<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
FILED BY THE REGISTRANT [x]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[X] PRELIMINARY PROXY STATEMENT
[ ] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 14a-12
FIBERCHEM, INC.
(Name of Registrant as Specified In Its Charter)
NONE
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] NO FEE REQUIRED.
[ ] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14a-6(i)(1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION
COMPUTED PURSUANT TO EXCHANGE ACT RULE 0-11:(1)
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
(5) TOTAL FEE PAID:
[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS:
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE
ACT RULE 0-11(a)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING
FEE WAS PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION
STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
(3) FILING PARTY:
(4) DATE FILED:
---------
(1) SET FORTH THE AMOUNT ON WHICH THE FILING FEE IS CALCULATED AND STATE
HOW IT WAS DETERMINED.
i
<PAGE>
FCI
FIBERCHEM, INC.
1181 GRIER DRIVE, SUITE B, LAS VEGAS, NV 89119
(702) 361-9873
PROXY STATEMENT OF FIBERCHEM, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD AT 10:00 A.M., PACIFIC TIME, ON NOVEMBER 29, 2000
October , 2000
Dear Stockholders:
You are cordially invited to attend the annual meeting of our
stockholders to be held at the DoubleTree Club Hotel, 7250 Pollock Drive, Las
Vegas, Nevada at 10:00 a.m., Pacific time, on November 29, 2000.
On July 27, 2000 we completed a business combination with Intrex Data
Communications Corp., a British Columbia corporation, and Pandel Instruments,
Inc., a Texas corporation which prior to the combination owned 24.89% of
Intrex's outstanding common shares, an event of singular importance in the
history of FiberChem. The transaction combined FiberChem's real-time sensor
and monitoring technology with Intrex's remote wireless data communications
systems to produce a new company, to be known as DecisionLink, Inc., which
will operate in the global wireless remote asset monitoring marketplace.
The business combination was effected pursuant to an Arrangement
Agreement between FiberChem and Intrex and a Merger Agreement between
FiberChem and its wholly-owned acquisition subsidiary, Pandel Mergerco, Inc.,
and Pandel. Under the Arrangement Agreement and the Merger Agreement, Intrex
stockholders (other than Pandel) and Pandel stockholders received securities
that can be converted into or exchanged for up to approximately 252,200,000
FiberChem common shares, or about 80% of FiberChem's common stock
capitalization when the transaction was completed. Securities convertible into
or exchangeable for approximately 189,000,000 of these shares have been placed
in escrow and will be released to Intrex and Pandel stockholders in
installments if the Intrex business meets certain milestones within a two year
period.
At this meeting, we are submitting to stockholders a proposal to
increase our authorized common stock from 150,000,000 to 500,000,000 in order
to carry out our undertaking in the Arrangement Agreement. The increase is
necessary because the number of shares of common stock which FiberChem
committed to issue upon conversion or exchange of securities issued in the
combination exceeds the number of FiberChem's authorized but unissued shares.
Pursuant to the Arrangement Agreement, we are also seeking stockholder
ii
<PAGE>
approval of a change in our corporate name from FiberChem, Inc. to
"DecisionLink, Inc." to reflect the wider scope of our activities after the
combination with Intrex.
Although the business combination was completed on July 27, 2000, we
may not be able to realize the full anticipated benefits of the transaction
unless these proposals are approved by stockholders. The Arrangement Agreement
provides that if the additional shares of FiberChem Common Stock are not
authorized by December 31, 2000, Intrex common shareholders received Intrex
Class B Shares, which are exchangeable for FiberChem common stock, can demand
payment in cash (rather than in shares) of the fair market value of the
FiberChem common stock they are entitled to receive. If we are required to pay
cash rather than FiberChem common stock for the exchangeable securities, we
may not be able to continue in business or may be required to re-negotiate
payment provisions which could be more or less favorable to FiberChem
stockholders.
The proposal to increase our authorized common stock requires the
approval of a majority of all outstanding stock entitled to vote and a
majority of all outstanding shares of common stock. Directors and officers of
FiberChem who are entitled to vote 48.7% of all the outstanding stock and
11.5% of the outstanding common stock have indicated they will vote in favor
of these proposals. THE BOARD OF DIRECTORS HAS DETERMINED THAT CARRYING OUT
THE PROVISIONS OF THE ARRANGEMENT AGREEMENT IS FAIR TO AND IS IN THE BEST
INTEREST OF FIBERCHEM STOCKHOLDERS AND URGES YOU TO VOTE IN FAVOR OF THESE
PROPOSALS.
WE URGE YOU TO CONSIDER CAREFULLY THE IMPORTANT MATTERSDESCRIBED IN
THE ATTACHED PROXY STATEMENT. WHETHER OR NOT YOU ARE PERSONALLY ABLE TO ATTEND
THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN
IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE. This action will not limit
your right to vote in person if you wish to attend the meeting and vote
personally.
Other matters to be considered at the meeting include the election of
directors, approval of our 2000 Stock Option Plan and ratification of the
selection of our auditors.
Sincerely yours,
Geoffrey F. Hewitt
Chairman of the Board of Directors and
Chief Executive Officer
iii
<PAGE>
FCI
FIBERCHEM, INC.
1181 GRIER DRIVE, SUITE B, LAS VEGAS, NV 89119
(702) 361-9873
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
NOVEMBER 29, 2000
TO THE STOCKHOLDERS OF FIBERCHEM, INC.:
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF THE
STOCKHOLDERS (THE "ANNUAL MEETING") OF FIBERCHEM, INC., ("FIBERCHEM" OR
THE "COMPANY") WHICH WILL BE HELD AT THE DOUBLETREE CLUB HOTEL, 7250
POLLOCK DRIVE, LAS VEGAS, NEVADA AT 10:00 A.M., PACIFIC TIME, ON
NOVEMBER 29, 2000, TO CONSIDER AND ACT UPON THE FOLLOWING MATTERS:
(1) To consider and act upon a proposal to amend the
Company's Certificate of Incorporation to increase
the number of authorized shares of Common Stock of
the Company, $.0001 par value ("Common Stock"), from
150,000,000 to 500,000,000 shares of Common Stock.
(2) To approve an amendment to the Company's Certificate
of Incorporation authorizing a change of the
Company's name to "DecisionLink, Inc."
(3) To elect three (3) Class A members, three (3) Class B
members and two (2) Class C members to the Board of
Directors. The members nominated by the Board of
Directors are described in the accompanying Proxy
Statement.
(4) To approve and adopt the 2000 Stock Option Plan for
the Company.
(5) To ratify the appointment of Goldstein Golub Kessler
LLP as the Company's auditors for the fiscal years
ended September 30, 1999 and September 30, 2000.
(6) To transact such other business as may properly come
before the Annual Meeting or any adjournments
thereof.
The additional shares of Common Stock authorized in item 1 above
would be used in part for issuance upon conversion or exchange of securities
issued to acquire Intrex Data Communications Corp., a
i
<PAGE>
British Columbia corporation ("Intrex"). An explanation of the business
combination with Intrex which was completed on July 27, 2000 is set forth in
the proxy statement. The change in the Company's name to DecisionLink, Inc. is
also being proposed to carry out a requirement of the Intrex business
combination agreement. The new name reflects the wider scope of the combined
companies activities.
Only stockholders of record at the close of business on October 5,
2000, will be entitled to notice of, and to vote at, the Annual Meeting or any
adjournments thereof.
Stockholders are cordially invited to attend the Annual Meeting.
Whether or not you expect to attend the Annual Meeting in person, please
complete, date and sign the accompanying proxy card and return it without
delay in the enclosed postage prepaid envelope. Your proxy will not be used if
you are present and prefer to vote in person or if you revoke the proxy.
Dated: October 10, 2000
BY ORDER OF THE BOARD OF DIRECTORS,
MELVIN W. PELLEY, SECRETARY
ii
<PAGE>
FIBERCHEM, INC.
1181 GRIER DRIVE, SUITE B
LAS VEGAS, NEVADA 89119
(702) 361-9873
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 29, 2000
QUESTIONS AND ANSWERS
PROPOSAL 1 - INCREASING OUR AUTHORIZED COMMON STOCK TO ALLOW
CONVERSION OR EXCHANGE OF SECURITIES ISSUED IN THE
BUSINESS COMBINATION WITH INTREX
PROPOSAL 2 - CHANGING OUR CORPORATE NAME FROM FIBERCHEM, INC. TO
DECISIONLINK, INC.
HAS THE BUSINESS COMBINATION WITH INTREX DATA COMMUNICATIONS CORP. BEEN
COMPLETED?
The business combination with Intrex closed on July 27, 2000. Since the
transaction did not provide for any change in the outstanding common stock of
FiberChem, common stockholder approval of the transaction was not required under
Delaware law where FiberChem is incorporated.
WHY IS MY APPROVAL AS A STOCKHOLDER BEING SOUGHT NOW?
In order to satisfy requirements to issue shares of common stock upon
conversion or exchange of securities issued in the business combination, we
agreed to call a stockholders meeting to seek approval of Proposal 1 - to amend
our certificate of incorporation to increase the number of shares of common
stock which FiberChem is authorized to issue from 150,000,000 to 500,000,000. We
also need stockholder approval for Proposal 2 - to amend our certificate of
incorporation to change our name to "DecisionLink, Inc." to carry out the terms
of the business combination. Our Board of Directors regards Proposal 1 and
Proposal 2 as independent proposals since the business combination with Intrex
will remain effective even if neither of the proposals is adopted.
HOW MANY FIBERCHEM SHARE EQUIVALENTS WERE ISSUED IN THE BUSINESS COMBINATION?
Securities exchangeable for or convertible into approximately
252,200,000 shares of FiberChem common were issued in the business combination.
This represented approximately 81% of the equity interest of the combined
company.
-1-
<PAGE>
Former common shareholders of Intrex (other than Pandel) received in
exchange for the 75.11% of Intrex common shares owned by them approximately
170,334,000 Class B Shares of Intrex pursuant to the Arrangement Agreement. Each
Class B Share is as nearly as practicable the economic equivalent of one share
of common stock of FiberChem. In addition, David S. Peachey, the former
President and Chief Executive Officer of Intrex received an additional 9,450,000
Intrex Class B Shares pursuant to a Compensation Agreement with Intrex and
FiberChem.
For each Class B Share issued to former Intrex common shareholders
pursuant to the Arrangement Agreement and to Mr. Peachey pursuant to his
compensation agreement, we also issued 1/100th of a share of a newly designated
series of non-participating FiberChem preferred stock known as Special Shares.
Each Special Share is entitled to 100 votes, voting together with all other
holders of FiberChem stock entitled to vote, and is subject to redemption by
FiberChem for a nominal amount upon exchange of the related Class B Shares. The
Special Shares afford each Class B shareholder voting rights as nearly as
practicable equivalent to the voting rights of one share of FiberChem common
stock for each Class B Share held.
The former shareholders of Pandel received in exchange for their Pandel
shares 580,782.21 shares of a new series of FiberChem preferred stock designated
as Pandel Series Preferred Stock. The Pandel Series Preferred Stock is
convertible into and is as nearly as practicable the economic equivalent of
58,078,221 shares of FiberChem common stock. In addition, Peter J. Lagergren,
the former President and Chief Executive Officer of Pandel received an
additional 94,500 shares of Pandel Series Preferred Stock, equivalent to
9,450,000 shares of FiberChem common stock, pursuant to a Compensation Agreement
with FiberChem.
IS THERE ANY ESCROW OR HOLD-BACK ARRANGEMENT FOR THE CLASS B SHARES OR FIBERCHEM
PANDEL SERIES PREFERRED STOCK ISSUED IN THE BUSINESS COMBINATION?
Yes. Approximately 75% of the Class B Shares, the Special Shares and
the shares of Pandel Series Preferred Stock issued in the business combination
(including all the shares issued to Messrs. Peachey and Lagergren pursuant to
their compensation agreements) have been placed in escrow, subject to release if
the Intrex business achieves certain milestones by July 27, 2002, a period of
two years following the combination.
WHAT WILL HAPPEN IF THE PROPOSAL TO INCREASE OUR AUTHORIZED COMMON STOCK IS NOT
APPROVED?
Beginning not later than December 31, 2000, each holder of the
approximately 179,784,000 Intrex Class B Shares (exclusive of any of the
137,200,000 Class B Shares which remain in escrow) has the right to require our
Intrex subsidiary to redeem his shares. FiberChem can satisfy the redemption
obligation by exchanging one share of FiberChem common stock for each Class B
Share to be redeemed, but if we do not for any reason have shares of our common
stock available for exchange, we or our subsidiary, Intrex, must satisfy the
redemption obligation by making a cash payment equal to the then market price
for the FiberChem common stock.
FiberChem presently has 47,668,620 shares of common stock available for
exchange for a portion of the Class B Shares before the proposed increase in the
authorized common stock. This amount is
-2-
<PAGE>
sufficient to cover the 42,583,549 Class B Shares which have been initially
released to the former Intrex common shareholders, but would not be sufficient
to cover the approximately 137,200,000 escrowed Class B Shares when and if
they are released.
We cannot presently estimate the amount of cash we would be required to
pay for redemption of Class B Shares, the period of time over which these
payments would be made or the effect of the required payments if the proposal to
increase our authorized common stock is not approved. However, the obligation to
make cash payments could have a serious effect on our business and might result
in FiberChem and its Intrex subsidiary being unable to continue in business or
being required to re-negotiate payment provisions which could be more or less
favorable to FiberChem stockholders.
The FiberChem Pandel Series Preferred Stock issued to former
stockholders of Pandel is automatically convertible into FiberChem common stock
on or after December 31, 2000, only if we reserve and have available for
issuance a sufficient number of shares of our common stock. The holders of the
Pandel Series Preferred Stock do not have any right to require conversion of
their shares if the proposal to increase FiberChem's authorized common stock is
not approved.
WHY DID WE ACQUIRE THE INTREX COMMON SHARES NOT OWNED BY PANDEL IN EXCHANGE FOR
INTREX CLASS B SHARES AND SPECIAL SHARES?
Intrex is a British Columbia corporation subject to British Columbia
provincial and Canadian federal tax laws. The use of exchangeable Class B Shares
and Special Shares in the transaction structure may allow the Intrex
shareholders other than Pandel to defer what might otherwise be a taxable gain
on the sale of their Intrex common shares.
The merger of Pandel, a Texas corporation, into our wholly-owned
subsidiary was intended to be a tax-free reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended.
WHAT ARE THE TAX CONSEQUENCES OF THE BUSINESS COMBINATION TO ME?
In the opinion of our counsel, FiberChem common stockholders should
not recognize any gain or loss for federal income tax purposes as a result of
the business combination or the increase in our authorized common stock from
150,000,000 to 500,000,000 shares.
WHY ARE WE BEING ASKED IN PROPOSAL 2 TO AUTHORIZE A CHANGE IN OUR CORPORATE NAME
FROM FIBERCHEM, INC. TO DECISIONLINK, INC?
We are proposing to change our corporate name to reflect the wider
scope of our activities after the recent business combination with Intrex.
WHAT DO I DO IF I HAVE ADDITIONAL QUESTIONS?
If you have any questions prior to the meeting, please call Mel Pelley,
Chief Financial Officer of FiberChem, who may be reached at 702-361-9873.
-3-
<PAGE>
SUMMARY TERM SHEET REGARDING BUSINESS COMBINATION WITH INTREX
This summary, together with the "Questions and Answers" on the
preceding pages highlights important selected information about our recent
business combination with Intrex Data Communications Corp., a British Columbia
corporation, and Pandel Instruments, Inc., a Texas corporation. We are
presenting this information because both Proposal 1 (to amend our certificate of
incorporation to increase the authorized number of shares of our common stock
from 150,000,000 to 500,000,000) and Proposal 2 (to amend our certificate of
incorporation to change our corporate name to "DecisionLink, Inc.") are being
submitted to stockholders to carry out provisions of this business combination.
ACQUIRED COMPANIES Intrex Data Communications Corp., a
British Columbia corporation, and Pandel
Instruments, Inc., a Texas corporation
which owned 24.89% of Intrex.
BUSINESS OF THE ACQUIRED Monitoring remote and difficult to reach
COMPANIES assets throughwireless data
communications networks. A brief
description of the business of the
acquired companies and our combined
company is included beginning on page
25.
TERMS OF THE BUSINESS
COMBINATION (page 21):
PURCHASE PRICE PAID
Intrex Shareholders other than Pandel: - 170,334,245 Intrex Class B Shares,
each exchangeable for one share of
FiberChem Common Stock
- 1,703,342.45 FiberChem Special Shares,
each with 100 votes per share
The Class B Shares and the Special
Shares are intended to provide as nearly
as practicable the same economic and
voting rights as one share of FiberChem
common stock for each Class B Share
issued. The use of exchangeable Class B
Shares and FiberChem Special Shares in
the transaction structure may allow the
Intrex shareholders other than Pandel
who are subject to Canadian taxation to
defer what might otherwise be a taxable
gain on the sale of their Intrex common
shares.
Pandel Shareholders: - 675,212.21 shares of FiberChem Pandel
Series Preferred Stock, each convertible
into 100 shares of common stock and
entitled to 100 votes per share
SHARES ISSUED PURSUANT
TO INCENTIVE COMPENSATION
AGREEMENTS - 9,450,000 Intrex Class B Shares and
94,500 FiberChem Special Shares were
issued to David S. Peachey, formerly
President and Chief Executive Officer of
Intrex and now President and Chief
-4-
<PAGE>
Operating Officer of FiberChem, pursuant
to a Compensation Agreement between Mr.
Peachey and Intrex and FiberChem
- 94,500 shares of FiberChem Pandel
Series Convertible Preferred Stock
(convertible into 9,450,000 shares of
FiberChem common stock) were issued to
Peter J. Lagergren, formerly Executive
Vice President and Chief Technology
Officer of Intrex and now Executive
Vice President - Communications
Division of FiberChem
ESCROWED SHARES Of the total purchase price consisting
of securities convertible into or
exchangeable for approximately
252,200,000 shares of FiberChem common
stock, securities convertible into or
exchangeable for approximately
189,000,000 or 75% of the total have
been deposited in escrow subject to
release in installments if the Intrex
business achieves certain milestones
during a two year period following the
closing on July 27, 2000. The securities
deposited in escrow include all
9,450,000 Intrex Class B Shares issued
to David S. Peachey and all 94,500
shares of FiberChem Pandel Series
Preferred Stock issued to Peter J.
Lagergren pursuant to their Compensation
Agreements.
OTHER AGREEMENTS Intrex, FiberChem and certain executive
officers and principal stockholders of
the companies have entered into
agreements covering the composition of
the FiberChem's board of directors, the
voting of shares of FiberChem stock, the
re-sale of shares of FiberChem stock and
the employment of certain executive
officers. These agreements are described
beginning on page 23.
ACCOUNTING TREATMENT: Since the securities issued as
consideration in the business
combination are exchangeable for or
convertible into shares of FiberChem
common stock representing from 51.8% to
81.1% of FiberChem's outstanding common
stock, the transaction will be accounted
for as a reverse acquisition by Intrex
of FiberChem using purchase accounting.
PER SHARE DATA, FINANCIAL Per Share Data (page 6), Financial
STATEMENTS AND Statements of Intrex (page F-2 and
PRO FORMA FINANCIAL Pandel (page F-13) and Pro Forma
INFORMATION Financial Information (page F-22) are
included elsewhere in this Proxy
Statement. Financial Statements of
FiberChem for FiberChem for the two
years ended September 30, 1999 are
incorporated by reference from
the accompanying Annual Report to
Shareholders of FiberChem. Interim
financial statements of FiberChem for
the nine month periods ended June 30,
2000 and June 30, 1999 are incorporated
by reference from the accompanying
Quarterly Report on Form 10-QSB of
FiberChem for the nine month period
ended June 30, 2000.
-5-
<PAGE>
COMPARATIVE PER SHARE DATA OF FIBERCHEM, INTREX AND PANDEL
Set forth below are the net income (loss), cash dividends declared, and
book value per common share data of FiberChem, Intrex and Pandel on an
historical and pro forma basis for FiberChem, and on an historical and
equivalent pro forma basis for Intrex and Pandel.
The FiberChem pro forma per share data was derived by combining
historical consolidated financial information of FiberChem, Intrex and Pandel,
giving effect to the combination under the purchase method of accounting for
business combinations. FiberChem pro forma dividends per common share assume no
dividend payments, which is consistent with FiberChem's historical dividend
level. The equivalent pro forma data for Intrex and Pandel combined was
calculated by multiplying the FiberChem pro forma per share data by the exchange
ratio of 27.801925.
The information set forth below should be read in conjunction with the
respective audited consolidated financial statements and related notes of
FiberChem, Intrex and Pandel and with the unaudited pro forma combined condensed
financial information and related notes included elsewhere in this Proxy
Statement.
<TABLE>
<CAPTION>
Nine Months Six Months Year Ended Year Ended
Ended Ended September 30, December 31,
June 30, 2000 June 30, 2000 1999 1999
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Historical Per Share Data:
FiberChem:
Net loss (0.04) -- (0.07) --
Cash dividends declared -- -- -- --
Book value at end of period 0.03 -- -- --
Intrex:
Net loss -- (0.10) -- (0.11)
Cash dividends declared -- -- -- --
Book value at end of period -- (0.13) -- --
Pandel:
Net (income) loss -- 0.00 -- 0.00
Cash dividends declared -- -- -- --
Book value at end of period -- 0.00 -- --
Pro Forma Combined Per Share Data:
FiberChem:
Net loss (0.01) -- (0.03) --
Cash dividends declared -- -- -- --
Book value at end of period 0.06(A) -- -- --
Equivalent Pro Forma Per Share Data:
Intrex and Pandel Combined:
Net loss -- (0.28) -- (0.83)
Cash dividends declared -- -- -- --
Book value at end of period -- 1.72 -- --
</TABLE>
-6-
<PAGE>
The pro forma and equivalent pro forma per share data is not necessarily
indicative of the per share data which would have been attained had the
reverse acquisition of FiberChem by Intrex and the merger of Pandel into
Mergerco been consummated at either of January 1, 1999 or June 30, 2000 or
which may be attained in the future. This per share data is not intended to be
a projection of future results.
The computation of pro forma and equivalent pro forma per share data, among
other things, assumes the ultimate distribution of all escrowed shares
resulting in an approximate 81.1% ownership interest of FiberChem by former
Intrex shareholders. However, any significant variance from this assumption
may have a material effect on the pro forma and equivalent pro forma per share
data. As such, additional pro forma and equivalent pro forma presentations
have been made in the following table giving effect to the range of possible
results and iterations thereto:
<TABLE>
<CAPTION>
Nine Months Six Months Year Ended Year Ended
Ended Ended September 30, December 31,
30-Jun-00 30-Jun-00 1999 1999
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSUMES 76.3% OWNERSHIP INTEREST:
Pro Forma Combined Per Share Data:
FiberChem:
Net loss (0.01) -- (0.04) --
Cash dividends declared -- -- -- --
Book value at end of period 0.08(B) -- -- --
Equivalent Pro Forma Per Share Data:
Intrex and Pandel Combined:
Net loss -- (0.35) -- (1.18)
Cash dividends declared -- -- -- --
Book value at end of period -- 2.16 -- --
ASSUMES 68.3% OWNERSHIP INTEREST:
Pro Forma Combined Per Share Data:
FiberChem:
Net loss (0.02) -- (0.06) --
Cash dividends declared -- -- -- --
Book value at end of period 0.10(C) -- -- --
Equivalent Pro Forma Per Share Data:
Intrex and Pandel Combined:
Net loss -- (0.50) -- (1.67)
Cash dividends declared -- -- -- --
Book value at end of period -- 2.89 -- --
ASSUMES 51.8% OWNERSHIP INTEREST:
Pro Forma Combined Per Share Data:
FiberChem:
Net loss (0.03) -- (0.10) --
Cash dividends declared -- -- -- --
Book value at end of period 0.16(D) -- -- --
Equivalent Pro Forma Per Share Data:
-7-
<PAGE>
Intrex and Pandel Combined:
Net loss -- (0.87) -- (2.84)
Cash dividends declared -- -- -- --
Book value at end of period -- 4.38 -- --
</TABLE>
(A) Includes goodwill of $19,761,880 or $0.06 per share.
(B) Includes goodwill of $20,121,356 or $0.08 per share.
(C) Includes goodwill of $20,720,483 or $0.11 per share.
(D) Includes goodwill of $21,956,183 or $0.18 per share.
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTREX
Management's Discussion and Analysis
The following discussion and analysis should be read in conjunction with the
audited consolidated financial statements of Intrex and notes thereto included
elsewhere in this Proxy Statement. All amounts are in Canadian dollars.
Material Changes in Financial Condition
Intrex's working capital deficiency at December 31, 1999 was $1,005,214, an
increased deficiency of $726,563 from its working capital deficiency of $278,651
at December 31, 1998. This increased deficit was primarily a result of Intrex's
net loss for the year of $1,188,713, offset in part by the issuance of 1,196,000
common shares for cash proceeds of $598,000.
Net cash used in operating activities for the twelve months ended December 31,
1999 ("1999") was $491,461, compared to net cash used in operating activities
for the twelve months ended December 31, 1998 ("1998") of $93,526. The deficit
during 1999 resulted primarily from Intrex's net loss of $1,188,713, less
adjustment for non-cash depreciation and amortization expense of $297,471, and
changes in current assets and liabilities, which included an increase in
accounts payable and accrued liabilities of $386,656. The deficit during 1998
resulted primarily from Intrex's net loss of $551,388, less adjustment for
non-cash depreciation and amortization expense of $284,215, and changes in
current assets and liabilities.
Net cash provided by financing activities during 1999 was $666,243, compared to
net cash provided by financing activities during 1998 of $106,061. During 1999
Intrex issued 1,196,000 common shares for net proceeds (after costs of issuance
of $83,294) of $514,706. Also during 1999 officers and directors of Intrex
advanced to Intrex in cash or paid on its behalf $230,487. Approximately $60,000
of advances from officers and directors was repaid during the year. During 1998
Intrex issued 239,896 common shares for net proceeds of $119,948.
Net cash used in investing activities during 1999 for the purchase of
communications and computer equipment was $85,579, compared to $13,171 during
1998.
As discussed in Note 2 to the consolidated financial statements, Intrex
continues to incur substantial losses, and needs additional financing to
continue its operations. As discussed in Note 11, Intrex's Arrangement Agreement
to combine its business with that of FiberChem, Inc. includes provisions for
interim advances to Intrex by FiberChem and for obtaining additional financing
for the combined entity. However, Intrex cannot be assured that FiberChem will
be able to continue to advance interim funds, or that the Arrangement Agreement
will be concluded, or that financing, if any, will be obtained on terms
satisfactory to Intrex and/or the combined entity.
Material Changes in Results of Operations
During late 1998 and early 1999 Intrex focused its development efforts primarily
on a method and associated hardware and software to measure the level of liquids
in storage tanks, transmit the data via satellite, and provide resulting
information via the Internet. In conjunction with Cornerstone Propane Partners,
LP ("Cornerstone"), the fourth largest propane distributor in the United States,
Intrex developed prototype systems, and in August 1999 signed a letter of intent
with Cornerstone to deploy the system in a substantial portion of Cornerstone's
approximately 400,000 tank locations. During the second half of 1999 and first
half of 2000, Intrex provided and installed systems as part of a field test at
approximately 150 Cornerstone locations. In May 2000 Intrex and Cornerstone
signed a letter of intent to form a joint venture to develop the worldwide
market for Intrex's product and Cornerstone's distribution and inventory
management software.
-9-
<PAGE>
In May 1999 Intrex signed a letter of intent to combine its business with that
of FiberChem, Inc., a United States company engaged, among other things, in the
development of optical-chemical sensors. In December 1999 Intrex and FiberChem
entered into a definitive Arrangement Agreement (amended in May 2000), which,
among other things, would provide financing for Intrex's development programs,
including the Cornerstone program.
During 1998, Intrex sold monitoring systems and services for $47,014. During
1999, primarily due to the focusing of development efforts on the Cornerstone
program, Intrex did not sell any other systems or services.
Research, development and engineering expenses increased to $637,762 during
1999, compared to $70,554 during 1998, an increase of $567,208, or more than 8
times the 1998 level, due almost entirely to the development of the propane tank
monitoring capability.
General and administrative expenses increased to $211,841 during 1999 from
$136,943 during 1998, an increase of $74,898, or 55%. This increase was
primarily attributable to financial and business consulting expenses, and travel
and other expenses associated with development of Intrex's overall business.
As a result of the foregoing, Intrex incurred a net loss of $1,188,713 during
1999, compared to a net loss of $551,388 during 1998.
-10-
<PAGE>
Pandel Instruments, Inc.
Management's Discussion and Analysis
The following discussion and analysis should be read in conjunction with the
audited financial statements of Pandel Instruments, Inc. and notes thereto
included elsewhere in this Proxy Statement.
Material Changes in Financial Condition
Pandel's working capital deficiency at December 31, 1999 was $3,043, a decrease
of $14,532 from its working capital of $11,489 at December 31, 1998. This
decrease was primarily due to Pandel's 1999 net loss of $14,532, more than
offset by a decrease in accounts receivable and inventory of $10,177 and $5,241,
respectively, and an increase in accounts payable of $1,706.
No cash was used or provided from investing or financing activities in 1999 or
1998.
On December 6, 1999, Pandel was party to an agreement providing for the
combination of its business with FiberChem, Inc. ("FiberChem") and Intrex Data
Communications Corp ("Intrex"). This transaction was consummated on July 27,
2000.
As discussed in Note I to the financial statements, Pandel has suffered
recurring losses from operations and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regards to these matters include: (a) reducing fixed expenses to a bare
minimum, (b) reducing salary expense which will only be incurred to the extent
that Pandel generates sales, and (c) exploring and leveraging potential cross
selling opportunities with FiberChem and Intrex. There can be no assurance that
any of these strategies can be effected on satisfactory terms. Any failure with
respect to the foregoing plan will more likely than not have a material adverse
effect on Pandel. Should management determine that the existing plan is
inadequate and/or that additional working capital cannot be raised, additional
steps may be required which may include the termination of operations.
Material Changes in Results of Operations
Revenues increased $52,746 or 56% 1999 over 1998 due to increased demand from
Pandel's sole customer.
Cost of revenues increased $59,090 or 80% 1999 over 1998 due to increased costs
from Pandel's suppliers.
Total operating expenses decreased $4,647 or 24% 1999 over 1998 due to decreased
travel in conjunction with the aforementioned business combination.
As a result of the foregoing, Pandel incurred a net loss of $14,532 during 1999,
compared to a net loss of $19,179 during 1998.
-11-
<PAGE>
FIBERCHEM
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis for FiberChem, Inc. for the fiscal
years ended September 30, 1999 and 1998 and for the nine month periods ended
June 30, 2000 and 1999 are incorporated herein by reference from FiberChem's
1999 Annual Report to Stockholders and from its Quarterly Report on Form 10-QSB
for the nine month period ended June 30, 2000, copies of which accompany this
proxy statement.
-12-
<PAGE>
SPECIFIC INFORMATION ABOUT THE MEETING AND VOTING
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of FiberChem, Inc., a Delaware corporation
("FiberChem" or the "Company"), for use at the Fiscal 1998 and1999 Annual
Meeting of Stockholders of the Company and for any adjournment or adjournments
thereof (the "Annual Meeting"), to be held at the DoubleTree Club Hotel, 7250
Pollock Drive, Las Vegas, Nevada at 10:00 a.m., Pacific time, on November 29,
2000, for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. A Board of Directors' proxy (the "Proxy") for the Annual Meeting
is enclosed, by means of which you may indicate your votes as to each of the
proposals described in this Proxy Statement. All Proxies which are properly
completed, signed and returned to the Company prior to the Annual Meeting, and
which have not been revoked, will be voted in accordance with the stockholder's
instructions contained in such Proxy.
The affirmative vote of a majority of all outstanding shares of common
stock and all of the outstanding shares with voting rights including the Common
Stock, Series A, Pandel Series, and Special Series preferred stock
(collectively, the "Voting Securities") is necessary to amend the Company's
Certificate of incorporation to increase the number of authorized shares of
Common Stock of the Company, $0.0001 par value ("Common Stock"), from
150,000,000 to 500,000,000 shares of Common Stock. The affirmative vote of a
majority of all Voting Securities is necessary approve an amendment to the
Certificate of Incorporation authorizing a change of the Company's name to
"DecisionLink, Inc." The affirmative vote by holders of a plurality of the votes
cast for the election of directors at the Annual Meeting is required for the
election of Directors. The affirmative votes of a majority of the shares present
in person or by proxy at the Annual Meeting and entitled to vote is required for
approval of the Company's 2000 Stock Option Plan and to ratify the appointment
of Goldstein Golub Kessler, LLP as the Company's auditors for the fiscal years
ended September 30, 1999 and September 30, 2000.
Directors and Officers of the Company beneficially own approximately
48.7% of the outstanding Voting Securities. In the absence of contrary
instructions, shares represented by Proxy will be FOR the amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock of the Company, FOR an amendment to the Company's
Certificate of Incorporation authorizing a change of the Company's name to
"DecisionLink, Inc", voted FOR the election of the nominees for Directors as set
forth herein, FOR adoption of the 2000 Stock Option Plan and FOR the
ratification of the appointment of the Company's auditors for the fiscal years
ended September 30, 1999 and September 30, 2000. Shares represented by proxies
which are marked "abstain" for Proposals 1, 2, 4 and 5 on the proxy card will
not be included in the vote totals, and therefore will have the effect of a
negative vote. In addition, where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not provided voting
instructions (commonly referred to as "broker non-votes"), those shares will not
be included in the vote totals.
The Board of Directors does not anticipate that its nominees will be
unavailable for election and does not know of any other matters that may be
brought before the Annual Meeting. In the event that any other matter shall come
before the Annual Meeting or the nominees are not available for election, the
persons named in the enclosed Proxy will have discretionary authority to vote
all Proxies not marked to the contrary with respect to such matter in accordance
with their best judgment.
A stockholder may revoke his Proxy at any time before it is exercised
by filing with the Secretary of the Company at its executive offices in Las
Vegas, Nevada, either a written notice of revocation or a duly
-13-
<PAGE>
executed Proxy bearing a later date, or by appearing in person at the Annual
Meeting and expressing a desire to vote his or her shares in person. All
costs of this solicitation are to be borne by the Company.
A list of stockholders entitled to vote at the Annual Meeting will be
open to examination by any stockholder, for any purpose germane to the meeting,
at the executive offices of the Company, 1181 Grier Drive, Suite B, Las Vegas,
Nevada 89119, during ordinary business hours for ten days prior to the Annual
Meeting. Such list shall also be available during the Annual Meeting.
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders, the Proxy, the 1999 Annual Report to Stockholders, and the
Quarterly Report on Form 10-QSB for June 30, 2000, are expected to be mailed
commencing on or about October 10, 2000 to stockholders of record on October 5,
2000 (the "Record Date").
VOTING SECURITIES
The securities entitled to notice of and to vote at the annual meeting
consist of the Company's Common Stock, par value $.0001 per share, which is
entitled to one vote per share; the Series A Preferred Stock, par value $.01 per
share, which is entitled to ten votes per share; the Company's preferred stock
designated as Special Shares, which is entitled to 100 votes per share; and the
Company's Convertible Preferred Stock, Pandel Series, which is entitled to 100
votes per share. All holders of the Common Stock and the classes of preferred
stock possessing voting power vote together as a single class, except where an
additional class vote of the Common Stock or a class or series of preferred
stock may be required by law. Under Delaware law, a class vote of the Common
Stock is required to approve the proposal to amend the certificate of
incorporation to increase the authorized number of common shares from
150,000,000 shares to 500,000,000 shares.
The following table sets forth as of the Record Date, October 5, 2000,
the number of shares of voting securities of each class outstanding, the number
of votes entitled to be cast by the holders of each class of voting securities,
the percentage of the total voting power represented thereby and the total
number of votes entitled to be cast by the holders of all voting securities:
<TABLE>
<CAPTION>
-------------------------------------------------------- --------------- --------------- -------------
Total number
Shares of Percentage
Title of Class Outstanding votes of votes
-------------------------------------------------------- --------------- --------------- -------------
<S> <C> <C> <C>
Common Stock, par value $.0001 per share (1 vote per 66,069,634 66,069,634 19.53%
share)
-------------------------------------------------------- --------------- --------------- -------------
Series A preferred stock, par value $.01 per share (ten 207,848 2,078,480 *
votes per share)
-------------------------------------------------------- --------------- --------------- -------------
Special Shares, par value $.01 per share (100 votes per 1,803,473 180,347,300 58.44%
share)
-------------------------------------------------------- --------------- --------------- -------------
Pandel Series Preferred Stock, par value $.01 per share 675,282.22 67,528,222 21.36%
(100 votes per share)
-------------------------------------------------------- --------------- --------------- -------------
Total 316,023,636 100%
-------------------------------------------------------- --------------- --------------- -------------
</TABLE>
-14-
<PAGE>
------------------------------
* Less than 1%
Directors and officers of the Company who own voting securities
entitled to cast 153,982,104 (48.7%) votes at the annual meeting have indicated
that they will cast all of their votes in favor of the election of management's
nominees for director and in favor of Proposals 2,3,4 and 5. These directors and
officers include Geoffrey F. Hewitt, Melvin W. Pelley, David S. Peachey, and
Peter J. Lagergren who have entered into a voting agreement under which they
have agreed, until July 27, 2002; to cast their votes in accordance with the
recommendation of the Board of Directors on all matters submitted to
stockholders.
The following table sets forth certain information as of September 25,
2000 with respect to the beneficial ownership (as such term is defined in Rule
13d-3 under the Securities Exchange Act of 1934) of shares of each class of the
Company's voting securities by (i) each person known by the Company to be the
owner of more than 5% of the outstanding shares of voting securities of any
class, (ii) each nominee and Director of the Company, (iii) each executive
officer named in the Summary Compensation Table and (iv) all Officers and
Directors as a group:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Percentage of
Name and Address Amount and Nature of votes entitled
of Beneficial Owner Beneficial Ownership(% of class) (1) to be cast(2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Geoffrey F. Hewitt (3) 1,946,311 shares Common Stock(4) *
---------------------------------------------------------------------------------------------------------------------
David S. Peachey 56,018,224 shares Common Stock (45.9%)(5) 17.7%
1500 West Georgia St. 560,182 shares special stock (31.1%)
Vancouver, British Columbia
V6G 2Z6
---------------------------------------------------------------------------------------------------------------------
Melvin W. Pelley (3) 2,316,489 shares of Common Stock (6) *
---------------------------------------------------------------------------------------------------------------------
Peter J. Lagergren 59,493,464 shares Common Stock (47.4%)(7) 18.8%
3033 Kellway Drive, Suite 118 594,934.64 shares Pandel Series Stock (88.1%)
Carrollton, TX 75006
---------------------------------------------------------------------------------------------------------------------
Thomas A. Collins (3) 509,962 shares Common Stock (8) *
---------------------------------------------------------------------------------------------------------------------
Brian O'Neil 18,384,023 shares Common Stock (21.4%)(9) 5.8%
1102-1425 West 6th Avenue 183,840 shares special stock(10.2%)
Vancouver, British Columbia
V6G 4H5
---------------------------------------------------------------------------------------------------------------------
Walter Haemmerli 6,589,659 shares Common Stock (9.4%)(10) 1.4%
Manport AG
Basteiplatz 3, CH 8001
Zurich, Switzerland
---------------------------------------------------------------------------------------------------------------------
Irwin J. Gruverman 1,153,235 shares Common Stock (11) *
30 Ossipee Road
Newton, MA 02164
---------------------------------------------------------------------------------------------------------------------
Trevor S. Nelson 10,856,652 shares Common Stock (14.1%)(12) 3.4%
575 Main Street, 108,566 shares special stock (6.0%)
Suite 201
---------------------------------------------------------------------------------------------------------------------
-15-
<PAGE>
---------------------------------------------------------------------------------------------------------------------
Percentage of
Name and Address Amount and Nature of votes entitled
of Beneficial Owner Beneficial Ownership(% of class) (1) to be cast(2)
---------------------------------------------------------------------------------------------------------------------
Penticton B.C., Canada V2A 5C6
---------------------------------------------------------------------------------------------------------------------
Byron A. Denenberg 1,730,476 shares Common Stock (13) *
RCT Systems, Inc.
327 Messner Drive
Wheeling, IL 60090
---------------------------------------------------------------------------------------------------------------------
All Directors and Officers of 158,998,495 shares Common Stock (73.1%)(14) 48.7%
FiberChem as a Group (10 persons) 852,588 shares special stock (47.3%)
594,934.64 shares Pandel Series Stock
(88.1%)
---------------------------------------------------------------------------------------------------------------------
</TABLE>
----------------------------------------
* Represents less than one percent.
(1) Unless otherwise noted, FiberChem believes that all persons named in
the table have sole investment power with respect to all shares of voting
securities beneficially owned by them. A person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60 days from the
date hereof upon the exercise of warrants, options or other rights or upon the
conversion of convertible securities. Each beneficial owner's percentage
ownership of any class of voting securities is determined by assuming that
options, warrants or other rights or convertible securities that are held by
such person (but not those held by any other person) and which are exercisable
or convertible within 60 days from the date hereof have been exercised or
converted.
(2) Based on the total number of votes entitled to be cast and the number
of shares of Voting Securities outstanding on the record date.
(3) The address of this person is c/o FCI Environmental, Inc., 1181 Grier
Drive, Suite B, Las Vegas, Nevada 89119.
(4) Includes an aggregate of 765,000 shares of Common Stock issuable upon
exercise of a like number of options. Also includes 159 shares of Common Stock
held by Mr. Hewitt's minor child.
(5) Includes 10,209,006 shares of Common Stock issuable in exchange for a
like number of Intrex Class B Shares and 36,912,602 common shares issuable in
exchange for a like number of Intrex Class B Shares upon the occurrence of
certain events. Also includes 2,410,983 shares of Common Stock issuable in
exchange for a like number of Intrex Class B Shares owned by Estero Capital
Corp. and 6,485,633 shares of Common Stock issuable in exchange for a like
number of Intrex Class B Shares owned by Estero Capital Corp. upon the
occurrence of certain events. Mr. Peachey is the sole stockholder of Estero
Capital Corp.
(6) Includes an aggregate of 530,000 shares of Common Stock issuable upon
exercise of a like number of options and 555,958 shares of Common Stock issuable
upon conversion of $65,000 in Convertible 9% Notes.
-16-
<PAGE>
(7) Includes 13,561,700 shares of Common Stock issuable upon conversion of
135,617 shares of Pandel Series Preferred Stock and 45,931,764 common shares
issuable upon conversion of 459,317.64 shares of Pandel Series Preferred Stock
upon the occurrence of certain events.
(8) Includes an aggregate of 395,000 shares of Common Stock issuable upon
exercise of a like number of options.
(9) Includes 9,418 shares of Common Stock issuable in exchange for a like
number of Intrex Class B Shares and 25,334 common shares issuable in exchange
for a like number of Intrex Class B Shares upon the occurrence of certain
events. Also includes 4,972,652 shares of Common Stock issuable in exchange for
a like number of Intrex Class B Shares owned by Pentland Resources Ltd., a
Barbados corporation, and 13,376,619 shares of Common Stock issuable in exchange
for a like number of Intrex Class B Shares owned by Pentland Resources Ltd. upon
the occurrence of certain events. Mr. O'Neil is the beneficiary of a trust that
owns 99% of the voting stock of Pentland Resources Ltd., however, such trust has
no power to vote or dispose of the securities. A second trust has the power to
appoint the sole director of Pentland Resources Ltd.. Mr. O'Neil does not have
the power to control said second trust. The securities are deemed beneficially
owned by the reporting person by reason of Rule 16a-8(a)(3). Mr. O'Neil
disclaims beneficial ownership for any other purpose.
(10) Includes 32,000 Class D Common Stock Purchase Warrants, 3,586 shares of
Series A Convertible Preferred Stock convertible into 35,860 shares of Common
Stock, an aggregate of 125,000 shares of Common Stock issuable upon exercise of
a like number of options, $156,000 of Senior Convertible 8% notes convertible
into 678,261 shares of Common Stock held by Manport AG, of which company Mr.
Haemmerli is Chief Executive Officer, and a $50,000 9% note convertible into
384,615 shares of Common Stock. Also includes 1,582,500 shares of Common Stock,
863,800 Class D Common Stock Purchase Warrants, and 165,286 shares of Series A
Convertible Preferred Stock convertible into 1,652,860 shares of Common Stock,
all held by Privatbank Vermag A.G., Chur Switzerland, as custodian for certain
customers, of which company Mr. Haemmerli is Vice-Chairman.
-17-
<PAGE>
(11) Includes an aggregate of 164,000 shares of Common Stock issuable
upon exercise of a like number of options. Also includes 430,770 shares of
Common Stock, 8,161 shares of Series A Convertible Preferred Stock,
convertible into 81,610 shares of Common Stock, and a $50,000 note
convertible into 384,615 shares of Common Stock held by G&G Diagnostics, L.P.
II, of which Mr. Gruverman is a principal.
(12) Includes 2,942,153 shares of Common Stock issuable in exchange for a
like number of Intrex Class B Shares and 7,914,499 common shares issuable in
exchange for a like number of Intrex Class B Shares upon the occurrence of
certain events.
(13) Includes an aggregate of 138,142 shares of Common Stock issuable upon
exercise of a like number of options.
(14) Includes all shares of Common Stock issued and issuable as described in
Notes 4-13 above.
-18-
<PAGE>
PROPOSAL 1: AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE AMOUNT OF AUTHORIZED
COMMON STOCK FROM 150,000,000 TO 500,000,000 SHARES.
At the Annual Meeting, Stockholders will be asked to ratify an amendment to
the Company's Certificate of Incorporation (the "Certificate") proposed by
resolution of the Board of Directors which would increase the number of
authorized shares of Common Stock from 150,000,000 to 500,000,000 shares of
Common Stock.
THE INTREX BUSINESS COMBINATION.
The principal reason for increasing the authorized number of shares of
common stock is to make available up to approximately 252,200,000 shares of
Common Stock for issuance upon conversion or exchange of securities issued as
consideration for the business combination with Intrex Data Communications
Corp., a British Columbia Corporation, which was completed on July 27, 2000. The
number of shares of Common Stock issuable upon conversion or exchange of
FiberChem and Intrex securities issued in the business combination presently
exceeds the number of shares authorized for issuance and not reserved for other
purposes. The business combination was authorized by our board of directors and
did not require stockholder approval under Delaware law where FiberChem is
incorporated.
FiberChem presently has 47,668,620 shares of common stock available for
exchange for a portion of the Class B Shares before the proposed increase in the
authorized common stock. This amount is sufficient to cover the 42,583,549 Class
B Shares which have been initially released to the former Intrex common
shareholders, but would not be sufficient to cover the approximately 137,200,000
escrowed Class B Shares when and if they are released. If we are unable to issue
shares of our common stock in exchange for Class B Shares, we are required to
redeem any Class B Shares when and as tendered for exchange for a cash payment
equal to the then market price of a share of FiberChem common stock. The
obligation to redeem Class B Shares for cash rather than common stock could have
a material adverse effect on our business.
The business combination with Intrex has resulted in a significant change
in the business and equity ownership of our company. In approving the
transaction, the board of directors determined that the business
-19-
<PAGE>
combination was in the best interests of FiberChem. A description of the
terms of the business combination with Intrex is set forth below. Financial
statements of Intrex and Pandel, per share data and pro forma financial
information are included elsewhere in this Proxy Statement.
SHARES AVAILABLE AFTER PROVISION FOR THE BUSINESS COMBINATION.
The additional shares remaining after provision for the business combination
would be available for issuance for other purposes, which include employee
benefit programs, at the discretion of the Board of Directors of the Company,
without the delays and expenses ordinarily attendant upon obtaining further
stockholder approval. In general, the additional authorized shares may be issued
by the Board of Directors for such purposes without stockholder approval. The
additional Common Stock would be available for dividends with respect to the
Company's Preferred Stock and for other stock dividends. Additional shares of
Common Stock would also provide needed flexibility for future financial and
capital requirements so that proper advantage could be taken of propitious
market conditions and possible business acquisitions. Additional shares of
Common Stock could also be used to discourage hostile takeover attempts of the
Company. The additional shares could be privately placed, thereby diluting the
stock ownership of persons seeking to obtain control of the Company.
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of the
Company. Adoption of the proposed amendment and issuance of the Common Stock
would not affect the rights of the holders of currently outstanding Common Stock
of the Company, except for economic effects of substantially increasing the
number of shares of the Company's Common Stock outstanding, such as dilution of
the earnings per share and voting rights of current holders of Common Stock. The
dilutive effect of issuing a substantial number of additional shares of common
stock in connection with the business combination will be offset, in large part,
because the additional shares of common stock will ultimately replace the Intrex
Class B Shares and shares of FiberChem Pandel Series Preferred Stock, which are
common stock equivalents issued in the business combination. If the amendment is
adopted, it will become effective upon filing of a Certificate of Amendment of
the Company's Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
The Company's authorized capital stock currently consists of a total of
150,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. As
of the Record Date, 102,331,380 shares of Common Stock were outstanding or were
reserved for issuance for specific purposes. Of the shares reserved for
issuance, there are 3,555,442 shares of Common Stock issuable upon exercise of
outstanding employee options; 500,000 shares issuable upon the exercise of
outstanding consultants' warrants; 1,895,175 shares issuable upon exercise of
Class D Warrants; an aggregate of 10,502,093 shares issuable upon exercise of
other outstanding Warrants; 747,826 shares issuable upon conversion of 8% Senior
Convertible Notes (assuming a conversion price of $.23); Warrants to purchase
747,826 shares upon conversion of the outstanding notes; 1,325,188 shares
issuable upon conversion of notes payable to officers, directors and affiliates;
683,784 shares issuable upon conversion of other notes payable; 2,078,480 shares
issuable upon conversion of Series A Preferred Stock; 4,355,932 shares issuable
upon conversion of Series B Preferred Stock and 9,870,000 shares issuable upon
conversion of 12% senior convertible debentures and notes. The Common Stock has
no preemptive or other subscription rights.
-20-
<PAGE>
THE BUSINESS COMBINATION
The following description of the business combination between the FiberChem
and Intrex Data Communications Corp of Vancouver, British Columbia is subject
to, and is qualified in its entirety by, the more detailed information and
financial statements contained in FiberChem's current or periodic reports filed
under the Securities Exchange Act of 1934.
This description of the business combination includes forward-looking
statements relating to the FiberChem's operations that are based on Management's
and third parties' current expectations, estimates and projections. These
statements are not guarantees of future performances and actual results could
differ materially. The statements regarding FiberChem's business combination
with Intrex, the combined entity's delivery of services over the Internet and
the size of the market for the combined company's services are forward-looking
statements that involve risks and uncertainties. These risks and uncertainties
include the combined entity's ability to market its services using the two
companies' technologies, the timely development and acceptance of new products,
final promulgation and enforcement of regulations, the impact of competitive
products and pricing, the timely funding of customer's projects, customer
payments to FiberChem and other risks detailed from time to time in FiberChem's
SEC reports.
BACKGROUND AND REASONS FOR THE BUSINESS COMBINATION
In 1998, FiberChem's Board of Directors authorized its management to
undertake a strategy of diversification away from total reliance on the
regulated environmental markets on which the Company depended for its
livelihood. This was primarily due to the persistent delays in promulgation and
then, more importantly, enforcement of those governmental regulations on which
the Company's revenues depended. This strategy was outlined in the proxy
material for the Annual Meeting held on August 31, 1998 and received
overwhelming support from the FiberChem shareholders. Over the next several
months, management evaluated several opportunities for mergers and acquisitions.
In April 1999, Intrex retained Entrenet Group, LLC, a business advisory group,
to provide Intrex with advice on strategic planning, including merger and
acquisition strategies. With the assistance of Entrenet, Intrex and FiberChem
began discussions with a view toward a business combination and, in July 1999,
FiberChem and Intrex entered into and announced the signing of a letter of
intent for a business combination and in December 1999 entered into a definitive
Arrangement Agreement. In June, 2000, FiberChem entered into an Amended
Arrangement Agreement.
Management of both companies believe that the combined business, to be
known as DecisionLink, can establish itself as a leading provider of
corporate remote asset monitoring and control systems, combining Intrex's
satellite and wireless communication technology with FiberChem's sensor
technology, to greatly reduce the cost of transmitting and monitoring data
acquired from remote, mobile or difficult to service multiple locations.
These large potential cost savings are expected to open opportunities for the
combined company in markets such as residential and commercial propane gas
tanks, oil wells, oil and gas pipelines and vehicle fleets and, and to
enhance the ability of the combined entity to raise capital funds to finance
its busines plan.
-21-
<PAGE>
TERMS OF THE TRANSACTION
On December 6, 1999, FiberChem and Intrex entered into an Arrangement
Agreement providing for a business combination of the two companies on terms
providing each company's shareholders with approximately 50% of the equity in
the combined business. In order to address various tax and legal issues and the
significant contribution expected to result from various Intrex business
opportunities which were not contemplated at the time of the original agreement,
FiberChem and Intrex entered into an Amended Arrangement Agreement on June 3,
2000, a copy which is attached as an Exhibit to the Form 8-K filed with the SEC
on June 21, 2000. The Intrex business combination was completed on July 27,
2000. The terms of the amended business combination provided for (i) the
acquisition by FiberChem of 75.11% of the outstanding Intrex voting shares
through a Plan of Arrangement under British Columbia law and (ii) the
acquisition of the remaining Intrex common shares through the merger of Pandel
Instruments, Inc., a Texas corporation, which owns the remaining 24.89% of
Intrex's outstanding common shares, with and into a wholly-owned subsidiary of
FiberChem (the "Pandel Merger"). The merger consideration issuable in the two
transactions provides Intrex shareholders with approximately 50% of the combined
Company with the opportunity to increase their equity participation in the
combined Company from 50% up to 80% upon release of escrowed shares if certain
milestones related to the Intrex business are met during a two year period
following the closing. Subsequent to closing, the only voting shares in Intrex
are held by a wholly-owned subsidiary of FiberChem.
Under the Amended Arrangement Agreement, all the outstanding Intrex shares
other than those acquired through the Pandel Merger, were converted into
175,240,930 shares of a new class of non-voting Intrex stock designated as
Intrex Class B Shares and 1,752,409 shares of a newly designated class of
FiberChem preferred stock designated as Special Shares. The Class B Shares and
the Special shares are intended to provide as nearly as practicable the same
economic and voting rights as one share of FiberChem common stock for each Class
B Share held. Of these shares, 127,758,403 Class B Shares and 1,277,584 Special
Shares were deposited by the Intrex shareholders participating in the
Arrangement Agreement into escrow pursuant to pooling agreements, subject to
release to the shareholders in installments if certain milestones related to
Intrex's business are met by the second anniversary of the closing.
An additional 9,450,000 Class B Shares and 94,500 Special Shares were issued
to David Peachey, Intrex's President and Chief Executive Officer, under a
Compensation Agreement entered into among Mr. Peachey, Intrex and FiberChem. All
9,450,000 shares were deposited in escrow and will be subject to release to Mr.
Peachey upon achievement of the pooling agreement milestones in the same
proportions as the shares under the pooling agreement are released to Intrex
shareholders.
Each Intrex Class B Share (other than the shares on deposit under the
pooling agreements) can be redeemed by the holder beginning not later than
December 31, 2000, in exchange for one share of Common Stock. Until exchanged,
each Class B Share will be entitled to receive the same dividends and
distributions as a share of FiberChem Common Stock and each Special Share will
be entitled to one hundred votes, or the same number of votes possessed by the
shares of FiberChem Common Stock for which the related Class B Shares can be
exchanged. The Special Shares are subject to redemption for nominal
consideration when the related Class B Shares are redeemed. The exchange of
Intrex common shares into Intrex Class B Shares and FiberChem Special Shares is
intended to allow Intrex shareholders to defer what might otherwise be a taxable
disposition if the Intrex shares were directly exchangeable for shares of
FiberChem Common Stock.
Pursuant to the Pandel Merger Agreement, Pandel was merged into Pandel
Mergerco, Inc., a wholly-owned FiberChem subsidiary, which thereby acquired
ownership of Intrex's common shares formerly owned by Pandel. Under the Pandel
Merger Agreement, the Pandel shareholders received 580,782.22 shares of a new
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class of FiberChem Convertible Preferred Stock (designated Pandel Series
Preferred Stock and convertible into 58,078,222 shares of Common Stock). The
58,078,222 shares of Common Stock issuable upon conversions of the Pandel Series
Preferred stock represent the number of Intrex Class B Shares that Pandel
otherwise would have received in exchange for its Intrex common shares under the
Amended Arrangement Agreement. The Pandel shareholders were required to deposit
423,393.22 shares of Pandel Series Preferred stock (72.90% of the 580,782.22
Shares of Pandel Series Preferred Stock) under pooling agreements similar to the
Intrex pooling agreement described above. These shares are also be subject to
proportionate release on the same terms and conditions as the Intrex pooling
agreement referred to above. The Pandel Merger transaction is intended to
qualify as a tax free reorganization under Section 368 of the United States
Internal Revenue Code of 1986, as amended.
An additional 94,500 shares of FiberChem's Pandel Series Preferred Stock
have been issued to Peter Lagergren under a Compensation Agreement entered into
between Mr. Lagergren and FiberChem. Mr. Lagergren became President of the
Communications Division, Chief Technology Officer, and a Director of FiberChem
on July 27, 2000. All 94,500 shares were deposited into escrow, pursuant to the
terms of a pooling agreement. These shares will be released to Mr. Lagergren, in
installments, if certain milestones related to FiberChem's business are met by
the second anniversary of the closing.
The business and operations of Pandel are not significant to the combined
companies, except for Pandel's ownership of 24.89% of the outstanding common
shares of Intrex and except that a component of Intrex's proprietary data
communications technology is licensed to Intrex by Pandel. Pandel and Peter
Lagergren, its principal shareholder, have agreed to indemnify FiberChem against
certain liabilities, including liabilities for breach of representations and
warranties made by Pandel and Peter Lagergren in the Pandel Merger Agreement.
As provided in the Pandel Merger Agreement, FiberChem issued the Pandel
Series Preferred Stock because it did not have a sufficient number of authorized
shares of Common Stock to satisfy its obligation to deliver Common Stock
pursuant to the Pandel Merger Agreement or Mr. Lagergren's Compensation
Agreement. The Pandel Series Stock is automatically convertible into shares of
Common Stock only when a sufficient number of shares of Common Stock are
authorized and the holders of the Pandel Series Preferred Stock do not otherwise
have the right to require conversion of their shares.
The issuance to four individuals of 4,874 of the 580,782 shares of Pandel
Series Preferred Stock issued pursuant to the Pandel Merger may have violated
the registration provisions of Section 5 of the Securities Act of 1933 because
these individuals did not meet sophistication criteria considered necessary to
establish the availability of the exemption from the registration provisions
afforded by Section 4(2) of the Securities Act for transactions not involving
any public offering. Accordingly, these former Pandel stockholders may be
entitled to rescind the exchange of their shares of Pandel common stock for
shares of FiberChem's Pandel Series Preferred Stock and we intend to offer them
the opportunity to do so. The staff of the Securities and Exchange Commission
has taken the position that liability under federal laws is not completely
extinguished because a potentially liable person makes a rescission offer. We do
not believe the exercise of rescission rights by these stockholders, whether
pursuant to a rescission offer or a civil suit seeking rescission under the
Securities Act, would have a material effect on our business or financial
condition.
FiberChem agreed in the Arrangement Agreement to call a meeting of its
shareholders to amend FiberChem's certificate of incorporation to increase the
amount of its authorized Common Stock to not less than 500,000,000 shares.
Commencing on the earlier of December 31, 2000, or the date FiberChem notifies
Intrex that the authorized Common Stock of FiberChem has been increased to not
less than 500,000,000 shares, the holders of the Intrex Class B Shares may
require Intrex to redeem the Class B Shares in exchange for proceeds of
redemption equal to the market value of one share of FiberChem Common Stock,
which may be paid at the election of FiberChem by delivery of one share of
FiberChem Common Stock or in cash. If FiberChem does not authorize at least
500,000,000 additional shares of Common Stock by December 31, 2000, FiberChem
will only be able to satisfy its obligation to redeem the Intrex Class B Shares
by payment in cash.
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FiberChem presently has 47,668,620 shares of common stock available for
exchange for a portion of the Class B Shares before the proposed increase in the
authorized common stock. This amount is sufficient to cover the 42,583,549 Class
B Shares which have been initially released to the former Intrex common
shareholders, but would not be sufficient to cover the approximately 137,200,000
escrowed Class B Shares when and if they are released.
We cannot presently estimate the amount of cash we would be required to pay
for redemption of Class B Shares, the period of time over which these payments
would be made or the effect of the required payments if the proposal to increase
our authorized common stock is not approved. However, the obligation to make
cash payments could have a serious effect on our business and might result in
FiberChem and its Intrex subsidiary being unable to continue in business or
being required to re-negotiate payment provisions which could be more or less
favorable to FiberChem stockholders.
CLOSING; FINANCING CONDITION; FAIRNESS OPINION
The business combination closed on July 27, 2000, after satisfaction or
waiver of the closing conditions contained in the Amended Arrangement Agreement
and the Pandel Merger Agreement, including a condition that new financing
proceeds in the amount of $5,000,000 or a lesser amount acceptable to FiberChem
and Intrex be available to FiberChem on terms and conditions satisfactory to
FiberChem and Intrex.
In satisfaction of the financing condition to the business combination,
FiberChem obtained cash financing proceeds of $3,635,000, of which $1,350,000
was available to FiberChem upon closing of the business combination and the
balance of which became available during August and September, 2000. The
respective boards of directors of FiberChem and Intrex determined that the
$1,350,000 of proceeds available at the time of closing was in an amount and
upon terms acceptable to them in satisfaction of the financing condition. These
aggregate proceeds were derived from the sale of $2,350,000 principal amount of
12% convertible debentures and notes due July 26, 2002 and 257,000 shares of
FiberChem's Series B Convertible Preferred Stock, with a stated value of $10 per
share. The debentures and notes are convertible into shares of common stock at a
conversion price per share equal to the lesser of $.30 or 92% of the average of
the market price for the common stock for the 20 consecutive trading days ending
two trading days prior to the conversion. Each share of Series B Convertible
Preferred Stock is convertible into a number of shares of common stock equal to
its stated value divided by the initial stated conversion price of $.59 per
share, subject to a reduction of $.07 per share on August 25 in each year
commencing 2001, and certain other adjustments in the conversion price.
In connection with the closing of the business combination, the board of
directors of FiberChem also received the opinion of O'Conor, Wright Wyman, Inc.,
Boston, Massachusetts, investment bankers, that the consideration, taken as a
whole, issuable to the shareholders of Intrex pursuant to the Amended
Arrangement Agreement was fair to the stockholders of FiberChem from a financial
point of view. The opinion of O'Conor, Wright Wyman, Inc. is summarized below
and is set forth in full on Annex I hereto.
The proposals in the accompanying Proxy Statement to change the name to
Decision Link and to increase capitalization are being made pursuant to
undertakings made by FiberChem in the Arrangement Agreement and the Pandel
Merger Agreement.
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OPINION OF O'CONOR, WRIGHT WYMAN, INC.
On April 14, 2000, FiberChem engaged O'Conor, Wright Wyman, Inc. ("OCWW")
for the purpose of rendering an opinion as to the fairness, from a financial
point of view, to the shareholders of FiberChem of the consideration, taken as a
whole, to be issuable by FiberChem to the shareholders of Intrex pursuant to the
proposed business combination with Intrex. OCWW's engagement was limited to
rendering its opinion as to the fairness of the consideration. OCWW did not act
as FiberChem's financial advisor in connection with the negotiation of the terms
of the transaction or determine, propose or recommend the terms of the
transaction or any alternative transaction. On June 29, 2000, following the
execution of the Amended Arrangement Agreement on June 2, 2000, OCWW made an
oral presentation to the FiberChem Board with regard to the purpose and scope of
the fairness opinion engagement and the methodology of its analysis, and
delivered to the FiberChem Board its draft written opinion that, as of the date
of such draft opinion, the consideration issuable to the shareholders of Intrex
pursuant to the business combination, taken as a whole, was fair, from a
financial point of view, to the shareholders of FiberChem. On July 27, 2000,
OCWW delivered to the FiberChem Board its written opinion to the effect that, as
of July 27, 2000, the consideration issuable to the shareholders of Intrex,
taken as a whole, was fair, from a financial point of view, to the shareholders
of FiberChem.
OCWW was selected by FiberChem's board of directors on the basis of its
qualifications and expertise in the valuation of businesses and their securities
in connection with mergers and acquisitions and for corporate and other
purposes, as well as its reputation as an investment banking firm. Although OCWW
evaluated the financial terms of the Amended Arrangement Agreement and the
consideration issuable to Intrex shareholders, OCWW did not recommend or
propose, or serve as financial advisor to FiberChem in negotiation of, the terms
of the Amended Arrangement Agreement. OCWW did not determine or recommend the
consideration issuable to Intrex shareholders pursuant to the Arrangement
Agreement, but only undertook the reviews, analyses and inquiries described in
the opinion letter in order to arrive at its opinion. The amount of
consideration issuable to shareholders of Intrex was determined by negotiation
between FiberChem, Intrex and Pandel prior to receipt of OCWW's opinion.
THE FULL TEXT OF THE OPINION OF OCWW, DATED JULY 27, 2000, IS ATTACHED
HERETO AS ANNEX I. FIBERCHEM SHAREHOLDERS ARE URGED TO, AND SHOULD, READ SUCH
OPINION IN ITS ENTIRETY FOR A SUMMARY OF ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY OCWW. THE SUMMARY OF THE
OPINION WHICH FOLLOWS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION. OCWW'S OPINION WAS PREPARED FOR THE FIBERCHEM BOARD AND MAY NOT
BE RELIED UPON BY PARTIES OTHER THAN THE FIBERCHEM BOARD AND THE FIBERCHEM
SHAREHOLDERS. OCWW'S OPINION IS DIRECTED ONLY TO THE FAIRNESS TO THE FIBERCHEM
SHAREHOLDERS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION ISSUABLE TO
THE SHAREHOLDERS OF INTREX PURSUANT TO THE ARRANGEMENT AGREEMENT, TAKEN AS A
WHOLE.
The OCWW Opinion has been provided for the exclusive use of the FiberChem
Board of Directors and should not be construed as a recommendation to any holder
of FiberChem Common Shares as to how such shareholder should vote at the Annual
Meeting. The OCWW Opinion states that it may not relied upon by any parties
other than the FiberChem Board of Directors. Whether or not the OCWW Opinion
could be relied upon by FiberChem shareholders to support a claim against OCWW
under applicable state or provincial law is an issue that, if asserted, would be
resolved by a court of competent jurisdiction in which the particular claim is
asserted. The resolution of such issue would have no effect on the rights and
responsibilities of the FiberChem Board of Directors under applicable state law
and the availability of a defense would have no effect on the rights or
responsibilities of the FiberChem Board of Directors or OCWW under applicable
United States federal securities laws.
In arriving at its opinion, OCWW, among other things:
(a) reviewed the Amended Arrangement Agreement and the Pandel Merger Agreement,
as well as other agreements incorporated therein relating to the
post-combination management and operations of the combined entity
including, among others, the lock-up agreement, the voting agreement,
various employment and non-competition agreements;
(b) reviewed the pooling agreements under which Intrex and Pandel shareholders
deposited a portion of the consideration issuable to them in escrow,
subject to release if certain milestones related to Intrex's business are
met by the second anniversary of the closing;
(c) reviewed the offering materials relating to the proposed issuance, to
non-U.S. persons only, of $5,000,000 aggregate principal amount of 12%
Senior Convertible Debentures Due 2002 of FiberChem, Inc., and conducted
discussions with a representative of RP&C International, the lead manager
for the offering, relating to the prospective financing and the results of
various due diligence investigations relating thereto conducted by them;
(d) reviewed certain SEC filings containing historical financial statements and
other information relating to FiberChem including, among others, (i) Form
10-KSB Annual Reports for the fiscal years ended September 30, 1997, 1998
and 1999; (ii) Form 10-QSB Quarterly Reports for the fiscal quarters ended
December 31, 1999 and March 31, 2000; (iii) Form 8-K Current Event Reports
for events reported as of December 6, 1999 and as of June 2, 2000; and (iv)
Form S-2 Registration Statement dated May 12, 1999 and Post-Effective
Amendment Number 1 thereto dated February 4, 2000;
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(e) reviewed and discussed with members of FiberChem senior management and the
FiberChem Board, among other matters, (i) the historical and current
operations and financial condition of FiberChem and its future prospects,
in consideration of various prevailing competitive, economic and regulatory
conditions; (ii) certain internal financial information prepared by
FiberChem management; and (iii) various corporate strategic objectives
which could potentially be served by the prospective business combination,
as well as potentially negative risk factors related thereto, and such
other courses of action which might be available to FiberChem, all of which
were considered by the FiberChem Board in its deliberations concerning the
proposed business combination;
(f) reviewed the strategic plan for the post-combination operation of
DecisionLink as described in various documents, including a confidential
business plan prepared by management of FiberChem and Intrex, and discussed
with members of the senior management of FiberChem and Intrex various
strategic, operational, financial, marketing and technical factors,
including potentially negative risk factors, relating to development and
implementation of the DecisionLink strategy;
(g) reviewed certain historical financial statements and other information
relating to Intrex including, among other documents, a memorandum of
understanding between Cornerstone and Intrex relating to a proposed joint
business venture for the global marketing of products used to measure the
liquid level of propane vessels and the delivery of tank data and software
for data reporting solutions; and conducted joint discussions with the
President and Chief Executive Officer of Intrex and with the representative
of Cornerstone anticipated to be the Chief Executive Officer of the joint
venture with regard to various operational, financial, marketing and
technical factors relating to its prospective operations, as well as
potentially negative risk factors, including the venture's prospective
level of reliance upon third parties, such as Orbcomm, for satellite
communications or other methods of communicating tank data;
(h) performed certain analyses and computed certain ratios with regard, among
other matters, to (i) the relative post-combination equity ownership
interests of the FiberChem and Intrex shareholders under alternative
scenarios relating to the achievement of the Intrex business milestones
under the pooling agreements and to the prospective future business and
financial performance of the combined entity and (ii) the relative
prospective financial, operational, strategic or other contributions of the
parties under such alternative scenarios;
(i) reviewed the historical stock prices, trading volumes and other public
market activity of FiberChem Common Stock over various time periods and (i)
analyzed changes in the aggregate market capitalization for FiberChem at
various dates prior and subsequent to the initial December 1999 public
announcement of the proposed business combination and at dates proximate to
the date of this opinion, and (ii) analyzed the relative changes, over
various time periods, in the stock prices of FiberChem and of certain
competitive or otherwise comparable companies and in certain public market
indices, in consideration of industry, company and general economic and
stock market conditions; and
(j) performed such other analyses and investigations and considered such other
factors as OCWW deemed appropriate.
OCWW relied, without assuming any responsibility for the independent
verification of such information, upon the accuracy, completeness and
reasonableness of all information, including financial forecasts, whether
provided to OCWW by the management and professional advisors of FiberChem and
Intrex, or otherwise obtained from public sources reasonably deemed to be
reliable. OCWW further relied upon the assurance of management of FiberChem and
Intrex that they are unaware of any facts that would make the information they
provided to OCWW incomplete or misleading in any material respect. In arriving
at its opinion, OCWW neither performed nor obtained any independent valuation or
appraisal of the assets of FiberChem, Intrex or Pandel. OCWW's opinion is
necessarily based upon economic, market and other conditions and circumstances
existing and disclosed to OCWW that could be evaluated as of the date of its
opinion.
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OCWW assumed that the business combination would be consummated on terms
and conditions provided for in the Amended Arrangement Agreement, without
material modification thereof. OCWW noted that, among other conditions to be
satisfied or waived prior to closing, completion of the proposed business
combination was subject to there being available to FiberChem immediately
following the combination, on terms and conditions satisfactory to FiberChem and
Intrex, new financing proceeds of $5,000,000 or such lesser amount as is
acceptable to FiberChem and Intrex.
The following presentation summarizes certain analyses performed by OCWW in
arriving at its opinion, which OCWW discussed in detail with the FiberChem Board
along with others of its analyses:
STRATEGIC FINANCIAL ANALYSIS. Based upon its review of FiberChem's
historical financial performance, current condition and future prospects, in
consideration of prevailing conditions in regulatory-driven environmental and
remediation markets, OCWW concluded that, in the absence of significant growth
and improvement in profitability prospects and in view of the high fixed
operating costs characteristic of a technology-oriented publicly-held company,
the continued use of capital to fund operating losses is not a viable permanent
strategy for FiberChem. OCWW noted that there is significant uncertainty about
the availability of new short-term or long-term financing and that FiberChem's
auditors have issued a qualified opinion expressing substantial doubt about
FiberChem's ability to continue as a going concern.
OCWW noted that the plan to combine FiberChem and Intrex into DecisionLink
has been developed with the intention of penetrating and developing markets for
corporate remote asset monitoring and control systems and, in particular,
markets requiring sophisticated sensors and integrated communications at low
delivery cost. OCWW noted further that FiberChem management expects such markets
to offer favorable prospects for revenue from hardware sales, recurring revenue
from monitoring and data management fees, and defensible proprietary
communications and sensor technology.
OCWW identified FiberChem's current or prospective contributions to
DecisionLink as expected to include, among others, (a) proprietary hydrocarbon
leak detection and other chemical sensor technologies; ongoing development,
marketing and management capabilities; and existing customer and development
relationships; (b) longstanding status as a fully-reporting publicly-traded
company and a senior management team experienced in the management of a public
company; and (c) historical relationships with certain proven sources of
external capital financing. OCWW identified Intrex's current or prospective
contributions to DecisionLink as expected to include, among others, (a)
proprietary sensor technology and integration of sensing, communications and
data management functions into a low cost solution for remote asset monitoring;
ongoing development, marketing and management capabilities; and established
product development relationships; (b) an established relationship with
Cornerstone Propane LP for development and testing of tank telemetry and related
elements of systems for remote monitoring of liquid propane tanks and an
agreement with Cornerstone, and (c) an established value added reseller
relationship with Orbcomm and its global licensees and prospects for potential
expansion of such relationship. OCWW also noted the substantial risks that the
objectives of the strategic plan for the post-combination operations of
DecisionLink might not be realized.
RELATIVE "CREDIT" FOR POTENTIAL CASH CONTRIBUTIONS OF FIBERCHEM AND INTREX
TO DECISIONLINK CAPITAL FUNDING. OCWW considered the combined entity's ability
to obtain capital funding necessary to finance its strategic plan for
post-combination operations. OCWW reviewed certain information provided by
FiberChem management and compared the relative "credit" for potential cash
contributions of FiberChem and Intrex to DecisionLink capital funding. OCWW
stated that such analysis was presented for discussion with the FiberChem Board,
subject to the understanding that no assurances could be provided by OCWW with
regard to the likelihood of availability and actual form, if any, of any
potential source of capital funding for DecisionLink.
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COMPARATIVE ANALYSIS OF STOCK PRICE PERFORMANCE OF 5-YR AND 1-YR TIME
PERIODS FOR FIBERCHEM AND SELECTED OTHER COMPANIES SERVING ENVIRONMENTAL
REGULATORY-DRIVEN MARKETS AND SELECTED PUBLIC MARKET INDICES. OCWW reviewed the
relative stock price performance over 5-year and 1-year time periods for
FiberChem and for certain other companies serving environmental
regulatory-driven markets and for selected public market indices. The comparable
companies reviewed were: USTMAN, Tanknology, Arizona Instruments, Nesco, Danaher
and ThermoElectron. The public market indices reviewed were: S&P 500 and NASDAQ
Composite. OCWW noted that, while the market prices for the selected
environmental companies, in general and including FiberChem, have shown
significant declining trends over the period June 1995 - June 2000, public
market indices have shown significant increases over such period. OCWW further
noted that certain of the environmental companies, including FiberChem, which
have diversified away from exclusively regulated markets, have shown significant
increasing stock price trends over the past one year, but may also have shown
the high volatility characterizing the NASDAQ Composite over the past year.
While the foregoing summary describes certain of the analyses which OCWW
deems material to its opinion, it is not a comprehensive description of all
analyses and examinations actually performed by OCWW in connection with its
fairness opinion. The preparation of a fairness opinion is a complex process and
involves various subjective business determinations as to the most appropriate
and relevant methods of financial analysis and the application of those methods
to the particular circumstances. Therefore, such an opinion is not susceptible
to partial analysis or summary description. Accordingly, notwithstanding the
separate factors summarized above, OCWW believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
could create an incomplete and misleading view of the evaluation process
underlying its opinion. With respect to analyses of changes over time in public
stock trading prices for FiberChem and for comparable companies, such analyses
are not appraisals and do not necessarily reflect the prices at which businesses
could actually be sold or actual values of future results that might be
achieved.
OCWW's analyses were prepared exclusively as part of OCWW's review of the
fairness, from a financial point of view, of the consideration issuable to the
shareholders of Intrex, taken as a whole, to the FiberChem shareholders in
connection with the delivery of OCWW's delivery of its opinion. In addition,
OCWW's opinion and presentation to the FiberChem Board was only one of many
factors taken into consideration by the FiberChem Board in its determinations
with regard to the proposed Amended Arrangement Agreement.
Pursuant to the terms of the engagement of OCWW for the purpose of
rendering its fairness opinion, FiberChem has paid OCWW in the amounts of
$30,000 for OCWW's services rendered and $2,500 for reimbursement of OCWW's
reasonable out-of-pocket expenses in connection with the engagement. FiberChem's
obligation for payment of OCWW's fees and expenses was not contingent upon
OCWW's issuance of a favorable opinion letter or upon completion of the proposed
business combination pursuant to the Amended Arrangement Agreement. FiberChem
has also agreed to indemnify OCWW and certain related parties against certain
liabilities, including liabilities under the securities laws, in connection with
its engagement. Neither OCWW nor the individuals involved with OCWW's opinion
have any present or contemplated future interest in FiberChem, Intrex, Pandel or
DecisionLink, other than as stated in its opinion.
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OPINION OF EVANS & EVANS, INC.
On January 10, 2000, Intrex engaged Evans & Evans, Inc. ("E&E") to prepare
an independent valuation report and fairness opinion (the "opinion") with
respect to the fairness of the sale of 100% of the common shares of Intrex, from
a financial point of view, to the shareholders of Intrex pursuant to the
Arrangement Agreement dated December 6, 1999, which provided Intrex shareholders
an approximately 50% equity interest in the combined company. On March 10, 2000,
E&E delivered to Intrex its written opinion that as at December 6, 1999, the
terms of the Arrangement Agreement as originally executed are fair from a
financial point of view to the shareholders of Intrex. In May, 2000 Intrex
requested E&E to prepare a memorandum to reflect the changes with respect to the
business combination reflected in the Amended Arrangement Agreement and the
impact, if any, the changes would have on the fairness of the transaction from a
financial standpoint to the shareholders of Intrex. On May 31, 2000, E&E
delivered to Intrex a memorandum stating that it was not unreasonable to
conclude that the terms of the Amended Arrangement Agreement will not place the
Intrex shareholders in a less fair position than under the terms of the
Arrangement Agreement as originally executed on December 6, 1999, and reviewed
in E&E's opinion dated March 10, 2000.
E&E was engaged by Intrex after the execution and delivery of the
Arrangement Agreement dated December 6, 1999 and did not act as Intrex's
financial advisor in connection with the negotiation of the terms of that
transaction or the terms of the Amended Arrangement Agreement or to determine,
propose or recommend the terms of the transaction or any alternative
transaction. The amount of consideration issuable to shareholders of Intrex was
determined by negotiation between FiberChem, Intrex and Pandel prior to receipt
of E&E's opinion, in the case of the original Arrangement Agreement, and prior
to the receipt of E&E's memorandum, in the case of the Amended Arrangement
Agreement.
E&E was selected by Intrex's board of directors on the basis of its
qualifications and expertise in the valuation of businesses and their
securities. E&E has been extensively involved in business valuation, other
investment banking and financial services and management consulting in
Vancouver, British Columbia, since its formation in 1989.
The E&E opinion and memorandum were prepared for the use of Intrex's board
of directors and the Supreme Court of British Columbia in connection with their
evaluation of the fairness of the business combination to Intrex shareholders
from a financial point of view and were not relied upon by FiberChem's board of
directors in arriving at its decision to approve the business combination. E&E's
opinion and memorandum may not be relied upon by parties other than the Intrex
board of directors and are directed only to the fairness to the Intrex
shareholders, from a financial point of view, of the consideration issuable to
the shareholders of Intrex pursuant to the Arrangement Agreement, taken as a
whole.
E&E believes that its opinion and memorandum cannot be relied upon by the
FiberChem board of directors or any FiberChem stockholder to support any claims
against E&E arising under applicable state or provincial law because the opinion
and memorandum are addressed only to the Intrex board of directors and were
prepared for the express purpose of evaluating the fairness of the consideration
to the shareholders of Intrex rather than FiberChem. In addition, the opinion
and memorandum expressly disclaim the right of any party other than the board of
directors of Intrex to rely on the opinion and memorandum. Whether or not the
E&E opinion and memorandum could be relied upon by FiberChem stockholders or
FiberChem's board of directors to support a claim under state or provincial law
is an issue that, if asserted, would be resolved by a court of competent
jurisdiction in which the particular claim is asserted. The resolution of such
issue would have no effect on the rights and responsibilities of FiberChem's
board of directors under applicable state law and the availability of a defense
would have no effect on the rights or responsibilities of the FiberChem board of
directors or E&E under applicable United States federal securities laws.
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In arriving at its opinion, E&E, among other things:
(a) reviewed the Arrangement Agreement and a draft of the Amended Arrangement
Agreement, as well as other agreements incorporated therein relating to the
post-combination management and operations of the combined entity
including, among others, the lock-up agreement, the voting agreement,
various employment and non-competition agreements;
(b) reviewed the draft pooling agreements under which Intrex shareholders
deposited a portion of the consideration issuable to them in escrow,
subject to release if certain milestones related to Intrex's business are
met by the second anniversary of the closing;
(c) reviewed offering materials dated September 30, 1999, relating to a
proposed offering by Intrex of 1.5 million common shares at a price of $.50
per share, which offering was not completed;
(d) reviewed a summary prepared by management of Intrex of capital raised,
research and development expenses, management time contributed and capital
assets acquired for research and development;
(e) reviewed financial projections for Intrex prepared by Intrex management;
(f) reviewed certain SEC filings containing historical financial statements and
other information relating to FiberChem including, among others, (i) Form
10-KSB Annual Report for the fiscal year ended September 30, 1999; (ii)
Form 10-QSB Quarterly Reports for the fiscal quarters ended June 30, 1999,
December 31, 1999 and March 31, 2000; and (iii) Form S-2 Registration
Statement dated May 12, 1999;
(g) reviewed the certificate of incorporation of FiberChem and amendments
thereto;
(h) reviewed the Web sites of satelllite communication systems that compete
with Orbcomm, including Iridium LLC, Faisat, GlobalStar, GEMnet, ICO Global
Communications and Odyssey Telecommunications International Inc.;
(i) reviewed and discussed with members of Intrex senior management, among
other matters, (i) the historical and current operations and financial
condition of Intrex and its future prospects, in consideration of various
prevailing competitive, economic and regulatory conditions; (ii) certain
internal financial information prepared by Intrex management; and (iii)
various corporate strategic objectives which could potentially be served by
the prospective business combination, as well as potentially negative risk
factors related thereto, and such other courses of action which might be
available to the combined company, all of which were considered by the
Intrex Board in its deliberations concerning the proposed business
combination;
(j) reviewed the strategic plan for the post-combination operation of
DecisionLink as described in various documents, including a confidential
business plan prepared by management of FiberChem and Intrex, and discussed
with members of the senior management of FiberChem and Intrex various
strategic, operational, financial, marketing and technical factors,
including potentially negative risk factors, relating to development and
implementation of the DecisionLink strategy;
(k) performed certain analyses and computed certain ratios with regard, among
other matters, to (i) the relative post-combination equity ownership
interests of the FiberChem and Intrex shareholders under alternative
scenarios relating to the achievement of the Intrex business milestones
under the pooling agreements and to the prospective future business and
financial performance of the combined entity and (ii) the relative
prospective financial, operational, strategic or other contributions of the
parties under such alternative scenarios;
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(l) reviewed the historical stock prices, trading volumes and other public
market activity of FiberChem Common Stock over various time periods and
analyzed changes in the aggregate market capitalization and stock price for
FiberChem at various dates prior and subsequent to the initial public
announcement of the proposed business combination through May 31, 2000; and
(m) performed such other analyses and investigations and considered such other
factors as E&E deemed appropriate.
E&E relied, without assuming any responsibility for the independent
verification of such information, upon the accuracy, completeness and
reasonableness of all information, including financial forecasts, whether
provided to E&E by the management of FiberChem and Intrex, or otherwise obtained
from public sources reasonably deemed to be reliable. In arriving at its
opinion, E&E neither performed nor obtained any independent valuation or
appraisal of the assets of FiberChem, Intrex or Pandel. E&E's opinion delivered
March 10, 2000, was based, at the direction of Intrex, upon economic, market and
other conditions and circumstances existing as at December 6, 1999, the date of
the Arrangement Agreement as originally executed and, with respect to its
memorandum dated May 31, 2000, upon the changes reflected in the terms and
conditions of the Amended Arrangement Agreement. Except for consideration of the
changes in the terms and conditions of the Amended Arrangement Agreement and
review of trading prices of FiberChem common stock through May 31, 2000, the E&E
memorandum dated May 31, 2000, was also based, at the direction of Intrex, on
economic, market and other conditions and circumstances existing as at December
6, 1999, management of Intrex having noted that there were no material changes
in the operations and financial position of Intrex and FiberChem since that
date.
E&E assumed that the business combination would be consummated on terms and
conditions provided for in the Arrangement Agreement with respect to its March
10, 2000 opinion and as provided for in the Amended Arrangement Agreement with
respect to its memorandum dated May 31, 2000, without material modification
thereof. E&E noted its assumption that there would be available to FiberChem
immediately following the combination, on terms and conditions satisfactory to
FiberChem and Intrex, new financing proceeds of $5,000,000. This assumption was
later varied by the boards of directors of FiberChem and Intrex since $3,635,000
in financing proceeds were obtained in connection with the closing of the
business combination, of which approximately $1,350,000 was available at the
time of closing.
The following presentation summarizes certain analyses performed by E&E in
arriving at its opinion dated March 10, 2000 and its memorandum dated May 31,
2000:
As to its opinion dated March 10, 2000, E&E compared the fair market value,
as at December 6, 1999, of all the outstanding common shares of Intrex to the
fair market value, on a pro forma basis, of the Intrex shareholders' prospective
interest in the combined company. E&E determined the fair market value of Intrex
on an asset value based approach on a going concern basis using principally a
modified replacement cost analysis to determine the value of Intrex's
intellectual property and goodwill. E&E considered this to be the most
appropriate approach, in preference to other valuation methodologies which it
considered because of (i) Intrex's modest revenues and lack of operating cash
flow, operating funds or significant revenue producing agreements in place with
other companies, and (ii) the lack of comparable companies for which information
was available which were at as early a stage of development as Intrex. In
determining the fair market value of FiberChem, E&E considered the average
trading price for FiberChem common stock for the period April 1999 to November
30, 1999 (the last day of the month prior to the execution of the original
Arrangement Agreement). Based on the foregoing E&E stated in its March 10, 2000
report that the shares of the post-transaction combined company to be received
by Intrex shareholders were not of a higher value than their shares of Intrex.
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In arriving at its March 10, 2000 opinion, E&E also evaluated numerous
qualitative benefits that may be realized subsequent to the combination,
including the numerous possible synergies between Intrex and FiberChem,
including:
- the ability of the two companies to share research and development
efforts given the complementary nature of their existing technolgies and
products
- the ability of both companies to attempt to sell products and services
into each other's client base
- the extent to which the data communications capabilities of Intrex can
extend the capabilities of the FiberChem sensor technologies and VICE VERSA
- the broader customer base available to each company through the
combination
- the separate skills of the two management teams which will strengthen
the management of the combined company
- the increased liquidity of the publicly traded shares of FiberChem
common stock as compared with the closely held Intrex shares
Based on the foregoing, E&E stated in its March 10, 2000 opinion that as at
December 6, 1999, the terms of the Arrangement Agreement as originally executed
are fair from a financial point of view to the shareholders of Intrex.
As to its May 31, 2000 Memorandum, in addition to the foregoing analyses,
E&E analyzed (i) the trading prices for FiberChem common stock for the period
from January 2, 2000 to May 31, 2000 and (ii) the changes in the proposed
transaction reflected in the Amended Arrangement Agreement. Based on these
analyses, E&E stated in its May 31, 2000 memorandum that while it was unable to
make specific conclusions as to the fairness of the transaction because it was
restricted from undertaking a fair market valuation of the companies as of the
date of the Amended Arrangement Agreement, it was not unreasonable to conclude
that the terms of the Amended Arrangement Agreement will not place the Intrex
shareholders in a less fair position than under the terms of the Arrangement
Agreement as originally executed on December 6, 1999, and reviewed in E&E's
opinion and report dated March 10, 2000.
While the foregoing summary describes certain of the analyses which E&E
deems material to its opinion and memorandum, it is not a comprehensive
description of all analyses and examinations actually performed by E&E in
connection with its opinion and memorandum. The preparation of a fairness
opinion is a complex process and involves various subjective business
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Therefore, such an opinion is not susceptible to partial analysis or summary
description. Accordingly, notwithstanding the separate factors summarized above,
E&E believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors could create an incomplete and misleading
view of the evaluation process underlying its opinion. With respect to analyses
of changes over time in public stock trading prices for FiberChem, such analyses
are not appraisals and do not necessarily reflect the prices at which businesses
could actually be sold or actual values of future results that might be
achieved.
E&E's analyses were prepared exclusively as part of E&E's review of the
fairness, from a financial point of view, of the consideration issuable to the
shareholders of Intrex, taken as a whole, to the Intrex shareholders in
connection with the delivery of E&E's opinion and memorandum. E&E's opinion and
memorandum were prepared for the use of the Intrex board of directors and
shareholders and were not relied upon by Fiberchem's board of directors in
evaluating the business combination.
Pursuant to the terms of the engagement of E&E for the purpose of rendering
its opinion, Intrex has paid E&E in the amounts of Cdn. $9,630 for E&E's
services rendered and Cdn. $678.71 for reimbursement of E&E's reasonable
out-of-pocket expenses in connection with the engagement. Intrex's obligation
for payment of E&E's fees and expenses was not contingent upon E&E's issuance of
a favorable opinion letter or upon completion of the proposed business
combination pursuant to the Arrangement Agreement or the Amended Arrangement
Agreement. Intrex has also agreed to indemnify E&E and certain related parties
against certain liabilities, including liabilities under the securities laws, in
connection with its engagement. Neither E&E nor the individuals involved with
E&E's opinion have any present or contemplated future interest in FiberChem,
Intrex, Pandel or DecisionLink, other than as stated in its opinion and
memorandum.
The E&E opinion and memorandum will be made available for inspection and
copying at the principal executive offices of FiberChem at 1181 Grier Avenue,
Suite B, Las Vegas, Nevada 89119. A copy of the E&E opinion and memorandum will
also be sent by FiberChem to any interested equity securityholder or
representative who has been so designated in writing upon written request and at
the expense of the requesting securityholder.
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AGREEMENTS AFFECTING THE COMPANIES AFTER THE COMBINATION
The Arrangement Agreement includes a number of agreements affecting the post
combination management and operations of the combined entity. Set forth below is
a summary of certain of the material terms included in certain of such
agreements. The Amended Arrangement is filed as an exhibit to the Current Report
on Form 8-K (date of the earliest event reported June 2, 2000), filed with the
Securities and Exchange Commission.
LOCK-UP AGREEMENT. Principal stockholders of Intrex and FiberChem who will
initially own approximately 154,091,957 shares (50.5% of the then outstanding
shares) of FiberChem Common Stock (or securities of FiberChem or Intrex
exchangeable for or convertible into such number of shares of Common Stock)
entered into a lock-up agreement limiting their public sales of any Common Stock
owned by them including any shares of Common Stock which may be obtained upon
the release to them under the pooling agreement of securities convertible into
or exchangeable for FiberChem Common Stock during the twelve month period
following the closing of the business combination to the amount which would be
eligible for sale by an affiliate under Rule 144 unless otherwise approved by
FiberChem.
COMPOSITION OF BOARD OF DIRECTORS AND VOTING AGREEMENT. Geoffrey F. Hewitt,
Melvin Pelley, David S. Peachey and Peter Lagergren, the principal executive
officers of FiberChem and Intrex entered into a voting agreement providing that
the FiberChem Voting Securities held by them or over which they have voting
power will be voted by each of them during a two year period following the
closing of the business combination to
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elect a board of directors consisting of nine persons, four of whom will be
nominated by David S. Peachey and Peter Lagergren, who are the principal
executive officers of Intrex; four of whom will be nominated by Geoffrey
Hewitt, the chief executive officer of FiberChem; and the ninth of whom will
be nominated jointly by Geoffrey Hewitt and David S. Peachey, or, if they are
unable to agree on a nominee, a person chosen by the other eight directors.
The voting agreement will also provide that the signatories will vote their
shares in accordance with the proposals put forward and recommended by the
Board of Directors.
REGISTRATION RIGHTS. If the shares of Common Stock issued to former Intrex
shareholders cannot be sold during the lock-up period in accordance with the
limitations of Rule 144, FiberChem has agreed to file a registration statement
covering the re-sale of such shares, to cause the registration statement to
become effective and to maintain its effectiveness for a period of two years. In
addition, if after the expiration of lock-up period and for a period of two
years thereafter, former Intrex shareholders cannot sell their FiberChem stock
in accordance with the limitations of Rule 144, FiberChem, at the request of the
holders of at least 25% of the remaining shares of Common Stock held by former
Intrex shareholders, will file and cause to become effective a registration
statement covering the re-sale of such shares and will maintain the
effectiveness of such registration statement for a period of two years.
POOLING AGREEMENT SHARES. Out of a total of approximately 252,220,000 shares
of Common Stock (or securities exchangeable for or convertible into shares of
Common Stock) which have been issued to Intrex and Pandel shareholders as
consideration for the business combination, 189,000,000, or 75%, of the shares
(62% of the 305,096,000 total number of all shares of FiberChem Common Stock to
be issued and outstanding) deposited into escrow pursuant to various pooling
agreements and will be subject to release in whole or in part to the Intrex and
Pandel shareholders only if certain milestones related to Intrex's business are
met during a two year period following the closing of the business combination.
The pooling agreements provide that any shares which have not been released by
the expiration of the two-year period will be cancelled. Holders of shares
subject to the pooling agreements will be entitled to receive dividends paid by
the Company but, except for shares issued to Pandel shareholders and except with
the consent of FiberChem, will not be entitled to associated FiberChem voting
rights.
EMPLOYMENT AND NON-COMPETITION AGREEMENTS. As a condition to the closing,
David S. Peachey, Peter Lagergren, Geoffrey Hewitt, Melvin Pelley, Brian O'Neil
and Thomas Collins each entered into an employment agreement and non-competition
agreement with FiberChem. In addition, as a further condition to the closing,
FiberChem entered into separate Compensation Agreements with each of David S.
Peachey and Peter Lagergren providing for the issuance to each of them of
securities convertible into or exchangeable for 9,450,000 shares of Common
Stock, which securities have been deposited into escrow subject to release to
them, in whole or in part, upon achievement within two years of the Intrex
business milestones contained in the pooling agreements.
FIBERCHEM SPECIAL MEETING OF STOCKHOLDERS. FiberChem agreed in the
Arrangement Agreement that within 90 days after the closing of the business
combination it will call and hold a shareholders' meeting at which the
shareholders of FiberChem will be asked to approve a resolution to increase the
number of authorized shares of Common Stock to 500,000,000 shares. FiberChem has
agreed to use its best efforts to solicit proxies or otherwise cause its
shareholders to vote in favor of the resolution. If FiberChem's stockholders do
not authorize the additional shares of Common Stock by December 31, 2000, then
FiberChem's obligation to redeem each Intrex Class B Share in exchange for one
share of Common Stock can be satisfied only by a cash payment in an amount equal
to the market value of a share of Common Stock. This Proxy Statement relates to
the special meeting of shareholders of FiberChem which has been called to
satisfy this agreement.
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ENTRENET AGREEMENT. On April 12, 2000, FiberChem, Intrex and Entrenet
entered into an agreement providing for the settlement of Intrex's obligation to
compensate Entrenet for advisory services. Under the agreement, upon the closing
of the business combination, Intrex's obligations to Entrenet were settled for a
payment of $3,557 in cash; 3,000,000 shares of Common Stock; a 10% Subordinated
Convertible Note in the amount of $126,500 convertible into Common Stock at a
conversion price of $0.185 per share; and a four year warrant to purchase
960,000 shares of Common Stock at a price of $0.185 per share.
COMBINED OPERATIONS OF FIBERCHEM AND INTREX
The conclusion of the merger of FiberChem with Intrex Data
Communications Corp. of Vancouver, BC, and Dallas, TX, has resulted in a new
company, to be named DecisionLink, Inc., which will operate in the global
wireless remote asset monitoring marketplace.
The business combination of FiberChem and Intrex has in management's
opinion produced many new marketing opportunities. Management believes that the
ability to collect data on a real time basis through FiberChem's sensor
technology combined with Intrex's communications technology offers the combined
Company a unique opportunity for rapid growth in the expanding wireless data
communications market. It provides us with the ability to transmit and monitor
data from remote or difficult to reach assets and locations.
The combined products and services are particularly suitable for
monitoring individual residential and commercial propane gas tanks, oil and gas
wells, pipelines, compressors, vehicle fleets, fuel storage tanks and other
related applications. The Company will now be able to provide Intrex
communication modules as a new component to its existing business in the above
or below ground storage tank, offshore platform monitoring, and its chemical
sensor marketplaces.
FiberChem/DecisionLink's Intrex Division, which carries on the
business conducted by Intrex before the business combination, provides
low-cost, proprietary Internet and communications technology for transmitting
data to or from remote or mobile assets on a real-time basis using ORBCOMM's
and Norcom's satellite services and other wireless data systems. Data is
routed through Intrex's global network that acts as a data gateway and
applications service provider. This allows customers to monitor and control
remote or mobile assets such as gas wells, propane tanks, pipelines,
compressors, storage tanks, offshore platforms, or service vehicles directly
from a desktop PC.
FiberChem/DecisionLink's FCI Environmental Division, which carries
on the business conducted by FiberChem before the business combination, will
continue to develop, manufacture, market and license fiber optic chemical
sensors that produce continuous, real-time information on environmental
pollutants in the air, water and soil. The FCIE product line has been
re-engineered to incorporate Intrex-developed communications technology.
These new products offer the environmental monitoring community FiberChem's
state-of-the-art sensing technology with all the benefits of satellite
communications, including dramatically reduced installation and start-up
costs, lower communications charges, ubiquitous coverage and the ability to
receive data on a customer-specific Web site.
THE DECISIONLINK STRATEGY
Building on the strengths of FiberChem and Intrex, the combined Company
intends to establish itself as a leading provider of corporate remote asset
monitoring, control and data information systems. The Company's SensorFusion-TM-
technology integrates the sensing and messaging functions seamlessly through its
Universal Data Network (UDN) and, with TCP/IP as its base protocol, it allows an
easy interface with most
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customer-supplied data management systems. SensorFusion-TM- provides an
end-to-end solution for clients with remote assets that require cost
efficient and time effective monitoring and control.
MARKET STRATEGY
The Company's marketing strategy is to target large-scale applications
where the customer requires the functionality of high technology sensors and
integrated communication systems at a low delivery cost.
The Company believes that markets with these characteristics will
provide:
- Significant recurring revenue potential derived from on-going
monitoring and data management fees,
- Significant revenue potential from the sale of hardware and
monitoring software.
MARKET OPPORTUNITIES
PROPANE TANKS
There are approximately 15 million commercial and residential propane
tanks in the United States alone. Current tank level measurement technology
provides rough estimates of tank fuel levels of limited management value.
Intrex's patented "GasLink" level monitoring system is accurate within 1%. It
will enable a fundamental change in the way propane distribution systems are
managed. Distributors will be able to accurately monitor individual tank fuel
levels from a central location. This will allow them to use more efficient fuel
delivery schedules and better control inventories. This should result in
increased customer satisfaction and an up to 25% reduction in delivery costs. In
addition, this new level of accuracy may permit distributors to change the
billing system from "pay per fill" to a monthly usage based billing system
(similar to a billing system for electricity). The resulting information will
also allow propane distributors to more cost effectively purchase and store
propane. The "GasLink" system has been designed for quick installation on
existing tanks without modification to the tanks and without the need to enter
an end user's premises.
The Company has signed a Memorandum of Understanding (MOU) with
Cornerstone Propane Partners, LP (NYSE :CNO), the fourth largest propane
distributor in the United States, with approximately 460,000 tanks owned or
controlled. The MOU sets out the basic terms for a joint venture between the
Company and Cornerstone for marketing the propane monitoring system to other
major propane delivery companies worldwide. The joint venture will be known as
TankSat LC with the Company owning 50% of the venture. Cornerstone also intends
to install the "GasLink" system throughout the Cornerstone network.
Revenue in this market segment will be derived from monthly monitoring
and data management fees, and the sale of individual tank monitoring and
communication equipment. The Company anticipates its monitoring contracts will
be for a minimum of five-year periods. In addition, it is the Company's belief
that given the proprietary nature of its technology and systems, once installed
it will be difficult for customers to cost justify switching monitoring
services.
OIL PUMPS AND GAS COMPRESSORS
The oil and gas industry has a critical operational need for accurate
measurement and monitoring of operating parameters for oil pumps and pipeline
compressors. Intrex has developed "CompressionLink", which is a monitoring and
communication device for accurately measuring compressor operational status.
Intrex currently has pilot projects underway with Weatherford, Hanover, POI,
Universal Compression
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Argentina and USA Compression, all leading industry suppliers. Intrex is also
providing monitoring and communication devices to Weatherford to monitor oil
pumps.
The sensing equipment monitors various operating parameters resulting
in the provision of greater operating efficiencies and preventive maintenance
information. The communication systems allow pump and compressor service
companies to ensure they can maintain throughput and operating "up time"
availability. This avoids excessive shutdowns and mechanical damage thereby
helping to limit "out of conformity operations".
Revenue will be derived from recurring monitoring fees and ongoing data
management fees as well as from the sale of the monitoring and communication
equipment.
GASOLINE VAPOR DETECTION MARKET
SENSOR-ON-A-CHIP-Registered Trademark-, jointly developed by
FiberChem and Texas Instruments, is an optical analytical spectrometer on a
plug-in chip with a standard 20-pin IC package. Applications include
environmental, medical and industrial sensing of gases such as carbon
monoxide, ethanol, ammonia, hydrocarbons and food contaminants.
FiberChem has been working with Gilbarco Inc., the largest supplier of
gas pumps in the United States, to deploy a low cost sensor for the detection of
gasoline vapor in Phase II vapor recovery systems for gasoline dispenser
systems. This device is designed to satisfy the requirements of the newly
enacted regulations promulgated by the California Air Resources Board. FiberChem
estimates there are approximately 100,000 gas stations each with an average of
six pumps that will be required to install vapor detection systems. Each pump
will require two chips with each chip having an expected life of three years.
This would suggest an initial market of 1.2 million chips and a replacement
market of approximately 400,000 chips per year. If the industry is to meet the
mandated compliance date of April 2001, the Company anticipates that shipments
will begin prior to the end of 2000.
ENVIRONMENTAL MONITORING
Management believes, based on their knowledge of the industry, that
FiberChem with its PetroSense-Registered Trademark- fiber optic based
petroleum hydrocarbon sensors is among the world's leaders in the detection
of hydrocarbon in vapor and water. The development of this technology as the
best available in monitoring of leaks from underground storage tanks (USTs)
and aboveground storage tanks (ASTs), pipelines and wastewaters has enabled
the Company to build an impressive list of Fortune 500 clients such as Shell,
Texaco, GATX, Coastal, Florida Power and the Miami, West Palm Beach and
Orlando International Airports.
The development of this market has been hampered by delays in the
enforcement of environmental regulations and the high cost associated with
communicating with the sensor units. However, with over 700,000 ASTs and 1.2
million USTs in the United States, combined with a continuing public requirement
to reduce environmental pollution, the Company perceives continuing and
significant opportunities for its products. Management believes now that Intrex
communications technology has been integrated with FiberChem's sensor
technology, it will allow the Company to more rapidly realize the potential of
this market.
The Company recently sighed a Memorandum of Understanding with
Mainsborne Communications Inc, Vancouver, Canada to develop an interface to the
modem in their automated meter-reading device or AMR. The Company intends to
market this product to utilities with a large rural based cliental and to
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developing countries as a low cost method of data recovery and communication for
electricity, water and gas usage. The Company considers there is an enormous
opportunity in the rapidly growing AMR marketplace and is positioning its
technology to become a leader in the communication pathway for remote meter
data.
OTHER MARKETS
In addition, the Company anticipates pursuing the following market
opportunities:
- Heavy Machinery and Transportation Asset monitoring;
- Sensors for chemical detection and measurement.
CURRENT PRODUCT PORTFOLIO
SMARTTRANS-TM- , a sophisticated hardware and software package,
remotely monitors mobile or fixed industrial assets via satellite or cellular
telephone utilizing the Company's LeoLink-TM- and reports operations to the
customer on demand through IntrexNet-TM- Universal Data Network
LEOLINK-TM- is an extremely flexible microcomputer that stores data and
is an active control system, and data link manager. It collects data from
external electronic components; accepts control commands; controls and monitors
the remote equipment; and interfaces to a wide variety of Remote Terminal Units
(RTUs). LeoLink-TM- is supplied as a complete field installable package.
INTREXNET-TM- is a Universal Data Network that allows customers to send
data using multiple input devices or systems such as satellite, cellular, public
Internet, or private networks and receive decision-making information through
the Internet or private networks, pager networks, or public telephone systems.
FUELMATE-TM-/DATAMATE-TM- monitors output from intelligent flow meters
and electronic engine components which measure multiple functions such as fuel
use, rpm, temperature, injector timing, etc. and transmits the data on demand
via satellite. DataMate-TM- is a generic version of the FuelMate-TM- and has the
ability to be programmed externally to monitor and process any type of digital
input signal.
INTREX ANYWHERE-TM- is a system that allows the IntrexNet-TM- Universal
Data Network customer to build a complete data acquisition system using the
latest IP and data base tools in conjunction with the latest in wireless and
satellite technology without having to invest in people and equipment
infrastructure required to build these systems from scratch.
INTREXNET DATA PORTAL-TM- is a service of the IntrexNet-TM- Universal
Data Network (UDN),which allows customers access to multistranded communications
networks using either a Virtual Private Network or a Frame Relay connection to
the Universal Data Network. This is a very flexible method for adding value
added services to an OEM's portfolio. The IntrexNet Data Portal-TM- allows the
Company to provide its client OEMs with private labeled wireless communications
services to provide very high quality Internet based data collection and
distribution systems
PETROSENSE-Registered Trademark- CMS-4000 and CMS-5000 Series are
fiber optic based petroleum hydrocarbon sensors, which can detect
hydrocarbons in vapor and in water. The Company believes that this product
line is the best available technology for monitoring soil vapor and ground
water on a real-time basis. These products are now satellite and Internet
enabled.
OILSENSE-Registered Trademark--4000 AND PHA-100WL replace the now
banned Freon-based instruments used to
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determine the hydrocarbon content of produced water from offshore oil
production platforms. This niche market represents a worldwide opportunity
for the Company. The OilSense-Registered Trademark- is now satellite and
Internet enabled.
SENSOR-ON-A-CHIP-Registered Trademark- is an optical analytical
spectrometer on a plug-in chip with a standard 20-pin IC package. Utilizing
standard TI components for ease of design compatibility, these devices
incorporate wave-guides onto which a chemical matrix may be coated. The
presence of a chemical causes a reversible change in the wave-guide material
that is detected and measured. The device is an integral component of the
Company's SensorFusion technology.
GASLINK-SM- is an ultrasound detection and communication device for the
measurement of fluid levels in tanks. This product is patented technology and
proprietary communication systems. There is a worldwide demand for this product.
COMPRESSIONLINK-SM- is a sensor and communication technology
specifically designed for compressor preventive maintenance control and
operational parameters. This is a large market with urgent need in remote oil
flow compressor locations.
PROPRIETARY TECHNOLOGY
The combined Company possesses cutting edge sensor technology, state of
the art satellite communication technology, supervisory control and data
acquisition systems ("SCADA"), and its Universal Data Network system.
The Company owns 23 U.S. patents and 15 International patents
covering the fundamental elements of both fiber and waveguide based chemical
sensors. The Company also owns the key trademarks which identify its
products, including Sensor-on-a-Chip-Registered Trademark-, FOCS-Registered
Trademark-, PetroSense-Registered Trademark-, OilSense-Registered Trademark-,
LeoLink-TM-, SmartTrans-TM-, FuelMate-TM-, DataMate-TM-, EMAP-TM-,
DolphinLink-TM-, the IntrexNet Universal Data Network-TM- and Intrex
Anywhere-TM-.
Through a five-year cross licensing agreement with Bosch Telecom GmbH
the Company licensed Bosch's proprietary chemistry and platforms with an
exclusive right for the medical market and non-exclusive rights as to other
markets in North America.
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STRONG RECURRING REVENUE MODEL
The combination of the two companies will accelerate the change in
strategy to a serviced-based company with recurring from fee-for-service sales
model. This is a fundamental and significant change to the recurring revenue
model from one-time sales of sensor equipment to its customers or distributors.
Under this strategy, the Company is focused on providing information to its
customers on a "fee-for-service" basis. The customer is provided with essential
equipment and a monthly service fee is charged for providing information and
linking the customer to its assets. In addition, "value-added" services are
provided to the customer as data is processed through the Universal Data Network
and transmitted to the customer via the Internet providing "real-time" decision
making information. Revenues will be tied to multi-year contracts resulting in a
repetitive revenue stream to the Company.
VOTE REQUIRED
The affirmative vote of the majority of outstanding shares of Common and
Preferred Stock (Series A, Special Series, and Pandel Series) and the
affirmative vote of the majority of outstanding shares of Common Stock voting
separately as a class are required to ratify the amendment to the Certificate.
AMENDMENT TO RESTATED CERTIFICATE
The proposed Amendment to the Certificate is as follows:
"FOURTH: (a) The Corporation is authorized to issue 510,000,000 shares,
consisting of 500,000,000 shares of Common Stock, $.0001 par value ("Common
Stock"), 10,000,000 shares of preferred stock, $.01 par value ("Preferred
Stock"). . ."
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF AND URGES
YOU TO VOTE "FOR" THE PROPOSED AMENDMENT OF THE
COMPANY'S CERTIFICATE OF INCORPORATION IN THE
FOREGOING PROPOSAL 1.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO AUTHORIZE THE CHANGE OF THE COMPANY'S
NAME TO "DECISIONLINK, INC."
The Company's Board of Directors is asking the stockholders to vote on a
proposal to authorize the amendment to the Company's certificate of
Incorporation to change the name of the Company from "FiberChem, Inc." to
"DecisionLink, Inc.," following the completion of the business combination with
Intrex. The Company's Board of Directors has unanimously approved such an
amendment to the Certificate of Incorporation.
The purpose of the proposed name change is to reflect the broader scope of
the Company's business following the combination of the Company and Intrex.
Upon consummation of the proposed name change it will not be necessary to
surrender stock certificates. Instead when certificates are presented for
transfer, new certificates bearing the name DecisionLink, Inc. will be issued.
If there exists any circumstances which would make consummation of the name
change inadvisable
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<PAGE>
in the judgment of the Company's Board of Directors, this proposal to amend
the Certificate of Incorporation may be terminated by the Company's Board of
Directors either before or after approval of the name change by the Company's
Stockholders.
The affirmative vote of the majority of outstanding shares of Common and
Preferred Stock (Series A, Special Series, and Pandel Series) is required to
ratify the amendment to the Certificate.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF AND URGES YOU TO VOTE "FOR" THE
AUTHORITY TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION CHANGING
THE NAME OF THE COMPANY TO "DECISION LINK, INC." (PROPOSAL 2).
PROPOSAL 3: ELECTION OF DIRECTORS
Pursuant to Section 2 of Article III of the Company's By-Laws, as
amended, the Board of Directors is divided into three classes, each of which is
to be elected for staggered three-year terms subject to phase in terms of two
years for the Class B and one year for the Class C Directors to be elected at
the meeting. The Company's Board of Directors currently has eight (8) Directors,
three (3) of which are to be elected as Class A Directors, three (3) as Class B
Directors and two (2) are to be elected as Class C Directors at the Annual
Meeting to hold office, subject to the provisions of the Company's By-Laws, for
a staggered term and until his successor is duly elected and qualified. The
Class A nominees are Geoffrey F. Hewitt, David S. Peachey and Irwin J.
Gruverman. The Class B nominees are Peter J. Lagergren, Brian A. O'Neil and
Walter Haemmerli. The Class C nominee is Trevor S. Nelson (collectively the
Class A, B and C Nominees are the "Nominees"). The remaining member of the Board
of Directors, Byron A. Denenberg, a Class C Director, was elected in August of
1998 for his respective three-year term. There is one vacancy on the Board for A
Class C Director to be mutually agreed to by Geoffrey F. Hewitt and David
Peachey.
It is intended that the accompanying form of Proxy will be voted FOR
the election as Directors of the Nominees named below, unless the Proxy contains
contrary instructions. Proxies which direct the Proxy holders to abstain and do
not direct the Proxy holders to vote for or withhold authority in the matter of
electing Directors will be voted for the election of the Nominees named below.
Proxies cannot be voted for a greater number of persons than the number of
nominees named in the Proxy Statement.
Management has no reason to believe that any Nominee will not be a
candidate or will be unable to serve. However, in the event any Nominee should
become unable or unwilling to serve as a Director, the Proxy will be voted for
the election of such person or persons as shall be designated by the Directors.
The following persons are currently serving as Directors of the Company
for their respective staggered terms including the seven Directors who are
Nominees:
<TABLE>
<CAPTION>
Name Age Positions with our Company Term
---- --- -------------------------- ----
<S> <C> <C> <C>
Geoffrey F. Hewitt 56 Chairman, Chief Executive
Officer, Class A Director 2000-2003
David S. Peachey 56 President, Chief Operating
Officer, Class A Director 2000-2003
Irwin J. Gruverman 66 Class A Director 2000-2003
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<PAGE>
Name Age Positions with our Company Term
---- --- -------------------------- ----
Peter J. Lagergren 53 Executive Vice President and
Group President Communications
Technology Division and Chief
Technology Officer, Class B
Director 2000-2002
Brian A. O'Neil 54 Executive Vice President,
Corporate Development, Class B
Director 2000-2002
Walter Haemmerli 71 Class B Director 2000-2002
Trevor S. Nelson 37 Class C Director 2000-2001
Byron A. Denenberg 65 Class C Director 1998-2001
</TABLE>
GEOFFREY F. HEWITT has served as Chairman of the Board since November
14, 1997, and as Chief Executive Officer of the Company since April 1998. Mr.
Hewitt was appointed as a Director of the Company on September 11, 1996. He has
also served as a Director of FCI Environmental since April 1994 and as its
President from April 1994 to November 1996 and as its Chairman and Chief
Executive Officer since August 1995. Prior thereto, from 1977 until March 1994,
Mr. Hewitt served as Vice President of worldwide sales and marketing for H.N.U.
Systems, Inc., a manufacturer of environmental and material analysis
instrumentation.
DAVID S. PEACHEY has served as President, Chief Operating Officer and
Director of the Company since July 27, 2000. He has served as a director of
Intrex since October 1994 and as President and Chief Executive Officer of Intrex
since July 1997. Since 1992, he has also served as President of Estero Capital
Corp., a private investment company, which participates in investment and
administration of industrial and high-tech based companies.
IRWIN J. GRUVERMAN has served as Director of the Company since May
1994. Since 1990, Mr. Gruverman has served as the General Partner for G&G
Diagnostics Funds, a venture capital business, and in 1982 founded and currently
serves as Chairman of the Board of Directors and Chief Executive Officer of
Microfluidics Corporation, an equipment manufacturer and process research and
development company.
PETER J. LAGERGREN has served as Director, President of the
Communication Technology Division and Chief Technology Officer of the Company
since July 27, 2000. He has served as an Officer and Director of Intrex since
December 1994, and as President of Firebird Data Communications, Inc., now a
subsidiary of Intrex, since 1992. Until 1997 and for more than five years prior
thereto, Mr. Lagergren was also President of Pandel Instruments, Inc. a company
engaged in the development, production and marketing of intelligent flow meters,
satellite interface programs, mapping programs for tracking ships, fuel
management
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<PAGE>
systems, tank measuring devices, and communications software. Pandel
Instruments, Inc. is now a subsidiary of FiberChem.
BRIAN A. O'NEIL has served as Executive Vice President and a Director
of the Company since July 27, 2000. Mr. O'Neil has served as a director of
Intrex since July 1997 and as its Vice President since July 1999. From 1996 to
1999 Mr. O'Neil was a Director of, and from 1996 to 1997 was Chief Executive
Officer of Foreword Demonstrations Inc., Vancouver, BC, an Internet software
development company specializing in the delivery of travel products to the
on-line consumer. Mr. O'Neil also served as a consultant to Intravelnet.com
Inc., an Internet and timeshare travel club sales organization from 1997 to
1999. From 1976 to 1995 Mr. O'Neil was founder and Chief Executive Officer of
Fiorucci Fashions Ltd., a leading New Zealand garment distributor. Mr. O'Neil is
a director of Paravision Technologies, Inc. Mainsbourne Communications, Inc.,
and Atex Garments, Ltd..
WALTER HAEMMERLI has served as a Director of the Company since February
1990. Mr. Haemmerli has been the Chief Executive Officer since 1978 of Manport
AG, Zurich, Switzerland, an investment management company owned by him. Mr.
Haemmerli was employed by Union Bank of Switzerland, Geneva, Basel and Zurich
from 1960 to 1978, holding the position of Vice President from 1970. Mr.
Haemmerli serves on the Board of Directors and is Vice-Chairman of Privatbank
Vermag AG, Chur, Switzerland, and is a Member of the Board of Directors of
American Cold Storage, Inc., Louisville, Kentucky.
TREVOR S. NELSON has served as a Director of the Company since July 27,
2000. He has served as a Director of Intrex since January 1996 and as Corporate
Secretary of Intrex since July, 1997. Mr. Nelson is a Chartered Accountant and
since 1994 he has served as the managing partner of The Stewart Thomas Group of
Penticton, British Columbia, an independent financial planning company of which
he was a founder. Mr. Nelson has also served as a member on the Board of
Directors of Schmitt Industries, Inc. of Portland, Oregon since 1991.
BYRON A. DENENBERG has served as a Director of the Company since August
1995. Mr. Denenberg is a Managing Partner of K B Partners, LLC, a venture
capital firm specializing in early-stage technology investments. Mr. Denenberg
was co-founder in 1969 of MDA Scientific, Inc. ("MDA"), a manufacturer and
marketer of toxic gas monitoring systems, where he was CEO from inception until
1991. MDA was purchased by Zellweger Uster AG in 1988. Mr. Denenberg received a
B.S. degree in Mechanical Engineering from Bucknell University, Lewisburg,
Pennsylvania. He currently serves as a Director of RCT Systems, Inc., and Orbit
Commerce, Inc. Mr. Denenberg was Chairman of MST Analytics, Inc. until its
merger with ATMI, Inc. in November 1999.
The following are the names, ages and respective positions of the executive
officers of the Company, who are not directors:
THOMAS A. COLLINS has served as President of the Sensor Division since
July 27, 2000, President of FCI Environmental since November 1996, and as Vice
President of International Marketing and Product Development from March 1996 to
November 1996. Prior thereto, from 1992, he was Director of International Sales
and Product Marketing of Arizona Instrument Corporation, a manufacturer of
environmental and control instrumentation; from 1990 to 1992 he was Director of
Marketing of Wayne Division, Dresser Industries, Inc., a manufacturer of
dispensing equipment for the gasoline industry; from 1986 to 1989 he was Manager
of Domestic Retail Marketing for Diebold, Inc., a manufacturer of transaction
terminals in the petroleum retailing market; and from 1968 to 1986 he held
marketing and engineering positions at ARCO Petroleum Products Co.
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<PAGE>
MELVIN W. PELLEY has been the Chief Financial Officer and Secretary of
the Company since April 1994. Prior thereto, from 1988 he was Vice President of
Finance and Administration of Acoustic Imaging Technologies Corporation,
Phoenix, Arizona, a manufacturer of diagnostic ultrasound medical equipment.
From 1983 to 1988 he was Director of Costs, Financial Planning and Analysis of
Advanced Technology Laboratories, Inc., Bothell, Washington, which manufactures
and markets real-time ultrasound medical diagnostic equipment. From 1977 to
1983, Mr. Pelley was Chief Financial and Administrative Officer for Advanced
Diagnostic Research Corporation, Tempe, Arizona, a designer, manufacturer and
marketer of diagnostic ultrasound scanners.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Officers serve at the discretion of the Board of Directors. All
Directors hold office until the expiration of their terms and the election and
qualification of their successors. The Company's Board of Directors is divided
into three classes of approximately equal size with the members of each class
elected, after an initial phase-in-period, to three-year terms expiring in
consecutive years.
In January 1993, the Company established a Stock Option Committee. The
Stock Option Committee is responsible for the granting of stock options under
the Company's Stock Option Plans. The Company also established a Compensation
Review Committee, which is responsible for reviewing the compensation of the
Company's executives and employees. In August 1995, Gerald T. Owens, a former
Director, and Mr. Haemmerli were appointed to a single Compensation Review and
Stock Option Committee. The Compensation and Stock Option Committee met two
times during Fiscal 1998 and two times during Fiscal 1999. Also, in August 1995,
Mr. Owens was appointed to a newly established Audit Committee and Mr. Gruverman
was appointed to the Audit Committee in November 1997. The Audit Committee is
responsible for recommending the independent public accountants to serve as the
Company's auditors, reviewing and considering the actions of management in
matters relating to audit functions, reviewing with such accountants the scope
and results of their audit engagement, reviewing the financial statements and
information included in the Company's filings with the Securities and Exchange
Commission, reviewing the Company's system of internal controls and procedures
and reviewing the effectiveness of procedures intended to prevent violations of
laws and regulations. The Audit Committee met two times in Fiscal 1998 and two
times during Fiscal 1999.
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<PAGE>
(a) SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
------------------- ------ --------
Other Restricted Securities Long-Term All
Name of Individual Fiscal Annual Stock Underlying Incentive Plan Other
and Principal Position Year Salary($) Bonus($) Compensation($) Awards($) Options/SARs(#) Payouts($) Compensation($)
---------------------- ------ ----------- -------- --------------- ----------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Geoffrey F. Hewitt 1999 $ 217,134(1) 300,000
President and CEO of 1998 $ 211,932(1) 240,000
FiberChem, Inc. and CEO 1997 $ 205,000(2) $ - $ - - 125,000 $ - $ -
of FCI Environmental,
Inc.
Melvin W. Pelley 1999 $ 139,479(3) 275,000
Chief Financial Officer 1998 $ 139,200(3) 180,000
of FiberChem, Inc. and 1997 $ 136,708(4) $ - $ - - 75,000 $ - $ -
of FCI Environmental,
Inc.
Thomas A. Collins 1999 $ 132,479(5) 200,000
President of 1998 $ 132,200(5) 120,000
FCI Environmental, Inc. 1997 $ 129,708(6) $ - $ - - 75,000 $ - $ -
</TABLE>
(1) Includes accrued but unpaid salary earned during Fiscal 1998 of $55,000 and
during Fiscal 1999 of $55,000.
(2) Includes $14,808 in accrued but unpaid salary, earned during the period from
June 15 through September 30, 1997.
(3) Includes accrued but unpaid salary earned during Fiscal 1998 of $32,000 and
during Fiscal 1999 of $36,123.
(4) Includes $8,615 in accrued but unpaid salary, earned during the period from
June 15 through September 30, 1997.
(5) Includes accrued but unpaid salary earned in Fiscal 1998 of $25,000 and
during Fiscal 1999 of $25,000.
(6) Includes $6,730 in accrued but unpaid salary, earned during the period from
June 15 through September 30, 1997.
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<PAGE>
(b) OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted Exercise
Options/SARs to Employees Or Base Expiration
Name of Individual Granted In Fiscal Year Price($/Share) Date
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Geoffrey F. Hewitt 300,000 18.6% $ 0.125 July 19, 2009
Melvin W. Pelley 275,000 17.1% $ 0.125 July 19, 2009
Thomas A. Collins 200,000 12.4% $ 0.125 July 19, 2009
</TABLE>
(c) AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Name of Shares Number of Securities Value of Unexercised
Individual Acquired Underlying Unexercised In-The-Money Options/SARs
Exercisable/ on Options/SARs at Fiscal at Fiscal Year End ($)
Unexercisable Exercise Value Year End (#) Realized ($) Exercisable/Unexercisable
------------- -------- ----- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Geoffrey F. Hewitt - - 765,000/$0 $ 1,500/$0
Melvin W. Pelley - - 534,000/$0 $ 1,375/$0
Thomas A. Collins - - 395,000/$0 $ 1,000/$0
</TABLE>
(d) LONG-TERM INCENTIVE PLANS
Effective January 1, 1994, the Company implemented an Internal Revenue Code
Section 401(k) Profit Sharing Plan (the "Plan"). The Plan provides for voluntary
contributions by employees into the Plan subject to the limitations imposed by
Internal Revenue Code Section 401(k). The Company will match employee
contributions at a rate of 50% of the employee's contribution up to a maximum of
2% of the employee's compensation. The Company matching funds are determined at
the discretion of management and are subject to a five-year vesting schedule
from the date of original employment.
(e) DIRECTORS COMPENSATION
Non-management directors receive options to purchase shares of Common Stock
of the Company for serving on the Board of Directors and for service on official
committees of the Board.
On July 19, 1999, the Company granted options to purchase 50,000 shares of
Common Stock at $0.125 per share, which was the market value of the Common Stock
on that date, to each of its four non-management Directors. In addition the
Company granted options to purchase an aggregate of 50,000 shares of Common
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<PAGE>
Stock to three of its non-management directors for service as members of the
Audit Committee (15,000 shares to each of its two members) and Compensation and
Stock Options Committee (10,000 shares to each of its two members).
(f) EMPLOYMENT CONTRACTS
Geoffrey F. Hewitt serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Hewitt is currently compensated
at a rate of $205,000 per annum and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The employment contract is terminable
for cause. Since June 15, 1997, payment of approximately 27% (or $55,000 per
annum) of Mr. Hewitt's salary has been deferred. In December 1998, Mr. Hewitt
applied his total unpaid salary from June 1997 through December 1998 of $84,615
to the purchase of unsubscribed Units in the Company's Rights Offering ($16,640
after taxes). In July 1999, Mr. Hewitt applied his total unpaid salary from
January 1999 through June 1999 of $27,500 ($16,640 after taxes) to the purchase
of restricted shares of the Company's Common Stock. In June 2000 Mr. Hewitt
applied the total unpaid salary from July 1999 through June 2000 to the exercise
of Class E Common Stock Purchase Warrants. The same proportion of Mr. Hewitt's
salary continues to be deferred.
David S. Peachey serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Peachey is currently compensated
at a rate of $200,000 per annum, and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The Employment contract is terminable
for cause. Since July 27, 2000, payment of approximately 25% (or $50,000 per
annum) of Mr. Peachey's salary has been deferred.
Melvin W. Pelley serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Pelley is currently
compensated at a rate of $132,000 per annum, and is entitled to receive
bonuses, if any, at the discretion of the Board of Directors. The employment
contract is terminable for cause. Since June 15, 1997, payment of
approximately 24% (or $32,000 per annum) of Mr. Pelley's salary has been
deferred. In December 1998, Mr. Pelley applied his total unpaid salary from
June 1997 through December 1998 of $49,230 to the purchase of unsubscribed
Units in the Company's Rights Offering ($29,395 after taxes). In July 1999,
Mr. Pelley applied his total unpaid salary from January 1999 through June
1999 of $16,000 ($8,970 after taxes) to the purchase of restricted shares of
the Company's Common Stock. In June 2000 Mr. Pelley applied his total unpaid
salary from July 1999 through June 2000 to the exercise of Class E Common
Stock Purchase Warrants. The same proportion of Mr. Pelley's salary continues
to be deferred.
Peter J. Lagergren serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. Lagergren is currently
compensated at a rate of $185,000 per annum, and is entitled to receive bonuses,
if any, at the discretion of the Board of Directors. The Employment contract is
terminable for cause. Since July 27, 2000, payment of approximately 22% (or
$40,000 per annum) of Mr. Lagergren's salary has been deferred.
Thomas A. Collins serves under an employment and non-competitive agreement
with the Company, effective July 27, 2000. Mr. Collins is currently compensated
at a rate of $125,000 per annum, and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The employment contract is terminable
for cause. Since June 15, 1997, payment of approximately 20% (or $25,000 per
annum) of Mr. Collins' salary has been deferred. In December 1998, Mr. Collins
applied $12,000 (approximately one-third) of his total unpaid salary from June
1997 through December 1998 to the purchase of unsubscribed Units in the
Company's Rights Offering ($6,146 after taxes). In July 1999, Mr. Collins
applied $10,000 of his unpaid salary ($6,500 after taxes) to the purchase of
restricted shares of the Company's Common Stock. In June 2000 Mr. Collins
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<PAGE>
applied $20,000 of his deferred salary to the exercise of Class E Common Stock
Purchase Warrants. The same proportion of Mr. Collins' salary continues to be
deferred.
Brian A. O'Neil serves under an employment and non-competition agreement
with the Company, effective July 27, 2000. Mr. O'Neil is currently compensated
at a rate of $125,000 per annum, and is entitled to receive bonuses, if any, at
the discretion of the Board of Directors. The Employment contract is terminable
for cause. Since July 27, 2000 payment of approximately 20% (or $25,000 per
annum of Mr. O'Neil's salary has been deferred.
(g) CONSULTING AGREEMENTS
None.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Executive Compensation - Directors Compensation; Employment Contracts;
and Consulting Agreements" for information concerning stock options granted and
employment and consulting agreements entered into during Fiscal 1997-1999 with
officers and Directors of the Company.
In December 1997 and January and February 1998, four directors (Geoffrey
Hewitt, Byron Denenberg, Irwin Gruverman and Walter Haemmerli) and an officer
(Melvin Pelley) of FiberChem each advanced the Company a total of $50,000 and
Mr. Haemmerli advanced an additional $75,000. These advances, aggregating
$325,000, were evidenced by convertible promissory notes bearing interest at the
rate of 8% per annum due five years from issuance. Each note and unpaid accrued
interest aggregating $20,275 was cancelled on December 22, 1998 in payment for
unsubscribed Units of the Rights Offering resulting in the issuance to the
directors and officer of 1,569,431 shares of Common Stock and a like number of
Class E Common Stock Purchase Warrants.
Mr. Pelley advanced the Company $25,000 on February 27, 1998, and an
additional $25,000 on July 1, 1998. Each of these advances is evidenced by a
separate promissory note bearing interest at the rate of 8% per annum and were
originally due on or before August 31, 1998. Mr. Pelley agreed to extend the due
dates of the promissory notes. Mr. Pelley advanced FiberChem $25,000 on June 2,
1999 and $25,000 on June 3, 1999 evidenced by promissory notes bearing interest
at the rate of 9% per annum and due three years from issuance. On June 19, 2000
these four notes and accrued interest thereon were applied to the exercise of
323,626 Class E Common Stock Purchase Warrants held by Mr. Pelley. Mr. Pelley
advanced $25,000 on July 27, 1999 and $40,000 on September 29, 1999, Mr.
Haemmerli advanced $50,000 on August 30, 1999 and Mr. Gruverman advanced $50,000
on July 26, 1999. Each of these advances is evidenced by a convertible
promissory note bearing interest at the rate of 9% per annum and due three years
from the date of issuance. Mr. Pelley advanced $200,000 on January 12, 2000,
evidenced by a promissory note bearing interest at the rate of 12% per annum and
due 3 years from the date of issuance. The note becomes convertible into Common
Stock at the option of the holder only if the Company deems it has sufficient
authorized shares available.
In March and August 1998, the Company obtained loans aggregating $433,000
from Privatbank Vermag AG, a private investment bank with which Mr. Haemmerli is
associated. These loans (the "Bridge Loans") were provided as interim financing
until the Company completed its Rights Offering. The Bridge Loans bear interest
at approximately 8.5% per annum. In addition, the Company agreed to issue to
Privatbank, as additional consideration, 130,000 Units (consisting of 130,000
shares of Common Stock and Class E Warrants
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<PAGE>
to purchase 130,000 shares of Common Stock). The Units were issued in October
1998 as part of the Rights Offering. Also, $50,000 of the Bridge Loans and
$1,920 in accrued interest were converted to Common Stock and Warrants as
part of the Rights Offering. The remaining $383,000 of Bridge Loans were due
on July 15, 1999, when principal of $133,000 and accrued interest of $14,680
were converted to 1,136,000 shares of Common Stock. The due date of the
remaining $250,000 principal amount was extended to October 15, 1999 and
subsequently to September 29, 2000.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, Directors and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
Directors and ten percent shareholders are required by regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on the
Company's copies of such forms received or written representations from certain
reporting persons that no forms were required for those persons, the Company
believes that, during the time period from October 1, 1998 to September 30,
1999, all filing requirements applicable to its officers, Directors and greater
than ten percent beneficial owners were complied with.
PROPOSAL 4: APPROVAL AND ADOPTION OF THE 2000 STOCK OPTION PLAN
FOR THE COMPANY
The Board of Directors of the Company, subject to stockholder approval, has
adopted the Company's 2000 Stock Option Plan (the "2000 Plan"), which authorizes
the grant of options to purchase an aggregate of 20,000,000 shares of Common
Stock. As of September 25, 2000, no options to purchase shares of Common Stock
have been granted under the 2000 Plan.
The affirmative vote of a majority of the shares of the Voting Securities
represented and entitled to vote at the Annual Meeting is required for approval
of the 2000 Plan. The Board recommends a vote in favor of the 2000 Plan.
The Board of Directors has deemed it in the best interest of the Company to
establish the 2000 Plan so as to provide employees and other persons involved in
the continuing development and success of the Company and its subsidiaries an
opportunity to acquire a proprietary interest in the Company by means of grants
of options to purchase Common Stock. The 2000 Plan authorizes additional options
for grant to eligible participants since no options to purchase shares remain
available for grant under the Company's 1994 Employee Stock Option Plan, 1995
Employee Stock Option Plan, and 1997 Employee Stock Option Plan; and 3,390,000
shares remain available under the 1999 Non-Qualified Stock Option Plan for which
the Company did not obtain shareholder approval. It is the opinion of the Board
of Directors that by providing the Company's employees and other individuals
contributing to the Company and its subsidiaries the opportunity to acquire an
equity investment in the Company, the 2000 Plan will maintain and strengthen
their desire to remain with the Company, stimulate their efforts on the
Company's behalf, and also attract other qualified personnel to provide services
on behalf of the Company.
The following statements summarize certain provisions of the 2000 Plan. All
statements are qualified in their entirety by reference to the text of the 2000
Plan, copies of which are available for examination at the
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<PAGE>
Securities and Exchange Commission and at the executive office of the
Company, 1181 Grier Drive, Suite B, Las Vegas, Nevada 89119.
The 2000 Plan allows the Company to grant incentive stock options ("ISOs"),
as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), Non-Qualified Stock Options ("NQSOs") not intended to qualify
under Section 422(b) of the Code and Stock Appreciation Rights ("SARs"). ISO's,
NQSO's and SAR's may be collectively referred to as "Options." The vesting of
one or more options granted hereunder may be based on the attainment of
specified performance goals of the participant or the performance of the
Company, one or more subsidiaries, parent and/or division of one or more of the
above. The 2000 Plan is intended to provide the employees, directors,
independent contractors and consultants of the Company with an added incentive
to commence or continue their services to the Company and to induce them to
exert their maximum efforts toward the Company's success. The Board of Directors
has deemed it in the best interest of the Company to establish the 2000 Plan so
as to provide employees and the other persons listed above the opportunity to
acquire a proprietary interest in the Company by means of grants of options to
purchase Common Stock. The 2000 Plan is not subject to ERISA.
ELIGIBILITY FOR PARTICIPATION
Under the 2000 Plan, ISOs or ISOs in tandem with SARs, which are subject to
the requirements set forth in Temp. Reg. Section 14a.422A-1, A-39 (a)-(e), may
be granted, from time to time, to employees of the Company, including officers,
but excluding directors who are not otherwise employees of the Company. Options
may be granted from time to time, under the 2000 Plan, to employees of the
Company, officers, directors, independent contractors, consultants and other
individuals who are not employees of, but are involved in the continuing
development and success of the Company (persons entitled to receive ISOs, NQSOs,
and/or SARs are hereinafter referred to as "Participants"). ISOs and ISOs in
tandem with SARs may not be granted under the 2000 Plan to any person for whom
shares first become exercisable under the 2000 Plan or any other stock option
plan of the Company in any calendar year having an aggregate fair market value
(measured at the respective time of grant of such options) in excess of
$100,000. Any grant in excess of such amount shall be deemed a grant of a NQSO.
As of September 25, 2000, the Company had 32 employees (7 of whom are also
Officers or Directors) who are eligible for grants of one or more types of
Options under the 2000 Plan. The Company cannot presently compute the number of
non-employees who may be entitled to NQSOs.
ADMINISTRATION
The 2000 Plan is to be administered by the Board of Directors of the Company
and/or by a stock option or compensation committee (the administrator of the
2000 Plan, whether the Board of Directors itself or a committee thereof, is
hereinafter referred to as the "Committee" unless the context otherwise
requires) which shall be comprised solely of at least two "outside directors"
(as such term is defined under Section 162(m) of the Code. The Committee will
have the authority, in its discretion, to determine the persons to whom options
shall be granted, the character of such options and the number of shares of
Common Stock to be subject to each option. The Board of Directors may administer
the 2000 Plan; provided, however, that in the event a Committee has been
appointed, the Committee will administer the 2000 Plan with respect to employees
included within the term "covered employee" under Section 162(m) of the Code.
TERMS OF OPTIONS
-50-
<PAGE>
The Terms of Options granted under the 2000 Plan are to be determined by the
Board of Directors or the Committee. Each Option is to be evidenced by a stock
option agreement between the Company and the person to whom such option is
granted, and is subject to the following additional terms and conditions:
(a) EXERCISE OF THE OPTION: The Committee will determine the time
periods during which Options granted under the 2000 Plan may be exercised.
An Option must be granted within ten (10) years from the date the 2000 Plan
was adopted or the date the 2000 Plan is approved by the stockholders of the
Company, whichever is earlier. Options will be exercisable in whole or in
part at any time during the period but will not have an expiration date
later than ten (10) years from the date of grant. Unless otherwise provided
in any option agreement issued under the 2000 Plan, any Option granted under
the 2000 Plan may be exercisable in whole or in part at any time during the
exercise period and except for performance based options, must become fully
exercisable within five years from the date of its grant, and not less than
20% of the Option shall become exercisable on an aggregate basis by the end
of any of the first five years of the Option. The Committee may, in its sole
discretion, accelerate any such vesting period after the grant thereof.
Notwithstanding the above, ISOs or SARs granted in tandem with ISOs, granted
to holders owning directly or through attribution more than 10% of the
Company's Common Stock are subject to the additional restriction that the
expiration date shall not be later than five (5) years from the date of
grant. An Option is exercised by giving written notice of exercise to the
Company specifying the number of full shares of Common Stock to be purchased
and tendering payment of the purchase price to the Company in cash or
certified check, or if permitted by the instrument of grant, with respect to
an ISO, or at the discretion of the Committee with respect to NQSOs, by
delivery of Common Stock having a fair market value equal to the Option
Price, by delivery of an interest bearing promissory note having an original
principal balance equal to the Option Price and an interest rate not below
the rate which would result in imputed interest under the Code or by a
combination of cash, shares of Common Stock and promissory notes.
Furthermore, in the case of a NQSO, at the discretion of the Committee, the
Participant may have the Company withhold from the Common Stock to be issued
upon exercise of the Option that number of shares having a fair market value
equal to the exercise price and/or the withholding amount due.
(b) OPTION PRICE: The option price of an NQSO or an SAR granted
in tandem with an NQSO granted pursuant to the 2000 Plan is determined in
the sole discretion of the Committee. The option price of an ISO or SAR
granted in tandem with an ISO pursuant to the 2000 Plan shall not be less
than the fair market value thereof at the date of grant. Such fair market
value of an ISO shall be determined by the Committee and, if the Common
Stock is listed on a national securities exchange or quoted on The Nasdaq
Stock Market, Inc., the fair market value shall be the closing price of the
Common Stock, or if closing prices are not available or the Common Stock is
quoted on the National Association of Securities Dealers, Inc. ("NASD") OTC
Bulletin Board ("OTCBB") or otherwise in the over-the-counter market, the
mean of the closing bid and asked prices of the Common Stock as reported by
The Nasdaq Stock Market, Inc., the NASD, the OTCBB or the National Quotation
Bureau, Inc., as the case may be, on such date, or if there is no closing
price or bid or asked price on that day, the closing price or mean of the
closing bid and asked prices on the most recent day preceding the day on
which the Option is granted for which such prices are available. ISOs or
SARs granted in tandem with ISOs, granted to holders owning directly or
through attribution, more than 10% of the Company's Common Stock are subject
to the additional restriction that the option price must be at least 110% of
the fair market value of the Company's Common Stock on the date of grant.
(c) TERMINATION OF EMPLOYMENT OR CONSULTING AGREEMENT; DEATH;
DISABILITY: Except as provided in the 2000 Plan, or otherwise extended by
the Committee in its sole discretion, upon voluntary termination of
employment with the Company, or, in the case of a consultant, termination of
the consulting
-51-
<PAGE>
relationship prior to the termination of the term thereof a holder of an
Option under the 2000 Plan may exercise such Option to the extent such
Option was exercisable as of the date of termination at any time
within thirty (30) days after the date of such termination. Except as
provided herein, or otherwise determined by the Board of Directors or the
Committee in its sole discretion, if such employment or consulting
relationship shall terminate for any reason other than death, voluntary
termination by the employee or for cause, then such Options may be exercised
at anytime within three (3) months after such termination. Notwithstanding
the above, unless otherwise determined by the Committee in its sole
discretion, any Options granted under the 2000 Plan shall immediately
terminate in the event the Optionee is terminated as a result of the
Optionee having not adequately performed the services for which he/she/it
was hired.
Unless extended by the Committee, if the holder of an Option granted
under the 2000 Plan dies (i) while employed by the Company or a subsidiary
or parent corporation or (ii) within three (3) months after the termination
of such holder's employment, such option may be exercised at anytime
determined by the Committee, but in no event within less than six months
after death by a legatee or legatees of such option under such individual's
last will or by such individual's estate, to the extent such option was
exercisable as of the date of death or date of termination of employment,
whichever date is earlier.
If the holder of an Option under the 2000 Plan becomes disabled within
the definition of Section 22(e)(3) of the Code while employed by the Company
or a subsidiary or parent corporation, such Option may be exercised at any
time within six months after such holder's termination of employment due to
the disability.
An Option may not be exercised except to the extent that the holder was
entitled to exercise the option at the time of termination of employment or
death unless otherwise extended by the Committee in its sole discretion, and
in any event it may not be exercised after the original expiration date of
the Option.
(d) NONTRANSFERABILITY OF OPTIONS; NO LIENS: ISOs and SARs
granted in tandem with ISOs shall be nontransferable and nonassignable
except by will or the laws of intestacy, and any ISO or SAR in tandem with
an ISO is exercisable during the lifetime of the Optionee only by the
Optionee, or in the event of his or her death, by a person who acquires the
right to exercise the Option by bequest or inheritance or by reason of the
death of the Optionee. The Board or its Committee has the right to grant
options other than ISO's or SAR's in tandem with ISO's which may or may not
be transferable or assignable.
The option agreement may contain such other terms, provisions and conditions
not inconsistent with the 2000 Plan as may be determined by the Committee.
TERMINATION; MODIFICATION AND AMENDMENT
The 2000 Plan (but not options previously granted under the 2000 Plan) shall
terminate ten years from the earlier of the date of its adoption by the Board of
Directors or the date the 2000 Plan is approved by the stockholders of the
Company. No Option will be granted after termination of the 2000 Plan.
The Board of Directors of the Company may terminate the 2000 Plan at any
time prior to its expiration date, or from time to time make such modifications
or amendments of the 2000 Plan, as it deems advisable. However, the Board of
Directors may not, without the approval of a majority of the then shares of the
capital stock of the Company present in person or by proxy at an Annual or
Special Meeting of Stockholders and entitled to vote thereon, except under
conditions described under "Adjustments Upon Changes in
-52-
<PAGE>
Capitalization," increase the maximum number of shares as to which options
may be granted under the 2000 Plan, materially change the standards of
eligibility under the 2000 Plan, or adopt a new plan.
No termination, modification or amendment of the 2000 Plan may adversely
affect the terms of any outstanding Options without the consent of the holders
of such Options.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event that the number of outstanding shares of Common Stock of the
Company is changed by reason of recapitalization, reclassification, stock split,
stock dividend, combination, exchange of shares, or the like, the Board of
Directors of the Company will make an appropriate adjustment in the aggregate
number of shares of Common Stock available under the 2000 Plan, in the number of
shares of Common Stock reserved for issuance upon the exercise of then
outstanding Options and in the exercise prices of such Options. Any adjustment
in the number of shares will apply proportionately only to the unexercised
portion of Options granted under the 2000 Plan. Fractions of shares resulting
from any such adjustment shall be revised to the next higher whole number of
shares.
In the event of the proposed dissolution or liquidation of substantially all
of the assets of the Company, all outstanding Options will automatically
terminate, unless otherwise provided by the Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES.
The following discussion is only a summary of the principal federal income
tax consequences of the Options granted under the 2000 Plan and is based on
existing federal law, which is subject to change, in some cases retroactively.
This discussion is also qualified by the particular circumstances of individual
optionees, which may substantially alter or modify the federal income tax
consequences discussed below. Accordingly, optionees should consult their own
tax advisors.
NQSOs. No income will be recognized by an Option recipient upon the grant of
an NQSO. On the exercise of an NQSO, the optionee will generally have ordinary
income in an amount equal to the excess of the fair market value of the shares
acquired over the exercise price. The income recognized by an optionee who is
also an employee of the Company will be subject to tax withholding. Upon a later
sale of such shares, the optionee will have short-term or long-term capital gain
or loss, as the case may be, in an amount equal to the difference between the
amount realized on such sale and the tax basis of the shares sold.
ISOs. No income will be recognized by an Option recipient upon the grant of
an ISO. Also, the optionee will recognize no income at the time of exercise
(although the optionee will have income for alternative minimum income tax
purposes at that time as if the option were an NQSO). If the acquired shares are
sold or exchanged after the later of (a) one year from the date of exercise of
the options and (b) two years from the date of grant of the option, the
difference between the amount realized by the optionee on that sale or exchange
and the option price will be taxed to the optionee as a long-term capital gain
or loss. If the shares are disposed of before such holding period requirements
are satisfied, then the optionee will have ordinary income in the year of
disposition equal to the difference between the exercise price and the lower of
the fair market value of the stock at the date of the Option exercise or the
sale of the stock and the optionee will have capital gain or loss, long-term or
short-term, as the case may be, in an amount equal to the difference between (i)
the amount realized by the optionee upon that disposition of the shares and (ii)
the option price paid by the optionee increased by the amount of ordinary
income, if any, so recognized by the optionee.
-53-
<PAGE>
SARs. The grant of an SAR is generally not a taxable event for the optionee.
Upon the exercise of an SAR the optionee will recognize ordinary income in an
amount equal to the amount of cash and with respect to SARs granted in tandem
with NQSOs, the fair market value of any shares of Common Stock received upon
such exercise, and the Company will be entitled to a deduction equal to the same
amount. However, if the sale of any shares received would be subject to Section
16(b) of the Securities Exchange Act of 1934, ordinary income attributable to
such shares received will be recognized on the date such sale would not give
rise to a Section 16(b) action, valued at the fair market value at such later
time, unless the optionee has made a Section 83(b) election within 30 days after
the date of exercise to recognize ordinary income as of the date of exercise
based on the fair market value at the date of exercise.
The foregoing discussion is only a brief summary of the applicable federal
income tax laws as in effect on this date and should not be relied upon as being
a complete statement. The federal tax laws are complex, and they are subject to
legislative changes and new or revised judicial or administrative
interpretations at any time. In addition to the federal income tax consequences
described herein, an optionee may also be subject to state and/or local income
tax consequences in the jurisdiction in which the grantee works and/or resides.
NEW PLAN BENEFITS
The table of "Option/SAR Grants in Last Fiscal Year" under "Executive
Compensation -- (b) Option/SAR Grants in Last Fiscal Year" provides information
with respect to the grant of options to the Named Executive Officers during
fiscal 1999. Information regarding options granted to non-employee Directors
during fiscal 1999 is set forth under the heading "Executive Compensation -- (e)
Directors Compensation."
As of July 27, 2000, no options had been granted or allocated under the 2000
Plan.
OTHER STOCK OPTION PLANS
In May 1999 the Company's Board of Directors adopted the 1999 Non-Qualified
Stock Option Plan that was not submitted for shareholder approval, covering an
aggregate of 5,000,000 shares of Common Stock. As of September 25, 2000, the
Company has issued options to purchase 1,610,000 shares of Common Stock at a
price of $0.125 per share under the 1999 Plan to Employees and Consultants of
Environmental and Directors of the Company. An aggregate of 3,390,000 options
remain available for grant under the 1999 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE ADOPTION OF THE 2000 STOCK OPTION PLAN (PROPOSAL 4).
PROPOSAL 5: RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has appointed Goldstein Golub Kessler LLP as
Independent auditors for the Company's fiscal years ended September 30, 1998 and
1999. This firm has audited the accounts of the Company since 1997. This firm
performed audit services in connection with the examination of the consolidated
financial statements of the Company for its fiscal years ended September 31,
1998 and 1999. In addition the firm has rendered other services including the
review of financial statements and related information in various registration
statements and filings with the SEC including quarterly reports on Form 10-Q.
-54-
<PAGE>
If this proposal does not receive the affirmative approval of a majority of
the votes cast on the proposal, the Board of Directors will reconsider the
appointment. Representatives of Goldstein Golub Kessler LLP are expected to be
present at the Annual Meeting to respond to appropriate questions from
stockholders and to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S AUDITORS (PROPOSAL 5).
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Annual Meeting except the matters set forth in the Notice and described in this
Proxy Statement. Unless otherwise directed, all shares represented by Board of
Directors' Proxies will be voted in favor of the proposal of the Board of
Directors described in this Proxy Statement. If any other matters come before
the Annual Meeting, the persons named in the accompanying Proxy will vote on
those matters according to their best judgment.
EXPENSES
The entire cost of preparing, assembling, printing and mailing this Proxy
Statement, the enclosed Proxy and other materials, and the cost of soliciting
Proxies with respect to the Annual Meeting, will be borne by the Company. The
Company will request banks and brokers to solicit their customers who
beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for the reasonable out-of-pocket expenses of
such solicitations. The original solicitation of Proxies by mail may be
supplemented by telephone and telegram by officers and other regular employees
of the Company, but no additional compensation will be paid to such individuals.
STOCKHOLDER PROPOSALS
No person who intends to present a proposal for action at a forthcoming
stockholders' meeting of the Company may seek to have the proposal included in
the proxy statement or form of proxy for such meeting unless that person (a) is
a record beneficial owner of at least 1% or $2,000 in market value of shares of
Common Stock, has held such shares for at least one year at the time the
proposal is submitted, and such person shall continue to own such shares through
the date on which the meeting is held, (b) provides the Company in writing with
his name, address, the number of shares held by him and the dates upon which he
acquired such shares with documentary support for a claim of beneficial
ownership, (c) notifies the Company of his intention to appear personally at the
meeting or by a qualified representative under Delaware law to present his
proposal for action, and (d) submits his proposal timely. A proposal to be
included in the proxy statement or proxy for the Company's next annual meeting
of stockholders, will be submitted timely only if the proposal has been received
at the Company's executive offices no later than June 20, 2001. If the date of
such meeting is changed by more than 30 calendar days from the date such meeting
is scheduled to be held under the Company's By-Laws, or if the proposal is to be
presented at any meeting other than the next annual meeting of stockholders, the
proposal must be received at the Company's principal executive office at a
reasonable time before the solicitation of proxies for such meeting is made.
Even if the foregoing requirements are satisfied, a person may submit only
one proposal of not more than 500 words with a supporting statement if the
latter is requested by the proponent for inclusion in the proxy
-55-
<PAGE>
materials, and under certain circumstances enumerated in the Securities and
Exchange Commission's rules relating to the solicitation of proxies, the
Company may be entitled to omit the proposal and any statement in support
thereof from its proxy statement and form of proxy.
Copies of the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1998 and 1999, as amended, the Company's Quarterly Report on Form
10-QSB for the quarter ended June 30, 2000, and the Company's Current Report on
Form 8-K, as amended, (date of earliest event reported July 27, 2000) as filed
with the Securities and Exchange Commission, including the financial statements
(but without exhibits), can be obtained without charge by stockholders
(including beneficial owners of the Company's Common Stock) upon written request
to Melvin W. Pelley, the Company's Secretary, FiberChem, Inc., 1181 Grier Drive,
Suite B, Las Vegas, Nevada 89119.
BY ORDER OF THE BOARD OF DIRECTORS
LAS VEGAS, NEVADA MELVIN W. PELLEY
OCTOBER , 2000 SECRETARY
--------------------------------------------------------------
-56-
<PAGE>
<TABLE>
<CAPTION>
FIBERCHEM, INC.
FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
<S> <C>
INTREX DATA COMMUNICATIONS CORP.
Auditors' Report to the Shareholders.............................................................F-3
Consolidated Balance Sheet.......................................................................F-4
Consolidated Statement of Operations & Deficit...................................................F-5
Consolidated Statement of Cash Flows.............................................................F-6
Notes to Consolidated Financial Statements.......................................................F-7
PANDEL INSTRUMENTS, INC.
Independent Auditor's Report.....................................................................F-14
Balance Sheets...................................................................................F-15
Statements of Operations.........................................................................F-16
Statements of Changes in Stockholder's Equity....................................................F-17
Statements of Cash Flows.........................................................................F-18
Notes to the Financial Statements................................................................F-19
FIBERCHEM, INC. - Pro Forma Condensed Combined Unaudited
Combined Balance Sheet, June 30, 2000............................................................F-23
Statement of Operations, June 30, 2000...........................................................F-24
Statement of Operations, Fiscal Years............................................................F-25
Notes to Condensed Combined Pro Forma Financial Statements.......................................F-26
</TABLE>
F-1
<PAGE>
INTREX DATA COMMUNICATIONS CORP.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
F-2
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheet of Intrex Data Communications
Corp. as at December 31, 1999 and the consolidated statements of operations and
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and the results of its operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting principles. As required
by the Company Act (British Columbia), we report that, in our opinion, these
principles have been applied on a consistent basis.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
June 2, 2000
F-3
<PAGE>
<TABLE>
<CAPTION>
INTREX DATA COMMUNICATIONS CORP.
Consolidated Balance Sheet
December 31, 1999, with comparative figures for 1998
----------------------------------------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 93,236 $ 4,033
Accounts receivable - 1,689
Inventory - 36,037
Deposits 1,915 1,387
----------------------------------------------------------------------------------------------------
95,151 43,146
Capital assets (note 4) 134,626 106,518
Deferred financing costs - 52,361
Deferred acquisition costs 227,241 -
Intellectual property (note 5) 240,000 480,000
----------------------------------------------------------------------------------------------------
$ 697,018 $ 682,025
====================================================================================================
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Accounts payable and accrued liabilities $ 673,405 $ 286,749
Advances on contracts - 24,073
Lease obligations (note 6) 10,975 10,975
Current portion of notes payable (notes 7 and 11(c)) 55,000 -
Due to related parties (note 8) 360,985 -
----------------------------------------------------------------------------------------------------
1,100,365 321,797
Notes payable (notes 7and 11(c)) 60,000 -
Due to related parties (note 8) - 190,193
----------------------------------------------------------------------------------------------------
1,160,365 511,990
Shareholders' equity (deficiency):
Share capital (note 9(b)) 2,693,217 2,137,886
Deficit (3,156,564) (1,967,851)
----------------------------------------------------------------------------------------------------
(463,347) 170,035
Future operations (note 2)
Subsequent events (note 11)
----------------------------------------------------------------------------------------------------
$ 697,018 $ 682,025
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
"D.S. Peachey" Director
"P. Lagergren" Director
F-4
<PAGE>
<TABLE>
<CAPTION>
INTREX DATA COMMUNICATIONS CORP.
Consolidated Statement of Operations and Deficit
Year ended December 31, 1999, with comparative figures for 1998
----------------------------------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Monitoring system sales $ - $ 47,014
Cost of sales - 30,703
----------------------------------------------------------------------------------------------
Gross margin - 16,311
Expenses:
Research and development 637,762 70,554
Depreciation and amortization 297,471 284,215
Sales and marketing 69,263 46,665
Communication and field operations - 5,754
Administration 211,841 136,943
----------------------------------------------------------------------------------------------
1,216,337 544,131
----------------------------------------------------------------------------------------------
Loss before undernoted 1,216,337 527,820
Foreign exchange loss (gain) (27,624) 23,568
----------------------------------------------------------------------------------------------
Loss for the year 1,188,713 551,388
Deficit, beginning of year 1,967,851 1,416,463
----------------------------------------------------------------------------------------------
Deficit, end of year $ 3,156,564 $ 1,967,851
===============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
INTREX DATA COMMUNICATIONS CORP.
Consolidated Statement of Cash Flows
Year ended December 31, 1999, with comparative figures for 1998
-------------------------------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operations:
Loss for the year $ (1,188,713) $ (551,388)
Items not involving cash:
Depreciation and amortization 297,471 284,215
Changes in non-cash operating working capital 399,781 173,647
-------------------------------------------------------------------------------------------------------------------
(491,461) (93,526)
Financing:
Issuance of common shares 598,000 139,948
Share issuance costs (83,294) -
Deferred acquisition costs (112,241) -
Repayment of lease obligations - (2,206)
Due to related parties 211,417 5,670
Proceeds from issuance of special warrants - 15,010
Deferred financing cost 52,361 (52,361)
-------------------------------------------------------------------------------------------------------------------
666,243 106,061
Investments:
Purchase of capital assets (85,579) (13,171)
-------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 89,203 (636)
Cash, beginning of year 4,033 4,669
-------------------------------------------------------------------------------------------------------------------
Cash, end of year $ 93,236 $ 4,033
===================================================================================================================
Supplemental disclosure of non-cash financing and investing activities:
Notes payable issued for deferred acquisition costs $ 115,000 $ -
Shares issued for settlement of debt due to related parties 40,625 48,600
Cash paid during year to:
Interest payments - -
Income taxes - -
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
INTREX DATA COMMUNICATIONS CORP.
Notes to Consolidated Financial Statements
Year ended December 31, 1999
-------------------------------------------------------------------------------
1. Organization:
Intrex Data Communications Corp. (the "Company") was incorporated on
October 26, 1994 under the Company Act (British Columbia).
The Company is in the business of providing its customers with data from
mobile or remote sites using satellite or other wireless communications and
distributes this data to the customer using the Internet or other means. It
provides this data on a fee-for-service basis or sells the equipment and
software necessary for transmission, reception, display, and analysis of
transmitted data. The Company develops the software necessary for providing
this data to its customers and, in some cases, develops the hardware and
other communication devices.
The Company began limited commercial operations in 1998 when it began
charging customers for data obtained from beta site units and from the sale
of the Company's fuel monitoring equipment.
2. Future operations:
The Company has incurred significant operating losses in 1999 and 1998 and
has a working capital deficiency at December 31, 1999. These consolidated
financial statements are based on the assumption that the Company will be
able to continue as a going concern and will realize its assets and
discharge its liabilities in the normal course of business. Future
operations, and the related recoverability of intellectual property, are
dependent upon the continued successful development and sale of its
software and hardware, obtaining additional financing and the establishment
of profitable commercial operations.
3. Significant accounting policies:
(a) Basis of presentation:
These consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles.
These financial statements include the accounts of Intrex Data
Communications Corp. and its wholly-owned subsidiary, Firebird Data
Communications Inc., a Texas corporation. All significant intercompany
accounts and transactions have been eliminated.
(b) Research and development costs:
Research costs are expensed as incurred. Development costs are expensed
as incurred unless they meet specific criteria for deferral and
amortization. The Company assesses whether it has met the relevant
criteria for deferral and amortization at each reporting date. No
development costs have been deferred in the current year as the
criteria for deferral were not met.
(c) Investment tax credits:
Investment tax credits are recognized as a reduction to the related
expenditure.
(d) Intellectual property:
Intellectual property acquired in 1995 is being amortized on the
straight-line basis at 20% per annum.
F-7
<PAGE>
INTREX DATA COMMUNICATIONS CORP.
Notes to Consolidated Financial Statements, page 2
Year ended December 31, 1999
3. Significant accounting policies (continued):
(e) Capital assets:
Capital assets are recorded at cost less investment tax credits and
accumulated amortization. Amortization is provided on the straight-line
basis at 20% per annum.
(f) Revenue recognition:
Software and equipment revenue is recognized when product delivery has
occurred and all material risks and rewards related to ownership have
passed on to the purchaser. Revenue from providing operational data to
customers is recognized in the month the service is provided.
(g) Foreign currency translation:
The functional currency for the Company is the Canadian dollar.
Monetary items denominated in foreign currency are translated into
Canadian dollars at exchange rates in effect at the balance sheet date
and non-monetary items are translated at exchange rates in effect when
the assets were acquired or obligations occurred. Revenues and expenses
are translated using average exchange rates prevailing during the year.
The resulting foreign exchange gains and losses are included in income
for the year.
(h) Share issue costs:
The costs of issuing shares are applied to reduce the value of
consideration assigned to such shares.
(i) Adoption of new accounting standard:
The Company retroactively adopted CICA Handbook 1540, Cash Flow
Statements, for the year ended December 31, 1999. Under Section 1540,
non-cash investing and financing activities are excluded from the
Statement of Cash Flows and are disclosed as supplementary information.
(j) Use of estimates:
The preparation of these consolidated financial statements in
conformity with Canadian generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
liabilities, and the reported amounts of expenses during the year.
Significant areas requiring the use of estimates are the useful life of
intellectual property. Actual results could differ from estimates used
in the preparation of these financial statements.
(k) Financial instruments:
The carrying amounts reported in the balance sheet for cash, accounts
receivable, accounts payable and accrued liabilities, and lease
obligation approximate fair values, due to the short term to maturity
of these instruments.
(l) Comparative figures:
Certain of the comparative figures have been restated to conform with
the presentation adopted in the current year.
F-8
<PAGE>
INTREX DATA COMMUNICATIONS CORP.
Notes to Consolidated Financial Statements, page 3
Year ended December 31, 1999
4. Capital assets:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------------------------------------------------------
Accumulated Net Net
Cost amortization book value book value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Communication equipment $ 264,448 $ 143,128 $ 121,320 $ 91,904
Computer and office equipment 54,151 40,845 13,306 14,614
-------------------------------------------------------------------------------------------------------------------
$ 318,599 $ 183,973 $ 134,626 $ 106,518
===================================================================================================================
</TABLE>
5. Intellectual property:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost $ 1,200,000 $ 1,200,000
Less accumulated amortization (960,000) (720,000)
-------------------------------------------------------------------------------------------------------------------
$ 240,000 $ 480,000
===================================================================================================================
</TABLE>
Intellectual property comprises the core development of data,
communications and monitoring technologies.
6. Lease obligations:
At year end, the Company has lease obligations to Laidlaw CybecLeasing LLC
("Laidlaw"), a Texas limited partnership controlled by a principal of the
Company. The leases expired in May, 1998.
7. Notes payable:
During the year, the Company entered into an agreement ("Entrenet
Agreement") with Entrenet Group, LLC ("Entrenet") dated April 12, 1999,
pursuant to which Entrenet is to provide certain corporate services for a
total of $120,000. The Company paid $5,000 in cash upon execution of the
Agreement and the remaining balance of $115,000 is payable as follows:
<TABLE>
<S> <C>
Balance unsecured, bearing interest at 10% per annum, not repayable in
whole or in part prior to maturity date of March 31, 2001 $ 60,000
Balance unsecured, bearing interest at 10% per annum commencing April 1,
1999, principal and accrued interest repayable upon the earlier of March
31, 2000 or the closing of $1,000,000 in
financing (note 8 (a)) 55,000
-------------------------------------------------------------------------------------------------------------------
115,000
Less current portion 55,000
-------------------------------------------------------------------------------------------------------------------
$60,000
===================================================================================================================
</TABLE>
Accrued interest of $8,242 is included in accounts payable and accrued
liabilities at year end. The notes payable, including its accrued interest,
is convertible into common shares of the Company, at the option of the
Company, at a price equal to the lower of $0.50 per share or the lowest
fair market value of the shares during the term of the note.
F-9
<PAGE>
INTREX DATA COMMUNICATIONS CORP.
Notes to Consolidated Financial Statements, page 4
Year ended December 31, 1999
8. Due to related parties:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trevor Nelson, Officer $ 3,000 $ 3,000
David Peachey, Officer 86,324 -
Pandel Instruments, Inc. 87,872 68,998
Peter Lagergren, Officer 126,289 -
Estero Capital Corp. - 23,622
Vanley Agencies Ltd. - 37,073
Harwood Ventures Ltd. 57,500 57,500
-------------------------------------------------------------------------------------------------------------------
$ 360,985 $ 190,193
===================================================================================================================
(a) Pandel Instruments, Inc. is controlled by an officer and director of the Company.
(b) Intrex Data Services, Inc. is controlled by the family of a director of the Company.
(c) Estero Capital Corp. is controlled by a director and officer of the Company.
(d) Harwood Ventures Ltd. is controlled by a director and officer of the Company.
</TABLE>
The amounts owing are in connection with loans made to the Company,
operational expenses paid on behalf of the Company, management services,
and other corporate expenses and are unsecured, payable on demand and bear
no interest.
9. Share capital:
(a) Authorized:
100,000,000 common shares without par value
50,000,000 preferred shares with a par value of $1 and issuable
in series
(b) Issued and unissued:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Number
of shares Amount
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Issued:
Balance at December 31, 1997 6,370,598 $ 1,832,100
Shares issued for cash 239,896 119,948
Shares issued on settlement of debt to related parties 97,200 48,600
Shares issued on conversion of warrants 201,750 117,238
-------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 6,909,444 2,117,886
Unissued:
Shares subscribed for, not issued at December 31, 1998 - 20,000
-------------------------------------------------------------------------------------------------------------------
Balance issued and unissued at December 31, 1998 6,909,444 2,137,886
Shares issued for shares subscribed in the prior year (note 8(c)) 40,000 -
Shares issued for cash 1,196,000 598,000
Shares issued on settlement of debt to a related party (note 8(d)) 81,250 40,625
Less: share issue costs - (83,294)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Balance issued at December 31, 1999 8,226,694 $ 2,693,217
===================================================================================================================
</TABLE>
F-10
<PAGE>
INTREX DATA COMMUNICATIONS CORP.
Notes to Consolidated Financial Statements, page 5
Year ended December 31, 1999
9. Share capital (continued):
(c) The Company received $20,000 in cash in 1998 for 40,000 shares which
were issued in 1999.
(d) During the year, the Company issued 81,250 shares at $0.50 per share as
payment for services rendered by a related party.
10. Related party transactions:
During the year, a total of $293,741 (1998 - $115,833) was incurred for
management fees, directors' fees and engineering fees, to three companies
controlled by three senior officers and directors of the Company.
11. Subsequent events:
(a) Arrangement Agreement:
Subsequent to year end, the Company has amended an Arrangement
Agreement entered into on December 6, 1999, subject to shareholder
approval, with FibreChem, Inc. ("FiberChem"). Under the proposed
Arrangement, one of the shareholders of the Company, owning 2,089,000
common shares of the Company, will merge with a subsidiary of
FibreChem, which will acquire the shares owned in the Company through
the merger. The Company will create new exchangeable Class B shares,
which will be exchangeable into common shares of FibreChem. These Class
B shares will have a par value of $.00001, are non-voting and are
redeemable and exchangeable into 1 common share of FibreChem. FibreChem
will designate a series of its authorized preferred shares as Special
Shares carrying voting rights equivalent to FibreChem common shares.
All outstanding common shares of the Company, except those held by
FibreChem, will be exchanged into 27.801925 Class B shares and
0.27801925 FibreChem Special Shares. Pursuant to the Arrangement,
Compensation Agreement has been entered into with one individual who is
a director and officer of the Company entitling that individual to
9,450,000 Class B shares of the Company and 94,500 Special Shares of
FibreChem for services rendered in facilitating Arrangement and certain
other agreements, contingent upon the completion of such agreements.
(b) Bridge financing:
On February 11, 2000, the Company entered into a financing agreement
with FiberChem as part of the Arrangement Agreement whereby FiberChem
will provide advances from time to time to the Company in consideration
of a convertible subordinated promissory note at a rate of 9% per annum
due on or before December 31, 2001. The promissory note is convertible
into common shares of the Company at the option of either FiberChem or
the Company in the event the Arrangement Agreement is not concluded.
On May 19, 2000, the Company entered into a term loan facility to
borrow $600,000 (US) payable on or before July 7, 2000 or under certain
conditions by July 26, 2000 at a rate of 18% per annum for which the
Company will pay an arrangement fee of $60,000 (US).
F-11
<PAGE>
INTREX DATA COMMUNICATIONS CORP.
Notes to Consolidated Financial Statements, page 6
Year ended December 31, 1999
11. Subsequent events (continued):
(c) Release and Settlement Agreement:
Subsequent to year end, Entrenet, FiberChem and the Company, entered
into a Release and Settlement Agreement with respect to the Entrenet
Agreement (note 7). Under the Release and Settlement Agreement, the
entire amount due to Entrenet will include:
(d) $3,557 in cash;
(e) 3,000,000 FiberChem common shares;
(f) a 10% subordinated convertible note of $126,500 ($115,000
principal plus accrued interest) convertible into FiberChem
common shares at a conversion price of $0.185 per share; and
(g) a four year warrant to purchase 960,000 FiberChem common
shares at a price of $0.185 per share.
The Release and Settlement Agreement will become effective only upon
the completion of the proposed merger between FiberChem and the Company
(note 11(a)).
(h) Lease commitment:
Subsequent to year end, the Company entered into a two-year office lease
agreement for its U.S. subsidiary, effective May 1, 2000. The Company is
committed to annual base rental payments of $69,000 (US).
F-12
<PAGE>
PANDEL INSTRUMENTS, INC.
FINANCIAL STATEMENTS
AT AND FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
F-13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholder's of Pandel Instruments, Inc.
In my opinion, the accompanying balance sheets and the related statements of
operations, of changes in stockholder's equity and of cash flows present
fairly, in all material respects, the financial position of Pandel
Instruments, Inc. at December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; my responsibility is to express an
opinion on these financial statements based on my audits. I conducted my
audits of these statements in accordance with generally accepted auditing
standards which require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. I believe
that my audits provide a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note I to the
financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency that raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note I. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Darrel Schneider, CPA
Dallas, Texas
October 5, 2000
F-14
<PAGE>
<TABLE>
<CAPTION>
PANDEL INSTRUMENTS, INC.
BALANCE SHEETS
December 31,
1999 1998
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................ $ 2,592 $ --
Accounts receivable.............................................. -- 10,177
Due from related party........................................... 60,888 60,888
Inventory........................................................ -- 5,241
----------- ----------
Total current assets.......................................... 63,480 76,306
Investments (Note C)................................................... -- --
----------- ----------
Total assets.................................................. 63,480 76,306
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable........................................... 5,635 3,929
Accrued liabilities.............................................. 23,000 23,000
Due to related parties........................................... 37,888 37,888
----------- ----------
Total current liabilities..................................... 66,523 64,817
Commitments and contingencies (Note E)................................. -- --
----------- ----------
Total liabilities............................................. 66,523 64,817
----------- ----------
Stockholder's equity:
Common stock; no par value; 5,000,000 shares authorized;
4,766,100 and 3,414,360 shares outstanding at
12/31/99 and 12/31/98, respectively........................... -- --
Additional paid-in capital....................................... 526,275 526,275
Retained deficit................................................. (529,318) (514,786)
----------- ----------
Total stockholder's equity.................................... (3,043) 11,489
----------- ----------
Total liabilities and stockholder's equity.................... $ 63,480 $ 76,306
=========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-15
<PAGE>
<TABLE>
<CAPTION>
PANDEL INSTRUMENTS, INC.
STATEMENTS OF OPERATIONS
Year Ended December 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenues............................................................. $ 147,516 $ 94,770
Cost of revenues..................................................... 133,315 74,225
----------- -----------
Gross profit......................................................... 14,201 20,545
----------- -----------
Operating expenses:
Administrative................................................ 24,931 24,618
Travel........................................................ -- 11,750
Utilities..................................................... 2,364 1,774
Rent.......................................................... 1,438 1,582
----------- -----------
Total operating expenses...................................... 28,733 39,724
----------- -----------
Net income (loss)............................................. (14,532) (19,179)
=========== ===========
Basic earnings (loss) per common share......................... (0.0035) (0.0063)
Diluted earnings (loss) per common share....................... $ (0.0035) $ (0.0063)
Weighted average common shares outstanding..................... 4,173,557 3,059,456
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-16
<PAGE>
PANDEL INSTRUMENTS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid Accumulated Stockholder's
Shares Amount Capital Deficit Equity
--------------- ---------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 1,509,360 -- $ 526,275 $ (495,607) $ 30,668
Shares issued at
$0.00 per share 1,905,000 -- -- -- --
Net loss -- -- -- (19,179) (19,179)
--------------- ---------------- --------------- --------------- ------------------
Balance at
December 31, 1998 3,414,360 -- 526,275 (514,786) 11,489
--------------- ---------------- --------------- --------------- ------------------
Shares issued at
$0.00 per share 1,351,740 -- -- -- --
Net income (loss) -- -- -- (14,532) (14,532)
--------------- ---------------- --------------- -------------- ------------------
Balance at
December 31, 1999 4,766,100 -- $ 526,275 $ (529,318) $ (3,043)
=============== ================ =============== =============== ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-17
<PAGE>
PANDEL INSTRUMENTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss..................................................... $ (14,532) $ (19,179)
Adjustments to reconcile loss to net
cash provided by (used in) operating activities:
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable............... 10,177 2,200
(Increase) decrease in due from related parties.......... -- --
(Increase) decrease in inventory......................... 5,241 --
Increase (decrease) in accounts payable.................. 1,706 12,907
Increase (decrease) in accrued liabilities............... -- --
Increase (decrease) in due to related parties............ -- --
------------------ ------------------
Net cash provided by (used in) operating activities................ 2,592 (4,072)
------------------ ------------------
Cash at beginning of year.......................................... -- 4,072
------------------ ------------------
Cash at end of year................................................ $ 2,592 $ --
================== ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-18
<PAGE>
PANDEL INSTRUMENTS, INC.
NOTES TO THE FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Pandel Instruments, Inc. ("Pandel or the Company") was incorporated in
the State of Texas on April 15, 1982 to develop, produce, market and license
flowmeters for monitoring and evaluating engine performance. Pandel's primary
customers are petroleum production and shipping companies.
Pandel's financial statements for the years ended December 31, 1999 and
1998 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. At December 31, 1999, Pandel had an accumulated
deficit of $529,318.
Management recognizes that Pandel must generate additional revenues or
reductions in operating expenses and may need additional financing to continue
its operations. On December 6, 1999, Pandel was party to an agreement providing
for the combination of its business with FiberChem, Inc. ("FiberChem") and
Intrex Data Communications Corp., a British Columbia corporation ("Intrex")
(Note H). However, no assurance can be given that the effect of this business
combination or any additional financing can be obtained on terms satisfactory to
the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH
Cash consist of cash in Pandel's bank account.
ACCOUNTS RECEIVABLE
Accounts receivable represents amounts due for products sold and
shipped.
INVENTORY
Inventory is stated at the lower of cost (first-in, first out) or
market.
REVENUE RECOGNITION
Pandel recognizes revenue from product sales when title passes, which
is upon shipment of product to the customer. There is generally no right of
return.
F-19
<PAGE>
PANDEL INSTRUMENTS, INC.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
INCOME TAXES
Pandel utilizes Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("Statement 109"). Under this asset and liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, 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.
LOSS PER SHARE
In February 1997, Statement of Financial Accounting Standards No. 128,
Earnings Per Share was issued requiring companies to present on the face of the
income statement, basic earnings per share (EPS) and diluted EPS, instead of the
primary and fully diluted EPS that was previously required. Companies with
complex capital structures are required to reconcile the numerator and
denominator used in the basic EPS computation to the numerator and denominator
used in the diluted EPS computation. Pandel's capital structure is comprised
solely of common stock. There were no dilutive common share equivalents
outstanding during each period. As such, for each of the periods presented,
basic and diluted EPS calculations are based on the weighted-average number of
common shares outstanding during the period.
B. RELATED PARTY TRANSACTIONS
Due from related party represents amounts due for services provided to
a company in which Pandel has a 24.89% ownership interest.
Due to related parties is comprised of: (a) $23,000 owed to a
shareholder of Pandel for legal services provided to Pandel, and (b) $14,888
owed to the President of Pandel for reimbursement of working capital advances.
C. INVESTMENTS
During 1992, Pandel obtained common stock representing a 24.89%
ownership interest in Intrex. For this common stock, Pandel exchanged its
ownership interest in Firebird Data Communications, Inc. ("Firebird"), a Texas
corporation, which was acquired by Intrex. At the exchange date, no value was
ascribed by Pandel to the Intrex common stock due to the lack of a market for
Intrex's common stock. Subsequent to the exchange date, the value of Pandel's
investment in Intrex has not been increased, as would be required under the
equity method of accounting for investments, as Intrex has not generated
earnings.
D. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1999 and 1998 relate to past legal
services rendered to Pandel.
E. COMMITMENTS AND CONTINGENCIES
There are no commitments and/or contingencies.
F-20
<PAGE>
PANDEL INSTRUMENTS, INC.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
F. CONCENTRATIONS OF MARKET AND CREDIT RISK
Financial instruments which potentially subject Pandel to
concentrations of credit risk are primarily trade accounts receivable with one
customer and amounts due from a related party. Pandel does not require
collateral or other security to support such amounts due. Pandel does not expect
its customer or related party to fail to meet their obligations and, as such,
considers the credit risk associated with these assets to be minimal. All of
Pandel's revenues have been generated from a single customer.
G. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1999 and 1998, the fair value of Pandel's cash, accounts
receivable, due from related party, accounts payable, accrued expenses and due
to related parties approximated their carrying value because of the short
maturities of those financial instruments.
H. SUBSEQUENT EVENTS
On July 27, 2000, in order to acquire Pandel's 24.89% ownership
interest in Intrex (Note C), Pandel Mergerco, Inc., a wholly-owned subsidiary of
FiberChem, acquired 100% of the common stock of Pandel in exchange for
580,782.22 shares of FiberChem preferred stock convertible into 58,078,222
shares of FiberChem common stock. Pandel shareholders deposited 423,393.22 of
these FiberChem preferred shares into escrow pursuant to the terms of the
contingent consideration agreement by and between FiberChem and Intrex. Shares
in escrow will be released in installments if certain milestones related to
Intrex's business are met by July 27, 2002. This transaction is intended to
qualify as a tax free reorganization under Section 368 of the United States
Internal Revenue Code of 1986, as amended.
I. GOING CONCERN
Pandel has suffered recurring losses from operations and has a net
capital deficiency that raise substantial doubt about its ability to continue as
a going concern. Management's plans in regards to these matters include: (a)
Pandel has reduced fixed expenses to a bare minimum, (b) salary expense has been
reduced and will only be incurred to the extent that the Company generates
sales, and (c) management intends to explore and leverage potential cross
selling opportunities with FiberChem and Intrex.
There can be no assurance that any of these strategies can be effected
on satisfactory terms. Any failure with respect to the foregoing plan will more
likely than not have a material adverse effect on the Company. Should management
determine that the existing plan is inadequate and/or that additional working
capital cannot be raised, additional steps may be required which may include the
termination of operations.
F-21
<PAGE>
FIBERCHEM, INC.
PRO FORMA CONDENSED COMBINED UNAUDITED:
BALANCE SHEET AT JUNE 30, 2000,
STATEMENTS OF OPERATIONS FOR THE SIX AND NINE MONTHS ENDED JUNE 30, 2000, AND
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1999
AND DECEMBER 31, 1999
F-22
<PAGE>
<TABLE>
<CAPTION>
FIBERCHEM, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
JUNE 30, 2000
Historical (1) Pro Forma
---------------------------------------------- Pro Forma Financial
FiberChem Intrex Pandel Adjustments Statements
--------------- -------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents 1,206,662 95,723 1,322 1,303,707
Cash in escrow as security for bridge
loan 675,000 675,000
Accounts receivable, net 231,381 5,568 236,949
Inventory, net 1,175,218 1,175,218
Prepaid expenses and other assets 34,033 51,999 86,032
--------------- -------------- --------------- -----------------
Total current assets 3,322,294 147,722 6,890 3,476,906
Equipment, net 36,798 120,446 157,244
Patent costs, net 38,642 38,642
Technology costs, net 83,143 83,143
Other deferred costs 150,271 150,271
Deferred acquisition costs 176,928 269,548 446,476
Excess of cost over net assets acquired 19,761,880C 19,761,880
Intercompany 800,193 60,888 (861,081)G
--------------- -------------- --------------- -----------------
Total assets 4,525,126 620,859 67,778 24,114,562
=============== ============== =============== =================
Current liabilities:
Bridge loan payable 600,000 600,000
Other notes payable 250,000 38,107 288,107
Accounts payable 499,556 463,020 1,104 963,680
Accrued liabilities 619,483 41,214 23,000 683,697
Due to related parties 289,810 37,888 327,698
--------------- -------------- --------------- -----------------
Total current liabilities 1,969,039 832,151 61,992 2,863,182
Intercompany 861,081 (861,081)G
Notes payable 172,000 41,571 213,571
Notes payable to related parties 395,000 395,000
--------------- -------------- --------------- -----------------
Total liabilities 2,536,039 1,734,803 61,992 3,471,753
--------------- -------------- --------------- -----------------
Minority interest 1,415,437C,F 1,415,437
--------------- -------------- --------------- -----------------
Stockholder's equity (deficiency):
Preferred stock-liquidation value 3,117,720 3,117,720
Common stock, par 5,873 25,222B 31,095
Additional paid-in capital 34,870,145 1,979,286 526,275 (12,615,461)D 24,760,245
Foreign currency translation adjustments (47,677) (47,677)
Retained deficit (35,916,193) (3,045,553) (520,489) 30,936,682E (8,545,553)
Stock subscription receivable (88,458) (88,458)
--------------- -------------- --------------- -----------------
Total stockholder's equity (deficiency) 1,989,087 (1,113,944) 5,786 19,227,372
--------------- -------------- --------------- -----------------
Total liabilities, minority interest
and stockholder's equity (deficiency) 4,525,126 620,859 67,778 24,114,562
=============== ============== =============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-23
<PAGE>
<TABLE>
<CAPTION>
FIBERCHEM, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX AND NINE MONTHS ENDED JUNE 30, 2000
Historical (1) Pro Forma
------------------------------- ------------- Pro Forma Financial
FiberChem Intrex Pandel Adjustments Statements
-------------- ---------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues 1,127,533 22,925 29,200 1,179,658
Cost of revenues 710,399 9,530 719,929
-------------- ---------------- ------------- ---------------
Gross profit 417,134 22,925 19,670 459,729
-------------- ---------------- ------------- ---------------
Operating expenses:
General and administrative 1,053,780 352,508 7,841 658,729C 2,072,858
Sales and marketing 545,029 54,631 599,660
Research, development and engineering 312,941 469,572 3,000 785,513
-------------- ---------------- ------------- ---------------
1,911,750 876,711 10,814 3,458,031
-------------- ---------------- ------------- ---------------
Profit (loss) from operations (1,494,616) (853,786) 8,829 (2,998,302)
Other income (expenses):
Interest expense (213,597) (213,597)
Interest and other income 2,496 2,496
Foreign exchange gain (loss) (4,721) (4,721)
-------------- ---------------- ------------- ---------------
Total other income (expense) (211,101) (4,721) (215,822)
-------------- ---------------- ------------- ---------------
Minority interest in FiberChem @ 18.9% 322,381C,F 322,381
-------------- ---------------- ------------- ---------------
Net profit (loss) (1,705,717) (858,507) 8,829 (2,891,743)
============== ================ ============= ===============
Net loss per share (0.04) (0.01)
Shares of common stock used in computing
net loss per share 45,102,244 300,138,160
</TABLE>
The accompanying notes are an integral part of these financial statements
F-24
<PAGE>
<TABLE>
<CAPTION>
FIBERCHEM, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND DECEMBER 31, 1999
Historical Pro Forma
-------------- ------------------------------ Pro Forma Financial
FiberChem Intrex Pandel Adjustments Statements
-------------- ---------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues 1,957,110 147,516 2,104,626
Cost of revenues 985,444 133,315 1,118,759
-------------- ---------------- ------------- ---------------
Gross profit 971,666 0 14,201 985,867
-------------- ---------------- ------------- ---------------
Operating expenses:
General and administrative 1,347,684 342,810 28,733 1,317,459C 3,036,686
Sales and marketing 661,544 46,620 708,164
Research, development and engineering 546,398 429,267 975,665
Disposal of inventory 94,150 94,150
============== ================ ============= ===============
2,649,776 818,697 28,733 4,814,665
============== ================ ============= ===============
Profit (loss) from operations (1,678,110) (818,697) (14,532) (3,828,798)
Other income (expenses):
Interest expense (366,666) (366,666)
Interest and other income 2,821 2,821
Foreign exchange gain (loss) 18,593 18,593
Other expense (179,787) (5,500,000)C (5,679,787)
-------------- ---------------- ------------- ---------------
Total other income (expense) (543,632) 18,593 (6,025,039)
-------------- ---------------- ------------- ---------------
Minority interest in FiberChem @ 18.9% 419,909C,F 419,909
-------------- ---------------- ------------- ---------------
Net profit (loss) (2,221,742) (800,104) (14,532) (9,433,928)
============== ================ ============= ===============
Net loss per share (0.07) (0.03)
Shares of common stock used in computing
net loss per share 34,113,758 289,983,024
</TABLE>
The accompanying notes are an integral part of these financial statements
F-25
<PAGE>
FIBERCHEM, INC.
NOTES TO THE CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS
(1) Basis of Accounting:
On July 27, 2000 (the "Reverse Acquisition Date"), FiberChem and Intrex
completed the combination of their businesses pursuant to an Amended Arrangement
Agreement dated as of May 26, 2000 (the "Arrangement Agreement"). The
Arrangement Agreement provides that, at the option of each Intrex shareholder,
each Intrex voting common share, except for those shares held by Pandel
Instruments, Inc. ("Pandel"), be exchanged into: (i) 27.801925 non-voting Intrex
Class B shares and 0.27801925 FiberChem Special Series preferred shares with
each Special Series preferred share entitled to one hundred votes, or (ii)
27.801925 FiberChem common shares. In conjunction with the Arrangement
Agreement, Pandel, which owned 24.89% of Intrex's common shares, was merged into
Pandel Mergerco, Inc., ("Mergerco") a wholly-owned FiberChem subsidiary, in
exchange for FiberChem mandatorily convertible Pandel Series preferred shares
with each Pandel Series preferred share entitled to one hundred votes and
mandatorily convertible into one hundred FiberChem common shares.
That number of Intrex Class B shares and Pandel Series preferred shares
representing a percentage in excess of an approximate 51.8% ownership interest
in FiberChem (collectively the "Pooled Shares") were deposited by the Intrex
shareholders into escrow pursuant to the terms of the Intrex Pooling Agreement
(see note 2.B.). This agreement provides that Pooled Shares be issued to the
Intrex shareholders if certain milestones related to the Intrex business are met
during a two-year period following the closing. Accordingly, the consideration
issuable in the combination provides former Intrex shareholders with an initial
approximate 51.8% ownership interest and the potential to acquire up to an
approximate 81.1% ownership interest of the combined entity upon distribution,
if any, of the Pooled Shares. For accounting purposes, the combination of Intrex
and FiberChem is treated as a reverse acquisition of FiberChem by Intrex.
The reverse acquisition of FiberChem by Intrex and the merger of Pandel into
Mergerco have both been accounted for using purchase accounting as a
simultaneous transaction. The carrying values of assets and liabilities have
been estimated to approximate fair market value. Accordingly, no pro forma
adjustments to these amounts were made to reflect the allocation and amount of
the ultimate purchase price with the exception of the allocation made to
FiberChem's in-process research and development. Final allocations, if any, will
be made on the basis of valuations giving effect to various market factors
including most significantly the ultimate distribution of Pooled Shares in the
resulting effect on goodwill, goodwill amortization and minority interest.
Purchase price adjustments, if any, will be made within one year from the
Reverse Acquisition Date. These adjustments may be material to the pro forma
financial information taken as a whole.
The pro forma unaudited condensed combined balance sheet is presented using the
interim consolidated balance sheets of Intrex and Pandel at June 30, 2000
combined with the interim consolidated balance sheet of FiberChem at June 30,
2000. Pro forma adjustments related to the unaudited condensed combined balance
sheet were computed assuming the reverse acquisition of FiberChem by Intrex and
the merger of Pandel into Mergerco were consummated on June 30, 2000.
The pro forma unaudited condensed combined statements of operations are
presented using the consolidated statement of operations of Intrex and Pandel
for the six months ended June 30, 2000 and for the twelve months ended December
31, 1999 combined with the consolidated statement of operations of FiberChem for
the nine months ended June 30, 2000 and for the twelve months ended September
30, 1999. Pro forma adjustments related to the unaudited combined statements of
operations have been computed assuming the reverse acquisition of FiberChem by
Intrex and the merger of Pandel into Mergerco were consummated on January 1,
1999.
The pro forma condensed combined financial statements should be read in
conjunction with the audited financial statements and notes thereto of Intrex
and Pandel for the year ended December 31, 1999 and with the audited financial
statements and notes thereto of FiberChem for the year ended September 30, 1999
included in this Form 8-K/A, Amendment No. 1.
F-26
<PAGE>
FIBERCHEM, INC.
NOTES TO THE CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
The pro forma unaudited financial information is not necessarily indicative of
the results of operations or the financial position which would have been
attained had the reverse acquisition of FiberChem by Intrex and the merger of
Pandel into Mergerco been consummated at either of the foregoing dates or which
may be attained in the future. The pro forma unaudited results are not intended
to be a projection of future results.
(2) The accompanying pro forma adjustments, among other things, assume the
ultimate distribution of all Pooled Shares resulting in an approximate
81.1% ownership interest of FiberChem by former Intrex shareholders.
However, any significant variance from this assumption may have a
material affect on these pro forma financial statements. As such,
additional pro forma presentations have been made in the following notes
giving effect to the range of possible results and iterations thereto:
(A) All historical financial statements included in the pro forma financial
information were prepared in accordance with U.S. generally accepted
accounting principles. The historical financial statements of Intrex,
which were prepared in accordance with Canadian generally accepted
accounting principles using the Canadian dollar as the functional
currency, were translated into U.S. dollars using the exchange rate at
June 30, 2000 for the balance sheet and using an average rate for the
periods presented in the statements of operations. Translation
adjustments are reflected as foreign currency translation adjustments in
Stockholder's equity and accordingly have no effect on net loss.
(B) The following table sets forth the allocation of the value of the total
consideration (see Note (1)):
<TABLE>
<CAPTION>
Shares Consideration
Non Pooled Pooled Total Value ($)
---------- ------ ----- -----------
<S> <C> <C> <C> <C>
Intrex Class B Shares 47,482,527 137,208,403 184,690,930 19,409,412
FiberChem Pandel Series 15,738,973 51,791,597 67,530,570 6,431,904
------------ ------------- ----------- -------------
Total issued 63,221,500 189,000,000 252,221,500 25,841,316
============ ============= =========== =============
</TABLE>
NONE OF THE CONSIDERATION HAS BEEN SEPARATELY ALLOCATED TO THE SPECIAL SHARES.
THE EFFECT OF THE VARIOUS PERCENTAGES OF INTREX'S INTEREST IN
THE ACQUIRED NET ASSETS OF FIBERCHEM DEPENDING ON THE ULTIMATE
DISTRIBUTION OF POOLED SHARES, ASSUMING: (a) FIBERCHEM'S
AUTHORIZED SHARES ARE INCREASED TO 500,000,000 AT THE NOVEMBER
29, 2000 ANNUAL MEETING, (b) EACH INTREX CLASS B SHARE IS
EXCHANGED FOR ONE SHARE OF FIBERCHEM COMMON STOCK, AND (c)
EACH SHARE OF PANDEL SERIES PREFERRED STOCK IS CONVERTED INTO
100 SHARES OF FIBERCHEM COMMON STOCK, IS AS FOLLOWS:
<TABLE>
<CAPTION>
FiberChem Common Shares
Issued and Outstanding Upon Exchange - Change to
Ultimate ------------------------------------------ FiberChem Common
Percent Intrex Minority ----------------------------------
Acquired Interest Interest Total Par Value ($) Paid-in Capital ($)
-------- -------- --------- ----- ------------- -------------------
<S> <C> <C> <C> <C> <C>
51.8 63,221,500 58,730,263 121,951,763 6,322 25,834,994
68.3 126,221,500 58,730,263 184,951,763 12,622 25,828,694
76.3 189,221,500 58,730,263 247,951,763 18,922 25,822,394
81.1 252,221,500 58,730,263 310,951,763 25,222 25,816,094
</TABLE>
F-27
<PAGE>
FIBERCHEM, INC.
NOTES TO THE CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(C) The value of the consideration given by Intrex, including those shares
held by Pandel, to FiberChem was determined as FiberChem common shares
of 58,730,263 at $0.44 per share (100% of FiberChem issued and
outstanding common shares and the closing price of such shares,
respectively, the day prior to the Reverse Acquisition Date), or
$25,841,316. Per the terms of the reverse acquisition, consideration of
75.11% and 24.89% is from exchange of stock with Intrex and Pandel,
respectively.
THE EXCESS OF THE VALUE OF THE CONSIDERATION GIVEN OVER THE NET ASSETS ACQUIRED,
ASSUMING AN 81.1% OWNERSHIP INTEREST, CREATED GOODWILL OF APPROXIMATELY
$19,761,880 COMPUTED AS:
<TABLE>
<S> <C> <C>
Stock purchase price............................................................. $ 25,841,316
Less: FiberChem net assets at June 30, 2000............ 1,989,087
Interest acquired................................ 81.1% 1,613,150
---------------
Pandel net assets at June 30, 2000......................................... 5,786
---------------
Excess of purchase price over net assets acquired
before allocation to identifiable assets...................................... 24,222,380
Less: Undervaluation of in-process research and development (5,500,000 x 81.1%).. 4,460,500
---------------
Excess of purchase price allocated to goodwill................................... $ 19,761,880
===============
</TABLE>
Goodwill is amortized over the estimated life of 15 years. The pro
forma amortization expense for the six months ended June 30, 2000 and
the year ended December 31, 1999 was $658,729 and $1,317,459,
respectively.
The acquired in-process research and development totaling $5,500,000
was expensed on January 1, 1999 and is included in retained deficit at
June 30, 2000.
The effect of various percentages of Intrex's interest in the acquired
net assets of FiberChem depending on the ultimate distribution of
Pooled Shares is as follows:
<TABLE>
<CAPTION>
Six Month Twelve Month
Ultimate Six Month Twelve Month Minority Minority Minority
Percent Amortization Amortization Equity Loss Loss
Acquired Goodwill ($) Expense ($) Expense ($) Interest($) Interest($) Interest($)
-------- ------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
51.8 21,956,183 731,873 1,463,746 3,609,740 822,156 1,070,880
68.3 20,720,483 690,683 1,381,366 2,374,041 540,712 704,292
76.3 20,121,356 670,712 1,341,424 1,774,914 404,255 526,553
81.1 19,761,880 658,729 1,317,459 1,415,437 322,381 419,909
</TABLE>
<TABLE>
<S> <C> <C>
(D) Calculated as: (34,870,145) to eliminate FiberChem additional paid-in capital
(526,275) to eliminate Pandel additional paid-in capital
25,816,094 exchange of acquisition shares (Note B)
(3,117,720) FiberChem preferred stock, Series A liquidation value, not eliminated
(5,873) FiberChem common stock, par value, not eliminated
88,458 FiberChem stock subscription receivable, not eliminated
-----------
(12,615,461) Additional paid-in capital, pro forma adjustment
</TABLE>
(E) Calculated as: 35,916,193 FiberChem retained deficit, eliminated
F-28
<PAGE>
FIBERCHEM, INC.
NOTES TO THE CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C> <C>
520,489 Pandel retained deficit, eliminated
(5,500,000) In-process research and development write-off (Note C)
----------
30,936,682 Retained deficit, pro forma adjustment
</TABLE>
(F) Represents minority interest.
(G) Represents elimination of intercompany accounts.
F-29
<PAGE>
ANNEX I
FAIRNESS OPINION OF O'CONOR, WRIGHT WYMAN, INC.
July 27, 2000
Board of Directors
FiberChem, Inc.
1181 Grier Drive, Building B
Las Vegas, NV 89119
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of FiberChem, Inc. ("FiberChem") of the transaction
consideration (the "Arrangement Consideration"), taken as a whole, to be
issuable by FiberChem to the shareholders of Intrex Data Communications Corp. of
Vancouver, British Columbia ("Intrex") pursuant to a business combination
agreement, as amended, between FiberChem and Intrex dated as of May 26, 2000
(the "Amended Arrangement Agreement").
The terms of the Amended Arrangement Agreement provide for (i) the
acquisition by FiberChem of 75.11% of the outstanding Intrex voting shares
through a Plan of Arrangement under British Columbia law and (ii) the
acquisition of the remaining Intrex common shares through the merger of Pandel
Instruments, Inc., a Texas corporation ("Pandel") which owns the remaining
24.89% of Intrex's outstanding common shares, with and into a wholly-owned
subsidiary of FiberChem (the "Pandel Merger"). The merger consideration issuable
in the two transactions provides Intrex shareholders with a minimum of
approximately 50% of the equity in the combined Company and up to 80% of the
equity in the combined Company if certain milestones related to the Intrex
business are met during a two-year period following the closing. Subsequent to
closing, the only voting shares in Intrex will be held by a wholly-owned
subsidiary of FiberChem.
Under the Amended Arrangement Agreement, all the outstanding Intrex shares
other than those acquired through the Pandel Merger, will be converted into
175,240,930 shares of a new class of non-voting Intrex stock designated as
Intrex Class B Shares and 1,752,409 shares of a newly designated class of
FiberChem preferred stock designated as Special Shares. Of these shares,
127,758,403 Class B Shares and 1,277,584 Special Shares will be deposited by the
Intrex shareholders participating in the Amended Arrangement Agreement into
escrow, pursuant to the terms of a pooling agreement (the "Intrex Pooling
Agreement"). These shares will be released to the shareholders in installments
if certain milestones (the "Release Events") related to Intrex's business are
met by the second anniversary of the closing.
An additional 9,450,000 Intrex Class B Shares and 94,500 Special Shares
will be issued to Intrex's President and Chief Executive Officer under a
Compensation Agreement to be entered into among Intrex, its President and Chief
Executive Officer, and FiberChem. All 9,450,000 shares will be deposited in
escrow and will be subject to release upon achievement of the Intrex Pooling
Agreement milestones in the same proportions as the shares under the pooling
agreement are released to Intrex shareholders.
Each Intrex Class B Share (other than the shares on deposit under the
pooling agreements) can be redeemed by the holder beginning not later than
December 31, 2000, in exchange for one share of FiberChem Common Stock, $.0001
per value per share (the "Common Stock"). Until exchanged, each Intrex Class B
Share will be entitled to receive the same dividends and distributions as a
share of Common Stock and each FiberChem Special Share will be entitled to one
hundred votes, or the same number of votes possessed by the shares of Common
Stock for which the related Intrex Class B Shares can be exchanged. The
FiberChem Special Shares are subject to redemption for nominal consideration
when the related Intrex Class B Shares are redeemed. The exchange of Intrex
common shares into Intrex Class B Shares and FiberChem Special Shares is
intended to allow Intrex shareholders to defer what might otherwise be a taxable
disposition if the Intrex shares were directly exchangeable for shares of
FiberChem Common Stock.
F-30
<PAGE>
Pursuant to the Pandel Merger Agreement, Pandel will be merged into Pandel
Mergerco, a wholly-owned FiberChem subsidiary, which will then own the 24.89% of
Intrex's outstanding common shares formerly owned by Pandel. Under the Pandel
Merger Agreement, the Pandel shareholders will receive 67,528,250 shares of
Common Stock, the same number of Intrex Class B Shares that Pandel otherwise
would have received in exchange for its Intrex common shares under the Amended
Arrangement Agreement. The Pandel shareholders will be required to deposit
51,791,597 shares (76.70% of the 67,528,250 shares) under a pooling agreement
similar to, and subject to proportionate release on the same terms and
conditions as, the Intrex Pooling Agreement. The Pandel Merger transaction is
intended to qualify as a tax free reorganization under Section 368 of the United
States Internal Revenue Code of 1986, as amended.
If FiberChem does not have a sufficient number of authorized shares of
Common Stock to satisfy its obligation to deliver Common Stock pursuant to the
Pandel Merger Agreement, FiberChem will be obligated to designate an additional
class of participating convertible preferred stock (the "Pandel Series Stock")
with voting and economic rights comparable to its Common Stock and to deliver to
Pandel shareholders the appropriate number of shares of Pandel Series Stock. The
Pandel Series Stock would be mandatorily convertible into shares of Common Stock
when a sufficient number of shares of Common Stock are authorized.
Following consummation of the business combination, FiberChem, the
surviving entity, intends to change its name to DecisionLink, Inc.
("DecisionLink"). For purposes of accounting in accordance with U.S. generally
accepted accounting principles, the business combination is to be treated as a
reverse acquisition of FiberChem by Intrex.
Among other conditions which must be satisfied or waived prior to closing,
completion of the proposed business combination is subject to $5,000,000 in new
financing proceeds (or such lesser amount as is acceptable to FiberChem and
Intrex) being available to FiberChem immediately following the combination on
terms and conditions satisfactory to FiberChem and Intrex.
O'Conor, Wright Wyman, Inc., as part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions and for corporate and other purposes. For our services
in connection with rendering this opinion, FiberChem has agreed to pay us a fee
and to reimburse us for certain expenses and FiberChem has indemnified us and
certain related parties against certain liabilities. FiberChem's obligation for
our fees and disbursements in connection with rendering this opinion is not
contingent upon issuance of a favorable opinion or upon completion of the
proposed transaction. Neither O'Conor, Wright Wyman, Inc. nor the individuals
involved with this opinion have any present or contemplated future interest in
FiberChem, Intrex, Pandel or DecisionLink, other than as stated herein.
In connection with this opinion, we have undertaken certain reviews,
analyses and inquiries which we deemed relevant and have, among other things:
(a) reviewed the Amended Arrangement Agreement and the Pandel Merger Agreement,
as well as other agreements incorporated therein relating to the
post-combination management and operations of the combined entity
including, among others, the Lock-Up Agreement, the Voting Agreement, the
Registration Rights Agreement and various Employment and Non-Competition
Agreements;
(b) reviewed the Intrex Pooling Agreement including, in particular, (i) the
identification of Cornerstone Propane LP ("Cornerstone"), Northwestern
Corporation ("Northwestern") and Orbcomm LP ("Orbcomm"); (ii) the Release
Events enumerated therein; and (iii) the Release Schedule specified
therein;
(c) reviewed the Preliminary Offering Circular dated June 16, 2000 relating to
the proposed issuance, to non-U.S. persons only and through RP&C
International ("RP&C") as Lead Manager, of U.S. $5,000,000 aggregate
principal amount of 12% Senior Convertible Debentures Due 2002 of
FiberChem, Inc., subject to the terms and conditions described therein (the
"Preliminary Offering Circular") and conducted discussions with a
representative of RP&C relating to the prospective financing and the
results of various due diligence investigations relating thereto conducted
by RP&C;
(d) reviewed certain SEC filings containing historical financial statements and
other information relating to FiberChem including, among others, (i) Form
10-KSB Annual Reports for the fiscal years ended September 30, 1997, 1998
and 1999, (b) Form 10-QSB Quarterly Reports for the fiscal quarters ended
December 31, 1999 and March 31, 2000, (c) Form 8-K Current Event Reports
for events reported as of December 6, 1999 and as of June 2, 2000, and (d)
Form S-2 Registration Statement dated May 12, 1999 and Post-Effective
Amendment Number 1 thereto dated February 4, 2000;
(e) reviewed and discussed with members of FiberChem senior management and the
FiberChem Board, among other matters, (i) the historical and current
operations and financial condition of FiberChem and its future prospects,
in consideration of various prevailing competitive, economic and regulatory
conditions; (ii) certain internal financial information prepared by
FiberChem management; and (iii) various corporate strategic objectives
which could potentially be served by the prospective business combination,
as well as potentially negative risk factors related thereto, and such
other courses of action which might be available to FiberChem, all of which
were considered by the FiberChem Board in its deliberations concerning the
proposed business combination;
F-31
<PAGE>
(f) reviewed the strategic plan for the post-combination operation of
DecisionLink (the "DecisionLink Strategy") as described in various
documents including, among others, the Preliminary Offering Circular and
the Confidential Business Plan Executive Summary for DecisionLink (the
"Business Plan") and discussed with members of the senior management of
FiberChem and Intrex various strategic, operational, financial, marketing
and technical factors, including potentially negative risk factors,
relating to development and implementation of the DecisionLink Strategy;
(g) reviewed certain historical financial statements and other information
relating to Intrex including, among other documents, a Memorandum of
Understanding dated May 15, 2000 between Cornerstone and Intrex (the "MOU")
with reference to the proposed formation of a joint business venture (the
"JV") for the global marketing of products used to measure the liquid level
of propane vessels and the delivery of tank data and software for data
reporting solutions to customers of the JV; and conducted joint discussions
with the President and Chief Executive Officer of Intrex and with the
representative of Cornerstone anticipated to be the Chief Executive Officer
of the JV with regard to various operational, financial, marketing and
technical factors relating to operation of the prospective JV, as well as
potentially negative risk factors, including the JV's prospective level of
reliance upon third parties, such as Orbcomm, for satellite communications
or other methods of communicating tank data;
(h) performed certain analyses and computed certain ratios with regard, among
other matters, to (i) the relative post-combination equity ownership
interests of the FiberChem and Intrex shareholders under alternative
scenarios relating to the occurrence of qualifying Release Events and to
the prospective future business and financial performance of the combined
entity and (ii) the relative prospective financial, operational, strategic
or other contributions of the parties under such alternative scenarios;
(i) reviewed the historical stock prices, trading volumes and other public
market activity of FiberChem Common Stock over various time periods and (i)
analyzed changes in the aggregate market capitalization for FiberChem at
various dates prior and subsequent to the initial December 1999 public
announcement of the proposed business combination and at dates proximate to
the date of this opinion, and (ii) analyzed the relative changes, over
various time periods, in the stock prices of FiberChem and of certain
competitive or otherwise comparable companies and in certain public market
indices, in consideration of industry, company and general economic and
stock market conditions; and
(j) performed such other analyses and investigations and considered such other
factors as we deemed appropriate.
In rendering this opinion, we have relied, without assuming any
responsibility for the independent verification of such information, upon the
accuracy, completeness and reasonableness of all information, including
financial forecasts, whether provided to us by the management and professional
advisors of FiberChem and Intrex, or otherwise obtained from public sources
reasonably deemed to be reliable. We have further relied upon the assurance of
management of FiberChem and Intrex that they are unaware of any facts that would
make the information they provided to us incomplete or misleading in any
material respect. In arriving at our opinion, we have not performed any
independent valuation or appraisal of the assets of FiberChem, Intrex or Pandel.
Our opinion is necessarily based upon economic, market and other conditions and
circumstances existing and disclosed to us that can be evaluated as of the date
hereof.
In rendering our opinion, we have assumed that the business combination
will be consummated on the terms and conditions provided for in the Amended
Arrangement Agreement, without material modification thereof.
This opinion letter is provided exclusively to the Board of Directors of
FiberChem for use in its consideration of the proposed business combination
pursuant to the Amended Arrangement Agreement and may not be used for any other
purpose or relied upon by any parties other than the Board of Directors of
FiberChem. We have not served as financial advisors to FiberChem in negotiation
of the terms of the Amended Arrangement Agreement or related agreements, nor
have we determined or recommended the Arrangement Consideration, but only
undertaken the reviews, analyses and inquiries described herein in order to
arrive at our opinion. This opinion shall not constitute a recommendation to any
member of the FiberChem Board as to how such member of the FiberChem Board
should vote with respect to approval of the proposed business combination
pursuant to the Amended Arrangement Agreement.
Based upon and subject to the foregoing and such other matters as we
consider relevant, it is our opinion that the Arrangement Consideration, taken
as a whole, to be issuable by FiberChem to the shareholders of Intrex pursuant
to the Amended Arrangement Agreement is fair, from a financial point of view, to
the shareholders of FiberChem.
Very truly yours,
/s/ O'CONOR, WRIGHT WYMAN, INC.
F-32
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
FIBERCHEM, INC.
(Registrant)
By: /s/ Geoffrey F. Hewitt Date: October 6, 2000
----------------------- ----------------
Geoffrey F. Hewitt
<PAGE>
FIBERCHEM, INC.
1181 Grier Drive, Suite B
Las Vegas, Nevada 89119
PROXY
The undersigned, a holder of Common Stock of FiberChem, Inc., a
Delaware corporation (the "Company"), hereby appoints GEOFFREY F. HEWITT and
MELVIN W. PELLEY, and each of them, the proxies of the undersigned, each with
full power of substitution, to attend, represent and vote for the undersigned,
all of the shares of the Company which the undersigned would be entitled to
vote, at the Annual Meeting of Stockholders of the Company to be held on
November 29, 2000 and any adjournments thereof, as follows:
1. The adoption of the proposal to amend the Certificate of Incorporation to
increase the authorized shares of the Company's Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The adoption of the proposal to amend the Certificate of Incorporation
authorizing a change in the Company's name to "DecisionLink, Inc."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The election of three (3) Class A members (Geoffrey F. Hewitt, David S.
Peachey and Irwin J. Gruverman), three (3) Class B Members (Peter J.
Lagergren, Brian A. O'Neil and Walter Haemmerli) and one Class C Director
(Trevor Nelson) to the Board of Directors to hold office for staggered
terms as provided in the Company's Proxy Statement:
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH OR OTHERWISE STRIKE OUT HIS OR HER
NAME BELOW)
Geoffrey F. Hewitt, David S. Peachey, Irwin J. Gruverman, Peter J. Lagergren,
Brian A. O'Neil, Walter Haemmerli, and Trevor S. Nelson.
4. To approve and adopt the 2000 Stock Option Plan for the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. The ratification of the appointment of Goldstein Golub Kessler LLP as the
Company's auditors for the fiscal years ending September 30, 1999 and
September 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Upon such other matters as may properly come before the meeting or any
adjournments thereof.
<PAGE>
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting, and hereby ratifies and confirms all that said attorneys and proxies,
and each of them, may lawfully do by virtue hereof. With respect to matters not
known at the time of the solicitations hereof, said proxies are authorized to
vote in accordance with their best judgment.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS ON THE OTHER SIDE HEREOF. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS NAMED IN PROPOSAL 1, FOR THE
ADOPTION OF PROPOSALS 2, 3, 4, 5, AND 6; AND AS SAID PROXIES SHALL DEEM
ADVISABLE ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated October 10, 2000 relating to the
Annual Meeting, the 1999 Annual Report to Stockholders for the year ended
September 30, 1999, and the Quarterly Report on Form 10-QSB for the quarter
ended June 30, 2000.
------------------------
------------------------
Signature(s) of Stockholder(s)
The signature(s) hereon should correspond exactly with the name(s) of
the Stockholder(s) appearing on the Stock Certificate. If stock is jointly held,
all joint owners should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If signer is a corporation,
please sign the full corporate name, and give title of signing officer.
Date: ____________, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FIBERCHEM, INC.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
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