereunder
shall be mailed by registered mail or delivered by hand to the party to whom
such notice is required or permitted to be given hereunder. If mailed, any such
notice shall be deemed to have been given when mailed as evidenced by the
postmark at point of mailing. If delivered by hand, any such notice shall be
deemed to have been given when received by the party to whom notice is given, as
evidenced by written and dated receipt of the receiving party.
Any notice to the Corporation or to any assignee of the Corporation
shall be addressed as follows:
SpecTran Corporation
50 Hall Road
Sturbridge, MA 01566
Attn: President and Chief Executive Officer
With a copy to:
Brian M. Hand, Esq.
Nordlicht & Hand
645 Fifth Avenue
11th Floor
New York, New York 10022
Any notice to Executive shall be addressed to the address appearing on
the records of the Corporation at the time such notice is given.
Either party may change the address to which notice to it is to be
addressed, by notice as provided herein.
14. Applicable Law. This Agreement shall be interpreted and enforced in
accordance with the laws of Massachusetts.
<PAGE>
15. Effective Date. This Agreement shall become effective as of the
date first mentioned in this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the above
Agreement as of the day and year first above written.
SPECTRAN CORPORATION
By: s/s Charles B. Harrison
-----------------------
Charles B. Harrison
President and CEO
s/s Bruce A. Cannon
-----------------------
Bruce A. Cannon
<PAGE>
Exhibit 10.113
EMPLOYMENT TERMINATION AGREEMENT AND RELEASE
SpecTran Corporation, (collectively the "Company"), and William B. Beck
("Beck") hereby agree as follows:
1. Beck's employment with the Company as Vice President, Marketing and Sales is
terminated effective July 27, 1998.
2. The Company shall continue to pay Beck his current compensation (at the
monthly rate of $12,250.00) through February 18, 1999 at the Company's regular
pay periods, subject to withholdings required by law. Instead of continuing to
pay Beck's monthly car allowance of $825 through February 18, 1999, the Company
will pay Beck a lump sum of $5,480.
3. The Company shall continue to provide Beck with the benefits outlined in his
Employment Agreement dated June 20, 1998 until such coverage is obtained by him
elsewhere, or until February 18, 1999, whichever is sooner. The release in
paragraph 8 shall not affect such rights. Following that date, the Company will
respect Beck's rights, if any, to continued medical and dental coverage at his
own expense under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
This agreement and release shall not affect any right Beck otherwise has under
the terms of the Company's 401(k), pension and stock option plans.
4. Instead of providing the assistance of an outplacement firm, the Company will
pay to Beck the sum of $5,000.
5. The execution of this agreement shall not be construed as an admission of a
violation of any statute or law or breach of any duty or obligation by either
the Company or Beck.
<PAGE>
6. This agreement, except for paragraph 12, is confidential and shall not be
made public by either the Company or Beck except as required by law or if
necessary in order to enforce this Agreement. However, Beck may disclose the
contents of this Agreement with his spouse and tax advisors and unemployment
authorities.
7. The Company agrees not to contest any claim for unemployment compensation
benefits which Beck may file. With regard to such claim, the Company will state
that the reason for termination was related to work performance and not
attributed to misconduct or known violation of uniformly enforced rule or
policy.
8. Beck acknowledges that the payments provided for in paragraphs 2, 3 and 4 of
this agreement are greater than any to which he may have otherwise been entitled
under any existing Company separation, benefit or compensation policy. In
consideration of the foregoing, Beck hereby releases and forever discharges the
Company, its present and former officers, employees, agents, partners,
subsidiaries, successors and assigns from any and all liabilities, causes of
action, debts, claims and demands both in law and in equity known or unknown,
fixed or contingent, which he may have or claim to have based upon or in any way
related to employment or termination of employment with the Company and hereby
covenants not to file a lawsuit or charge to assert such claims. This includes
but is not limited to claims arising under federal, state or local laws
prohibiting employment discrimination, including specifically the Age
Discrimination in Employment Act of 1967, as amended (ADEA), or claims growing
out of any legal restrictions on the Company's right to terminate its employees.
The foregoing does not constitute a release of any claim Beck may have for
unemployment compensation benefits. Neither the Company (including its
directors, officers or employees) nor Beck will make any disparaging remarks
regarding the other, whether written or oral.
<PAGE>
9. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this agreement shall
be construed in all respects as if such invalid or unenforceable provisions were
omitted.
10. Beck understands that various state and federal laws prohibit employment
discrimination based on age, sex, race, color, national origin, handicap or
veteran status. These laws are enforced through the Equal Employment Opportunity
Commission (EEOC), Department of Labor and state human rights agencies. Beck
acknowledges that he has been advised and represented by counsel with regard to
this Agreement and has had the opportunity to review this Agreement since if was
first presented to him on July 27, 1998.
11. Beck has carefully read and fully understands all of the provisions of this
Termination Agreement and Release which sets forth the entire understanding
between him and the Company. This agreement may not be changed orally but only
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought. Beck
acknowledges that he has not relied upon any representation or statement,
written or oral, not set forth in this document.
12. The Company agrees that from the date hereof Beck is no longer bound by the
non-compete obligations contained in his Employment Agreement and that the
Company will not exercise the option provided under Section 10 of his Employment
Agreement regarding his activities during the one-year period following the
termination of Beck's employment with the Company.
<PAGE>
13. Beck may revoke his agreement to the terms hereof at any time during the
seven (7) day period required by law immediately following the date of his
signature below ("revocation period") by delivering written notice of his
revocation to the Company. This agreement shall become effective upon the
expiration of the revocation period.
SPECTRAN CORPORATION
By: /s/ Charles Harrison /s/ William B. Beck
-------------------- -------------------
Charles Harrison William B. Beck
President and Chief Executive Officer
Dated: October 7, 1998 Dated: September 30, 1998
<PAGE>
Exhibit 10.114
Mseifert.FIN
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, executed as of August 25, 1998, between SpecTran
Specialty Optics Company, a Delaware corporation (hereinafter referred to as the
"Corporation") and Martin Seifert (hereinafter referred to as "Executive").
W I T N E S S E T H:
WHEREAS, Executive desires to be employed by the Corporation and the
Corporation desires to enter into this employment agreement with Executive;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree with each other as follows:
1. Employment. (a) The Corporation agrees to and does hereby employ
Executive, and Executive agrees to and does hereby accept employment by the
Corporation, as President of the Corporation or in any other executive capacity
as determined by and subject to the supervision and direction of the Chief
Executive Officer and/or the Board of Directors of the Corporation. It is also
understood that Executive may also serve simultaneously in an executive capacity
in an Affiliate1 of the Corporation. The term of Executive's employment
hereunder will be for the one year period commencing on August 25, 1998, and
ending at midnight on the 24th day of August, 1999 (the "Base Term"). The Base
Term shall be automatically renewed on a daily basis so that on each date during
which Executive is employed under this Agreement the remaining term shall be a
period of one year terminating at midnight of the first anniversary of the day
immediately preceding such date, unless at any time the outside (i.e.,
non-employee) members of the Corporation's Board of Directors terminate the
automatic daily renewal feature of this Agreement as provided in Article 1(b)
below. The Base Term and all renewals thereof shall be deemed the "Employment
Period" and shall hereinafter be referred to as such.
- --------
1 For the purpose of this Agreement, an "Affiliate" of the Corporation shall be
deemed to be any corporation or other legal entity which controls the
Corporation, which is controlled by the Corporation, or which is under common
control with the Corporation.
<PAGE>
(b) At any time during the Employment Period the outside (i.e.,
non-employee) members of the Corporation's Board of Directors may by resolution
terminate the automatic daily renewal of this Agreement and set a termination
date which shall be midnight of the first anniversary of the date immediately
preceding the day on which such resolution was adopted (the "Termination Date").
Written notice ("Notice of Nonrenewal") of the outside Directors' resolution
setting a Termination Date shall be executed by each outside Director and
delivered to Executive within two business days of the adoption of such
resolution. A Notice of Nonrenewal may be rescinded at any time by resolution of
the outside members of the Corporation's Board of Directors executed and
delivered in the same fashion.
(c) If, following delivery to Executive of the Notice of Nonrenewal,
neither the Corporation nor Executive terminates Executive's employment under
Article 12 below, this Agreement shall continue in full force and effect for the
one-year period set forth in the Notice of Nonrenewal, and shall terminate on
the Termination Date.
2. Scope of Duties/Headquarters/Other Directorships.
(a) Executive agrees that as President of the Corporation, he will
devote his full time and effort during the Employment Period to the performance
of the duties of such office.
(b) Executive shall make his business headquarters at Avon,
Connecticut, but will also be required to render services at Sturbridge,
Massachusetts. Executive shall relocate should the Corporation change its
headquarters. Executive shall undertake such travel as the Corporation may
request.
<PAGE>
(c) It is understood and agreed that Executive will advise the
Corporation of his intentions to act as a director of other corporations and may
hold such directorships and shall be permitted to devote such time thereto as
may reasonably be necessary to discharge the ordinary duties attendant upon any
such directorships. Executive agrees that he will, upon request of the Board of
Directors of the Corporation, resign from any such directorship notwithstanding
that the Corporation may have theretofore approved his accepting or retaining
such directorship.
3. Employment Period - Compensation.
(a) Executive Compensation. For the services and duties to be rendered
and performed by Executive during the Employment Period, the Corporation agrees
to pay Executive compensation at the rate of not less than Twelve Thousand One
Hundred dollars and no cents ($12,100.00) per month, for a total of One Hundred
Forty Five Thousand Two Hundred dollars and no cents ($145,200.00) per year,
which amount may be increased by action of the Compensation and Incentive Stock
Option Committee (or a successor thereof) of the Board of Directors of the
Corporation and/or resolution of the Board of Directors of the Corporation at
such time or times and in such amount or amounts as it or they may in its and
their sole discretion determine (this annual amount to be referred to as "Base
Annual Executive Compensation"). Base Annual Executive Compensation shall be
payable in equal semi-monthly installments. The Corporation shall reimburse
Executive for all expenses reasonably and necessarily incurred in connection
with his employment by the Corporation, including traveling expenses while
absent, on the Corporation's business, from his business headquarters. The
Corporation will pay to Executive Thirty Three Thousand Three Hundred Thirty
Three dollars and Thirty Four cents ($33,333.34) for expenses relating to
Executive's relocation to the Avon, Connecticut area and Executive will be
reimbursed, based upon receipts, for reasonable temporary lodging in the Avon,
Connecticut area for a period of up to six weeks. Executive will receive a
monthly automobile allowance of Eight Hundred Twenty Five Dollars and no cents
($825.00).
<PAGE>
(b) Bonus. Executive will be eligible to participate in the
Corporation's key employee incentive plan which, based upon the achievement of
certain specified objectives, will entitle Executive, while in the position of
President, to a target bonus equal to thirty percent (30%) of the Base Annual
Executive Compensation with additional opportunities to earn up to a maximum of
seventy five percent (75%) of Executive Base Annual Executive Compensation.
However, for 1998 only, Executive understands that the target bonus will be
fifteen percent (15%) of the Base Annual Executive Compensation and will be
granted only if the Corporation achieves the financial results incorporated in
the Corporation's 1998 plan. Executive will also be eligible to participate in
the Corporation's all employee profit sharing plan, which entitles Executive to
earn up to ten percent (10%) of Base Annual Executive Compensation as additional
compensation. Notwithstanding anything herein to the contrary, Executive
understands and agrees that the plans and payments referred to in this Section
3(b) are subject to amendment or termination at the discretion of the Board of
Directors of the Corporation.
(c) Stock Options. At the first meeting of the Compensation and
Incentive Stock Option Committee of the Corporation's parent company, SpecTran
Corporation ("SpecTran"), held on or after Executive's first day as a full time
employee of the Corporation, Executive will be granted incentive stock options
to purchase an aggregate of Twenty Thousand (20,000) shares of SpecTran's common
stock at a per share exercise price equal to the closing price of such common
stock on the date of grant, as reported on the NASDAQ National Market (the
"Closing Price"), subject to the terms of SpecTran's 1991 Incentive Stock Option
Plan.
4. Vacation. Executive will earn vacation at a rate of three (3) weeks
per year in the first year of the Employment Period and four (4) weeks per year
thereafter. Said vacation may be taken all at once or weekly at the sole
discretion of Executive.
<PAGE>
5. Secrets. Executive agrees that any trade secrets or any other
proprietary information (whether in written, verbal or any other form) relating
to the existing or contemplated business and/or field of interest of the
Corporation or any of its Affiliates, or of any corporation or other legal
entity in which the Corporation or any of its Affiliates has an ownership
interest of more than twenty-five percent (25%), and any proprietary information
(whether in written, verbal or any other form) of any of the Corporation's
customers, suppliers, licensor or licensees, including, but not limited to,
information relating to inventions, disclosures, processes, systems, methods,
formulae, patents, patent applications, machinery, materials, notes, drawings,
research activities and plans, costs of production, contract forms, prices,
volume of sales, promotional methods, lists of names or classes of customers,
which he has heretofore acquired during his employment by the Corporation or any
of its Affiliates or which he may hereafter acquire during his employment with
the Corporation or any of its Affiliates, in both cases whether during or
outside business hours, whether or not on the Corporation's premises, as the
result of any disclosures to him, or in any other way, shall be regarded as held
by him in a fiduciary capacity solely for the benefit of the Corporation, its
successors or assigns, and shall not at any time, either during the term of this
Agreement or thereafter, be disclosed, divulged, furnished, or made accessible
by him to anyone, or be otherwise used by him, except in the regular course of
business of the Corporation or its Affiliates. Upon termination of his
employment, Executive shall return or deliver to the Corporation all tangible
forms of such information in his possession or control, and shall retain no
copies thereof. Information shall, for purposes of this Agreement, be considered
to be secret if not known by the trade generally, even though such information
may have been disclosed to one or more third parties pursuant to any business
discussion or agreement, including distribution agreements, joint research
agreements or other agreements entered into by the Corporation or any of its
Affiliates.
<PAGE>
6. Patents. Executive agrees to and does hereby sell, assign, transfer
and set over to the Corporation, its successors, assigns, or Affiliates, as the
case may be, all his right, title, and interest in and to any inventions,
improvements, processes, patents or applications for patents which he develops
or conceives individually or in conjunction with others during his employment by
the Corporation, or, having possibly conceived same prior to his employment, may
complete while in the employ of the Corporation or any of its Affiliates, in
both cases whether during or outside business hours, whether or not on the
Corporation's premises, which inventions, improvements, processes, patents or
applications for patents are (i) in connection with any matters within the scope
of the existing or contemplated business of the Corporation or any of its
Affiliates, or (ii) aided by the use of time, materials, facilities or
information paid for or provided by the Corporation, all of the foregoing to be
held and enjoyed by the Corporation, its successors, assigns or Affiliates, as
the case may be, to the full extent of the term for which any Letters Patent may
be granted and as fully as the same would have been held by Executive, had this
Agreement, sale or assignment not been made. Executive will make, execute and
deliver any and all instruments and documents necessary to obtain patents for
such inventions, improvements and processes in any and all countries. Executive
hereby irrevocably appoints the Corporation to be his attorney in fact in the
name of and on behalf of Executive to execute all such instruments and do all
such things and generally to use the Executive's name for the purposes of
assuring to the Corporation (or its nominee) the full benefit of its rights
under the provisions of Articles 5 and 6.
<PAGE>
7. Disability. (a) In the event Executive becomes partially disabled,
or becomes totally disabled (as determined in accordance with Article 7(c)
below) and such total disability has continued for less than six (6) full
consecutive calendar months, then the Corporation shall continue during the
Employment Period to pay Executive at the rate of his Base Annual Executive
Compensation as set forth in Article 3 and continue the benefits provided for
him in Articles 8 and 9 hereof. The Corporation shall retain the right,
notwithstanding Executive's partial disability, to deliver a Notice of
Nonrenewal during such time as such partial disability continues, unless
Executive has already received a Notice of Nonrenewal, in which event such prior
Notice of Nonrenewal shall remain effective notwithstanding Executive's partial
disability. In any event, the Corporation's obligations in the event of
Executive's partial disability shall terminate upon the end of the Employment
Period.
(b) In the event Executive becomes totally disabled (as determined in
accordance with Article 7(c) below), and such total disability has continued for
six (6) full consecutive calendar months or more, then for so long thereafter
during the Employment Period as such total disability shall continue or for a
period of one (1) year, whichever is longer, Executive shall be paid at
seventy-five percent (75%) of the rate of his Base Annual Executive Compensation
as set forth in Article 3 hereof. For purposes of determining the balance of the
Employment Period under this Article 7(b), Executive shall be deemed to have
received a Notice of Nonrenewal effective on the last day of said six-month
period, unless he has already received a Notice of Nonrenewal, in which event
such prior Notice of Nonrenewal shall be controlling.
(c) For purposes of this Agreement, determination of whether Executive
is or is not totally disabled shall be made as follows:
(i) Executive's inability, physical or mental, for
whatever reason, to be able to perform his duties to the Corporation shall be
total disability; and
<PAGE>
(ii) If any difference shall arise between the
Corporation and Executive as to whether he is totally disabled, such
difference shall be resolved as follows: Executive shall be examined by a
physician appointed by the Corporation and a physician appointed by Executive.
If said two physicians shall disagree concerning whether Executive is totally
disabled, that question shall be submitted to a third physician, who shall
be selected by such two physicians. The medical opinion of such third physician,
after examination of Executive and consultation with such other two physicians,
shall decide the question.
(d) Should Executive become totally disabled then he may by action of
the Board of Directors be removed from his position and employment with the
Corporation.
8. Death. In the event of the death of Executive during the Employment
Period, the Corporation shall continue to pay Executive's Base Annual Executive
Compensation for a period of one (1) year from the date of death. The salary
payment will be made to the wife of Executive or if no wife shall survive
Executive, to his estate.
<PAGE>
9. Employee Benefits. (a) Executive may participate in any life
insurance, hospitalization or surgical program, or insurance program presently
in effect or hereafter adopted by the Corporation, to the extent, if any, that
he may be eligible to do so under the provisions of such plan or program. The
Corporation may terminate, modify, or amend any such plan or program, in the
manner and to the extent permitted therein, and the rights of Executive under
any such plan or program shall be subject to any such right of termination,
modification, or amendment. To the extent any payments under any such plan or
program are made to Executive because he is disabled, such amounts shall be
credited against amount due to Executive under Article 7.
(b) The Corporation shall provide Executive with term life insurance
for which Executive may designate one or more beneficiaries, with a death
benefit equal to the Base Annual Executive Compensation. To the extent that such
life insurance is not provided in the Corporation's existing employee benefits
package, the Corporation will endeavor to take out supplemental coverage,
provided that Executive shall cooperate in obtaining such coverage, that
Executive is not uninsurable and that the premium is not unreasonably high.
(c) For the sake of clarification, and notwithstanding any other
provision of this Agreement, it is understood and agreed that all benefits
provided to Executive under this Agreement shall be provided to the extent that
they exceed any employee benefit provided to Executive other than specifically
through this Agreement, such as the programs, plans, etc. referred to in Article
9(a) above. The benefits provided under this Agreement shall be supplemental to
benefits provided otherwise to Executive by the Corporation, and shall not be
provided to the extent that they are duplicative.
<PAGE>
10. Covenant Not to Solicit Employees. During the one-year period
immediately following termination of Executive's employment with the Corporation
(the "One-Year Period"), Executive agrees that, if such agreement is requested
by the Corporation, he will not (a) solicit any past, present or future
customers of the Corporation or any of its Affiliates in any way relating to any
business in which the Corporation or any of its Affiliates was engaged during
the term of his employment, or which the Corporation or any of its Affiliates
planned, during the term of his employment, to enter, or (b) induce or actively
attempt to influence any other employee or consultant of the Corporation or any
of its Affiliates to terminate his or her employment or consultancy with the
Corporation or any of its Affiliates. During the One-Year Period, provided that
the Corporation has requested the non-competition agreement referred to above
with respect to said period, Executive shall be paid, in the same manner as paid
while Executive was an employee, compensation equal to seventy-five percent
(75%) of Executive's Base Annual Executive Compensation and employee benefits he
received during the last year of employment with the Corporation, and, in
addition, the Corporation shall have the right to call upon Executive's services
as a consultant. In the event that Executive violates any provision of this
Article 10, then in addition to any other remedies available to the Corporation,
the Corporation shall have the right immediately to terminate any payments or
benefits provided or to be provided to Executive under this Agreement.
11. Assignment. This Agreement may be assigned by the Corporation as
part of the sale of substantially all of its business; provided, however, that
the purchaser shall expressly assume all obligations of the Corporation under
this Agreement. Further, this Agreement may be assigned by the Corporation to an
Affiliate, provided that any such Affiliate shall expressly assume all
obligations of the Corporation under this Agreement, and provided further that
the Corporation shall then fully guarantee the performance of the Agreement by
such Affiliate. Executive agrees that if this Agreement is so assigned, all the
terms and conditions of this Agreement shall remain between such assignee and
himself with the same force and effect as if said Agreement had been made with
such assignee in the first instance.
12. Termination.
(a) Survival. The provisions of Articles 5, 6, 10, 12 and 14 shall
survive the termination of this Agreement.
<PAGE>
(b) Termination by Executive. Subject to the provisions of Article
12(c)(iii) regarding a Change in Control, if at any time during the Employment
Period (whether or not Executive has received a Notice of Nonrenewal), Executive
elects to terminate his employment with the Corporation, then the Corporation's
obligations to Executive under this Agreement shall be limited to the Base
Annual Executive Compensation and benefits earned up to the date of Executive's
departure.
(c) Termination Without Cause.
(i) Subject to the provisions of Article 12(c)(ii) below, and
provided there has been no Change in Control (as defined in Article
12(c)(v) below), in the event the Corporation dismisses Executive
without Cause from employment in a senior executive capacity with the
Corporation, the Corporation shall continue to fulfill its obligations
under this Agreement until the later of: (A) the date six months
following Executive's dismissal, or (B) the end of the Employment
Period. For purposes of determining the end of the Employment Period
under this Article, Executive shall be deemed to have received a
Notice of Nonrenewal effective on the date of his dismissal without
Cause, unless he has already received a Notice of Nonrenewal, in which
event such prior Notice of Nonrenewal shall be controlling.
(ii) Provided there has been no Change in Control (as defined in
Article 12(c)(v) below), if Executive takes other full-time employment
during the six-month period following his dismissal without Cause,
then the Corporation's obligation to Executive shall be limited to
payment of Executive's Base Annual Executive Compensation for the
balance of said six-month period. Provided there has been no Change in
Control (as defined in Article 12(c)(v) below), if Executive takes
other full-time employment after the end of the six-month period
following his dismissal without Cause but before the end of the
Employment Period, the Corporation's obligations to Executive under
this Agreement shall cease upon Executive's taking such other
full-time employment.
<PAGE>
(iii)In the event that a Change in Control occurs during the
Employment Period and either [A] Executive is dismissed without Cause
from employment in a senior executive capacity up to and including
twelve (12) months from such Change in Control or [B] Executive
voluntarily leaves the employ of the Corporation up to and including
twelve (12) months from such Change in Control, then in either case
the Corporation shall continue to fulfill its obligations under this
Agreement for a period of twelve (12) months from such dismissal
without Cause or voluntary departure, as the case may be; provided,
however, that if Executive takes other full-time employment during
said twelve-month period, the Corporation's obligation to Executive
for the balance of said twelve-month period shall be limited to
payment of Executive's Base Annual Executive Compensation.
(iv) Notwithstanding anything to the contrary in this Agreement,
the Corporation, in its sole and absolute discretion, may accelerate
the payment of any amounts payable under Article 12(c) hereof to
Executive, provided, however, that accelerating such payments does not
affect Executive's eligibility to continue his insurance benefits on
the same basis (both with respect to coverage and contributions) as
the Corporation's active employees until such time as he would have
received the last amount payable under Article 12(c) hereof had
payment thereof not been accelerated pursuant to this Article
12(c)(iv).
<PAGE>
(v) "Change in Control" shall mean [A] the date of public
announcement that a person has become, without the approval of the
SpecTran's Board of Directors, the beneficial owner of 20% or more of
the voting power of all securities of the SpecTran then outstanding;
[B] the date of the commencement of a tender offer or tender exchange
by any person, without the approval of the SpecTran'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 SpecTran then outstanding; or [C] the date on which individuals
who constituted the Board of Directors of the SpecTran on the date
this 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.
(vi) "Cause" shall mean [A] breach of Executive's obligations
under Article 5 or 10 of this Agreement, [B] stealing from the
Corporation or any of its Affiliates or [C] Executive's conviction of
a felony.
(d) Executive agrees not to apply for or receive unemployment
insurance benefits while receiving any benefits under this contract.
<PAGE>
13. Notices. All notices required or permitted to be given hereunder
shall be mailed by certified mail or delivered by hand to the party to whom such
notice is required or permitted to be given hereunder. If mailed, any such
notice shall be deemed to have been given when mailed as evidenced by the
postmark at point of mailing. If delivered by hand, any such notice shall be
deemed to have been given when received by the party to whom notice is given, as
evidenced by written and dated receipt of the receiving party.
Any notice to the Corporation or to any assignee of the Corporation
shall be addressed as follows:
SpecTran Specialty Optics Company
55 Darling Drive
P.O. Box 1260
Avon, CT 06001-1260
Attn: Chief Executive Officer
With an additional copy to:
Ira S. Nordlicht, Esq.
Nordlicht & Hand
645 Fifth Avenue
New York, New York 10022
Any notice to Executive shall be addressed to the address appearing on
the records of the Corporation at the time such notice is given.
Either party may change the address to which notice to it is to be
addressed, by notice as provided herein.
14. Applicable Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the Commonwealth of Massachusetts without giving
effect to the principles of conflicts of law.
15. Effective Date. This Agreement shall become effective as of
the date first mentioned in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed the above
Agreement as of the day and year first above written.
SPECTRAN SPECIALTY OPTICS COMPANY
By S/S Charles B. Harrison
---------------------------
NOTARY Name: Charles B. Harrison
Title: CEO
___________________ S/S Martin Seifert
------------------
NOTARY Martin Seifert
<PAGE>
Exhibit 10.115
9903.23-1
ac/msoffice/worddocs/spectran/reincentive7fin.323
RESTATED AND AMENDED
1991 INCENTIVE STOCK OPTION PLAN
(Amended effective March 18, 1999)
1. Purpose of the Plan. The purpose of the Plan is to authorize the
grant to directors and key employees of SpecTran Corporation (the "Corporation")
or any present or future subsidiary thereof as hereinafter defined (any
"subsidiary") of options to purchase shares of Common Stock of the Corporation
and thus benefit the Corporation by giving such persons a greater personal
interest in the success of the enterprise and an added incentive to continue and
advance in their employment.
2. Administration. Except as provided in paragraph 4.2 hereof, the Plan
shall be administered by a committee (the "Committee") to be appointed from time
to time by the Corporation's Board of Directors and to consist of not less than
three of the then members of the Board, none of whom shall be an officer or
other employee of the Corporation. The Corporation shall effect the grant of
options under the Plan, in accordance with determinations made by the Committee,
except as provided in paragraph 4.2 hereof, pursuant to the provisions of the
Plan, by execution of instruments in writing in form approved by the Committee.
The Committee shall select one of its members as its Chairman and shall hold its
meetings at such times and places as it shall deem advisable. A majority of its
members shall constitute a quorum and all determinations of the Committee shall
be made by a majority of its members. Any decision or determination reduced to
writing and signed by a majority of the members shall be fully as effective as
if made by a majority vote at a meeting duly called and held. The Committee may
appoint a Secretary, shall keep minutes of its meetings and shall have full
power to make and amend such rules and regulations for the conduct of its
business and for the administration of the Plan as it shall deem appropriate.
The interpretation and construction by the Committee of any provision of the
Plan and of the options granted thereunder shall, unless otherwise determined by
the Board of Directors, be final and conclusive on all persons having any
interest thereunder.
<PAGE>
3. Shares Subject to Plan. Subject to adjustment under the provisions
of paragraph 12 hereof, the number of shares of the Corporation's Common Stock
of the par value of $10 per share which may be issued and sold under the Plan
will not exceed 1,200,490 shares, of which no more than 89,000 shares may be
issued pursuant to paragraph 4.2 hereof. Such shares may be either authorized
and unissued shares or shares issued and thereafter acquired by the Corporation,
and such shares will not be offered to the Corporation's stockholders prior to
their issuance under the Plan. If options granted under the Plan shall terminate
or expire without being wholly exercised, new options may be granted under the
Plan covering the number of shares to which such termination, expiration or
surrender relates. The Corporation shall not, upon the exercise of any option,
be required to issue or deliver any shares of stock prior to (a) the admission
of such shares to listing on any stock exchange on which the Corporation's
Common Stock is then listed and (b) the completion of such registration or other
qualification of such shares under any state or federal law, rule or regulation
as the Corporation shall determine to be necessary or advisable.
4. Eligibility.
4.1 Eligible Grantees. Options may be granted only to key employees
of the Corporation or any subsidiary who, in the judgment of the Committee, are
responsible for the management of the enterprise. In addition, non-qualified
options may be granted to members of the Board who are not full-time employees
of the Corporation or any subsidiary ("outside directors") only as provided in
paragraph 4.2 hereof. The terms "parent" and "subsidiary" as used in the Plan
shall mean any corporation which is defined as a "parent corporation" or as a
"subsidiary corporation" in the United States Internal Revenue Code of 1986, as
amended (the "Code"). The term "key employees" as used in the Plan shall mean
officers and other employees of the Corporation or any subsidiary (including
officers who are also directors of the Corporation).
<PAGE>
Subject to the foregoing and to paragraph 4.2 hereof, the
Committee shall have full and final authority to determine the persons who are
to be granted options under the Plan and the number of shares subject to each
option; provided, however, that anything contained herein to the contrary
notwithstanding, no employee of the Corporation or any subsidiary shall be
granted an option under this Plan, if such employee at the time the option is
proposed to be granted owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Corporation or of any parent or
subsidiary unless the option price is at least 110% of the fair market value of
the stock subject to the option and the option is not exercisable more than 5
years from the date it is granted.
4.2 Non-Discretionary Option Grants to Outside Directors. (a) Any
other provision of this Plan to the contrary notwithstanding, outside directors
shall not be eligible to receive options under the Plan except pursuant to this
paragraph 4.2. Options shall be granted pursuant to this paragraph only to
persons who are serving as outside directors on the grant date.
<PAGE>
(b) Each outside director shall receive an initial grant of a
non-qualified option to purchase 5,000 shares of stock without any action by the
Committee upon the earlier of the effective date of this Plan, or 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. Subject to subparagraph (d)
below, each initial grant of an option to purchase 5,000 shares shall be
exercisable after the expiration of one year from the date of grant. No outside
director shall receive more than one grant pursuant to this subparagraph.
(c) In addition to the initial grant, on the last business day
of December in each year, each outside director shall without any action of the
Committee be granted a non-qualified option to purchase 1,000 shares. Subject to
subparagraph (d) below, each option to purchase 1,000 shares shall become
exercisable in accordance with subparagraph (a) of paragraph 7 below.
(d) The grants referred to in this paragraph 4.2 shall be
subject to adjustment in accordance with paragraph 12 hereof. The purchase price
per share of the stock under each option granted pursuant to this paragraph 4.2
shall be equal to the fair market value of the stock on the date the option is
granted. All options granted pursuant to this paragraph 4.2 shall expire on the
tenth anniversary of the grant date. All options granted to an outside director
shall, subject to the provisions of paragraph 10, become exercisable when such
director ceases to serve as a director for any reason, 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.
5. Types of Option: Incentive and Non-Qualified. An option granted by
the Committee under this Plan shall, as determined by the Committee, be either
<PAGE>
an incentive stock option which conforms to the provisions of Section 422 of the
Code (an "incentive stock option") or an option which is not an incentive stock
option (a "non-qualified option"). To the extent that the aggregate fair market
value (determined at the time the option is granted) of the stock with respect
to which incentive stock options that are granted after December 31, 1986 under
the Plan (and all other stock option plans of the Corporation and any subsidiary
or parent) are exercisable for the first time by an optionee during any calendar
year exceeds $100,000, such options shall be treated as options which are not
incentive stock options. The foregoing limitation shall be applied by taking
into account the order in which they were granted.
6. Price. Except as provided in paragraph 4.2, the purchase price under
each option will be determined by the Committee but will not be less than 100%
of the fair market value of the stock at the time of the grant of the option, as
determined by the Committee in accordance with the applicable Code provisions
and regulations. In no event shall the purchase price be less than the par value
of the stock.
7. Period of Option and Rights to Exercise. (a) Except as provided in
paragraphs 4.2, 10 and 11 hereof, the option will be exercisable pursuant to a
schedule that the Committee, in its discretion, may establish.
(a) Each option granted pursuant to this Plan will vest and be
exercisable in any manner that the Committee, in its discretion, may establish,
provided that if no vesting period or other restriction on vesting is specified
in the resolution passed granting any option under this Plan, such option shall
vest as set forth in Section 7(b).
<PAGE>
(b) If no vesting schedule is established by the Committee
pursuant to Section 7(a), then the following will apply. The optionee must
remain in the continuous employ of the Corporation and/or its subsidiaries for
one year from the date his option is granted before he can exercise any part
thereof. Thereafter, subject to the provisions of this Section and Sections 10
and 11 below, the option will be exercisable 33-1/3% after one year from grant,
66-2/3% after two years from grant, and 100% after three years from grant.
(c) The right to exercise an option granted to any employee
will expire upon the expiration of ten years from the date the option was
granted.
(d) The right to purchase the shares, including shares
purchased on the exercise of options granted pursuant to paragraph 4.2 hereof,
included in each installment is cumulative, i.e., once such right has become
exercisable it may be exercised in whole at any time or in part from time to
time until the expiration of the option.
(e) All options shall be exercisable in full upon the
occurrence of a Change in Control of the Company. For purposes of this
paragraph, a "Change in Control" shall be deemed to have occurred if (a) any
"person" or "group" (as such terms are used in Section 13 (d)(3) and 14 (d)(2)
of the Securities Exchange Act of 1934, as amended) other than the Company is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities; or (b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least 75 % of
the directors of the Company then still in office who were directors of the
Company at the beginning of the period.
<PAGE>
(f) The shares to be purchased upon each exercise of any
option, including shares purchased on the exercise of options granted pursuant
to paragraph 4.2 hereof, shall be paid for in full at the time of such exercise,
such payment to be made in cash, in Common Stock of the Corporation owned by the
optionee and having a fair market value on the date of exercise equal to the
aggregate purchase price of the shares of Common Stock to be purchased upon such
exercise, or in a combination of Common Stock owned by the optionee and cash.
When payment is made in whole or in part with shares of Common Stock owned by
the optionee, such shares as are surrendered by the optionee shall be exchanged
share for share for an equal number of shares being issued upon the exercise of
the option, but the aggregate fair market value of such surrendered shares shall
be credited against the aggregate purchase price of all of the shares with
respect to which the option is then being exercised.
Except for options granted pursuant to paragraphs 4.2 and 7(a)
hereof, and except as provided in paragraphs 10 and 11 below, no option may be
exercised unless the optionee is then in the employ of the Corporation or any
subsidiary and shall have been continuously employed by one or more of the
Corporation and its subsidiaries since the grant of his option. Absence on leave
approved by an officer of the Corporation or of any subsidiary authorized to
give such approval shall not be considered an interruption of employment for any
purpose of the Plan.
(g) Subsequent to exercise of an option, in the event the
optionee makes a "disqualifying disposition" (i.e., a disposition of shares
received upon exercise of the option held less than two years from the date on
which the option was granted, or less than one year from the date the shares
were transferred to the optionee), the optionee shall so notify the Company, and
shall pay the Company the amount equal to the withholding tax obligation of the
Company with respect to said "disqualifying disposition".
<PAGE>
8. Non-Transferability of Option. No option granted under the Plan
shall be transferable by the grantee otherwise than by will or by the laws of
descent and distribution, and such option shall be exercisable, during the
grantee's lifetime, only by the grantee.
9. Registration Under the Securities Act of 1933. The Corporation
contemplates having an effective Registration Statement under the United States
Securities Act of 1933 at such time as options granted under the Plan are
exercised.
10. Termination of Employment. If an optionee shall cease to be
employed by or serve as a director of the Corporation or any subsidiary for any
reason (other than death), he may, but only within the period of three months
next succeeding such cessation of employment or service as a director in no
event after the expiration of ten years from the date the option was granted
exercise his option if and to the extent that he was entitled to exercise it at
the time of such cessation of employment or service as a director unless he was
terminated for cause by the Corporation or any subsidiary. Any optionee whose
employment with or service as a director of the Corporation or any subsidiary is
terminated for cause shall lose the right to exercise any option granted under
this Plan as of the date of notice of his termination.
<PAGE>
11. Death of an Optionee. In the event of the death of an optionee,
including an outside director, while in the employ of or serving as an outside
director of the Corporation or any subsidiary or within the period of three
months after cessation of such employment, the option theretofore granted to him
shall be exercisable within, but only within, the period of one year next
succeeding his death, and in no event after the expiration of ten years from the
date of grant, and then only if and to the extent that the optionee would have
been entitled to exercise if he had lived during said one-year period.
12. Adjustment in Shares Subject to Plan. The options granted under the
Plan shall contain such provisions as the Committee may determine with respect
to adjustments to be made in the number and kind of shares covered by such
options and in the option price in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering or any other change in the corporate structure or
shares of the Corporation; and in the event of any such change, the aggregate
number and kind of shares available under the Plan and the maximum number of
shares as to which options may be granted to any individual shall be
appropriately adjusted.
13. Period, Expiration and Termination of the Plan. Options may be
granted under the Plan at any time prior to the tenth anniversary of the
effective date of the Plan, on which anniversary the Plan will expire except as
to options then outstanding thereunder, which options shall remain in effect
until they have been exercised or have expired. The Plan (or, in accordance with
paragraph 14, only paragraph 4.2) may be abandoned or terminated at any time by
the Corporation's Board of Directors except with respect to any options then
outstanding under the Plan.
<PAGE>
14. Amendment of the Plan. The Corporation's Board of Directors from
time to time may make such changes in and additions to the Plan as it may deem
proper and in the best interests of the Corporation or any subsidiary, without
action on the part of the stockholders of the Corporation, provided, however,
that (subject to the provisions of paragraph 12 hereof) no such change or
addition by the Board of Directors shall (a) impair without the consent of the
optionee any option theretofore granted under the Plan or deprive any optionee
of any shares of stock of the Corporation which he may have acquired through or
as a result of the Plan, (b) increase the total number of shares which may be
purchased under the Plan, (c) change the minimum purchase price, (d) extend the
period during which any option may be granted or exercised, (e) withdraw the
administration of the Plan from a Committee of Directors of the Corporation none
of whose members is an officer or other employee of the Corporation or any
subsidiary, or (f) change the provisions of the Plan relating to eligibility,
provided, however, that the Board may terminate paragraph 4.2 without
stockholder approval and, provided further, that Section 4.2 shall not be
amended more than once every six months, other than to comport with changes in
the Internal Revenue Code, or the rules thereunder.
15. Substitution or Assumption of Options. Notwithstanding any other
provision of the Plan to the contrary, by action of the Board of Directors, the
Corporation or any of its subsidiaries may as an incident to or by reason of any
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, substitute new options on stock of the
Corporation for options granted by another employer to its employees on stock of
such employer or may assume options granted by another employer to its
employees, at such purchase prices and under such conditions as may be permitted
by Section 425 (a) of the Code, and the Committee is hereby expressly authorized
to take such action as may be required to effectuate any such issuance or
assumption. Shares of the Corporation subject to any option so issued or assumed
shall be charged against the total number of shares available for issuance under
the Plan.
<PAGE>
16. Withholding and Reporting. The Corporation's obligation to deliver
shares of stock or make any payment upon the exercise of any option shall be
subject to applicable federal, state and local tax withholding and reporting
requirements.
17. Effective Date of the Plan. The Plan shall become effective if and
when the Corporation's Board of Directors declares the Plan operative and fixes
an effective date therefor, provided that no option granted under the Plan may
be exercised unless and until the Plan has been approved by the holders of a
majority of the shares of Common Stock of the Corporation outstanding and
entitled to vote at a stockholders' meeting.
Approved by the stockholders of SpecTran Corporation on May 24, 1991,
and adopted and declared effective by the Board of Directors of the Corporation
on May 21, 1991. Amended by the stockholders of SpecTran Corporation on May 15,
1992, May 27, 1994, May 31, 1996 and May 29, 1998. Amended by the Board of
Directors on January 25, 1999 and March 18, 1999.
<PAGE>
Exhibit 10.116
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "First Amendment") is by and
among FLEET NATIONAL BANK, a national bank having offices at One Federal Street,
Boston, Massachusetts, (the "Lender") and SPECTRAN CORPORATION, a Delaware
corporation with a principal place of business at 50 Hall Road, Sturbridge,
Massachusetts ("SpecTran"), SPECTRAN SPECIALTY OPTICS COMPANY, a Delaware
corporation with a principal place of business at 55 Darling Drive, Avon,
Connecticut ("Optics"), APPLIED PHOTONIC DEVICES, INC., a Delaware corporation
with a principal place of business at 50 Hall Road, Sturbridge, Massachusetts
("Photonic") and SPECTRAN COMMUNICATION FIBER TECHNOLOGIES, INC., a Delaware
corporation with a principal place of business at 50 Hall Road, Sturbridge,
Massachusetts ("Communication") (SpecTran, Optics, Photonic and Communication
are sometimes collectively referred to herein as the "Borrowers").
WHEREAS, the Lender and the Borrowers are parties to that certain Loan
Agreement dated as of December 1, 1996 (the "Agreement"); and
WHEREAS, the Lender and the Borrowers desire to amend the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Lender and the Borrowers hereby amend the
Agreement as set forth hereinafter:
A. AMENDMENTS TO AGREEMENT
1. Amend Section 1.3 of the Agreement by adding the following sentence to the
end thereof:
The Borrowing Base will be reduced, dollar for dollar, to the extent the
outstanding balance of the Revolving Note is paid down with the proceeds of "an
Asset Disposition, the incurrence of Debt owing to any Person other than the
Bank or a holder of the Notes, or the issuance of equity interests" as
described in Section 10.8 of the Note Purchase Agreement.
<PAGE>
2. Restate Section 1.4 of the Agreement as follows:
1.4 "Business Day" means any day on which commercial banks settle payments in
(a) London if the payment obligation is calculated by reference to any LIBOR (as
that term is defined in the Note) rate or (b) New York if the payment obligation
is calculated by reference to the Prime Rate, subject to adjustment in
accordance with Modified Following Business Day Convention. For purposes hereof
"Modified Following Business Day Convention" means the convention for adjusting
any relevant date if it would otherwise fall on a day that is not a Business Day
to the date that will be the first following day that is a Business Day.
3. Amend Section 1.6 of the Agreement by deleting ", prior to January 1,
2000," from the first line.
4. Restate Section 1.13 of the Agreement as follows:
1.13 "Consolidated EBITDA Cumulative" means, Consolidated Operating Income minus
income (based on the equity method of accounting in accordance with GAAP)
derived from unconsolidated Subsidiaries or other Persons plus Consolidated
Interest and consolidated taxes, depreciation and amortization computed on a
rolling twelve (12) month basis in accordance with GAAP.
5. Amend Section 1.15 of the Agreement by changing the upper case "O" at the
beginning of the word "Obligations" in subsections a, b, c, d, and e to a lower
case "o".
6. Restate Section 1.25 of the Agreement as follows:
1.25 "Control Percentage" means prior to January 1, 2000, 30% and on and
after January 1, 2000, 50%.
<PAGE>
7. Restate Section 1.42 of the Agreement as follows:
1.42 "Revolving Note" means the Revolving Note substantially in the form of
Exhibit 1.42 attached to this Agreement, as amended by the First Amendment to
Revolving Note dated as of September 30, 1998 and as it may be further amended,
modified and/or restated from time to time.
8. Add a new Section 1.48 to the Agreement as follows:
1.48 "Accounts" and "Inventory" shall have the same respective meanings as are
given to those terms in the Uniform Commercial Code as presently adopted and in
effect in the Commonwealth of Massachusetts.
9. Add a new Section 1.49 to the Agreement as follows:
1.49 "Consolidated EBITDA" means Consolidated Operating Income minus income
(based on the equity method of accounting in accordance with GAAP) derived from
unconsolidated Subsidiaries or other Persons plus Consolidated Interest and
consolidated taxes, depreciation and amortization computed for a particular
fiscal quarterly period (i.e. for the fiscal quarterly periods ending March 31,
June 30, September 30 and December 31).
10. Add a new Section 1.50 to the Agreement as follows:
1.50 "Consolidated Fixed Charge Coverage Ratio" means the ratio of Consolidated
EBITDA Cumulative minus the sum of (i) cash taxes and (ii) Consolidated Capital
Expenditures (excluding all Consolidated Capital Expenditures set forth in
Exhibit 1.50 attached hereto) to Consolidated Interest plus scheduled principal
repayments all computed on a rolling twelve (12) month basis.
<PAGE>
11. Amend Section 2.3 of the Agreement by deleting "December 31, 1999" from the
second line and inserting April 1, 2000.
12. Restate Section 2.7 of the Agreement as follows:
2.7 The Commitment Fee and the Modification Fee.
At the Closing, the Borrowers paid a commitment fee to the Lender in the
amount of $50,000.00. Simultaneously with the execution of the First Amendment
to Loan Agreement, the Lender shall charge the deposit account of the Borrowers
identified in Exhibit 2.2 a modification fee in the amount of $150,000.00.
13. Add a new Section 2.8 to the Agreement as follows:
2.8 Payment Due Dates.
The due dates of all payments required under this Agreement or under the
Revolving Note are subject to adjustment in accordance with the Modified
Following Business Day Convention.
14. Restate Section 6.1(b)(iv) of the Agreement as follows:
(iv) Contemporaneously with the year-end financial report required by
the foregoing paragraph (iii), a copy of the management letter issued to
SpecTran by KPMG Peat Marwick or another certified public accountant selected by
SpecTran and reasonably acceptable to the Lender (the Borrowers must require
their certified public accountant to issue a management letter with the year-end
fiscal report);
15. Restate Section 6.1(b)(v) of the Agreement as follows:
(v) Contemporaneously with each quarterly and year-end financial report
required by the foregoing paragraphs (ii) and (iii) and on each occasion that
the Borrowers request an advance under the Loan that will result in the
outstanding balance of the Revolving Note to be greater that $12,500,000.00, a
certificate of the chief financial officer of SpecTran substantially in the form
of Exhibit 6.1(b)(v) attached hereto stating that he has individually reviewed
the provisions of this Agreement and that a review of the activities of the
<PAGE>
Borrowers during such quarterly period, year or period through the end of the
most recently reported month, as the case may be, has been made by him or under
his supervision, with a view to determining whether the Borrowers have fulfilled
all of their obligations under this Agreement, and that, to the best of his
knowledge, the Borrowers have observed and performed each undertaking contained
in this Agreement and are not in default in the observance or performance of any
of the provisions hereof or, if the Borrowers shall be so in default, specifying
all such defaults and events of which he may have knowledge;
16. Amend Section 6.1(b)(vi) of the Agreement by deleting the "and" at the end
thereof.
17. Add a new Section 6.1(b)(viii) to the Agreement as follows:
(viii) As soon as available, but in any event within forty-five
(45) days after the close of each quarter of each fiscal year (i.e. March 31,
June 30, September 30 and December 31), in such form and detail as shall be
satisfactory to the Lender, an aging as of the end of such quarter of all
Accounts of the Borrowers certified by the chief financial officer of SpecTran
to be complete and correct; and
18. Add a new Section 6.1(b)(ix) to the Agreement as follows:
(ix) As soon as available, but in any event within forty-five
(45) days after the close of each quarter of each fiscal year (i.e. March 31,
June 30, September 30 and December 31), in such form and detail as shall be
satisfactory to the Lender, a listing as of the end of such quarter of all
Inventory of the Borrowers certified by the chief financial officer of SpecTran
to be complete and correct;
19. Delete Section 6.1(f)(i) of the Agreement and replace with the following:
(i) a Consolidated Fixed Charge Coverage Ratio of at least 1.25:
1.00 to be measured monthly and computed on a rolling twelve (12) month basis;
20. Restate Section 6.1(f)(ii) of the Agreement as follows:
(ii) a Consolidated Tangible Net Worth of at least (i)
$43,950,000.00 for the period from September 30, 1998 through December 30, 1998
and (ii) $48,000,000.00 at December 31, 1998; thereafter Consolidated Tangible
Net Worth must increase (x) as of December 31 of each fiscal year by an amount
equal to seventy-five percent (75%) of that fiscal year's Consolidated Net
Income (to be added only if a positive number and no reduction for a negative
number) and (y) after any Offering by an amount equal to the net proceeds of any
such Offering; Consolidated Tangible Net Worth to be measured monthly;
<PAGE>
21. Add a new Section 6.1(f)(iii) to the Agreement as follows:
(iii) a Consolidated EBITDA of at least (i) $3,000,000.00 for the
quarterly period ended September 30, 1998, (ii) $3,500,000.00 for the quarterly
period ending December 31, 1998 and (iii) $2,700,000.00 for the quarterly period
ending March 31, 1999, to be measured as of each of the above dates;
22. Add a new Section 6.1(f)(iv) to the Agreement as follows:
(iv) a Consolidated EBITDA Cumulative of at least (i)
$12,000,000.00 for the twelve (12) month periods ending June 30, 1999, July 31,
1999, and August 31, 1999 (ii) $13,000,000.00 for the twelve (12) month periods
ending September 30, 1999, October 31, 1999, and November 30, 1999 and (iii)
$14,500,000.00 for the twelve (12) month period ending December 31, 1999 and
thereafter, to be measured monthly on a rolling twelve (12) month basis; and
23. Add a new Section 6.1(f)(v) to the Agreement as follows:
(v) a Consolidated Net Income of at least $1.00 for each fiscal
year to be measured as of December 31 of each fiscal year.
24. Amend Section 6.1(q) of the Agreement by deleting the "and" at the end
thereof.
25. Amend Section 6.1(r) of the Agreement by deleting the period at the end
thereof and adding "; and".
26. Add a new Section 6.1(s) to the Agreement as follows:
(s) The Borrowers will satisfy each of the conditions set forth on
Schedule A (a copy of which is attached hereto) on or before January 15, 1999,
such satisfaction to be determined by the Lender in its sole discretion.
<PAGE>
27. Restate Section 6.2(p)(i) of the Agreement as follows:
(i) the Consolidated Leverage Ratio to exceed 1.15:1.00 through
September 30, 1999 and 1.00:1.00 thereafter, to be measured monthly;
28. Restate Section 6.2(p)(ii) of the Agreement as follows:
(ii) the ratio of Consolidated Indebtedness to Consolidated
EBITDA Cumulative to exceed (i) 3.75:1.00 from September 30, 1998 through June
29, 1999, (ii) 3.00:1.00 from June 30, 1999 through December 30, 1999 and (iii)
2.75:1.00 at December 31, 1999 and thereafter, to be measured on a rolling
twelve (12) month basis;
29. Amend Section 6.2(o) of the Agreement by deleting the "and" at the end
thereof.
30. Add a new Section 6.2(q) to the Agreement as follows:
(q) SpecTran will not declare or pay any dividends, or make any other
payment or distribution on account of its capital stock;
31. Add a new Section 6.2(r) to the Agreement as follows:
(r) No Borrower will make any prepayment of any Consolidated
Indebtedness (other than scheduled, mandatory prepayments under the Note
Purchase Agreements, as amended), except the Obligations or enter into or modify
any agreement as a result of which the terms of payment of any of the
Consolidated Indebtedness are waived or modified;
32. Add a new Section 6.2(s) to the Agreement as follows:
(s) No Borrower will make any payment with respect to Consolidated
Indebtedness, except the Obligations, after the occurrence of an Event of
Default;
33. Add a new Section 6.2(t) to the Agreement as follows:
(t) SpecTran will not enter into any amendments of the Note Purchase
Agreements without the prior written consent of the Lender.
34. Restate Section 8.3 of the Agreement as follows:
<PAGE>
8.3 Lien, Set-off.
The Borrowers and any guarantor hereby grant to the Lender, a lien,
security interest and right of setoff as security for the Obligations, upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Lender or any entity under
the control of Fleet Financial Group, Inc., or in transit to any of them. At any
time, without demand or notice, the Lender may set off the same or any part
thereof and apply the same to any of the Obligations even though unmatured and
regardless of the adequacy of any other collateral securing the Obligations. ANY
AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWERS OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVED.
35. Restate Section 10.8(b) of the Agreement as follows:
(b) Fleet National Bank
Attention: John F. Lynch, V.P.
One Federal Street
Boston, MA 02110-2010
<PAGE>
36. Restate Section 10.10 of the Agreement as follows:
10.10 Participations.
The Lender shall have the unrestricted right at any time and from time
to time, and without the consent of or notice to the Borrowers (the Lender will
endeavor to deliver notice to the Borrowers after any such participation), to
grant to one or more banks or other financial institutions (each a
"Participant") a participating interest in the Lender's obligation to lend
hereunder and the Loan held by the Lender hereunder. In the event of any such
grant by the Lender of a participating interest to a Participant, whether or not
upon notice to the Borrowers, the Lender shall remain responsible for the
performance of its obligations hereunder and the Borrowers shall continue to
deal solely and directly with the Lender in connection with the Lender's rights
and obligations hereunder. The Lender may furnish any information concerning the
Borrowers in its possession from time to time to prospective assignees and
Participants, provided that the Lender shall require any such prospective
assignee or Participant to agree in writing to maintain the confidentiality of
such information.
37. Add a new Section 10.17 to the Agreement as follows:
10.17 Pledge to the Federal Reserve.
The Lender may at any time pledge all or any portion of its rights under
the Agreement, the Revolving Note and the Collateral Documents to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement thereof shall
release the Lender from its obligations under such documents.
<PAGE>
38. Add a new Section 10.18 to the Agreement as follows:
10.18 Usury Laws.
All agreements among the Borrowers and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Obligations or otherwise, shall the amount paid
or agreed to be paid to the Lender for the use or the forbearance of the
Obligations exceed the maximum permissible under applicable law. As used herein,
the term "applicable law" shall mean the law in effect as of the date hereof
provided, however that in the event there is a change in the law which results
in a higher permissible rate of interest, then the Obligations shall be governed
by such new law as of its effective date. In this regard, it is expressly agreed
that it is the intent of the Borrowers and the Lender in the execution, delivery
and acceptance of the Revolving Note to contract in strict compliance with the
laws of the Commonwealth of Massachusetts from time to time in effect. If, under
or from any circumstances whatsoever, fulfillment of any provision hereof or of
any of the loan documents at the time performance of such provision shall be
due, shall involve transcending the limit of such validity prescribed by
applicable law, then the obligation to be fulfilled shall automatically by
reduced to the limits of such validity , and if under or from circumstances
whatsoever the Lender should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of principal balance of the Revolving Note and
not to the payment of interest. This provision shall control every other
provision of all agreements among the Borrowers and the Lender.
<PAGE>
39. Add a new Section 10.19 to the Agreement as follows:
10.19 Payments.
All payments shall be in lawful money of the United States in
immediately available funds.
40. Add a new Section 10.20 to the Agreement as follows:
10.20 Sale to Third Party.
The Lender shall have the unrestricted right at any time or from time
to time, and without the Borrowers' consent, to assign all or any portion of its
rights and obligations hereunder to one or more banks or other financial
institutions (each, an "Assignee"), and the Borrowers agree that they shall
execute, or cause to be executed, such documents, including without limitation,
amendments to the Agreement and to any other documents, instruments and
agreements executed in connection herewith as the Lender shall deem necessary to
effect the foregoing. In addition, at the request of the Lender and any such
Assignee, the Borrowers shall issue one or more new promissory notes, as
applicable, to any such Assignee and, if the Lender has retained any of its
rights and obligations hereunder following such assignment to the Lender, which
new promissory notes shall be issued in replacement of, but not in discharge of,
the liability evidenced by the promissory note held by the Lender prior to such
assignment and shall reflect the amount of the respective commitments and loans
held by such Assignee and the Lender after giving effect to such assignment.
Upon the execution and delivery of appropriate assignment documentation,
amendments and any other documentation required by the Lender in connection with
such assignment, and the payment by Assignee of the purchase price agreed to by
the Lender, and such Assignee, such Assignee shall be a party to this Agreement
and shall have all of the rights and obligations of the Lender hereunder (and
under any and all other guaranties, documents, instruments and agreements
executed in connection herewith) to the extent that such rights and obligations
have been assigned by the Lender pursuant to the assignment documentation
between the Lender and such Assignee, and the Lender shall be released from its
obligations hereunder and thereunder to a corresponding extent.
<PAGE>
41. Add a new Section 10.21 to the Agreement as follows:
10.21 Application of Proceeds
All proceeds received by the Lender hereunder, including without
limitation, insurance proceeds, condemnation proceeds and proceeds received
pursuant to the Lender's exercise of its rights hereunder may be applied to the
Obligations in such order as determined by the Lender.
42. Add a new Section 10.22 to the Agreement as follows:
10.22 Replacement Documents.
Upon receipt of an affidavit of any officer of the Lender as to the
loss, theft, destruction or mutilation of the Agreement or any other document
which is not a public record, and, in the case of any such loss, theft,
destruction or mutilation, upon cancellation of this Agreement or other
document, the Borrowers will issue, in lieu thereof, a replacement agreement or
other document of like tenor.
B. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lender that:
1. The Borrowers are duly organized, validly existing and in
good standing in their respective jurisdictions of
incorporation.
2. The Borrowers have the power to enter into this First
Amendment and to perform their obligations hereunder.
3. This First Amendment has been duly authorized by all
necessary action on the part of the Borrowers, and this
First Amendment constitutes the legal, valid and binding
obligation of each of the Borrowers enforceable against each
Borrower in accordance with its terms, except as such
enforceability may be limited by
<PAGE>
(i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally, and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4. Neither the execution or delivery by the Borrowers of this First
Amendment nor the performance by the Borrowers of their obligations will:
(i) require the taking of any action or the giving of any
consent or approval by, or the making or any registration or filing with, any
Person other than such actions, consents, approvals, registrations and filings
as have heretofore been taken, given or made (as the case may be);
(ii) violate any provision of any organizational documents of
the Borrowers, or any provision of any law, rule, regulation, order or decree of
any governmental authority applicable to the Borrowers; or
(iii) violate or constitute a default under any material
agreement to which any Borrower is a party or by which the Borrowers' properties
or assets are or may be bound, or will result in the creation or imposition of
any lien on the properties or assets of the Borrowers.
5. (i) Neither this First Amendment nor any certificate furnished in
connection herewith nor any other document or statement furnished to the Lender
in connection with the amendments contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading; and
(ii) There is no fact known to the Borrowers that has had or,
so far as the Borrowers can now reasonably foresee, could reasonably be expected
to have, a material adverse effect on the Borrowers that has not been publicly
disclosed.
6. Immediately after the effectiveness hereof and after giving
effect hereto, there exists no Event of Default and the Borrowers have
performed all of their obligations to be performed to date under the
Agreement.
<PAGE>
C. SCOPE AND EFFECT OF FIRST AMENDMENT
1. The terms of this First Amendment shall not operate as or constitute a
waiver by the Lender, other otherwise prejudice any of the Lender's rights,
remedies or powers under, the Agreement, or under applicable law. Except as
expressly provided herein,
(i) no terms or provisions of the Agreement are modified or
changed by this First Amendment, and
(ii) the terms and provisions of the Agreement continue in
full force and effect.
2. The Borrowers hereby acknowledge, confirm, reaffirm and ratify all of their
obligations and duties under the Agreement and all agreements related thereto.
This First Amendment does not constitute an agreement or obligation by the
Lender to give its consent to any future amendment of the Agreement or to any
future transaction that would, absent consent of the Lender, constitute an Event
of Default under the Agreement. This First Amendment shall not extinguish,
terminate or impair any of the obligations of the Borrowers under the Agreement
or any of the financing instruments. In addition, this First Amendment shall not
release or impair the priority of any security interests or liens held by the
Lender on any assets of the Borrowers. This First Amendment may not be
contradicted by evidence of any actual or alleged prior, contemporaneous or
subsequent understandings or agreements of the parties, written or oral, express
or implied, other than a writing which expressly amends or supersedes this First
Amendment or the Agreement. Upon the effectiveness of this First Amendment, each
reference to the Agreement shall mean and be a reference to the Agreement as
amended hereby.
D. MISCELLANEOUS
1. All capitalized terms used herein and not defined herein shall have
the meanings ascribed in the Agreement.
2. The Lender acknowledges and agrees that the payments due Lucent
Technologies Inc. in connection with that certain Patent License Agreement
effective as of October 1, 1998 will not be characterized as Consolidated
Indebtedness for purposes of the Agreement.
<PAGE>
WITNESS, the execution hereof as an instrument under seal as of this
30th day of September, 1998.
SPECTRAN CORPORATION
____________________________ By:_____________________________
Witness Its Duly Authorized Officer
SPECTRAN SPECIALTY OPTICS
COMPANY
____________________________ By:_____________________________
Witness Its Duly Authorized Officer
APPLIED PHOTONIC DEVICES, INC.
____________________________ By:_____________________________
Witness Its Duly Authorized Officer
SPECTRAN COMMUNICATION FIBER
TECHNOLOGIES, INC.
____________________________ By:_____________________________
Witness Its Duly Authorized Officer
FLEET NATIONAL BANK
____________________________ By:____________________________
Witness Its Duly Authorized Officer
<PAGE>
Exhibit 10.117
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment") dated as of September 30, 1998, by
and among SpecTran Corporation, a Delaware corporation (the "Company"), and EACH
OF THE INSTITUTIONS IDENTIFIED AS A HOLDER OF NOTES ON THE SIGNATURE PAGES
HEREOF (collectively, the "Noteholders").
1. Preliminary Statement
0.1 The Company entered into those separate Note Purchase Agreements,
dated as of December 1, 1996 (as in effect immediately prior to the Effective
Date, collectively, the "Existing Note Purchase Agreement" and as amended
hereby, the "Note Purchase Agreement"), with, respectively, the purchasers of
the Notes signatory thereto, pursuant to which the Company issued and sold to
such purchasers $16,000,000 in principal amount of the Company's 9.24% Senior
Notes due December 26, 2003 and $8,000,000 in principal amount of the Company's
9.39% Senior Notes due December 26, 2004 (collectively the "Notes").
0.2 The Company and the Noteholders agree to amend the Existing Note
Purchase Agreement as more particularly set forth in this Amendment.
1. Defined Terms
The terms used herein have the meanings specified in the Existing Note
Purchase Agreement unless otherwise defined herein.
2. Amendments to Terms of Existing Note Purchase Agreement
0.1 The terms of the Existing Note Purchase Agreement are hereby
amended as set forth on Attachment A hereto.
3.2 The provisions of Section 9.8 of the Existing Note Purchase
Agreement are waived with respect to the amendment to the Bank Agreement
attached hereto as Attachment D, provided that such amendment becomes effective
as of the Effective Date.
3. Warranties and Representations of the Company
The Company represents and warrants to the holders of the Notes as of
the Effective Date:
(a) the Company is duly organized, validly existing and in
good standing in its jurisdiction of incorporation;
(b) the Company has the power to enter into this Amendment and
to perform its obligations hereunder;
(c) this Amendment has been duly authorized by all necessary
action on the part of the Company , and this Amendment constitutes a
legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability
may be limited by
<PAGE>
SPECTRAN CORPORATION FIRST AMENDMENT
(i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and
(ii) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law);
(d) neither the execution or delivery by the Company of this
Amendment nor the performance by the Company of its
obligations hereunder or under the Financing Documents:
(i) will adversely affect the enforceability against
the Company of the Financing Documents;
(ii) will require the taking of any action or the
giving of any consent or approval by, or the making or any
registration or filing with, any Governmental Authority or
other person other than such actions, consents, approvals,
registrations and filings as have heretofore been taken, given
or made (as the case may be);
(iii) will violate any provision of any
organizational document of the Company, or any provision of
any law, rule, regulation, order or decree of any Governmental
Authority applicable to the Company; or
<PAGE>
(iv) will violate or constitute a default under any
material agreement to which the Company is a party or by which
any of its Properties or assets is or may be bound, or will
result in the creation or imposition of any Lien on the
Properties or assets of the Company;
(e) (i) neither this Amendment nor any certificate furnished
in connection herewith nor any other document or statement
furnished to the holders of the Notes in connection with the
amendments contemplated hereby contains any untrue statement
of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein
not misleading;
(ii) there is no fact known to the Company that has
had or, so far as the Company can now reasonably foresee,
could reasonably be expected to have, a Material Adverse
Effect that has not been publicly disclosed; and
(f) immediately after the effectiveness hereof and after
giving effect hereto, there exists no Default or Event of Default.
4. Scope and Effect of Amendment
The terms of this Amendment shall not operate as or constitute a waiver
by any holder of Notes of, or otherwise prejudice any holder of Notes' rights,
remedies or powers under, the Existing Note Purchase Agreement, any other
Financing Document or under applicable law. Except as expressly provided herein,
<PAGE>
(a) no terms or provisions of the Existing Note Purchase
Agreement are modified or changed by this Amendment, and
(b) the terms and provisions of the Existing Note Purchase
Agreement continue in full force and effect.
The Company hereby acknowledges, confirms, reaffirms and ratifies all of its
obligations and duties under the Financing Documents and all agreements related
thereto. This Amendment does not constitute an agreement or obligation of any
holder of Notes to give its consent to any future amendment of any Financing
Document or to any future transaction that would, absent consent of the holders
of the Notes, constitute a Default or Event of Default under the Note Purchase
Agreement. This Amendment may not be contradicted by evidence of any actual or
alleged prior, contemporaneous or subsequent understandings or agreements of the
parties, written or oral, express or implied, other than a writing which
expressly amends or supersedes this Amendment or Financing Documents. Upon the
effectiveness of this Amendment, each reference in any Financing Document to any
Note Purchase Agreement shall mean and be a reference to the Note Purchase
Agreement as amended hereby.
<PAGE>
5. Miscellaneous
0.1 Governing Law
This Amendment is governed by the internal laws of the Commonwealth of
Massachusetts and shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of such State.
5.1 Successors and Assigns
This Amendment shall bind and inure to the benefit of the respective
successors and assigns of the Company and the holders of the Notes.
5.2 Expenses
The Company will pay, or cause to be paid, the reasonable out-of-pocket
costs and expenses of each holder of Notes in connection with entering into this
Amendment and the consummation of all transactions contemplated hereby. The
obligations of the Company under this Section 6.3 shall survive payment of any
Note issued under the Note Purchase Agreement.
5.3 Effectiveness
This Amendment may be executed in one or more counterparts and shall be
effective, as of the date hereof (the "Effective Date"), when
(a) at least one counterpart shall have been executed by the
Company and holders of Notes constituting the Required Holders, and
<PAGE>
(b) the Company shall have complied with each of the
conditions precedent set forth on Attachment B hereto to the reasonable
satisfaction of the Required Holders.
[Remainder of page intentionally blank. Next page is signature page.]
<PAGE>
SPECTRAN CORPORATION FIRST AMENDMENT IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be executed on their behalf by a duly authorized
officer or agent thereof, as the case may be, as of the date first above
written.
Very truly yours,
SPECTRAN CORPORATION
By: ---------------------------
Name:
Title:
<PAGE>
Holder of Notes:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: ----------------------------------
Name:
Title:
CM LIFE INSURANCE COMPANY
By: -----------------------------------
Name:
Title:
<PAGE>
J ROMEO & CO.
By: ----------------------------------
Name:
Title:
<PAGE>
PACIFIC LIFE INSURANCE COMPANY
By: -----------------------------------
Name:
Title:
By: -----------------------------------
Name:
Title:
<PAGE>
Attachment A-7
SPECTRAN CORPORATION FIRST AMENDMENT
ATTACHMENT A
AMENDMENT
1. A new Section 8.10 is hereby added to the Existing Note Purchase
Agreement as set forth below:
8.10 Offer to Pay upon Receipt of Proceeds
(a) Offer. If the Company is required to make an offer to
prepay the Notes in accordance with Section 10.8 such offer will be in
writing and will
(i) refer to this Section 8.10 and Section 10.8,
(ii) include the information required in the notices
delivered pursuant to Section 10.8 in connection with the
transactions giving rise to the offer to prepay,
(iii) specify the prepayment date (the "Proceeds
Prepayment Date"), which shall not be less than 5 Business
Days after, nor more than 10 Business Days after, the date of
such offer, and which shall on or before the repayment of Debt
giving rise to the requirement to make an offer under this
Section 8.10,
(iv) specify the last date upon which the offer can
be accepted or rejected, and state the consequences of failing
to provide an acceptance or rejection, as provided in Section
8.10(b),
<PAGE>
(v) specify the amount of such offer (as determined
in accordance with Section 10.8, the "Proceeds Payment
Amount"), the minimum ratable share of such Proceeds Payment
Amount payable in respect of each Note (such minimum ratable
share to be determined on the basis of the aggregate principal
amount of all Notes outstanding immediately prior to the
making of such offer) and the principal amount of each Note
offered to be prepaid on such Proceeds Prepayment Date,
(vi) specify the amount of interest that would be due
on each Note offered to be prepaid, accrued to such Proceeds
Prepayment Date, and
(vii) be executed by a Senior Financial Officer of
the Company.
(b) Acceptance, Rejection. To accept or reject such offered
payment, a holder of Notes shall cause a notice of such acceptance or
rejection to be delivered to the Company at no later than 5 p.m. on the
second preceding Business Day prior to the Proceeds Prepayment Date. A
failure to respond to any such offer of payment as provided in this
Section 8.5(b) shall be deemed to constitute an acceptance of such
offer.
<PAGE>
(c) Payment. The Company shall pay to each holder which shall
have accepted such offer a principal amount equal to such holder's
ratable share of the Proceeds Payment Amount (such ratable share to be
determined on the basis only of the aggregate principal amount of the
Notes outstanding immediately prior to the making of such offer which
shall have accepted such offer) at 100% of such principal amount and
interest thereon accrued to such Proceeds Prepayment Date, shall become
due and payable on such Proceeds Prepayment Date. The Company shall,
promptly after making such payment, notify in writing all holders of
Notes of the payment amount, and the name of each holder, of any Notes
prepaid under this Section 8.10.
(d) Effect on Required Payments. The amount of each payment of
the principal of the Notes made pursuant to this Section 8.5 shall be
applied against and reduce each of the then remaining principal
payments due pursuant to Section 8.1 by a percentage equal to the
aggregate principal amount of the Notes so paid divided by the
aggregate principal amount of the Notes outstanding immediately prior
to such payment.
(e) Payment of Make-Whole Amounts. If a prepayment of the
principal of the Notes is made under this Section 8.10 from the
proceeds of Asset Dispositions, then, notwithstanding anything to the
contrary in this Section 8.10, no Make-Whole Amount will be due in
connection therewith and no calculation of any Make-Whole Amounts shall
be required.
<PAGE>
2. Section 10.4 of the Existing Note Purchase Agreement is amended to read
in full as follows:
10.4 Maintenance of Consolidated Net Worth.
On and after April 1, 2000, the Company will not, at any time, permit
Consolidated Net Worth to be less than the sum of
(a) Consolidated Net Worth as of December 31, 1999, plus
(b) an aggregate amount equal to 50% of its Consolidated Net
Income (but, in each case, only if a positive number) for each
completed fiscal year beginning with the fiscal year ended December 31,
2000 plus
(c) the net proceeds of all sales of equity securities (or
convertible securities upon conversion) by and of the Company and the
Subsidiaries (other than sales to the Company or a Subsidiary) received
by the Company and the Subsidiaries after December 31, 1999.
3. Section 10.5 of the Existing Note Purchase Agreement is amended to read
in full as follows:
10.5 Limitation on Debt.
(a) Funded Debt. On and after April 1, 2000, the Company will
not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, or otherwise become
directly or indirectly liable with respect to, any Funded Debt, except
(i)the Notes and Debt incurred under the Bank
Agreement,
<PAGE>
(ii) Funded Debt outstanding on the Closing Date and
identified on Schedule 5.15, and renewals and extensions
thereof, provided that the amount of any such Funded Debt
outstanding is not increased in connection with such renewal
or extension, and
(iii) other Funded Debt, so long as on the date the
Company or such Subsidiary becomes liable with respect to any
such Funded Debt and immediately after giving effect thereto
and the concurrent retirement of any other Funded Debt,
(A) no Default or Event of Default exists, and
(B) Consolidated Funded Debt does not exceed
325% of Consolidated Cash Flow determined in respect
of the period of 12 consecutive months then most
recently ended.
(b) Net Debt. On and after April 1, 2000, the Company will not
at any time permit Consolidated Net Debt to exceed 55% of Consolidated
Total Adjusted Capitalization.
(c) Subsidiaries. For the purposes of this Section 10.5, any
Person becoming a Subsidiary after the date hereof shall be deemed, at
the time it becomes a Subsidiary, to have incurred all of its then
outstanding Debt, and any Person extending, renewing or refunding any
Debt shall be deemed to have incurred such Debt at the time of such
extension, renewal or refunding.
<PAGE>
4. Section 10.6 of the Existing Note Purchase Agreement is amended to read
in full as follows:
10.6 Fixed Charge Coverage.
On and after April 1, 2000, the Company will not, at any time, permit
Consolidated Earnings Available for Fixed Charges to be less than 300% of
Consolidated Fixed Charges, in each case determined in respect of the period of
12 consecutive months then most recently ended.
5. Section 10.7 of the Existing Note Purchase Agreement is amended to read
in full as follows:
10.7 Sale of Assets.
On and after April 1, 2000, and except as permitted under Section 10.2,
the Company will not, and will not permit any of its Subsidiaries to, make any
Asset Disposition unless:
(a) such Asset Disposition is the JV Transfer; or
(b) (i) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair
Market Value at least equal to that of the property exchanged
and is in the best interest of the Company or such Subsidiary;
<PAGE>
(ii) immediately after giving effect to the Asset
Disposition, no Default or Event of Default would
exist; and
(iii) (A) the Disposition Value of all property that
was the subject of any Asset Disposition (other than
the JV Transfer) occurring in the then current fiscal
year of the Company would not exceed 10% of
Consolidated Assets as of the end of the then most
recently ended fiscal year of the Company, and
(B) the Disposition Value of all property
that was the subject of any Asset Disposition (other
than the JV Transfer) occurring on or after the
Closing Date would not exceed 25% of Consolidated
Assets as of the end of the then most recently ended
fiscal quarter of the Company.
If, and solely to the extent that, the Net Proceeds Amount for any Asset
Disposition is applied to a Debt Prepayment Application or a Property
Reinvestment Application within 365 days after such Asset Disposition, then such
Asset Disposition, only for the purpose of determining compliance with Section
10.7(b)(iii) as of any date, shall to the extent of such application be deemed
not to be an Asset Disposition.
<PAGE>
6. A new Section 10.8 is hereby added to the Existing Note Purchase
Agreement as set forth below:
10.8 Application of Proceeds of Certain Transactions
(a) Notice. The Company shall notify the holders of the Notes
of the receipt of moneys or property by the Company or any Subsidiary
as a result of an Asset Disposition, the incurrence of Debt owing to
any Person other than the Bank or a holder of Notes, or the issuance of
equity interests in the Company or any Subsidiary, within two Business
Days after such receipt. Such notice shall
(i) set forth the amount of the gross proceeds of
such transaction, and the net proceeds (net of transaction
costs and together with any investment earnings thereon, the
AProceeds@), which, in the case of property received, shall be
the Fair Market Value of such property,
(ii) set forth in detail the use of the proceeds, which
shall be one or more of
(A) investment in long-term assets to be used in the
business of the Company and the Subsidiaries, and
(B) the repayment of Debt of the Company and the
Subsidiaries, and
<PAGE>
(C) investment in Short-Term Investments pending the
acquisition of such long-term assets or the repayment of
such Debt, and
(iii) be certified as true and correct by an authorized
officer of the Company.
If, after the delivery of such notice, the Company becomes aware that
such notice no longer sets forth the gross proceeds, Proceeds or use of
the proceeds of such transaction accurately in any material respect,
then the Company shall, within three Business Days of becoming so
aware, deliver a revised notice to the holders of the Notes.
(b) Use of Proceeds. If the Company applies Proceeds for the
repayment of Debt other than the Notes or the payment during the period
beginning on April 1, 2000 and ending on April 30, 2000, inclusive, of
Debt outstanding under the Bank Agreement, then the Company shall make
an offer of prepayment of the Notes in accordance with Section 8.10 in
respect of such application in an amount not less than
(i) the amount of such Proceeds so applied multiplied
by
<PAGE>
(ii) the principal amount of the Notes outstanding on
the date of such application divided by the principal amount
of such Debt outstanding immediately prior to such
application.
Payments made to the holders of the Notes pursuant to this Section
10.8(b) shall be in immediately available funds by wire transfer,
regardless of the form or nature of the Proceeds.
(c) Security Interest. At all times when Proceeds are
being held in the form of Short-Term Investments,
(i) such Proceeds shall be deposited by the Company
with the Security Trustee (immediately upon receipt by the
Company), as security for the payment of the Secured
Obligations (as defined in the Trust Indenture),
(ii) the Security Trustee shall maintain a deposit
account and investment account solely for the Proceeds of
Asset Dispositions and a separate deposit account and
investment account for Proceeds derived from other types of
transactions;
(iii) the Company shall take such action (at its
expense) and execute and deliver such documents and agreements
as reasonably requested by the Security Trustee, the Required
Holders or the Bank to perfect the Security Trustee's security
interest in such Proceeds,
(iv) the Security Trustee shall invest such Proceeds
as directed by the Company in Short-Term Investments, so long
as the Security Trustee retains a perfected security interest
in such investments, and
<PAGE>
(v) the Company will notify the holders of the Notes
and the Bank not less than five Business Days prior to
delivering any direction to the Security Trustee to disburse
such Proceeds for the purpose of purchasing such long-term
assets or paying Debt of the Company or the Subsidiaries.
(d) Subject to Security Documents. This Section 10.8 is
subject to the Security Documents, and to the extent that this Section
10.8 shall conflict therewith, the terms of the Security Documents
shall control.
(e) Debt Prepayment Applications. Debt Prepayment Applications
shall be, for purposes of determining compliance with this Section
10.8, deemed to be payments of the Notes under Section 8.10.
7. A new Section 10.9 is hereby added to the Existing Note Purchase
Agreement as set forth below:
10.9 Incorporation of Bank Covenants
From September 30, 1998 to March 31, 2000, inclusive, the Company and
the Subsidiaries will comply with Section 6 (exclusive of Section 6.2(r),
Section 6.2(s) and Section 6.2(t) thereof) of the form of the Bank Agreement
(including, in determining such compliance, all defined terms and all
cross-referenced sections set forth therein) attached to that certain First
Amendment to the Note Purchase Agreement, dated as of September 30, 1998, as
Attachment D (as amended by the First Amendment to the Bank Agreement included
in such Attachment D), and such Section 6 shall be deemed to have been
incorporated herein by reference. For the avoidance of doubt, it is understood
that
<PAGE>
(i) amendments by the parties to the Bank Agreement of the
Bank Agreement made after the effectiveness of the First Amendment
shall have no effect on the form of the Bank Agreement as so
incorporated hereby, and
(ii) if a Default or an Event of Default exists on March 31,
2000 under any of such incorporated Sections, such Default or Event of
Default will continue after March 31, 2000 if and for so long
thereafter as the Company or any Subsidiary is obligated in any respect
under the Bank Agreement.
8. A new Section 10.10 is hereby added to the Existing Note Purchase
Agreement as set forth below:
10.10 Other Covenants
The Company shall not, nor shall it permit any Subsidiary to,
(a) enter into any amendment of any term of payment of
any Debt (other than the Notes) of the Company or any
Subsidiary, or
<PAGE>
(b) pay any Debt (other than the Notes in accordance
with the provisions hereof) during the continuation of an
Event of Default.
9. A new Section 10.11 is hereby added to the Existing Note Purchase
Agreement as set forth below:
10.11 Further Assurances Regarding Collateral, Etc.
The Company shall satisfy at the Company's expense, on or prior to
January 15, 1999, each of the conditions set forth on Attachment C to that
certain First Amendment to the Note Purchase Agreement, dated as of September
30, 1998, in the reasonable opinion of the Required Holders, which reasonable
opinion shall be evidenced solely by a written affirmation of such satisfaction
delivered by the Required Holders on or prior to January 15, 1999.
10. The following defined terms are hereby added to Schedule B to the Existing
Note Purchase Agreement in the appropriately alphabetical locations:
Proceeds B is defined in Section 10.9.
Proceeds Payment Amount B is defined in Section 8.10.
Proceeds Prepayment Date B is defined in Section 8.10.
<PAGE>
Short-Term Investments B means investments that maximize total return
within the confines of a short to average overall maturity framework.
AShort-Term Investments will be US Governments, domestic corporates,
asset-backed paper (AAA rated), Govt Agency mortgage-backed paper including
short term CMO's and Govt Agency backed short-term floating rate paper.
Positions required for liquidity needs will be held in high grade short-term or
money market balances. The horizon on these investments will be approximately a
for immediate liquidity needs (if necessary), approximately a to be used for
intermediate term purposes, and the remaining approximately a for long term
expansion purposes. The Company will have full authority and discretion on all
investment changes.
<PAGE>
Attachment B-1
SPECTRAN CORPORATION FIRST AMENDMENT
ATTACHMENT B
CONDITIONS PRECEDENT
1. The Company shall pay all legal fees and expenses of the Noteholders'
counsel incurred in connection herewith
2. The Company shall pay an amendment fee in the aggregate amount of $150,000 to
the Noteholders, to be allocated among the Noteholders in proportion to the
aggregate principal value of their Notes, in immediately available federal
funds.
3. The Company shall have entered into an amendment to the Bank Agreement in
form attached hereto as Attachment D. The Company shall have provided to the
holders of the Notes a copy of the Bank Agreement and all related documentation,
as in effect on the Effective Date (including such amendment), certified as true
and correct by an authorized officer of the Company.
4. The Company shall provide the Noteholders' with evidence reasonably
satisfactory to the Noteholders' of the consent of the Bank to this Amendment.
<PAGE>
Attachment C-2
SPECTRAN CORPORATION FIRST AMENDMENT
ATTACHMENT C
CONDITIONS SUBSEQUENT
The Company will provide to counsel for the Noteholders and the Bank the
following:
1. Recent Federal and State Tax Lien Searches against the Company.
2. Composite Certificate of Secretary of SpecTran with attached:
2.1 Certificate of Incorporation with all amendments (certified to
by the Delaware Secretary of State)
2.2 By-Laws
2.3 Votes
3. Certificate of Legal Existence and Good Standing for SpecTran issued by the
Delaware Secretary of State
4. Certificate of Qualification To Do Business in Massachusetts for SpecTran
issued by the Massachusetts Secretary of State
<PAGE>
5. Opinion of Counsel to the Company and the Subsidiaries, reasonably
satisfactory to the Required Holders, opining as to
(i) due authorization , execution, and delivery of documents
by the Company and the Subsidiaries, and the enforceability
thereof,
(ii) absence of government approvals or filings in connection
therewith, other than with respect to security interests and
liens, and
(iii) proper form and recording of security interests,
mortgages and the like in the Massachusetts, Connecticut and
the U.S. Patent and Trademark Office.
6. Copies of Amendment executed with the Bank.
70 Amendments to the following to reflect changes to secured obligations:
7.1 Mortgage, Assignment of Rents and Security Agreement
7.2 Open-End Mortgage, Assignment of Rents and Security Agreement
7.3 Guaranty Agreement
7.4 UCC-1's
7.5 Trademark and Patent Filings
80 Landlord waivers and consents on all leased real estate.
90 Title Insurance Policies and/or Endorsements to existing Title
Insurance Policies to reflect changes to secured obligations.
<PAGE>
100 UCC Searches against the Company and each Subsidiary from:
10.1 Massachusetts Secretary of State
10.2 Sturbridge Town Clerk
10.3 Connecticut Secretary of State
10.4 Additional filing locations as may be reasonably specified by
counsel to the Noteholders.
110 Confirmation of secured position of Bank and Noteholders
120 Covenant Compliance Certificate as of September 30, 1998
130 Duly authorized, executed and delivered documents amending the Security
Documents to the extent deemed reasonably necessary by the Required
Holders or the Security Trustee.
140 Payment of all legal fees and expenses of counsel to the
Noteholders (promptly upon receipt of a bill therefor)
<PAGE>
ATTACHMENT D
BANK AGREEMENT (WITH AMENDMENT)
<PAGE>
Attachment A-1
SPECTRAN CORPORATION FIRST AMENDMENT TO TRUST INDENTURE
Exhibit 10.118
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment") dated as of September 30, 1998, by
and among SPECTRAN CORPORATION (the "Company"), a Delaware corporation, SPECTRAN
COMMUNICATION FIBER TECHNOLOGIES, INC. ("SCFT"), a Delaware corporation,
SPECTRAN SPECIALTY OPTICS COMPANY ("SSOC"), a Delaware corporation, and APPLIED
PHOTONIC DEVICES, Inc. ("APD"), a Delaware corporation (SCFT, SSOC and APD,
together with their respective successors and assigns, referred to individually,
as a "Guarantor," and, collectively, as the "Guarantors;" the Company and the
Guarantors being referred to herein as the "Obligors"), Fleet National Bank, a
national banking association (the "Former Trustee") as security trustee under a
certain Trust Indenture (as amended and as may be further amended from time to
time, the "Trust Indenture"), dated as of December 1, 1996 among the Obligors,
the Former Trustee and the other parties thereto, and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, as successor to the Former Trustee
and in its capacity as security trustee, together with its successors and
assigns and any co-trustees that becomes such in accordance with the provisions
of the Trust Indenture, the "Trustee").
1. Preliminary Statement
(a) The Obligors entered into a certain Trademark Security Agreement
(the "Existing Trademark Security Agreement"), dated as of December 1, 1996, in
favor of the Former Trustee to secure the obligations of the Obligors pursuant
to the Lending Documents. The Existing Trademark Security Agreement, as amended
by this Amendment, is referred to herein as the "Amended Trademark Security
Agreement."
<PAGE>
(b) All acts and proceedings required by law and by the certificate or
articles of incorporation and bylaws of each of the Obligors necessary to
constitute this Amendment a valid and binding agreement for the uses and
purposes set forth herein, in accordance with its terms, have been done and
taken, and the execution and delivery hereof has been in all respects duly
authorized.
2. Defined Terms
The terms used herein have the meanings specified in the Existing
Trademark Security Agreement unless otherwise defined herein.
3. Amendments to Terms of Existing Trademark Security Agreement
The Existing Trademark Security Agreement is amended as follows:
(a) in connection with the resignation of Fleet National Bank, as
Trustee, as acknowledged by Fleet National Bank by its
execution and delivery of this Amendment, and the appointment
of State Street Bank and Trust Company as successor trustee as
acknowledged by State Street Bank and Trust Company and each
of the Obligors by their respective execution and delivery of
this Amendment, all references to Fleet National Bank in its
capacity as Trustee are hereby amended to be references to
State Street Bank and Trust Company as Trustee; and
(b) Exhibit 1 thereto is amended and restated in its entirety as
set forth on Exhibit 1 hereto.
<PAGE>
SPECTRAN CORPORATION FIRST AMENDMENT TO TRADEMARK SECURITY AGREEMENT
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OBLIGORS
Each of the representations, warranties and covenants made by the
Obligors in respect of the Trademarks set forth in the Existing Trademark
Security Agreement are incorporated herein by reference and are made as of the
date hereof and immediately after the effectiveness hereof and after giving
effect hereto, there exists no Default or Event of Default.
4. Scope and Effect of Amendment
Except as expressly provided herein, no terms or provisions of the
Existing Trademark Security Agreement are modified or changed by this Amendment,
and the terms and provisions of the Existing Trademark Security Agreement
continue in full force and effect.
Each of the Obligors hereby acknowledges, confirms, reaffirms and
ratifies all of its obligations and duties under the Lending Documents and all
agreements related thereto. This Amendment does not constitute an agreement or
obligation of any Beneficiary to give its consent to any future amendment of any
Lending Document or to any future transaction that would, absent consent of the
Beneficiaries, constitute a Default or Event of Default under any of the Lending
Documents. This Amendment may not be contradicted by evidence of any actual or
alleged prior, contemporaneous or subsequent understandings or agreements of the
parties, written or oral, express or implied, other than a writing which
expressly amends or supersedes this Amendment or the Lending Documents. Upon the
effectiveness of this Amendment, each reference in any Lending Document to any
Trademark Security Agreement shall mean and be a reference to the Trademark
Security Agreement as amended hereby.
<PAGE>
5. Miscellaneous
(a) Successors and Assigns
This Amendment shall bind and inure to the benefit of the respective
successors and assigns of the Obligors, the Trustee and the Beneficiaries.
(1) Expenses
The Company will pay, or cause to be paid, the reasonable out-of-pocket
costs and expenses of each Beneficiary and the Trustee in connection with
entering into this Amendment and the consummation of all transactions
contemplated hereby. The obligations of the Company under this Section 6(b)
shall survive payment of any Secured Obligations.
(2) Effectiveness
This Amendment may be executed in one or more counterparts and shall be
effective, as of the date hereof, when at least one counterpart shall have been
executed by each of the parties hereto.
[Remainder of page intentionally blank. Next page is signature page.]
<PAGE>
SPECTRAN CORPORATION FIRST AMENDMENT TO TRADEMARK SECURITY AGREEMENT IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on
their behalf by a duly authorized officer or agent thereof, as the case may be,
as of the date first above written.
Signed, sealed and delivered SPECTRAN CORPORATION
in the presence of:
By: ------------------------
Name:
Title:
SPECTRAN COMMUNICATION FIBER
TECHNOLOGIES, INC.
By: ------------------------
Name:
Title:
SPECTRAN SPECIALTY OPTICS
COMPANY
By: ------------------------
Name:
Title:
APPLIED PHOTONIC DEVICES, INC.
By: -----------------------
Name:
Title:
<PAGE>
FLEET NATIONAL BANK, as Former Trustee
By: -----------------------
Name:
Title:
<PAGE>
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: -------------------------
Name:
Title:
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of SPECTRAN CORPORATION, a Delaware
corporation, and acknowledged that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of SPECTRAN COMMUNICATION FIBER
TECHNOLOGIES, INC., a Delaware corporation, and acknowledged that such
corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of SPECTRAN SPECIALTY OPTICS
COMPANY, a Delaware corporation, and acknowledged that such corporation executed
the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of APPLIED PHOTONIC DEVICES, INC., a
Delaware corporation, and acknowledged that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of FLEET NATIONAL BANK, a national
banking association, and acknowledged that such national banking association
executed the same as security trustee thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, and acknowledged that such Massachusetts
trust company executed the same as security trustee thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
Exhibit 1 - 2
SPECTRAN CORPORATION FIRST AMENDMENT TO TRADEMARK SECURITY AGREEMENT
EXHIBIT 1
TRADEMARK ASSIGNMENT
WHEREAS, [NAME OF OBLIGOR], a [________] corporation, (the "Obligor")
owns and has used in its business certain trademarks which are registered or for
which a registration has been applied for, as listed in Schedule A hereto; and
WHEREAS, an "Event of Default" has occurred under the terms of the
Trust Indenture, dated as of December 1, 1996, as amended, among the Obligor,
certain of its affiliates, and State Street Bank and Trust Company, in its
capacity as security trustee (the "Trustee") and the Trademark Security
Agreement, dated as of December 1, 1996, as amended, among the Obligor, certain
of its affiliates and the Trustee (collectively, the "Security Documents"); and
WHEREAS, the Trustee, pursuant to its rights as a secured party under
the Security Documents, and pursuant to and in exercise of its rights as a
secured party under the Massachusetts Uniform Commercial Code, has chosen to
exercise its rights upon default;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the Obligor does hereby absolutely sell, assign, transfer and convey
unto the Trustee all of the Obligor's right, title and interest in and to:
(i) the trademarks, together with the goodwill of the business
symbolized by the trademarks, the registrations and applications
thereof as set forth on Schedule A attached hereto;
(ii) all trade names, trade styles, service marks, prints and
labels on which said trademarks, trade names, trade styles and service
marks have appeared or appear, designs and general intangibles of like
nature; and
(iii) all proceeds of the foregoing (including, without
limitation, license royalties and proceeds of infringement suits).
IN WITNESS WHEREOF, [NAME OF OBLIGOR] has caused this Trademark
Assignment to be duly executed by its duly authorized officer as of ____________
___, 199__.
[NAME OF OBLIGOR]
By:____________________________
Name:
Title:
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the ___________________________________ of
_________________________, a _______________ corporation, and acknowledged that
such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
Schedule A-1
SPECTRAN CORPORATION FIRST AMENDMENT TO TRADEMARK SECURITY AGREEMENT
Schedule A
TRADEMARKS AND TRADEMARK APPLICATIONS AND REGISTRATIONS
<PAGE>
Exhibit 10.119
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment") dated as of September 30, 1998, by
and among SPECTRAN CORPORATION (the "Company"), a Delaware corporation, SPECTRAN
COMMUNICATION FIBER TECHNOLOGIES, INC. ("SCFT"), a Delaware corporation,
SPECTRAN SPECIALTY OPTICS COMPANY ("SSOC"), a Delaware corporation, and APPLIED
PHOTONIC DEVICES, Inc. ("APD"), a Delaware corporation (SCFT, SSOC and APD,
together with their respective successors and assigns, referred to individually,
as a "Guarantor," and, collectively, as the "Guarantors;" the Company and the
Guarantors being referred to herein as the "Obligors"), Fleet National Bank, a
national banking association (the "Former Trustee") as security trustee under a
certain Trust Indenture (as amended and as may be further amended from time to
time, the "Trust Indenture", dated as of December 1, 1996 among the Obligors,
the Former Trustee and the other parties thereto, and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, as successor to the Former Trustee
and in its capacity as security trustee, together with its successors and
assigns and any co-trustees that becomes such in accordance with the provisions
of the Trust Indenture, the "Trustee").
6. Preliminary Statement
(a) The Obligors entered into a certain Patent Collateral Assignment
(the "Existing"), dated as of December 1, 1996, in favor of the Former Trustee
to secure the obligations of the Obligors pursuant to the Lending Documents. The
Existing Patent Collateral Assignment, as amended by this Amendment, is referred
to herein as the "Amended Patent Collateral Assignment."
(b) All acts and proceedings required by law and by the certificate or
articles of incorporation and bylaws of each of the Obligors necessary to
constitute this Amendment a valid and binding agreement for the uses and
purposes set forth herein, in accordance with its terms, have been done and
taken, and the execution and delivery hereof has been in all respects duly
authorized.
<PAGE>
7. Defined Terms
The terms used herein have the meanings specified in the Existing
Patent Collateral Assignment unless otherwise defined herein.
8. Amendments to Terms of Existing Patent Collateral Assignment
The Existing Patent Collateral Assignment is amended as follows:
(a) in connection with the resignation of Fleet National Bank, as
Trustee, as acknowledged by Fleet National Bank by its
execution and delivery of this Amendment, and the appointment
of State Street Bank and Trust Company as successor trustee as
acknowledged by State Street Bank and Trust Company and each
of the Obligors by their respective execution and delivery of
this Amendment, all references to Fleet National Bank in its
capacity as Trustee are hereby amended to be references to
State Street Bank and Trust Company as Trustee; and
(b) Schedule A thereto is amended and restated in its entirety as set
forth on Schedule A hereto.
<PAGE>
SPECTRAN CORPORATION FIRST AMENDMENT TO PATENT COLLATERAL ASSIGNMENT
16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF OBLIGORS
Each of the representations, warranties and covenants made by the Obligors in
respect of the Trademarks set forth in the Existing Patent Collateral Assignment
are incorporated herein by reference and are made as of the date hereof and
immediately after the effectiveness hereof and after giving effect hereto, there
exists no Default or Event of Default.
9. Scope and Effect of Amendment
Except as expressly provided herein, no terms or provisions of the
Existing Patent Collateral Assignment are modified or changed by this Amendment,
and the terms and provisions of the Existing Patent Collateral Assignment
continue in full force and effect.
Each of the Obligors hereby acknowledges, confirms, reaffirms and
ratifies all of its obligations and duties under the Lending Documents and all
agreements related thereto. This Amendment does not constitute an agreement or
obligation of any Beneficiary to give its consent to any future amendment of any
Lending Document or to any future transaction that would, absent consent of the
Beneficiaries, constitute a Default or Event of Default under any of the Lending
Documents. This Amendment may not be contradicted by evidence of any actual or
alleged prior, contemporaneous or subsequent understandings or agreements of the
parties, written or oral, express or implied, other than a writing which
expressly amends or supersedes this Amendment or the Lending Documents. Upon the
effectiveness of this Amendment, each reference in any Lending Document to any
Patent Collateral Assignment shall mean and be a reference to the Patent
Collateral Assignment as amended hereby.
<PAGE>
10. Miscellaneous
(a) Successors and Assigns
This Amendment shall bind and inure to the benefit of the respective
successors and assigns of the Obligors, the Trustee and the Beneficiaries.
(1) Expenses
The Company will pay, or cause to be paid, the reasonable out-of-pocket
costs and expenses of each Beneficiary and the Trustee in connection with
entering into this Amendment and the consummation of all transactions
contemplated hereby. The obligations of the Company under this Section 6(b)
shall survive payment of any Secured Obligations.
(2) Effectiveness
This Amendment may be executed in one or more counterparts and shall be
effective, as of the date hereof, when at least one counterpart shall have been
executed by each of the parties hereto.
[Remainder of page intentionally blank. Next page is signature page.]
<PAGE>
SPECTRAN CORPORATION FIRST AMENDMENT TO PATENT COLLATERAL ASSIGNMENT IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on
their behalf by a duly authorized officer or agent thereof, as the case may be,
as of the date first above written.
Signed, sealed and delivered SPECTRAN CORPORATION
in the presence of:
By: -------------------------
Name:
Title:
SPECTRAN COMMUNICATION FIBER
TECHNOLOGIES, INC.
By:-------------------------
Name:
Title:
SPECTRAN SPECIALTY OPTICS
COMPANY
By: ------------------------
Name:
Title:
APPLIED PHOTONIC DEVICES, INC.
By: -----------------------
Name:
Title:
<PAGE>
FLEET NATIONAL BANK, as Former Trustee
By: -----------------------
Name:
Title:
<PAGE>
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: -----------------------
Name:
Title:
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of SPECTRAN CORPORATION, a Delaware
corporation, and acknowledged that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of SPECTRAN COMMUNICATION FIBER
TECHNOLOGIES, INC., a Delaware corporation, and acknowledged that such
corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of SPECTRAN SPECIALTY OPTICS
COMPANY, a Delaware corporation, and acknowledged that such corporation executed
the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of APPLIED PHOTONIC DEVICES, INC., a
Delaware corporation, and acknowledged that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of FLEET NATIONAL BANK, a national
banking association, and acknowledged that such national banking association
executed the same as security trustee thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
STATE OF _______________ )
) ss.
COUNTY OF _____________ )
On _______________, before me, the undersigned, a notary public in and
for said County and State, duly commissioned and sworn, personally appeared
_____________________________, personally known to me or proved to me to be on
the basis of satisfactory evidence to be the person who executed the within
instrument as the _________________________ of STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, and acknowledged that such Massachusetts
trust company executed the same as security trustee thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public in and for the
County of ____________________,
State of ______________________
My Commission Expires: __________________
[SEAL]
<PAGE>
Schedule A-1
SPECTRAN CORPORATION FIRST AMENDMENT TO PATENT COLLATERAL ASSIGNMENT
Schedule A
To be provided.
<PAGE>
Exhibit 1-1
SPECTRAN CORPORATION FIRST AMENDMENT TO PATENT COLLATERAL ASSIGNMENT
<PAGE>
Exhibit 10.120
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (this "Agreement"), is made as of September
30, 1998, between SPECTRAN COMMUNICATION FIBER TECHNOLOGIES, INC., a Delaware
corporation, having a place of business and a mailing address at 50 Hall Road,
Sturbridge, Massachusetts 01566 ("Mortgagor") and STATE STREET BANK AND TRUST
COMPANY (successor to Fleet National Bank, as Trustee), a Massachusetts trust
company having a place of business and a mailing address at 2 International
Place Boston, Massachusetts 02110, not individually but solely as security
trustee under that certain Trust Indenture, dated as of December 1, 1996, among
the Mortgagor, Fleet National Bank and the other parties signatory thereto, as
amended by that certain First Amendment dated as of September 30, 1998, among
Mortgagor, State Street Bank and Trust Company (in its capacity as successor
trustee to Fleet National Bank, as Trustee and together with any successor or
co-security trustee that becomes such in accordance with the provisions of the
Trust Indenture, the "Trustee") and the other parties signatory thereto (said
Trust Indenture, as so amended and as may hereafter be amended, restated or
otherwise modified from time to time, the "Trust Indenture").
R E C I T A L S
WHEREAS, Mortgagor is party to that certain Loan Agreement dated as of
December 1, 1996 (as amended to but excluding the date hereof, the "Existing
Loan Agreement"), among Mortgagor, SpecTran Corporation (the "Parent"), a
Delaware corporation, SpecTran Specialty Optics Company, a Delaware corporation,
and Applied Photonic Devices, Inc, a Delaware corporation (collectively, the
ABorrowers@), and Fleet National Bank (the "Lender"), a national banking
association, pursuant to which Lender has extended credit to Borrowers pursuant
to a revolving line of credit facility (the "Facility"), as evidenced by a
certain Revolving Note dated as of December 1, 1996, in the face amount of
$20,000,000 (as amended to but excluding the date hereof, the "Existing
Revolving Note");
<PAGE>
WHEREAS, Borrowers and Lender have agreed to enter into that certain
First Amendment to Loan Agreement dated as of September 30, 1998, a copy of
which is attached hereto as Schedule 1-a and made a part hereof (the "Loan
Agreement Amendment"; the Existing Loan Agreement as amended by the Loan
Agreement Amendment and as further amended from time to time, the "Amended Loan
Agreement"), and that certain First Amendment to Revolving Note dated as of
September 30, 1998, a copy of which is attached hereto as Schedule 2-a and made
a part hereof (the "Revolving Note Amendment"; the Existing Revolving Note as
amended by the Revolving Note Amendment and as further amended from time to
time, the "Amended Revolving Note"), pursuant to which, among other things,
Borrowers and Lender have agreed to extend the maturity of the Existing
Revolving Note from December 31, 1999, to April 1, 2000, and to make certain
other amendments to the Existing Loan Agreement and the Existing Revolving Note,
as more particularly set forth in the Loan Agreement Amendment and the Revolving
Note Amendment, respectively;
<PAGE>
WHEREAS, the Parent issued certain 9.24% Series A Senior Secured Notes
due December 26, 2003, in the aggregate principal amount of $16,000,000, and
certain 9.39% Series B Senior Secured Notes due December 26, 2004, in the
aggregate principal amount of $8,000,000 (collectively, the "Existing Term
Notes") pursuant to those certain Note Purchase Agreements each dated as of
December 1, 1996 (as amended to but excluding the date hereof, collectively, the
"Existing Note Agreement"), which Existing Term Notes were guarantied by
Mortgagor pursuant to a certain Guaranty Agreement dated as of December 1, 1996
(as amended from time to time, the "Guaranty Agreement");
WHEREAS, all capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to such terms in the Trust Indenture;
WHEREAS, as required by the Existing Loan Agreement and the Existing
Note Agreement, Mortgagor's obligations from time to time evidenced by or
arising in connection with the Existing Revolving Note, the Guaranty Agreement,
the Trust Indenture or the other Lending Documents are secured by that certain
Mortgage, Assignment of Rents and Security Agreement dated as of December 1,
1996, and recorded in the Registry of Deeds of Worcester County, Massachusetts,
in Book 18503, at page 183 (the "Existing Mortgage" and as amended by this
Agreement, the "Amended Mortgage"), encumbering, among other things, certain
real property located in Sturbridge, Worcester County, Massachusetts, and more
particularly described in Exhibit A attached thereto; and
<PAGE>
WHEREAS, as a condition of, and as an inducement to, Lender agreeing to
enter into the Loan Agreement Amendment and the Revolving Note Amendment,
Mortgagor has agreed to amend the Existing Mortgage to reflect the modifications
made to the Existing Loan Agreement by the Loan Agreement Amendment and those
made to the Existing Revolving Note by the Revolving Note Amendment, including
the extension of the maturity of the Revolving Note to April 1, 2000;
A G R E E M E N T S
NOW, THEREFORE, in consideration of the foregoing RECITALS and for
other good and valuable consideration received to the mutual satisfaction of the
parties hereto, the undersigned hereby agree as follows:
Modifications to the Existing Mortgage. The Existing Mortgage is hereby
modified as follows:
(a) The first paragraph following W I T N E S S E T H
is hereby amended and restated in its entirety as follows:
<PAGE>
WHEREAS, Grantor, SpecTran Corporation, a
Delaware corporation having an address at 50 Hall
Road, Sturbridge, Massachusetts 01566 (the "Parent"),
SpecTran Specialty Optics Company ("SSOC"), a
Delaware corporation having an address at 150 Fisher
Drive, Avon, Connecticut 06001, and Applied Photonic
Devices, Inc. ("APD"), a Delaware corporation having
an address at 300 Lake Road, Dayville, Connecticut
06241, and Fleet National Bank, a national banking
association ("Lender") have entered into a certain
Loan Agreement dated as of December 1, 1996, a copy
of which is attached hereto as Schedule 1 and made a
part hereof and the terms of which are incorporated
herein, as amended by a First Amendment to Loan
Agreement dated as of September 30, 1998, a copy of
which is attached hereto as Schedule 1-a and made a
part hereof and the terms of which are incorporated
herein (the Loan Agreement as presently constituted
and as amended by the First Amendment to Loan
Agreement and as the same may hereafter be amended
from time to time, the ALoan Agreement@) which Loan
Agreement provides for the extension of credit to
Grantor, the Parent, SSOC and APD in the nature of a
revolving line of credit facility (the "Facility") as
evidenced by a certain Revolving Note dated as of
December 1, 1996, in face amount of $20,000,000, a
<PAGE>
copy of which is attached hereto as Schedule 2 and
made a part hereof and the terms of which are
incorporated herein, as amended by a First Amendment
to Revolving Note dated as of September 30, 1998, a
copy of which is attached hereto as Schedule 2-a and
made a part hereof and the terms of which are
incorporated herein (the Revolving Note as presently
constituted and as amended by the First Amendment to
Revolving Note and as the same may hereafter be
amended, extended, renewed or consolidated from time
to time, together with any and all promissory notes
that may have been or may be exchanged or given in
substitution therefor from time to time, being
collectively referred to herein as the "Revolving
Credit Notes"), which Revolving Credit Notes bear
interest and are payable as set forth therein and in
the Loan Agreement, and mature on April 1, 2000, all
as more particularly provided therein and in the Loan
Agreement;
(b) The Loan Agreement Amendment, attached hereto as
Schedule 1-a is hereby attached to the Existing Mortgage as
Schedule 1-a and made a part thereof, and the terms thereof
are hereby incorporated in the Existing Mortgage.
(c) The Revolving Note Amendment attached hereto as
Schedule 2-a is hereby attached to the Existing Mortgage as
Schedule 2-a and made a part thereof, and the terms thereof
are hereby incorporated in the Existing Mortgage.
<PAGE>
Continued Force and Effect; References to Existing Mortgage.
(a) All of the terms and conditions of the Amended
Loan Agreement, the Amended Revolving Note, the Guaranty, the
Amended Mortgage and the other Lending Documents to which
Mortgagor is a party and the indebtedness evidenced thereby
and/or the collateral security provided thereby are hereby
ratified and confirmed in all respects and shall remain and in
full force and effect. Nothing contained in this Agreement
shall (i) be deemed to cancel, extinguish, release, discharge
or constitute payment or satisfaction of the Amended Note or
the Guaranty or the indebtedness evidenced thereby or to
otherwise affect the obligations represented thereby, all of
which obligations are hereby continued and remain in full
force and effect; (ii) constitute a new or additional
indebtedness or constitute a readvance of any loan; or (iii)
be deemed to impair in any manner the validity, enforceability
or priority of the Amended Mortgage or the lien thereof.
<PAGE>
(b) From and after the date hereof, unless the
context shall clearly require otherwise, all references in any
of the Lending Documents to the Existing Mortgage or the
security provided thereby (regardless of the term or terms
used to make any such reference) shall be deemed and construed
to refer, respectively, to the Amended Mortgage and the
security provided thereby. The Lending Documents are hereby
modified to incorporate therein the aforesaid definitions,
interpretations and other terms and provisions.
(c) In the event of any conflict between the terms of
this Agreement and the terms of the Existing Mortgage, the
terms of this Agreement shall control.
No Defenses, Counterclaims or Rights of Offset. Mortgagor hereby
acknowledges, admits, and agrees that, as of the date hereof, there
exists no rights of offset, defense, counterclaim, claim, or objection
in favor of Mortgagor with respect to the Amended Loan Agreement, the
Amended Revolving Note, the Guaranty, the Amended Mortgage and the
other Lending Documents to which Mortgagor is a party, or
alternatively, that any and all such right of offset, defense,
counterclaim, claim, or objection which Mortgagor may have or claim, of
any nature whatsoever, whether known or unknown, is hereby expressly
and irrevocably waived and released.
<PAGE>
Miscellaneous.
(a) The Recitals set forth at the beginning of this
Agreement are incorporated in and made a part of this
Agreement by this reference.
(b) This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed to be an
original, and all of which, taken together, shall be deemed to
be one and the same Agreement.
This Agreement shall bind and inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, legal representatives,
successors and assigns. This Agreement and the obligations of such parties
hereunder are and at all times shall be deemed to be for the exclusive
benefit of such parties and their respective successors and assigns, and
nothing set forth herein shall be deemed to be for the benefit of any other
person. Nothing set forth in this paragraph shall be deemed or construed to
create, recognize or allow any assignment or transfer rights not otherwise
provided for in the Lending Documents.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed to be effective as of the day and year first above written.
Signed and Acknowledged SPECTRAN COMMUNICATION FIBER
in the Presence of: TECHNOLOGIES, INC.
_______________________________ By________________________________
Name: Name:
Its:
- -------------------------------
Name:
STATE OF NEW YORK )
) ss.
COUNTY OF )
On this ____ day of ___________, 1999, before me personally appeared
___________________________________, to me personally known, who, being by me
duly sworn, did say that he/she is the _____________________________ of SPECTRAN
COMMUNICATION FIBER TECHNOLOGIES, INC., a Delaware corporation, that the seal
affixed to the foregoing instrument is the corporate seal of said corporation,
that he/she signed the foregoing instrument on behalf of said corporation by
authority of its board of directors, and acknowledged said instrument to be
his/her free act and deed and the free act and deed of said corporation.
------------------------------------
Notary Public
My Commission Expires:
[SEAL]
<PAGE>
Signed and Acknowledged STATE STREET BANK AND TRUST in the Presence
of: COMPANY , as Trustee
_______________________________ By________________________________
Name: Name:
Its:
- -------------------------------
Name:
STATE OF MASSACHUSETTS )
)ss.
COUNTY OF )
On this ____ day of ___________, 1999, before me personally appeared
___________________________________, to me personally known, who, being by me
duly sworn, did say that he/she is the _____________________________ of State
Street Bank and Trust Company, a a Massachusetts trust company, as Trustee, that
[the seal affixed to the foregoing instrument is the seal of said trust
company][said trust company has no seal], that he/she signed the foregoing
instrument on behalf of said trust company, as Trustee, and acknowledged said
instrument to be his/her free act and deed and the free act and deed of said
trust company, as Trustee.
------------------------------------
Notary Public
My Commission Expires:
<PAGE>
Exhibit A-0
EXHIBIT A
[Legal Description]
<PAGE>
Schedule 1-a-0
SCHEDULE 1-a
[Loan Agreement Amendment]
<PAGE>
Schedule 2-a-0
SCHEDULE 2-a
[Revolving Note Amendment]
<PAGE>
Exhibit 10.121
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (this "Agreement"), is made as of September
30, 1998, between SPECTRAN SPECIALITY OPTICS COMPANY, a Delaware corporation,
having a place of business and a mailing address at 150 Fisher Drive, Avon,
Connecticut 06001 ("Mortgagor") and STATE STREET BANK AND TRUST COMPANY
(successor to Fleet National Bank, as Trustee), a Massachusetts trust company
having a place of business and a mailing address at 2 International Place
Boston, Massachusetts 02110, not individually but solely as security trustee
under that certain Trust Indenture, dated as of December 1, 1996, among the
Mortgagor, Fleet National Bank and the other parties signatory thereto, as
amended by that certain First Amendment dated as of September 30, 1998, among
Mortgagor, State Street Bank and Trust Company (in its capacity as successor
trustee to Fleet National Bank, as Trustee and together with any successor or
co-security trustee that becomes such in accordance with the provisions of the
Trust Indenture, the "Trustee") and the other parties signatory thereto (said
Trust Indenture, as so amended and as may hereafter be amended, restated or
otherwise modified from time to time, the "Trust Indenture").
R E C I T A L S
WHEREAS, Mortgagor is party to that certain Loan Agreement dated as of
December 1, 1996 (as amended to but excluding the date hereof, the "Existing
Loan Agreement"), among Mortgagor, SpecTran Corporation (the "Parent"), a
Delaware corporation, SpecTran Communication Fiber Technologies, a Delaware
corporation, and Applied Photonic Devices, Inc, a Delaware corporation
(collectively, the "Borrowers"), and Fleet National Bank (the "Lender"), a
national banking association, pursuant to which Lender has extended credit to
Borrowers pursuant to a revolving line of credit facility (the "Facility"), as
evidenced by a certain Revolving Note dated as of December 1, 1996, in the face
amount of $20,000,000 (as amended to but excluding the date hereof, the
"Existing Revolving Note");
<PAGE>
WHEREAS, Borrowers and Lender have agreed to enter into that certain
First Amendment to Loan Agreement dated as of September 30, 1998, a copy of
which is attached hereto as Schedule 1-a and made a part hereof (the "Loan
Agreement Amendment"; the Existing Loan Agreement as amended by the Loan
Agreement Amendment and as further amended from time to time, the "Amended Loan
Agreement"), and that certain First Amendment to Revolving Note dated as of
September 30, 1998, a copy of which is attached hereto as Schedule 2-a and made
a part hereof (the "Revolving Note Amendment"; the Existing Revolving Note as
amended by the Revolving Note Amendment and as further amended from time to
time, the "Amended Revolving Note"), pursuant to which, among other things,
Borrowers and Lender have agreed to extend the maturity of the Existing
Revolving Note from December 31, 1999, to April 1, 2000, and to make certain
other amendments to the Existing Loan Agreement and the Existing Revolving Note,
as more particularly set forth in the Loan Agreement Amendment and the Revolving
Note Amendment, respectively;
<PAGE>
WHEREAS, the Parent issued certain 9.24% Series A Senior Secured Notes
due December 26, 2003, in the aggregate principal amount of $16,000,000, and
certain 9.39% Series B Senior Secured Notes due December 26, 2004, in the
aggregate principal amount of $8,000,000 (collectively, the "Existing Term
Notes") pursuant to those certain Note Purchase Agreements each dated as of
December 1, 1996 (as amended to but excluding the date hereof, collectively, the
"Existing Note Agreement"), which Existing Term Notes were guarantied by
Mortgagor pursuant to a certain Guaranty Agreement dated as of December 1, 1996
(as amended from time to time, the "Guaranty Agreement");
WHEREAS, all capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to such terms in the Trust Indenture;
WHEREAS, as required by the Existing Loan Agreement and the Existing
Note Agreement, Mortgagor's obligations from time to time evidenced by or
arising in connection with the Existing Revolving Note, the Guaranty Agreement,
the Trust Indenture or the other Lending Documents are secured by that certain
Open-End Mortgage, Assignment of Rents and Security Agreement dated as of
December 1, 1996, and recorded in the Town Clerk of Avon, Connecticut Land
Records, in Book 327, at page 378 (the "Existing Mortgage" and as amended by
this Agreement, the "Amended Mortgage"), encumbering, among other things,
certain real property located in Avon, Connecticut, and more particularly
described in Exhibit A attached thereto; and
WHEREAS, as a condition of, and as an inducement to, Lender agreeing to
enter into the Loan Agreement Amendment and the Revolving Note Amendment,
Mortgagor has agreed to amend the Existing Mortgage to reflect the modifications
made to the Existing Loan Agreement by the Loan Agreement Amendment and those
made to the Existing Revolving Note by the Revolving Note Amendment, including
the extension of the maturity of the Revolving Note to April 1, 2000;
<PAGE>
A G R E E M E N T S
NOW, THEREFORE, in consideration of the foregoing RECITALS and for
other good and valuable consideration received to the mutual satisfaction of the
parties hereto, the undersigned hereby agree as follows:
1. Modifications to the Existing Mortgage. The Existing Mortgage is hereby
modified as follows:
(a) The first paragraph following "W I T N E S S E T
H" is hereby amended and restated in its entirety as follows:
<PAGE>
AWHEREAS, Grantor, SpecTran Corporation, a
Delaware corporation having an address at 50 Hall
Road, Sturbridge, Massachusetts 01566 (the "Parent"),
SpecTran Communication Fiber Technologies, Inc.
("SCFT"), a Delaware corporation having an address at
50 Hall Road, Sturbridge, Massachusetts 01566, and
Applied Photonic Devices, Inc. ("APD"), a Delaware
corporation having an address at 300 Lake Road,
Dayville, Connecticut 06241, and Fleet National Bank,
a national banking association ("Lender") have
entered into a certain Loan Agreement dated as of
December 1, 1996, a copy of which is attached hereto
as Schedule 1 and made a part hereof and the terms of
which are incorporated herein, as amended by a First
Amendment to Loan Agreement dated as of September 30,
1998, a copy of which is attached hereto as Schedule
1-a and made a part hereof and the terms of which are
incorporated herein (the Loan Agreement as presently
constituted and as amended by the First Amendment to
Loan Agreement and as the same may hereafter be
amended from time to time, the "Loan Agreement")
which Loan Agreement provides for the extension of
credit to Grantor, the Parent, SCFT and APD in the
nature of a revolving line of credit facility (the
<PAGE>
"Facility") as evidenced by a certain Revolving Note
dated as of December 1, 1996, in face amount of
$20,000,000, a copy of which is attached hereto as
Schedule 2 and made a part hereof and the terms of
which are incorporated herein, as amended by a First
Amendment to Revolving Note dated as of September 30,
1998, a copy of which is attached hereto as Schedule
2-a and made a part hereof and the terms of which are
incorporated herein (the Revolving Note as presently
constituted and as amended by the First Amendment to
Revolving Note and as the same may hereafter be
amended, extended, renewed or consolidated from time
to time, together with any and all promissory notes
that may have been or may be exchanged or given in
substitution therefor from time to time, being
collectively referred to herein as the "Revolving
Credit Notes"), which Revolving Credit Notes bear
interest and are payable as set forth therein and in
the Loan Agreement, and mature on April 1, 2000, all
as more particularly provided therein and in the Loan
Agreement;
(b) The Loan Agreement Amendment, attached hereto as
Schedule 1-a is hereby attached to the Existing Mortgage as
Schedule 1-a and made a part thereof, and the terms thereof
are hereby incorporated in the Existing Mortgage.
<PAGE>
(c) The Revolving Note Amendment attached hereto as
Schedule 2-a is hereby attached to the Existing Mortgage as
Schedule 2-a and made a part thereof, and the terms thereof
are hereby incorporated in the Existing Mortgage.
2. Continued Force and Effect; References to Existing Mortgage.
(a) All of the terms and conditions of the Amended
Loan Agreement, the Amended Revolving Note, the Guaranty, the
Amended Mortgage and the other Lending Documents to which
Mortgagor is a party and the indebtedness evidenced thereby
and/or the collateral security provided thereby are hereby
ratified and confirmed in all respects and shall remain and in
full force and effect. Nothing contained in this Agreement
shall (i) be deemed to cancel, extinguish, release, discharge
or constitute payment or satisfaction of the Amended Note or
the Guaranty or the indebtedness evidenced thereby or to
otherwise affect the obligations represented thereby, all of
which obligations are hereby continued and remain in full
force and effect; (ii) constitute a new or additional
indebtedness or constitute a readvance of any loan; or (iii)
be deemed to impair in any manner the validity, enforceability
or priority of the Amended Mortgage or the lien thereof.
<PAGE>
(b) From and after the date hereof, unless the
context shall clearly require otherwise, all references in any
of the Lending Documents to the Existing Mortgage or the
security provided thereby (regardless of the term or terms
used to make any such reference) shall be deemed and construed
to refer, respectively, to the Amended Mortgage and the
security provided thereby. The Lending Documents are hereby
modified to incorporate therein the aforesaid definitions,
interpretations and other terms and provisions.
(c) In the event of any conflict between the terms of
this Agreement and the terms of the Existing Mortgage, the
terms of this Agreement shall control.
3. No Defenses, Counterclaims or Rights of Offset. Mortgagor hereby
acknowledges, admits, and agrees that, as of the date hereof, there
exists no rights of offset, defense, counterclaim, claim, or objection
in favor of Mortgagor with respect to the Amended Loan Agreement, the
Amended Revolving Note, the Guaranty, the Amended Mortgage and the
other Lending Documents to which Mortgagor is a party, or
alternatively, that any and all such right of offset, defense,
counterclaim, claim, or objection which Mortgagor may have or claim, of
any nature whatsoever, whether known or unknown, is hereby expressly
and irrevocably waived and released.
<PAGE>
4. Miscellaneous.
(a) The Recitals set forth at the beginning of this
Agreement are incorporated in and made a part of this
Agreement by this reference.
(b) This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed to be an
original, and all of which, taken together, shall be deemed to
be one and the same Agreement.
(3) This Agreement shall bind and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, legal
representatives, successors and assigns. This Agreement and the obligations
of such parties hereunder are and at all times shall be deemed to be for
the exclusive benefit of such parties and their respective successors and
assigns, and nothing set forth herein shall be deemed to be for the benefit
of any other person. Nothing set forth in this paragraph shall be deemed or
construed to create, recognize or allow any assignment or transfer rights
not otherwise provided for in the Lending Documents.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed to be effective as of the day and year first above written.
Signed and Acknowledged SPECTRAN SPECIALTY OPTICS COMPANY in the Presence of:
_______________________________ By________________________________
Name: Name:
Its:
- -------------------------------
Name:
STATE OF NEW YORK )
) ss.
COUNTY OF )
Personally Appeared ____________________________ of SPECTRAN SPECIALTY
OPTICS COMPANY, a Delaware corporation, as aforesaid, Signer of the foregoing
Instrument, and acknowledged the same to be his/her free act and deed as such
______________________ and the free act and deed of said corporation, before me.
------------------------------------
Notary Public
My Commission Expires:
[SEAL]
<PAGE>
Signed and Acknowledged STATE STREET BANK AND TRUST in the Presence
of: COMPANY , as Trustee
_______________________________ By________________________________
Name: Name:
Its:
- -------------------------------
Name:
COMMONWEALTH OF MASSACHUSETTS )
)ss.
COUNTY OF )
Personally appeared _____________________________________ of State
Street Bank and Trust Company, a Massachusetts trust company, as Trustee, as
aforesaid, Signer of the foregoing instrument, and acknowledged the same to be
his/her free act and deed as such _________________________________ and free act
and deed of said trust company, before me.
------------------------------------
Notary Public
My Commission Expires:
<PAGE>
Exhibit A-1
EXHIBIT A
[Legal Description]
<PAGE>
Schedule 1-a-0
SCHEDULE 1-a
[Loan Agreement Amendment]
<PAGE>
Schedule 2-a-1
SCHEDULE 2-a
[Revolving Note Amendment]
SPECTRAN CORPORATION
EXHIBIT 21.0
SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation
SpecTran Communication Fiber Technologies, Inc. Delaware
SpecTran Specialty Optics Company Delaware
Applied Photonic Devices, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000718487
<NAME> SPECTRAN CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,690
<SECURITIES> 0
<RECEIVABLES> 13,091
<ALLOWANCES> 523
<INVENTORY> 8,279
<CURRENT-ASSETS> 26,106
<PP&E> 91,090
<DEPRECIATION> 22,595
<TOTAL-ASSETS> 105,419
<CURRENT-LIABILITIES> 14,557
<BONDS> 0
0
0
<COMMON> 700
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 105,419
<SALES> 70,856
<TOTAL-REVENUES> 70,856
<CGS> 51,976
<TOTAL-COSTS> 19,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,419
<INCOME-PRETAX> 772
<INCOME-TAX> 249
<INCOME-CONTINUING> 523
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 523
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
