AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 27, 1996
REGISTRATION NO. 333-10319
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIBERCORE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Nevada 3229 87-0445729
(State or other (Primary standard
jurisdiction of incorporation industrial classification (I.R.S. Employer
or organization) code number) Identification Number)
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174 Charlton Road, Sturbridge, Massachusetts 01566
(508) 347-7744
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------------
Mohd A. Aslami
174 Charlton Road, Sturbridge, Massachusetts 01566
(508) 347-7744
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Agent for Service)
with a copy to:
Bruce S. Coleman, Esq.
Coleman & Rhine LLP, 1120 Avenue of the Americas, New York, New York 10036
(212) 840-3330
Approximate date of commencement of proposed sale to the public: As soon as
practicable as this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-------------------
Pursuant to Rule 416, there are also being registered hereby such additional
indeterminate number of shares of Common Stock as may become issuable by reason
of share splits, share dividends, and similar adjustments as set forth in the
provisions of the Notes, Warrants and Options.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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FIBERCORE, INC.
CROSS-REFERENCE SHEET
REQUIRED BY ITEM 501(B) OF REGULATION S-K
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Form S-1
Item Number Location in Prospectus
----------- ----------------------
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus Facing Page, Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus Inside Front and Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges The Company; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Dilution
7. Selling Securityholders Selling Securityholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of Securities
10. Interests of Named Experts and Counsel Experts; Legal
11. Information with Respect to the Registrant Prospectus Summary; Risk Factors; Stock Price
and Dividend Policy; Capitalization; Selected
Consolidated and Consolidated Pro Forma
Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management;
Business-Litigation; Certain Transactions;
Principal Securityholders; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Not Applicable
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<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 27, 1996
40,791,159 SHARES
FIBERCORE, INC.
COMMON STOCK
This is a resale prospectus (the "Prospectus") relating to a total of
40,791,159 shares of common stock, $.001 par value per share (the "Common
Stock"), of FiberCore, Inc. (the "Company") which are held by, for the benefit
of or are otherwise issuable to certain shareholders (the "Selling
Shareholders") of the Company. Included within the shares of Common Stock
offered hereby are 5,757,213 shares of Common Stock issuable to holders upon:
(i) conversion of a convertible note issued to AMP Incorporated (the "AMP Note")
into 1,688,845 shares of Common Stock; (ii) conversion of a convertible note
issued to Hedayat Amin-Arsala (the "Arsala Note" and together with the AMP Note,
the "Notes") into 153,773 shares of Common Stock; (iii) exercise of common stock
purchase warrants (the "Warrants") into 2,936,161 shares of Common Stock; and
(iv) exercise of common stock purchase options (the "Options") into 978,434
shares of Common Stock (the Notes, Warrants, and Options are sometimes referred
to collectively as the "Convertible Securities"). Also included within the
shares of Common Stock offered hereby are 550,696 shares of Common Stock held
for the benefit of or otherwise issuable to Middle East Specialized Cables Co.
("MESC"), which are subject to the satisfaction of certain conditions. See
"BUSINESS -- Recent Developments." The Warrants include 550,696 Warrants held
for the benefit of or otherwise issuable to MESC and 1,550,696 Warrants held by,
for the benefit of or otherwise issuable to Techman International Corp.
("Techman"), which are each subject to the satisfaction of certain conditions.
See "BUSINESS -- Recent Developments." Until April 17, 2000, the conversion
price of the AMP Note is $1.15763 per share of Common Stock, subject to
adjustment; thereafter the conversion price is equal to the price per share paid
by a third party investor in a private sale of Common Stock by the Company
immediately prior to such conversion. The initial conversion price of the Arsala
Note is $1.36 per share of Common Stock, subject to adjustment. The Warrants and
currently outstanding Options were issued by the Company and its predecessors
from 1987 through 1996 and are exercisable into Common Stock at prices ranging
from $0.0027 to $2.00 per share through various expiration dates. The holders of
the Convertible Securities, together with the Selling Shareholders, are
sometimes hereinafter referred to collectively as the "Selling Securityholders."
See "USE OF PROCEEDS," "SELLING SECURITYHOLDERS," "PLAN OF DISTRIBUTION" and
"DESCRIPTION OF SECURITIES."
The Common Stock offered by this Prospectus may be sold from time to time by
the Selling Securityholders, provided a current registration statement with
respect to such securities is then in effect. The distribution of shares of
Common Stock offered hereby by the Selling Securityholders may be effected in
one or more transactions, including ordinary broker's transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
such securities as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Securityholders.
The Selling Securityholders and intermediaries through whom the securities
offered hereby are sold may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
such securities.
The Company will receive all the proceeds from the issuance of shares of
Common Stock upon the exercise of Warrants and Options. However, the Company
will not receive any of the proceeds from the sale of shares of Common Stock by
the Selling Securityholders. Expenses of this Offering, other than fees and
expenses of counsel to the Selling Securityholders and selling commissions, if
any, will be paid by the Company. See "Plan of Distribution."
Prior to the Offering, the Company's Common Stock was quoted on the OTC
Bulletin Board (the "Bulletin Board") under the symbol FBCE. In connection with
the Offering, the Company intends to apply for the Common Stock to be listed on
the NASDAQ Small Cap Market ("Nasdaq") under the symbol FBCE. On November 26,
1996, the closing bid price of the Common Stock on the Bulletin Board was $3.63.
-------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK. THESE SECURITIES SHOULD ONLY BE PURCHASED BY INVESTORS WHO
CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS," BEGINNING
ON PAGE 8 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December __, 1996.
[Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offer to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.]
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (such Registration Statement,
together with all amendments and exhibits thereto, being hereinafter referred to
as the "Registration Statement") under the Securities Act, for the registration
under the Securities Act of the Common Stock offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement;
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is hereby made to the Registration Statement for
further information with respect to the Company, the Common Stock offered
hereby. Statements herein concerning the provisions of documents filed as
exhibits to the Registration Statement are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
Following completion of this offering (the "Offering"), the Company will
become subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith will file
reports, including annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549 and at the following regional offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601 and 7 World Trade Center, Suite 1300, New York, New York 10048.
In addition, such reports, proxy statements and other information filed through
the Commission's Electronic Data Gathering, Analysis and Retrieval System may be
accessed through the Commission's Website on the World Wide Web located at
(http: //www.sec.gov). Such reports, proxy statements and other information can
also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1733 K Street, N.W., Washington, D.C. 20006.
The Company publishes its financial statements in United States dollars
("dollars" or "$"). The financial statements of the Company's German subsidiary,
FiberCore Glasfaser Jena GmbH ("FiberCore Jena"), which have been consolidated
with the Company's financial statements, are published in German marks ("DM"),
but were translated into dollars in accordance with generally accepted
accounting principals prior to consolidation.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Prospectus Summary and under the captions "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: changes in
general economic and business conditions; loss of market share through
competition; introduction of competing products by other companies; changes in
industry capacity; pressure on prices from competition or from purchasers of the
Company's products; availability of qualified personnel; the loss of any
significant customers; and other factors both referenced and not referenced in
this Prospectus. When used in this Prospectus, the words "estimate," "project,"
"anticipate," "expect," "intend," "believe," and similar expressions are
intended to identify forward-looking statements.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
Unless otherwise indicated, the information included in this Prospectus does
not give effect to the exercise or conversion of Convertible Securities.
Certain statements set forth under this caption constitute "forward-looking
statements" within the meaning of the Reform Act. See "Special Note Regarding
Forward-Looking Statements" on page 2 for additional factors relating to such
statements.
THE COMPANY
The Company manufactures and markets single-mode and multi-mode optical fiber
and optical fiber preforms for the telecommunications, data communications, and
cable television industries and, through its Automated Light Technologies, Inc.
("ALT") subsidiary, develops and markets products capable of identifying and
monitoring faults in fiber optic cables and splice points.
The current organization of the Company resulted from the merger on July 18,
1995 (the "Venturecap Merger") of FiberCore Incorporated ("FiberCore"), a Nevada
corporation organized in November 1993, into Venturecap, Inc. ("Venturecap"), an
inactive Nevada corporation organized in May 1987. Venturecap issued 3.671307
shares in exchange for each outstanding share of FiberCore, and as a result,
Venturecap issued a total of 24,617,133 shares for all of the outstanding shares
of FiberCore. Unless otherwise noted, all share amounts in this prospectus give
effect to the Venturecap Merger. Following the Venturecap Merger, Venturecap
changed its name to FiberCore, Inc.
The Company's strategy in the fiber optic manufacturing and marketing
business is to become a low cost supplier of fiber optic preforms and optical
fiber to independent manufacturers of fiber optic cable. The Company, through
its FiberCore Jena subsidiary, maintains a manufacturing facility in Jena,
Germany (the "Jena Facility"), which was established in 1986 and acquired by the
Company in July 1994. The Company's initial marketing efforts are focused in
Europe and on establishing strategic distribution alliances in developing
countries where demand for fiber optic cable is believed by the Company to be
growing more rapidly than in North America. Management believes that customers
producing fiber from preforms themselves will enjoy the benefit of the Company's
low-cost production methodology and avoid import duties on the value added in
the fiber optic cable manufacturing process.
In pursuit of its strategy, the Company has undertaken to form strategic
alliances on a world-wide basis. These strategic alliances will range from
joint-ventures, particularly in those countries requiring local control, to
direct investments by the Company. The Company expects that product demand will
be generated from these strategic alliances, as well as from independent
manufacturers of fiber optic cable. Independent market forecasters, such as
Kessler Marketing Intelligence of Newport, Rhode Island, have projected strong
growth in the fiber optic market. The Company intends to capitalize on the
projected growth by constructing a number of facilities to produce optical fiber
preforms and optical fiber. Such new facilities and/or expansion of existing
facilities are planned for the United States, Europe, the Middle East and
elsewhere in Asia. The Company intends to use a well-balanced, phased-in
approach for establishment of these facilities. The Company has already begun
upgrading its Jena Facility and has begun planning the construction of a
facility in the United States. The Company's long-term strategy also consists of
constructing both Company owned and joint-venture owned facilities in the Middle
East and elsewhere in Asia. Under this strategy, the Company plans to have at
least two Company owned and at least two
3
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joint-venture owned facilities. The Company will attempt to continually improve
the manufacturing processes at its facilities by implementing its patented
technology and by developing new techniques that lower production costs, thereby
enhancing the Company's already low cost producer strategy.
On April 13, 1995, the Company and MESC entered into an agreement, which was
amended on September 15, 1995 (the "MESC Share Purchase Agreement"), whereby
MESC agreed to purchase 734,262 shares of Common Stock in two blocks of 367,131
shares at a purchase price of approximately $1.36 per share. MESC also received
Warrants, which expires on April 13, 1997, to purchase 550,696 shares of Common
Stock at an exercise price of $1.63 per share. MESC will receive 312,061 shares
of Common Stock, will become entitled to exercise the Warrants and receive an
additional 238,635 shares of Common Stock for no additional consideration upon
delivery of a supply agreement between the Company and the JV Company (as
defined below). Since October 1995, the Company has issued 734,262 shares of
Common Stock in exchange for $1,000,000. Subsequently on January 31, 1996 and in
connection with the MESC Share Purchase Agreement, the Company, through its
subsidiary FiberCore Mid East Ltd., entered into agreements with a subsidiary of
John Royle & Sons ("Royle"), a United States manufacturer of cable manufacturing
systems and equipment, and the owners of Middle East Fiber Optic Manufacturing
Company Limited ("MEOFC"), a Saudi Arabian company and an affiliate of MESC, for
the establishment of a joint venture company (the "JV Company" or "MEFC") to
engage in the manufacture and sale of optical fiber and optical fiber cable both
inside and outside of Saudi Arabia. The Company and Royle have each contributed
$500,000 to the JV Company and each holds a 15% interest in the JV Company.
MEOFC contributed $2,330,000 and holds a 70% interest. The JV Company intends to
borrow approximately $10,000,000 from the Saudi Industries Development Fund for
investment in equipment and working capital and intends to purchase optical
fiber preform and fiber from the Company. See "Business -- Joint Marketing
Arrangements" and "Description of Securities".
On April 17, 1995, the Company issued the AMP Note, a ten year $5,000,000
convertible note bearing interest at LIBOR plus one percent. In July 1996, the
Company and AMP entered into a five year supply agreement (renewable for an
additional five year term at AMP's option), whereby the Company will supply AMP
with a minimum of 50% of AMP's future glass optical fiber needs. On November 27,
1996, the Company obtained an additional $3,000,000 loan from AMP and AMP
converted $3,000,000 of principal plus accrued interest on the AMP Note into
3,058,833 shares of Common Stock. As part of the new $3,000,000 loan from AMP,
Mohd A. Aslami, Charles DeLuca, M. Mahmud Awan and AMP entered into a Voting
Agreement pursuant to which they agreed to vote together to elect a slate of
directors to the Board of Directors of the Company. Such slate of directors
initially consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one
nominee of AMP and three outside directors, one of whom is Dr. M. Mahmud Awan.
The Voting Agreement also requires a classified and three year staggered Board
of Directors. See "Business --Recent Developments," "Certain Transactions --
Dealings With AMP," and "Risk Factors -- Control of the Company."
On September 18, 1995, the Company acquired ALT for the net issuance of
5,139,830 shares of Common Stock. ALT manufactures a patented Fiber Optic Cable
Monitoring System ("FOCMS"), which continuously monitors fiber optic cables for
faults. ALT also manufactures patented long-range Fault Locator Devices, Cable
Protection Devices, which are applied at cable splice joints prior to fiber
optic cable entering a building, and Electro-Optical Talksets, which are used by
field personnel to communicate over optical fiber, twisted pair-cable (regular
telephone cable) and metal sheaths encasing optical fiber and copper cables
(together with FOCMS, the "ALT Products"). Target customers for the ALT Products
include telephone companies worldwide. See "Business -- ALT Products" and
"Certain Transactions -- The ALT Acquisition."
On November 1, 1995, the Company entered into an International Distributor
Agreement with Techman, a company owned by Dr. M. Mahmud Awan, a director of the
Company. The International
4
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Distributor Agreement provides for commissions to be paid in the form of up to
1,000,000 shares of Common Stock based on sales generated by Techman for the
Company of up to $200,000,000.
Subsequently on January 11, 1996, Techman agreed to purchase 734,260 shares
of Common Stock at $1.36 per share and received Warrants exercisable at $1.63
per share to purchase an additional 550,696 shares of Common Stock pursuant to a
written agreement (the "Techman Share Purchase Agreement"). Additionally, under
the Techman Share Purchase Agreement, the Company agreed to issue Techman
312,061 shares of Common Stock upon (i) formation of Fiber Optic Industries
(Private) Ltd. ("FOI"), a joint-venture company in which the Company will hold a
30% ownership interest, to produce optical fiber and cable; and (ii) the
completion of a supply agreement between FOI and the Company. Between February
and September 1996, pursuant to the Techman Share Purchase Agreement and at the
request of Techman, the Company issued 575,477 shares to Dr. Awan. Subsequent to
September 1996, an additional 470,844 shares of Common Stock (representing the
balance of shares to be issued under the Techman Share Purchase Agreement) were
issued to Dr. Awan in exchange for a payment of $450,000 and the delivery by
Techman of a twenty year supply agreement between the Company and FOI which the
Company estimates could generate revenues of up to approximately $93,000,000
over five years, although there can be no assurance. The $450,000 payment was
invested by the Company in FOI as an additional capital contribution (along with
ratable additional capital contributions by FOI's other shareholders). The
Company maintains a 30% ownership interest in FOI. See "Business -- Recent
Developments" and "Certain Transactions -- Dealings With Techman."
Unless otherwise specified, the term "Company", with respect to events prior
to July 18, 1995, refers to FiberCore Incorporated and with respect to events
subsequent to July 18, 1995, refers to FiberCore, Inc. and its subsidiaries
(including ALT, subsequent to September 18, 1995).
The Company incurred net losses of $1,625,368 during the 1994 calendar year
on revenues of $230,888 and net losses of $4,009,163 during the 1995 calendar
year on revenues of $3,093,499. For the nine months ended September 30, 1996,
the Company incurred net losses of $1,652,670 on revenues of $6,244,566.
The executive offices of the Company are located at 174 Charlton Road,
Sturbridge, Massachusetts 01566 and its telephone number is (508) 347-7744.
5
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THE OFFERING
Securities Offered:.................... Up to 40,791,159 shares of Common Stock
which may be offered and sold, from
time to time, by the Selling
Securityholders. As of the date of this
prospectus, the Selling Securityholders
own or, upon the satisfaction of
certain conditions, have the right to
receive, 35,033,946 of such shares,
while 5,757,213 shares are issuable to
the Selling Securityholders upon the
conversion or exercise of the
Convertible Securities. See
"Description of Securities."
Shares of Common Stock
outstanding prior to the
Offering: ........................... 35,233,250 shares (1) and (2)
Shares of Common Stock out-
standing after the
Offering ............................ 41,541,159 shares((3)) assuming all
Warrants and Options are exercised and
$5,705,167 in principal and accrued
interest on the Notes are converted.
Use of Proceeds: ...................... The Company will receive all of the
proceeds from the exercise, of which
there can be no assurance, of the
Warrants and the Options, or
approximately $3,864,658. Such proceeds
will be used by the Company for the
purchase of equipment, research and
development and working capital. In the
event any portion of the Notes are
converted, the Company's indebtedness
will be reduced accordingly. None of
the proceeds from the sale of shares of
Common Stock offered hereby by the
Selling Securityholders will go to the
Company. See "Use of Proceeds."
Risk Factors: ......................... The securities offered hereby involve a
high degree of risk. See "Risk
Factors."
Current OTC Bulletin Board
Symbol: ............................. FBCE
Proposed NASDAQ Small Cap Symbol: ..... FBCE
- ----------
(1) Includes 750,000 shares of Common Stock of Venturecap that were outstanding
prior to the Venturecap Merger and are not being registered hereunder.
(2) Excludes all Underlying Shares issuable upon the exercise or conversion of
the Convertible Securities. Also excludes an aggregate of 550,696 shares of
Common Stock held by, for the benefit of or otherwise issuable to MESC,
which are subject to the delivery of a supply agreement between the Company
and the JV Company.
(3) Includes an aggregate of 550,696 shares of Common Stock held by, for the
benefit of or otherwise issuable to MESC, which are subject to the delivery
of a supply agreement between the Company and the JV Company.
6
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FIBERCORE, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
The following summary financial information and operating data of the Company
is qualified in its entirety by the more detailed information and the Company's
Consolidated Financial Statements and notes thereto appearing elsewhere in this
prospectus.
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Year Ended December 31,
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Historical
Pro Forma ------------------------------------------------------------------
1995(1)(4) 1995(2) 1994(3)(5) 1993(3)(5) 1992(6) 1991(6)
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Operating Data:
Net Sales .................... $ 3,255 $ 3,094 231 $ -- $ -- $ --
Costs and Expenses:
Cost of sales ............... 5,077 4,509 1,064 -- -- --
Research and Development .... 188 75 90 -- -- --
Selling, general, and
administrative ............. 2,247 2,099 699 1 -- --
Interest expense, net of
interest income ............ 382 369 8 -- -- --
Other expense (income), net . (14) 51 (5) -- -- --
Income (loss) before
provision for income taxes.. (4,625) (4,009) (1,625) (1) -- --
Provision for income taxes .. -- -- -- -- -- --
Net income (loss)(7) ........ $ (4,625) $ (4,009) $ (1,625) $ (1) $ -- --
Primary earnings (loss) per
share(7) ................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ --
Fully diluted earnings (loss)
per share................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ --
Weighted average shares
outstanding(7) ............. 30,245,879 26,584,630 22,873,322 21,309,323 955,450 955,450
Weighted average shares
outstanding (fully diluted). 30,980,539 27,319,291 22,873,322 21,309,323 955,450 955,450
Balance Sheet Data:
Working capital (deficit) ... (293) (277) (519) 403 5 5
Total assets ................ 14,183 14,783 4,270 645 5 5
Total liabilities ........... 8,431 8,415 1,687 4 -- --
Accumulated deficit ......... (6,254) (5,638) (1,628) (3) (2) (2)
Stockholders' equity ........ 5,752 6,368 2,583 641 5 5
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Nine Months Ended
September 30,
-----------------------------------------
Pro Forma Historical
----------- -------------------------
1995(1)(4) 1996 1995(2)(5)
---------- ---- ----------
Operating Data:
Net Sales .................... $ 1,790 $ 6,245 $ 1,628
Costs and Expenses:
Cost of sales ............... 3,048 6,108 2,509
Research and Development .... 152 281 34
Selling, general, and
administrative ............. 1,206 2,766 1,050
Interest expense, net of
interest income ............ 196 279 234
Other expense (income), net . (48) (690) (48)
Income (loss) before
provision for income taxes.. (2,764) (2,499) (2,151)
Provision for income taxes .. -- -- --
Net income (loss)(7) ........ $ (2,764) $ (2,499) $ (2,151)
Primary earnings (loss) per
share(7) ................... $ (0.09) $ (.08) $ (0.09)
Fully diluted earnings (loss)
per share................... $ (0.09) $ (.08) $ (0.09)
Weighted average shares
outstanding(7) ............. 30,157,895 30,815,900 25,262,819
Weighted average shares
outstanding (fully diluted). 30,365,796 32,899,366 25,470,719
Balance Sheet Data:
Working capital (deficit) ... 734 223 734
Total assets ................ 16,454 14,018 17,064
Total liabilities ........... 12,254 8,073 12,251
Accumulated deficit ......... (4,392) (8,136) (3,779)
Stockholders' equity ........ 4,200 5,945 4,813
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(1) Includes the results of ALT as if acquired at the beginning of the period
and as if the conversion of ALT debt and warrants into approximately
4,500,000 shares of ALT common stock occurred immediately prior thereto.
(2) Includes the results of ALT from September 18, 1995 (the date of
acquisition) through December 31, 1995.
(3) Does not include the results of ALT.
(4) The pro forma results reflect higher amortization costs than the historical
financials due to the allocation of the purchase price of the ALT
acquisition to ALT's assets. The pro forma financials also reflect lower
interest costs than the historical financials due to the conversion of ALT
debt at an earlier date than the actual conversion.
(5) Restated to reflect the Venturecap Merger as of the beginning of the
period.
(6) The years 1991 and 1992 reflect the financial position of Venturecap, Inc.,
a development stage company, prior to the merger with FiberCore,
Incorporated in 1995. Venturecap had no significant activities in these
years. FiberCore, Incorporated was formed in November 1993.
(7) Supplementary Earnings Per Share Data: If the convertible debt had been
converted at the beginning of the periods below, the earnings per share and
the basis for this computation would have been as follows:
Nine Months Ended Year Ended
September 30, 1996 December 31, 1995
------------------ -----------------
Net loss for the period ............ $ (2,242) $ (3,761)
Weighted average shares outstanding. 35,214,743 29,644,053
Primary loss per share.............. $ (0.06) $ (0.13)
7
<PAGE>
RISK FACTORS
The securities offered hereby are highly speculative and subject to numerous
and substantial risks. Therefore, prospective investors should carefully
consider the following risk factors as well as the information contained
elsewhere in this Prospectus.
NEW BUSINESS; HISTORY OF OPERATING LOSSES
The Company, founded in November 1993, is a relatively new business and is
subject to all the risks inherent in early-stage operations. Such risks include,
but are not limited to, rejection or partial acceptance of the Company's
products by its customers, the inability to establish networks for distribution
of the Company's products, inefficient and unreliable manufacturing processes
and the inability to obtain sufficient capital necessary to sustain the Company
and expand its manufacturing capacity. The Company has incurred operating losses
since inception, and such losses are expected to continue until at least
December 31, 1997. The Company had a net loss of $4,009,163 for the year ended
December 31, 1995. To achieve profitable operations, the Company must
successfully overcome these and other new business risks. There can be no
assurance that any or all of the Company's efforts will be successful or that
the Company will ever be profitable. If the Company's efforts are unsuccessful,
purchasers of shares of Common Stock offered hereby could lose their entire
investment. As of September 30, 1996, the Company had an accumulated deficit of
approximately $8,136,000.
NEED FOR ADDITIONAL FINANCING AND CAPITAL RESOURCES
Notwithstanding the fact that the demand for optical fiber currently exceeds
supply, the Company has had net losses in each year of operation. The Company's
history of losses is based principally on the fact that the Company is a new
business, has not fully implemented its more efficient manufacturing technology
and has not increased manufacturing capacity sufficiently in order to achieve
economies of scale leading to lower unit production costs. The Company's ability
to continue operations will depend upon the success of its financing, marketing
and manufacturing efforts. There can be no assurance that any or all of such
efforts will be successful. At least a substantial portion of such additional
financing is required by the end of 1996 in order to finance the Company's
planned expansion of its Jena Facility, which is estimated to cost approximately
$7,800,000 and is expected to be completed by July 31, 1997. This expansion is
necessary for the Company to satisfy its backlog of orders for 1996 and 1997.
The Company, with its current cash and cash equivalents, cannot fund both the
required amount of capital expenditures and current and projected operating
losses.
The Company believes that the planned expansion will enable the Jena Facility
to improve its manufacturing capacity thereby leading to an increase in sales.
The Company (i) has been awarded a grant from the German Government of
approximately $2,700,000; (ii) has received a loan from Berliner Bank of
approximately $5,100,000 to finance the expansion; and (iii) has received a
$3,000,000 loan from AMP which will be used principally as collateral for the
Berliner Bank loan. AMP has also converted $3,000,000 of principal and $540,985
of accrued interest on the AMP Note into 3,058,833 shares of Common Stock at a
conversion rate of approximately $1.16 per share. In connection with the new AMP
loan, the Company issued AMP five year warrants, exercisable at approximately
$1.45 per share, to purchase up to 1,382,648 shares of Common Stock, and has
agreed to issue AMP additional shares of Common Stock in the event the Company's
share price does not exceed certain minimum levels by November 27, 1998. The
issuance of such additional shares would have a dilutive effect on the Company's
other shareholders and could adversely effect the market price of the Common
Stock. See "Business -- Recent Developments."
Except for the partial conversion of the AMP Note, the Company is not relying
on the conversion of other loans or the exercise of any Options or Warrants to
complete the expansion of the Jena Facility. Management anticipates that upon
completion of the technology integration and related equipment upgrades at the
Jena Facility, there will be increases in sales along with efficiencies and
economics of scale, resulting in improved operating results. There can be no
assurance that operating losses will not continue longer than anticipated, in
which case, there may be need for additional capital. Furthermore,
8
<PAGE>
there can be no assurance that additional capital will be available on terms
acceptable to the Company. In addition, revenues of the Company's ALT subsidiary
declined substantially in 1995, compared to 1994. ALT is currently operating at
a loss, and historically has not been profitable.
LIMITED CAPACITY OF JENA FACILITY
The Company's Jena Facility (at the present time the Company's only facility
for the manufacture of optical fiber and fiber preform) is currently operating
at full capacity. At its current capacity, the Jena Facility cannot produce
sufficient product for the Company to satisfy its present and long-term supply
contracts and for the Company to achieve profitable operations. Although the
Company has received additional financing for the purchase of additional
equipment and the expansion of its Jena Facility, there can be no assurance that
the level of manufacturing capacity necessary to meet the Company's supply
contracts will be achieved.
DEPENDENCE ON CERTAIN CUSTOMERS AND PRODUCTS
During each year of operation, the Company and its predecessors have relied
on a few customers for the majority of sales revenue. During the first nine
months of 1996, FiberCore had net sales to one customer in excess of 61% of
total sales. The loss of its principal customer would have a material adverse
effect on the Company. See "Business -- Customers, Inventory, Backlog and
Advertising."
DEPENDENCE ON THIRD-PARTY SUPPLIERS
The Company will largely rely on outside parties for the manufacture of its
raw materials, including its principal raw material, glass tubing. Accordingly,
the Company will be dependent on the capabilities of these outside parties for
the successful manufacture of its products. Currently, the Company purchases
over 90% of its required glass tubing from one supplier. At the beginning of
each year, the Company negotiates a firm commitment with this supplier for the
Company's annual glass tubing requirements. The Company does not have a
long-term agreement with such supplier and such supplier recently required the
Company to prepay for three months supply of glass tubing. The prepayment terms
did not have any material adverse effect on the Company's results of operations
and subsequently this supplier reestablished normal credit terms with the
Company. The Company has established relationships with two other manufacturers
for supply of the Company's required glass tubing. There can be no assurance
that these manufacturers will be able to meet the Company's needs in a
satisfactory and timely manner in the event the Company's current supplier is
unable or unwilling to do so. Although the Company believes that these
manufacturers would have an economic incentive to perform such manufacturing for
the Company, the amount and timing of resources to be devoted to these
activities are not within the control of the Company, and there can be no
assurance that problems obtaining glass tubing or other raw materials will not
occur in the future. See "Business -- Raw Materials."
COMPETITION
The optical fiber business is highly competitive, and there are several
competitors that have substantially greater resources than the Company. These
companies are providing or are capable of providing products similar to products
produced by the Company at competitive prices. If these competitors were to
aggressively target the Company's market segment, the Company could be
materially adversely affected. If the market for FOCMS products grows, it is
likely that companies with substantially greater resources than the Company will
enter the market, which may adversely affect the Company's business. See
"Business -- Competition."
INDUSTRY CONDITIONS
Based on published market studies, management believes that, currently,
demand for optical fiber products exceeds supply. To the extent future supply
begins to exceed demand, or to the extent the Company's products are no longer
in demand, prices for the Company's products may decline from current levels and
result in substantially lower profitability than has been anticipated by the
Company.
9
<PAGE>
RAPID TECHNOLOGICAL CHANGE
Optical fiber products are characterized by rapid technological advances and
evolving industry standards. Any failure by the Company to anticipate or respond
adequately to technological developments or end-user requirements could damage
the Company's competitive position in the marketplace and reduce revenues and/or
profit.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the performance of
its key executive officers. The Company is not a party to an employment
agreement with any of its executive officers, but intends to enter into
non-compete agreements with Dr. Aslami, Mr. DeLuca, Mr. Beecher and Mr. Moeller.
The loss of any of the executives would have a material adverse effect on the
Company. The Company intends to apply for key-man life insurance policies on Dr.
Aslami, Mr. DeLuca, Mr. Beecher and Mr. Moeller with the Company as the sole
beneficiary. The Company's future success will also depend in large part upon
its ability to attract and retain additional highly skilled managerial,
technical and marketing personnel. There can be no assurance that the Company
will be successful in attracting and retaining such personnel. See "Management."
PATENTS AND PROPRIETARY RIGHTS
The Company owns five United States patents relating to the manufacture of
optical fiber preform, fiber optic cable monitoring systems, long range fault
locating systems, optical communications systems and methods and related
products. The Company has filed one additional improvement patent to its basic
fiber optic manufacturing process, and intends to file at least one more
improvement patent in the United States and abroad. The Company also owns three
European and United Kingdom patents covering the ALT Products. One additional
patent filing in Europe, two in Japan and three in other countries related to
the ALT Products are pending. The Company's ability to compete effectively will
depend, in part, on its ability to protect its patents. There can be no
assurance that the steps taken by the Company to protect its intellectual
property will be adequate to prevent misappropriation or that others will not
develop competitive technologies or products. Furthermore, there can be no
assurance that others will not independently develop products that are similar
or superior to the Company's products or technologies, duplicate any of the
Company's technologies, or design around the patents issued to the Company. In
addition, the validity and enforceability of a patent can be challenged after
its issuance. While the Company does not believe that its patents infringe upon
the patents or other proprietary rights of any other party and is unaware of any
claim of such infringement, other parties may claim that the Company's patents
and manufacturing processes infringe upon such patents or other proprietary
rights. There can be no assurance that the Company would be successful in
defending against such a claim of infringement. Moreover, the expense of
defending against such a claim could be substantial. See "Business -- Patents."
In addition, in conjunction with its acquisition of equipment located at the
Jena Facility, the Company acquired the right and title to all patents and
expertise relating to fiber optics developed or owned by Sico Quarzschmelze Jena
GmbH ("Sico"), the seller and former operator of the Jena Facility. While the
Company does not believe the Sico patents infringe upon the patents or other
proprietary rights of any other party, other parties may claim that the Sico
patents infringe upon such patents or proprietary rights. In the event the
Company were to default on its obligations to Sico, the Company's title to these
patents could revert to Sico. Without use of Sico patents and technology, the
Company's expense in manufacturing optical fiber and optical fiber preforms
could increase substantially.
The Company's ALT subsidiary entered into a Purchase and Sale Agreement,
dated as of September 7, 1986, with Norscan Instruments, Ltd. ("Norscan"), for
the acquisition of certain patents and know-how relating to FOCMS. A dispute
exists between ALT and Norscan with respect to Norscan selling FOCMS products in
competition with the ALT Products that utilize technology other than the
technology assigned to ALT pursuant to the terms and conditions of the Purchase
and Sale Agreement. ALT contends that, in so doing, Norscan is violating a
non-competition provision of the Purchase and Sale Agreement. Failure by ALT and
Norscan to resolve this dispute could materially adversely affect the future
sales of ALT Products.
10
<PAGE>
INTERNATIONAL OPERATIONS
The Company is subject to all the risks of conducting business
internationally. These risks include unexpected changes in legislative or
regulatory requirements and fluctuations in the United States dollar and the
German mark, and other currencies in which the Company is doing business from
time to time. The Company has limited foreign currency fluctuation exposure and
does not currently engage in foreign currency hedging transactions. The business
and operations of the Company's German subsidiary, FiberCore Jena, are subject
to the changing economic and political conditions prevailing from time to time
in Germany. Labor costs, corporate taxes and employee benefit expenses are high
and weekly working hours are shorter compared to the rest of the European Union,
the United States and Japan. The Company's participation in the JV Company and
its investment in FOI are subject to the risks of doing business in Saudi
Arabia, and in the Middle East in general. These risks include, but are not
limited to, the threat of regional conflict.
INABILITY TO RELOCATE MANUFACTURING OPERATION; REVERSION OF EQUIPMENT
The Company is contractually restricted from moving its manufacturing
equipment out of the Jena Facility. In June 1994, the Company leased the Jena
Facility for a fixed monthly sum, and acquired certain equipment located in that
facility from Sico. In the event the Company defaults on its agreement with
Sico, the equipment purchased from Sico could revert to Sico and Sico could
purchase any additional equipment owned by FiberCore Jena at fair market value.
Until the year 2001, the Company's ownership of the equipment is subject to the
right of the German government, from whom Sico purchased the equipment, to
repossess the equipment in the event the Company ceases production. This
contractual limitation could adversely effect the Company's ability to take
advantage of less expensive labor markets and consequently adversely impact the
Company's profitability. In addition, the manufacturing equipment at the Jena
Facility could revert to a German government entity if the Company does not
properly maintain the Jena Facility or continue to employ a minimum number of
employees. See "Certain Transactions -- Dealings With Sico."
USE OF PROCEEDS
Although the Company will receive all of the proceeds from the exercise of
the Warrants and Options (approximately $3,864,658), there can be no assurance
that any of such securities will be exercised by the holders thereof. The
Company currently intends to utilize such proceeds for working capital and
general corporate purposes. None of any such proceeds are intended to be used to
discharge debt prior to maturity. Accordingly, the Company will have broad
discretion as to the application of a substantial portion of the net proceeds,
if any, derived from the exercise of the Warrants and Options. None of the
proceeds from the sale of shares of Common Stock, including the Underlying
Shares offered hereby by the Selling Securityholders, from time to time, will go
to the Company.
NO DIVIDENDS
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
intends to retain any future earnings to finance the growth and development
of its business. See "Stock Price and Dividend Policy."
SUPPLY CONTRACTS AND COMMITMENTS
The Company is contractually committed to provide at least 50% of AMP's
forecasted quantities of optical fiber for an initial term of five years, and an
additional five year term at AMP's option. In the event AMP's needs change and
AMP does not purchase the forecasted quantity of the Company's products, the
Company may be in the position of having committed significant resources to
accommodate AMP's needs without having a guarantee that AMP will purchase the
Company's products. In addition, the Company has entered into a written twenty
year supply agreement with FOI, which management believes could generate
revenues of up to approximately $93,000,000, although there can be no assurance.
The Company also anticipates entering into a supply agreement with the JV
Company.
11
<PAGE>
LOAN DEFAULTS AND GUARANTEES
On July 31, 1996, the Company entered into a forbearance agreement with
Connecticut Innovation, Inc. ("CII") with respect to $241,869 owed to CII by
ALT. Among the terms of that agreement, and in exchange for a general release
from CII obtained on September 11, 1996, the Company issued 111,462 shares of
Common Stock to CII in full settlement of the debt.
On August 26, 1996, the Company issued 142,450 shares of Common Stock to
Connecticut Development Authority ("CDA"), in full settlement of a loan in the
amount of $272,489 owed to CDA by ALT.
For both CII and CDA, the Company agreed to register the shares issued to CII
and CDA, and upon registration, to list such shares on Nasdaq as soon as
practical. However, in the event such shares are not listed on Nasdaq by May 15,
1997, the Company has agreed to issue an additional 10,000 shares of Common
Stock each to CII and CDA; in the event such shares are not listed on Nasdaq by
August 18, 1997, the Company has agreed to issue a further 10,000 shares of
Common Stock each to CII and CDA.
In addition, ALT is the primary guarantor of approximately $172,000 in loan
obligations of Allied Controls, Inc. ("Allied"), a former subsidiary of ALT, to
the Department of Economic Development for the State of Connecticut ("DED"),
bearing a 7% interest rate and maturing in November 1999. ALT is also a
secondary guarantor on $538,450 of bank loan obligations of Allied to Lafayette
American National Bank, bearing an interest rate of prime plus 1% and maturing
in June 1999 (see Notes 5 and 6 to the Notes to ALT financial statements). As of
the date of this prospectus, such former subsidiary is making payments to DED as
part of an oral standstill agreement and to the bank under a forbearance
agreement.
With the settlement of the CII and CDA loans, the Company can meet the
payment terms of its remaining outstanding debt. Allied is current on its DED
and bank loans as modified by standstill and forbearance agreements.
LITIGATION
The Company's FiberCore Jena subsidiary, Sico and Sico's president, Mr.
Walter Nadrag (who was previously the Managing Director of FiberCore Jena) are
defendants in a lawsuit in Germany brought against them by COIA GmbH, a former
customer, claiming damages of approximately $1,500,000 arising from FiberCore
Jena's alleged failure to comply with a sales contract. The Company believes no
sales contract existed and is aggressively defending this action. The Company
has established a reserve in the amount of $126,000, which includes legal fees.
However, there is no assurance that the Company will prevail in this action or
that the reserve of $126,000 will be adequate.
The Company's ALT subsidiary is in a dispute with Norscan, a Canadian
company, with respect to Norscan selling FOCMS products, in competition with ALT
products and in violation of a non-competition agreement between ALT and
Norscan. ALT would be the claimant in any lawsuit brought in connection with
this matter. Failure by ALT and Norscan to resolve this dispute could materially
adversely affect the future sale of ALT Products.
The Company was a defendant in a lawsuit pending in Federal Court in
Worcester, MA seeking to enjoin the Company from using the name "FiberCore," as
well as unspecified monetary damages in excess of $50,000. In August 1996, the
plaintiff, Fibercore, Ltd., withdrew such action without prejudice.
In addition to the above, the Company is subject to various claims which
arise in the ordinary course of business. The Company believes such claims,
individually or in the aggregate, will not have a material adverse effect on
the business of the Company. See "Business -- Litigation."
INSURANCE
The Company maintains casualty and liability insurance on the Jena Facility.
There can be no assurance that in the event of a loss, policy limits will not be
exceeded.
12
<PAGE>
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED FOR SELLING
SECURITYHOLDERS TO SELL COMMON STOCK
The Selling Securityholders will be able to sell Common Stock only if a
current prospectus relating to such shares is then in effect and only if the
Common Stock is qualified for sale under the securities laws of the applicable
state or states or an exemption from any such qualification is available.
Although the Company has undertaken to maintain such a current prospectus and
intends to seek to qualify the Common Stock for sale in applicable
jurisdictions, there is no assurance that it will be able to do so. See
"Description of Securities."
LIMITED TRADING MARKET
Prior to the Offering, the Common Stock was quoted on the Bulletin Board and
has traded on a very limited basis. In connection with the Offering, the Company
has applied for listing on Nasdaq, but there can be no assurance that such
application will be granted, or if granted that the Company will not
subsequently be disqualified. If the Company is not qualified for inclusion on
Nasdaq and the Company fails to meet certain other criteria, the Common Stock
would be subject to a Commission rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors. For transactions covered by this
rule, the broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to sale. Consequently, if the Company's securities are not quoted on
Nasdaq, the rule may affect the ability of broker-dealers to sell the Company's
securities and the ability of purchasers in this Offering to sell Common Stock
in the secondary market. Upon completion of this Offering, 41,541,159 shares of
Common Stock will be issued and outstanding (assuming exercise or conversion of
all currently outstanding Convertible Securities and the satisfaction of all
conditions relating to the issuance of Common Stock and Warrants to MESC and
Techman).
MARKET OVERHANG FROM OPTIONS, WARRANTS AND NOTES
Immediately after the Offering, the Company will have outstanding a number of
Options, Warrants, and Notes, including the securities described herein. To the
extent that such Options, Warrants and Notes are exercised or converted, as the
case may be, equity interests of the Company's shareholders will be diluted.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of the outstanding
Options, Warrants and Notes can be expected to exercise or convert them, to the
extent they are able to, at a time when the Company would, in all likelihood, be
able to obtain any needed capital on terms more favorable to the Company than
those provided in the Options, Warrants and Notes. Further, the sale of Common
Stock or other securities held by or issuable to the holders of such Options,
Warrants and Notes offered hereby, or merely the potential of such sales, could
have an adverse effect on the market price of the Company's Common Stock.
POSSIBLE VOLATILITY OF STOCK PRICE
The market for the Common Stock could be subject to wide fluctuations in
response to such factors as, among others, variations in the Company's
anticipated or actual results of operations and market conditions (which may be
unrelated to the Company's operating performance). Prior to the Offering, only
750,000 shares of Common Stock were freely tradeable. After the Offering, the
resale of an additional 40,791,159 shares of Common Stock will be registered
under the Securities Act, subject to the requirement of maintaining a current
resale prospectus for such securities. It is therefore possible that the price
of the Common Stock will decline on the Bulletin Board after the Offering
described in this Prospectus is priced into the market.
DILUTION
Shareholders purchasing shares of Common Stock from the Selling
Securityholders would suffer an immediate dilution of approximately $3.40,
assuming an offering price of $3.63 per share based upon a net tangible book
value deficiency at September 30, 1996 of $.03.
13
<PAGE>
CONTROL OF THE COMPANY
Several persons beneficially own over 5% of the Common Stock. One person
controls 20.2% of the Common Stock. Some of such persons acting alone or
together could control or strongly affect the votes of shareholders for
directors of the Company. Under the new AMP loan, Mohd A. Aslami, Charles
DeLuca, M. Mahmud Awan and AMP, who in the aggregate beneficially own
approximately 47% of Common Stock (after the Offering, assuming the exercise or
conversion of all Convertible Securities have entered into a Voting Agreement
pursuant to which they agreed, to vote together to elect a slate of directors to
the Board of Directors of the Company. Such slate of directors initially
consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one nominee of
AMP and three outside directors, one of whom is Dr. M. Mahmud Awan. The Voting
Agreement also requires a classified and three year staggered Board of
Directors. Such Voting Agreement would remain in effect until the earlier of (i)
termination of the new AMP loan agreement; or (ii) an underwritten public
offering by the Company which generates at least $5,000,000. See "Business --
Recent Developments," "Certain Transactions -- Dealings With AMP" and "Principal
Securityholders."
USE OF PROCEEDS
The Company will receive all of the proceeds from the exercise of the
Warrants and Options. To the extent any part of the Notes are converted, the
Company's indebtedness will be reduced by such amount. If all of the Warrants
and Options are exercised, the net proceeds to the Company will be $3,864,658.
All proceeds from the exercise of the Warrants and Options will be added to
working capital to be used for general corporate purposes. None of the proceeds
from such exercise, if any, are intended to be used to discharge debt prior to
maturity. There can be no assurance that any of the Warrants and Options will be
exercised.
The Company will not receive any of the proceeds from the sale of the shares
of Common Stock being offered and sold, from time to time, by the Selling
Securityholders.
CAPITALIZATION
The following table sets forth the capitalization of the Company at September
30, 1996 and as adjusted to give effect to the issuance of the 917,827 shares of
Common Stock to MESC, the issuance of 470,844 shares to the sole shareholder of
Techman, the conversion or exercise of the Convertible Securities as of such
date, and the application of the estimated net proceeds derived therefrom as
described under "Use of Proceeds." This table should be read in conjunction with
the Company's Consolidated Financial Statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
September 30, 1996
---------------------------
(Dollars in Thousands)
Actual As Adjusted
------ -----------
<S> <C> <C>
Current portion of long term debt .......................................................... $ 200 $ --
Long term debt, less current portion ....................................................... 5,500 500
Stockholders' equity .......................................................................
Preferred Stock, $.001 par value, 10,000,000 authorized; none issued and outstanding ...... -- --
Common stock, $.001 par value, 100,000,000 shares authorized; 31,336,442((1)) shares issued
and outstanding; 41,541,159 shares as adjusted ........................................... 31 42
Additional paid in capital ................................................................ 13,903 24,404
Retained earnings deficit ................................................................. (8,136) (8,136)
Aggregate translation adjustment .......................................................... 147 147
---------- ----------
Total stockholders' equity ................................................................ 5,945 16,457
---------- ----------
Total capitalization ...................................................................... $ 11,645 $ 16,957
========== ==========
</TABLE>
(1) Subsequent to September 30, 1996, 367,131 shares of Common Stock were
issued to MESC, 470,844 shares of Common Stock were issued to Techman and
3,058,833 shares of Common Stock were issued to AMP.
14
<PAGE>
STOCK PRICE AND DIVIDEND POLICY
The Company has applied to list its Common Stock on Nasdaq, although there is
no assurance that its application will be approved. There were 208 holders of
record of Common Stock as of November 22, 1996 and 389 beneficial owners of
Common Stock as of October 30, 1996. The public market for the Common Stock on
the Bulletin Board, where the stock trades under the symbol FBCE, is limited.
Set forth below for the periods indicated are the high and low closing prices
for the Common Stock as reported on the Bulletin Board. The prices prior to July
18, 1995 reflect the price of Venturecap, a predecessor to the Company, which
traded under the symbol VTUR.
<TABLE>
<CAPTION>
<S> <C> <C>
Period ................................ High Bid Low Bid
1995
1st Quarter .......................... No Reported Trades No Reported Trades
2nd quarter (first reported bid on
May 11, 1995) ....................... $4.94 $2.55
3rd quarter .......................... $4.45 $2.75
4th quarter .......................... $3.25 $2.37
1996
1st quarter .......................... $3.12 $2.00
2nd quarter .......................... $7.25 $1.75
3rd quarter .......................... $7.44 $3.00
4th quarter to November 26, 1996 ..... $4.13 $2.63
</TABLE>
To date, the Company has not paid any cash dividends on its Common Stock. On
August 31, 1995, ALT paid a dividend to its shareholders by the distribution of
its ownership interest in a limited liability company. Such interests were
valued by ALT's Board of Directors as nil. See "Certain Transactions --The
Allied Distribution."
The payment of dividends, if any, in the future is within the discretion of
the Board of Directors and will depend on the Company's earnings, its capital
requirements, financial condition, contractual and legal restrictions and other
relevant factors. The Company does not expect to declare or pay any dividends in
the foreseeable future. In addition, the ability of the Company to pay cash
dividends in the future will be subject to its ability to meet certain other of
its obligations.
15
<PAGE>
DILUTION
At September 30, 1996, the Company's net tangible book value (deficiency) per
share was $(.03) based upon a total of 31,336,442 shares of outstanding Common
Stock. "Net tangible book value per share" represents total tangible assets
minus total liabilities divided by the total number of shares outstanding. The
table below sets forth dilution to shareholders purchasing shares of Common
Stock being offered hereby from the Selling Securityholders at $3.63, the
closing bid price on the Bulletin Board on November 26, 1996.
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed offering price per share((1))......................... $3.63
Net tangible book value per share before conversion of the
Convertible Securities (based upon 31,336,442 shares
outstanding)................................................ $(.03)
Increase in net tangible book value per share attributable to
issuance of 10,204,717 shares of Common Stock upon exercise
or conversion of Convertible Securities .................... $ .26
Pro forma net tangible book value per share after the
offering (based upon 41,541,159 shares outstanding).......... $ .23
Dilution of net tangible book value per share of new
shareholders................................................. $3.40(94%)
</TABLE>
- ----------
(1) The offering price per share of $3.63 is based upon the closing bid on the
Bulletin Board and may not reflect actual trading of shares. Furthermore,
only 750,000 shares of Common Stock are currently eligible for trading on
the Bulletin Board and as a result the reported sales prices of the Common
Stock may not be reflective of the fair market value of the Common Stock.
The following table sets forth on a pro forma basis the total number of
shares of Common Stock issued by the Company, the total consideration received
and the average price per share allocated to the existing stockholders and paid
by new investors in this offering, before deducting estimated offering expenses
payable by the Company. The table assumes that all shares offered hereby (all of
which are being offered by the Selling Securityholders) are sold, of which there
can be no assurance, and accordingly that the present stockholders retain no
ongoing equity interest in the Company, other than the 750,000 shares of Common
Stock issued to the former stockholders of Venturecap in the Venturecap Merger,
which 750,000 shares are not being offered hereby.
<TABLE>
<CAPTION>
Percent Percent of Average
Shares of Total Total Total Price Per
Present Stockholders Issued Shares Consideration Consideration Share
- ---------------------------- ------ ------ ------------- ------------- -----
<S> <C> <C> <C> <C> <C>
Present Stockholders........ 41,541,159 100% $ 23,607,973 100% $ 0.57
Public Investors ........... 40,791,159 98% $ 148,071,907 0%(1) $ 3.63
Total....................... 41,541,159 100% $ 23,607,973(1) 100%
</TABLE>
- ----------
(1) None of the consideration for the shares of Common Stock offered hereby
will be paid to, or received by, the Company.
16
<PAGE>
SELECTED CONSOLIDATED AND CONSOLIDATED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
The following selected financial data of the Company for each of the years
1995, 1994, 1993, 1992 and 1991 have been derived from the audited financial
statements of the Company and its predecessors and notes thereto included
elsewhere in this prospectus. The financial data for the year ended December 31,
1995 on a consolidated pro forma basis was derived from the financial statements
of the Company and ALT included elsewhere in this prospectus. The selected
financial data for the nine month periods ended September 30, 1996 and 1995 and
for the Company on a consolidated pro forma basis for the nine months ended
September 30, 1995 were derived from the unaudited financial statements of the
Company and its predecessors, and in the opinion of management, include all
adjustments necessary to fairly present such data. The information set forth
below is qualified by reference to, and should be read in conjunction with, the
consolidated financial statements and related notes thereto included elsewhere
in this prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Results for the interim periods are not
necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
Historical
Pro Forma ------------------------------------------------------------------
1995(1)(4) 1995(2) 1994(3)(5) 1993(3)(5) 1992(6) 1991(6)
---------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Net Sales .................... $ 3,255 $ 3,094 231 $ -- $ -- $ --
Costs and Expenses:
Cost of sales ............... 5,077 4,509 1,064 -- -- --
Research and Development .... 188 75 90 -- -- --
Selling, general, and
administrative ............. 2,247 2,099 699 1 -- --
Interest expense, net of
interest income ............ 382 369 8 -- -- --
Other expense (income), net . (14) 51 (5) -- -- --
Income (loss) before
provision for income taxes.. (4,625) (4,009) (1,625) (1) -- --
Provision for income taxes .. -- -- -- -- -- --
Net income (loss)(7) ........ $ (4,625) $ (4,009) $ (1,625) $ (1) $ -- --
Primary earnings (loss) per
share(7) ................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ --
Fully diluted earnings (loss)
per share................... $ (0.15) $ (0.15) $ (0.07) $ -- $ -- $ --
Weighted average shares
outstanding(7) ............. 30,245,879 26,584,630 22,873,322 21,309,323 955,450 955,450
Weighted average shares
outstanding (fully diluted). 30,980,539 27,319,291 22,873,322 21,309,323 955,450 955,450
Balance Sheet Data:
Working capital (deficit) ... (293) (277) (519) 403 5 5
Total assets ................ 14,183 14,783 4,270 645 5 5
Total liabilities ........... 8,431 8,415 1,687 4 -- --
Accumulated deficit ......... (6,254) (5,638) (1,628) (3) (2) (2)
Stockholders' equity ........ 5,752 6,368 2,583 641 5 5
</TABLE>
Nine Months Ended
September 30,
-----------------------------------------
Pro Forma Historical
----------- -------------------------
1995(1)(4) 1996 1995(2)(5)
---------- ---- ----------
Operating Data:
Net Sales .................... $ 1,790 $ 6,245 $ 1,628
Costs and Expenses:
Cost of sales ............... 3,048 6,108 2,509
Research and Development .... 152 281 34
Selling, general, and
administrative ............. 1,206 2,766 1,050
Interest expense, net of
interest income ............ 196 279 234
Other expense (income), net . (48) (690) (48)
Income (loss) before
provision for income taxes.. (2,764) (2,499) (2,151)
Provision for income taxes .. -- -- --
Net income (loss)(7) ........ $ (2,764) $ (2,499) $ (2,151)
Primary earnings (loss) per
share(7) ................... $ (0.09) $ (.08) $ (0.09)
Fully diluted earnings (loss)
per share................... $ (0.09) $ (.08) $ (0.09)
Weighted average shares
outstanding(7) ............. 30,157,895 30,815,900 25,262,819
Weighted average shares
outstanding (fully diluted). 30,365,796 32,899,366 25,470,719
Balance Sheet Data:
Working capital (deficit) ... 734 223 734
Total assets ................ 16,454 14,018 17,064
Total liabilities ........... 12,254 8,073 12,251
Accumulated deficit ......... (4,392) (8,136) (3,779)
Stockholders' equity ........ 4,200 5,945 4,813
- ----------
See the Notes to Selected Financial Data.
17
<PAGE>
FIBERCORE, INC.
NOTES TO SELECTED FINANCIAL DATA
(1) Includes the results of ALT as if acquired at the beginning of the period
and as if the conversion of ALT debt and warrants into approximately 4.5
million shares of ALT common stock occurred immediately prior thereto.
(2) Includes the results of ALT from September 18, 1995 through December 31,
1995.
(3) Does not include the results of ALT.
(4) The pro forma results reflect higher amortization costs than the historical
financials due to the allocation of the purchase price of the ALT
acquisition to ALT's assets. The pro forma financials also reflect lower
interest costs than the historical financials due to the conversion of ALT
debt at an earlier date than the actual conversion.
(5) Restated to reflect the Venturecap merger as of the beginning of the
period.
(6) The years 1991 and 1992 reflect the financial position of Venturecap, Inc.
which was a development stage company, prior to the merger with FiberCore,
Incorporated in 1995. Venturecap had no significant activities in those
years. FiberCore, Incorporated was formed in November 1993.
(7) Supplementary Earnings Per Share Data: If the convertible debt had been
converted at the beginning of the periods below, the earnings per share and
the basis for this computation would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended Year Ended
September 30, 1996 December 31, 1995
------------------ -----------------
Net loss for the period ........... $ (2,242) $ (3,761)
Weighted average shares
outstanding........................ 35,214,743 29,644,053
Primary loss per share............. $ (0.06) $ (0.13)
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS AND DEUTSCHE MARKS IN THOUSANDS)
BACKGROUND
Unless otherwise stated, reference to the Company in this section includes
FiberCore and subsidiaries, including ALT, from September 18, 1995.
FiberCore was organized under the laws of the State of Nevada on November 5,
1993. Venturecap was a development stage enterprise, with no significant
operations, no significant assets or liabilities and was inactive from 1990
until the time of the Venturecap Merger with FiberCore on July 19, 1993.
Venturecap issued 24,617,133 common shares for all of the outstanding shares of
FiberCore. The Venturecap Merger has been accounted for as a pooling of
interests. Subsequent to the Venturecap Merger, Venturecap changed its name to
FiberCore, Inc.
The Company operates primarily through its FiberCore Jena subsidiary. The
Company maintains a headquarters in Sturbridge, Massachusetts which is staffed
by executive, engineering, accounting and administrative personnel. The
following discussion and analysis of the results of operations is based on the
Company's audited financial statements for the years ended December 31, 1995,
1994 and 1993, and the unaudited statements of the Company for the nine month
periods ended September 30, 1996 and 1995.
RESULTS OF OPERATIONS
Nine months ended September 30, 1996 and 1995
Total revenues for the nine months ended September 30, 1996 were $6,245
compared with revenues of $1,628 for the nine month period ended September 30,
1995, an increase of 284%. This increase in revenues was attributable to the
Company's increase of production capacity resulting from an upgrade of the Jena
Facility, and the Company's sales and marketing efforts resulting in the
addition of new customers.
Gross profit for the nine months ended September 30, 1996 was $137 compared
to a loss of $881 for the nine months ended September 30, 1995. This difference
was attributable to the upgrade of the Jena Facility since its acquisition in
July 1994. The improvement and upgrading of machinery and equipment and
production process technology changes resulted in better production yields and
lower per unit production costs.
Selling, general and administrative expenses were $2,766 for the nine months
ended September 30, 1996 compared to $1,050 for the nine months ended September
30, 1995, an increase of 163%. This increase was due primarily to compensation
expense of $846 incurred in connection with the grant to employees and others of
options to acquire 382,184 common shares of the Company, and the acquisition of
ALT, which accounted for $498 of the increase. Additionally, the commencement of
increased production at the Jena Facility, the Company's increased sales and
marketing efforts and the addition of personnel in Germany, added to this
increase in costs.
Interest expense for the nine months ended September 30, 1996 was $280
compared to $315 (a decrease of 11%) from the year-earlier comparable period.
This decrease was due to the repayment in 1995 of a working capital line of
credit that was outstanding for most of 1995, offset by the interest on the AMP
Note.
Other income was $807, an increase of $759 (1,581%) for the nine months ended
September 30, 1996 as compared to the corresponding period in 1995. This
increase was principally due to the receipt of $786 in grants from the German
government.
The net loss for the nine months ended September 30, 1996 was $2,499, an
increase of $348 (16%) from the loss of $2,151 in the corresponding period in
1995. The primary cause of the increase was the increase in sales and gross
profit at the Jena Facility and the changes in administrative and interest
income and expense as described above.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
RESULTS OF OPEATIONS - (continued)
Fiscal Years Ended December 31, 1995 and 1994.
Total revenues for the year ended December 31, 1995 were $3,094 compared to
$231 for the prior year, an increase of $2,863 (1,239%). This increase in
revenues was due to the acquisition of the Jena Facility by the Company in July
1994, with sales commencing primarily in the last quarter of the year and
expansion and upgrade of the Jena Facility since its acquisition. The results
for 1995 reflect a full year of operations and the related increase in sales
volume to new customers.
Selling, general and administrative costs increased by $1,399 in 1995, a 200%
increase over 1994. This increase is principally attributable to the full year
of operation at the Jena Facility compared to only six months of operation in
1994. In addition, the acquisition of ALT in September 1995 added $223 to
administrative costs in 1995.
Interest expense was $516 in 1995 compared to $23 in 1994, a 2,143% increase.
This increase was caused by a working capital loan that was outstanding during
1995 and interest on the AMP Note that was closed in April 1995.
Interest income was $148 in 1995 compared to $15 in 1994, an increase of $133
(887%). This increase resulted principally from the short term investment of the
proceeds of the AMP Note.
The net loss for the year ended December 31, 1995 of $4,009 was $2,384, 146%
greater than the loss of $1,625 for the year ended December 31, 1994. The
increase in loss is principally related to the increase in costs as described
above and the full year of operations of the Jena Facility resulting in an
increase in the gross loss on sales of $583 or 70%. The cost of goods sold as a
percent of sales decreased from 461% in 1994 to 146% in 1993. This is typical of
the nature of a capital intensive production operation wherein capacity and
through put increases result in a significant improvement in per unit production
costs, as fixed costs are spread over a higher production volume.
Fiscal Year Ended December 31, 1994 and Period November 5, 1993 to December
31, 1993.
Total revenues for the year ended December 31, 1994 were $231 compared to
$-0- for the prior period in 1993. This was due to the acquisition of the Jena
Facility by the Company in July 1994, with shipments commencing primarily in the
last quarter of the year. The Company was incorporated in November 1993 and had
no products, production or revenues during the two months of 1993.
The operating loss for the year ended December 31, 1994 of $1,625 was due to
startup and production inefficiencies at the Jena Facility, selling, general and
administrative expenses of $699, and research and development expenses of $90.
For the period ended December 31, 1993, the Company had no comparable expenses.
For the year ended December 31, 1994, the Company had net interest expense of
$8, primarily attributable to its capitalized lease obligations of the Jena
Facility.
LIQUIDITY AND CAPITAL RESOURCES
Nine months ended September 30, 1996
During the nine months ended September 30, 1996, the Company used $916 for
operating activities, principally resulting from the loss for the period of
$1,653, reduced by depreciation and amortization of $1,033 and non-cash
compensation expense of $846. Accounts payable was reduced by $715, while
accrued expenses increased by $388, principally from the increase in accrued
interest on the AMP Note. Also, during the period the Company utilized cash in
investing activities of $420, principally for equipment ($353). Cash generated
through financing totaled $1,027, principally from the sale of stock ($550) and
new borrowings ($700). These funds were used to finance operations and to repay
a note for $200.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES - (continued)
The proceeds from the sale of stock noted above were received from Techman
under the Techman Share Purchase Agreement entered into in January 1996. Under
that Agreement, Techman subscribed to purchase 734,260 shares of the Company for
$1,000. The initial payment of $550 resulted in an increase in equity and was
used as working capital, improving the Company's ability to meet its current
obligations.
The Company expects to continue to incur operating losses until such time as
the Jena Facility's production equipment is expanded and fully upgraded, and
manufacturing inefficiencies are substantially eliminated. The Company has and,
with additional capital, will continue to transfer its more efficient and
productive technology to its Jena Facility with management's expectation of
improved operating results. The planned upgrade and expansion of the Jena
Facility will result in improved production yields thus lowering production
costs per unit of preform and fiber. Additionally, the expansion will increase
throughput resulting in increased production volume. The Company has already
received commitments from current customers to purchase this increase in
production volume. These increased sales combined with lower per unit production
costs will lead to profitability. The Company will require an estimated $7,800
in capital investment. Of this amount approximately $2,000 will be for building
expansion and $5,800 for equipment upgrades and new equipment. The Company, with
its current cash and cash equivalents, cannot fund both the required amount of
capital expenditures and current and projected operating losses, including debt
service payments. Therefore, the Company requires additional financing in the
near term.
The Company, therefore, has sought additional financing from one or more of
the following sources: (i) issuance of convertible instruments or stock in
private or public offerings; (ii) financing for the Jena Facility through a
combination of German bank loans, German federal and state government grants,
loan guarantees, and equity investments generated in all or part from (i) above;
(iii) exercise of stock Options and Warrants; and (iv) loans from officers,
directors, and principal stockholders of the Company. Funds for such loans to
the Company from officers, directors, and principal stockholders would be
derived, in part, from sales or pledges (to obtain loans) of Common Stock by
such individuals. There can be no assurance that financing from all of the
preceding sources will be available to the Company on attractive terms.
The Company believes that its success in raising additional capital is
dependent on investors' beliefs in the Company's technology, its position in the
fiber optics industry, and its strategic business plan. Achieving profitability
is dependent, in part, on raising additional funds to invest in capital
expenditures. In this regard, the Company has received a grant from the German
government of 4,000 Deutsche Marks (DM) (approximately $2,700) and a loan from
the Berliner Bank of 7,700 DM (approximately $5,100). These funds totalling
$7,800, are committed to the upgrade and expansion of the Jena Facility
described above. On November 27, 1996, AMP loaned the Company $3,000, part of
which will be used as collateral for the Berliner Bank Loan. As part of the new
AMP loan, AMP also converted $3,000 of principal plus interest of the existing
$5,000 loan into 3,058,833 shares of Common Stock.
The Company is not relying on the conversion of Warrants and Options to fund
the upgrade and expansion of the Jena Facility; however, if the Warrants and
Options are exercised, the total proceeds that the Company would receive upon
the exercise is approximately $4,800. To the extent that the Warrants and
Options are exercised, the Company intends to use the proceeds from the exercise
of such Warrants and Options for working capital purposes, including debt
service (approximately $93 per quarter beginning January 1997 through December
2001). There are long payment deferral periods on a substantial amount of the
Company's outstanding loans. Under the AMP Note, the remaining $2,000 in
principal and accrued interest are due and payable at maturity on April 2005.
Similarly, under the new $3,000 AMP loan, payments of interest accrue for the
first five years. Thereafter, accrued and unpaid interest is payable quarterly.
The principal and any remaining accrued interest is payable at maturity on
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES - (continued)
November 27, 2006. As for the German loan, principal is also due and payable at
the tenth anniversary of closing; however, interest at 6.25 % is due and payable
quarterly. The Company does not foresee any inability to meet its current debt
requirements.
The Company currently has a backlog of orders aggregating approximately
$18,600 which is scheduled to be shipped through the end of 1996 and 1997. The
backlog at September 30, 1995 was approximately $4,800. Additionally, the
Company has entered into, or is negotiating, long-term supply agreements which,
in the opinion of management, could generate sales of up to approximately
$251,000 in the aggregate although there can be no assurance. These include
supply agreements with MEFC, AMP, FOI and others. Pursuant to the supply
agreement with AMP, which provides for an initial term of five years and for an
additional five year term at AMP's option, AMP has undertaken to purchase at
least 50% of its global fiber requirements from the Company. The Company
estimates that this could amount to over $60,000 in sales over the five year
period, significantly improving the Company's cash flow and profits, although
there can be no assurance.
For the year ended December 31, 1995
At December 31, 1995, the Company had cash of $833 and non-cash current
assets of $2,304. During 1995, the Company used $2,874 for operating activities.
This cash was used principally to fund the loss of $4,009, adjusted for
depreciation and amortization of $747. Accounts payable and accrued expenses
increased $2,119 and receivables and inventory increased $1,783, due to the
increases in sales, production and material costs and other operating costs.
Cash used in investing activities was $2,005 principally for the purchase of
equipment ($1,817) and reduction in amounts due to related parties of $358
(principally Sico). The Company also had a foreign currency translation
adjustment of $221 related to the Sico equipment transactions. In addition, the
Company acquired ALT in a non-cash transaction for Common Stock valued at
$7,000.
During the year the Company received $5,454 from financing activities,
principally through the sale of common stock ($500) and the issuance of the AMP
Note for $5,000. These funds were used to finance operations and acquire
equipment as noted above.
For the year ended December 31, 1994
At December 31, 1994, the Company had cash of $258 and non-cash current
assets of $453. During the year, the Company used $1,250 in operating activities
principally from the loss for the year of $1,625, adjusted for depreciation and
amortization of $289.
Cash used in investing activities was $178, principally due to the purchase
of equipment ($593) and an increase in amounts due to related parties of $419
for the acquisition of the Jena Facility. The Company also acquired equipment
from Sico of $2,996 in exchange for shares valued at $2,420 and a capital lease
agreement of $576.
Cash from financing activities was $1,284 resulting primarily from the sale
of Common Stock ($1,629), issuance of a note ($200) and repurchase of stock
($500). The proceeds from the sale of stock were used to fund operating costs
and purchase equipment as noted above.
Period -- November 5, 1993 to December 31, 1993
Since its inception, the Company has relied upon private equity and debt
financing and revenues from sales to finance its operations. For the period
November 5, 1993 to December 31, 1993, the Company had a cash inflow of $414
from the sale of Common Stock. The Company also issued Common Stock valued at
$223 to acquire patents ($60) and pay for startup costs ($163).
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-(CONTINUED)
ALT
ALT was acquired by the Company as of September 18, 1995. ALT has
historically operated at a loss, has cumulative losses from its date of
inception, and requires additional capital to operate. The Company intends to
raise additional funds for ALT, however, there is no assurance that such funds
will be available. ALT has received an order from Pakistan Telecom in the amount
of $152, for a test installation of the fiber optic cable monitoring system. If
the test installation is successful, the Company anticipates that Pakistan
Telecom will place an order for additional installation estimated to be valued
at approximately $1,660, although there can be no assurance. This increase in
revenues, if realized, would provide sufficient cash flow to sustain operations
and improve the profitability of ALT's operations.
23
<PAGE>
BUSINESS
GENERAL
The Company develops, manufactures and markets products primarily for the
fiber optic industry. These products include single-mode and multi-mode optical
fiber and optical fiber preforms. Preforms are the basic component from which
optical fiber is drawn and subsequently cabled. The Company has developed a
patented preform production process which management believes to be more cost
effective than existing production methods in use. Through its ALT subsidiary,
the Company manufactures patented cable monitoring systems, a patented long
range fault locator, cable protection devices, and electro-optical talk sets.
On July 18, 1995, FiberCore merged into Venturecap, an inactive corporation,
organized under the laws of the State of Nevada in 1987. Venturecap issued
3.671307 shares in exchange for each outstanding share of FiberCore, and as a
result, Venturecap issued a total of 24,617,133 shares for all of the
outstanding shares of FiberCore. After the merger, Venturecap changed its name
to FiberCore, Inc.
On September 18, 1995, the Company acquired ALT, a Delaware corporation
organized in 1986 and engaged in the business of manufacturing equipment which
monitors and identifies faults in fiber optic cables, cable protection devices,
and electro-optical talk sets. See "Certain Transactions -- The ALT
Acquisition."
In January 1996, the Company established a subsidiary, InfoGlass Incorporated
("InfoGlass"), through which it intends eventually to conduct its North American
fiber optic business.
The following is an organizational chart depicting the principal subsidiaries
of the Company, all of which are wholly-owned by the Company, except FOI (30%)
and MEFC (15%):
<TABLE>
<CAPTION>
COMPANY CORPORATE STRUCTURE
FiberCore, Inc.
Headquaters
USA
<S> <C> <C> <C> <C>
FOI (Pvt) Ltd. FiberCore Jena GmbH InfoGlass, Inc. FiberCore MidEast Ltd. ALT, Inc.
(Pakistan) (Europe) USA (Asia) (Non-Fiber)
30% Owned by FCI 100% Owned by FCI 100% Owned by FCI 100% Owned by FCI 100% Owned by FCI
MEFC
15% Owned
</TABLE>
Company and ALT sales by product group for the last two years and for the
nine months ended September 30, 1996, were as follows:
(dollars in thousands)
Year Ended Nine months ended
December 31, September 30, 1996
------------ ------------------
1994 1995
---- ----
Optical Fiber and
Preform.................. $ 231 $ 3,009 $ 6,096
ALT Products............. 476 246 149
Total.................... $ 707 $ 3,255 $ 6,245
RECENT DEVELOPMENTS
The Company is engaged in the business of developing, manufacturing, and
marketing single-mode and multi-mode optical fiber and optical fiber preforms
for the telecommunication and data communications industry. It was incorporated
under the laws of the State of Nevada in November 1993. In June 1994, the
Company leased the Jena Facility for a fixed monthly sum, and acquired certain
equipment located in that facility from Sico. Until the year 2001, the Company's
ownership of the equipment is subject to the right of
24
<PAGE>
the German government, from whom Sico purchased the equipment, to repossess the
equipment in the event the Company ceases production. The agreement pursuant to
which the Company acquired the equipment provides for the sale of 2,221,141
shares of Common Stock to Sico in exchange for the equipment. See "Certain
Transactions -- Dealings with Sico." The Jena Facility is an existing 26,500
square foot optical fiber manufacturing plant located in Jena, Germany, which
has been in operation since 1986.
In April 1995, the Company issued the AMP Note, which is a ten year
$5,000,000 convertible note, to AMP, a company listed on the New York Stock
Exchange and a manufacturer of electrical and optical connection devices,
systems and other equipment including fiber optic cable. AMP's annual worldwide
sales for the 1995 fiscal year were in excess of $5,000,000,000. Principal plus
accrued interest on the AMP Note at a rate of LIBOR plus one percent may be
converted into Common Stock through April 17, 2005. Until April 17, 2000, the
conversion price is $1.16 per share; thereafter the conversion price is equal to
the price per
share paid by a third party investor in the private sale of Common Stock
immediately prior to such conversion. The AMP Note is initially collateralized
by the Company's patents, patent applications, licenses, rights and royalties
arising from such patents. The AMP Note is subject to prepayment on demand in
the event the Company is the issuer of securities to be sold by the Company
under an effective registration statement. Since this Prospectus does not
contemplate the sale and issuance of new securities by the Company, the
registration of the Common Stock hereunder will not trigger the prepayment
provision under the AMP Note.
In July 1996, AMP entered into a five year supply contract (renewable at
AMP's option for an additional five year period) with the Company whereby AMP
has undertaken to purchase from the Company at least 50% of AMP's future glass
optical fiber needs. On November 27, 1996, the Company obtained an additional
$3,000,000 loan at an interest rate of prime plus 1%, adjustable on the first
business day of each calendar quarter, from AMP to fund the expansion of the
Jena Facility, in exchange for a 10 year note and $2,000,000 of common stock
purchase warrants exercisable for up to 1,382,648 shares of Common Stock at
$1.45 per share and expiring on November 27, 2001. In connection with the new
AMP loan and the expansion of the Jena Facility, the Company has been awarded a
grant from the German Government of approximately $2,700,000 and has received a
loan from Berliner Bank of approximately $5,100,000, which has been funded
contemporaneously with the new $3,000,000 AMP loan. AMP also converted
$3,000,000 of principal plus $540,985 of accrued interest on the AMP Note into
3,058,833 shares of Common Stock at a conversion rate of approximately $1.16 per
share. In connection with the new loan from AMP, the Company agreed to issue AMP
additional shares of Common Stock in the event the Company's share price does
not exceed $1.74 for 30 consecutive trading days by November 27, 1998. The
issuance of additional shares under the new AMP Loan would have a dilutive
effect on the Company's other shareholders and could adversely affect the market
price of the Common Stock. As part of the new $3,000,000 loan from AMP, Mohd A.
Aslami, Charles DeLuca, M. Mahmud Awan and AMP entered into a Voting Agreement
pursuant to which they agreed to vote together to elect a slate of directors to
the Board of Directors of the Company. Such slate of directors initially
consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one nominee of
AMP and three outside directors, one of whom is Dr. M. Mahmud Awan. The Voting
Agreement also requires a classified and three year staggered Board of
Directors. Such Voting Agreement would remain in effect until the earlier of (i)
termination of the new AMP loan agreement, or (ii) an underwritten public
offering by the Company which generates at least $5,000,000. See "Business --
Recent Developments," "Certain Transactions -- Dealings With AMP," and "Risk
Factors -- Control of the Company."
Since October 1995, MESC has purchased 734,262 shares of Common Stock for an
aggregate purchase price of $1,000,000 and MESC has been granted Warrants to
purchase 550,696 shares of Common Stock at an exercise price of $1.63 per share
through April 13, 1997. MESC will also be issued 312,061 shares of Common Stock,
will be entitled to exercise the Warrants and will receive an additional 238,635
shares of Common Stock upon delivery of a supply agreement between the Company
and the JV Company totalling approximately $33,000,000.
See"-- Joint Marketing Arrangements."
On November 1, 1995, the Company entered into an International Distributor
Agreement with Techman. Under such agreement, Techman will be issued Warrants
for the exercise of up to 1,000,000 shares of Common Stock. The Warrants will be
exercised and the applicable shares will be issued ratably by the Company as
commissions on Company sales generated by Techman up to $200 million.
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On January 11, 1996, pursuant to the Techman Share Purchase Agreement,
Techman agreed to purchase for $1,000,000 a total of 734,260 shares of Common
Stock, and Warrants exercisable at $1.63 per share into 550,696 shares of Common
Stock expiring on January 11, 1998. Additionally, Techman would be issued
312,061 shares of Common Stock upon the delivery of a supply agreement between
FOI and the Company. Between February 1996 and September 1996, the Company,
pursuant to the Techman Share Purchase Agreement, issued to Dr. Awan at the
request of Techman, 403,843 shares (representing approximately 55% of the
734,260 shares issuable to Techman) in exchange for $550,000 and 171,634 shares
in conjunction with the formation of FOI. Subsequent to September 1996, an
additional 470,844 shares of Common Stock (representing the balance of shares to
be issued under the Techman Share Purchase Agreement) were issued to Dr. Awan in
exchange for a payment of $450,000 and the delivery by Techman of a twenty year
supply agreement between the Company and FOI, which management believes could
generate revenues of up to approximately $93 million over five years, although
there can be no assurances. This payment was invested by the Company in FOI as
an additional capital contribution (along with ratable additional capital
contributions by FOI's other shareholders). The Company maintains a 30%
ownership interest in FOI. See "Description of Securities -- Techman."
On July 1, 1996, the Company borrowed $500,000 under two loan agreements with
the spouses of the Chairman and Chief Executive Officer and the Executive Vice
President of the Company. The loans are in the amount of $250,000 each, bear
interest at the prime rate plus one percent (currently 9.25%) and are due on
June 30, 1999. In conjunction with the loans, each lender received Warrants to
purchase 115,220 shares of Common Stock at a price of $1.81 per share. The
Warrants expire on July 31, 2001.
FIBER OPTIC PREFORM MANUFACTURING TECHNOLOGIES
Optical fibers are solid strands of hair-thin, high quality glass which are
usually combined to form cables for transmitting information via light pulses
from one point to another. The fibers consist of a core of high-purity glass
which transmits light encased within a covering layer designed to reduce signal
loss through the side walls of the fibers. Information transmitted through
optical fibers is converted from electrical impulses into light waves by a laser
or light emitting diode. At point of reception, the light waves are converted
back into electrical impulses by a photo-detector.
Communication by means of light waves guided through glass fibers offers a
number of advantages over conventional means of transmitting information. Glass
fibers carry significantly more information than metallic conductors and, unlike
metallic conductors, are not subject to electromagnetic or radio frequency
interference. Signals of equal strength can be transmitted over much longer
distances through optical fibers than through metallic conductors and require
the use of fewer repeaters (devices which strengthen a signal). Further,
fiber-optic cables, which typically consists of numerous optical fibers encased
in one or more plastic sheaths, are substantially smaller and lighter than
metallic conductor cables of the same capacity, so they can be less expensive
and more easily installed, particularly in limited conduit or duct spaces.
There are two basic types of communication optical fibers: multi-mode fiber
and single- mode fiber. Multi-mode fiber has a larger core (the area where the
light travels) than single-mode fibers, carries less bandwidth and is more
expensive. It is generally used over relatively short distances in building
wiring and among a group of buildings. The electronics and the connectors
required to work with multi-mode fiber are less costly than the electronics
required for single mode-fiber. For example, the light source for multi-mode
fiber can be light emitting diodes, while single-mode fiber requires laser light
sources. Single-mode fiber is used in long-distance trunk lines (cables between
cities) and fiber-to-the-curb (cable from a central office to the curb in front
of an office building or home).
The three basic technologies widely used to manufacture multi-mode and
single-mode optical fiber are:
1. Outside Vapor Deposition ("OVD"), otherwise known as the "Corning
process."
2. Inside Vapor Deposition ("IVD"), which is also known as Modified Chemical
Vapor Deposition ("MCVD") or the "AT&T process". Due to its flexibility and
relative ease of operation, this process is the most widely used around the
world by independent manufacturers.
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3. Axial Vapor Deposition ("AVD"), also known as the "Japanese process". This
process is similar to the Corning process.
The basic production unit from which fiber "is drawn" is a preform. A preform
is a cylindrical high purity glass rod with a high refractive index glass
material in the central part of the rod (the "core") and a low refractive index
glass material in the outer part of the rod (the "clad"). The rod can be less
than one inch to several inches in diameter and one to several meters in length.
From one such preform many thousands of meters of optical fiber can be drawn.
The OVD and AVD processes both manufacture 100% of the glass composing the final
preform and are comparable in terms of machine speeds that manufacture glass per
unit of time. These speeds are significantly higher than those of the IVD
process. In contrast, the IVD process manufactures only about one-third of the
total glass required in the manufacture of a preform, with the balance of the
glass being purchased in the form of a tube at costs significantly lower than
that of either OVD or AVD, thus balancing the overall expense.
Optical fiber cable is produced from optical fiber by first coloring the
coated fiber and then encasing the fiber in a protective jacket.
THE COMPANY'S PROPRIETARY MANUFACTURING PROCESS AND PRODUCTS
The Company manufactures both multi-mode and single-mode preforms and fiber,
but does not manufacture optical fiber cable, although the JV Company in which
the Company has an interest intends to draw fiber from preforms and to
manufacture fiber optic cable.
The Company's patented technology can be best described as a "rod-and-tube"
process, or as a hybrid of the OVD, IVD and the AVD processes. The Company's
process takes advantage of available high quality doped((1)) and undoped fused
silica rods and tubes during the manufacturing process to produce more
efficiently single-mode optical fiber preform and single-mode fiber at a
substantially reduced cost than the alternative processes.
Specifically, the Company's process places a high-purity "core" glass rod
inside a high-purity glass tube or "clad", which has a lower refractive index
than the core, and collapses the tube over the rod to form an intermediate
preform. The Company purchases the glass tubes and manufactures the "core" glass
inside of the purchased glass tube. The composite material is subsequently
converted to a glass rod referred to as an intermediate preform. Such
intermediate preform can also be manufactured by any of the other existing
processes. This intermediate preform is placed inside another purchased tube and
collapsed together to form a final preform, which has the proper ratio of
core-to-outside-diameter-glass. The preform is then drawn into finished fiber by
placing it inside a "draw furnace", heated to approximately 2000 degrees
celcius, and "stretched" into tens of thousands of meters of hair-thin, flexible
glass fiber. The Company believes that its patented process offers
manufacturing-cost and capital-investment advantages over the processes
currently in use by competitors for the manufacture of optical fiber, because
(i) the machine time necessary to produce a given size preform is significantly
less, thereby allowing the Company to produce more preforms in the same time
period; and (ii) the Company purchases the tube while manufacturing a much
smaller portion of the clad and all of the core which accounts for approximately
5% of the perform, while the OVD process, for example, manufactures 100% of the
preform, requiring substantially more capital investment.
Prior to its acquisition by the Company, the Jena Facility was used to
manufacture multi-mode fiber and preform for the Eastern European market. The
Company's lease of the Jena Facility provides a potentially efficient, low-cost,
existing manufacturing operation. Management believes the time and cost required
to achieve manufacturing efficiencies at the Jena Facility can potentially be
minimized as a result of management's knowledge and experience in fiber
production and machine design.
ALT PRODUCTS
The Company's ALT subsidiary has four principal products, all of which are
manufactured at the Company's Sturbridge, Massachusetts facility and are
marketed by independent sales representatives.
- ----------
(1) Doping means adding other glassy materials, such as germanium dioxide to
the silica glass.
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ALT's FOCMS facilitate the continuous monitoring of fiber optic and copper
cables. The FOCMS consist of sensors housed in a protective cover placed at
cable splice points and connected to a central monitoring system. ALT holds two
United States patents covering this technology. ALT purchased one of these
patents and know-how relating to fiber optic cable monitoring systems on
September 7, 1986, from Norscan, a Canadian company. Norscan retained the right
to use the technology in Canada and the rights to a Canadian reissuance of the
purchased patent and has had the technology in operation on the Trans Canada
fiber optic network since 1988. ALT intends to make the technology widespread in
other regions worldwide. A dispute exists between ALT and Norscan with respect
to Norscan selling FOCMS products, in competition with ALT products, that
utilize technology other than the technology assigned to ALT pursuant to its
agreement with Norscan. ALT contends that, in so doing, Norscan is violating a
non-competition provision of Norscan's agreement with ALT. Failure by ALT and
Norscan to resolve this dispute could materially adversely affect the future
sales of ALT products. See "-- Patents."
ALT also manufactures patented long range fault locators, which are generally
used in pairs. Typically, each device is applied at a point on a fiber optic
cable, less than 100 miles from the other unit. These devices can detect and
locate cable faults between the units.
In addition, ALT manufactures cable protection devices, which are applied at
cable splice joints prior to cables entering a building to protect against
hazardous electrical currents that could otherwise be carried by metal sheaths
encasing optical fibers, and electro-optical talksets, which are used by field
personnel to communicate over optical fiber, twisted pair-cable (regular
telephone cable), and metal sheaths encasing optical fibers and copper cables.
Customers for the FOCMS and other ALT Products have included telephone
companies worldwide, including MCI Telecommunications Corp., AT&T and Pacific
Telesis.
ALT also has developed flood and leak detection devices for the home. ALT is
not actively marketing these products because of lack of resources, but may
attempt to market such products in the future. See "Trademarks."
RESEARCH AND DEVELOPMENT
The Company conducts research and development activities at its Jena Facility
and Sturbridge offices. The Company's research and development activities
consist primarily of optical fiber manufacturing process improvements and fault
locating technology improvements, as well as the development for sale of new
fault locating products. The Company is currently conducting research in Germany
under two grants from the German government totaling approximately $107,000.
The Company incurred costs of $90,000 and $75,000 for research and process
development for the fiscal years ended December 31, 1994 and 1995, respectively.
For the nine months ended September 30, 1996, research costs were $281,000, of
which approximately $33,000 was attributable to ALT. The principal purpose of
the research activity is to improve the production process for the manufacturing
of fiber preforms, with concentration on reducing production time and reducing
raw material consumption per unit of product. ALT's expenditures are principally
for product development and enhancements of its products.
Three of the Company's employees devote over 90% of their time, and two
employees devote over 50% of their time to research and development, which
includes process and product development.
SALES AND MARKETING
The Company's initial marketing efforts are being primarily targeted at the
overseas markets, particularly toward developing nations whose
telecommunications infrastructure is in the early stages of evolution and where
competition is not well established. The Company is initially targeting the
large fiber optic cable manufacturing companies in Asia, the Middle East, the
Pacific Rim, and certain European and Eastern European markets.
In the past, developing countries would typically purchase older, previously
deployed communication technology and equipment. The lack of a copper cable
infrastructure and a desire to become more technologically advanced, however,
has driven some developing countries to choose fiber optic cable
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networks because this technology provides an expeditious and cost-effective
means of developing a sophisticated communication network infrastructure. These
countries must first install a fiber optic infrastructure of trunk and feeder
lines followed by fiber, copper or wireless to the subscriber loop.
The Company's sales and marketing objective is to develop long-term,
strategic relationship/supply contracts for both preform and fiber products as
rapidly as practical, emphasizing the cost advantages of the Company's patented
technology.
JOINT MARKETING ARRANGEMENTS
Pursuant to an agreement executed in June 1994 and subsequently amended on
June 17, 1995 (the "Royle Cooperation Agreement"), which expires in June 1999,
the Company has been making joint proposals to sell fiber and preforms with
Royle, a manufacturer, distributor and value added installer of cable
manufacturing systems with customers and sales channels worldwide. Gregory
Perry, a shareholder and a former director of the Company, is Director of Fiber
Technology at Royle. See "Certain Transactions -- Dealings With Royle" and
"Principal Securityholders."
Pursuant to the Royle Cooperation Agreement, Royle agreed to provide a
favorable price for the Company's initial order of draw towers. A draw tower is
a vertical metallic structure designed to draw optical fiber from preforms.
Subsequent Company orders of Royle manufactured equipment are to be sold by
Royle at prices reduced by 10%. In addition, as compensation to the Company for
the provision of certain proprietary designs, until June 17, 1999, Royle has
agreed to pay the Company a 5% royalty on the selling price of any draw towers
that are sold to third parties. Royle also agreed not to enter into any fiber or
preform joint ventures without FiberCore's permission and FiberCore agreed not
to enter into any joint ventures that commence with the fiber coloring operation
without Royle's permission. In October 1995, the Company and Royle amended the
Cooperation Agreement by eliminating the payment of commissions (but not the
royalties described above) to each other and establishing guidelines for
entering into joint ventures with third parties. See "Certain Transactions --
Dealings With Royle."
The Company is attempting to enter into joint ventures with potential foreign
and domestic partners, including cable manufacturers, to build modern plants for
producing optical fiber and optical fiber cable. Most of these plants will
require preform as "raw material". Royle and the Company, each through
subsidiaries, recently entered into such an agreement (the "Mideast JV
Agreement") with MEOFC, a Saudi Arabian company. Pursuant to the agreement, the
parties jointly own the JV Company, a Saudi Arabian joint venture company. The
JV Company will engage in the manufacture and sale of optical fiber and optical
fiber cable both inside and outside of Saudi Arabia. The Company and Royle each
contributed $500,000 to the venture and each holds a 15% interest in the JV
Company. MEOFC contributed $2,330,000 and holds a 70% interest. The JV Company
has placed a $5,500,000 purchase order with Royle for fiber optic cable
manufacturing equipment, and intends to purchase fiber and preforms from the
Company. The Company and the JV Company are in the process of finalizing a
long-term supply agreement for the JV Company to purchase and the Company to
supply fiber and preforms totaling approximately $33,000,000 over the next five
years. There is no obligation for the JV Company to purchase or the Company to
sell fiber until such supply agreement has been completed. The Company may not
transfer its interest in the JV Company to any entity other than Royle or MEOFC
without the permission of such parties.
In connection with the Company's participation in the JV Company, on October
5, 1995, MESC, a Saudi Arabian Company in which the owners of MEOFC have an
interest, purchased 367,131 shares of the Common Stock at an aggregate price of
$500,000. In November 1996, MESC purchased the second block of 367,131 shares of
Common Stock for an additional $5,000,000. See "Business -- Recent
Developments."
The Company is seeking to increase market penetration in optical fiber
markets through strategic alliances and/or joint ventures similar to the JV
Company. Currently, negotiations are underway with several potential new joint
venture partners. These relationships are being structured so that the Company
provides the preforms and the related technology requirements and the partner
provides the financing, operating and local marketing expertise. In this way, it
may be possible for the Company to rapidly obtain market penetration with
little, if any, capital investment. Discussions regarding similar joint ventures
and/or strategic
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alliances are underway in India, Pakistan, China and several
other countries, although there can be no assurances that such discussions will
lead to the consummation of any transactions. See "Certain Transactions --
Dealings With Techman."
CUSTOMERS, INVENTORY, BACKLOG AND ADVERTISING
A key element of the Company's marketing strategy is to maintain sufficient
raw material and finished goods inventories to enable the Company to fill
customer orders promptly. This strategy requires a substantial amount of working
capital to maintain inventories at a level sufficient to meet anticipated
demand.
CUSTOMERS REPRESENTING OVER 10% OF SALES
The following table is based on the combined sales of the Company and ALT for
all periods presented. The Company has requested that the Commission grant
confidential treatment for the names of the Customers.
Optical Fiber and
Preform Business ALT Combined
1996 (9 months)
Customers
A ................. 62 % -- 61%
B ................. -- 48% Less than 10%
C ................. -- 19% Less than 10%
D ................. -- 16% Less than 10%
1995
Customers ..........
A ................. 62% -- 57%
B ................. -- 11% Less than 10%
C ................. -- -- Less than 10%
D ................. -- 11% Less than 10%
E ................. 11% -- 10%
F ................. 10% -- Less than 10%
1994 ...............
Customers ..........
A ................. 38% -- 12%
B ................. -- -- --
C ................. -- -- --
D ................. -- 36% 24%
E ................. -- -- --
F ................. -- -- --
G ................. -- 10% Less than 10%
H ................. -- 19% 13%
The Company believes that only the loss of Customer A would have a material
adverse effect on the Company.
The Company currently has orders and/or supply agreements, which, in
management's opinion, are sufficient to consume the Company's current production
capacity and the currently planned expanded capacity of the Jena Facility.
Accordingly, sales of optical fiber and preforms are being made by only one
full-time salaried employee who is engaged in sales as only a portion of his
duties. The Company, however, plans to commence the use of independent local
sales representatives in some international markets during 1997 to coincide with
the Company's planned additional expansion of the Company's production
facilities beyond the current expansion of the Jena Facility. Assisted by local
representatives, management intends to host seminars in key countries to
identify the best possible sales opportunities
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and to establish potential relationships with key managers of local cable and
telephone companies. In addition, other management executives are engaged in
negotiating long-term supply agreements with current and potential customers.
Sales of ALT products are made by one salaried full-time Company employee
based in Massachusetts, who is engaged in sales as only a portion of his duties,
as well as by a number of independent sales agents.
The Company does not currently engage in extensive advertising. Commencing in
1997, and in conjunction with the use of local sales representatives, the
Company intends to advertise in trade journals. The advertising effort will
focus on developing an overall corporate image as well as name recognition of
the product and awareness of its competitive advantages. Advertisements will
also include reader response cards to generate sales leads for direct follow-up.
In addition, the Company intends to exhibit at selected industry trade shows.
COMPETITION
FIBER PREFORM
Management believes that there is limited competition in the sale of preforms
to cable manufacturers who draw their own fiber. Such competition, however, is
expected to grow. At present, the competition for single-mode preforms on a
world-wide basis is limited to two United States manufacturers, SpecTran
Specialty Optics ("SpecTran"), formerly Ensign Bickford Optics/Lightwave
Technologies, Inc., and Alcatel U.S.A. SpecTran's product sales are for unique
fiber applications. Alcatel U.S.A. is marketing single mode preforms and has the
capability to market now and in the future. In Europe, Lycom, Alcatel and Nokia,
Shin-Etsu from Japan and DaiWoo from Korea are marketing single mode preforms.
The predominant practice of most fiber manufacturers is to make fiber optic
preform only for their internal use and not to sell preform to other fiber-optic
manufacturers. Management believes these large companies will not enter the
preform market since demand for fiber currently exceeds supply and fiber
manufacturers have an inherent disincentive in selling preforms; they have
already invested heavily in plant, equipment and technology to convert preforms
into fiber and/or cable, and by selling preforms they would be giving up
value-added margins. The disadvantages associated with selling preforms to third
parties for companies like Corning and AT&T do not apply to the Company,
because, unlike those companies, the Company's customers are not vertically
integrated, and require preforms which are in limited supply.
Due to the current high demand for fiber, the Company has initially
concentrated on manufacturing and selling fiber and currently plans to increase
its fiber manufacturing capability. Because competition in the production of
preforms is somewhat limited, the Company plans to focus its future
manufacturing and marketing efforts on the preform segment of the market.
FIBER
The competition in multi-mode fiber products is limited to a few
manufacturers in North America and Europe. They include Corning, AT&T, Alcatel
and SpecTran in the United States and Plasma Optical Fiber and Alcatel in
Europe. Management believes that Corning, AT&T, and Alcatel generally supply the
bulk of their production to their own cablers or joint venture partners.
The competition in the single-mode fiber market is much more extensive than
in the preform market or the multi-mode fiber market. Most of the competition
for fiber comes from Corning and AT&T. Both Corning and AT&T have several joint
ventures throughout the world, but, it is believed by management, generally play
significantly smaller roles than their partners. Competition in the fiber market
is primarily based on availability and quality. With some exceptions, the
Company's fiber is generally priced at comparable levels to fiber manufactured
by the larger producers.
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ALT PRODUCTS
ALT's management believes there is limited or no direct competition for its
FOCMS product line except Norscan (see "Risk Factors -- Patents and Proprietary
Rights"). Most other competing technologies and products are more complementary
to the Company's products than true competitors because these products and the
Company's products are both needed to perform short range and long range fault
locating.
Numerous companies manufacture cable protection devices. The Company
believes, however, that it has the only product approved by U/L Laboratories, an
internationally recognized certifying organization.
Numerous companies manufacture field talksets that enable personnel to
communicate over either twisted pair, metal sheath or optical fiber. The Company
knows of no other company that manufactures a product that enables personnel to
communicate over all three media, although many companies have or can acquire
the technology to create such a device.
PRODUCT WARRANTIES
Customers may obtain refunds for any defective fiber and fiber preforms
shipped by the Company within 90 days of delivery. The Company extends one year
warranties on ALT Products.
PATENTS
The Company is the registered owner in the United States of U.S. Patent No.
4,596,589 relating to optical fiber fabrication. The patent, which expires in
2003, was acquired in 1993 from Gregory Perry, a co-founder of the Company and
currently a consultant to the Company on an as needed basis. The existing patent
provides a more efficient method for fabricating a single-mode optical fiber
preform by substantially reducing the time and cost required to produce the
preform. The patent also provides an efficient method of attaching cladding
material around a single-mode fiber core. The Company has filed an application
in the United States and European Common Market improving upon the process
covered by the above patent, and intends to file in other foreign jurisdictions,
as well as filing further improvement patents for its process.
In addition, in conjunction with its acquisition of equipment located at the
Jena Facility, the Company acquired the right and title to all Sico patents and
expertise developed or owned by Sico relating to fiber optics. While the Company
does not believe the Sico patents infringe upon the patents or other proprietary
rights of any other party, other parties may claim that the Sico patents
infringe upon such patents or proprietary rights. In the event the Company were
to default on its obligaions to Sico, the Company's title to these patents could
revert to Sico. Without use of Sico patents and technology, the Company's
expense in manufacturing optical fiber and optical fiber preforms could increase
substantially.
The Company is the registered owner in the United States of three patents
covering its cable monitoring systems and fault locating methods. The Company
acquired the first such U.S. patent, Patent No. 4,480,251, which covers cable
monitoring systems and expires in 2001, from Norscan. A Patent issued by the
United Kingdom for the same technology was also acquired by the Company from
Norscan. The Company has filed international patent applications covering this
technology in various other countries around the world, although none have yet
been granted. Pursuant to the Company's agreement with Norscan, Norscan has the
right to a Canadian patent reissuance and may otherwise use the technology in
Canada. The Company has improved upon Norscan's technology and obtained a
European patent and United States patent, Patent No. 5,077,526, which expires in
2008 covering the improvements. The Company also owns a United States patent,
Patent No. 4,947,469 expiring in 2007, and a European patent covering a cable
fault location method. In addition, the Company owns a United States patent
covering the provision of backup power to optical communications systems.
The Company's ability to compete effectively will depend, in part, on its
ability to protect its patents. There can be no assurance that the steps taken
by the Company to protect its intellectual property will be adequate to prevent
misappropriation or that others will not develop competitive tech-
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nologies or products. Furthermore, there can be no assurance that others will
not independently develop products that are similar or superior to the Company's
products or technologies, duplicate any of the Company's technologies, or design
around the patents issued to the Company. In addition, the validity and
enforceability of a patent can be challenged after its issuance. While the
Company does not believe that its patents infringe upon the patents or other
proprietary rights of any other party and is unaware of any claim of such
infringement, other parties may claim that the Company's systems do infringe
upon such patents or other proprietary rights. There can be no assurance that
the Company would be successful in defending against such a claim of
infringement. Moreover, the expense of defending against such a claim could be
substantial.
TRADEMARKS
The Company is the owner of the registered trademark Floodhound(R) which is
used in the sale of the Company's water leak detection devices. These products
are not currently being marketed by the Company.
LITIGATION
The Company's FiberCore Jena subsidiary, Sico and Sico's president, Mr.
Walter Nadrag (who was previously the Managing Director of FiberCore Jena) are
defendants in a lawsuit in Germany brought against them by COIA GmbH, a former
customer, claiming damages of approximately $1.5 million arising from FiberCore
Jena's alleged failure to comply with a sales contract. The Company believes no
sales contract existed and is aggressively defending this action. The Company
has established a reserve in the amount of $126,000, which includes legal fees.
However, there is no assurance that the Company will prevail in this action or
that the reserve of $126,000 will be adequate.
The Company was a defendant in a lawsuit pending in Federal Court in
Worcester, MA seeking to enjoin the Company from using the name "FiberCore," as
well as unspecified monetary damages in excess of $50,000. In August 1996, the
plaintiff, Fibercore, Ltd., withdrew such action without prejudice.
The Company's ALT subsidiary is in a dispute with Norscan, a Canadian
company, with respect to Norscan selling FOCMS products, in competition with ALT
products and in violation of a non-competition agreement between ALT and
Norscan. ALT would be the claimant in any lawsuit brought in connection with
this matter. Failure by ALT and Norscan to resolve this dispute could materially
adversely affect the future sale of ALT Products.
In addition to the above, the Company is subject to various claims which
arise in the ordinary course of business. The Company believes such claims,
individually or in the aggregate, will not have a material adverse effect on the
business of the Company.
SEASONALITY
The Company's business does not have strong seasonal fluctuations and the
Company does not expect material seasonal variations to revenue.
RAW MATERIALS
The Company presently can purchase all its raw material requirements for its
optical fiber and preform business. The major component of a preform is silica
glass tubing which is available in various sizes. Various high purity gases such
as oxygen, nitrogen, argon, helium, chlorine and chemicals such as silicon
tetrachloride, silicon tetra fluoride and germanium tetrachloride are used in
the process of manufacturing preform. During 1994, 1995 and the first nine
months of 1996, the Company's optical fiber and preform business purchased
approximately 90% of its key glass tubing raw material from one supplier. If the
Company becomes unable to continue to purchase raw materials from this supplier,
there can be no assurance that the Company will not face difficulties in
obtaining raw materials on commercially acceptable terms, which could have a
material adverse effect on the Company. See "Risk Factors -- Dependence on Third
Party Suppliers," "Management's Discussion and Analysis of Financial Condition
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and Results of Operations -- Liquidity and Capital Resources." To limit future
shortages of key materials, the Company has acquired equipment capable of making
the necessary core glass using readily available "first" tubing and clad glass,
if required. The Jena Facility has the capability to manufacture the high-purity
synthetic core glass using a first purchased cladding tube, as well as adding
additional purchased cladding tubes using the Company's patented production
process.
The Company's ALT subsidiary uses raw materials widely available from
numerous suppliers.
EMPLOYEES
At September 30, 1996, the Company employed 59 persons, of whom five are
executives, 7 are engaged in sales and administration, 42 are engaged in
manufacturing and five are engaged principally in research and development. The
Company considers its relations with employees to be satisfactory and believes
that its employee turnover does not exceed the industry average.
The Company is not party to any collective bargaining agreements and the
Company does not maintain a pension plan. However, approximately 51 of the
Company's employees are located in Jena, Germany. Under German law, the Company
is required to make lump sum payments to its German employees upon termination
of their employment with the Company.
PROPERTIES
The Company's headquarters are located in a 20,000 sq. ft. leased building,
including 5,000 sq. ft. of office space, in Sturbridge, Massachusetts. The
initial term of the lease is three years and was due to expire on January 31,
1997. The Company has extended the lease to September 1997,
The Company's optical fiber and preform manufacturing facility is located in
Jena, Germany. The facility is leased from Sico. It occupies approximately
26,500 sq. ft., including 17,200 sq. ft. of clean room manufacturing space,
6,100 sq. ft. of office and storage space and an additional 3,200 sq. ft. of
outside facilities for gas storage tanks. The Company owns all machinery and
equipment at the facility, subject to certain restrictions. See "Certain
Transactions -- Dealings With Sico." The lease expires in 2000 and is renewable
for additional terms aggregating 25 years. Existing replacement cost of the Jena
Facility (other than the structure), including machinery and equipment, is
approximately $8.4 million. The Company maintains casualty and liability
insurance on the Jena Facility. There is no assurance that in the event of a
loss, policy limits will not be exceeded. See "Risk Factors -- Insurance."
34
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following tables set forth certain information with respect to each
person who was an executive officer or director of the Company as of September
30, 1996.
NAME AGE POSITION
- ------------------- ------ -------------------------------------------------
Mohd A. Aslami 50 Chairman Of The Board Of Directors, Chief
Executive Officer and Director
Charles DeLuca 59 Executive Vice President, Secretary and Director
of the Company and General Manager of the
Company's ALT subsidiary
Michael J. Beecher 52 Chief Financial Officer
Hans F.W. Moeller 66 Managing Director of the Company's FiberCore
Jena subsidiary
Zaid Siddig 59 Director
Steven Phillips 51 Director
M. Mahmud Awan 45 Director
Dr. Aslami is a co-founder, Chairman of the Board of Directors and Chief
Executive Officer of the Company. Dr. Aslami has served as Chairman and Chief
Executive Officer of FiberCore Jena, the Company's wholly-owned subsidiary in
Germany, since 1994. Dr. Aslami also co-founded and became President, Chief
Executive Officer and a director of ALT in 1986. Dr. Aslami received a Ph.D. in
chemical engineering from the University of Cincinatti (1974).
Mr. DeLuca is a co-founder, Executive Vice President, Secretary and a
director of the Company. Mr. DeLuca also co-founded and became an Executive Vice
President and director of ALT in 1986.
Mr. Beecher became Chief Financial Officer of the Company in April 1996. Mr.
Beecher was the Vice President/Treasurer and Chief Financial Officer at the
University of Bridgeport from 1989 through 1995. Mr. Beecher is a Certified
Public Accountant and is a member of the American Institute of Certified Public
Accountants.
Mr. Moeller became Managing Director of FiberCore Jena in the fourth quarter
of 1995 on a part time basis. He served as a director of FiberCore Incorporated
from 1994 through March 1996. As part of a reorganization of the Company, he
resigned his position as a director and agreed to serve as a director of the
Company's newly formed subsidiary InfoGlass. From 1993 to 1994, he served as
Vice Chairman of Schott Corporation ("Schott"), a United States subsidiary of
Schott A.G., a corporation specializing in the production of, among other
things, optical glass. From 1989 to 1993, he served as President of Schott. Mr.
Moeller was a member of the Board of Directors of Schott from 1989 to 1994.
Mr. Siddig became a director of the Company in 1994. He also serves as a
consultant to the Board of Directors of FiberCore Jena. Since 1991, Mr. Siddig
has been active as a private investor and has occasionally served as a
consultant to ALT. Mr. Siddig is the uncle of Dr. Aslami's wife.
Mr. Phillips became a director of the Company in May 1995 and became a
director of ALT in 1989. Since November 1992, Mr. Phillips has served as
Secretary and Chief Financial Officer, and a director, of Winstar Incorporated,
the sole general partner of The Winstar Government Securities Company L.P., a
registered broker-dealer specializing in odd-lot United States Government
securities transactions, of which he is a founder. Since August 1987, Mr.
Phillips has served as a director, Secretary and Chief Financial Officer of
James Money Management, Inc., a private investment company. Since June 1987, Mr.
Phillips has served as director and President of One Financial Group
Incorporated, a financial consulting company of which he is the majority
stockholder.
35
<PAGE>
Dr. Awan is the founder and President of Techman, a Massachusetts company
engaged in providing technical, sales and management consulting services to
various industrial companies in the United States and abroad. Dr. Awan has been
responsible for the development of several high tech companies in Massachusetts
over the past 10 years and serves on the Board of Directors of a number of
professional organizations as well as these companies. He is an active investor
in the Pakistani market and has maintained manufacturing and distribution
operations in Karachi, Islamabad, and Lahore since 1982. Dr. Awan has been
instrumental in promoting satellite networks for Pakistan. His company was
licensed in 1994 by the Government of Pakistan to operate a national and
international satellite data communication network throughout Pakistan. Dr. Awan
received a Ph.D. in economics from Clark University (1974).
VOTING AGREEMENT, AMENDMENTS TO BY-LAWS
Pursuant to the Voting Agreement with AMP, the Company has agreed to revise
its by-laws to create a classified and three year staggered Board of Directors.
Mohd A. Aslami, Charles DeLuca, M. Mahmud Awan and AMP, who in the aggregate
beneficially own approximately 47% of the Common Stock (assuming the issuance of
all underlying Shares in this prospectus), have agreed to vote together to elect
a slate of directors to the Board of Directors. Such slate of directors
initially consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one
nominee of AMP and three outside directors, one of whom is Dr. M. Mahmud Awan.
The Company intends to hold a Special Meeting of shareholders in early 1997
to (i) ratify changes to the by-laws which permit a classified and three year
staggered Board of Directors, and (ii) elect the new Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal years,
the cash salary and bonuses and non-cash salary and bonuses earned or paid, as
well as certain other compensation paid or accrued for those years, to the
Company's President and Chief Executive Officer and to each of the Company's
other most highly compensated executive officers with compensation in excess of
$100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION OTHER ANNUAL LONG TERM
NAME AND ---------------------- COMPENSATION COMPENSATION ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) STOCK OPTIONS COMPENSATION
- ----------------------------- ------- ----------- ---------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mohd A. Aslami 1995 146,500 -- -- -- --
Chairman, Chief Executive 1994 178,729 -- 10,529 -- --
Officer and Director of 1993 9,333 -- 188,687 -- --
the Company and ALT
Charles DeLuca 1995 37,699 -- -- -- --
Executive Vice President,
Secretary and Director 1994 18,000 -- 99,485 -- --
of the Company and
General Manager 1993 5,925 -- 117,269 -- --
of ALT
</TABLE>
- ----------
(1) Includes deferred salary earned by Dr. Aslami and Mr. DeLuca. Interest
accruing on deferred salary at a rate of 13% is not included. Includes warrants
to purchase 27,583, 138,610 and 40,579 shares of ALT common stock at $1.75 per
share in 1994, 1993, and 1992, respectively, issued to Dr. Aslami and warrants
to purchase 57,607, 88,405, and 32,084 shares of ALT common stock at $1.75 per
share, in 1994, 1993, and 1992, respectively, issued to Mr. DeLuca. Such
warrants were issued in connection with deferment of salary of Messrs. Aslami
and DeLuca and interest accrued thereon. Also includes 2,500 shares per year of
ALT common stock awarded to Dr. Aslami and Mr. DeLuca in 1995 for serving on
ALT's Board of Directors. Shares of ALT common stock were valued at $2.10.
Warrants for ALT stock were valued at $0.35, which represents the difference
between the ALT share value of $2.10 and the ALT warrant exercise price of
$1.75.
EMPLOYMENT AGREEMENTS
The Company maintains no written employment or severance agreements with its
executive officers. The Company intends to enter into non-compete agreements
with Dr. Aslami, Mr. DeLuca, Mr.
36
<PAGE>
Moeller, and Mr. Beecher. The loss of any of the aforementioned executive
officers would have a material adverse effect on the Company. The Company
intends to apply for key-man life insurance policies on each of its executive
officers with the Company as the sole beneficiary.
COMMITTEES OF THE BOARD
The Company intends to establish an audit committee, an executive committee,
and a compensation committee. The Company does not have a nominating committee.
The functions of those committees currently are performed by the Board as a
whole.
STOCK OPTIONS
The Board of Directors grants options to purchase Common Stock to directors,
officers and employees of the Company. The Company has no formal stock option
plan. ALT maintained a stock option plan prior to its acquisition by the Company
(the "ALT Acquisition"). The Company intends to adopt a formal Employee Stock
Option Plan.
AGGREGATED OPTION EXERCISES IN 1995
AND OPTION VALUE AT DECEMBER 31, 1995
The following table sets forth information related to options exercised
during 1995 by the Company's Chief Executive Officer and by each of the
Company's other three most highly compensated executive officers and the number
and value of options held at December 31, 1995 by such individuals.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995 DECEMBER 31, 1995
ACQUIRED VALUE ------------------------------ -------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ --------------- ----------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mohd A. Aslami ... -- -- 60,913 -- $124,872 --
Charles DeLuca ... -- -- 46,050 -- 9,375 --
Michael J.
Beecher........... -- -- 64,248 -- 181,118 --
Hans F.W.
Moeller........... -- -- 88,235 -- 197,381 --
</TABLE>
There were no options granted and no exercises of Company stock options for
the years ended December 31, 1995 and 1994 by the Chief Executive Officer and
any of the other three most highly compensated executive officers of the
Company.
DIRECTORS' COMPENSATION
During 1995 and 1994, the Company's directors received no compensation for
serving as directors, other than reimbursement for expenses. For each of 1992,
1993, 1994 and 1995, ALT's directors were granted in 1995, 2,500 shares of ALT
common stock for serving as directors of ALT. The Company intends to adopt a
compensation plan for its non-employee directors.
37
<PAGE>
CERTAIN TRANSACTIONS
FORMATION OF THE COMPANY
The Company was organized under the laws of the State of Nevada in November
1993 by Mohd Aslami, Charles DeLuca, Gregory Perry and ALT. Dr. Aslami
contributed $96,667 in services and cash in exchange for 5,914,883 shares. Mr.
DeLuca contributed $50,000 in cash in exchange for 2,957,443 shares. Mr. Perry
assigned a patent to the Company, valued at $60,000, and received 3,671,307
shares. ALT contributed $60,000 worth of services in exchange for 3,671,307
shares. See "Business -- Patents."
DEALINGS WITH SICO
In June 1994, FiberCore Jena entered into a six year capital lease for
equipment in Germany with Sico, in exchange for 2,221,141 shares of Common Stock
issuable to Sico or a designee thereof. Walter Nadrag, managing director and
owner of a majority stock interest in Sico, became managing director of
FiberCore Jena and was designated by Sico to hold the 2,221,141 shares of Common
Stock. In August 1995, Sico and the Company amended the agreement, and the
Company agreed to pay Sico DM 3,775,200 (approximately $2,420,000) for such
assets in 24 quarterly installments (plus 15% refundable value added tax). In
turn, Sico and Mr. Nadrag agreed to the cancellation of all shares of Common
Stock previously issued to them.
In January 1996, the parties entered into a new agreement whereby the
installment debt was eliminated, Sico retained the 2,221,141 shares, the Company
retained the right, title and interest to all equipment and agreed to register
the shares as soon as practicable. Mr. Nadrag resigned as Managing Director of
FiberCore Jena in November 1995 at which time Mr. Hans Moeller was appointed as
the new Managing Director of FiberCore Jena. Mr. Nadrag continues to serve as a
consultant to FiberCore Jena on an as needed basis at an equivalent half-time
monthly salary of DM 3,000. Pursuant to its agreements with Sico, the Company
has the right and title to all Sico patents and expertise developed or owned by
Sico relating to fiber optics. See "Business -- Patents."
Since June 1994, FiberCore Jena has leased its office building in Germany
from Sico. The lease payment is fixed for the initial term of the lease (which
expires on June 30, 2000) at DM 51,376 per month (approximately $34,000). See
"Business -- Properties." Sico is also a reseller customer of the Company. In
1995 and the first nine months of 1996, Sico accounted for approximately 10% and
less than 1%, respectively, of Company total sales.
DEALINGS WITH ROYLE
In November 1993, Jack Ramsey, the President of Royle, purchased 1,529,710
shares of Common Stock from the Company for $50,000. In July 1994, Royle
subscribed for 458,913 shares of Common Stock and Warrants to purchase 229,457
shares of Common Stock at an exercise price of $1.31. The aggregate price paid
by Royle was $500,000. The Company deposited $500,000 with Royle toward the
purchase of up to $1,400,000 million of equipment used in the manufacture and
testing of optical fiber. The Company, due to the acquisition of the Jena
Facility and delays in raising capital for a facility in the United States, had
to cancel the purchase order with Royle. Royle then returned the subscribed
shares and Warrants, and cancelled its subscription for such securities.
In June 1994, the Company entered into the Royle Cooperation Agreement to
present joint proposals to sell fiber and preform with Royle. The Royle
Cooperation Agreement was amended in November 1995, to eliminate commissions
paid to each other and to establish guidelines for both companies entering into
joint venture agreements. In October 1995, Royle, the Company and MEOFC entered
into the Mideast JV Agreement, whereby each acquired an interest in the JV
Company, a company which intends to produce optical fiber and optical fiber
cable both inside and outside of Saudi Arabia. Gregory Perry, a current
shareholder and former director of the Company, is the Director of Fiber
Technology at Royle. See "Business -- Joint Marketing Agreements."
38
<PAGE>
DEALINGS WITH TECHMAN
Since 1995, the Company has maintained a working relationship with Techman, a
technology management company headquartered in Massachusetts since 1982. Dr. M.
Mahmud Awan, the President and sole shareholder of Techman, is a director of the
Company. Techman specializes in sales of fiber optic products and
telecommunication systems. It has served as an international sales distributor
for SpecTran Corporation, Raytheon Company, GTE, Satellite Transmission Systems,
Inc., California Microwave, Inc., SeaBeam Instruments, Channel Technologies,
Inc., and several other European and United States based multinationals. Techman
developed the first wireless Local Area Network ("LAN") in 1984 based on its
proprietary modem design before selling the technology to a local manufacturer.
Techman has offices in Charlton and East Brookfield, Massachusetts, Karachi,
Lahore, and Islamabad, Pakistan and Muscat, Oman.
On November 1, 1995, the Company entered into an International Distributor
Agreement with Techman to market the Company's products worldwide. Techman
agreed to receive customary sales commissions in the form of Warrants
exercisable into 1,000,000 shares of Common Stock to be issued to Techman for
sales of the Company's products up to $200,000,000 of the Company's products.
Such shares will be issued upon receipt of the proceeds of any such sales. Based
on Techman's efforts, in June 1996, ALT was awarded a contract through an
International Tender from Pakistan Telecom for a test of its FOCMS with revenues
of approximately $153,000. Under this agreement, ALT is responsible for
installing a fiber optic cable monitoring system in the Northern region of
Pakistan. If the test is successful, the Company believes that ALT may receive
orders to install additional FOCMS.
Pursuant to the Techman Share Purchase Agreement dated January 11, 1996,
Techman agreed to purchase 734,260 shares of Common Stock and Warrants
exercisable into 550,696 shares of Common Stock at $1.63 per share and the
Company agreed to issue an additional 312,061 shares of Common Stock to Techman
upon (i) the formation of FOI, in which the Company would hold a 30% ownership
interest, and (ii) the delivery of a supply agreement between FOI and the
Company. Between February and September 1996, the Company issued at the request
of Techman, 575,477 shares of Common Stock to Dr. Awan. Of this amount, 403,843
shares were issued on payment of $550,000 and 171,634 shares were issued in
conjunction with the formation of FOI. Subsequent to September 1996, an
additional 470,844 shares of Common Stock (representing the balance of shares to
be issued under the Techman share Purchase Agreement) were issued to Dr. Awan in
exchange for a payment of $450,000 and delivery by Techman of a twenty year
supply agreement between the Company and FOI which management believes could
generate revenues of up to approximately $93,000,000 over five years, although
there can be no assurance. The $450,000 was invested by the Company in FOI as an
additional capital contribution (along with ratable additional capital
contributions by FOI's other shareholders). The Company maintains a 30%
ownership interest in FOI.
FOI, a company incorporated in Islamabad under the laws of Pakistan, was
formed to manufacture optical fiber products in Pakistan, and is in the process
of raising capital to fund the construction of a manufacturing facility. Since
its inception in June 1995, FOI has been funded primarily by Techman. FOI has
contracted with First Capital Securities Corporation Limited to arrange for
listing of FOI on the Karachi Stock Exchange.
In addition, FOI has a 25% ownership interest in Oman Fiber Optic Company
("OFOC"), a company listed on Muskat Stock Exchange. The other founders of OFOC
include, General Telephone Organization, the Omani Government Telephone Company,
and Oman/Emirates Investment Holding Company, a joint venture funded by the
Royal Governments of Oman and the United Arab Emirates.
DEALINGS WITH AMP
In April 1995, the Company issued the AMP Note, which is a ten year
$5,000,000 convertible note, to AMP, a company listed on the New York Stock
Exchange and a manufacturer of electrical and optical connection devices,
systems and other equipment including fiber optic cable. Principal of the AMP
Note plus accrued interest at a rate of LIBOR plus one percent may be converted
into Common Stock through April 17, 2005. Until April 17, 2000, the conversion
price is $1.16 per share; thereafter the
39
<PAGE>
conversion price is equal to the price per share paid by a third party investor
in the private sale of Common Stock immediately prior to such conversion. The
AMP Note is subject to prepayment on demand in the event the Company is the
issuer of securities to be sold by the Company under an effective registration
statement. Since this prospectus does not contemplate the sale and issuance of
new securities by the Company, other than the Underlying Shares, the
registration of the Common Stock and Underlying Shares hereunder will not
trigger the prepayment provision under the AMP Note.
In July 1996, AMP entered into a five year supply contract (renewable at
AMP's option for an additional five year period) with the Company whereby the
Company will supply AMP with at least 50% of AMP's future glass optical fiber
needs. On November 27, 1996 the Company obtained an additional $3,000,000 loan
at an interest rate of prime plus 1%, adjustable on the first business day of
each calendar quarter, from AMP to fund the expansion of the Jena Facility, in
exchange for a ten year note and $2,000,000 of common stock purchase warrants
exercisable for up to 1,382,648 shares of Common Stock at $1.45 and expiring on
November 27, 2001. In connection with the new AMP loan and the expansion of the
Jena Facility, the Company has been awarded a grant from the German government
of approximately $2,700,000 and has received a loan from Berliner Bank of
approximately $5,100,000. AMP also converted $3,000,000 plus $540,985 of accrued
interest on the AMP Note into 3,058,833 shares of Common Stock. In connection
with the new loan from AMP, the Company agreed to issue AMP additional shares of
Common Stock in the event the Company's share price does not exceed $1.74 for 30
consecutive trading days by November 27, 1998. The issuance of additional shares
under the new AMP loan would have a dilutive effect on the Company's other
shareholders and could adversely affect the market price of the Common Stock.
ASLAMI AND DELUCA GUARANTEES
In 1991, Allied acquired the assets and assumed certain liabilities of a
corporation which had filed for bankruptcy protection under Title 11 of the
United States Code. One of the assumed liabilities was a loan held by Lafayette
American National Bank ("Lafayette") in the original amount of $750,000. The
loan bears interest at the prime rate plus 1% per year and matures in June 1999.
The current outstanding balance is $538,450. As a condition of the loan
assumption, in March 1991, Lafayette obtained the guarantees of ALT and Messrs.
Aslami and DeLuca, which guarantees were in addition to the initial loan
guarantees Lafayette already had obtained from other persons. Dr. Aslami and Mr.
DeLuca each guaranteed $150,000. Before Lafayette can commence commencing
proceedings to enforce the guarantee against ALT and Messrs. Aslami and DeLuca,
Lafayette must first take all reasonable steps to realize upon the assets of
Allied and the security of the initial guarantors. As compensation for their
guarantees Messrs. Aslami and DeLuca each received warrants to purchase 25,000
shares of ALT common stock at $1.75 per share. These warrants were converted
into ALT common stock immediately prior to the acquisition of ALT Acquisition in
September 1995.
In 1992, Messrs. Aslami and DeLuca guaranteed a $250,000 loan to Allied from
a Connecticut governmental agency. The current loan balance is $172,000. The
loan bears interest at 7% per year and matures in November 1999. As
consideration for their guarantees, Messrs. Aslami and DeLuca each received
warrants to purchase 62,500 shares of common stock of ALT at $1.75 per share.
These warrants were converted into ALT stock immediately prior to the ALT
Acquisition.
DEFERRED COMPENSATION
Since 1987, Messrs. Aslami and DeLuca have agreed to defer portions of their
salaries from ALT. Interest accrued on such deferred salaries at a rate of 13%
through June 1994, and at a rate of 8 3/4% through August 1995. In addition,
through June 1994, for each dollar of deferred salary and accrued interest,
Messrs. Aslami and DeLuca were each granted warrants to purchase 0.767 shares of
ALT common stock exercisable at $1.75 per share. These loans and warrants were
converted into ALT common stock immediately prior to the ALT Acquisition.
Since 1989, One Financial Group Incorporated ("OFG") has provided financial
services to ALT and since the third quarter of 1995, to ALT and the Company. In
1992, 1993, 1994 and from January 1, 1995 to June 30, 1995, OFG's services were
billed at $66,750, $13,775, $24,350, and $20,825, respectively.
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<PAGE>
For the period July 1, 1995 through June 30, 1996, OFG billed the Company
$60,530 for services including expenses. Payment of such bills was deferred.
Interest accrued thereon at a rate of 13% through June 1994 and at a rate of 8
3/4 % through August 1995. In addition, through June 1994, for each dollar of
deferred payment and interest accrued thereon, OFG was granted warrants to
purchase 0.767 shares of ALT common stock at a price of $1.75 per share. All
such deferred amounts, including interest accruing thereon and warrants were
converted into shares of ALT common stock immediately prior to the ALT
Acquisition. Steven Phillips, a director of ALT since 1989 and a director of the
Company, is a director, majority stockholder and President of OFG.
LOANS
THE COMPANY
In February 1995, Dr. Aslami, Zaid Siddig, currently a director of the
Company, and Royle loaned $110,000 to the Company, at an interest rate of 2%
over prime. In connection with such loans, each lender received 41,667 shares of
Common Stock. These loans were repaid in April 1995.
On July 1, 1996, the Company borrowed $500,000 under two loan agreements from
the spouses of Dr. Aslami and Mr. DeLuca. The loans are in the amount of
$250,000 each and bear interest at the prime rate plus one percent (currently
9.25%), and are due on June 30, 1999. In conjunction with the loans each lender
received warrants to purchase 115,220 shares of Common Stock at the rate of
$1.81 per share. The warrants expire on July 31, 2001.
ALT
In May 1991 and August 1991, Hedayat Amin-Arsala, a director of ALT, loaned
$150,000 and $120,000 to ALT, respectively. These loans were convertible at
$1.50 per share of ALT common stock and bore interest at the rate of 12% per
annum. Through September 30, 1995, for every dollar of principal and accrued
interest on such loans, Mr. Amin-Arsala was granted warrants to purchase one
share of ALT common stock. The loans were convertible into ALT common stock at
$1.50 per share through April 30, 2001. The loans and warrants were converted
into shares of ALT common stock immediately prior to the ALT Acquisition. See
"-- The ALT Acquisition."
In September 1991, Mohd Aslami, Charles DeLuca and OFG each loaned Allied, a
subsidiary of ALT, $25,000. They each earned interest of $1,700 and warrants of
2,672 on such loan through March 1992. In April 1992, ALT substituted its notes,
each in the amount of $25,000, for Allied notes. In conjunction with the notes
and interest accruing thereon through June 1994, each of Dr. Aslami, Mr. DeLuca,
and One Financial Group, Inc. received warrants to purchase 16,319 shares of ALT
common stock at an exercise price of $2.00 per share. The loans bore interest at
a rate of 12% until June 1994, at which time the rate was reduced to 8 3/4%. All
such deferred amounts, including interest accruing thereon, and warrants were
converted into shares of ALT common stock immediately prior to the ALT
Acquisition. See "-- The ALT Acquisition."
In January 1992, Messrs. Aslami and DeLuca each loaned $30,000 to ALT. In
conjunction with the loans and interest accruing thereon through June 1994, each
of Messrs. Aslami and DeLuca received 20,063 warrants to purchase ALT common
stock at an exercise price of $2.00. The loans bore interest at a rate of 12%
until June 1994, at which time the rate was reduced to 8 3/4%. These loans were
convertible into ALT common stock at $2.00 per share through July 1993 and the
loans and warrants were converted into shares of ALT common stock immediately
prior to the ALT Acquisition. See "-- The ALT Acquisition."
In February 1992, Mr. Siddig, loaned $100,000 to ALT at an interest rate of
12%. Such loan was convertible into ALT common stock at $2.00 per share through
July 31, 1993. Through June 1994, for every dollar of principal and accrued
interest on such loans he was granted warrants to purchase 0.66 shares of common
stock. One of the loans was convertible into shares of ALT common stock at $2.00
per share through July 31, 1993 and the loans and warrants were converted into
shares of ALT common stock immediately prior to the ALT Acquisition. See "-- The
ALT Acquisition."
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<PAGE>
In addition to the above, prior to December 1990, officers and directors of
ALT loaned to ALT funds and/or deferred their compensation and were granted
warrants in conjunction with such loans and deferred compensation. Through June
30, 1994, for every dollar of principal and accrued interest on such loans such
persons were granted warrants to purchase a certain number of shares of common
stock. These loans, and warrants were converted into shares of ALT common stock
immediately prior to the ALT Acquisition. See "Management -- Deferred
Compensation."
The following table sets forth the number of shares of ALT common stock
issued upon conversion of the above loans, and the number of shares of the
Company for which the ALT shares were exchanged in conjunction with the ALT
acquisition.
NUMBER OF NUMBER OF
AMOUNT ACCRUED SHARES OF ALT SHARES OF
DESCRIPTION OF LOAN INTEREST COMMON STOCK THE COMPANY
- --------------------- ---------- ---------- --------------- --------------
M. Aslami:
Loan - Sept. 1991... 25,000 11,144 19,666 20,646
Loan - Jan. 1992.... 30,000 14,435 23,982 25,177
---------- ---------- --------------- --------------
$ 55,000 25,579 43,648 45,823
C. DeLuca:
Loan - Sept. 1991... 25,000 11,144 19,666 20,646
Loan - Jan. 1992.... 30,000 14,435 23,982 25,177
---------- ---------- --------------- --------------
$ 55,000 25,579 43,648 45,823
One Financial Group:
Loan - Sept. 1991... $ 25,000 11,144 19,666 20,646
---------- ---------- --------------- --------------
$ 25,000 11,144 19,666 20,646
Hedayat Amin-Arsala:
Loan - May 1991..... 150,000 60,071 198,448 208,334
Loan - Aug. 1991.... 120,000 35,050 149,788 157,250
---------- ---------- --------------- --------------
$270,000 95,121 348,236 365,584
Zaid Siddig:
Loan - Feb. 1992.... 100,000 29,208 88,401 92,805
---------- ---------- --------------- --------------
$100,000 29,208 88,401 92,805
CONSULTING
Mr. Phillips continues to be a consultant to ALT and the Company without a
formal agreement, but the Company and Mr. Phillips intend to enter into such an
agreement. The Company anticipates that the agreement will provide that Mr.
Phillips will serve as a senior financial advisor to the Company for a term of
one year, renewable at the Company's option. Mr. Phillips will be paid a
retainer of $60,000 per year payable in monthly installments of $5,000, based on
an hourly rate of $185 per hour. The retainer will be adjusted quarterly based
on actual hours of service. For the nine months through September 1996, Mr.
Phillips' fee was $49,380, including expenses.
Since June 1995, Techman has been providing technology consulting services to
the Company at a fee of $3,000 per month. Mr. Awan, a director of the Company,
is President and sole shareholder of Techman.
THE ALT ACQUISITION
In 1994, ALT entered into a restructuring plan with certain debt holders and
warrant holders whereby they agreed to convert their debts and warrants into
shares of ALT, upon the consummation of a transaction with a strategic partner.
On September 18, 1995, ALT Merger Co., a wholly-owned subsidiary of the Company,
merged into ALT. Each shareholder of ALT received approximately 1.0498 shares of
Common Stock in exchange for each outstanding share of ALT common stock.
Approximately 8.4 million shares of ALT common stock were converted into an
aggregate of 8.8 million shares of Common Stock. Approximately 3.7 million
shares of Common Stock held by ALT were canceled.
42
<PAGE>
The following table sets forth the holdings of Messrs. Aslami, DeLuca, Perry,
Siddig, Ramsey, Phillips, and Arsala in ALT and the Company, immediately before
the ALT Acquisition and such persons' holdings in the Company immediately after
the ALT Acquisition.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BENEFICIAL OWNERSHIP IN THE COMPANY IN THE COMPANY
IN ALT IMMEDIATELY IMMEDIATELY IMMEDIATELY
BEFORE ALT BEFORE ALT AFTER ALT
ACQUISITION ACQUISITION ACQUISITION
-------------------- -------------------- ---------------------
SHARES % SHARES % SHARES %
--------- -------- --------- ------- -- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Mohd A. Aslami ..... 1,488,932 17.7 6,031,141 23.8 7,594,250 24.9
Charles DeLuca ..... 1,602,865 19.1 2,947,443 11.7 4,640,158 15.2
Gregory Perry ...... -0- 0 3,597,881 14.2 3,597,881 11.8
Zaid Siddig ........ 417,942 5.0 152,972 0.6 591,735 1.9
Jack Ramsey ........ -0- 0 1,682,685 6.6 1,682,685 5.5
Steven Phillips ... 766,375 9.1 -0- 0 804,553 2.6
Hedayat Amin-Arsala 559,519 6.7 183,565 0.7 770,957 2.5
</TABLE>
Pursuant to a restructuring plan agreed to in 1994, immediately prior to the
ALT Acquisition, more than 98% and 90% of ALT debt and warrants, respectively,
were converted by their holders into shares of ALT common stock. Loans, other
than loans arising from deferred compensation, were converted into shares of ALT
common stock pursuant to each lender's loan agreement or at the exercise price
of the warrants issued in conjunction with the loans less $0.05. Loans arising
from deferred compensation were converted at $1.25 per share. The exercise price
of all warrants exercisable at $2.00 per share was reduced to $1.75 per share,
except for warrants held by Messrs. Aslami and DeLuca and OFG. Warrants were
valued at the value set for ALT shares ($2.10) less the exercise price of each
such warrant. For example, a warrant to purchase one share of ALT common stock
with an exercise price of $1.75 was valued at $0.35. Shares of common stock of
ALT were purchased to the extent of such warrant value. In consideration for all
past due loans, the percentage of warrants each lender was entitled to receive
was increased by 25%.
THE ALLIED DISTRIBUTION
In 1995, ALT transferred its shares in its wholly-owned Allied subsidiary to
Allied Controls Holdings, LLC (the "LLC"). ALT also assigned certain notes
issued by Allied to the LLC. ALT distributed interests in the LLC to
shareholders and placed interests in the LLC in trust for certain warrant
holders and option holders pursuant to the terms of their respective
instruments, payable upon exercise of such instruments. As a result of the
distribution, Messrs. Aslami, DeLuca, Siddig, Phillips and Arsala beneficially
own 17.7%, 19.1%, 5%, 9.1% and 6.7% of the LLC, respectively.
FUTURE TRANSACTIONS
In the determination of the Board of Directors, all past transactions with
officers, directors and 5% shareholders of the Company were, and all future
transactions with such individuals will be, on terms no less favorable to the
Company than could be obtained from third parties.
The Company will not grant options in excess of 15% of the outstanding shares
as of the date of this Prospectus for a one year period following the date of
this Prospectus. The Company will not grant non-qualified stock options with an
exercise price of less than 85% percent of the fair market value of the Common
Stock on the date of the grant.
43
<PAGE>
PRINCIPAL SECURITYHOLDERS
The following table sets forth certain information regarding the ownership of
the Common Stock as of November 22, 1996 to reflect the sale of shares of all
Common Stock and Underlying Shares offered hereby, with respect to (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each executive officer named in the Executive
Compensation Table, (iii) each director of the Company and (iv) all the
directors and executive officers of the Company as a group. Unless otherwise
indicated, each of the shareholders has sole voting and investment power with
respect to the shares beneficially owned.
NAME
AND SHARES %
ADDRESSES (1) OWNED OWNED
------------- -------------- ------
Mohd Aslami........................................... 7,510,109 (2) 18.1
Charles DeLuca........................................ 4,499,055 (3) 10.8
Gregory A. Perry...................................... 3,597,881 (4) 8.7
Steven Phillips....................................... 846,299 (5) 2.0
Zaid Siddig........................................... 591,735 (6) 1.4
M. Mahmud Awan........................................ 2,597,017 (7) 6.3
Hans F.W. Moeller..................................... 88,235 (8) 0.2
AMP Incorporated ..................................... 4,747,678 (9) 11.4
Sico Jena Quarzchemelze GmbH.......................... 2,221,141 5.3
Michael J. Beecher.................................... 64,248(10) 0.2
All directors and executive officers as a group (7
persons)............................................ 16,196,698 39.0%
- ----------
(1) The addresses of the persons and entities named in this table are as
follows: Messrs. Aslami, DeLuca, Perry, Siddig, Beecher, Moeller, Ramsey,
Awan, and the Ariana Trust c/o the Company, P.O. Box 206, 174 Charlton
Road, Sturbridge, MA. 01566; AMP Incorporated, 470 Friendship Road,
Harrisburg, PA 17105; and Sico Quarzchemelze Jena Gmbh, Goscheweitzer Str.
20 07745, Jena, Germany.
(2) Includes 157,473 shares held by Dr. Aslami's wife, 425,085 shares held by
Dr. Aslami's children, 1,998,589 and 608,914 shares held respectively by
the Ariana Trust and the Kabul Foundation, trusts of which Dr. Aslami's
wife is trustee and of which Dr. Aslami's children are beneficiaries, and
284,860 shares held by the Raja Foundation, a trust of which Dr. Aslami's
wife and Mr. DeLuca's wife are trustees and of which various organizations
and family members are beneficiaries. Dr. Aslami disclaims beneficial
ownership of all such shares. Also includes 60,018 currently exerciseable
options.
(3) Includes 1,395,097 shares held by Elizabeth DeLuca, Mr. DeLuca's wife,
347,715 shares held by Mr. DeLuca's children, 608,914 shares held by the
Dawn Foundation, a trust of which Mrs. DeLuca is trustee and of which Mr.
DeLuca's children are beneficiaries, and 174,053 shares held by the Raja
Foundation, a trust of which Dr. Aslami's wife and Mr. DeLuca's wife are
trustees and of which various organizations and family members are
beneficiaries. Mr. DeLuca disclaims beneficial ownership of all such
shares. Also includes 46,050 currently exercisable options.
(4) Includes 1,358,384 shares held by Beth Perry, Mr. Perry's wife, and 146,852
shares held by Mr. Perry's children. Mr. Perry disclaims beneficial
ownership of all such shares.
(5) Include 41,746 currently exercisable options issued to One Financial Group
Incorporated.
(6) Mr. Siddig is the uncle of Dr. Aslami's wife.
(7) Includes shares issuable to Techman or its designee upon exercise of
Warrants (550,696), and shares (1,000,000) to be issued on exercise of
Warrants ratably as commissions on Company sales up to $200 million.
(8) Includes 88,235 currently exercisable options.
(9) Includes shares into which the AMP Note is convertible at $1.16 per share.
(10) Includes 64,248 currently exercisable options.
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of November 22, 1996 by each Selling
Securityholder, as adjusted to reflect the sale by each Selling Securityholder
of the Common Stock, from time to time, and assumes the exercise or conversion
of all Convertible Securities. All shares owned, or which may be acquired, by
the Selling Securityholders are sold to the public by means of this Prospectus.
Ownership percentages of less than one percent are depicted by an asterisk.
Except as set forth in the footnotes to the table, the Company believes that
each Selling Securityholder has sole voting power and investment power with
respect to the shares of Common Stock indicated.
<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
<S> <C> <C> <C> <C>
Mohd Aslami, Chairman, Chief Executive Officer and
Director................................................ 7,510,109 (1) 18.1% -- --
Charles DeLuca, Executive Vice President, Secretary and
Director and General Manager of ALT .................... 4,499,055 (2) 10.8% -- --
M. Mahmud Awan, Director................................ 2,597,017 (3) 6.3% -- --
Hans Moeller, Director and Managing Director of
FiberCore Jena ......................................... 88,235 (4) 0.2 -- --
Steven Phillips, Director............................... 846,299 (5) 2.0% -- --
Zaid Siddig, Director................................... 591,735 (6) 1.4% -- --
Michael Beecher, Chief Financial Officer................ 64,248 (7) 0.2% -- --
H. Amin-Arsala, Director of ALT......................... 1,114,642 (8) 2.7% -- --
AMP Incorporated........................................ 4,747,678 (9) 11.4 -- --
PEBCO, Inc.............................................. 1,636,298(10) 3.9% -- --
Gregory A. Perry........................................ 3,597,881(11) 8.7% -- --
Jack Ramsey............................................. 1,682,685(12) 4.1% -- --
Abed, Sofia............................................. 8,315 *
Achin, Ron.............................................. 6,582 * -- --
Albany Venture Group.................................... 272,103 * -- --
Alpert, Jay............................................. 72,404 * -- --
Anderson, Ron........................................... 5,249 * -- --
Andre, Maurick & Brenda................................. 5,218 * -- --
Arayesh, Mohammad....................................... 20,996 * -- --
Arsala, Betsy........................................... 10,499 * -- --
Aslami, Fraidoon........................................ 49,852(13) * -- --
Aslami, Qasim........................................... 241,156(14) * -- --
Aubi, Mohammad.......................................... 2,205 * -- --
Ayoubi, Amanollah....................................... 45,891 * -- --
Bekesi, Erika........................................... 6,700 *
Benjamin, G............................................. 12,850 * -- --
Benoit, Ronald ......................................... 79,748(15) * -- --
Bichum, Anthony......................................... 3,671 * -- --
Bonanno, Salvatoro...................................... 25,237 * -- --
Cagatay, Hafiz.......................................... 29,336 * -- --
Cagatay, Hafizula....................................... 11,014 * -- --
Camelot Investments .................................... 68,837 * -- --
Cannistraci, Anthony.................................... 51,933 * -- --
Caprera, John........................................... 12,073 * -- --
Carlin, Jeffrey ........................................ 20,188 * -- --
Chamberlain, John....................................... 10,498 * -- --
Chapman, John........................................... 31,495 * -- --
Chisson, J.............................................. 3,671 * -- --
Ciesla Associates....................................... 36,713 * -- --
Ciesla Construction Corp................................ 18,357 * -- --
Clark, Kevin............................................ 32,100 *
Coleman & Rhine LLP .................................... 73,426(16) * -- --
Connecticut Development Authority (CDA)................. 142,540(17) * -- --
Connecticut Innovations, Inc. (CII)..................... 111,462(18) * -- --
Damen, William.......................................... 2,096 * -- --
Davenport, D............................................ 1,836 * -- --
Dean, R................................................. 36,713 * -- --
DeLoreto, Mario......................................... 73,426 * -- --
DeLuca, M & C .......................................... 2,205(19) * -- --
Dill, Sheldon........................................... 3,149 * -- --
Doucette, R............................................. 7,342 * -- --
Dow, Cynthia ........................................... 7,390(20) * -- --
Drew, Robert............................................ 21,025 * -- --
45
<PAGE>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
Duchaine, Raymond....................................... 2,100 * -- --
Duda, Pat............................................... 15,747 * -- --
Dyck, Victor & Lydia.................................... 10,498 * -- --
Earnest, Alice ......................................... 61,162(21) * -- --
Eggert, Abida........................................... 2,310 * -- --
Eoll, Christopher....................................... 3,149 * -- --
Flood, John............................................. 68,837 * -- --
Frenzel, James.......................................... 70,430 * -- --
Fugitive Holding........................................ 1,700 * -- --
Gianaris, Paul.......................................... 3,671 * -- --
Gianaris, Zachary....................................... 3,671 * -- --
Giardano, Richard....................................... 25,237 * -- --
Glickman, Eleanor....................................... 36,713 * -- --
Glickman, J............................................. 7,343 * -- --
Global Money Management Corp............................ 344,185 * -- --
Handy, Roland........................................... 1,260 * -- --
Harris, Bernard......................................... 44,427 * -- --
Hillis, Paul............................................ 3,149 * -- --
Hunt, Peter & Ann....................................... 9,102 * -- --
Ingraham, Ronwyn........................................ 3,499 * -- --
Jackle, Jack............................................ 3,149 * -- --
Jaeger, Frank........................................... 10,498 * -- --
Jalil, Abdul............................................ 68,628 * -- --
James Money Management, Inc............................. 677,764(22) 1.6 -- --
Jensen, M.L............................................. 7,863 * -- --
Kampf, Andrew........................................... 31,495 * -- --
Kanter, Arlene.......................................... 31,190 * -- --
Khatua, H............................................... 10,498 * -- --
Keedwell, Rodney........................................ 5,249 * -- --
Khaki, Mansour.......................................... 220,279(23) * -- --
Khatau, Bharatt......................................... 76,007(24) * -- --
Khodadad, F............................................. 10,498 * -- --
Khybery, Kassem......................................... 55,070 * -- --
Krebs, William.......................................... 68,837 * -- --
Kusunoki, Alan.......................................... 36,713 * -- --
Lai, Richard ........................................... 137,674 * -- --
Lambert, Alfred ........................................ 10,498 * -- --
Laurion, Arthur ........................................ 71,357(25) * -- --
Lavellee, Ronald ....................................... 139,004(26) * -- --
Lees, B. ............................................... 3,175 * -- --
Lees, T. ............................................... 9,178 * -- --
Leyden, Lloyd .......................................... 3,932 * -- --
Looney, R............................................... 7,342 * -- --
Lowenstern, Carl........................................ 48,012 * -- --
Mahoney, J.............................................. 5,511 * -- --
Mainsfield, E. Blaine................................... 73,426 * -- --
Malikyar, Jamila........................................ 34,077 * -- --
Malikyar, Malal......................................... 3,333 *
Malikyar, Tuba.......................................... 9,667 *
Mangual, C.............................................. 18,357 * -- --
Markowicz, Victor....................................... 344,185 * -- --
Mastellone, Edward...................................... 137,674 * -- --
Mattison, John ......................................... 215,060(27) * -- --
Mayernick, F.C.......................................... 2,100 * -- --
McDermid, Embrer........................................ 5,626 * -- --
McDermid, Rodney........................................ 5,626 * -- --
MacKirdy, J............................................. 7,342 * -- --
Magida, N............................................... 26,542 * -- --
Marinilli, A............................................ 36,713 * -- --
Maziello, W............................................. 36,713 * -- --
McNaughton, Paul........................................ 23,923 * -- --
McNulty, Dale........................................... 68,837 * -- --
Miller, Bruce........................................... 3,149 * -- --
Miller, Gary............................................ 10,498 * -- --
Moisan, Bernard......................................... 15,675 * -- --
Morales, Ruth........................................... 3,499 * -- --
Morgan and Evans........................................ 83,985 * -- --
Morrison, M............................................. 11,014 * -- --
MS Trading Company...................................... 20,000 *
Muenchmeyer, G.......................................... 3,671 * -- --
46
<PAGE>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
Muir, Ted............................................... 2,625 * -- --
Munab Investments Limited............................... 1,615,375(28) 3.9 -- --
Nasir, Sayed............................................ 246,422 * -- --
Nava, K................................................. 3,671 * -- --
Nieves, Margarat and Santos............................. 20,000 *
Norscan Instruments, Ltd................................ 123,360 * -- --
O'Connor, Lawrence ..................................... 15,747 * -- --
Osman, Ghulam........................................... 24,966 * -- --
Pilch, Denis............................................ 5,249 * -- --
Pinney, Selby J......................................... 5,249 * -- --
Pitcher, Charles........................................ 3,149 * -- --
Porosoff, Melvin........................................ 30,282 * -- --
Prouty, Daniel.......................................... 15,288(29) * -- --
Quinn, Lorne............................................ 6,998 * -- --
Rahim, Abdul............................................ 15,000 *
Rashidi, Abdul.......................................... 13,000 *
Rastgooy, Homa.......................................... 32,394 * -- --
Rastgooy, Mahmood....................................... 10,498 * -- --
Rauf, A................................................. 52,491 * -- --
Richards, Donald........................................ 1,050 * -- --
Riley, Christopher...................................... 1,060 * -- --
Rossmanith, Jutta....................................... 10,498 * -- --
Russo, Thomas .......................................... 73,249 * -- --
Safton, Richard......................................... 10,000 *
Samee, Akbar............................................ 10,498 * -- --
Samee, Dastigar......................................... 2,205 * -- --
Samee, Tamin............................................ 2,205 * -- --
Santoro, Enrico and Ellen Beck.......................... 735 * -- --
Sarnecky, Arthur........................................ 3,149 * -- --
Scanlon, Donald ........................................ 68,837 * -- --
Schaji, Nazanine........................................ 8,333 *
Schulz, Werner.......................................... 10,498 * -- --
Seal Partners........................................... 25,927 * -- --
Sello, Kenneth.......................................... 1,050 * -- --
Seraj, Ibrahim.......................................... 10,498 * -- --
Shairzay, Abraham & Soforina............................ 55,930 * -- --
Shairzay, Homa and Bari................................. 3,333 *
Shairzay, Sabrina ...................................... 73,426 * -- --
Shairzay, Tahera........................................ 154,323(30) * -- --
Sharif, Najib........................................... 10,333 *
Sheppard, Douglas....................................... 2,625 * -- --
Sherzai, Abdul Bari .................................... 22,946 * -- --
Sico Jena GmbH.......................................... 2,221,141(31) 5.3 -- --
Siddig, Khaled.......................................... 222,622(32) * -- --
Siddig, Nicolai......................................... 87,492 * -- --
Simone, Giuseppi........................................ 20,000 *
Smith, Dave............................................. 95,905 * -- --
Smylie, Donn............................................ 10,498 * -- --
Sontag, Ken ............................................ 110,231 * -- --
Steg, Brian............................................. 16,797 * -- --
Sudol, David............................................ 20,554 * -- --
Sutherland, William..................................... 8,399 * -- --
Tarakai, Ashraf ........................................ 15,747 * -- --
Tehrani, Djalal......................................... 16,667 *
Tessier, Gerald......................................... 2,100 * -- --
Thames Group............................................ 23,863(33) * -- --
Valgardson, Norman...................................... 10,498 * -- --
Vazpaziani, J........................................... 18,357 * -- --
Vazpaziani, P........................................... 18,357 * -- --
Vokey, David............................................ 139,146 * -- --
Vokey, Robert .......................................... 10,498 * -- --
Vokey, Wayne............................................ 15,850 * -- --
Von Summer, Alexander................................... 36,744 * -- --
Votaw, Gregory.......................................... 3,499 * -- --
Warasta, A. Ghafar...................................... 70,512 * -- --
Warasta, A. Jabar....................................... 4,400 *
Warasta, Carol.......................................... 110,139 * -- --
Wardak, Khatol.......................................... 15,000 *
Wattman, Malcom......................................... 73,249 * -- --
Welles, Edward.......................................... 3,499 * -- --
47
<PAGE>
BEFORE OFFERING AFTER OFFERING
------------------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
--------------- --------- -------- ---------
Wu, Dau ................................................ 84,777(34) * -- --
Yankoski, Murray........................................ 10,492 * -- --
Yasin, M................................................ 16,136 * -- --
Young, D................................................ 11,014 * -- --
Young, John............................................. 7,373 * -- --
Yusof, Quyoom........................................... 2,310 * -- --
Zheng, Carl............................................. 110,139 * -- --
Zulfacar, Diane Mavee................................... 20,996 * -- --
----------- --------- ------- ---------
Total................................................. 40,791,159 100.0% -- --
</TABLE>
- ----------
(1) Includes 157,473 shares held by Dr. Aslami's wife, 425,085 shares held by
Dr.Aslami's children, 1,998,589 and 608,914 shares held respectfully by the
Ariana Trust and the Kabul Foundation, trusts of which Dr. Aslami's wife is
trustee and of which Dr. Aslami's children are beneficiaries and 284,860
shares held by the Raja Foundation, a trust of which Dr. Aslami's wife and
Mr. DeLuca's wife are trustees and of which various organizations and
family members are beneficiaries. Dr. Aslami disclaims beneficial ownership
of all such shares. Also includes 60,913 currently exercisable options.
(2) Includes 1,395,097 shares held by Elizabeth DeLuca, Mr. DeLuca's wife,
357,715 shares held by Mr. DeLuca's children, 608,914 shares held by the
Dawn Foundation, a trust of which Mrs. DeLuca is trustee and of which Mr.
DeLuca's children are beneficiaries, and 174,053 shares held by the Raja
Foundation, a trust of which Dr. Aslami's wife and Mr. DeLuca's wife are
trustees and of which various organizations and family members are
beneficiaries. Mr. DeLuca disclaims beneficial ownership of all such
shares. Also includes 46,050 currently exercisable options.
(3) Includes shares issuable to Techman or its designees upon exercise of
Warrants (550,696), and shares (1,000,000) to be issued on exercise of
Warrants ratably as commissions on Company sales up to $200 million.
(4) Includes 88,235 currently exercisable options.
(5) Includes 41,746 currently exercisable options to One Financial Group, Inc.
(6) Mr. Siddig is the uncle of Dr. Aslami's wife.
(7) Includes 64,248 currently exercisable options.
(8) Includes 347,450 shares issuable on conversion of debt and exercise of
warrants. Mr. Arsala is a director of ALT, and is a lender to the
Company.
(9) Includes shares into which the AMP Note is convertible at $1.16 per share.
AMP is a customer of and lender to the Company.
(10) Shares are held of record by nominee, and includes 43,597 currently
exercisable warrants. PEBCO, Inc. acted as a broker in the private
placement of shares in July 1994.
(11) Includes 1,358,384 shares held by Beth Perry, Mr. Perry's wife, and 146,852
shares held by Mr. Perry children. Mr. Perry disclaims beneficial ownership
of all such shares. Mr. Perry is former director and former employer of the
Company.
(12) Includes 152,972 shares held by Royle, a company controlled by Jack Ramsey.
Mr. Ramsey is a former director of the Company.
(13) Mr. Fraidoan Aslami is the brother of Mohd A. Aslami
(14) Mr. Qasim Aslami is the brother of Mohd A. Aslami
(15) Mr. Benoit is a former employee of ALT.
(16) Coleman & Rhine LLP are legal counsel to the Company.
(17) CDA is a former lender to ALT. H (18) CII is a former lender to ALT.
(19) M. DeLuca and C. DeLuca are the sister-in-law and brother of Charles
DeLuca.
(20) Ms. Dow is a former employee of the Company.
(21) Ms. Earnest is a former employee of ALT.
(22) Mr. Phillips, a director of the Company, is the Chief Financial Officer of
James Money Management, Inc.
(23) Mr. Khaki is an investor in MEFC.
(24) Mr. Khatau is a former consultant to the Company.
(25) Mr. Laurion is an employee of the Company.
(26) Mr. Lavellee is a former employee of ALT.
(27) Mr. Mattison is an employee of the Company.
(28) The principals of Munab Investments, Ltd are also principal investors in
MEFC.
(29) Mr. Prouty is a principal in Cobra Realty Trust, the Company's landlord for
it's offices in Massachusetts.
(30) Ms. Shairzay is the sister of Mohd A. Aslami.
(31) Sico is the landlord of the Jena Facility. Sico is controlled by Mr. Walter
Nadrag, the former Managing Director of FiberCore Ieora.
(32) Mr. Siddig is the father-in-law of Mohd A. Aslami
(33) The principal owner of the Thames Group is the former Chief Financial
Officer of the Company.
(34) Mr. Wu is an employee of the Company.
48
<PAGE>
PLAN OF DISTRIBUTION
All shares being offered pursuant to this resale prospectus are "restricted
securities," as such term is defined in Rule 144 under the Securities Act, and
the certificates evidencing such shares will bear a legend restricting their
transfer under the Securities Act.
All shares of Common Stock offered hereby are being offered directly by the
Selling Securityholders. The Company will not receive any of the proceeds from
the sale of shares by the Selling Securityholders (although the Company will
receive all the proceeds from the exercise or conversion of the Convertible
Securities). The Selling Securityholders may sell such shares from time to time,
provided a current registration statement with respect to such securities is
then in effect. The distribution of shares of Common Stock offered hereby by the
Selling Securityholders may be effected in one or more transactions, including
ordinary broker's transactions, privately negotiated transactions or through
sales to one or more dealers for resale of such securities as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders.
Selling Securityholders may also pledge their shares to banks, brokers or
other financial institutions as security for margin loans or other financial
accommodations that may be extended to such Selling Securityholders, and any
such pledgee institution may similarly offer, sell and effect transactions in
such shares. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Act may be sold under Rule 144
rather than pursuant to this Prospectus. Each Selling Securityholder (and
pledgee) reserves the sole right to accept and, together with its agents from
time to time, to reject, in whole or in part, any proposed purchase of shares to
be made directly or through agents.
In order to comply with the securities laws of certain states, the shares of
Common Stock offered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with by the Company
and the Selling Securityholders.
The Selling Securityholders and intermediaries through whom the shares
offered hereby are sold may be deemed to be "underwriters" within the meaning of
the Securities Act with respect to such securities.
Pursuant to applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of securities may not simultaneously engage in
market-making activities with respect to the securities for a period of two
business days prior to the commencement of such distribution. In addition, and
without limiting the foregoing, each Selling Securityholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6, 10b-6A and 10b-7, which
provisions may limit the timing of the purchases and sales of securities of the
Company by the Selling Securityholders.
The Company has agreed to pay all fees and expenses incident to the
registration of the Common Stock offered hereby, except fees and expenses of
counsel or other professionals or advisors, if any, to the Selling
Securityholders.
49
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, par value $0.001, and 10,000,000 shares of preferred stock, par
value $0.001 ("Preferred Stock"). Immediately prior to this Offering, 35,233,250
shares of Common Stock were issued and outstanding, and no shares of Preferred
Stock were issued and outstanding. Assuming all Convertible Securities are
either exercised or converted, there will be 40,791,159 shares of Common Stock
outstanding after the Offering.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of shareholders. There is no cumulative voting with
respect to the election of directors. Accordingly, holders of a majority of the
shares entitled to vote in any election of directors may elect all of the
directors standing for election. Under the new AMP loan, the Company, Mohd A.
Aslami, Charles DeLuca, M. Mahmud Awan and AMP entered into a Voting Agreement
pursuant to which they agreed to vote together to elect a slate of directors to
the Board of Directors of the Company. Such slate of directors initially
consists of Mohd A. Aslami, Charles DeLuca, Hans F.W. Moeller, one nominee of
AMP and three outside directors, one of whom is Dr. M. Mahmud Awan. The Voting
Agreement also requires a classified and three year staggered Board of
Directors.
Subject to preferences that may be applicable to any then outstanding
Preferred Stock, the holders of Common Stock are entitled to receive such
dividends, if any, as may be declared by the Board of Directors from time to
time out of legally available funds. Upon liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in all
assets of the Company that are legally available for distribution, after payment
of all debts and other liabilities and subject to the prior rights of holders of
any Preferred Stock then outstanding. The holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of Common Stock are subject to the rights
of the holders of shares of any series of Preferred Stock that the Company may
issue in the future.
PREFERRED STOCK
Ten million shares of Preferred Stock may be issued from time to time. The
Board of Directors, without further approval of the shareholders, is authorized
to issue the Preferred Stock in one or more series and to fix the rights and
terms relating to dividends, conversion, voting, redemption, liquidation
preferences, sinking funds and any other rights, preferences, privileges and
restrictions applicable to each such series of Preferred Stock which could
adversely affect the voting power or other rights of holders of the Common
Stock. In the event of issuance, the Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Such actions could have the effect of
discouraging bids for the Company and, thereby, preventing shareholders from
receiving the maximum value for their shares. Although the Company has no
present intention to issue any shares of Preferred Stock, there can be no
assurance that the Company will not do so in the future. There are no
outstanding shares of Preferred Stock at the present time, nor any commitments
or options or other rights currently outstanding for the issuance of Preferred
Stock.
NOTES
In April 1995, the Company issued the AMP Note, a ten year $5,000,000
convertible note bearing interest at LIBOR plus one percent. Until April 17,
2000, the conversion price is $1.16 per share; thereafter until April 17, 2005,
the AMP Note may still be converted but the conversion price is equal to the
price per share paid by a third party investor in the private sale of Common
Stock immediately prior to such conversion. AMP's right to convert the AMP Note
terminates upon the issuance by the Company of its stock in a public offering,
but AMP could demand prepayment of the AMP Note upon such termination of its
right to convert. On November 27, 1996, AMP converted $3,000,000 of principal
plus $540,985 of accrued interest on the AMP Note into 3,058,833 shares of
Common Stock, leaving a balance on the AMP Note of approximately $2,000,000.
50
<PAGE>
In March 1996, the Company issued the Arsala Note, a one year, $200,000
convertible note bearing interest at 8.5%. The conversion price is $1.36 per
share. The balance outstanding on this note as of November 30, 1996 is
approximately $200,000.
On November 27, 1996, the Company issued a $3,000,000 note to AMP bearing
interest at the prime rate plus one percent, adjusted on the first business day
of each calendar quarter.
WARRANTS
Since its formation but prior to the Venturecap Merger, FiberCore
Incorporated issued Warrants to purchase shares of Common Stock exercisable, in
whole or in part, at prices ranging from $1.31 to $1.63 per share and expiring
in periods ranging from April 13, 1997 through July 7, 1999. There are 745,273
shares of Common Stock issuable on exercise of the Warrants, subject to
adjustment in certain circumstances, including in the event of a stock dividend,
payment of a cash dividend from other than earned surplus, recapitalization,
reorganization, merger or consolidation of the Company.
In connection with the ALT Acquisition, there are two outstanding Warrants.
The Warrants were issued to Morgen Evan & Associates and Ivan Mahoney, are
exercisable into an aggregate of 89,496 shares of Common Stock at a weighted
average exercise price of $.98 per share and each expires in 1998. These
warrants are subject to adjustment in certain circumstances, including in the
event of a stock dividend, payment of a cash dividend from other than earned
surplus, recapitalization, reorganization, merger or consolidation of the
Company.
In connection with the MESC Share Purchase Agreement, the Company will issue
MESC Warrants (the "MESC Warrants") to purchase 550,696 shares of Common Stock
which are exercisable, in whole or in part, at $1.63 per share and expire on
April 13, 1997. The MESC Warrants will be issued upon execution of a supply
agreement. The Company is in the process of finalizing the supply agreement. The
number of shares of Common Stock issuable on exercise of the MESC Warrants is
subject to adjustment in certain circumstances, including in the event of a
stock dividend, payment of a cash dividend from other than earned surplus,
recapitalization, reorganization, merger or consolidation of the Company.
In connection with the Techman Share Purchase Agreement between Techman and
the Company, the Company issued Warrants to purchase 550,696 shares of Common
Stock, which are exercisable at $1.63 per share and expire on January 11, 1998.
In connection with the International Distributor Agreement between Techman and
the Company, the Company issued Warrants exercisable for up to 1,000,000 shares
of Common Stock, which will be released ratably as commissions for Company sales
generated by Techman of up to $200,000,000, and expire upon the termination of
the International Distributor Agreement. The Common Stock will be issued upon
receipt by the Company of the proceeds from such sales.
OPTIONS
Prior to the ALT Acquisition, ALT issued several options to employees
pursuant to the 1987 ALT Stock Option Plan, which expire at various dates
through 2005. In connection with the ALT Acquisition, all ALT employee options
immediately vested and were converted into Options to purchase an aggregate of
287,860 shares of Common Stock at a weighted average exercise price of $1.49 per
share.
Prior to the Venturecap Merger, FiberCore Incorporated issued several options
to employees and consultants As a result of the Venturecap Merger, these options
were converted to Options to purchase 308,390 shares of the Company's Common
Stock, with a weighted average exercise price of $0.12 per share.
In addition, the Company has granted various executives options pursuant to
the terms of their employment arrangements, at a weighted average exercise price
of $0.49. See "Certain Transactions- Unrealized Gains on Options."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Interstate Transfer
Company, 10 W. Broadway, Suite 510 Salt Lake City, Utah 84301.
51
<PAGE>
EXPERTS
The financial statements and schedules of the Company at December 31, 1995
and FiberCore Incorporated, a predecessor to the Company at December 31, 1994
and December 31, 1993 have been audited by Mottle McGrath Braney & Flynn, P.C.,
independent auditors, to the extent indicated in their report. The financial
statements and schedules of ALT, as of December 31, 1994, December 31, 1993, and
December 31, 1992 have been audited by Mottle McGrath Braney & Flynn, P.C.
independent auditors, to the extent indicated in their report. The financial
statements of Venturecap, Inc., prior to the merger of Venturecap, Inc. and
FiberCore Incorporated, have been audited by Dwayne Midgley, certified public
accountant. Such financial statements have been included herein in reliance upon
such report given upon the authority of such firms as experts in accounting and
auditing.
LEGAL
The validity of the Common Stock offered hereby will be passed upon for the
Company by Coleman & Rhine LLP, 1120 Avenue of the Americas, New York, New York
10036. Coleman & Rhine LLP holds Warrants to purchase 73,426 shares of Common
Stock of the Company at an exercise price of $1.31 per share. Such warrants
expire on February 28, 1999.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FIBERCORE, INC. AND PREDECESSORS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
HISTORICAL (audited)
Independent Auditors' Report....................................................................... F-3
Consolidated Balance Sheets at December 31, 1995 and 1994.......................................... F-4
Consolidated Statements of Operations for the Years Ended December 31, 1995 and 1994............... F-5
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1995
and 1994.......................................................................................... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1994............... F-7
Notes to Financial Statements for the Years Ended December 31, 1995 and 1994....................... F-9
HISTORICAL AND PRO FORMA (unaudited)
Consolidated Balance Sheets at September 30, 1996 and 1995......................................... F-24
Consolidated Statements of Operations for the Nine Months Ended September 30, 1996 and 1995........ F-25
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995........ F-26
Notes to Consolidated Interim Financial Statements for the Nine Months Ended September 30, 1996 and
1995.............................................................................................. F-27
Pro Forma Consolidated Balance Sheet at September 30, 1995......................................... F-29
Pro Forma Consolidated Statement of Operations for the Nine Months Ended September 30, 1995........ F-30
Notes to Pro Forma Consolidated Financial Statements for the Nine Months Ended September 30, 1995.. F-31
Pro Forma Consolidated Balance Sheet at December 31, 1995.......................................... F-33
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1995................ F-34
Notes to Pro Forma Consolidated Financial Statement for the Year Ended December 31, 1995........... F-35
FIBERCORE INCORPORATED
HISTORICAL (audited)
Independent Auditors' Report....................................................................... F-36
Balance Sheets at December 31, 1994 and 1993....................................................... F-37
Statements of Operations for the Year Ended December 31, 1994 and the Period November 5, 1993 (Date
of Inception) to December 31, 1993................................................................ F-38
Statements of Stockholder's Equity for the Year Ended December 31, 1994 and the Period November 5,
1993 (Date of Inception) to December 31, 1993..................................................... F-39
Statements of Cash Flows for the Year Ended December 31, 1994 and the Period November 5, 1993 (Date
of Inception) to December 31, 1993................................................................ F-40
Notes to Financial Statements for the Years Ended December 31, 1994 and 1993....................... F-42
AUTOMATED LIGHT TECHNOLOGIES, INC.
HISTORICAL (audited)
Independent Auditors' Report....................................................................... F-51
Balance Sheets at December 31, 1994, 1993 and 1992................................................. F-52
Statements of Operations for the Years Ended December 31, 1994, 1993 and 1992...................... F-53
Statements of Stockholder's Deficiency for the Years Ended December 31, 1994, 1993 and 1992........ F-54
Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992...................... F-55
Notes to Financial Statements for the Years Ended December 31, 1994, 1993 and 1992................. F-57
F-1
<PAGE>
PAGE
---------
VENTURECAP, INC.
HISTORICAL (audited)
Independent Auditors' Report ...................................................................... F-65
Balance Sheet as of April 30, 1995 and 1994 and December 31, 1993 and 1992......................... F-66
Statement of Operations for the Four Months Ended April 30, 1995 and 1994 and for the Years Ended
December 31, 1993 and 1992........................................................................ F-67
Statement of Shareholders' Equity for the Four Months Ended April 30, 1995 and for the Years Ended
December 31, 1994, 1993, 1992, 1991 and 1990...................................................... F-68
Statement of Cash Flows for the Four Months Ended April 30, 1995 and 1994 and for the Years Ended
December 31, 1993 and 1992........................................................................ F-69
Notes to Financial Statements for the Four Months Ended April 30, 1995 and the Years Ended December
31, 1994, 1993 and 1992........................................................................... F-70
Independent Auditors' Report ...................................................................... F-71
Balance Sheet as of June 30, 1995.................................................................. F-72
Statement of Operations for the Six Months Ended June 30, 1995..................................... F-73
Statement of Shareholders' Equity for the Six Months Ended June 30, 1995 and the Years Ended
December 31, 1994 and 1993........................................................................ F-74
Statement of Cash Flows for the Six Months Ended June 30, 1995 .................................... F-75
Notes to Financial Statements for the Six Months Ended June 30, 1995............................... F-76
</TABLE>
F-2
<PAGE>
LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.
INDEPENDENT AUDITORS' REPORT
The Boards of Directors and Stockholders
FiberCore, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of FiberCore, Inc.
and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FiberCore, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ MOTTLE McGRATH BRANEY & FLYNN, P.C.
MOTTLE McGRATH BRANEY & FLYNN, P.C.
Worcester, Massachusetts
July 29, 1996,
Except for the eighth paragraph
of Note 15, as to which the date
is December 18, 1996
F-3
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................................... $ 833,407 $ 257,857
Accounts receivable, less allowance for doubtful accounts of $39,150 in
1995.................................................................... 583,422 13,674
Other receivables........................................................ 286,051 297,243
Inventories.............................................................. 1,406,449 134,324
Prepaid and other current assets......................................... 28,424 7,853
-------------- --------------
Total current assets.................................................... 3,137,753 710,951
-------------- --------------
Property and equipment................................................... 5,044,373 3,591,201
Less accumulated depreciation............................................ 925,351 254,953
-------------- --------------
4,119,022 3,336,248
Other assets:
Patents, less accumulated amortization of $202,939 and $2,086 in 1995 and
1994.................................................................... 7,399,945 81,591
Organizational costs, less accumulated amortization of $42,629 and
$33,315 in 1995 and 1994................................................ 63,944 133,259
Investment in joint venture.............................................. 54,482 --
Security deposits........................................................ 7,750 7,500
-------------- --------------
7,526,121 222,350
-------------- --------------
$14,782,896 $ 4,269,549
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY .....................................
Current liabilities:
Current maturities of long-term debt..................................... $ 609,590 $ 207,150
Current maturities of capitalized lease obligation....................... -- 81,052
Accounts payable......................................................... 1,810,689 854,671
Accrued expenses......................................................... 994,629 86,926
-------------- --------------
Total current liabilities .............................................. 3,414,908 1,229,799
-------------- --------------
Long-term debt, less current maturities .................................. 5,000,000 --
Capitalized lease obligation, less current maturities .................... -- 456,476
-------------- --------------
5,000,000 456,476
-------------- --------------
Stockholders' equity:
Common stock, $.001 par value, authorized 100,000,000 shares; 30,506,963 in
1995 and 24,959,568 in 1994 shares issued and outstanding; of which
458,916 shares are held in treasury in 1994 ............................ 30,507 24,960
Preferred stock, $.001 par value, authorized 10,000,000 shares; no shares
issued and outstanding ................................................. -- --
Paid in capital ......................................................... 11,760,034 4,676,531
Accumulated deficit ..................................................... (5,637,550) (1,628,387)
Accumulated translation adjustment....................................... 214,997 10,170
-------------- --------------
6,367,988 3,083,274
Less treasury stock, at cost ............................................ -- 500,000
-------------- --------------
Total stockholders' equity.............................................. 6,367,988 2,583,274
-------------- --------------
$14,782,896 $ 4,269,549
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1995 and 1994
1995 1994
-------------- ---------------
Net sales....................................... $ 3,093,499 $ 230,888
Cost of sales................................... 4,508,860 1,063,560
-------------- ---------------
Gross loss.................................... (1,415,361) (832,672)
Operating expenses:
Selling, general and administrative expenses... 2,099,015 699,654
Research and development....................... 75,156 90,465
-------------- ---------------
Operating loss................................ (3,589,532) (1,622,791)
Interest income................................. 147,681 14,870
Interest expense................................ (516,318) (22,590)
Other income (expense).......................... (50,994) 5,143
-------------- ---------------
Net loss...................................... $(4,009,163) $(1,625,368)
============== ===============
Loss per share of common stock.................. $ (.15) $ (.07)
============== ===============
Weighted average shares outstanding............. 26,584,630 22,873,322
============== ===============
Loss per share of common stock and common stock
equivalents (fully diluted).................... $ (.15) $ (.07)
Weighted average shares and common stock
equivalents outstanding (fully diluted) ....... 27,319,291 22,873,322
============== ===============
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
ADDITIONAL ACCUMULATED
$.001 PAR PAID-IN SUBSCRIPTION ACCUMULATED TRANSLATION TREASURY
SHARES VALUE CAPITAL RECEIVABLE DEFICIT ADJUSTMENT STOCK
------------- ----------- ------------ -------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 .......... 21,309,323 $21,309 $ 702,462 $(80,000) $ (3,019) $ -- $ --
Issuance of stock in exchange for
equipment............................ 2,221,141 2,221 2,417,779 -- -- -- --
Issuance of stock for cash........... 1,421,714 1,422 1,547,578 -- -- -- --
Proceeds received.................... -- -- -- 80,000 -- -- --
Issuance of stock for services ...... 7,390 8 8,042 -- -- -- --
Proceeds from capital contribution .. -- -- 670 -- -- -- --
Purchase of treasury stock, (458,916
shares).............................. -- -- -- -- -- -- (500,000)
Currency translation adjustment ..... -- -- -- -- -- 10,170 --
Net loss............................. -- -- -- -- (1,625,368) -- --
------------- ----------- ------------ -------------- -------------- ----------- -----------
Balance, December 31, 1994........... 24,959,568 24,960 4,676,531 -- (1,628,387) 10,170 (500,000)
Issuance of stock for services
provided............................. 40,434 40 44,010 -- -- -- --
Reissuance of treasury stock as loan
incentive............................ -- -- (455,000) -- -- -- 500,000
Issuance of stock for acquisition of
ALT.................................. 8,811,137 8,811 6,991,189 -- -- -- --
Issuance of stock for investment in
MEFC joint venture................... 367,131 367 499,633 -- -- -- --
Retirement of shares held by ALT .... (3,671,307) (3,671) 3,671 -- -- -- --
Currency translation adjustment ..... -- -- -- -- -- 204,827 --
Net loss............................. -- -- -- -- (4,009,163) -- --
------------- ----------- ------------ -------------- -------------- ----------- -----------
Balance, December 31, 1995........... 30,506,963 $30,507 $11,760,03 $ -- $(5,637,550) $214,997 $ --
============= =========== ============ ============== ============== =========== ===========
</TABLE>
TOTAL
------------
Balance, December 31, 1993 .......... $ 640,752
Issuance of stock in exchange for
equipment............................ 2,420,000
Issuance of stock for cash........... 1,549,000
Proceeds received.................... 80,000
Issuance of stock for services ...... 8,050
Proceeds from capital contribution .. 670
Purchase of treasury stock, (458,916
shares).............................. (500,000)
Currency translation adjustment ..... 10,170
Net loss............................. (1,625,368)
-----------
Balance, December 31, 1994........... 2,583,274
Issuance of stock for services
provided............................. 44,050
Reissuance of treasury stock as loan
incentive............................ 45,000
Issuance of stock for acquisition of
ALT.................................. 7,000,000
Issuance of stock for investment in
MEFC joint venture................... 500,000
Retirement of shares held by ALT .... --
Currency translation adjustment ..... 204,827
Net loss............................. (4,009,163)
------------
Balance, December 31, 1995........... $ 6,367,988
============
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $(4,009,163) $(1,625,368)
--------------- ---------------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization .................................... 746,518 289,237
Bad debt expense ................................................. 28,303 --
Officers interest for loan incentive ............................. 45,000 --
Increase (decrease) in operating assets:
Accounts receivable ............................................. (555,436) (13,674)
Other receivables ............................................... (96,681) (120,119)
Inventories ..................................................... (1,131,103) (134,324)
Prepaid and other current assets ................................ (20,353) (2,727)
Increase (decrease) in operating liabilities:
Accounts payable ................................................ 1,319,339 269,771
Accrued expenses ................................................ 799,393 86,926
--------------- ---------------
Total adjustments .............................................. 1,134,980 375,090
--------------- ---------------
Net cash used in operating activities .......................... (2,874,183) (1,250,278)
--------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment ................................ (1,816,647) (592,673)
Increase in patent costs .......................................... (4,145) (15,642)
Investment in joint venture ....................................... (54,482) --
Cash acquired from ALT acquisition ................................ 7,233 --
Foreign currency translation adjustment ........................... 220,908 11,287
Due to related parties, net ....................................... (357,567) 419,225
--------------- ---------------
Net cash used in investing activities .......................... (2,004,700) (177,803)
--------------- ---------------
Cash flows from financing activities:
Proceeds from subscriptions receivable ............................ -- 80,000
Proceeds from sale of common stock................................. 500,000 1,549,000
Proceeds from long-term debt ...................................... 5,000,000 --
Proceeds from notes payable ....................................... -- 200,000
Proceeds from capital contribution ................................ -- 670
Repayment of notes payable ........................................ (7,150) --
Security deposits ................................................. (250) (7,500)
Repayment of capitalized lease obligation ......................... (38,167) (38,167)
Purchase of treasury stock ........................................ -- (500,000)
--------------- ---------------
Net cash provided by financing activities ...................... 5,454,433 1,284,003
--------------- ---------------
Net change in cash ................................................. 575,550 (144,078)
Cash, beginning of year ............................................ 257,857 401,935
--------------- ---------------
Cash, end of year .................................................. $ 833,407 $ 257,857
=============== ===============
</TABLE>
F-7
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest ........................................................... $ 182,850 $ 290
Supplemental disclosure of noncash investing and financing activities:
FiberCore, Inc. issued 8,811,137 shares at approximately $.80 per
share to acquire ALT for $7,000,000. Assets and liabilities acquired
from ALT acquisition are as follows:
Cash ................................................................. 7,233 --
Accounts receivable, less allowance of $11,025 ....................... 42,615 --
Inventories .......................................................... 141,022 --
Prepaid and other current assets ..................................... 218 --
Property and equipment, net of accumulated depreciation of $130,874 .. 5,012 --
Patents, net of accumulated amortization of $11,700 .................. 7,506,733 --
Accounts payable ..................................................... 146,169 --
Accrued expenses ..................................................... 108,310 --
Deferred revenue ..................................................... 39,400 --
Notes payable, net of discount ....................................... 408,954 --
Reduction of property and equipment book value due to cancellation of
obligation under capitalized lease ................................... 499,361 --
Retirement of 3,671,307 shares of FiberCore, Inc., (1,000,000 shares
of FiberCore Incorporated) owned by ALT before acquisition ........... 3,671 --
Common stock issued in exchange for services .......................... 44,050 8,050
Equipment acquired in exchange for common stock and capital lease .... -- 2,995,695
Accounts payable reclassed to notes payable ........................... -- 7,150
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Incorporation and nature of operations
FiberCore, Inc. (Company) was organized under the laws of the State of Nevada on
November 5, 1993. The Company is involved in the research, development and
commercialization of a patented, new and more efficient method of producing
single-mode optical fiber preforms.
On July 14, 1994, the Company established a wholly-owned subsidiary, FiberCore
Glasfaser Jena GmbH (FCJ) which is organized and operates under the laws of
Germany. FCJ is involved in the production and selling of optical fiber and
preforms for the telecommunications market.
On May 19, 1995, the Board of Directors approved a merger agreement with
Venturecap, Inc., (Venturecap). On July 18, 1995, Venturecap exchanged 100% of
the outstanding shares of FiberCore Incorporated for shares of restricted common
stock of Venturecap. Effective at the closing all officers and directors of
Venturecap resigned and were replaced with designees of FiberCore Incorporated.
Venturecap changed its name to FiberCore, Inc. The merger has been accounted for
under the pooling of interests method.
On May 19, 1995, a merger under the purchase method of accounting between
Automated Light Technologies, Inc. (ALT), an affiliate, and a wholly-owned
subsidiary of FiberCore, Inc. (ALT Merger Co.) was approved by the Boards of
Directors of both Companies. The merger took place on September 18, 1995.
Accordingly, effective immediately prior to the merger, loans and warrants of
consenting ALT holders were converted, resulting in the issuance of
approximately 4.5 million additional shares of common stock. FiberCore, Inc.
acquired 100% of all the outstanding shares of ALT in exchange for shares of
restricted common stock of FiberCore, Inc. Following the acquisition, ALT
operates as a subsidiary of FiberCore, Inc. ALT is a manufacturer and
distributor of fiber optic cable monitoring and fault locating systems for the
telecommunications industry.
In August 1995, ALT distributed the stock of its wholly-owned subsidiary, Allied
Controls, Inc. (Allied), to its shareholders thereby making Allied a separate
independent entity. ALT transferred all of its shares in Allied, together with
notes and advances of Allied to ALT to Allied Controls Holding LLC in exchange
for a membership interest. Thereafter, on August 31, 1995, ALT transferred the
membership interest to its shareholders.
(b) Use of estimates in the preparation of financial statements
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.
(c) Principles of consolidation
For 1995, the consolidated financial statements include the accounts of
FiberCore, Inc. and its subsidiaries, FiberCore Glasfaser Jena GmbH and
Automated Light Technologies, Inc. All material intercompany balances and
transactions have been eliminated in consolidation.
For 1994, the consolidated financial statements include the accounts of
FiberCore, Inc. and its subsidiary, FiberCore Glasfaser Jena GmbH. All material
intercompany balances and transactions have been eliminated in consolidation.
F-9
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Inventories
Inventories are valued at the lower of cost (average) or market. Cost for FCJ
finished goods inventory, approximately 41% and 91% of total inventory, is
determined based upon standard costs which approximate average actual cost using
the first-in, first-out method. The cost of unutilized production capacities is
charged directly to expense. Cost for Company inventory, approximately 1% and 9%
of total inventory in 1995 and 1994, respectively, and FCJ materials inventory,
is determined by the first-in, first-out method. ALT inventory cost,
approximately 9% of total inventory in 1995, is determined based upon standard
costs which approximate actual cost using the first-in, first-out method.
(e) Property and equipment
All property and equipment acquisitions are stated at cost. The cost of
maintenance and repairs is charged to expense as incurred. Expenditures for
significant renewals or improvements to properties and equipment are added to
the basis of the asset.
The Companies' policy is to depreciate property and equipment using the
straight-line method over the estimated useful lives of the assets.
(f) Other assets
Organizational costs are amortized using the straight-line method over a five
year period.
The Company and ALT have made various filings for patents on new products and
product improvements. Total related costs amount to $4,145 and $15,642 at
December 31, 1995 and 1994, respectively, and are amortized over seventeen years
beginning with the period in which the patent rights are granted.
It is the Company's policy to account for patents at the lower of amortized cost
or net realizable value. On an ongoing basis the Company reviews the valuation
and amortization of its patents. As a part of this review, the Company estimates
the net realizable value of its patents, taking into consideration any events
and circumstances which might have diminished the value.
(g) Fair value of financial instruments
The Company, FCJ and ALT have financial instruments which consist of cash,
short-term receivables, accounts payable and notes payable for which their
carrying amounts approximate fair value due to the short maturity of those
instruments.
The carrying amount of the long-term debt approximates fair value because the
interest rate on this instrument changes with market interest rates.
(h) Translation of foreign currencies
The translation of foreign currencies into U.S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using an average exchange rate for the
period. The gains and losses resulting from translation are included in
stockholders' equity.
F-10
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Deferred taxes are
recognized based on the temporary difference between the recognition of certain
costs and expenses for financial statement and tax purposes.
(j) Loss per share of common stock
Primary loss per share of common stock as computed is based on the weighted
average of the shares outstanding during the year. The stock purchase warrants
and stock options have not been included in the computation of primary loss per
share since the effect would be anti-dilutive.
Fully diluted loss per share of common stock is computed by taking into account
the weighted average of the shares outstanding during the year and taking all
shares of common stock issued for consideration below the registration price and
all common stock warrants, options, or other potentially dilutive instruments
with exercies prices below the registration price issued within one year prior
to the filing of a registration statement with the Securities and Exchange
Commission, as outstanding for all reported periods, even if the effect was
anti-dilutive.
(2) MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS
On July 18, 1995, the Company completed a merger with Venturecap, Inc., whereby
FiberCore Incorporated was merged directly into Venturecap. Approximately
24,600,000 shares of Venturecap common stock were exchanged for all of the
outstanding shares of FiberCore Incorporated. In addition, all outstanding stock
options, warrants and convertible securities to purchase FiberCore Incorporated
stock were converted into stock options, warrants and convertible securities to
purchase Venturecap common stock at the per share merger consideration. The per
share merger consideration states that each share of FiberCore Incorporated
stock shall be converted into 3.6713070 shares of Venturecap stock. The merger
has been accounted for as a pooling of interests and, accordingly, the Company's
consolidated financial statements have been restated for all prior periods as if
the merger took place at the beginning of such periods.
The following pro forma information has been prepared assuming that this
acquisition had taken place at the beginning of the respective periods. The pro
forma financial information is not necessarily indicative of the results of
operations as they would have been had the transactions been effected on the
assumed dates.
1995 1994
--------------- --------------
Net sales:
Venturecap, Inc...................... $ -- $ --
FiberCore Incorporated and Subsidiary 3,093,499 230,888
--------------- --------------
Total............................... $ 3,093,499 $ 230,888
=============== ==============
Net loss:
Venturecap, Inc...................... $ (4,300) $ (455)
FiberCore Incorporated and Subsidiary (4,004,863) (1,624,913)
--------------- --------------
Total .............................. $(4,009,163) $(1,625,368)
=============== ==============
F-11
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(2) MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS (CONTINUED)
On September 18, 1995, FiberCore, Inc. acquired all the outstanding stock of
Automated Light Technologies, Inc. The purchase method of accounting for
business combinations was used. The operating results of ALT have been included
in the Company's consolidated results of operations from the date of acquisition
which included net sales of $84,209 and a net loss of $189,176 for the period
September 18, 1995 to December 31, 1995. The acquisition for $7,000,000 was made
with the issuance of 8,811,137 shares of restricted common stock of the Company
valued at approximately $0.80 per share. The fair value of assets acquired was
approximately $7,700,000, of which approximately $7,500,000 is attributable to
patents developed or acquired by ALT over the years. The Company had an
appraisal performed on ALT patents by an outside valuation consultant which
substantiates the fair value used by the Company in recording the ALT patents at
fair value. The only adjustment recorded was recording the patents at fair
market value, by adjusting the basis of the patents by $7,436,794. ALT now
operates as a wholly-owned subsidiary of the Company.
ALT on September 18, 1995 merged with a newly formed wholly-owned subsidiary of
the Company, called ALT Merger Co. under the purchase method of accounting.
Under the terms of this merger, ALT was the surviving corporation. All shares of
FiberCore, Inc. common stock owned by ALT were cancelled and each share of ALT
was converted into 1.0498172 shares of the Company's stock at the effective
date, on a fully diluted basis (excluding 251,917 shares underlying warrants
issued to entities which are not waiving their registration rights as holders of
debt convertible into ALT stock and 275,000 shares underlying certain incentive
stock options.) As stated, prior to the merger, approximately 4.5 million of
additional shares of ALT common stock were issued to warrant holders and
debenture holders exercising their warrants or converting their debt at the time
of merger. Approximately 8.8 million shares of FiberCore, Inc. common stock were
issued to ALT shareholders, warrant holders and debenture holders after taking
into account the 3.6713070 conversion ratio of FiberCore stock to Venturecap
stock, as stated above.
The following proforma unaudited consolidated operating results of the Company,
Jena and ALT for the years ended December 31, 1995 and 1994, assuming the
acquisition had been made as of January 1, 1995 and 1994, are summarized below:
1995 1994
----------- -----------
Net sales .................. $ 3,255,021 $ 707,269
Net loss ................... (4,624,892) (2,358,959)
These proforma results have been prepared for comparative purposes only and
include certain adjustments for additional amortization expense as a result of a
step-up in the basis of ALT patents, and the reduction of interest expense
accrued on debt which was converted for common stock. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect on January 1, 1995 and 1994 or of future results
of operations of the consolidated entities.
F-12
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(2) MERGERS, ACQUISITIONS AND STRATEGIC INVESTMENTS (CONTINUED)
In April 1995, the Board of Directors ratified actions by FiberCore Incorporated
to enter into a joint venture with John Royle & Sons Co. and Middle East
Specialized Cables Company (MESC) for a period of 15 years to be known as Middle
East Fiber Cables Co. (MEFC). The Company shall issue and sell to MESC 734,260
shares of common stock at approximately $1.36 per share. The agreement also
states MESC will receive 312,061 shares of additional common stock and 550,696
warrants upon the completion and execution of a product supply contract between
the Company and the joint venture entity, MEFC. MESC must exercise the warrants
to purchase shares of the Company's common stock at approximately $1.63 per
share, within a two year period to receive an additional 238,635 shares. The
Company will invest $500,000 of the $1,000,000 purchase price in MEFC as a
capital contribution to the joint venture and in the process acquire a 15%
interest in MEFC. The Company issued 367,131 shares to MESC at approximately
$1.36 per share in October 1995.
On May 19, 1995, the Board of Directors of Fibercore Incorporated authorized the
establishment of a wholly owned subsidiary, FiberCore Mid East Ltd., to be
located in the Cayman Islands for the purpose of holding the Company's eventual
15% ownership of Middle East Fiber Cables Co. (MEFC). At December 31, 1995 the
Company had not made the $500,000 capital contribution to acquire the 15%
interest in MEFC.
On June 23, 1995 the Board of Directors authorized 200,000 shares of FiberCore
Incorporated common stock (734,261 shares of the Company) to be exchanged with
Techman International Corporation (Techman) for shares of Fiber Optic Industries
Limited (FOI), a joint venture located in Pakistan. The President and sole
shareholder of Techman is a director of the Company. The transaction would give
the Company a 51% ownership in the joint venture. This transaction is contingent
upon the closing of financing arrangements of FOI. This agreement was
subsequently replaced in January 1996, (see note 15).
(3) OTHER RECEIVABLES
Other receivables consist of the following:
1995 1994
-------- --------
Value added tax ........................ $189,105 $118,984
SICO ................................... 69,251 175,334
MEFC ................................... 24,823 --
Other .................................. 2,872 2,925
-------- --------
$286,051 $297,243
======== ========
The value added tax receivable comprises principally advance payments to the
German tax authorities that are to be refunded to FCJ.
(4) INVENTORIES
Inventories consist of the following:
1995 1994
---------- ----------
Raw materials ............... $ 735,653 $ 11,929
Work-in-process ............. 17,107 --
Finished goods .............. 653,689 122,395
---------- ----------
$1,406,449 $ 134,324
========== ==========
F-13
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(5) PROPERTY AND EQUIPMENT
Property and equipment, together with their estimated useful lives, consist of
the following:
ESTIMATED
USEFUL LIVES 1995 1994
--------------- ------------- ------------
Office equipment ........ 3 - 5 years $ 109,493 $ 24,707
Machinery and equipment 2 - 12 years 4,808,659 3,522,346
Furniture and fixtures . 5 - 7 years 18,055 5,421
Leasehold improvements . 3 - 10 years 4,707 4,707
Construction in progress 103,459 34,020
------------- ------------
$5,044,373 $3,591,201
============= ============
Depreciation on property and equipment charged to expense was $523,443 in 1995
and $253,836 in 1994.
Included in the above amounts for 1994 is property and equipment acquired from
SICO Jena GmbH Quarzschmelze (SICO) under capital lease obligations of
$2,995,695. 2,221,141 shares of common stock of the Company, valued at
$2,420,000, which were received by FCJ as a consideration for the issuance of
profit participation rights to the Company, were given as a consideration for
the major portion of the lease obligation.
Under an agreement dated August 19, 1995 and amended in January 1996, the
capital lease agreement between SICO and FCJ was revised. It was agreed that
SICO would keep the 2,221,141 shares as payment in full for the obligation under
a capital lease. The outstanding lease obligation, which amounted to $499,361 on
August 19, 1995, was cancelled. As a result, the net book value of the assets
was reduced by $499,361.
(6) ACCRUED EXPENSES
Accrued expenses consist of the following:
1995 1994
----------- ---------
Accrued interest .......... $350,794 $ --
Accrued wages and benefits 323,278 645
Accrued legal and audit .. 210,922 42,002
Accrued expenses - other .. 109,635 44,279
----------- ---------
$994,629 $86,926
=========== =========
F-14
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(7) LONG-TERM DEBT
Long-term debt consist of the following:
<TABLE>
<CAPTION>
1995 1994
------------- ----------
<S> <C> <C>
Note payable to AMP Incorporated ............................... $5,000,000 $ --
Note payable to Connecticut Innovation, net of unamortized
discount of $834,with interest at 8.5% and due September 1,
1996 ........................................................... 210,050 --
Note payable Connecticut Development Authority, net of unamortized
discount of $2,736, with interest at 12% (default rate) and due
January 1, 1996 ............................................... 199,540 --
Note payable to Harkerside Trust, interest at 10.5% payable
semi-annually, due December 6, 1995, issued with non-qualified
warrants expiring January 1, 2000 to purchase 36,713 shares of
common stock at approximately $1.63 per share (note paid in
January, 1996) ................................................. 200,000 200,000
Note payable to John Royle and Sons, with interest at prime
plus 2%, due February 2, 1996 .................................. -- 7,150
------------- ----------
5,609,590 207,150
Less current portion ........................................... 609,590 207,150
============= ==========
$5,000,000 $ --
============= ==========
</TABLE>
In April 1995, FiberCore Incorporated issued to AMP Incorporated (AMP), a
floating rate, collateralized, ten year debenture in the amount of $5,000,000
due April 17, 2005, with interest, at an annualized rate adjusted quarterly,
equal to the sum of 1% and the 3-month London Interbank Offered Rate (6.9375% at
December 31, 1995). No interest is due until the earlier of: AMP conversion of
debt to stock, a public financing by the Company and AMP elects to call the
loan, or maturity. AMP has the option to convert the outstanding loan plus
accrued interest into common stock of the Company at approximately $1.16 per
share in years 1-5 or the per share price provided for in the last third party
private equity financing in years 6-10.
The note payable to Connecticut Innovation, Inc. (CII) with interest at 8.5%
payable monthly, was issued with detachable stock warrants to purchase shares of
common stock of ALT at $1.50 per share. The note was due September 1, 1996 but
is in arrears as the contractual principal and interest payments were not made
by ALT. On July 10, 1996, CII agreed to exchange the balance of the note plus
accrued interest for approximately 103,000 shares of the Company.
The note payable to Connecticut Development Authority (CDA) with interest at 12%
payable monthly, was issued with detachable stock warrants to purchase 100,000
shares of common stock of ALT at $1.50 per share. The number of shares into
which these warrants are exercisable increases to 200,000 if ALT does not
maintain certain contacts with the State of Connecticut. Between December 1,
1995 and December 1, 1997, CDA can require ALT to repurchase the warrants at
$150,000 or buy back all shares underlying the warrants at $300,000. Upon the
occurrence of certain defaults, the redemption prices increase to $300,000 and
$600,000, respectively. The note was due January 1, 1996 but is in arrears as no
principal and interest payments were made by ALT. The note is collateralized by
the personal guarantee of two officers of the Company. In July 1996, the Company
and CDA initiated discussions to negotiate a settlement of this note.
F-15
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(7) LONG-TERM DEBT (CONTINUED)
Scheduled maturities on long-term debt for the next five fiscal years are as
follows:
1996 ..................................... $609,590
1997 - 2000 .............................. --
(8) OBLIGATION UNDER A CAPITAL LEASE
1995 1994
------- -----------
Obligation under a capital lease to SICO Jena
Quarzschmelze GmbH, with interest at
approximately 8%, expiring June 2000 ........ $ -- $537,528
Less current portion ......................... -- 81,052
------- -----------
$ -- $456,476
======= ===========
The obligation under the capital lease was cancelled at August 19, 1995 as FCJ
purchased the machinery and equipment which had been originally leased from
SICO, (see Note 5).
(9) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have entered into various leases for its office
and production space. The Company's office lease expires on January 31, 1997
with an option to extend for two successive three year periods after the initial
term of the lease. The leased property may be acquired for amounts ranging from
$1,200,000 to $1,450,000 over the first three years of the lease term.
FCJ conducts its operations from premises under an operating lease with SICO.
The lease expires within the next five years, and contains various renewal
options. The rental payments for the facility is fixed per month through June
30, 2000. On July 1, 1995, the lease rental was changed from $21,224 to $31,348
per month.
Future minimum lease payments under noncancellable operating leases (with
minimum or remaining lease terms in excess of one year) are as follows:
FISCAL YEAR ENDING DECEMBER AMOUNT
---------------------------- ------------
1996 ....................... $ 471,619
1997 ....................... 387,919
1998 ....................... 376,671
1999 ....................... 376,176
2000 ....................... 188,088
------------
Total minimum payments .... $1,800,473
============
Included in the statement of operations for the years ended December 31, 1995
and 1994 is rent expense of $412,919 and $169,244, respectively, under the above
described operating leases. Substantially, all lease payments pertain to
payments to a related party (SICO).
FCJ is a defendant in a case brought against it by a German firm, COIA GmbH,
Hasenhdgweg 73, D- 63 741 Aschaffenburg, F.R. Germany. COIA GmbH is suing FCJ,
SICO and SICO's president, Mr. Walter Nadrag, (who was previously the managing
director of FCJ) (the "Defendants") for approximately $1.5 million, alleging
that the Defendants failed to comply with a sales contract. The Company believes
no such sales contract existed because COIA GmbH failed to provide the
F-16
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(9) COMMITMENTS AND CONTINGENCIES (CONTINUED)
required end user certificate which the Company believes was required under
United States law and failed to pay FCJ for previous sales to COIA and money is
still due from COIA. The Company is aggressively defending this action and has
established a reserve in the amount of $126,000, which includes legal fees.
In addition to the above, the Company is subject to various claims which arise
in the ordinary course of business. The Company believes such claims and legal
actions, individually or in the aggregate, will not have a material adverse
effect onthe business of the Company.
ALT is contingently liable for debt of a former subsidiary, Allied,
approximating $900,000, details of which are described below.
ALT and two of its key officers have issued the following guarantees and/or
security interests with respect to certain loans of its spun off former
subsidiary (Allied). In a $250,000 financing of Allied from the State of
Connecticut acting through the Department of Economic Development ("DED"), dated
as of October 9, 1992, DED received a guarantee and security interest in certain
assets from ALT. In a $250,000 financing of Allied from the State of
Connecticut, acting through the Connecticut Development Authority ("CDA"), dated
as of June 9, 1992, CDA received a guarantee from two key officers of ALT. As
consideration for their guarantee, each officer received warrants to purchase
62,500 shares of common stock of ALT at $1.75 per share, expiring in 1998.
Under a plan of reorganization, on May 14, 1991, the present Allied acquired the
assets and assumed certain liabilities of a corporation that had filed for
voluntary protection under Chapter 11 of the U.S. Bankruptcy Code. One of the
assumed liabilities was a $650,000 SBA loan dated May 29, 1989, (originally in
the amount of $1,000,000) from American National Bank, now Lafayette American
National Bank ("Lafayette"). As a condition of the loan assumption on March 21,
1991, Lafayette obtained the guarantees of ALT and two key officers of ALT which
guarantees were in addition to the initial loan guarantees Lafayette already had
from other persons. Before commencing proceedings to enforce the guarantees
first against ALT and second against the two key officers, Lafayette must first
take all reasonable steps to realize upon the assets of Allied and the security
provided by the initial guarantors. In the event of a deficiency, Lafayette may
enforce its guarantee against ALT, provided that at all times it simultaneously
and diligently pursues actions to enforce its guarantees from the initial
individual loan guarantors. Each of the key officers guaranteed $150,000 and
received in consideration warrants to purchase 25,000 shares of common stock of
ALT at $1.75, expiring in 1998. Allied is now current with its payments under
this loan. In addition, management has been in discussions with several
potential buyers of Allied which, if successful, would eliminate the
aforementioned security interests and guarantees that have been provided by ALT
and the two key officers.
ALT extends performance warranties on its telecommunications products for
extended periods. Liability under such warranties is contingent upon future
product performance and durability and the ultimate liability is not reasonably
estimable at this time. Management does not believe that such warranties will
result in material expense to ALT.
F-17
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(10) STOCKHOLDERS' EQUITY
The following employee stock options were granted during the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
EXERCISABLE AT PRICE PER SHARE
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.003 $ 1.09 $ 1.43 $ 1.50 $ 1.51
---------- --------- --------- --------- ----------
Granted in 1994 .................................. 110,139 -- -- -- --
---------- --------- --------- --------- ----------
Balance, December 31, 1994 ....................... 110,139 -- -- -- --
Granted in 1995 .................................. 55,070 33,042 -- -- --
Granted in 1995 in connection with the ALT
acquisition ...................................... -- -- 67,188 41,993 178,679
---------- --------- --------- --------- ----------
Balance, December 31, 1995 ....................... 165,209 33,042 67,188 41,993 178,679
========== ========= ========= ========= ==========
</TABLE>
Options vest at rates stated in each employees contract, principally the
anniversary date of the employee's date of hire. The options have no expiration
dates and no options were exercised in 1995 and 1994.
The following warrants have been issued during the years ended December 31, 1995
and 1994:
<TABLE>
<CAPTION>
EXERCISE AT PRICE PER SHARE
----------------------------------------
<S> <C> <C> <C> <C>
$ 0.95 $ 1.31 $ 1.42 $ 1.63
--------- ---------- -------- ----------
Issued in 1994 ....................... -- 598,423 -- --
--------- ---------- -------- ----------
Balance, December 31, 1994 ........... -- 598,423 -- --
Issued in 1995 ....................... -- -- -- 550,696
Issued in 1995 in connection with the
ALT acquisition ...................... 83,985 -- 5,511 --
--------- ---------- -------- ----------
Balance, December 31, 1995 ........... 83,985 598,423 5,511 550,696
========= ========== ======== ==========
</TABLE>
As noted above, in connection with the acquisition of ALT by the Company,
certain options and warrants were converted into options and warrants of the
Company. Certain warrant holders in ALT elected not to convert their warrants.
At December 31, 1995 warrants to acquire shares of ALT are outstanding as
follows:
Connecticut Development
Authority........................ 100,000
Connecticut Innovation, Inc. ... 66,667
Other ........................... 85,250
Subsequent to December 31, 1995, CII agreed to accept stock in the Company in
settlement of the debt (see note 7). The ALT warrants connected with the debt
will be canceled.
F-18
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(11) INCOME TAXES
The significant components of the net deferred tax asset (liability) as of
December 31, 1995 and 1994 were as follows:
1995 1994
-------------- --------------
Net operating loss carryforwards $ 3,474,000 $ 2,142,000
Less valuation allowance ........ (3,474,000) (2,142,000)
-------------- --------------
Net deferred tax asset .......... $ -- $ --
============== ==============
The liability method of accounting for deferred income taxes requires a
valuation allowance against deferred tax assets if, based on the weight of
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.
The Company has a net operating loss carryforward available of approximately
$1,800,000 at December 31, 1995 for financial, federal and state tax purposes.
The net operating loss carryforward expires in the years 2009 and 2010. FCJ has
net operating loss carryforwards at December 31, 1995 of approximately
$2,700,000 for corporation tax and trade income tax purposes available to offset
future taxable income. Under German tax law the losses can be carried forward
indefinitely. Because future profitability is uncertain, such benefits have been
fully reserved.
ALT has net operating loss carryforwards available of approximately $4,400,000
at December 31, 1995 for financial, federal and state tax purposes, of which
only approximately $180,000 is available to the Company for consolidated tax
purposes for the year ended December 31, 1995. The loss carryforwards expire
between the years 2001 through 2010. Because future profitability is uncertain,
such benefits have been fully reserved.
(12) CONCENTRATION OF CREDIT RISK OF FINANCIAL INSTRUMENTS
The customers listed below accounted for approximately the following amounts and
related percentages of the trade accounts receivable balance of FiberCore, Inc.
and Subsidiaries at December 31, 1995 and 1994:
CUSTOMER 1995 1994
----------- ----------------- ---------------
AMOUNT % AMOUNT %
----------- ----- --------- -----
A ......... $132,000 23 $ --
B ......... 233,000 40 9,000 66
C ......... 134,000 23 -- --
The approximate net product sales by FiberCore, Inc. and Subsidiaries to its
major customers and related percentages are as follows:
CUSTOMER 1995 1994
----------- ------------------ ---------------
AMOUNT % AMOUNT %
------------ ----- --------- -----
A ......... $ 137,000 4 $ -- --
B ......... 1,855,000 60 88,000 38
C ......... 319,000 10 -- --
F-19
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(13) RELATED PARTY TRANSACTIONS
In 1994, FCJ was the lessee of machinery and equipment under a capital lease
with SICO expiring in 2001. 2,221,141 shares of the common stock of the Company,
valued at $2,420,000 by the parties, was given as consideration to SICO in
exchange for plant and equipment under the capital lease. At December 31, 1994,
the remaining capital lease obligation amounted to $537,528.
Effective August 19, 1995 and amended in January 1996, the capital lease
agreement between SICO and FCJ was revised. It was agreed that SICO will keep
the 2,221,141 shares as payment for the obligation under a capital lease. The
outstanding lease obligation, which amounted to $499,361 on August 19, 1995, was
cancelled. As a result, the net book value of the assets was reduced by
$499,361.
The managing director of FCJ was the controlling shareholder of SICO. In
November 1995, this officer resigned from his position with FCJ.
Transactions with SICO during the years ended December 31, 1995 and 1994 consist
of the following:
1995 1994
---------- -------------
Property and equipment under capital lease .. $ -- $2,995,695
Purchase price reduction of property and
equipment under capital lease ............. 499,361 --
Rent of premises ............................. 315,373 127,342
Purchase of services ......................... 601,366 407,252
Purchase of heating and energy ............... 273,128 --
Purchase of materials ........................ 350,610 69,076
Interest ..................................... 25,823 --
Other expenses ............................... 22,061 --
Sales of fibers .............................. 131,077 166,079
FCJ at December 31, 1995 and 1994 had a net payable due to SICO of $61,658 and
$958,543, respectively. The balance at December 31, 1994 included the remaining
portion of the obligation under a capitalized lease. Included in the statements
of operations for the years ended December 31, 1995 and 1994 are $327,162 and
$127,342, respectively, for lease expenses under an operating lease.
With the transfer of the employees from SICO, FCJ is now the official employer
of 48 employees with all legal obligations. The former obligation to use 30
employees of SICO at SICO's direct cost no longer exists.
In 1994, SICO was FCJ's main supplier of materials and its main customer
accounting for approximately 72% of its sales. In 1995, SICO was no longer the
main supplier of materials and accounted for only 5% of FCJ sales.
See also notes 2 and 15 regarding transactions with Techman.
F-20
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(14) FOREIGN OPERATIONS
FiberCore, Inc. and Subsidiaries operates principally in 2 geographic areas:
the United States (Company and ALT) and Germany (FCJ). Following is a summary
of information by area for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Net sales to customers:
United States ............................................ $ 305,142 $ --
Germany .................................................. 2,788,357 230,888
--------------- ---------------
Net sales as reported in the accompanying statements of
operations ............................................. $ 3,093,499 $ 230,888
=============== ===============
Inter-company sales:
United States ............................................ $ 1,644,619 $ 488,838
Germany .................................................. -- --
--------------- ---------------
Total intercompany sales ................................ $ 1,644,619 $ 488,838
=============== ===============
Loss from operations:
United States ............................................ $(1,756,568) $ (644,232)
Germany .................................................. (1,832,964) (978,559)
--------------- ---------------
(3,589,532) (1,622,791)
Interest income ........................................... 147,681 14,870
Interest expense .......................................... (516,318) (22,590)
Other income (expense) .................................... (50,994) 5,143
--------------- ---------------
Net loss as reported in the accompanying statements of
operations ............................................. $(4,009,163) $(1,625,368)
=============== ===============
Identifiable assets:
United States ............................................ $ 8,488,198 $ 496,000
Germany .................................................. 6,294,698 3,773,549
--------------- ---------------
Total assets as reported in the accompanying balance
sheets ................................................. $14,782,896 $ 4,269,549
=============== ===============
</TABLE>
Inter-company sales are eliminated in consolidation and are excluded from net
sales reported in the accompanying consolidated statements of operations.
Identifiable assets are those that are identifiable with operations in each
geographic area.
F-21
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(15) SUBSEQUENT EVENTS
In January 1996, the Company reached an agreement with Techman, a related party,
(see note 2), whereby Techman will purchase 734,260 shares for $1 million ($1.36
per share). The price per share was based on private sales of shares in 1995.
Techman made an initial $100,000 down payment in February 1996 and executed and
delivered to the Company a secured promissory note of $900,000. The note will be
paid by Techman in nine equal monthly installments of $100,000 beginning March
31, 1996 and ending November 30, 1996. Interest will accrue on the unpaid
principal balance at the London Interbank Offered Rate (LIBOR), 6.41% at
December 31, 1995, for six month deposits as quoted in the Wall Street Journal
on each business day preceding each payment due date. The note is collateralized
by Techman's right, title and interest in the shares and warrants to purchase
the Company's stock.
The Company entered into the Techman agreement to provide the Company with cash
to fund its operations in 1996. The agreement, as stated above, provides the
Company with $1 million of cash over a ten month period to assist the Company in
maintaining its operations at a time when the Company was projecting a cash flow
shortfall.
Upon acceptance of the offer and delivery of the 734,260 shares, the Company
will deliver to Techman warrants, granting Techman the right to purchase 550,696
shares of the Company at $1.63 per share exercisable in whole or in part within
a 2 year period. The Company will also issue an additional 312,061 shares to
Techman upon all partners of FOI completing all documents required to form FOI,
and FOI and the Company executing an exclusive supply agreement for preforms.
On July 10, 1996, the Company and AMP agreed that on the date of closing, AMP
will convert $3,000,000 (principal and interest) relating to the original
$5,000,000 ten year debenture (see note 7), into shares of common stock of the
Company at the rate of approximately $1.16 per share and to enter into a
multi-year supply agreement. This agreement was made to provide capital for
additional production capacity. The remaining principal balance shall remain
subject to the terms of the original debenture agreement. The conversion
agreement contains certain valuation guarantees of the market value of the
Company's common stock. Unless the closing price of the Company's common shares
equals or exceeds $1.7364 for 30 consecutive trading days during the first two
(2) years following the closing at a time when AMP was not restricted from
selling such shares, then effective on the second anniversary of the closing, an
additional number of shares of Company common stock shall be issued to AMP and
an adjustment shall be made in the conversion rate for the outstanding balance
of the debenture such that the total number of shares held and convertible by
AMP would have a market value (based on the average closing price of Company's
shares during the last thirty (30) trading days preceding the second anniversary
of the closing) equal to $7,500,000; provided, however, that not more than
6,478,810 Company shares will be issued or issuable to AMP as a result of the
conversion of the $5,000,000 debenture and this guarantee.
In the alternative, the Company may satisfy this guarantee on the second
anniversary of the closing by offering or arranging for its designee to offer to
purchase from AMP the converted shares and the outstanding balance of the
debenture, including accrued interest, for $7,500,000, reduced prorata for any
intervening sales of shares by AMP. Such offer to purchase shall be for cash
only in immediately available funds.
As an additional part of this agreement, AMP will loan the Company $3,000,000
under a ten-year note, secured by equipment owned by the Company, with interest
at prime plus one percent, to the Company. Terms of the note payable state that
interest shall be accrued, but not paid, for the first five years of the loan
and the proceeds are required to be used as collateral for the estimated $7.8
million planned expansion of its FCJ facility, the financing of this project is
to be obtained by FCJ from a financial institution in Germany. The principal
will become due before the maturity date if the major financing is repaid or the
collateral is released by the German financial institution.
F-22
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
In conjunction with the loan agreement, AMP will be issued five year warrants to
acquire $2,000,000 of the Company's stock at an exercise price of approximately
$1.45 per share. The Company has guaranteed the market value of their stock.
Unless the closing price of the Company's common shares equals or exceeds
$2.1697 for a period of thirty (30) consecutive trading days during the first
two (2) years following the closing at a time when AMP was not restricted from
selling such shares, then the exercise price of the warrants shall be adjusted
effective as of the second anniversary of the closing by multiplying $1.4465 per
share by a fraction the denominator of which is $2.1697 and the numerator of
which is the average closing price of the shares during the last thirty (30)
trading days preceding the second anniversary of the closing; provided, however,
that the adjusted exercise price shall not be less than $0.7232 per share (50%
of $1.4465). In the alternative, the Company or its designee may offer to
purchase the warrants on the second anniversary of the closing for an amount
equal to $1,000,000. Provided, however, that AMP shall have the right not to
sell, in which case the guarantee will no longer be available.
On November 27, 1996, the Company obtained the additional $3 million loan from
AMP, described above, to fund the expansion of the FCJ facility, in exchange for
a ten year note and $2 million of common stock purchase warrants exercisable at
$1.45 and expiring on November 27, 2001. In connection with the new AMP loan and
the expansion of the FCJ facility, the Company has been awarded a grant from the
German government of approximately $2,700,000 and has received a loan from
Berliner Bank of approximately $5,100,000. The loan from Berliner Bank bears
interest at 6.25% per year. Interest is payable quarterly and the principal is
due in a lump sum on September 30, 2006. The loan is collateralized by a deposit
with the bank of approximately $2,500,000. Also on November 27, 1996 AMP
converted $3,000,000 of principal plus $540,985 of accrued interest of its
previous note into 3,058,833 shares of common stock as described above. In
connection with the conversion the Company provided valuation guarantees as
described above.
In the event that additional shares are issued as a result of the guarantees,
the net book value of all shares and earnings per share would be diluted. There
would be no effect on the net income of the Company.
(16) Accounting Pronouncements
Effective January 1, 1996, the Company has adopted Financial Accounting
Standards Board, (FASB) Statements No. 121 "Accounting for the Impairment of
Long-Lived Assets to be Disposed of" and No. 123 "Accounting for Stock-Based
Compensation". The Company has reviewed these pronouncements and expects that
there will be no impairment of any of its long-lived assets under FASB Statement
No. 121. FASB Statement No. 123 defines a fair value based method of accounting
for an employee stock option or similar equity instrument. However, the Company
may continue to measure compensation cost for employee stock compensation
transactions using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25 "Accounting for Stock Issued to Employees". If the Company
elects to remain with the accounting in Opinion 25 it then must make proforma
disclosures of net income and earnings per share, as if the fair value based
method of accounting, as defined under FASB Statement No. 123 had been applied.
These statements are effective for financial statements for fiscal years that
begin after December 15, 1995. The Company is of the position that if these
statements had been implemented for fiscal year 1995, the effect would be
immaterial to the overall financial statements.
F-23
<PAGE>
FIBERCORE, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................................................... $ 524 $ 4,268
Accounts receivable, net of allowance for doubtful
accounts of $39 and $11 in 1996 and 1995, respectively................. 859 559
Inventory............................................................... 1,347 889
Other current assets.................................................... 66 75
--------- ---------
Total Current Assets................................................... 2,796 5,791
Property and equipment, net of depreciation.............................. 3,950 3,618
Patents, net of amortization............................................. 6,906 7,556
Other assets............................................................. 366 99
--------- ---------
Total Assets........................................................... $14,018 $17,064
========= =========
LIABILITIES and STOCKHOLDERS' EQUITY Current Liabilities:
Notes payable........................................................... $ 200 $ 3,441
Accounts payable........................................................ 1,096 1,389
Accrued liabilities..................................................... 1,277 227
--------- ---------
Total Current Liabilities.............................................. 2,573 5,057
Long-term debt, less current maturities................................. 5,500 7,194
--------- ---------
Total Liabilities...................................................... 8,073 12,251
Stockholders' Equity:
Common stock, $0.001 par value, authorized 100,000,000 shares; 31,336,442 and
27,919,691 issued and outstanding in 1996 and 1995,
respectively........................................................... 31 28
Additional paid-in capital.............................................. 13,903 8,843
Accumulated deficit..................................................... (8,136) (3,779)
Accumulated translation adjustment...................................... 147 (279)
--------- ---------
Total Stockholders' Equity............................................. 5,945 4,813
--------- ---------
Total Liabilities and Stockholders' Equity............................. $14,018 $17,064
========= =========
</TABLE>
See the notes to the consolidated financial statements.
F-24
<PAGE>
FIBERCORE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
1996 1995
------------ ------------
Net Sales.......................................... $ 6,245 $ 1,628
Cost of Sales...................................... 6,108 2,509
------------ ------------
Gross Profit (Loss)............................... 137 (881)
Research and Development........................... 281 34
Selling, General and Administrative Expenses ...... 2,766 1,050
------------ ------------
Loss from Operations.............................. (2,910) (1,965)
Interest Income.................................... 1 81
Interest Expense................................... 280 315
Other Income....................................... 807 48
Other Expense...................................... 117
------------ ------------
Net Loss.......................................... $ (2,499) $ (2,151)
============ ============
Primary Earnings (Loss) Per Share................. $ (0.08) $ (0.09)
============ ============
Weighted Average Shares Outstanding............... 30,815,900 25,262,819
============ ============
Fully Diluted Earnings (Loss) Per Share........... $ (0.08) $ (0.09)
============ ============
Weighted Average Shares Outstanding (Fully
Diluted)......................................... 32,899,366 25,470,719
============ ============
See the notes to the consolidated financial statements.
F-25
<PAGE>
FIBERCORE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Dollars in Thousands
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................................... $(2,499) $(2,151)
---------- -----------
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization.................................... 1,033 480
Officers interest for loan incentive............................. 45
Compensation expense of stock options issued..................... 846
Increase (decrease) in operating assets:
Accounts receivable............................................. 84 205
Inventories..................................................... (59) 614
Prepaid and other current assets................................ (56) 67
Increase (decrease) in operating liabilities:
Accounts payable................................................ (715) 389
Accrued expenses................................................ 388 145
---------- -----------
Total adjustments................................................. 1,583 173
---------- -----------
Net cash from (used in) operating activities..................... (916) (1,978)
Cash flows from (used in) investing activities:
Purchase of property and equipment................................ (353) (1,224)
Foreign currency translation adjustment........................... (67) (67)
Decrease in deferred expenses..................................... 2
Cash acquired from ALT acquisition................................ 7
Increase in patent costs..........................................
---------- -----------
Net cash from (used in) investing activities...................... (420) (1,282)
---------- -----------
Cash flows from financing activities:
Proceeds from sale of stock....................................... 550
Proceeds from notes............................................... 700 7,315
Repayment of notes................................................ 200 7
Increase in deposits.............................................. 23
Repayment of capital lease liability.............................. 38
---------- -----------
Net cash from (used in) financing activities..................... 1,027 7,270
Net charge in cash................................................. (309) 4,010
Cash, beginning of period.......................................... 833 258
---------- -----------
Cash, end of period................................................ $ 524 $ 4,268
========== ===========
Supplemental disclosure of non-cash financing activities:
Net assets acquired from acquisition of ALT for stock............. $ 7,000
Reduction in value of equipment due to cancellation of capital
lease............................................................ $ 499
Common stock issued for services.................................. $ 44
Retirement of shares owned by ALT before acquisition.............. $ 4
Note issued to SICO for equipment in exchange for Company shares
previously issued................................................ $ 2,642
Common stock issued for retirement of debt........................ $ 514
Common stock issued for investment in joint venture............... $ 233
</TABLE>
See the notes to the consolidated financial statements.
F-26
<PAGE>
FIBERCORE, INC.
Notes to Consolidated Interim Financial Statements
September 30, 1996 and 1995
(Unaudited)
1. The consolidated interim financial statements include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the periods. These adjustments are of a normal recurring nature.
2. NOTES PAYABLE AND LONG-TERM DEBT:
In August 1996, the Company issued 111,642 shares of common stock in full
settlement of the note payable to Connecticut Inovations, Inc. in the amount of
$210,884 plus accrued interest of $30,984. Also in August 1996, the Company
issued 142,540 shares of common stock in full settlement of the note payable to
the Connecticut Development Authority in the amount of $202,276 plus accrued
interest of $70,213.
In March 1996 the Company issued a convertible promissory note in the amount of
$200,000 to a director of ALT. The note bears interest at 8.5% and is due on
April 1, 1997. The note plus accrued interest, if any, is convertible into
common stock of the Company at the rate of $1.36 per share. In addition, the
Company issued warrants to purchase 146,850 common shares of the Company at
$1.63 per share. The warrants expire on March 15, 1998.
On July 1, 1996 the Company borrowed $500,000 under two loan agreements with the
spouses of the President and the Vice-President of the Company. The loans are in
the amount of $250,000 each and bear interest at the prime rate plus one
percent, (currently 9.25%) and are due on June 30, 1999. In conjunction with the
loans each lender received warrants to purchase 115,220 common shares of the
Company at the rate of $1.81 per share. The warrants expire on July 31, 2001.
3. STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1996 the Company issued 403,843
shares of the Company's common stock to Dr. M. Mahmud Awan, a director, under a
share purchase agreement dated January 11, 1996. The Company received $550,000
($1.36 per share) in payment for the shares. Also under the agreement the
Company issued 171,634 shares as part of the shares to be issued for the
formation of and interest in a joint venture ( FOI).
4. STOCK OPTIONS
During the nine months ended September 30, 1996 the Company granted options to
purchase 382,184 common shares of the Company to employees and others. The
options are exercisable at prices ranging from $0.68 to $2.00 per share. The
Company has recorded compensation expense of $846,000 representing the
difference between the trading price of the Company's stock on the dates of the
grants multiplied by the number of shares under option and the proceeds that
would be received on exercise of the options.
5. EARNINGS PER SHARE
The fully diluted earnings per share amounts assume exercise of outstanding
common stock equivalents ( warrants and options ) issued subsequent to June 30,
1995, using the treasury stock method. In accordance with SEC staff accounting
bulletin topic 4D these shares are included even though the effect may be
anti-dilutive.
6. The interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1995, including the
notes thereto.
F-27
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
The Pro Forma Financial Statements are presented for the year ended December 31,
1995 and the nine months ended September 30, 1995 to reflect the acquisition by
the Company of ALT (the only transaction for which the pro forma statements are
presented) as if the acquisition had occurred at the beginning of the respective
periods, January 1, (the acquisition actually occurred on September 18, 1995).
The entities included are FiberCore, Inc. and ALT, Inc. The pro forma
presentation shows what the effect on net income, assets and net equity would
have been if the acquisition had occurred on January 1, 1995. The acquisition
was accounted for as a purchase.
F-28
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
--------------------------- ------------- -----------
FIBERCORE,
ASSETS INC. ALT, INC. ADJUSTMENTS COMBINED
--------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash.............................................. $ 4,260 $ 8 $ $ 4,268
Accounts receivable, net of allowance for doubtful
accounts......................................... 518 44 562
Inventory......................................... 750 139 889
Other current assets.............................. 74 1 75
--------------- ----------- ------------- -----------
Total Current Assets............................. 5,602 192 -- 5,794
Property and equipment, net of depreciation ....... 3,613 5 3,618
Patents, net of amortization....................... 82 7,034 (173)(2,3) 6,943
Other assets....................................... 7,139 7,040 (1,5) 99
--------------- ----------- ------------- -----------
Total Assets..................................... $16,436 $7,231 $ 6,867 $16,454
=============== =========== ============= ===========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable..................................... $ 2,963 $ 478 $ $ 3,441
Accounts payable.................................. 1,239 153 1,392
Accrued liabilities............................... 173 94 40 (5) 227
--------------- ----------- ------------- -----------
Total Current Liabilities........................ 4,375 725 40 5,060
Long-term debt, less current maturities............ 7,194 7,194
--------------- ----------- ------------- -----------
Total Liabilities................................ 11,569 725 40 12,254
--------------- ----------- ------------- -----------
Stockholders' Equity:
Common stock...................................... 28 9 9 (1) 28
Additional paid-in capital........................ 8,843 6,991 6,991 (1) 8,843
Accumulated deficit............................... (3,725) (494) (173) (4,392)
Accumulated translation adjustment................ (279) -- (279)
--------------- ----------- ------------- -----------
Total Stockholders' Equity....................... 4,867 6,506 6,827 4,200
--------------- ----------- ------------- -----------
Total Liabilities and Stockholders' Equity....... $16,436 $7,231 $ 6,867 $16,454
=============== =========== ============= ===========
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-29
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
--------------------------- ------------- ------------
FIBERCORE,
INC. ALT, INC. ADJUSTMENTS COMBINED
--------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales.......................................... $ 1,617 $ 173 $ $ 1,790
Cost of Sales...................................... 2,504 109 435 (2) 3,048
--------------- ----------- ------------- ------------
Gross Profit (Loss)............................... (887) 64 (435) (1,258)
Research and Development........................... 31 121 152
Selling, General and Administrative Expenses ...... 1,033 278 105 (4) 1,206
--------------- ----------- ------------- ------------
Loss from Operations.............................. (1,951) (335) (330) (2,616)
Interest Income.................................... 81 81
Interest Expense................................... 262 277 (262)(3) 277
Other Income....................................... 35 118 (105)(4) 48
--------------- ----------- ------------- ------------
Net Loss.......................................... $(2,097) $(494) $ (173) $ (2,764)
=============== =========== ============= ============
Primary Earnings (Loss) Per Share................. $ (0.09)
============
Weighted Average Shares Outstanding............... 30,157,895
============
Fully Diluted Earnings (Loss) Per Share........... $ (0.09)
============
Weighted Average Shares Outstanding (Fully
Diluted)......................................... 30,365,796
============
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-30
<PAGE>
FIBERCORE, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
1. The consolidated interim financial statements include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the periods. These adjustments are of a normal recurring nature.
2. Explanation of Pro Forma Adjustments:
(1) Elimination of investment by FiberCore in ALT.
(2) Additional amortization expense on patents for the period January 1, 1995
to September 18, 1995 that would have been charged had the acquisition occurred
at the beginning of the period. Immediately prior to the acquisition of ALT by
FiberCore, the basis of the ALT patents was adjusted to the fair value of those
patents based on an independent appraisal. The basis of the patents was adjusted
by $7,437,000 as of September 18, 1995, the acquisition date. Had the
acquisition occurred at the beginning of the period this adjustment would have
been made at that date, and, therefor, an additional amortization would have
been recorded on the increased value for the period January 1, 1995 to September
18, 1995. This additional amortization would be approximately $435,000.
(3) Reduction of interest expense on ALT debt that was capitalized
immediately prior to the acquisition, that would not have been incurred had the
acquisition occurred at the beginning of the period. Immediately prior to the
acquisition of ALT by FiberCore, approximately $3,367,000 of debt of ALT was
capitalized (converted to stock of ALT). Had the acquisition occurred at January
1, 1995 (the beginning of the period) this debt would have been capitalized at
that date. As a result, the interest on such debt for the period January 1 to
September 18, 1995 (the actual acquisition date) would not have been incurred by
ALT. The amount of interest for the period was $262,000 and the average interest
rate on the debt was 11.0%.
(4) Elimination of intercompany charges vs income.
(5) Elimination of deferred costs on FiberCore's books resulting from charges
from ALT that were included in deferred revenue on ALT's books.
F-31
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(Unaudited)
The Pro Forma Financial Statements are presented for the year ended December 31,
1995 and the nine months ended September 30, 1995 to reflect the acquisition by
the Company of ALT (the only transaction for which the pro forma statements are
presented) as if the acquisition had occurred at the beginning of the respective
periods, January 1, (the acquisition actually occurred on September 18, 1995).
The entities included are FiberCore, Inc. and ALT, Inc. The pro forma
presentation shows what the effect on net income, assets and net equity would
have been if the acquisition had occurred on January 1, 1995. The acquisition
was accounted for as a purchase.
F-32
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
--------------------------- ------------- -----------
FIBERCORE,
ASSETS INC. ALT, INC. ADJUSTMENTS COMBINED
--------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash................................................ $ 793 $ 40 $ $ 833
Accounts receivable, net of allowance for doubtful
accounts........................................... 832 74 36 (6) 870
Inventory........................................... 1,280 127 1,407
Other current assets................................ 27 1 28
--------------- ----------- ------------- -----------
Total Current Assets............................... 2,932 242 36 3,138
Property and equipment, net of depreciation ......... 4,114 5 4,119
Patents, net of amortization......................... 77 6,896 (173)(2,3) 6,800
Other assets......................................... 7,162 7,036 (1,5) 126
--------------- ----------- ------------- -----------
Total Assets....................................... $14,285 $7,143 $ 6,899 $14,183
=============== =========== ============= ===========
LIABILITIES and STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable....................................... $ 200 $ 410 $ $ 610
Accounts payable.................................... 1,658 204 35 (6) 1,827
Accrued liabilities................................. 870 161 37 (5) 994
--------------- ----------- ------------- -----------
Total Current Liabilities.......................... 2,728 775 72 3,431
Long-term debt, less current maturities.............. 5,000 5,000
--------------- ----------- ------------- -----------
Total Liabilities.................................. 7,728 775 72 8,431
--------------- ----------- ------------- -----------
Stockholders' Equity:
Common stock........................................ 31 9 9 (1) 31
Additional paid-in capital.......................... 11,760 6,991 6,991 (1) 11,760
Accumulated deficit................................. (5,449) (632) (173) (6,254)
Accumulated transalation adjustment................. 215 215
--------------- ----------- ------------- -----------
Total Stockholders' Equity......................... 6,557 6,368 6,827 5,752
--------------- ----------- ------------- -----------
Total Liabilities and Stockholders' Equity......... $14,285 $7,143 $ 6,899 $14,183
=============== =========== ============= ===========
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-33
<PAGE>
FIBERCORE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
--------------------------- ------------- ------------
FIBERCORE,
INC. ALT, INC. ADJUSTMENTS COMBINED
--------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales.................................... $ 3,009 $ 246 $ $ 3,255
Cost of Sales................................ 4,467 175 435 (2) 5,077
--------------- ----------- ------------- ------------
Gross Profit (Loss)......................... (1,458) 71 (435) (1,822)
Research and Development..................... 55 133 188
Selling, General and Administrative
Expenses.................................... 1,922 432 107 (4) 2,247
--------------- ----------- ------------- ------------
Loss from Operations........................ (3,435) (494) (328) (4,257)
Interest Income.............................. 148 148
Interest Expense............................. 485 307 (262)(3) 530
Other Income................................. 85 169 (107)(4) 147
Other Expense................................ 133 133
--------------- ----------- ------------- ------------
Net Loss.................................... $(3,820) $(632) $(173) $ (4,625)
=============== =========== ============= ============
Primary Earnings (Loss) Per Share........... $ (0.15)
============
Weighted Average Shares Outstanding......... 30,245,879
============
Fully Diluted Earnings (Loss) Per Share..... $ (0.15)
============
Weighted Average Shares Outstanding (Fully
Diluted)................................... 30,980,539
============
</TABLE>
See the notes to the pro forma consolidated financial statements.
F-34
<PAGE>
FIBERCORE, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(Unaudited)
1. The consolidated pro forma financial statements include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the periods. These adjustments are of a normal recurring nature.
2. Explanation of Pro Forma Adjustments:
(1) Elimination of investment by FiberCore in ALT.
(2) Additional amortization expense on patents for the period January 1, 1995
to September 18, 1995 that would have been charged had the acquisition occurred
at the beginning of the period. Immediately prior to the acquisition of ALT by
FiberCore, the basis of the ALT patents was adjusted to the fair value of those
patents based on an independent appraisal. The basis of the patents was adjusted
by $7,437,000 as of September 18, 1995, the acquisition date. Had the
acquisition occurred at the beginning of the period this adjustment would have
been made at that date, and, therefor, an additional amortization would have
been recorded on the increased value for the period January 1, 1995 to September
18, 1995. This additional amortization would be approximately $435,000.
(3) Reduction of interest expense on ALT debt that was capitalized
immediately prior to the acquisition, that would not have been incurred had the
acquisition occurred at the beginning of the period. Immediately prior to the
acquisition of ALT by FiberCore, approximately $3,367,000 of debt of ALT was
capitalized (converted to stock of ALT). Had the acquisition occurred at January
1, 1995 (the beginning of the period) this debt would have been capitalized at
that date. As a result, the interest on such debt for the period January 1 to
September 18, 1995 (the actual acquisition date) would not have been incurred by
ALT. The amount of interest for the period was $262,000 and the average interest
rate on the debt was 11.0%.
(4) Elimination of intercompany charges vs income.
(5) Elimination of deferred costs on FiberCore's books resulting from charges
from ALT that were included in defered revenue on ALT's books.
(6) Elimination of intercompany accounts receivable vs. accounts payable
between FiberCore and ALT.
F-35
<PAGE>
LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
FiberCore Incorporated and Subsidiary
We have audited the consolidated balance sheets of FiberCore Incorporated and
Subsidiary as of December 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year ended
December 31, 1994 and the period ended November 5, 1993 (Date of Inception) to
December 31, 1993. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of FiberCore Incorporated and
Subsidiary as of December 31, 1994 and 1993, and the results of their operations
and their cash flows for the year ended December 31, 1994 and the period
November 5, 1993 (Date of Inception) to December 31, 1993 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern As described in Note 1 to the financial
statements, the Company has experienced a loss from operations for the year
ended December 31, 1994 and has a net working capital deficiency at December 31,
1994. In the event that the Company is unable to obtain suitable alternative
financing, there is substantial doubt about the Company's ability to continue as
a going concern. Management's plans in response to this matter are described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ MOTTLE MCGRATH BRANEY & FLYNN, P . C.
MOTTLE MCGRATH BRANEY & FLYNN, P . C.
Worcester, Massachusetts
November 6, 1995
F-36
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
BALANCE SHEETS
December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
-------------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 253,557 $397,850
Accounts receivable .............................................. 189,008 --
Other receivables ................................................ 120,119 --
Due from affiliate ............................................... 1,790 --
Inventories ...................................................... 168,344 --
Prepaid and other current assets ................................. 7,853 5,126
-------------- -----------
Total current assets ............................................ 740,671 402,976
-------------- -----------
Property and equipment ............................................ 3,557,181 2,833
Less accumulated depreciation .................................... 254,953 --
-------------- -----------
3,302,228 2,833
-------------- -----------
Other assets:
Patent, less accumulated amortization of $2,086 in 1994 .......... 81,591 68,035
Organizational costs, less accumulated amortization of $33,315 in
1994 ............................................................ 133,259 166,574
Security deposit ................................................. 7,500 --
-------------- -----------
222,350 234,609
-------------- -----------
$ 4,265,249 $640,418
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable .................................................... $ 207,150 --
Current maturities of capitalized lease obligation ............... 81,052 --
Accounts payable ................................................. 854,671 3,751
Accrued expenses ................................................. 86,926 --
-------------- -----------
Total current liabilities ....................................... 1,229,799 3,751
-------------- -----------
Capitalized lease obligation, less current portion ............... 456,476 --
-------------- -----------
Stockholders' Equity:
Common stock, $.01 par value, authorized 20,000,000 shares; issued
6,594,264 and 5,600,001 shares; of which 125,000 shares are held
in treasury in 1994 ............................................. 65,943 56,000
Paid in capital .................................................. 4,627,774 660,667
Subscriptions receivable ......................................... (80,000)
Accumulated deficit .............................................. (1,624,913) --
Accumulated translation adjustment ............................... 10,170 --
-------------- -----------
3,078,974 636,667
Less treasury stock, at cost ..................................... 500,000 --
-------------- -----------
Total stockholders' equity ...................................... 2,578,974 636,667
-------------- -----------
$ 4,265,249 $640,418
============== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-37
<PAGE>
FIBERCORE INCORPORATED AND SUBSTDIARY
STATEMENTS OF OPERATIONS
Year Ended December 31, 1994 and the Period November 5, 1993
(Date of Inception) to December 31, 1993
1994 1993
--------------- -------
Net sales ................................... $ 230,888 $ --
Cost of sales ............................... 1,063,560 --
--------------- -------
Gross profit (loss) ........................ (832,672) --
Operating expenses: .........................
Selling, general and administrative expenses 699,199 --
Research and development ................... 90,465 --
--------------- -------
(1,622,336) --
Operating loss .............................
Interest income ............................ 14,870 --
Interest expense ........................... (22,590) --
Other income ............................... 5,143 --
--------------- -------
Net loss ................................... $(1,624,913) $ --
=============== =======
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
STATEMENTS OF STOCKHOLDERS' EQUITY
Year Ended December 31, 1994 and the Period November 5, 1993
(Date of Inception) to December 31, 1993
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
ADDITIONAL ACCUMULATED
$0.1 PAR PAID-IN SUBSCRIPTION ACCUMULATED TRANSLATION
SHARES VALUE CAPITAL RECEIVABLE DEFICIT ADJUSTMENT
- ------------------------------------------------- ---------- --------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock for services provided ......... 2,617,581 $26,176 $ 136,961 $ -- $ -- $ --
Issuance of stock for patent .................... 1,000,000 10,000 50,000 -- -- --
Issuance of stock ............................... 1,535,753 15,357 398,173 -- -- --
Issuance of stock in exchange for subscription
receivable ...................................... 446,667 4,467 75,533 (80,000) -- --
---------- --------- ----------- ---------- ----------- ---------
Balance, December 31, 1993 ...................... 5,600,001 56,000 660,667 (80,000) -- --
Issuance of stock in exchange for equipment .... 605,000 6,050 2,413,950 -- -- --
Issuance of stock for cash ...................... 387,250 3,873 1,545,127 -- -- --
Proceeds received ............................... -- -- -- 80,000 -- --
Issuance of stock for services .................. 2,013 20 8,030 -- -- --
Purchase of treasury stock, (125,000 shares) ... -- -- -- -- -- --
Currency translation adjustment ................. -- -- -- -- -- 10,170
Net loss ........................................ -- -- -- -- (1,624,913) --
---------- --------- ----------- ---------- ----------- ---------
Balance, December 31, 1994 ...................... 6,594,264 $65,943 $4,627,774 $ -- $ (1,624,913) $ 10,170
========== ========= =========== ========== =========== =========
</TABLE>
TREASURY
STOCK TOTAL
- ------------------------------------------------- ---------- -----------
Issuance of stock for services provided ......... $ -- $ 163,137
Issuance of stock for patent .................... -- 60,000
Issuance of stock ............................... -- 413,530
Issuance of stock in exchange for subscription
receivable ...................................... -- --
---------- - ----------
Balance, December 31, 1993 ...................... -- 636,667
Issuance of stock in exchange for equipment .... -- 2,420,000
Issuance of stock for cash ...................... -- 1,549,000
Proceeds received ............................... -- 80,000
Issuance of stock for services .................. -- 8,050
Purchase of treasury stock, (125,000 shares) ... (500,000) (500,000)
Currency translation adjustment ................. -- 10,170
Net loss ........................................ -- (1,624,913)
---------- -----------
Balance, December 31, 1994 ...................... $(500,000) $ 2,578,974
========== ===========
See accompanying notes to consolidated financial statements.
F-39
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
Year Ended December 31, 1994 and the Period November 5, 1993
(Date of Inception) to December 3l, 1993
<TABLE>
<CAPTION>
1994 1993
--------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................................ $(1,624,913) $ --
--------------- -----------
Adjustments to reconcile net loss to net cash used in operating activities: .....
Depreciation and amortization .................................................. 289,237 --
Accounts receivable ............................................................ (189,008) --
Other receivables .............................................................. (120,119) --
Inventories .................................................................... (168,344) --
Prepaid and other current assets ............................................... (2,727) (5,126)
Accounts payable ............................................................... 866,120 3,751
Accrued expenses ............................................................... 86,926 --
--------------- -----------
Total adjustments ............................................................. 762,085 (1,375)
--------------- -----------
Net cash used in operating activities ......................................... (862,828) (1,375)
--------------- -----------
Cash flows from investing activities:
Purchase of property and equipment .............................................. (558,653) (2,833)
Increase in patent costs ........................................................ (15,642) (8,035)
Cost of organizational costs .................................................... (3,437)
Foreign currency translation adjustment ......................................... 11,287 --
Net amount due from affiliate ................................................... (1,790) --
--------------- -----------
Net cash used in investing activities .......................................... (564,798) (14,305)
--------------- -----------
Cash flows from financing activities:
Proceeds from subscriptions receivable .......................................... 80,000 --
Proceeds from sale of common stock .............................................. 1,549,000 413,530
Proceeds from note payable ...................................................... 200,000 --
Security deposit ................................................................ (7,500) --
Repayment of capitalized lease obligations ...................................... (38,167) --
Purchase of treasury stock ...................................................... (500,000) --
--------------- -----------
Net cash provided by financing activities ...................................... 1,283,333 413,530
--------------- -----------
Net change in cash ............................................................... (144,293) 397,850
Cash, beginning of year .......................................................... 397,850 --
--------------- -----------
Cash, end of year ................................................................ $ 253,557 $397,850
=============== ===========
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest ......................................................................... $ 22,590 $ --
Supplemental disclosure of noncash investing and financing activities:
Patents acquired in exchange for common stock ................................... -- 60,000
Common stock issued in exchange for services provided in the start-up phase of
the Company .................................................................... -- 163,137
Equipment acquired in exchange for common stock and capital lease ............... 2,995,695 --
Accounts payable reclassed to notes payable ..................................... 7,150 --
Stock issued in exchange for services ........................................... 8,050 --
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
Year Ended December 31, 1994 and the Period November 5, 1993
(Date of Inception) to December 31, 1993
<TABLE>
<CAPTION>
1994 1993
----------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest........................................................... $ 22,590 $ --
Supplemental disclosure of noncash investing and financing activities:
Patents acquired in exchange for common stock....................... -- 60,000
Common stock issued in exchange for services provided in the
start-up phase of the Company...................................... -- 163,137
Equipment acquired in exchange of common stock and capital lease.... 2,995,695 --
Accounts payable reclassed to notes payable......................... 7,150 --
Stock issued in exchange for services............................... 8,050 --
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
(1) INCORPORATION AND DESCRIPTION OF BUSINESS
FiberCore Incorporated (Company) was organized under the laws of the State of
Nevada on November 5, 1993. The Company is involved in the research, development
and commercialization of a patented, new and more efficient method of producing
single-mode optical fiber preforms.
At December 31, 1993 the Company was considered a development stage corporation.
For the year ended De cember 31, 1994, the Company is no longer considered to be
in the development stage.
On July 14, 1994 the Company established a 100% wholly-owned subsidiary, Fiber
Core Glasfaser Jena GmbH (Jena) which is organized and operates under the laws
of Germany. Jena is involved in the production and selling of optical fiber,
preforms and fiber for the telecommunications market.
The Company experienced a loss from operations of $1,624,913 for the year ended
December 31, 1994 and has a net working capital deficiency of $489,128 at
December 31, 1994. Additionally, the Company's newly acquired subsidiary, ALT
(see Note 14) is in default on loans totaling approximately $413,000 plus
accrued interest and is contingently liable for debt of its former subsidiary
approximating $l,000,000. The Company is attempting to obtain additional funding
through debt and/or equity financing. In the event that the Company is unable to
secure additional funding, there is substantial doubt about the Company's
ability to continue as a go ing concern.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
For 1994, the consolidated financial statements include the accounts of
FiberCore Incorporated and its subsid iary, Fiber Core Glasfaser Jena GmbH. All
material intercompany balances and transactions have been eliminated in
consolidation.
(b) Inventories
Inventories are stated at the lower of cost (average) or market. Cost for Jena
inventory, approximately 73% of total inventory, is based upon normal
utilization of production capacities. Cost for Company inventory, approximately
27% of total inventory, is determined by the first-in, first-out method.
(c) Property and equipment
All property and equipment acquisitions are stated at cost. The cost of
maintenance and repairs is charged to expense as incurred.
The Company's policy is to depreciate property and equipment using the
straight-line method over the useful lives of the assets.
(d) Other assets
Organizational costs will be amortized using the straight-line method over a
five year period.
The Company has made various filings for patents on new products and product
improvements. Total related costs amount to $15,642 and $668,035 at December 31,
1994 and 1993, respectively, and are amortized over seventeen years beginning
with the period in which the patent rights are granted.
It is the Company's policy to account for patents at the lower of amortized cost
or net realizable value. On an ongoing basis the Company reviews the valuation
and amortization of its patents. As a part of this review, the Company estimates
the net realizable value of its patents, taking into consideration any events
and circumstances which might have diminished the value.
F-42
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Translation of foreign currencies
The translation of foreign currencies into U.S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using an average exchange rate for the
period. The gains and losses resulting from translation are included in
stockholders' equity.
(f) Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Deferred taxes are
recognized based on the temporary difference between the recognition of certain
costs and expenses for financial statement and tax purposes.
(3) OTHER RECEIVABLES
Other receivables consist of the following:
1994 1993
----------- ------
Value added tax... $118,984 $ --
Other............. 1,135 --
----------- ------
$120,119 $ --
=========== ======
The value added tax receivable comprises principally advance payments to the
German tax authorities.
(4) INVENTORIES
Inventories consist of the following:
1994 1993
---------- ------
Raw materials .. $ 11,929 $ --
Finished goods . 156,415 --
---------- ------
$168,344 $ --
========== ======
(5) PROPERTY AND EQUIPMENT
Property and equipment, together with their estimated useful lives, consist of
the following:
ESTIMATED
USEFUL LIVES 1994 1993
-------------- ------------ --------
Office equipment........ 5 years $ 24,707 $2,833
Machinery and equipment. 3 - 7 years 3,522,346 --
Furniture and fixtures.. 7 years 5,421 --
Leasehold improvements 10 years 4,707 --
------------ --------
$3,557,181 $2,833
============ ========
Depreciation on property and equipment charged to expense was $253,836 in 1994.
Included in the above amounts is equipment acquired by an obligation under a
capital lease of $2,995,695. Accumulated amortization on property and equipment
acquired by an obligation under a capital lease totalled $250,986, which is
included in depreciation expense for the year ended December 31, 1994.
F-43
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(6) NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
1994
----------
<S> <C>
Note payable to John Royle and Sons, with interest at prime plus 2%, due February
2, 1996........................................................................... $ 7,150
Note payable to Harkerside Trust, dated December 23, 1994, interest at 10.5%
payable on June 1st and December 1st of each year, due December 23, 1996 or on
demand after December 6, 1995, by thirty days prior written notice of such demand
to FiberCore Incorporated, issued with non-qualified warrants expiring January 1,
2000 to purchase 10,000 shares of common stock at $6.00 per share................. 200,000
----------
207,150
Less current portion................................................................ 207,150
----------
$ --
==========
</TABLE>
(7) OBLIGATION UNDER A CAPITAL LEASE
Obligation under a capital lease to SICO Jena
Quarzschmelze GmbH, with interest at approximately 8%,
expiring June 2000....................................... $537,528
Less current portion ...................................... 81,052
-----------
$456,476
===========
Minimum future lease payments for an obligation under a capital lease as of
December 31, 1994 for each of the next five years and in the aggregate are:
YEAR ENDED DECEMBER AMOUNT
- -------------------------------------------- -----------
1995...................................... $121,125
1996 ..................................... 121,125
1997...................................... 121,125
1998...................................... 121,125
1999 and thereafter....................... 181,690
-----------
Total minimum future lease payments ...... 666,190
Less: amount representing interest........ 128,662
-----------
Present value of net minimum lease
payments ................................ $537,528
===========
F-44
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(8) COMMITMENTS AND CONTINGENCIES
In January 1994, the Company signed a lease for its office and production space.
The lease term of the original lease expires on January 31, 1997 with an option
to extend for two successive three year periods after the original expiration of
the lease. The leased property may be acquired for amounts ranging from
$1,200,000 to $l,450,000 over the first three years of the lease term.
Future minimum lease payments under noncancellable operating leases (with
minimum or remaining lease terms in excess of one year) are as follows:
YEAR ENDING AMOUNT
------------- ----------
1995 ...... $81,246
1996 ...... 89,583
1997....... 7,500
Jena conducts its operations from premises under an operating lease with SICO
Jena Quarzschmelze GmbH. The lease expires within the next six years, and
contains various renewal options. The rental payments for the facility is fixed
at $21,224 per month for the first six years.
Approximate future minimum payments under the operating lease, including all
option periods which Jena believes will be exercised, for the next five years
and in the aggregate are as follows:
FISCAL YEAR ENDING
DECEMBER AMOUNT
--------------------------- -------------
1995..................... $ 254,684
1996..................... 254,684
1997..................... 254,684
1998..................... 254,684
1999..................... 254,684
Thereafter............... 127,344
-------------
Total minimum payments.. $1,400,764
=============
Included in the statement of operations for the year ended December 31, 1994 is
rent expense of $165,846 under the above described operating leases.
The Company is subject to various claims and legal actions which arise in the
ordinary course of business. The Company believes such claims and legal actions,
individually or in the aggregate, will not have a material adverse effect on the
business of the Company.
Management of Jena has disclosed the fact that none of the property and
equipment at Jena are presently covered by adequate insurance coverage.
The Company at December 31, 1994 maintained a cash account in excess of the
federally insured limit of $100,000.
Jena has given a minimum investment guarantee in the amount of $1,290,600 to
upgrade the equipment acquired from SICO under the capital lease. The investment
can be made within the lease period at the discretion of Jena. Subsequently, the
Company entered into an agreement which provided the funds in May l995.
Jena has entered into a contract to utilize 25 employees from SICO until June
30, 1995 and 30 employees; thereafter at SICO's direct cost. This obligation
expires on June 30, 2000.
F-45
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(8) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Based on 1994 payments under the contract the future financial commitments are
estimated as follows:
YEAR ENDED DECEMBER AMOUNT
- ---------------------------------------- -------------
1995.................................. $1,220,750
1996 ................................. 1,349,250
1997 ................................. 1,349,250
1998 ................................. 1,349,250
1999 and thereafter................... 2,023,875
-------------
Total estimated personnel lease
payments............................ $7,292,375
=============
(9) SHAREHOLDERS' EQUITY
The following stock options were granted during the year ended December 31,
1994:
SHARES PRICE
--------- --------
Granted in 1994............. 20,000 $.01
---------
Balance at December 31,
1994........................ 20,000
=========
Options vest at rates stated in each employee's employment contract. The primary
vesting date is the anniversary of each employee's starting date of employment.
These stock options have no stated expiration dates.
The activity relating to stock warrants issued for the year ended December 31,
1994 is summarized below:
EXERCISABLE AT PRICE PER SHARE
$4.80 $6.00 TOTAL
---------- --------- ----------
December 31,
1993.............. -- -- --
Issued ........... 213,625 10,000 223,625
Cancelled ........ -- -- --
Reclassed......... -- -- --
---------- --------- ----------
December 31, 1994 213,625 10,000 223,625
========== ========= ==========
As of December 31, 1994, no warrants had been exercised.
(10) INCOME TAXES
The Company has a net operating loss carryforward available of approximately
$500,000 at December 31, 1994 for financial and federal and state tax purposes.
The net operating loss carryforward expires in the year 2009. Jena has net
operating loss carryforwards at December 31, 1994 of approximately $760,000 for
corporation tax and for trade income tax purposes available to offset future
taxable income. Under German tax law the losses can be carried forward
indefinitely. Because future profitability is uncertain, such benefits have been
fully reserved.
F-46
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(11) CONCENTRATIONS OF CREDIT RISK
The approximate net product sales by the Company to its major customers and
related percentage are as follows:
1994
CUSTOMER AMOUNT %
- -------- -------- --------
A ................................... $141,167 61%
B ................................... 77,755 34%
At December 31, 1994, one customer accounted for 95% of the total receivables.
(12) RELATED PARTY TRANSACTIONS
The common stock of FiberCore Incorporated at fair market value of $2,420,000
has been given as consideration to SICO Jena Quarzschmelze GmbH in exchange for
equipment under the capital lease.
The chief executive officer of Fiber Core Glasfaser Jena GmbH is the controlling
shareholder of SICO Jena Quarzschmelze GmbH.
SICO is Jena's main supplier of materials and its main customer; substantially
all transactions between SICO and Jena did not result in cash payments in 1994.
SICO so far informally extended payment terms. In conducting its operations Jena
is dependent on SICO.
Transactions with SICO Jena Quarzschmelze GmbH during the year ended December
31, 1994 consist of the following:
AMOUNT
-------------
Plant and equipment under capital
lease.................................. $2,995,695
Rent of premises....................... 127,342
Purchase of services................... 407,252
Purchase of materials.................. 69,076
Sales of fibers........................ 166,079
At December 31, 1994 the Company has a receivable from SICO amounting to
$178,676 and a liability to SICO of $1,133,877 including the remaining capital
lease obligations, utilization of SICO personnel, rent and purchases of raw
material.
F-47
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(13) FOREIGN OPERATIONS
FiberCore Incorporated and Subsidiary operates principally in 2 geographic
areas: the United States (Company) and Germany (Jena). Following is a summary
of information by area for the years ended December 31, 1994 and 1993:
1994 1993
-------------- -----------
Net sales to customers:
United States ..................................... $ -- $ --
Germany............................................ 230,888 --
-------------- -----------
Net sales as reported in the accompanying
statements of operations......................... $ 230,888 $ --
============== ===========
Inter-area sales:
United States...................................... $ 488,838 $ --
Germany............................................ -- --
-------------- -----------
Total intersegment sales.......................... $ 488,838 $ --
============== ===========
Loss from operations:
United States ..................................... $(1,023,413) $ --
Germany ........................................... (598,923) --
-------------- -----------
(1,622,336) --
Interest income..................................... 14,870 --
Interest expense ................................... (22,590) --
Other income........................................ 5,143 --
Net loss as reported in the accompanying
statements of operations ........................ $(1,624,913) $ --
============== ===========
Identifiable assets:
United States...................................... $ 491,700 $ 640,418
Germany............................................ 3,773,549 --
-------------- -----------
Total assets as reported in the accompanying
balance sheets..................................... $ 4,265,249 $ 640,418
============== ===========
Inter-area sales are eliminated in consolidation and are excluded from net sales
reported in the accompanying statements of operations. Identifiable assets are
those that are identifiable with operations in each geographic area.
F-48
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(14) SUBSEQUENT EVENTS
In April 1995, FiberCore Incorporated issued to AMP Incorporated (AMP), a
floating rate collateralized debenture in the amount of $5,000,000 due ten years
after the date of issuance, with interest, at an annualized rate adjusted
quarterly, equal to the sum of 1% and the 3-month London Interbank offered rate.
AMP has the option to convert the outstanding loan plus accrued interest into
common stock of FiberCore at $4.25 per share in years 1-5 or the per share price
provided for in the last third party private equity financing in years 6-10.
In April 1995, the Board of Directors ratified actions by FiberCore Incorporated
to enter into a joint venture with John Royle & Sons Co. and Middle East
Specialized Cables Company (MESC) for a period of 15 years to be known as Middle
East Fiber Cables Co. (MEFC). The Company shall issue and sell to MESC 200,000
shares of common stock at $5.00 per share. The agreement also states MESC will
receive 85,000 shares of additional common stock and 150,000 warrants upon the
completion and execution of a product supply contract between the Company and
the joint venture entity, MEFC. MESC must exercise the 150,000 warrants, to
purchase 150,000 shares of the Company's common stock at $6.00 per share, within
a two year period to receive an additional 65,000 shares. The Company will
invest $500,000 of the $1,000,000 purchase price in MEFC as a capital
contribution to the joint venture and in the process acquire a 20% interest in
MEFC.
On May 19, 1995, the Board of Directors of FiberCore Incorporated authorized the
establishment of a wholly-owned subsidiary, FiberCore Mid East Ltd., to be
located in the Cayman Islands for the purpose of holding the Company's eventual
15% ownership of Middle East Fiber Cables Co. (MEFC).
On May 19, 1995, the Board of Directors approved a merger agreement with
Venturecap, Inc. On July 18, 1995, Venturecap acquired 100% of the outstanding
shares of FiberCore Incorporated in exchange for shares of restricted common
stock of Venturecap. Effective at the closing all officers and directors of
Venturecap resigned and were replaced with designees of FiberCore Incorporated.
Venturecap changed its name to FiberCore, Inc.
On June 23, 1995 the Board of Directors authorized 200,000 shares of FiberCore
Incorporated common stock to be exchanged for shares owned by a consultant,
Techman International, of F.O.I. (Pvt.) Ltd., a joint venture located in
Pakistan. The transaction would give the Company a 51% ownership in the joint
venture. This transaction is contingent upon the closing of financing
arrangements of F.O.I. Ltd.
On May 19, 1995, a merger under the purchase method of accounting between
Automated Light Technologies, Inc. (ALT), an affiliate, and a wholly-owned
subsidiary of FiberCore, Inc. (ALT Merger Co.) was approved by the Boards of
Directors of both Companies. The merger took place on September 18, 1995.
Accordingly, effective immediately prior to the merger, loans and warrants of
consenting ALT holders were converted, resulting in the issuance of
approximately 4.5 million additional shares of common stock. FiberCore, Inc.
will acquire 100% of all the outstanding shares of ALT in exchange for shares of
restricted common stock of FiberCore Incorporated. Following the acquisition,
ALT will operate as a subsidiary of FiberCore Incorporated.
F-49
<PAGE>
FIBERCORE INCORPORATED AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-(Continued)
(14) SUBSEQUENT EVENTS (CONTINUED)
On August 19, 1995, Jena entered into a purchase agreement regarding assets
previously leased under the capital lease agreement from SICO. Subject to the
purchase agreement, the 605,000 shares of FiberCore Incorporated will be
returned to Jena in exchange for 24 equal quarterly installments of $100,833
beginning October 31, 1995 subject to Jena or the Company closing on its current
financing. The Company is authorized to cancel these shares after the first two
installment payments have been made. After such payments the installment obli
gation will be collateralized by the underlying assets. In the same agreement,
Jena has assumed the obligation to take over the existing employment contracts
between SICO and all personnel leased from SICO. The transfer of employment
contracts is subject to the employees' consent. Employer's obligations related
to the 30 employment contracts covered under the agreement will transfer to
Jena.
On August 19, 1995, the lease agreement for the premises with SICO has been
amended effective September 1, 1995. The new lease expires on June 30, 2000 and
has various renewal options. The agreement states that the monthly payments of
$28,703 not including utilities are for the premises only. The intention of the
agreement is however, for the monthly payments to include installment payments
for the purchase of plant and equipment in the same amount as the lease payments
under the original capital lease agreement. An amend ment to the new lease
agreement is in the process of being prepared.
The Company in 1995, received from Harkerside Trust, a demand notice for the
note payable dated December 23, 1994. As stated in the terms of the note
Harkerside Trust gave the Company thirty days prior written notice. The note is
now due on demand after December 6, 1995. Also the Company in April 1995 repaid
the note payable to John Royle and Sons, in full. These obligations are recorded
in the balance sheet at December 31, 1994 as current due to the items of note
above, (see note 6).
F-50
<PAGE>
LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Automated Light Technologies, Inc.
We have audited the accompanying balance sheets of Automated Light Technologies,
Inc. as of December 31, 1994, 1993 and 1992 and the related statements of
operations, shareholders' deficiency, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Automated Light Technologies,
Inc. as of December 31, 1994, 1993 and 1992 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As described in Note 1 to the financial
statements, the Company has experienced recurring losses from operations and has
a net capital deficiency and is in arrears on certain liabilities. In the event
that the Company is unable to obtain suitable alternative financing, there is
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in response to this matter are described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ MOTTLE McGRATH BRANEY & FLYNN, P.C.
MOTTLE McGRATH BRANEY & FLYNN, P.C.
Worcester, Massachusetts
November 6, 1995
F-51
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
BALANCE SHEETS
December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS .......................................................
Current assets:
Cash ........................................................ $ 7,957 $ 11,472 $ 1,978
Accounts receivable, net of allowance for doubtful accounts
of $17,000, $21,374 and $21,154 in 1994, 1993 and 1992,
respectively ............................................... 51,284 34,961 141,893
Due from subsidiary ......................................... -- -- 133,485
Note receivable - subsidiary ................................ -- -- 75,000
Inventories ................................................. 157,111 163,848 225,003
Other current assets ........................................ 851 1,166 1,166
-------------- -------------- --------------
Total current assets ...................................... 217,203 211,447 578,525
Property and equipment, net of depreciation ............... 6,646 3,288 5,754
Patents, net of amortization of $7,663, $5,192 and $3,867
in 1994, 1993 and 1992, respectively ..................... 69,376 59,314 41,759
Investment in affiliate ................................... 60,000 60,000 --
Finance commitment fees and deposits ...................... -- 3,958 36,960
-------------- -------------- --------------
$ 353,225 $ 338,007 $ 662,998
============== ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ........................ $ 2,942,303 $ 2,827,254 $ 2,584,932
Accounts payable ............................................ 125,250 125,075 119,642
Accrued liabilities ......................................... 88,705 93,110 67,907
Accrued interest payable .................................... 1,533,333 1,100,658 636,480
Deferred revenue - affiliate ................................ 48,000 60,000 --
Due to affiliate ............................................ 1,790 -- --
Total current liabilities .................................. 4,739,381 4,206,097 3,408,961
Long-term debt, less current maturities .................... 690,000 690,000 690,000
-------------- -------------- --------------
Total liabilities ......................................... 5,429,381 4,896,097 4,098,961
-------------- -------------- --------------
Shareholders' deficiency:
Common stock, $0.01 par value, authorized 10,000,000 shares;
issued 3,848,423 in 1994 and 3,839,236 in 1993 and 1992 ..... 38,484 38,392 38,392
Additional paid-in capital ................................... 1,670,246 1,695,872 1,695,872
Accumulated deficit .......................................... (6,784,886) (6,264,369) (5,142,242)
-------------- -------------- --------------
(5,076,156) (4,530,105) (3,407,978)
Less treasury stock, cost of 15,323 shares in 1993 and 1992,
respectively ................................................ -- 27,985 27,985
Total shareholders deficiency ............................... (5,076,156) (4,558,090) (3,435,963)
$ 353,225 $ 338,007 $ 662,998
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
F-52
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- --------------- ---------------
<S> <C> <C> <C>
Net sales ....................... $ 476,381 $ 328,063 $ 697,010
Cost of sales ................... 218,940 152,727 300,711
------------- --------------- ---------------
Gross profit .................. 257,441 175,336 396,299
Operating expenses:
Selling ........................ 144,153 200,352 282,184
General and administrative ..... 121,901 241,434 266,564
Research and development ....... 71,338 72,413 134,144
------------- --------------- ---------------
Operating loss ................ (79,951) (338,863) (286,593)
------------- --------------- ---------------
Other income (expense):
Interest expense ............... (472,721) (488,322) (438,351)
Interest income ................ 363 102,631 94,910
Other income ................... 41,238 -- --
Loss on investment in subsidiary (9,446) (397,573) (710,852)
------------- --------------- ---------------
Net loss ...................... $(520,517) $(1,122,127) $(1,340,886)
============= =============== ===============
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIENCY
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL
NUMBER OF PAR PAID-IN ACCUMULATED TREASURY
SHARES VALUE CAPITAL DEFICIT STOCK
------------ ---------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 ......... 3,831,766 $38,317 $1,684,142 $(3,801,356) $(27,985)
Common stock issued for services .... 7,470 75 11,730 -- --
Net loss ............................ -- -- -- (1,340,886) --
------------ ---------- ------------- --------------- ------------
Balance at December 31, 1992 ......... 3,839,236 38,392 1,695,872 (5,142,242) (27,985)
Net loss ............................ -- -- -- (1,122,127 --
------------ ---------- ------------- --------------- ------------
Balance at December 2l, 1993 ......... 3,839,236 38,392 1,695,872 (6,264,369) (27,985)
Common stock issued for services .... 24,510 245 2,206 -- --
Cancellation of treasury stock shares
(15,323 shares) .................... (15,323) (153) (27,832) -- 27,985
Net loss ............................ -- -- -- (520,517) --
------------ ---------- ------------- --------------- ------------
Balance at December 31, 1994 ......... 3,848,423 $38,484 $1,670,246 $(6,784,886) $ --
============ ========== ============= =============== ============
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ............................................... $(520,517) $(1,122,127) $(1,340,886)
------------- --------------- ---------------
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Loss on investment in subsidiary ....................... 9,446 397,573 710,852
Depreciation and amortization .......................... 18,817 33,393 49,177
Product warranty reserve ............................... (6,800) (7,500) 1,680
Inventory obsolescence reserve ......................... (1,200) (3,400) 7,900
Write-down of financing commitment fee ................. -- 30,000 --
Bad debt expense ....................................... 7,266 -- --
Write-down of deposits and note receivable ............. 3,600 -- --
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ................................... (23,589) 106,932 5,226
Inventories ........................................... 7,937 64,555 (143,700)
Other current assets .................................. (685) -- (1,000)
Increase (decrease) in liabilities:
Accounts payable ..................................... 175 5,433 87,642
Accrued liabilities .................................. 106,126 268,050 172,744
Deferred revenue - affiliate ......................... (12,000) -- --
Accrued interest ..................................... 432,675 464,178 273,083
------------- --------------- ---------------
Total adjustments ................................... 541,768 1,359,214 1,163,604
------------- --------------- ---------------
Net cash provided by (used in) operating activities .. 21,251 237,087 (177,282)
------------- --------------- ---------------
Cash flows from investing activities:
Issuance of a note receivable to subsidiary ............ -- -- (335,000)
Net (increase) decrease in subsidiary receivable ....... (9,446) (189,088) (66,425)
Net increase in amount due to affiliate ................ 1,790 -- --
Purchase of fixed assets ............................... (4,577) (916) (4,165)
Increase in patent costs ............................... (12,533) (18,880) (l,660)
------------- --------------- ---------------
Net cash used in investing activities ................ (24,766) (208,884) (407,250)
------------- --------------- ---------------
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---------- ----------- ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from debt ............................... -- -- 345,000
Payments of debt ................................. -- (17,709) (100,704)
Rental/services deposit .......................... -- (1,000) (1,400)
Payment of finance commitment fees ............... -- -- (30,000)
---------- ----------- ------------
Net cash provided by (used in) financing
activities ...................................... -- (18,709) 212,896
---------- ----------- ------------
Net increase (decrease) in cash ................... (3,515) 9,494 (371,636)
----------- ------------
Cash, beginning of year ........................... 11,472 1,978 373,614
---------- ----------- ------------
Cash, end of year ................................. $ 7,957 $ 11,472 $ 1,978
========== =========== ============
Supplemental disclosures of cash flow information:
Cash paid during the year for: Interest .......... $36,338 $ 23,873 $ 166,631
Non-cash transactions:
Received stock in exchange for services to be pro-
vided to affiliate $ -- $ 60,000 $ --
Stock issued in exchange for debt and services 2,451 -- 11,805
Other receivables reclassed against debt -- -- 10,046
Notes payable issued in exchange for services 101,280 235,347 509,389
Cancellation of treasury stock shares 27,985 -- --
</TABLE>
See accompanying notes to financial statement.
F-56
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and operations
Automated Light Technologies (ALT or the Company) is a manufacturer and
distributor of fiber optic cable monitoring and fault locating systems to the
telecommunications industry. Its wholly-owned subsidiary, Allied Controls, Inc.
(Allied), which was acquired in May 1991, is engaged in the designing,
manufacturing and marketing of electromechanical and solid state relays and push
button switches and controls. Allied has a wholly-owned subsidiary, Thermosen,
Incorporated, which is also engaged in the relay business.
In August 1995, the Company distributed the stock of its subsidiary to its
shareholders thereby making Allied a separate independent entity. Therefore, the
financial statements for the years ended December 31, 1994, 1993 and 1992
reflect the financial position and results of operations of Automated Light
Technologies, Inc. on a nonconsolidated basis. (See Note 10)
The Company has experienced recurring losses from operations and has a net
capital deficiency of $5,076,156 at December 31, 1994. Additionally, the Company
is in default on loans totaling approximately $413,000 plus accrued interest of
approximately $58,000 and is contingently liable for debt of its former
subsidiary approximating $1,000,000. In September 1995 the Company was merged by
the purchase accounting method with a wholly-owned subsidiary of FiberCore, Inc.
(FiberCore) (See Note 11). FiberCore is attempting to obtain additional funding
through debt and/or equity funding. In the event that the Company is unable to
secure additional funding, there is substantial doubt about the Company's
ability to continue as a going concern.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is determined based
upon standard costs which approximate actual cost using the first-in, first-out
method.
(c) Property and equipment
All property and equipment acquisitions are stated at cost. The cost of
maintenance and repairs is charged to income as incurred.
The Company's policy is to depreciate property and equipment using the
straight-line method over the useful lives of the assets. Generally these lives
are as follows:
Machinery and equipment ... 12 years
Furniture and fixtures ... - 5 years
Computer equipment ........ - 3 to 5 years
(d) Patents
In 1987, the Company exchanged 150,000 shares of common stock to acquire patents
technology, know-how and the worldwide rights (except Canada) to manufacture and
market a patented cable monitoring system for the detection of moisture and/or
sheath penetration. No value was assigned to these intangible assets.
The Company has made various filings for patents on new products and product
improvements. Total related costs amount to $22,156, $23,676 and $25,381 at
December 31, 1994, 1993 and 1992, respectively, and are amortized over seventeen
years beginning with the period in which the patent rights are granted.
F-57
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Deferred taxes are
recognized based on the temporary difference between the recognition of certain
costs and expenses for financial statement and tax purposes.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Raw material ........................... $ 58,147 $ 57,735 $ 80,747
Work-in-process ........................ 15,964 24,873 17,289
Finished goods ......................... 90,800 90,240 139,367
----------- ----------- -----------
164,911 172,848 237,403
----------- ----------- -----------
Allowance for obsolete and excess stock (7,800) (9,000) (12,400)
----------- ----------- -----------
$157,111 $163,848 $225,003
=========== =========== ===========
</TABLE>
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Office equipment ........ $ 63,292 $ 58,715 $ 57,799
Machinery and equipment 65,099 65,099 65,099
Furniture and fixtures . 7,494 7,494 7,494
------------ ------------ ------------
135,885 131,308 130,392
Accumulated depreciation (129,239) (128,020) (124,638)
------------ ------------ ------------
$ 6,646 $ 3,288 $ 5,754
============ ============ ============
</TABLE>
Depreciation on property and equipment charged to income was $1,219 in 1994,
$3,382 in 1993 and $8,717 in 1992.
F-58
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(4) LONG-TERM DEBT
As of December 31, 1994, the Company owes $5,165,636 of notes payable and
accrued interest, all of which are in arrears. Of this amount, $239,360 bearing
interest at 10% and due on January 1, t996, is owed to Connecticut Development
Authority, and $231,747 bearing interest at 8.5% and due September 1, 1996, is
owed to Connecticut Innovation Inc. Holders of the balance $4,694,529, have
consented to the conversion of their loans to common stock, including interest
upon the happening of certain events. Prior to June 30, 1994, these loans were
bearing interest ranging from between 11% - 138. Thereafter, these loans bear
interest at 8.75%. (See Note 6)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Line of credit ....................................................... $ 200,000 $ 200,000 $ 200,000
Notes payable to One Venture Group, net of unamortized discount of
$2,331 and $9,427 for 1993 and 1992, respectively .................... 882,275 879,944 872,848
Notes payable to One Financial Group Inc. net of unamortized discount
of $8,898 and $17,796 for 1993 and 1992, respectively ................ 393,113 359,865 337,342
Notes payable to Albany Venture Group ................................ 305,000 305,000 305,000
Notes payable to individual officers and directors, net of
unamortized discount of $5,000 for 1992 .............................. 1,049,229 970,781 741,032
Note payable to Connecticut Innovation, net of unamortized discount
of $1,945, $3,056 and $4,167 for 1994, 1993 and 1992, respectively .. 208,939 207,828 215,053
Note payable to Connecticut Development Authority, net of unamortized
discount of $4,165 $5,594 and $7,023 for 1994, 1993 and 1992,
respectively ......................................................... 198,111 196,682 204,626
Notes payable, others, net of unamortized discount of $1,150 for 1992 395,636 397,154 399,031
------------ ------------ ------------
3,632,303 3,517,254 3,274,932
------------ ------------ ------------
Less current portion ................................................. 2,942,303 2,827,254 2,584,932
------------ ------------ ------------
$ 690,000 $ 690,000 $ 690,000
============ ============ ============
</TABLE>
The general terms of the Company's debt are outlined below. The debt discounts
are attributable to an allocation of the debt issue price between the debt and
warrants when they are considered together (See Note 6 for information regarding
detachable stock warrants). Generally, when unpaid interest payments are carried
over as a new loan, the Company agrees to issue additional stock warrants for
additional interest deferred.
Line of credit, under note agreements with two officers, dated December 22,
1987, interest at prime plus 2% payable monthly. For making this line available,
these officers each received detachable stock warrants to purchase common stock
at $2.00 per share. This line of credit will remain in effect until the Company
has raised $2,500,000 in any combination of earnings and equity in connection
with a public offering, except that it will not be withdrawn prior to January 1,
1993.
Notes payable to One Venture Group, with interest ranging from 8 3/4% to 13%
payable monthly, issued with detachable stock warrants to purchase shares of
common stock at $1.50 to $2.00 per share. The notes are generally due May 26,
1993 or by 30 days written notice subsequent to May 26, 1991, extended to
January 1, 1993. Unpaid monthly interest payments are deferred as a new loan and
bear interest at the above stated rate.
F-59
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(4) LONG-TERM DEBT (CONTINUED)
Note payable to One Financial Group Incorporated, with interest rates ranging
from 8 3/4 % to 13% payable monthly, issued with detachable stock warrants to
purchase shares of common stock at $1.75 per share. The note is due May 26, 1993
or by 30 days written notice subsequent to May 26, 1991 extended to January 1,
1993. Unpaid monthly interest payments are deferred as a new loan and bear
interest at the above stated rates (See Note 9).
Note payable to Albany Venture Group, with interest ranging from 8 3/4% to 11%
payable monthly, principal due December 6, 1996. The note is convertible into
common stock at $2.00 per share until December 6, 1993 and convertible into
common stock at $1.75 a share after December 6, 1993. The note is also
redeemable after one year subject to ALT's ability to repay and after three
years without stipulation.
Individual notes payable to certain officers and directors of the Company have
interest rates ranging from 8 3/4% to 13%. Interest is payable monthly and the
notes mature beginning in May 1993. Certain of the notes are due on demand or
upon 30 days notice, extended to January 1, 1993. All the notes were either
issued with detachable stock warrants to purchase common stock at $1.50 or are
convertible to common stock at $1.75 to $2.00.
The Company has not paid a portion of the salary of two key officers over the
past three years. Obligations to these officers, including interest at 13%, were
reclassified as debt by the Company during 1992. As consideration for deferring
payment of salary these officers were also awarded warrants to purchase 220,000
shares of common stock at $1.75 per share, expiring ten years after issuance.
Note payable to Connecticut Innovation with interest at 8.5% payable monthly,
issued with detachable stock warrants to purchase shares of common stock at
$l.50 per share. The note is due September 1, 1996 but is in arrears as the
contractual principal and interest payments were not made by the Company.
Note payable to Connecticut Development Authority with interest at 10% payable
monthly, issued with detachable stock warrants to purchase common stock at $1.50
per share. The note is due January 1, 1996, but is in arrears as no monthly
interest payments were made by the Company. The note is collateralized by the
personal guarantee of two officers.
Scheduled maturities on long-term debt are as follows:
1995 ......................... $ --
1996 ......................... 635,000
1997 ......................... 55,000
----------
$690,000
==========
F-60
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(5) COMMITMENTS AND CONTINGENCIES
The Company and two of its key officers have issued the following guarantees
and/or security interests with respect to certain loans of its spun off former
subsidiary (Allied). In a $250,000 financing of Allied from the State of
Connecticut acting through the Department of Economic Development ("DED"), dated
as of October 9, 1992, DED received a guarantee and security interest in certain
assets from the Company. In a $250,000 financing of Allied from the State of
Connecticut, acting through the Connecticut Development Authority ("CDA"), dated
as of June 9, 1992, CDA received a guarantee from two key officers of the
Company. As consideration for their guarantees, each officer received warrants
to purchase 62,500 shares of common stock of the Company at $1.75 per share,
expiring in 1998.
Under a plan of reorganization, on May 14, 1995, the present Allied acquired the
assets and assumed certain liabilities of a corporation that had filed for
voluntary protection under Chapter 11 of the U. S. Bankruptcy Code. One of the
assumed liabilities was a $750,000 SBA loan dated May 29, 1989 (originally in
the amount of $1,000,000) from American National Bank, now Lafayette American
National Bank ("Lafayette"). As a condition of the loan assumption on March 21,
1991, Lafayette obtained the guarantees of ALT and two key officers of ALT which
guarantees were in addition to the initial loan guarantees Lafayette already had
from other persons. Before commencing proceedings to enforce the guarantees
first against ALT and second against the two key officers, Lafayette must first
take all reasonable steps to realize upon the assets of Allied and the security
provided by the initial guarantors. In the event of a deficiency, Lafayette may
enforce its guarantee against ALT, provided that at all times it simultaneously
and diligently pursues actions to enforce its guarantees from the initial
individual loan guarantors. Each of the key officers guaranteed $150,000 and
received in consideration warrants to purchase 25,000 shares of common stock of
the Company at $1.75, expiring in 1998. Allied is in arrears in its payments on
each of these loans, and management has been working with the lenders to, among
other things, negotiate new loan terms. In addition, management has been in
discussions with several potential buyers of Allied which, if successful, would
eliminate the aforementioned security interests and guarantees that have been
provided by ALT and the two key officers.
The Company extends performance warranties on its telecommunications products
for extended periods. Liability under such warranties is contingent upon future
product performance and durability and the ultimate liability is not reasonable
estimable at this time. Management does not believe that such warranties will
result in material expense to the Company.
The amount of rent expense charged to income during the period is $17,497,
$17,080 and $31,440 for December 31, 1994, 1993 and 1992, respectively. The
Company subleased space from its former subsidiary (Allied). In December 1994,
the Company moved its operations to an affiliate's location, (see note 11).
F-61
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(6) SHAREHOLDERS' EQUITY
In July 1994, the Company proposed a restructuring plan (the "Plan") designed to
convert the existing debt and outstanding warrants into equity. In general, the
Plan provided that a lender and/or warrant holder would consent to the
conversion, but that the actual conversion would only occur upon the closing of
any one of a number of certain events, including the closing of a merger, joint
venture, or other similar transaction with a strategic partner. In addition, the
agreement provided that (1) loans held by consenting lenders would accrue
interest from July 1, 1994 at 8.75% until the date of conversion and would be
converted at the then outstanding loan amount, including accrued interest, (2)
no additional warrants would be issued after June 30, 1994, (3) agreement of at
least 75% of the June 30, 1994 lenders was needed by August 31, 1994 to declare
the Plan effective, and (4) the Plan would terminate by July 31, 1996, if the
closing of one of the certain events did not occur (See Note 11).
By August 31, 1995, holders of all $5,165,636 in outstanding loans and accrued
interest, as of December 31, 1994 consented to the Plan with the exception of
the Connecticut Development Authority and Connecticut Innovations, Inc., whose
loans and accrued interest, were outstanding, in the amounts of $239,360 and
$231,747, respectively. In addition, of the 4,960,701 in outstanding warrants as
of December 31, 1994, holders of all but 251,917 consented to the Plan. Of the
251,917 in non-consenting warrant holders, Connecticut Development Authority and
Connecticut Innovations, Inc. represent 100,000 and 66,667, respectively.
Activity in the Incentive Stock Option Plan is summarized below:
SHARES PRICE
----------- --------
Granted in 1986 ............. 15,000 $ .01
Granted in 1987 ............. 121,000 1.50
Granted in 1988 ............. 31,300 1.50
Canceled in 1988 ............ (39,000) 1.50
Granted in 1991 ............. 106,900 1.50
Exercised in 1991 ........... (15,000) .01
Balance at December 31, 1991 220,200
Canceled 1992 - 1994 ........ (66,000)
-----------
Balance at December 31, 1994 154,200
===========
Options vest at a rate of one-third per year from the date of grant. Options
expire after ten years or at such date the holders' employment with the Company
is terminated.
F-62
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(6) SHAREHOLDERS' EQUITY (CONTINUED)
The activity relating to stock warrants issued for the years ended December 31,
1994, 1993 and 1992 is summarized below:
<TABLE>
<CAPTION>
EXERCISABLE AT PRICE PER SHARE
---------------------------------------------------------------------------------
$1.00 $1.50 $1.75 $2.00 TOTAL
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
December 31, 1991 -- 1,226,349 857,632 298,532 2,382,513
Issued ........... -- 133,666 577,048 64,884 775,598
--------- ------------ ------------ ------------ ------------
December 31, 1992 -- 1,360,015 1,434,680 363,416 3,158,111
Issued ........... 80,000 37,837 435,831 70,238 623,906
--------- ------------ ------------ ------------ ------------
December 31, 1993 80,000 1,397,852 1,870,511 433,654 3,782,017
Issued ........... -- 264,806 932,877 97,451 1,295,134
--------- ------------ ------------ ------------ ------------
Cancelled ........ -- (116,450) -- -- (116,450)
Reclassed ........ -- -- 159,730 (159,730) --
--------- ------------ ------------ ------------ ------------
December 31, 1994 80,000 1,546,208 2,963,118 371,375 4,960,701
========= ============ ============ ============ ============
</TABLE>
As of December 31, 1994, 1993 and 1992, no warrants had been exercised.
(7) INCOME TAXES
The Company has net operating loss carryforwards available of approximately
$3,800,000 at December 31, 1994 for federal and state tax purposes. The loss
carryforwards expire between the years 2001 through 2009. Because future
profitability is uncertain, such benefits have been fully reserved.
(8) CONCENTRATIONS OF CREDIT RISK
The approximate net product sales by the Company to its major customers and
related percentage are as follows:
1994 1993 1992
CUSTOMER AMOUNT % AMOUNT % AMOUNT %
- ---------- ---------- ------ ---------- ------ ----------- ------
A $ 28,428 6% $ 3,342 1% $387,038 56%
B 179,540 38% 134,790 41% 193,863 29%
C -- -- 56,810 17% -- --
D 65,669 14% 25,133 8% -- --
E 63,064 13% -- -- -- --
At December 31, 1994, three customers accounted for 96% of the total
receivables
(9) RESEARCH AND DEVELOPMENT COSTS
The Company incurred $71,338, $72,413 and $134,144 of research and development
costs for the years ended December 31, 1994, 1993 and 1992.
(10) RELATED PARTS TRANSACTIONS
As described in Note 4, the Company has substantial debt payable to related
parties. One Financial Group, Incorporated, a financial consulting firm,
provides consulting services to ALT. One of the principals of One Financial
Group, Incorporated is also a Director of the Company. Consulting fees of
$16,520, $13,625 and $33,237 were incurred in 1994, 1993 and 1992, respectively.
Such fees were settled through the issuance of notes to One Financial Group,
Incorporated with detachable stock warrants for the purchase of common stock
(see Note 4). This same Director is also one of the principals of One Venture
Group, a significant investor in the Company.
F-63
<PAGE>
AUTOMATED LIGHT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS-(Continued)
(11) SUBSEQUENT EVENTS
On May 10, 1995, the Company transferred all of its shares in Allied, together
with notes and advances of Allied to the Company to Allied Controls Holding LLC
in exchange for a membership interest. Thereafter, on August 31, 1995, the
Company transferred the membership interest to its shareholders
On May 19, 1995, a merger between ALT and a wholly-owned subsidiary of FiberCore
was approved by the Boards of Directors of both Companies. The merger took place
on September 18, 1995. The merger with FiberCore represents a merger with a
strategic partner as provided in the terms of the Plan, described in Note 6.
Accordingly, effective immediately prior to the merger, loans and warrants of
consenting holders were converted, resulting in the issuance of approximately
4.5 million additional shares of common stock.
The Company entered into a sublease with FiberCore commencing January 1, 1995,
to use and occupy floor space within the same premises leased by FiberCore. The
terms of the lease state that payments shall be $1,041 a month, plus all
applicable maintenance, utilities and taxes. Either party may terminate the
sublease by giving sixty days written notice.
F-64
<PAGE>
LETTERHEAD OF DUANE V. MIDGLEY
INDEPENDENT AUDITORS' REPORT
July 1, 1996
Board of Directors
Venturecap, Inc.
Salt Lake City, Utah
We have audited the balance sheets of Venturecap, Inc. (a development stage
company), as of April 30, 1995, December 31, 1994, December 31, 1993 and
December 31, 1992, and the related statements of operations, stockholders'
equity and cash flows for the years ended Decem ber 31, 1994, December 31, 1993,
December 31, 1992, and for the period January 1, 1995 to April 30, 1995. 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material re spects, the financial positron of Venturecap, Inc., at April 30,
1995, December 31, 1994, December 31, 1993 and December 31, 1992, and the
results of its operations and cash flows for the years ended December 31, 1994,
December 31, 1993, December 31, 1992, and for the period January 1, 1995 to
April 30, 1995, in conformity with generally accepted accounting principles.
/s/ DUANE V. MIDGLEY
DUANE V. MIDGLEY
Certified Public Accountant
F-65
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 30, DECEMBER 31,
--------------------- ---------------------
1995 1994 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash .............................................. $ 15 $ 4,300 $ 4,085 $ 4,750
---------- ---------- ---------- ----------
Total Current Assets............................. 15 4,300 4,085 4,750
---------- ---------- ---------- ----------
Total Assets........................................ $ 15 $ 4,300 $ 4,085 $ 4,750
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities: ............................... $ 0 $ 0 $ 0 $ 0
Stockholders' Equity:
Common stock, $.001 par value, authorized
20,000,000 shares; issued and outstanding 955,450
shares ........................................... 955 955 955 955
Additional paid-in capital ........................ 6,819 6,819 6,149 6,149
Loss accumulated during development stage ......... (7,759) (3,474) (3,019) (2,354)
---------- ---------- ---------- ----------
Total Stockholders' Equity....................... 15 4,300 4,085 4,750
---------- ---------- ---------- ----------
Total Liabilities and Stockholders' Equity ........ $ 15 $ 4,300 $ 4,085 $ 4,750
========== ========== ========== ==========
</TABLE>
F-66
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
JANUARY 1,
1995 MAY 14, 1987
TO YEAR ENDED (INCEPTION) TO
APRIL 30, DECEMBER 31, APRIL 30,
1995 1994 1993 1992 1995
--------------- ---------- -------------- ------- ---------------
<S> <C> <C> <C> <C> <C>
INCOME: ........... $ 0 $ 0 $ 0 $ 0 $ 0
EXPENSE:
Accounting ....... 100 200 450
Legal ............ 1,500 255 665 4,620
Directors fees ... 4
Finders fee ...... 2,650 2,650
Bank charges ..... 15 35
--------------- ---------- -------------- ------- ---------------
TOTAL EXPENSES . 4,285 455 665 0 7,759
NET LOSS .......... $(4,285) $ (455) $ (665) $ 0 $ (7,759)
=============== ========== ============== ======= ===============
NET LOSS PER SHARE $ (.004) $(.001) $(.001) $NIL $ (.008)
=============== ========== ============== ======= ===============
</TABLE>
See accompanying notes to financial statements.
F-67
<PAGE>
VENTURECAP, INC .
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL LOSS
---------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1990 ............ 954,450 $954 $6,149 $(2,353)
May 24 1993 issued for directors fees 1,000 1
Net loss, year ended December 31, 1991 (1)
---------- --------- ------------ -------------
Balance, December 31, 1991 and 1992 .. 955,450 955 6,149 (2,354)
Net loss, year ended December 31, 1993 (665)
---------- --------- ------------ -------------
Balance December 31, 1993 ............. 955,450 955 6,149 (3,019)
Contribution to capital ............... 670
Loss, year ended December 31, 1994 ... (455)
---------- --------- ------------ -------------
Balance, December 31, 1994 ............ 955,450 955 6,819 (3,474)
Loss to April 30, 1995 ................ (4,285)
---------- --------- ------------ -------------
Balance, April 30, 1995 ............... 955,450 $955 $6,819 $(7,759)
========== ========= ============ =============
</TABLE>
See accompanying notes to financial statements.
F-68
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
JANUARY 1,
1995 MAY 14, 1987
TO YEAR ENDED (INCEPTION) TO
APRIL 30, DECEMBER 31, APRIL 30,
1995 1994 1993 1992 1995
--------------- --------- -------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss ............................. $(4,285) $ (455) $ (665) $ 0 $(7,759)
Cash Flows from Investing Activities: 0 0 0 0 0
Cash Flows from financing Activities:
Issuance of common stock ............ 7,104
Contribution to capital .............. 670 670
--------------- --------- -------------- --------- ---------------
Net increase (decrease) in cash ..... (4,285) 215 (665) 0 15
Cash, beginning of period ............ 4,300 4,085 4,750 4,750 0
--------------- --------- -------------- --------- ---------------
Cash, end of period .................. $ 15 $4,300 $4,750 $4,750 $ 15
=============== ========= ============== ========= ===============
</TABLE>
See accompanying notes to financial statements.
F-69
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, DECEMBER 31, 1993,
DECEMBER 31, 1992 AND APRIL 30, 1995
NOTE 1 - ACCOUNTING POLICIES AND PROCEDURES
Venturecap, Inc., was Organized May 14, 1987 under the laws of the State of
Nevada. The Company has never started any operations and has no income. In
accordance with SFAS #7, the Company is considered a development stage company.
No accounting policies have been de termined by the Company.
NOTE 2 - WARRANTS AND OPTIONS
There are no warrants or options to acquire any additional shares of common
stock of the Company.
NOTE 3 - PROPOSED MERGER
In April, 1995, the Company signed a Letter of Intent to acquire FiberCore,
Incorporated. In connection with the proposed merger, the Company would amend
its Articles of Incorporation to authorize 100,000,000 shares of common stock
and 10,000,000 shares of preferred stock. The Company would also effect a
reverse stock split on the basis of one (1) share for each 1.27393466 shares
outstanding.
F-70
<PAGE>
LETTERHEAD OF DUANE V. MIDGLEY
INDEPENDENT AUDITORS' REPORT
July 12, 1995
Board of Directors
Venturecap, Inc.
Salt Lake City, Utah
We have audited the balance sheets of Venturecap, Inc. (a development stage
company), as of June 30, 1995, and the related statements of operations,
stockholders' equity and cash flows for the period January 1, 1995 to June 30,
1995. 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Venturecap, Inc., at June 30,
1995, and the results of its operations and cash flows for the period January 1,
1995 to June 30, 1995, in conformity with generally accepted accounting
principles.
/s/ DUANE V. MIDGLEY
- --------------------
DUANE V. MIDGLEY
Certified Public Accountant
F-71
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
1995
----------
<S> <C>
ASSETS
Current Assets:........................................................ $ 0
----------
Total Current Assets................................................. 0
----------
Total Assets.......................................................... $ 0
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:................................................... $ 0
Stockholders' Equity:
Common stock, $.001 par value, authorized 20,000,000 shares; issued
and outstanding 955,450 shares....................................... 955
Additional paid-in capital............................................ 6,819
Loss accumulated during development stage............................. (7,774)
----------
Total Stockholders' Equity........................................... 0
----------
Total Liabilities and Stockholders' Equity............................ $ 0
==========
</TABLE>
See accompanying notes to financial statements.
F-72
<PAGE>
VENTURECAP, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
JANUARY 1, MAY 24, 1987
1995 (INCEPTION)
TO TO
JUNE 30, JUNE 30,
1995 1995
--------------- --------------
INCOME............ $ 0 $ 0
EXPENSES:
Accounting....... 100 450
Legal............ 1,500 4,620
Directors Fee.... -- 4
Finders fee...... 2,650 2,650
Bank charges..... 50 50
--------------- --------------
TOTAL EXPENSES. 4,300 7,774
--------------- --------------
NET LOSS........ $(4,300) $(7,774)
=============== ==============
NET LOSS PER
SHARE.......... $ (.004) $ (.008)
=============== ==============
See accompanying notes to financial statements.
F-73
<PAGE>
VENTURECAP, INC .
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL LOSS
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993........ 955,450 $955 $6,149 $(3,019)
Contribution to capital........... 670
Loss, year ended December 31,
1994.............................. (455)
--------- --------- ------------ -------------
Balance, December 31, 1994........ 955,450 955 6,819 (3,474)
--------- --------- ------------ -------------
Loss to June 30, 1995............. (4,300)
--------- --------- ------------ -------------
Balance, June 30, 1995............ 955,450 $955 $6,819 $(7,774)
========= ========= ============ =============
</TABLE>
See accompanying notes to financial statements.
F-74
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
JANUARY 1, MAY 14, 1987
1995 (INCEPTION)
TO TO
JUNE 30, JUNE 30,
1996 1995
--------------- --------------
Cash Flow from Operating Activities:
Net loss............................ $(4,300) $(7,774)
Cash Flows from Investing
Activities:......................... 0 0
Cash Flows from Financing
Activities:
Issuance of common stock............ 7,104
Contribution to capital............. 670
--------------- --------------
Net increase (decrease) in cash ..... (4,300) 0
Cash, beginning of period............ 4,300 0
--------------- --------------
Cash, end of period.................. $ 0 $ 0
=============== ==============
See accompanying notes to financial statements.
F-75
<PAGE>
VENTURECAP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(1) ACCOUNTING POLICIES AND PROCEDURES
VentureCap, Inc., was organized May 14, 1987 under the laws of the State of
Nevada. The Company has never started any operations and has no income. In
accordance with SFAS #7, the Company is considered a development stage company.
No accounting policies have been determined by the Company.
(2) WARRANTS AND OPTIONS
There are no warrants or options to acquire any additional shares of common
stock of the Company.
(3) PROPOSED MERGER
In April, 1995, the Company signed a Letter of Intent to acquire FiberCore,
Incorporated. In connection with the proposed merger, the Company would amend
its Articles of Incorporation to authorize 100,000,000 shares of common stock
and 10,000,000 shares of preferred stock. The Company would also effect a
reverse stock split on the basis of one (1) share for each 1.27393466 shares
outstanding.
F-76
<PAGE>
No dealer, sales representative or any other person has been authorized to
give any information or to make any representation in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the registered securities to which it relates or an offer to, or a
solicitation of, any person in any jurisdiction where such offer or solicitation
would be unlawful. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
PAGE
-------
Available Information .................................................. 2
Special Note Regarding Forward Looking
Statements ............................................................. 2
Prospectus Summary ..................................................... 3
Risk Factors ........................................................... 8
Use of Proceeds ........................................................ 14
Capitalization ......................................................... 14
Stock Price and Dividend Policy ........................................ 15
Dilution ............................................................... 16
Selected Consolidated and Consolidated Pro Forma Financial Data ........ 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations ......................................................... 19
Business ............................................................... 24
Management ............................................................. 35
Certain Transactions ................................................... 38
Principal Securityholders .............................................. 44
Selling Securityholders ................................................ 45
Plan of Distribution ................................................... 49
Description of Securities .............................................. 50
Experts ................................................................ 52
Legal .................................................................. 52
Index to Financial Statements .......................................... F-1
40,791,159 SHARES
FIBERCORE, INC.
COMMON STOCK
PROSPECTUS
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the shares of Common Stock being registered. All items are estimated except
the registration and filing fees.
SEC registration fee ............................. $ 78,200
NASD filing fee .................................. 15,000
Blue Sky fees and expense ........................ 15,000
Printing and engraving expenses .................. 100,000
Legal fees and expenses .......................... 150,000
Accounting fees and expenses ..................... 60,000
Transfer agent fees .............................. --
Miscellaneous .................................... 5,000
-------
Total ......................................... $ 423,200
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law ("Nevada Law") provides
generally and in pertinent part that a Nevada corporation may indemnify its
directors and officers against expenses, judgments, fines and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters in
issue, they acted in good faith and in a manner reasonably believed to be in, or
not opposed to, the best interests of the corporation, and in connection with
any criminal suit or proceeding, if in connection with the matters in issue,
they had no reasonable cause to believe their conduct was unlawful. Section
78.751 further provides that, in connection with the defense or settlement of
any action by or in the right of the corporation, a Nevada corporation may
indemnify its officers and directors against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in good
faith, in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation. Section 78 .751 further permits a Nevada
corporation to grant its directors and officers additional rights of
indemnification through by-law provisions and otherwise.
Article VIII of the By-Laws of the Registrant provides in relevant part that
each person who was or is made a party or is threatened to be made a party to
any action, by reason of the fact that he or she is or was a director or
officer, employee or agent of the Registrant or is serving at the request of the
Registrant as an officer, director, employee or agent of another enterprise
shall be indemnified to the full extent provided by Nevada Law; provided,
however, that the Registrant will indemnify any such indemnitee in connection
with a proceeding commenced by such indemnitee only if such proceeding was
authorized by the board of directors of the Registrant. The right of
indemnification includes the right to be advanced expenses; provided, however,
that if Nevada law requires an advancement of expenses incurred by an indemnitee
in his or her capacity as an officer or director then advances shall be paid
only upon delivery to the Registrant of an undertaking to repay such amounts if
it is judicially determined that the indemnitee was not entitled to
indemnification. In the event an indemnitee is forced to sue the corporation to
recover unpaid indemnification expenses, the indemnitee is generally entitled to
recover the costs expended in such proceedings from the Registrant.
Article XIII of the Registrant's Articles of Incorporation, as amended,
provides that the directors and officers of the Registrant are not liable to the
corporation or its stockholders for breaches
II-1
<PAGE>
of fiduciary duty other than (1) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (2) payment of distributions
in violation of section 78.3 of the Nevada Revised Statutes.
The Registrant maintains officers and directors insurance to further insure
its officers and directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
As used herein FiberCore refers to FiberCore Incorporated, which merged into
the Registrant in July 1995. ALT refers to Automated Light Technologies, Inc.,
which was acquired by the Registrant in September 1995. All numbers listed in
association with shares issued by FiberCore have been restated to reflect the
exchange of 3.671307 shares of the Registrant for each share of FiberCore.
Unless otherwise stated below the Registrant, FiberCore or ALT relied on the
exemption to the registration requirements of the Securities Act set forth in
section 4(2) of the Securities Act
In November 1993, FiberCore issued 3,671,307 shares to Gregory Perry in
exchange for the assignment of a patent.
In November 1993, FiberCore issued 5,914,883 shares to Mohd Aslami and his
designees in exchange for cash and services aggregating to $96,667 ( $0.016 per
share). In November 1993, FiberCore issued 2,957,443 shares to Charles DeLuca
and his designees in exchange for cash and services valued at $50,000 ( $0.016
per share).
In December 1993, FiberCore issued 3,671,307 shares to ALT in exchange for
$60,000 ($0.016 per share) worth of services.
In December 1993, FiberCore issued 1,529,712 shares to each of Patrick Brake
and Jack Ramsey at a price of $0.033 per share.
In December 1993, FiberCore sold 1,284,957 shares of common stock at a price
of $0.27 per share to 11 investors for a total of $350,000.
The following table lists the 11 investors and the number of shares
purchased.
NAME # SHARES
---------- ---------
H. Amin-Arsala .............................. 183,565
Sayed I. Nasir .............................. 183,565
Carol A. Warasta ............................ 110,139
Alan A. Kusunoki ............................ 36,713
Sabrina Shairzay ............................ 73,426
M. Kassem Khybury ........................... 55,070
Eleanor Glickman ............................ 36,713
Mario and Rose
DeLoreto .................................... 73,426
Daniel Prouty ............................... 325,021
Qasim Aslami ................................ 97,180
Carl Zheng .................................. 110,139
---------
Total ...................................... 1,284,957
=========
In April 1994 and April 1995, FiberCore issued 124,824 options to various
employees. Such options are exercisable at $0.0027 per share and expire no
earlier than ten (10) years from the date of grant.
The Registrant is contractually committed to issue options to purchase
132,167 shares to various employees at various times in 1996, 1997 and 1998,
each exercisable at $0.0027 per share.
In June 1994, FiberCore issued 2,221,141 shares to a designee of Sico
Quarzschmelze Jena GmbH ("Sico") in consideration for equipment purchased from
Sico located in Jena, Germany. The parties agreed to several modifications to
the initial sale, including one contemplating a retention of the shares by Sico,
which were superseded by a January 1996 amendment pursuant to which Sico
retained the shares.
II-2
<PAGE>
In July 1994, FiberCore sold a total of 29 units ("Units") to 10 investors.
Each Unit consisted of 45,891 shares of Common Stock and 22,946 Warrants to
purchase Common Stock at a price of $1.31 per share. Each Unit cost $50,000. A
total of 1,330,848 shares and 665,424 Warrants were sold in the offering.
The following table lists the 10 investors and the number of shares and
warrants purchased.
NAME # SHARES # WARRANTS
---------- --------- ---------
Victor Markowicz ........................... 229,457 114,730
Donald Scanlon ............................. 45,890 22,946
John Flood ................................. 45,890 22,946
Camelot Investments ........................ 45,890 22,946
Richard Lai ................................ 91,782 45,892
Global Money Management .................... 229,457 114,730
Dale Archer McNulty ........................ 45,890 22,946
John Royle and Sons,
Inc. ....................................... 458,920 229,450
William C. & Rita Krebs .................... 45,890 22,946
Victor Mastellone .......................... 91,782 45,892
--------- ---------
Total ...................................... 1,330,848 665,424
========= =========
In July 1994, FiberCore issued Warrants to purchase 73,426 shares at an
exercise price of $1.31 per share to Coleman & Rhine LLP, a law firm, in
exchange for services valued at $7,500.
In December 1994, FiberCore issued 90,864 shares and Warrants to purchase an
additional 45,432 shares exercisable at $1.31 per share in exchange for $99,000
to an investor.
In December 1994, FiberCore issued 7,390 shares to an employee in exchange
for services valued at $8,050.
On April 17, 1995, FiberCore issued a ten year $5,000,000 convertible note
(the "AMP Note") to AMP Incorporated ("AMP"), a manufacturer of electrical
connectors and other equipment. Principal plus interest accrue at a rate of
LIBOR plus one percent, may be converted into Common Stock of the Registrant
through April 17, 2005. Until April 17, 2000, the conversion price is $1.16 per
share; thereafter the conversion price is equal to the price per share paid by a
third party investor in the private sale of Common Stock by the Registrant
immediately prior to such conversion. The AMP Note is initially collateralized
by certain patents, patent applications, licenses, rights and royalties arising
from such patents and, claims for damages arising from infringement of such
patents. The parties have agreed, to replace such collateral with various pieces
of equipment owned or to be owned by the Registrant.
In May 1995, FiberCore issued 23,863 shares to a consultant for services
valued at $26,000 and 16,569 shares to an employee in lieu of compensation.
On July 18, 1995, FiberCore merged into the Registrant. Each of the
outstanding shares of FiberCore Incorporated was exchanged for 3.671307 shares
of the Registrant.
On October 5, 1995, MESC purchased 367,131 shares of the Registrant's Common
Stock at a price of $500,000. At that time the Registrant deposited with Shawmut
Bank, N.A. (i) 679,192 shares of Common Stock; (ii) Warrants granting MESC the
right to purchase 550,696 shares of the Registrant's Common Stock at a price of
$1.63 per share exercisable at any time until October 5, 1997; and (iii) 238,634
shares of Common Stock to be issued to MESC immediately upon MESC exercising its
rights to purchase shares pursuant to the Warrants referred to in clause (ii).
The securities (other than the aforementioned 238,634 shares of Common Stock)
are issuable upon the execution of all documents required to complete the
formation of a joint venture, the execution of a product supply agreement with
the Registrant, and the purchase by MESC of an additional 367,131 shares of the
Registrant's Common Stock at a price of $500,000. In November 1996, MESC
purchased and was issued the second block of 367,131 shares of the Registrant's
Common Stock.
In January 1996, Techman, a company controlled by M. Mahmud Awan, a director
of the Registrant, agreed to purchase, pursuant to a Share Purchase Agreement
dated January 11, 1996, 734,260 shares of Common Stock and Warrants exercisable
into 550,696 shares of Common Stock exercisable at
II-3
<PAGE>
$1.63 per share for $1,000,000. Additionally, the Company, as part of the Share
Purchase Agreement, agreed to issue 312,061 shares to Techman upon (i) the
formation of FOI and (ii) completion of a supply agreement between the Company
and FOI. Between February 1996 and September 1996, the Company, pursuant to the
Share Purchase Agreement, issued at the request of Techman, 575,477 shares to
Dr. Awan, the sole shareholder of Techman. Subsequent to September 1996, an
additional 470,844 shares of Common Stock (representing the balance of shares to
be issued under the Techman Share Purchase Agreement) were issued to Dr. Awan in
exchange for a payment of $450,000 and the delivery by Techman of a twenty year
supply agreement between the Company and FOI. The $450,000 payment was invested
by the Registrant in FOI as an additional capital contribution to FOI (along
with ratable additional capital contributions by FOI's other shareholders). The
Registrant maintains a 30% ownership interest in FOI.
In addition, warrants entitling Dr. Awan to 1,000,000 shares are being held
in escrow under an International Distributor Agreement. The warrants will be
exercised and the shares will be issued ratably by the Registrant as commissions
on sales generated by Techman of up to $200,000,000. Such shares will be issued
upon receipt by the Registrant of proceeds from such sales.
On July 1, 1996 the Company borrowed $500,000 under two loan agreements from
the spouses of the President and the Executive Vice President of the Company.
The loans are in the amount of $250,000 each and bear interest at the prime rate
plus one percent (currently 9.25%), and are due on June 30, 1999. In conjunction
with the loans each lender received warrants to purchase 115,220 shares of
Common Stock at the rate of $1.81 per share. The warrants expire on July 31,
2001.
In August 1996, the Registrant issued 111,462 shares of Common Stock to CII
in full settlement of the outstanding debt to CII in amount of $241,869.
In August 1996, the Registrant issued 142,450 shares of Common Stock to CDA
in full settlement of the outstanding debt to CDA in the amount of $272,489.
On November 27, 1996, the Registrant issued a $3,000,000 note and warrants to
purchase up to $2,000,000 of shares of Common Stock to AMP. Additionally, the
Registrant issued 3,058,833 shares of Common Stock in exchange for the
conversion by AMP of $3,000,000 of principal plus accrued interest on the AMP
Note.
In 1995, ALT granted to various employees, options exercisable into 120,000
shares of ALT common stock at a price of $1.50 per share pursuant to the ALT
1987 Stock Option Plan.
In 1995, each of the four ALT directors received 17,500 shares of ALT common
stock as compensation for serving as director during the years 1989 through
1995. As a result, a total of 70,000 shares of ALT common stock were issued.
In November 1994, ALT issued 4,931 shares to Bernard Moison in exchange for
services to Allied, a former subsidiary, valued at $493.
In November 1994, ALT issued 19,579 shares to David Sudol in exchange for
services to Allied a former subsidiary valued at $1,957.
In December 1993, ALT issued a warrant for 80,000 shares exercisable at $1.00
per share expiring in 1998 for services to a financial services company.
In addition, ALT issued warrants to purchase 0.767 shares of ALT common
stock, as shown in the table below, for each dollar in salary deferred and
interest accruing thereon by Charles DeLuca and Mohd Aslami during 1992, 1993
and 1994. ALT also issued warrants to purchase shares of ALT Common Stock to One
Financial Group, Inc., a company controlled by Steven Phillips, a director of
the Registrant, for amounts earned, but not paid, through June 30, 1994.
Warrants were also earned on interest accruing on such deferred salary and
earnings as stated below. Only issuances of warrants for principal are depicted
below.
Number of shares of ALT common stock issuable pursuant to ALT warrants
exercisable originally at $1.75 per share issued for deferred salary or
compensation, not including interest accrued.
II-4
<PAGE>
1992 1993 1994
------- ------- -------
Mohd Aslami ....................... 22,064 106,800 --
Charles DeLuca .................... 16,338 65,516 60,146
One Financial Group ............... 51,139 10,446 18,669
From November 1992 to June 1994, ALT issued warrants to purchase 121,058
shares to ten lenders exercisable at prices ranging from $1.00 to $2.00 per
share, in connection with making of the loans and interest accruing thereon.
Such lenders included Mohd Aslami, Charles DeLuca, Hedayat Amin-Arsala, Zaid
Siddig; One Financial Group, Inc. and One Venture Group. Messrs. Aslami, DeLuca,
Arsala and Phillips were directors of ALT at such time. Mr. Phillips is a
Director, President and major stockholder of One Financial Group, Inc. and was a
managing partner of One Venture Group at such time. Zaid Siddig is Mr. Aslami's
wife's uncle.
On September 18, 1995, ALT Merger Co., a wholly-owned subsidiary of the
Registrant merged into ALT (the "ALT Acquisition"). Each shareholder of ALT
received approximately 1.0498 shares of the Registrant's Common Stock in
exchange for each outstanding share of ALT stock. 3,671,307 shares of the
Registrant's Common Stock held by ALT were canceled. Approximately 8.4 million
shares of ALT common stock were converted into approximately 8.8 million shares
of the Registrant's Common Stock. Immediately prior to the acquisition, several
ALT warrantholders and debtholders converted their debts and warrants into
shares of ALT common stock. Loans, other than loans arising from deferred.
compensation (which were converted at $1.25), were converted pursuant to each
lender's loan agreement, if applicable, otherwise at the exercise price of the
warrants issued less $0.05. Loans arising from deferred compensation were
converted at $1.25 per share. The exercise price of all warrants exercisable at
$2.00 per share was reduced to $1.75 per share, except for warrants held by
Messrs. Aslami and DeLuca and OFG. Warrants were valued at the deemed value of
ALT shares ($2.10) less the exercise price of each such warrant. For example a
warrant to purchase one share of ALT common stock with an exercise price of
$1.75 was valued at $0.35. Shares of common stock of ALT were purchased to the
extent of such warrant value. In consideration for the fact that all loans were
past due, the percentage of warrants that each lender had been entitled to
receive pursuant to such loans was increased by 25%. A total of warrants
4,013,960 and $5,092,449 in debt were converted into approximately 4.53 million
shares of ALT common stock in conjunction with the ALT Acquisition.
All other outstanding warrants and options to purchase shares of ALT common
stock were automatically converted into instruments to purchase shares of the
Registrant's Common Stock, pursuant to the terms of such instruments.
II-5
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------------
<S> <C>
++2.1 Agreement And Plan Of Reorganization dated as of July 18, 1995 between Venturecap, Inc. AND
FiberCore Incorporated.
++2.2 Agreement of Merger dated as of July 18, 1995 between Venturecap and FiberCore Incorporated.
++2.3 Agreement and Plan of Reorganization dated as of September 18, 1995 between the Company Alt
Merger Co., and Automated Light Technologies, Inc. ("ALT").
P +2.4 Agreement dated February 13, 1987 between Norscan Instruments Ltd. and ALT.
+3.1 Certificate of Incorporation of FiberCore, Inc.
+3.2 By-Laws of FiberCore, Inc.
++5.1 Opinion of Coleman & Rhine LLP
p +10.1 Loan Agreement dated August 2, 1990 between ALT and Connecticut Innovations Incorporated
("CII").
P +10.2 Promissory Note issued by ALT to CII.
P +10.3 Security Agreement dated as of August 1990 between ALT and CII.
P +10.4 Subordination executed August 2, 1990 between CII, Mohd Aslami, and Charles DeLuca
P +10.5 Collateral Assignment and Security Agreement dated August 2, 1990 between ALT and
Connecticut Innovations Incorporated
P +10.6 Loan Agreement dated December 5, 1990 between ALT and the Connecticut Development Authority
("CDA").
P +10.7 Promissory Note dated December 5, 1990 issued by ALT to CDA.
P +10.8 Guaranty dated December 5, 1990 issued to CDA by Mohd Aslami and Charles DeLuca.
P +10.9 Collateral Assignment and Security Agreement dated December 5, 1990 between ALT and CDA.
P +10.10 Security Agreement dated as of December 5, 1990 between ALT and CDA.
P +10.11 Subordination dated November 5, 1990 between CDA, Mohd Aslami and Charles DeLuca.
P +10.12 Form of Warrant issued by ALT to CDA
P +10.13 Form of Warrant issued by Agreement between ALT to Connecticut Innovations Incorporated.
P +10.14 Form of Warrant issued by ALT.
P +10.15 Form of FiberCore Incorporated Warrant.
P +10.16 Assignment dated November 8, 1993 by Gregory Perry to FiberCore, Incorporated of U.S. Patent
No. 4,596,589.
P +10.17 Lease executed January 31, 1994 between Cobra Realty Trust, FiberCore, Incorporated, Mohd
Aslami and Charles DeLuca.
P +10.18 Agreement dated June 7, 1994 between Sico GmbH and FiberCore, Inc., to lease building and
equipment and to manufacture optical fiber and optical fiber preform.
P +10.19 Agreement dated August 19, 1995 between Sico GmbH and FiberCore Jena GmbH, with supplemental
agreement by Walter Nadrag.
P +10.20 Cooperation Agreement dated December 19,. 1995 between Sico Jena GmbH and FiberCore, Inc.
P +10.21 Lease dated August 19, 1995 between Sico Jena GmbH and FiberCore Jena GmbH.
P +10.22 Agreement dated January 25, 1996 between the Company, FiberCore Jena and Sico.
P +10.23 Share Purchase Agreement dated January 11, 1996 between the Company and Techman
International, Inc.
P +10.24 Escrow Agreement dated as of April 13, 1995 between FiberCore Incorporated, Middle East
Specialized Cables Co. ("MESC") and Shawmut Bank, N.A.
II-6
<PAGE>
EXHIBIT
NUMBER
- ---------------
P +10.25 Escrow Amending Agreement dated September 15, 1995 between the Registrant, MESC and Shawmut
Bank, N.A.
P +10.26 Share Purchase Agreement dated as of April 13, 1995 between FiberCore Incorporated and MESC.
P +10.27 Share Purchase Amending Agreement dated September 15, 1995 between the Registrant and MESC.
P +10.28 Convertible Debenture Purchase Agreement effective as of April 17, 1995 between AMP Incorporated
and FiberCore Incorporated, with form of Convertible Debenture Attached, as Exhibit A.
P +10.29 Cooperation Agreement dated June 17, 1994 between John Royle & Sons and FiberCore
Incorporated, with Amendment No. 1 executed on the same date.
++10.30 Warrant issued by the Registrant to Techman to purchase upto 550,696 shares of Common Stock.
P +10.31 Agreement dated July 1, 1994 between FiberCore Incorporated and FiberCore Jena GmbH.
P +10.32 Joint Venture Agreement dated January 31, 1996 between Middle East Optic Fiber Company
("MEOFC"), Royle Mid East Ltd. and FiberCore Mid East Ltd.
P + 10.34 Joint Venture Agreement dated May 21, 1995 between the Company, Techman International, Inc.
and the other parties named therein.
P +10.35 International Distributor Agreement between Techman and the Company.
++10.36 Term Loan Agreement by and between FiberCore, Inc. as borrower and AMP Incorporated a lender
dated November 27, 1996.
++10.37 Term Promissory Note in the original principal amount of $3 million dated November 27, 1996.
++10.38 Amendment No. 1 to Convertible Debenture Purchase Agreement between FiberCore, Inc., as
borrower and AMP Incorporated as Lender dated November 27, 1996.
++10.39 Subsidiary Guarantee between FiberCore Glasfaser Jena GmbH and AMP Incorporated dated
November 27, 1996.
++10.40 Security Interest Agreement between FiberCore Glasfaser Jena GmbH and AMP Incorporated dated
November 27, 1996.
++10.41 Patent Security Agreement between FiberCore, Inc. and AMP Incorporated dated November 27,
1996.
++10.42 Warrant issued to AMP Incorporated to purchase shares of Common Stock of FiberCore, Inc.
dated November 27, 1996.
++10.43 Amended and Restated Convertible Debenture dated April 17, 1995.
++10.44 Voting Agreement between FiberCore, Inc., AMP Incorporated, Mohd Aslami, Charles DeLuca and
Dr. M. Mahmud Awan dated November 27, 1996.
P +10.45 Copy of patents purchased from Sico Jena GmbH.
+10.46 Supply contract between AMP Incorporated and the Registrant dated July 28, 1996. The Company
has requested that the Commission grant confidential treatment for this contract.
+22 List of subsidiaries of FiberCore, Inc.
++23.1 Consent of Mottle McGrath Braney & Flynn, P.C. independent auditors.
++23.2 Consent of Dwayne Midgley, independent accountants.
++23.3 Consent of Coleman & Rhine LLP (contained in the opinion filed as Exhibit 5.1)
+25 Power of Attorney (contained on the signature page)
++27 Financial Data Schedule
</TABLE>
+ Previously filed
++ Filed herewith
II-7
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act, shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; and
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes: Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
described in Item 14, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-8
<PAGE>
SIGNATURES
Pursuant to the Securities Act of 1933, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on December 27,
1996.
FIBERCORE, INC.
By: /s/ Mohd A. Aslami
----------------------------
Mohd A. Aslami,
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes, Mohd A. Aslami
and Michael J. Beecher, and each of them, with full power of substitution and
full power to act without the other, to file one or more amendments (including
post-effective amendments) to this Registration Statement which amendments may
make such changes as any of such persons deems appropriate, and each such
person, individually and in each capacity stated below, hereby appoints each of
such persons as attorney-in-fact to execute in his name and on his behalf any of
such amendments to the Registration Statement.
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated below on the 27th day of December, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- -------------------------------------------- --------------------
<S> <C> <C>
/s/ Mohd A. Aslami Chairman, Chief Executive
- ---------------------------- Officer and Director December 27, 1996
Mohd A. Aslami
* Executive Vice President, Secretary and
- ---------------------------- Director and General Manager of Automated
Charles DeLuca Light Technologies, Inc. December 27, 1996
/s / Michael J. Beecher Chief Financial Officer and
- ---------------------------- Principal Accounting Officer December 27, 1996
Michael J. Beecher
*
- ---------------------------- Director December 27, 1996
Zaid Siddig
*
- ---------------------------- Director December 27, 1996
Steven Phillips
*
- ---------------------------- Director December 27, 1996
M. Mahmud Awan
* By Michael J. Beecher
Attorney-in-fact
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------------
<S> <C>
++2.1 Agreement And Plan Of Reorganization dated as of July 18, 1995 between Venturecap, Inc. AND
FiberCore Incorporated.
++2.2 Agreement of Merger dated as of July 18, 1995 between Venturecap and FiberCore Incorporated.
++2.3 Agreement and Plan of Reorganization dated as of September 18, 1995 between the Company Alt
Merger Co., and Automated Light Technologies, Inc. ("ALT").
P +2.4 Agreement dated February 13, 1987 between Norscan Instruments Ltd. and ALT.
+3.1 Certificate of Incorporation of FiberCore, Inc.
+3.2 By-Laws of FiberCore, Inc.
++5.1 Opinion of Coleman & Rhine LLP
p +10.1 Loan Agreement dated August 2, 1990 between ALT and Connecticut Innovations Incorporated
("CII").
P +10.2 Promissory Note issued by ALT to CII.
P +10.3 Security Agreement dated as of August 1990 between ALT and CII.
P +10.4 Subordination executed August 2, 1990 between CII, Mohd Aslami, and Charles DeLuca
P +10.5 Collateral Assignment and Security Agreement dated August 2, 1990 between ALT and
Connecticut Innovations Incorporated
P +10.6 Loan Agreement dated December 5, 1990 between ALT and the Connecticut Development Authority
("CDA").
P +10.7 Promissory Note dated December 5, 1990 issued by ALT to CDA.
P +10.8 Guaranty dated December 5, 1990 issued to CDA by Mohd Aslami and Charles DeLuca.
P +10.9 Collateral Assignment and Security Agreement dated December 5, 1990 between ALT and CDA.
P +10.10 Security Agreement dated as of December 5, 1990 between ALT and CDA.
P +10.11 Subordination dated November 5, 1990 between CDA, Mohd Aslami and Charles DeLuca.
P +10.12 Form of Warrant issued by ALT to CDA
P +10.13 Form of Warrant issued by Agreement between ALT to Connecticut Innovations Incorporated.
P +10.14 Form of Warrant issued by ALT.
P +10.15 Form of FiberCore Incorporated Warrant.
P +10.16 Assignment dated November 8, 1993 by Gregory Perry to FiberCore, Incorporated of U.S. Patent
No. 4,596,589.
P +10.17 Lease executed January 31, 1994 between Cobra Realty Trust, FiberCore, Incorporated, Mohd
Aslami and Charles DeLuca.
P +10.18 Agreement dated June 7, 1994 between Sico GmbH and FiberCore, Inc., to lease building and
equipment and to manufacture optical fiber and optical fiber preform.
P +10.19 Agreement dated August 19, 1995 between Sico GmbH and FiberCore Jena GmbH, with supplemental
agreement by Walter Nadrag.
P +10.20 Cooperation Agreement dated December 19,. 1995 between Sico Jena GmbH and FiberCore, Inc.
P +10.21 Lease dated August 19, 1995 between Sico Jena GmbH and FiberCore Jena GmbH.
P +10.22 Agreement dated January 25, 1996 between the Company, FiberCore Jena and Sico.
P +10.23 Share Purchase Agreement dated January 11, 1996 between the Company and Techman
International, Inc.
P +10.24 Escrow Agreement dated as of April 13, 1995 between FiberCore Incorporated, Middle East
Specialized Cables Co. ("MESC") and Shawmut Bank, N.A.
P +10.25 Escrow Amending Agreement dated September 15, 1995 between the Registrant, MESC and Shawmut
Bank, N.A.
<PAGE>
EXHIBIT
NUMBER
- ---------------
P +10.26 Share Purchase Agreement dated as of April 13, 1995 between FiberCore Incorporated and MESC.
P +10.27 Share Purchase Amending Agreement dated September 15, 1995 between the Registrant and MESC.
P +10.28 Convertible Debenture Purchase Agreement effective as of April 17, 1995 between AMP Incorporated
and FiberCore Incorporated, with form of Convertible Debenture Attached, as Exhibit A.
P +10.29 Cooperation Agreement dated June 17, 1994 between John Royle & Sons and FiberCore
Incorporated, with Amendment No. 1 executed on the same date.
++10.30 Warrant issued by the Registrant to Techman to purchase upto 550,696 shares of Common Stock.
P +10.31 Agreement dated July 1, 1994 between FiberCore Incorporated and FiberCore Jena GmbH.
P +10.32 Joint Venture Agreement dated January 31, 1996 between Middle East Optic Fiber Company
("MEOFC"), Royle Mid East Ltd. and FiberCore Mid East Ltd.
P +10.34 Joint Venture Agreement dated May 21, 1995 between the Company, Techman International, Inc.
and the other parties named therein.
P +10.35 International Distributor Agreement between Techman and the Company.
++10.36 Term Loan Agreement by and between FiberCore, Inc. as borrower and AMP Incorporated a lender
dated November 27, 1996.
++10.37 Term Promissory Note in the original principal amount of $3 million dated November 27, 1996.
++10.38 Amendment No. 1 to Convertible Debenture Purchase Agreement between FiberCore, Inc., as
borrower and AMP Incorporated as Lender dated November 27, 1996.
++10.39 Subsidiary Guarantee between FiberCore Glasfaser Jena GmbH and AMP Incorporated dated
November 27, 1996.
++10.40 Security Interest Agreement between FiberCore Glasfaser Jena GmbH and AMP Incorporated dated
November 27, 1996.
++10.41 Patent Security Agreement between FiberCore, Inc. and AMP Incorporated dated November 27,
1996.
++10.42 Warrant issued to AMP Incorporated to purchase shares of Common Stock of FiberCore, Inc.
dated November 27, 1996.
++10.43 Amended and Restated Convertible Debenture dated April 17, 1995.
++10.44 Voting Agreement between FiberCore, Inc., AMP Incorporated, Mohd Aslami, Charles DeLuca and
Dr. M. Mahmud Awan dated November 27, 1996.
P +10.45 Copy of patents purchased from Sico Jena GmbH.
+10.46 Supply contract between AMP Incorporated and the Registrant dated July 28, 1996. The Company
has requested that the Commission grant confidential treatment for this contract.
+22 List of subsidiaries of FiberCore, Inc.
++23.1 Consent of Mottle McGrath Braney & Flynn, P.C. independent auditors.
++23.2 Consent of Dwayne Midgley, independent accountants.
++23.3 Consent of Coleman & Rhine LLP (contained in the opinion filed as Exhibit 5.1)
+25 Power of Attorney (contained on the signature page)
++27 Financial Data Schedule
</TABLE>
+ Previously filed
++ Filed herewith
AGREEMENT AND PLAN OF REORGANIZATION
Between
Venturecap, Inc.
And
FiberCore Incorporated
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
RECITALS .........................................................................................................1
ARTICLE 1. DEFINITIONS............................................................................................1
1.1 Certain Definitions.............................................................................1
1.2 Other Definitions...............................................................................2
ARTICLE 2. THE MERGER.............................................................................................2
2.1 Effective Time of the Merger....................................................................2
2.2 Effects of the Merger...........................................................................2
2.3 Effect on Capital Stock.........................................................................3
2.4 Exchange of Certificates........................................................................4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF FIBERCORE............................................................5
3.1 Organization and Standing.......................................................................5
3.2 Capital Structure...............................................................................5
3.3 Authority.......................................................................................6
3.4 Brokers or Finders..............................................................................6
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF VENTURECAP...........................................................6
4.1 Organization....................................................................................6
4.2 Capital Structure...............................................................................6
4.3 Authority.......................................................................................7
4.4 No Violation or Conflict........................................................................7
4.5 Consent of Governmental Authorities.............................................................8
4.6 Information and Disclosure Statement............................................................8
4.7 Information Supplied............................................................................8
4.8 Shares of Common Stock..........................................................................8
4.9 Litigation......................................................................................9
4.10 Environmental Liability.........................................................................9
4.11 Subsidiaries....................................................................................9
4.12 Property........................................................................................9
4.13 Prior Activities................................................................................9
4.14 Tax Matters.....................................................................................9
4.15 Financial Statements...........................................................................10
4.16 Employee Matters...............................................................................11
4.17 Employee Benefit Plans.........................................................................11
4.18 Bank Accounts..................................................................................11
4.19 Brokers or Finders.............................................................................11
4.20 Public Filings.................................................................................11
i
<PAGE>
4.21 Compliance With Laws...........................................................................11
ARTICLE 5. COVENANTS RELATING TO CONDUCT OF BUSINESS.............................................................12
5.1 Dividends; Changes in Stock....................................................................12
5.2 Issuance of Securities.........................................................................12
5.3 Governing Documents............................................................................12
5.4 Accounting Practices...........................................................................12
5.5 Other Agreements...............................................................................12
5.6 Liabilities....................................................................................13
5.7 Dividends; Changes in Stock....................................................................13
5.8 Agreements.....................................................................................13
5.9 Issuance of Securities.........................................................................13
5.10 No Dispositions................................................................................13
5.11 Governing Documents............................................................................13
5.12 No Acquisitions................................................................................13
5.13 Accounting Practices...........................................................................14
5.14 Other Agreements...............................................................................14
5.15 Recapitalization...............................................................................14
ARTICLE 6. OMITTED ..............................................................................................14
ARTICLE 7. ADDITIONAL AGREEMENTS.................................................................................14
7.1 Legal Conditions to the Merger.................................................................14
7.2 Shareholders' Approval.........................................................................14
7.3 Delivery of Stock Certificates.................................................................14
7.4 Tax Treatment..................................................................................15
7.5 Board of Directors.............................................................................15
ARTICLE 8. CONDITIONS PRECEDENT..................................................................................15
8.1 Conditions to Each Party's Obligations to Effect the
Merger.........................................................................................15
8.2 Conditions to Obligations of Venturecap........................................................16
8.3 Conditions to Obligations of FiberCore.........................................................17
ARTICLE 9. OMITTED ..............................................................................................18
ARTICLE 10. CLOSING..............................................................................................18
10.1 Closing Date...................................................................................18
10.2 Filing Date....................................................................................18
ARTICLE 11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
.......................................................................................................19
ii
<PAGE>
ARTICLE 12. PAYMENT OF EXPENSES..................................................................................19
12.1 Payment of Expenses...........................................................................19
ARTICLE 13. TERMINATION, AMENDMENT AND WAIVER....................................................................20
13.1 Termination....................................................................................21
13.2 Effect of Termination..........................................................................21
13.3 Amendment......................................................................................21
13.4 Extension; Waiver..............................................................................21
ARTICLE 14. LIMITATION ON LIABILITY..............................................................................22
14.1 Liabilities of FiberCore.......................................................................22
ARTICLE 15. GENERAL..............................................................................................22
15.1 Notices........................................................................................22
15.2 Headings.......................................................................................23
15.3 Counterparts...................................................................................23
15.4 Binding Nature.................................................................................23
15.5 Other Agreements...............................................................................23
15.6 Good Faith.....................................................................................23
15.7 Applicable Law.................................................................................23
15.8 No Third Party Beneficiaries...................................................................23
15.9 Severability...................................................................................23
iii
</TABLE>
<PAGE>
SCHEDULES
Schedule 3.2 Outstanding Equity Securities of FiberCore
Schedule 4.11 Subsidiaries of Venturecap
Schedule 4.13 Liabilities of Venturecap
Schedule 4.14 Taxes
Schedule 4.15(a) Annual Financial Statements
Schedule 4.15(b) April Financial Statements
Schedule 4.16 Venturecap Employees
Schedule 4.18 Bank Accounts
Schedule 4.20 Venturecap Documents Filed with Regulators
iv
<PAGE>
EXHIBITS
Exhibit A Merger Agreement
Exhibit B Certificate of Incorporation of Surviving Corporation
Exhibit C Bylaws of Surviving Corporation
Exhibit D Directors of Surviving Corporation
Exhibit E Officers of Surviving Corporation
Exhibit F Opinion of Venturecap's Counsel
Exhibit G Form of Principals' Letter
Exhibit H Certificate of Duane Midgley
v
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT is made and entered into as of the 18th day of July,
1995, by and among Venturecap, Inc., a Nevada corporation ("Venturecap"), and
FiberCore Incorporated a Nevada corporation ("FiberCore").
RECITALS
A. The respective Boards of Directors of Venturecap and FiberCore have
approved the merger of FiberCore with and into Venturecap (the "Merger"), upon
the terms and subject to the conditions set forth herein and in the Merger
Agreement annexed as Exhibit A (the "Merger Agreement"), as a result of which
FiberCore will be merged into Venturecap and the shareholders of FiberCore
(other than shareholders who perfect appraisal rights) will be entitled to
receive the consideration provided in this Agreement.
B. The parties hereto desire to set forth certain representations,
warranties and covenants made by Venturecap to FiberCore, and by FiberCore to
Venturecap, and the conditions precedent to the consummation of the Merger.
C. The Boards of Directors of Venturecap and FiberCore, respectively,
have approved and adopted this Agreement and the Merger as a plan of
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants herein contained, Venturecap and FiberCore
hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Certain Definitions. The terms defined in this Section 1.1 shall, for all
purposes of this Agreement, have the meanings herein specified, unless the
context expressly or by necessary implication otherwise requires:
<PAGE>
(a) "Dissenting Shares" shall mean shares of FiberCore Capital Stock
which shall be owned by shareholders who shall duly perfect and pursue their
appraisal rights with respect to such shares in accordance with the Nevada
Corporation Law.
(b) "Dissenting Shareholders" shall mean those shareholders of
FiberCore who are holders of and are entitled to Dissenting Shares.
(c) "SEC" shall mean the Securities and Exchange Commission.
(d) "FiberCore Capital Stock" means the common stock of FiberCore, par
value $0.01 per share.
(e) "FiberCore Shareholders" shall mean all holders of FiberCore
Capital Stock immediately prior to the Effective Time of the Merger.
(f) "Subsidiary" means a corporation whose voting securities are owned
directly or indirectly by a "parent" corporation in such amounts as are
sufficient to elect at least a majority of the Board of Directors of the
Subsidiary.
(g) "Venturecap Common" means the common stock of Venturecap, par value
$.001 per share.
1.2 Other Definitions. In addition to the terms defined in Section 1.1, certain
other terms are defined elsewhere in this Agreement; whenever such terms are
used in this Agreement they shall have their respective defined meanings, unless
the context expressly or by necessary implication otherwise requires.
ARTICLE 2.
THE MERGER
2.1 Effective Time of the Merger. Subject to the provisions of this Agreement,
the Articles of Merger, together with all other required certificates, shall be
filed in accordance with the Nevada Revised Statutes as soon as practicable on
or after the Closing Date (as defined in Section 10.1 of this Agreement). The
Merger shall become effective upon the filing of such certificates with the
Nevada Secretary of State (the "Effective Time of the Merger").
2
<PAGE>
2.2 Effects of the Merger. At the Effective Time of the Merger:
(a) the separate existence of FiberCore shall cease and FiberCore shall
be merged with and into Venturecap as the surviving corporation (the "Surviving
Corporation").
(b) the Certificate of Incorporation and By-laws of the Surviving
Corporation shall be in the form attached to this Agreement as Exhibit B and
Exhibit C, respectively; and
(c) the persons listed on Exhibit D shall be the directors of the
Surviving Corporation, and shall continue to act as such, until their respective
successors are duly elected and qualified, and the persons listed on Exhibit E
shall hold the offices in the Surviving Corporation listed next to their names
until their respective successors are duly elected and qualified.
2.3 Effect on Capital Stock. As of the Effective Time of the Merger, by virtue
of the Merger and without any action on the part of the holder of any shares of
the issued and outstanding shares of FiberCore Capital Stock:
(a) Cancellation of FiberCore Stock Owned by Venturecap or FiberCore.
All shares of FiberCore Capital Stock, if any, that are owned by FiberCore or
directly or indirectly by Venturecap, or any Subsidiary of Venturecap, shall be
canceled, and no stock of Venturecap or other consideration shall be delivered
in exchange therefor.
(b) Conversion of FiberCore Capital Stock and Options. Other than
shares to be canceled pursuant to Section 2.3(a), Dissenting Shares and
fractional shares as provided in Section 2.3(e), each share of FiberCore Capital
Stock issued and outstanding immediately prior to the Effective Time of the
Merger shall be converted, without any action on the part of the holders
thereof, into 3.6713070 shares (hereinafter, the "Exchange Ratio" or the "Per
Share Merger Consideration") of issued and outstanding Venturecap Common. An
aggregate of 24,250,000 shares of Venturecap Common will be issued in the Merger
if all 6,605,277 shares of FiberCore Capital Stock outstanding prior to the
Effective Time of the Merger are converted into shares of Venturecap Common.
With respect to unexpired options ("Options") or warrants ("Warrants") or
convertible securities ("Convertible Securities"), whether or not
3
<PAGE>
exercisable or convertible, as the case may be, at the Effective Time of the
Merger, outstanding on the Effective Time of the Merger which have been issued
by FiberCore, each such Option or Warrant or Convertible Security shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive, for each share of FiberCore Capital
Stock subject thereto, the Per Share Merger Consideration upon payment of the
exercise price specified in such Option or Warrant or conversion price specified
in such Convertible Security subject to the expiration date and other terms of
such Options or Warrants or Convertible Securities.
(c) Adjustments of Exchange Ratio. If, between the date of this
Agreement and the Effective Time of the Merger, the outstanding shares of
Venturecap Common or FiberCore Capital Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, not contemplated by this Agreement, the Exchange Ratio shall be
correspondingly adjusted.
(d) Dissenters' Rights of FiberCore Shareholders. Any Dissenting Shares
shall not be converted into Venturecap Common but shall be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to the Nevada Revised Statutes. In the event
of the legal obligation, after the Effective Time of the Merger, to deliver
shares of Venturecap Common to any Dissenting Shareholder who shall have failed
to make an effective demand for appraisal or shall have lost his status as a
Dissenting Shareholder, Venturecap shall issue and deliver, upon surrender by
such Dissenting Shareholder of his certificate or certificates representing
shares of FiberCore Capital Stock, the shares of Venturecap Common to which such
Dissenting Shareholder is then entitled under this Section 2.3, and the Nevada
Revised Statutes.
(e) Fractional Shares. No fractional shares of Venturecap Common shall
be issued, but in lieu thereof each holder of shares of FiberCore Capital Stock
who would otherwise be entitled to receive a fraction of a share of Venturecap
Common shall receive a whole share of Venturecap Common.
2.4 Exchange of Certificates.
4
<PAGE>
(a) Exchange Procedures. On and after the Effective Time of the Merger
each holder of a certificates representing outstanding shares of FiberCore
Capital Stock (the "Certificates"), shall be entitled to receive upon the
surrender of such Certificates to an office of the Surviving Corporation
designated for the purpose the number of shares of Venturecap Common to which
the holder of FiberCore Capital Stock is entitled pursuant to Section 2.3 of
this Agreement and is represented by the Certificates so surrendered. The
Certificates so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of FiberCore Capital Stock which is not registered in the
transfer records of FiberCore, the appropriate number of shares of Venturecap
Common may be delivered to a transferee if the Certificate representing the
right to receive such Venturecap Common is presented to Venturecap and
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.4, each Certificate shall be
deemed at any time after the Effective Time of the Merger to represent the right
to receive upon such surrender the number of shares of Venturecap Common as
provided by Section 2.3 and the provisions of the Nevada Corporation Law.
(b) No Further Ownership Rights in FiberCore Capital Stock. All
Venturecap Common delivered upon the surrender for exchange of shares of
FiberCore Capital Stock in accordance with the terms hereof shall be deemed to
have been delivered in full satisfaction of all rights pertaining to such shares
of FiberCore Capital Stock. There shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
FiberCore Capital Stock which were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 2.
5
<PAGE>
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF FIBERCORE
FiberCore represents and warrants to Venturecap as of the date hereof
and as of the Closing as follows:
3.1 Organization and Standing. FiberCore is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation, and has the full power and authority (corporate and otherwise) to
carry on its business in the places and as it is now being conducted and to own
and lease the properties and assets which it now owns or leases.
3.2 Capital Structure. The authorized capital stock of FiberCore consists of
20,000,000 shares of FiberCore Capital Stock, of which 6,605,277 are issued and
outstanding. All of the outstanding shares of FiberCore Capital Stock were
issued in compliance with applicable federal and state securities laws, and no
further registration, qualification or other compliance under such securities
laws is required. All of the outstanding shares of FiberCore Capital Stock are
validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, FiberCore's Articles of Incorporation or Bylaws or
any agreement to which FiberCore is a party or is bound. Except for the
foregoing, and as set forth on Schedule 3.2 there are no equity securities of
any class of FiberCore or any security exchangeable or convertible into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth on Schedule 3.2, there are no options,
warrants, calls, rights, commitments or agreements of any character to which
FiberCore is a party or by which it is bound obligating FiberCore to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of FiberCore or obligating FiberCore to grant, extend or enter
into any such option, warrant, call, right, commitment or agreement.
3.3 Authority. FiberCore has all requisite corporate power and authority to
enter into this Agreement and, subject to approval of this Agreement by the
shareholders of FiberCore, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
6
<PAGE>
Directors of FiberCore, subject to such approval by the shareholders of
FiberCore. This Agreement has been duly executed and delivered by FiberCore and,
subject to such approval by the shareholders of FiberCore, constitutes a valid
and binding obligation of FiberCore, enforceable against FiberCore in accordance
with its terms, except to the extent that their enforcement is limited by
bankruptcy, insolvency, reorganization or other laws relating to or affecting
the enforcement of creditors' rights generally and by general principles of
equity.
3.4 Brokers or Finders. Except with respect to the Armand Group, FiberCore has
not incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders' fees or agents commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF VENTURECAP
Venturecap represents and warrants to FiberCore as of the date hereof
and as of the Closing as follows:
4.1 Organization. Venturecap is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation. Venturecap
has the corporate authority to (A) own or lease and operate its properties and
(B) conduct its business as presently conducted.
4.2 Capital Structure. The authorized capital stock of Venturecap presently
consists of 20,000,000 shares of Venturecap Common, of which 955,451 shares are
issued and outstanding. As set forth in Section 5.15 prior to the Effective Time
of the Merger the authorized capital stock of Venturecap will be increased to
100,000,000 shares of Venturecap Common and 10,000,000 shares of preferred
stock, par value $.001 per share; and Venturecap will effect a reverse stock
split so that 750,000 shares of Venturecap Common will be outstanding. All of
the outstanding shares of Venturecap Common Stock were issued in compliance with
applicable federal and state securities laws, no further registration,
qualification or other compliance under such securities laws is required. No
shareholder or group of shareholders of Venturecap could be characterized as an
underwriter under the Securities Act
<PAGE>
of 1933, as amended, and all shareholders of Venturecap received their stock in
private offerings. All of the outstanding shares of Venturecap Common are
validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, Venturecap's Articles of Incorporation or Bylaws or
any agreement to which Venturecap is a party or is bound. Except for the
foregoing and except as set forth in Section 5.15, there are no equity
securities of any class of Venturecap or any security exchangeable or
convertible into or exercisable for such equity securities, issued, reserved for
issuance or outstanding. There are no options, warrants, calls, rights,
commitments or agreements of any character to which Venturecap or any Subsidiary
of Venturecap is a party or by which any of them is bound obligating Venturecap,
or such Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of Venturecap, or such Subsidiary or
obligating Venturecap or such Subsidiary to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. There are no voting
trusts or other agreements or understandings with respect to the shares of
capital stock of Venturecap or any Subsidiary of Venturecap.
4.3 Authority. Venturecap has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Venturecap. This Agreement has been duly executed and delivered by
Venturecap and constitutes a valid and binding obligation of Venturecap,
enforceable against Venturecap in accordance with its terms, except to the
extent that its enforcement is limited by bankruptcy, insolvency, reorganization
or other laws relating to or affecting the enforcement of creditors' rights
generally and by general principles of equity.
4.4 No Violation or Conflict. The execution, delivery and performance by
Venturecap of this Agreement and the Merger Agreement and the consummation by
Venturecap of the transactions contemplated hereby and thereby: (A) do not and
will not violate or conflict with any provision of law or regulation, or any
writ, order, judgment or decree of any court or governmental or regulatory
authority, or any provision of Venturecap's Articles of Incorporation or Bylaws;
and (B) do not and will not, with or without the passage of time or the giving
of notice, result in the
<PAGE>
breach of, or constitute a default, cause the acceleration of performance, or
require any consent under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of Venturecap pursuant to any material
instrument or agreement to which Venturecap is a party or by which Venturecap or
its properties may be bound or affected.
4.5 Consent of Governmental Authorities. Other than in connection with the
Nevada Revised Statutes, no consent, approval or authorization of, or
registration, qualification or filing with any federal, state, local or foreign
governmental or regulatory authority is required to be made by Venturecap or any
of its Subsidiaries in connection with the execution, delivery or performance by
Venturecap of this Agreement and the Merger Agreement or the consummation by
Venturecap of the transactions contemplated hereby or thereby.
4.6 Information and Disclosure Statement. As of the respective dates they were
filed, the Information and Disclosure Statements filed by Venturecap, including
all documents attached thereto, complied in all material respects with the rules
and regulations of the SEC and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. No material changes have occurred in
the financial condition of Venturecap since the Information and Disclosure
Statement was filed.
4.7 Information Supplied. As of the date of this Agreement and at all times
subsequent thereto until the Closing Date none of the information provided or to
be provided by Venturecap to FiberCore in writing in connection with the
transactions contemplated by this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.8 Shares of Common Stock. The shares of Venturecap Common will, when issued
and delivered to the shareholders of FiberCore in accordance with this
Agreement, be duly authorized, validly issued,
<PAGE>
fully paid and nonassessable, and subject to no encumbrances of any kind.
4.9 Litigation. Venturecap is not and never has been a party to any litigation
and no litigation has been ever been threatened against Venturecap.
4.10 Environmental Liability. Venturecap (i) does not come within the scope of
42 U.S.C. 9607(a)(1) through (a)(4); (ii) could not be liable for or incur
response costs or similar costs under 42 U.S.C. 9607 (including costs and
damages listed under 42 U.S.C. 9607(A)- (D)), or any other similar statute, or
regulation when and if such costs are incurred by the United States Government,
or another person or entity; or (iii) could not incur any liability, or costs
associated with reclaiming, decontaminating or restoring any property including
land, real property or personal property relating to any environmental statute
based on past activity, ownership, status, affiliations or otherwise.
4.11 Subsidiaries. Venturecap does not now have nor has it ever had Subsidiaries
or equity investments of any kind.
4.12 Property. Neither Venturecap nor any of its Subsidiaries has ever owned or
leased any real property. There are no liens or encumbrances of any kind on the
assets or properties of Venturecap or any of its Subsidiaries.
4.13 Prior Activities. Except as set forth in Schedule 4.13, neither Venturecap
nor any of its Subsidiaries has any liabilities whether contingent, liquidated,
unliquidated, matured, unmatured, or otherwise, nor is Venturecap a party to any
agreements, or contracts, whether written or oral. Except as set forth on
Schedule 4.13 neither Venturecap nor any of its Subsidiaries has engaged in any
business or activities of any type or kind whatsoever and neither is subject to
or bound by any obligation or undertaking which are not contemplated by this
Agreement or incurred in connection with its incorporation.
4.14 Tax Matters. All tax returns and other similar documents (collectively,
"Returns") required to be filed with respect to Venturecap or any of its
Subsidiaries have been timely filed with the appropriate governmental
authorities in all jurisdictions in which such returns and documents are
required to be filed, all of
<PAGE>
the foregoing as filed are true, correct and complete in all material respects
and reflect accurately all liabilities for taxes of Venturecap and its
Subsidiaries for the periods to which such returns and documents relate, and all
amounts shown as owing thereon have been paid. All Returns are attached hereto
as part of Schedule 4.14. All material, profits, franchise, sales, use, value
added, occupancy, property, excise, payroll, FICA, FUTA and other taxes
(including interest and penalties), if any, collectible or payable by Venturecap
and its Subsidiaries or relating to or chargeable against any of their assets,
revenues or income through December 31, 1994 were fully collected and paid by
such date or provided for by adequate reserves in Venturecap's December 31, 1994
financial statements. No claims or deficiencies have been asserted against
Venturecap or any Subsidiary with respect to any taxes or other governmental
charges or levies which have not been paid or otherwise satisfied or for which
accruals or reserves have not been made in Venturecap' December 31, 1994
financial statements, there exists no reasonable basis for the making of any
such claims. Except as disclosed on Schedule 4.14, neither Venturecap nor any of
its Subsidiaries have waived any restrictions on assessment or collection of
taxes or consented to the extension of any statute of limitations relating to
taxation.
4.15 Financial Statements. (a) The audited balance sheets of Venturecap and its
Subsidiaries as at December 31, 1987, December 31, 1988, December 31, 1989,
December 31, 1990, December 31, 1991, December 31, 1992, December 31, 1993 and
December 31, 1994 and the related audited statements of income, stockholders'
equity and cash flows for the respective years then ended, including the notes
thereto, and the reports thereon of Duane Midgley, independent certified public
accountants (the "Company Financial Statements"), are attached hereto as
Schedule 4.15(a). The Company Financial Statements present fairly the
consolidated financial position and the results of operations of Venturecap and
its Subsidiaries as of the dates and for the periods indicated on the Company
Financial Statements, in each case in conformity with generally accepted
accounting principles ("GAAP"), consistently applied during such periods.
Venturecap and its Subsidiaries do not have any material liabilities or
obligations of any nature (whether accrued, absolute, contingent, unasserted or
otherwise) except (1) as disclosed, reflected or reserved against in the balance
sheet dated December 31, 1994 included in the Company Financial Statements and
<PAGE>
the notes thereto and (2) for items explicitly disclosed in the Interim
Financial Statements (as defined below).
(b) Attached hereto as Schedule 4.15(b) is the balance sheet
(the "April Balance Sheet") of Venturecap as of April 30, 1995 (the "Balance
Sheet Date") and the related statements of income, stockholders' equity and cash
flows for the four-month period then ended (the "Interim Financial Statements").
The Interim Financial Statements present fairly, in all material respects, the
financial position and results of operations of Venturecap and its Subsidiaries
as of the dates and for the periods indicated on the Interim Financial
Statements, in accordance with GAAP, consistently applied with prior periods,
except that the Interim Financial Statements do not contain footnotes and will
be subject to normal year-end adjustments. At the Effective Time of the Merger,
Venturecap will have no liabilities of any kind.
4.16 Employee Matters. Venturecap and its Subsidiaries have no employees, and
except as set forth in Schedule 4.16 have never paid or owed compensation to any
officers, directors or employees, consultants or contractors person for services
performed. There are no employment contracts in effect with respect to
Venturecap.
4.17 Employee Benefit Plans. (A) There are not now nor have there ever been any
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, other employee benefit plan,
program, agreement or arrangement (other than arrangements involving the payment
of wages), sponsored, maintained or contributed to or required to be contributed
to by Venturecap or any of its Subsidiaries or by any trade or business, whether
or not incorporated (an "ERISA Affiliate") that together with Venturecap or any
of its Subsidiaries would be deemed a "single employer" within the meaning of
section 4001(a)(14) of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder ("ERISA"), for the
benefit of any current or former employee, director or officer of Venturecap or
any of its Subsidiaries or any ERISA Affiliate, whether formal or informal and
whether legally binding or not (the "Plans") with respect to which Venturecap or
any of its Subsidiaries or any ERISA Affiliate has or may in the future have
<PAGE>
any liability or obligation to contribute or make payments of any kind.
(B) No liability under Title IV of ERISA has been incurred by
Venturecap or any of its Subsidiaries or any ERISA Affiliate since the effective
date of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to Venturecap or any of its Subsidiaries or an ERISA
Affiliate of incurring a liability under such Title,
4.18 Bank Accounts. Schedule 4.18 includes a list of all bank accounts and safe
deposit boxes in the name of or controlled by Venturecap within the last 24
months or any of their Subsidiaries and the persons having access thereto.
4.19 Brokers or Finders. Venturecap has not and shall not incur, directly or
indirectly, any liability for any brokerage or finders' fees or agents
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
4.20 Public Filings. Attached hereto as Schedule 4.20 are copies of all
documents filed by Venturecap with state or federal securities regulators,
agencies or departments and all Information Disclosure Statements filed by
Venturecap.
4.21 Compliance With Laws. Neither Venturecap nor its officers or directors have
committed any acts, made any statements, failed to timely file any documents,
failed to timely comply with any NASD rules, failed to timely publicly disclose
any information, or failed to do any other acts, which acts or failures to act
could give rise to any liability, or cause of action whatsoever (whether by a
public entity or a private person) under state or federal securities or fraud
statutes or regulations, or under any other statutes or regulations.
ARTICLE 5.
COVENANTS RELATING TO CONDUCT OF BUSINESS
During the period from the date of this, FiberCore agrees (except as
expressly contemplated by this Agreement or to the extent that Venturecap shall
otherwise consent in writing) that:
<PAGE>
5.1 Dividends; Changes in Stock. FiberCore shall not: (i) declare, pay or
promise to pay any dividends on or make other distributions in respect of any of
its capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of FiberCore or (iii)
repurchase or otherwise acquire any shares of its capital stock.
5.2 Issuance of Securities. FiberCore shall not issue, deliver or sell or
authorize, promise or propose the issuance, delivery or sale of, or purchase or
promise or propose the purchase of, any shares of its capital stock or any class
or securities exercisable or convertible into or exchangeable for, or rights,
warrants or options to acquire, any such shares or other convertible securities,
other than at fair value.
5.3 Governing Documents. FiberCore shall not amend its Articles of Incorporation
or Bylaws, except as contemplated in this Agreement or the Merger Agreement.
5.4 Accounting Practices. FiberCore shall not alter the manner of keeping its
books, accounts or records, or change in any manner the accounting practices
therein reflected.
5.5 Other Agreements. FiberCore shall not agree, in writing or otherwise, to do
any of the foregoing.
During the period from the date of this Agreement and continuing until
the Effective Time of the Merger, Venturecap agrees (except as expressly
contemplated by this Agreement or to the extent that FiberCore shall otherwise
consent in writing) that:
5.6 Liabilities. Venturecap will not incur liabilities of any kind whatsoever,
including, but not limited to, matured, unmatured, liquidated, unliquidated,
contingent liabilities, other than liabilities not to exceed $1,000 arising from
consummation of this Agreement. Venturecap will not conduct any business, other
than business necessary to consummate the transactions contemplated by this
Agreement.
5.7 Dividends; Changes in Stock. Venturecap shall not: (i) declare, pay or
promise to pay any dividends on or make other
<PAGE>
distributions in respect of any of its capital stock, (ii) split, reverse split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of Venturecap or (iii) repurchase or otherwise
acquire any shares of its capital stock, except as specified in Section 5.15.
5.8 Agreements. Venturecap shall not enter into any agreements or contracts,
whether oral or written.
5.9 Issuance of Securities. Venturecap shall not issue, deliver or sell or
authorize, promise or propose the issuance, delivery or sale of, or purchase or
promise or propose the purchase of, any shares of its capital stock or any class
or securities exercisable or convertible into or exchangeable for, or rights,
warrants or options to acquire, any such shares or other convertible securities.
5.10 No Dispositions. Venturecap shall not sell, lease, transfer or otherwise
dispose of any of its assets, including but not limited to, the granting of
liens or security interests.
5.11 Governing Documents. Venturecap shall not amend its Articles of
Incorporation or Bylaws, except as contemplated in this Agreement or the Merger
Agreement.
5.12 No Acquisitions. Venturecap shall not acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business of any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets except with the prior written consent of
FiberCore.
5.13 Accounting Practices. Venturecap shall not alter the manner of keeping its
books, accounts or records, or change in any manner the accounting practices
therein reflected.
5.14 Other Agreements. Venturecap shall not agree, in writing or otherwise, to
do any of the foregoing.
<PAGE>
5.15 Recapitalization. Venturecap shall effect a 1.27393466 to 1 reverse stock
split so that immediately prior to the Effective Time of the Merger 750,000
shares will be outstanding and increase its authorized capital to 100,000,000
shares of Venturecap Common, and authorize the issuance of 10,000,000 shares of
preferred stock, par value $.01 per share, the terms of which shall be
determined by the Board of Directors of Venturecap after the Effective Time of
the Merger.
ARTICLE 6.
OMITTED
ARTICLE 7.
ADDITIONAL AGREEMENTS
7.1 Legal Conditions to the Merger. Each party will take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to the Merger and will promptly cooperate with and
furnish information to the other party in connection with any such requirements
imposed upon such other party in connection with the Merger. Each party will
take all reasonable actions to obtain (and to cooperate with the other party)
any consent, authorization, order or approval of, or any exemption by, any
governmental entity, or other third party, required to be obtained or made by
such party or its Subsidiaries in connection with the Merger or the taking of
any action contemplated thereby or by this Agreement.
7.2 Shareholders' Approval. Venturecap and FiberCore each agree to submit this
Agreement and any related matters to their respective shareholders for approval,
as provided by law and their respective Articles of Incorporation and Bylaws,
immediately following the execution of this Agreement. The Board of Directors of
each of Venturecap and FiberCore will unanimously recommend to their respective
shareholders that such shareholders approve the transactions contemplated by
this Agreement.
7.3 Delivery of Stock Certificates. Venturecap will issue and deliver as and
when required by the provisions of this Agreement, certificates representing the
shares of Venturecap Common into which the shares of FiberCore Capital Stock
outstanding immediately
<PAGE>
prior to the Effective Time of the Merger shall have been converted as provided
herein and deliver substitute option and warrants into which the options and
warrants outstanding immediately prior to the Effective Time of the Merger shall
have been converted as provided herein.
7.4 Tax Treatment. FiberCore and Venturecap shall use best efforts to qualify
the Merger, and shall use best efforts not to take any action to cause the
Merger not to qualify, as a reorganization under Section 368(a) of the Code.
From and after the Effective Time of the Merger, (i) Venturecap shall continue
FiberCore's historic business or use a significant portion of FiberCore's
historic business assets in a business within the meaning of Treasury Regulation
Section 1.368-1(d), and (ii) Venturecap shall treat the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code and shall file
such information with its income tax returns as may be required by Treasury
Regulation Section 1.368-3 or other applicable law.
7.5 Board of Directors. Venturecap will cause the persons listed in Exhibit D to
be the only members of its Board of Directors immediately following the Closing.
ARTICLE 8.
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligations to Effect the Merger. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by the required affirmative vote or consent of (i) the holders of the
outstanding shares of FiberCore Capital Stock and (ii) the holders of the
outstanding shares of Venturecap Common.
(b) Government Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expira tion of waiting periods
imposed by, any governmental entity necessary for the consummation of the
transactions contemplated by this Agreement including, but not limited to, such
requirements
<PAGE>
under applicable state securities laws, shall have been filed, occurred or been
obtained, other than filings with and approvals by foreign governments relating
to the Merger if failure to make such filings or obtain such approvals would not
be materially adverse to Venturecap or its Subsidiaries taken as a whole, or
FiberCore.
(c) Third-Party Approvals. Any and all consents or approvals required
from third parties shall have been obtained.
(d) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against FiberCore or Venturecap of substantial damages
if the Merger is consummated, shall be pending which, in the good faith judgment
of FiberCore's or Venturecap's Board of Directors has a reasonable probability
of resulting in such order, injunction or damages. In the event any such order
or injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(e) Statutes. No statute, rule or regulation shall have been enacted by
the government of the United States or any state or agency thereof which would
make the consummation of the Merger illegal.
8.2 Conditions to Obligations of Venturecap. The obligations of Venturecap to
effect the Merger are subject to the satisfaction on or prior to the Closing
Date of the following conditions, unless waived by Venturecap:
(a) Representations and Warranties. The representations and warranties
of FiberCore set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date,
and Venturecap shall have received a certificate or certificates to such effect
signed by the Chief Executive Officer of FiberCore.
(b) Performance of Obligations of FiberCore. FiberCore shall have
performed in all material respects all obligations required to be performed by
it under this Agreement prior to the Closing Date,
<PAGE>
and Venturecap shall have received a certificate signed by the Chief Executive
Officer of FiberCore to such effect.
(c) Corporate Action. Venturecap shall have received from FiberCore
certified copies of resolutions of FiberCore's shareholders and Board of
Directors approving and adopting this Agreement and the transactions
contemplated hereby, and Venturecap shall have received a certificate signed on
behalf of FiberCore by the corporate secretary of FiberCore to such effect.
8.3 Conditions to Obligations of FiberCore. The obligations of FiberCore to
effect the Merger are subject to the satisfaction on or prior to the Closing
Date of the following conditions unless waived by FiberCore:
(a) Representations and Warranties. The representations and warranties
and covenants of Venturecap set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date, and FiberCore shall have received a certificate signed by the
Chief Executive Officer of Venturecap to such effect.
(b) Performance of Obligations of Venturecap. Venturecap shall have
performed all obligations required to be performed by it under this Agreement
prior to the Closing Date, and FiberCore shall have received a certificate
signed by the Chief Executive Officer of Venturecap to such effect.
(c) Opinion of Venturecap's Counsel. FiberCore shall have received an
opinion dated the Closing Date of Leonard Nielsen, counsel to Venturecap,
substantially in the form set forth in Exhibit F attached hereto.
(d) No Adverse Tax Opinion. FiberCore shall not have obtained an
opinion of counsel, who shall be reasonably satisfactory to Venturecap, that the
exchange of shares contemplated by the Merger will not be tax-free to the
exchanging holders of FiberCore Capital Stock.
(e) Corporate Action. FiberCore shall have received from Venturecap
certified copies of resolutions of such entities' shareholders and of such
entities Boards of Directors approving and adopting this Agreement and the
transactions contemplated hereby,
<PAGE>
and FiberCore shall have received a certificate signed on behalf of each such
entity by the corporate secretary of each such entity to such effect. FiberCore
shall have also received a Report of Inspector of Elections setting forth the
vote of Venturecap shareholders relating to the shareholder meeting at which the
Merger is approved (the "Shareholder Meeting") and an affidavit by the person
mailing the notices of the shareholder meeting of the Shareholder Meeting,
setting forth the list of shareholders to whom notices of the Shareholder's
Meeting were mailed, the date of the mailing and attaching the complete contents
of the mailing.
(f) Venturecap 1995 Financial Statements. Venturecap shall have
furnished to FiberCore the balance sheets of Venturecap as of June 30, 1995 and
related statements of earnings, shareholders' equity and statements of cash
flows for the year then ended, certified by Duane Midgley, independent certified
public accountants which shall not reflect a material adverse change from
Venturecap's projected June 30, 1995 financial statements.
(g) Board of Directors. Venturecap shall have taken all action
necessary to cause the persons listed on Exhibit D hereto to constitute its
Board of Directors immediately after the closing.
(h) Principals' Letter. James R. Glavas shall have delivered the
Principals' Letter attached hereto as Exhibit G.
(i) Accountants Letter. Duane Midgley shall have delivered the
certificate attached as Exhibit H to FiberCore.
(j) Recapitalization. Venturecap shall have effected the
recapitalization set forth in Section 5.15 hereof.
(k) Appraisal Rights. Holders of no more than 5% of the outstanding
shares of Venturecap shall have commenced pursuit of their rights for demand for
payment or appraisal under the Nevada Revised Statutes.
(l) By-Laws. Venturecap shall have adopted the current By- Laws of
FiberCore.
ARTICLE 9.
OMITTED
<PAGE>
ARTICLE 10.
CLOSING
10.1 Closing Date. The Closing under this Agreement (the "Closing") shall be
held not more than two (2) business days following the later of (a) the approval
of the Merger by the shareholders of FiberCore; (b) approval of the Merger by
the shareholders of Venturecap and (c) satisfaction of all other conditions
precedent to the Merger specified in this Agreement, unless duly waived by the
party entitled to satisfaction thereof. The parties hereto anticipate that the
Closing will occur on or before July 10, 1995. In any event, if the Closing has
not occurred on or before July 28, 1995, this Agreement may be terminated as
provided in Article 13. Such date on which the Closing is to be held is herein
referred to as the "Closing Date." The Closing shall be held at the offices of
Coleman & Rhine, 1120 Avenue of the Americas, New York, New York, at 10:00 a.m.
on such date, or at such other time and place as the parties may agree upon in
writing.
10.2 Filing Date. Subject to the provisions of this Agreement, on the Closing
Date a fully-executed and acknowledged copy of this Agreement, if required,
along with required related certificates of FiberCore and Venturecap meeting the
requirements of the Nevada Revised Statutes, shall be filed with the Nevada
Secretary of State, all in accordance with the provisions of this Agreement.
ARTICLE 11.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Survival of Representations. The representations, warranties and covenants
contained in this Agreement shall survive the Merger for five years following
the merger. All representations, warranties and covenants in or pursuant to this
Agreement shall be deemed to be conditions to the Merger, and in the event this
Agree ment shall be terminated in accordance with the terms thereof, the
provisions of Section 7.1 and Articles 11 and 12 of this Agreement shall survive
any termination of this Agreement.
<PAGE>
ARTICLE 12.
PAYMENT OF EXPENSES
12.1 Payment of Expenses. If for any reason the Merger as contemplated herein is
not consummated Venturecap and FiberCore shall each pay their own out-of-pocket
expenses incurred incident to the preparation and carrying out of the
transactions herein contemplated; provided that, unless the Merger is not
consummated because of a failure of Venturecap to satisfy any of the conditions
of Section 8.2, Venturecap will reimburse FiberCore the actual documented costs
incurred, up to a maximum of Five Thousand Dollars $5,000, in consideration of
the expenses incurred by FiberCore and the termination of this Agreement and the
Merger; provided further, that if the Merger is not consummated because of a
failure of FiberCore to satisfy any of the conditions of Section 8.3, FiberCore
will reimburse Venturecap actual documented costs incurred, up to a maximum of
Five Thousand Dollars ($5,000), in consideration of the expenses incurred by
Venturecap and the termination of this Agreement and the Merger.
ARTICLE 13.
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of matters
presented in connection with the Merger by the shareholders of FiberCore and
Venturecap:
(a) by mutual written consent of FiberCore and Venturecap;
(b) by Venturecap, on the one hand or FiberCore, on the other hand, as
the non-defaulting party, if there has been a material breach of any material
representation, warranty, covenant or agreement contained in this Agreement on
the part of the other party set forth in this Agreement and, if such breach is
curable, such breach has not been cured within a ten (10) day period after
written notice of such breach;
(c) by either Venturecap or FiberCore if the Merger shall not have been
consummated on or before July 28, 1995;
<PAGE>
provided, however, that if the Merger shall not be consummated on or before July
28, 1995 because of a party's failure to satisfy any of the conditions set forth
in Sections 8.2 or 8.3, neither Venturecap nor FiberCore may rely upon its own
actions or lack thereof to terminate the Agreement;
(d) by either Venturecap or FiberCore if (i) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger or (ii) there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any governmental entity which would make
consummation of the Merger illegal;
(e) by either Venturecap or FiberCore if there shall be any action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any governmental entity, which would (A)
prohibit Venturecap's ownership or operation of all or a material portion of the
business or assets of FiberCore and its Subsidiaries taken as a whole, or compel
Venturecap to dispose of or hold separate all or a material portion of the
business or assets of FiberCore and its Subsidiaries taken as a whole or
Venturecap and its Subsidiaries taken as a whole, as a result of the Merger or
(B) render Venturecap or FiberCore unable to consummate the Merger, except for
any waiting period provisions; or
(f) by either party; provided however that the party terminating solely
pursuant to this provision shall be liable to the other party for such party's
expenses, but in no event shall such amount exceed $5,000.
Where action is taken to terminate this Agreement pursuant to this
Section 13.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
13.2 Effect of Termination. In the event of termination of this Agreement by
either FiberCore or Venturecap as provided in Section 13.1, this Agreement and
the Merger Agreement shall forthwith become void and there shall be no liability
or obligation on the part of Venturecap or FiberCore or their respective
officers or directors except as set forth in Article 12 and except to the
<PAGE>
extent that such termination results from the breach by a party hereto of any of
its covenants or agreements set forth in this Agreement.
13.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken by their respective Board of Directors, at any time before or after
approval of matters presented in connection with the Merger by the shareholders
of FiberCore and Venturecap but, after any such shareholder approval, no
amendment shall be made which by law requires the further approval of
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
13.4 Extension; Waiver. At any time prior to the Effective Time of the Merger,
any party hereto, by such corporate action as shall be appropriate, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE 14.
LIMITATION ON LIABILITY
14.1 Liabilities of FiberCore. The aggregate liability of all entities for
breaches by FiberCore and its officers and directors under this Agreement and
the Merger Agreement and the transactions contemplated hereby and thereby shall
be no greater than $5,000.
<PAGE>
ARTICLE 15.
GENERAL
15.1 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and delivered personally
or sent by certified mail, postage prepaid, as follows:
If to Venturecap prior to the Effective Time of the Merger:
Venturecap, Inc.
1037 East 3300 South
Suite 203
Salt Lake City, Utah 84105
with a copy to
Leonard E. Neilson, Esq.
1121 East 3900 South
Suite 200, Building C
Salt Lake City, Utah 84124
If to FiberCore or the Surviving Corporation following the Effective
Time of the Merger:
Dr. Mohd Aslami, President
FiberCore Incorporated
P.O. Box 206
174 Charlton Road
Sturbridge, Massachusetts 01566
with a copy to
Coleman & Rhine LLP
1120 Avenue of the Americas
New York, New York 10036
Attention: Bruce S. Coleman, Esq.
15.2 Headings. The headings of the several sections of this Agreement are
inserted for convenience of reference only and are
<PAGE>
not intended to affect the meaning or interpretation of this Agreement.
15.3 Counterparts. This Agreement may be executed in counterparts, and when so
executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
15.4 Binding Nature. This Agreement shall be binding upon and inure to the
benefit of the parties hereto. Neither Venturecap, nor FiberCore may assign or
transfer any rights under this Agreement.
15.5 Other Agreements. All written agreements heretofore made between the
parties hereto in contemplation of this Agreement are superseded by this
Agreement and are hereby terminated in their entirety.
15.6 Good Faith. Each of the parties hereto agrees that it shall act in good
faith in an attempt to cause all the conditions precedent to their respective
obligations to be satisfied.
15.7 Applicable Law. This Agreement shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of New York and
each party agrees to submit to the jurisdiction of the courts of the state of
New York.
15.8 No Third Party Beneficiaries. The terms and provisions of this Agreement
are intended for the benefit of each party hereto and their respective
successors and permitted assigns, and it is not the intention of the parties to
confer third party beneficiary rights upon any other person or entity.
15.9 Severabilty. A determination that any portion of this Agreement is
unenforceable or invalid shall not affect the enforceability or validity of any
of the remaining portions hereof or of this Agreement as a whole. In the event
that any part of any of the covenants, sections or provisions herein may be
determined by a court of law to be overly broad or against applicable precedent
or public policy, thereby making such covenants, sections or provisions invalid
or unenforceable, the parties hereto agree, and it is their desire that, such
<PAGE>
court shall substitute a reasonable and judicially enforceable limitation in
place of the invalid and unenforceable part of such covenants, sections or
provisions, and that, as so modified, the covenants, sections or provisions
shall be as fully enforceable as if set forth herein by the parties themselves
in the modified form. If, however, any court of law shall refuse to substitute
any reasonable and judicially enforceable provisions in their place, the parties
shall attempt to reach agreement with respect to a valid and enforceable
substitute for the deleted provisions which shall be as close in its intent and
effect as possible to the deleted portions.
<PAGE>
IN WITNESS WHEREOF, Venturecap and FiberCore have caused this Agreement
to be duly executed as of the date first written above.
VENTURECAP, INC.
By: /s/ James R. Glaven
----------------------
Name: James R. Glaven
--------------------
Title:
--------------------
FIBERCORE INCORPORATED
By: /s/ Mohd Aslami
----------------------
Name: Mohd Aslami
--------------------
Title: President
--------------------
MERGER AGREEMENT
This Merger Agreement is executed as of this 18th day of July, 1995.
WITNESSETH:
WHEREAS, the Board of Directors of each of the undersigned corporations
has adopted the Plan of Merger of FiberCore Incorporated, a Nevada corporation,
into Venturecap, Inc., a Nevada corporation, attached as Annex 1 (the "Plan");
and
NOW, THEREFORE, the undersigned corporations hereby agree that the Plan
and the merger contemplated thereby, shall be consummated as provided by the
Plan, unless terminated pursuant to the Plan prior to the filing of Articles of
Merger, and further agree that following consummation of the merger, this
instrument and Annex 1 hereto shall constitute the complete executed Plan of
Merger referred to in Nevada Revised Statutes 78.451 et seq.
<PAGE>
IN WITNESS WHEREOF, Venturecap and FiberCore have caused this Agreement
to be duly executed as of the date first written above.
VENTURECAP, INC.
By: /s/ James R. Glavas
--------------------------
Name: James R. Glavas
-------------------------
Title:
------------------------
FIBERCORE INCORPORATED
By: /s/ Mohd Aslami
--------------------------
Name: Mohd Aslami
------------------------
Title: President
<PAGE>
ANNEX 1
PLAN OF MERGER
Pursuant to the provisions of Nevada Revised Statutes ("NRS") 78.451,
et seq., the following sets forth a plan of merger of FiberCore Incorporated, a
Nevada corporation (the "Constituent Corporation"), into Venturecap, Inc., a
Nevada corporation (the "Surviving Corporation," or "Venturecap"):
a. If this plan of merger is adopted by the stockholders of the parties
in accordance with the laws of the State of Nevada and not terminated or
abandoned as hereinafter provided, the merger of the Constituent Corporation
into the Surviving Corporation shall become effective upon the filing of
Articles of Merger in the office of the Secretary of State of Nevada pursuant to
the provisions of NRS 78.458, or at such later time as may be set forth in the
Articles of Merger (the "Effective Time of the Merger").
b. At the Effective Time of the Merger, the separate existence of the
Constituent Corporation shall cease, and the Surviving Corporation shall possess
all rights, privileges and powers, and be subject to all restrictions,
disabilities and duties of the Constituent Corporation.
c. At the Effective Time of the Merger, the title to all real estate
and other property, real and personal, owned by the Constituent Corporation and
all debts due to the Constituent Corporation shall be vested in the Surviving
Corporation without reversion or impairment.
d. At the Effective Time of the Merger, the Surviving Corporation shall
have all of the debts, liabilities and duties of the Constituent Corporation,
but all rights of creditors and all liens upon any property of the Constituent
Corporation shall be preserved unimpaired.
e. Any proceeding pending against the Constituent Corporation may be
continued as if the merger had not occurred or the Surviving Corporation may be
substituted in the proceeding for the Constituent Corporation.
<PAGE>
f. The Articles of Incorporation of the Surviving Corporation shall
remain in full force and effect as the Articles of Incorporation of the
Surviving Corporation, and will be amended at the Effective Time of the Merger,
as follows:
Article I of the Articles of Incorporation is deleted in its entirety
and replaced by the following:
The Name of the Corporation is FiberCore, Inc.
g. The Bylaws of the Surviving Corporation shall remain in full force
and effect as the Bylaws of the Surviving Corporation following the Effective
Time of the Merger, without amendment, until altered, amended or repealed as
provided therein.
h. The officers and directors of FiberCore Incorporated on the
Effective Time of the Merger, to wit:
Name Position
Mohd A. Aslami Director and Chief Executive Officer
Gregory A. Perry Director and Vice President of Sales
and Marketing
Charles DeLuca Director and Secretary
Hans Moeller Director
Zaid Siddig Director
John Ramsey Director
Steven Phillips Director
shall be the officers and directors of the Surviving Corporation following the
Effective Time of the Merger until respective successors are appointed or
elected and qualified.
i. Each outstanding share of common stock of the Constituent
Corporation shall be converted into 3.6713070 shares of the Surviving
Corporation.
j. The manner of converting the outstanding shares of the capital stock
of the Constituent Corporation into the shares or other securities of the shall
be as follows:
<PAGE>
(1) Each share of common stock of Venturecap, Inc., which
shall be issued and outstanding at the Effective Time of the Merger shall remain
issued and outstanding.
(2) Other than shares of common stock of the Constituent
Corporation owned by the Constituent Corporation or shares of common stock of
the Constituent Corporation owned directly or indirectly by Venturecap, which
shall be cancelled, the shares of common stock of the Constituent Corporation
which shall be outstanding at the Effective Time of the Merger and all rights in
respect thereof, shall forthwith be changed and converted into 3.6713070 shares
of common stock of the Surviving Corporation.
(3) After the Effective Time of the Merger, each holder of an
outstanding certificate representing shares of common stock of the Constituent
Corporation shall surrender the same to the Surviving Corporation and each such
holder shall be entitled upon such surrender to receive the number of shares of
common stock of the basis provided herein. Until so surrendered, the outstanding
shares of the stock of the Constituent Corporation to be converted into the
stock of as provided herein, may be treated by the Surviving Corporation for all
corporate purposes as evidencing the ownership of shares of the Surviving
Corporation as though said surrender and exchange had taken place. After the
Effective Time of the Merger, each registered owner of any uncertified shares of
common stock of the Constituent Corporation shall have said shares canceled and
said registered owner shall be entitled to such number of common shares of the
Surviving Corporation as are provided for herein.
k. Anything herein or elsewhere to the contrary notwithstanding, the
merger may be abandoned by the Board of Directors of either corporation, in the
sole discretion of any such Board and without further action by stockholders, at
any time prior to the Effective Time of the Merger, subject to the provisions of
the Agreement and Plan of Reorganization between Venturecap and FiberCore.
l. Any officer of the Surviving Corporation is authorized to execute
and deliver such other and further instruments and documents as may be necessary
to effectuate this plan of merger in accordance with its terms.
<PAGE>
m. The shares to be issued in the merger will not be registered under
the Securities Act of 1933, as amended, or under any state securities laws.
n. The Surviving Corporation shall in no event be required to
consummate the merger unless the Surviving Corporation in its sole discretion
shall have determined that issuance of shares in the merger is exempt from the
registration requirements of the Securities Act of 1933, as amended, and that
such shares may be lawfully issued without registration under the provisions of
any state securities law.
<PAGE>
ARTICLES OF MERGER
OF
FiberCore Incorporated,
a Nevada Corporation
Into
Venturecap, Inc.,
a Nevada Corporation
THE UNDERSIGNED, as the President and the Secretary of Venturecap,
Inc., a Nevada corporation (the "Surviving Corporation"), as and for the purpose
of complying with the provisions of Nevada Revised Statutes ("NRS") Sections
78.451 et seq., and in order to effectuate the merger of FiberCore Incorporated,
a Nevada Corporation into Venturecap, Inc., a Nevada Corporation, hereby
certifies as follows:
1. The name of the Constituent Corporation is FiberCore Incorporated
and its place of incorporation was the State of Nevada. The name of the
Surviving Corporation is Venturecap, Inc. and its place of incorporation was
also the State of Nevada.
2. A plan of merger has been adopted by the Board of Directors of each
corporation that is a party to this merger.
3. The plan of merger was submitted by the Board of Directors of the
Surviving Corporation to its stockholders pursuant to the Nevada Revised
Statutes. Of the 955,451 outstanding shares of Venturecap common stock, par
value, $.001 per share at the time of the vote, all were entitled to vote on the
plan of merger, 765,550 were represented at the shareholders meeting, 765,550
shares were voted in favor of the plan of merger and 0 shares were voted against
the plan and the number of votes cast in favor of the plan was sufficient for
approval of the plan of merger.
4. The plan of merger was submitted by the Board of Directors of the
Constituent Corporation to its stockholders pursuant to the
<PAGE>
Nevada Revised Statutes. Of the 6,605,277 outstanding shares of FiberCore common
stock, par value, $.01 per share, holders representing 5,333,334 shares agreed
to the plan of merger by written consent, and the consent of such stockholders
was sufficient for approval.
4. The Articles of Incorporation of the Surviving Corporation are
hereby amended as follows:
Article I of the Articles of Incorporation is deleted in its
entirety and replaced by the following:
The Name of the Corporation is FiberCore, Inc.
5. A complete executed plan of merger is on file at the office of the
registered agent of the Surviving Corporation which is hereby changed to be:
Corporation Trust Company
One East 1st Street, Suite 1600
Reno, Nevada 89501
Formerly the registered agent was:
Broadmoor Associates, Inc.
3916 Orville Circle
Las Vegas, Nevada 89108
6. A copy of the plan of merger will be furnished by the Surviving
Corporation on request and without any cost to any stockholder of any
corporation which is a party to this merger.
7. The effective date of this merger is the date upon which these
Articles of Merger are filed in the Office of the Secretary of State of the
State of Nevada.
<PAGE>
IN WITNESS WHEREOF, we have set forth our hands as of the day of
1995.
VENTURECAP, INC.
By
----------------------------
Name:
Title: President
By
----------------------------
Name:
Title: Secretary
FIBERCORE INCORPORATED
By
----------------------------
Name:
Title: President
By
----------------------------
Name:
Title: Secretary
<PAGE>
EXHIBIT D
DIRECTORS OF SURVIVING CORPORATION
Mohd A. Aslami
Gregory A. Perry
Charles DeLuca
Hans Moeller
Zaid Siddig
John Ramsey
Steven Phillips
<PAGE>
Exhibit E
OFFICERS OF SURVIVING CORPORATION
Mohd A. Aslami Chief Executive Officer
Gregory A. Perry Vice President of Sales and Marketing
Charles DeLuca Secretary
<PAGE>
EXHIBIT F
July __, 1995
FiberCore Incorporated
P.O. Box 206
174 Charlton Road
Sturbridge, Massachusetts 01566
Gentlemen:
We have acted as counsel to Venturecap, Inc., a Nevada corporation
("Venturecap"), in connection with their execution and delivery of the (i)
Agreement and Plan of Reorganization (the "Agreement and Plan") among Venturecap
and FiberCore Incorporated, a Nevada corporation ("FiberCore") and (ii) the
Merger Agreement among FiberCore and Venturecap (the "Merger Agreement"), each
dated as of July __, 1995 (the Agreement and Plan and the Merger Agreement are
sometimes hereinafter referred to collectively as the "Merger Agreements"). This
opinion is given pursuant to Section 8.3(c) of the Agreement and Plan.
Capitalized terms used but not defined herein have the meanings ascribed to such
terms respectively in the Agreement and Plan.
In connection with this opinion, we have examined: the Merger
Agreements and certain originals or copies of corporate records of Venturecap.
For purposes of this opinion, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, and that the information in the certificates,
representations, and
<PAGE>
statements referred to above remains true and complete as of the date hereof.
Based upon and subject to the foregoing, and subject to the
qualifications and exceptions hereinafter set forth, we are of the opinion as of
this date that:
a. Venturecap is duly organized and validly existing corporations in
good standing under the laws of the State Nevada has the corporate power and
authority to own its properties and conduct its businesses as presently
conducted. Venturecap has full corporate power and authority to enter into the
Merger Agreements and to consummate the transactions contemplated thereby.
b. The execution, delivery, and performance of the Merger Agreements by
Venturecap have been duly authorized by all requisite corporate and shareholder
action on the part of Venturecap. The Merger Agreements have been duly executed
and delivered by Venturecap and constitute legal, valid, and binding obligations
on the part of Venturecap.
c. The execution and delivery of the Merger Agreements and the
consummation of the Merger do not violate or conflict with the Certificate of
Incorporation or Bylaws of Venturecap.
d. Upon and following the Effective Time of the Merger, the shares of
Venturecap to be issued in the Merger will be duly authorized, validly issued,
fully paid and non-assessable outstanding shares of Venturecap Common.
e. The Articles of Merger, when filed with the Nevada Secretary of
State will be effective to consummate the merger between Venturecap and
FiberCore.
In addition, I declare that as of the date hereof, neither myself nor
my firm is owed any funds (including disbursements) by Venturecap, including but
not limited to funds owed for work related to this merger.
Very truly yours,
<PAGE>
EXHIBIT G
Principal's Letter
------------------
July , 1995
FiberCore Incorporated
P.O. Box 206
174 Charlton Road
Sturbridge, Massachusetts 01566
Ladies and Gentlemen:
In consideration of the merger of FiberCore Incorporated ("FiberCore"),
into Venturecap, Inc. ("Venturecap"), of which I am a shareholder, in my
individual capacity, and not in my capacity as a director or officer of
Venturecap, I agree represent, warrant and covenant as follows:
(i) I will indemnify, pay the defense costs of and hold FiberCore and
if the merger is consummated, the corporation surviving the merger (the
"Surviving Corporation") and its affiliates (the "Indemnitees") harmless from
and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys, fees and expenses (collectively
"Damages"), imposed upon or incurred by FiberCore or the Surviving Corporation
by reason of or resulting from:
(a) any inaccuracy or breach of any representation, warranty or
covenant or failure of any condition or lack of compliance with
any term of the Agreement by Venturecap contained in or made
pursuant to the Agreement and Plan of Reorganization (the
"Agreement") and the Merger Agreement (the "Merger Agreement"),
or
(b) any inaccuracy or misrepresentation in any certificate or any
Venturecap Schedule delivered by Venturecap pursuant to the
Agreement, or
<PAGE>
(c) any breach by me of this letter.
(ii) I will pay each Indemnitee the amount which would be required to
put such Indemnitee in the position that it would have been in had any breach
(including any inaccuracy of any representation or warranty, failure of any term
or condition, or lack of compliance with any term of the agreement) not
occurred.
(iii) I will not seek contribution or indemnification or any other
recourse for my obligations hereunder from Venturecap or the Surviving
Corporation, or any of their officers or directors, or any other entity, if such
contribution or indemnification would or could cause any payments to be made by
Venturecap or the Surviving Corporation, either directly or indirectly.
(iv) Any notice may be sent to me at the address listed above.
(v) I represent that I own 80,000 shares of Venturecap common stock and
that I acquired my shares in Venturecap in a transaction exempt from
registration under the Securities Act of 1933, as amended.
(vi) This letter will be governed by the laws of the State of New York
and any dispute relating thereto shall be adjudicated in the courts of the state
of New York or in the federal courts located in such jurisdiction, and I hereby
submit to the jurisdiction of such courts.
(vii) I acknowledge that any Indemnitee may seek recourse against me,
independent of any other recourse he may have, provided that no Indemnitee shall
be entitled to more than a single recovery.
(viii) In executing this letter agreement, I am not relying on any
other shareholder executing a similar agreement.
<PAGE>
(ix) This indemnification shall remain in full force and effect
notwithstanding any waivers by any entity.
(x) In executing this letter, I am not relying on any statement by
FiberCore with respect to its financial condition or otherwise contained in the
Agreement.
Very truly yours,
By
--------------------------
James R. Glavas
<PAGE>
EXHIBIT H
CERTIFICATE OF DUANE MIDGLEY
I hereby certify that as of the date hereof, there are no amounts owing
from Venturecap, Inc. to me or my firm, and all such amounts have been paid in
full.
---------------------------
Duane Midgley
<PAGE>
Schedule 3.2
Warrants, Options and Other
Outstanding Convertible Equity Securities
-----------------------------------------
$5,000,000 convertible debt plus interest accumulatuing at a rate of
LIBOR plus one percent may be converted into common stock of FiberCore through
April 17, 2005. For the first five years the conversion price is $4.25 per
share; thereafter the conversion price is equal to the price per share paid by a
third party investor in the private sale of common stock by FiberCore
immediately prior to such conversion.
95,000 employee stock options are outstanding and 305,000 additional
options are available for issuance.
425,000 options may be issued to a new chief operating officer.
Pursuant to a Letter of Intent dated May 15, 1995 between FiberCore and
Automated Light Technologies, Inc. ("ALT"), ALT will merge into FiberCore or a
subsidiary thereof and FiberCore will issue a 2.4 million shares of common stock
of FiberCore to ALT shareholders.
Additional warrants exercisable into 150,000 shares of FiberCore
Capital Stock are due to be issued to Middle Eastern Specialized Cable Company
("MESC"), upon signing of certain agreements.
65,000 shares of FiberCore Capital Stock are due to be issued to MESC
upon the exercise of the warrants listed in the above paragraph.
An additional 185,000 shares of FiberCore Capital Stock are to be
issued to MESC upon the signing of certain agreements.
100,000 shares of FiberCore Capital Stock are currently being held in
escrow for MESC pending certain approvals and the signing of certain documents.
<PAGE>
An additional 223,625 warrants are outstanding (subject to adjustment)
Additional warrants may be due the Armand Group in an amount dependent
on the number of the Company's securities placed by them, in a contemplated
private placement.
All warrants and options reflect pre-dilution numbers. Such dilution
may have occurred from issuance of other warrants, options or sales of stock. In
addition, the terms of this agreement may further dilute options and warrants.
AGREEMENT AND PLAN OF REORGANIZATION
Among
FiberCore, Inc.,
a Nevada corporation
ALT Merger Co.,
a Delaware corporation
And
Automated Light Technologies, Inc.,
a Delaware corporation
DATED AS OF SEPTEMBER 15, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
RECITALS .........................................................................................................1
ARTICLE 1. DEFINITIONS............................................................................................1
1.1 Certain Definitions.............................................................................1
1.2 Other Definitions...............................................................................2
ARTICLE 2. THE MERGER.............................................................................................2
2.1 Effective Time of the Merger....................................................................2
2.2 Effects of the Merger...........................................................................2
2.3 Effect on Capital Stock.........................................................................3
2.4 Exchange of Certificates........................................................................5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF FIBERCORE AND SUB....................................................6
3.1 Organization and Standing.......................................................................6
3.2 Capital Structure...............................................................................6
3.3 Authority.......................................................................................7
3.4 Brokers or Finders..............................................................................7
3.5 Financial Statements............................................................................7
3.6 Subsidiaries....................................................................................8
3.7 No Violation or Conflict........................................................................8
3.8 Consent of Governmental Authorities.............................................................9
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF ALT..................................................................9
4.1 Organization and Standing.......................................................................9
4.2 Capital Structure...............................................................................9
4.3 Authority......................................................................................10
4.4 Brokers or Finders.............................................................................10
4.5 Financial Statements...........................................................................10
4.6 Subsidiaries...................................................................................11
4.7 No Violation or Conflict.......................................................................11
4.8 Consent of Governmental Authorities............................................................11
ARTICLE 5. COVENANTS RELATING TO CONDUCT OF BUSINESS.............................................................12
5.1 Covenants of FiberCore and Sub.................................................................12
5.2 Covenants of ALT...............................................................................13
ARTICLE 6. OMITTED ..............................................................................................13
<PAGE>
ARTICLE 7. ADDITIONAL AGREEMENTS.................................................................................13
7.1 Legal Conditions to the Merger.................................................................13
7.2 Delivery of Stock Certificates.................................................................14
7.3 Tax Treatment..................................................................................14
7.4 Board of Directors.............................................................................14
ARTICLE 8. CONDITIONS PRECEDENT..................................................................................14
8.1 Conditions to Each Party's Obligations to Effect the
Merger.........................................................................................14
8.2 Conditions to Obligations of ALT...............................................................16
8.3 Conditions to Obligations of FiberCore and Sub.................................................16
ARTICLE 9. OMITTED ..............................................................................................17
ARTICLE 10. CLOSING..............................................................................................17
10.1 Closing Date...................................................................................17
10.2 Filing Date....................................................................................17
ARTICLE 11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS...............................................................................................17
ARTICLE 12. PAYMENT OF EXPENSES..................................................................................18
ARTICLE 13. TERMINATION, AMENDMENT AND WAIVER....................................................................18
13.1 Termination....................................................................................18
13.2 Effect of Termination..........................................................................19
13.3 Amendment......................................................................................19
13.4 Extension; Waiver..............................................................................20
ARTICLE 14. LIMITATION ON LIABILITY..............................................................................20
ARTICLE 15. GENERAL..............................................................................................20
15.1 Notices........................................................................................20
15.2 Headings.......................................................................................21
15.3 Counterparts...................................................................................21
15.4 Binding Nature.................................................................................21
15.5 Other Agreements...............................................................................21
15.6 Good Faith.....................................................................................21
15.7 Applicable Law.................................................................................21
15.8 No Third Party Beneficiaries...................................................................21
15.9 Severability...................................................................................21
</TABLE>
<PAGE>
SCHEDULES
Schedule 2.3 Exchange Ratio
Schedule 3.2 Outstanding Equity Securities of FiberCore
Schedule 3.7 FiberCore Violations or Conflicting
Agreements
Schedule 3.5(a) FiberCore 1993 and 1994 Financial Statements
Schedule 3.5(b) FiberCore June 1995 Financial Statements
Schedule 4.2 Outstanding Equity Securities of ALT
Schedule 4.7 ALT Violations or Conflicting Agreements
Schedule 4.5(a) ALT 1993 and 1994 Financial Statements
Schedule 4.5(b) ALT June 1995 Financial Statements
Schedule 5.1 FiberCore Covenants Relating to Conduct of
Business
Schedule 5.2 ALT Covenants Relating to Conduct of
Business
<PAGE>
EXHIBITS
Exhibit A Plan of Merger
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as
of the 15th day of September, 1995, by and among FiberCore, Inc. ("FiberCore"),
a Nevada corporation, ALT Merger Co. ("Sub"), a Delaware corporation and a
wholly owned subsidiary of FiberCore, and Automated Light Technologies, Inc.
("ALT"), a Delaware Corporation.
RECITALS
A. The respective Boards of Directors of FiberCore, Sub and ALT have
approved the merger of Sub with and into ALT (the "Merger"), upon the terms and
subject to the conditions set forth herein and in the Plan of Merger annexed as
Exhibit A (the "Plan of Merger"), as a result of which Sub will be merged into
ALT and the shareholders of ALT (other than shareholders who perfect appraisal
rights) will be entitled to receive the consideration provided in this
Agreement.
B. The parties hereto desire to set forth certain representations,
warranties and covenants made by FiberCore and Sub to ALT, and by ALT to
FiberCore and Sub and the conditions precedent to the consummation of the
Merger.
C. The Boards of Directors of FiberCore, Sub and ALT respectively, have
approved and adopted this Agreement and the Merger as a plan of reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants herein contained, FiberCore, Sub and ALT
hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Certain Definitions. The terms defined in this Section 1.1 shall, for all
purposes of this Agreement, have the meanings herein specified, unless the
context expressly or by necessary implication otherwise requires:
1
<PAGE>
(a) "ALT Capital Stock" means the common stock of ALT, par value $0.01
per share.
(b) "Dissenting Shares" shall mean shares of ALT Capital Stock which
shall be owned by shareholders who shall duly perfect and pursue their appraisal
rights with respect to such shares in accordance with the Delaware General
Corporation Law.
(c) "Dissenting Shareholders" shall mean those shareholders of ALT who
are holders of and are entitled to Dissenting Shares.
(d) "SEC" shall mean the Securities and Exchange Commission.
(e) "Sub Common" means the common stock of Sub, par value $0.01 per
share.
(f) "FiberCore Capital Stock" means the common stock of FiberCore, par
value $0.001 per share.
(g) "ALT Shareholders" shall mean all holders of ALT Capital Stock
immediately prior to the Effective Time of the Merger.
(h) "Subsidiary" means a corporation whose voting secu rities are owned
directly or indirectly by a "parent" corporation in such amounts as are
sufficient to elect at least a majority of the Board of Directors of the
Subsidiary.
1.2 Other Definitions. In addition to the terms defined in Section 1.1, certain
other terms are defined elsewhere in this Agreement; whenever such terms are
used in this Agreement they shall have their respective defined meanings, unless
the context expressly or by necessary implication otherwise requires.
2
<PAGE>
ARTICLE 2.
THE MERGER
2.1 Effective Time of the Merger. Subject to the provisions of this Agreement,
the Articles of Merger, together with all other required certificates, shall be
filed in accordance with the Delaware General Corporation Law as soon as
practicable on or after the Closing Date (as defined in Section 10.1 of this
Agreement). The Merger shall become effective upon the filing of such
certificates with the Delaware Secretary of State (the "Effective Time of the
Merger").
2.2 Effects of the Merger. At the Effective Time of the Merger:
(a) the separate existence of Sub shall cease and Sub shall be merged
with and into ALT as the surviving corporation (the "Surviving Corporation").
(b) the Certificate of Incorporation and By-laws of ALT shall be the
Certificate of Incorporation and By-laws of the Surviving Corporation; and
(c) the directors of ALT shall be the directors of the Surviving
Corporation, and shall continue to act as such, until their respective
successors are duly elected and qualified, and the officers of ALT shall hold
the same offices in the Surviving Corporation until their respective successors
are duly elected and qualified.
2.3 Effect on Capital Stock. As of the Effective Time of the Merger, by virtue
of the Merger and without any action on the part of the holder of any shares of
the issued and outstanding shares of ALT Capital Stock:
(a) Cancellation of ALT and FiberCore Stock Owned by ALT and FiberCore.
All shares of ALT Capital Stock and FiberCore Capital Stock, if any, that are
owned directly by ALT or FiberCore, shall be canceled, and no stock of FiberCore
or other consideration shall be delivered in exchange therefor, except as
provided herein.
3
<PAGE>
(b) Conversion of ALT Capital Stock and Options. Other than shares to
be canceled pursuant to Section 2.3(a), Dissenting Shares and fractional shares
as provided in Section 2.3(e), each share of ALT Capital Stock issued and
outstanding immediately prior to the Effective Time of the Merger shall be
converted, without any action on the part of the holders thereof, into a number
of shares of issued and outstanding FiberCore Capital Stock equal to the ratio
of (x) 8,811,137 over (y) the total number of shares of ALT Capital Stock
outstanding on a fully diluted basis (other than shares underlying warrants
issued to the Connecticut Development Authority ("CDA") and Connecticut
Innovations, Inc. ("CII") and other than 85,250 shares underlying certain
warrants and 275,000 shares underlying certain incentive stock options, but
including approximately 4.53 million shares underlying warrants and debt to be
issued at the Effective Time of the Merger) (the "ALT Outstanding") at the
Effective Time of the Merger (hereinafter, the "Exchange Ratio" or the "Per
Share Merger Consideration"). The exact Exchange Ratio is set forth on Schedule
2.3. An aggregate of 8,811,137 shares of FiberCore Capital Stock will be issued
in the Merger if all shares of ALT Outstanding are converted into shares of
FiberCore Capital Stock. With respect to unexpired options ("Options") or
warrants ("Warrants") or convertible securities ("Convertible Securities"),
whether or not exercisable or convertible, as the case may be, at the Effective
Time of the Merger, outstanding on the Effective Time of the Merger which have
been issued by ALT, each such Option or Warrant or Convertible Security shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive, for the number of shares of ALT
Capital Stock to which the warrantholder, optionholder, or convertible security
holder is entitled (the "Underlying Share Count"), the number of shares of
FiberCore Capital Stock determined by multiplying the aforesaid number by the
Per Share Merger Consideration, upon payment of an amount equal to the exercise
price specified in such Option or Warrant or conversion price specified in such
Convertible Security multiplied by the Underlying Share Count, subject to the
expiration date and other terms of such Option or Warrant or Convertible
Securities. At the request of the holder of Options, Warrants, or Convertible
Securities, FiberCore shall upon surrender of such instruments exchange such
instruments for similar instruments in FiberCore Capital Stock, adjusting the
4
<PAGE>
exercise price and the Underlying Share Count for the Exchange Ratio, all as set
forth in this paragraph.
(c) Adjustments of Exchange Ratio. If, between the date of this
Agreement and the Effective Time of the Merger, the outstanding shares of ALT
Capital Stock or FiberCore Capital Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, not contemplated under this Agreement, the Exchange Ratio shall be
correspondingly adjusted.
(d) Dissenters' Rights of ALT Shareholders. Any Dissenting Shares shall
not be converted into FiberCore Capital Stock but shall be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to the Delaware General Corporation Law. In
the event of the legal obligation, after the Effective Time of the Merger, to
deliver shares of FiberCore Capital Stock to any Dissenting Shareholder who
shall have failed to make an effective demand for appraisal or shall have lost
his status as a Dissenting Shareholder, FiberCore shall issue and deliver, upon
surrender by such Dissenting Shareholder of his certificate or certificates
representing shares of ALT Capital Stock, the shares of FiberCore Capital Stock
to which such Dissenting Shareholder is then entitled under this Section 2.3,
and the Delaware General Corporation Law.
(e) Fractional Shares. No fractional shares of FiberCore Capital Stock
shall be issued, but in lieu thereof each holder of shares of ALT Capital Stock
who would otherwise be entitled to receive a fraction of a share of FiberCore
Capital Stock shall receive a whole share of FiberCore Capital Stock.
2.4 Exchange of Certificates.
(a) Exchange Procedures. On and after the Effective Time of the Merger,
each holder of a certificate representing out standing shares of ALT (the
"Certificates") shall be entitled to receive upon the surrender of such
Certificates to an office of the Surviving Corporation designated for the
purpose the number of shares of FiberCore Capital Stock to which the holder of
ALT Capital Stock is entitled pursuant to Section 2.3 of this
5
<PAGE>
Agreement and is represented by the Certificates so surrendered. The
Certificates so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of ALT Capital Stock which is not registered in the
transfer records of ALT, the appropriate number of shares of FiberCore Capital
Stock may be delivered to a transferee if the Certificate representing the right
to receive such ALT Capital Stock is presented to FiberCore and accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.4, each Certificate shall be deemed at any time
after the Effective Time of the Merger to represent the right to receive upon
such surrender the number of shares of FiberCore Capital Stock as provided by
Section 2.3 and the provisions of the Delaware General Corporation Law.
(b) No Further Ownership Rights in ALT Capital Stock. All FiberCore
Capital Stock delivered upon the surrender in exchange of shares of ALT Capital
Stock in accordance with the terms hereof shall be deemed to have been delivered
in full satis faction of all rights pertaining to such shares of ALT. There
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of ALT Capital Stock which were outstanding
immediately prior to the Effective Time of the Merger. If, after the Effective
Time of the Merger, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article 2.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF FIBERCORE AND SUB
FiberCore and Sub represent and warrant to ALT as of the date hereof
and as of the Closing as follows:
3.1 Organization and Standing. Each of FiberCore and Sub is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation, and has the full power and authority
(corporate and otherwise) to carry on its business in the places and as it is
now being conducted and to own and lease the properties and assets which it
6
<PAGE>
now owns or leases. FiberCore is or shortly after the Effective Time of the
Merger will be qualified in Massachussets.
3.2 Capital Structure. The authorized capital stock of FiberCore consists of
100,000,000 shares of common stock, par value $.001 per share, of which
25,367,130 shares of FiberCore Capital Stock are issued and outstanding
(including 367,130 shares to be issued to Middle Eastern Specialized Cable
Company, which may or may not have been issued at the time of this Agreement),
and 10,000,000 shares of preferred stock, par value $.001 per share, of which no
shares are outstanding. The authorized capital stock of Sub consists of 1,000
shares of Sub Common of which 1,000 are outstanding and held by FiberCore. All
of the outstanding shares of FiberCore Capital Stock and Sub Common were issued
in compliance with applicable federal and state securities laws, and no further
registration, qualification or other compliance under such securities laws is
required. All of the outstanding shares of FiberCore Capital Stock and Sub
Common are validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, FiberCore's or Sub's Articles of
Incorporation or Bylaws or any agreement to which FiberCore or Sub is a party or
is bound. Except for the foregoing, and as set forth on Schedule 3.2, there are
no equity securities of any class of FiberCore or Sub or any security
exchangeable or convertible into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth on Schedule
3.2, there are no options, warrants, calls, rights, commitments or agreements of
any character to which either of FiberCore or Sub is a party or by which it is
bound obligating FiberCore or Sub to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of FiberCore or
Sub or obligating FiberCore or Sub to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
3.3 Authority. Each of FiberCore and Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of FiberCore and Sub, and by FiberCore as the sole
shareholder of Sub. This Agreement has been duly executed and delivered by
FiberCore and Sub and constitutes a valid and
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binding obligation of FiberCore and Sub, enforceable against FiberCore and Sub
in accordance with its terms, except to the extent that their enforcement is
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity.
3.4 Brokers or Finders. Neither FiberCore nor Sub has incurred, or will incur,
directly or indirectly, any liability for any brokerage or finders' fees or
agents commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.5 Financial Statements. (a) The consolidated balance sheets of FiberCore
Incorporated ("Old FiberCore") and its Subsidiaries as at December 31, 1993
(audited) and December 31, 1994 (unaudited) and the related consolidated
statements of income, stockholders' equity and cash flows for the respective
years then ended, including the notes thereto, and the reports thereon of Mottle
McGrath & Company, independent certified public accountants (in the case of the
1993 financial statements) (the "Company Financial Statements"), are attached
hereto as Schedule 3.5(a). The Company Financial Statements present fairly the
consolidated financial position and the results of operations of FiberCore and
its Subsidiaries as of the dates and for the periods indicated on the Company
Financial Statements, in each case in conformity with generally accepted
accounting principles ("GAAP"), consistently applied during such periods.
FiberCore and its Subsidiaries do not have any material liabilities or
obligations of any nature, which would be reflected in a current unaudited
financial statement, if available, except (1) as disclosed, reflected or
reserved against in the balance sheet dated December 31, 1994 included in the
Company Financial Statements and the notes thereto; (2) for items explicitly
disclosed in the Interim Financial Statements (as defined below); (3) for
liabilities incurred after June 30, 1995 in the ordinary course of business,
consistent with past practice; (4) for items disclosed in the Information and
Disclosure Statement previously delivered to ALT; and (5) for items listed in
Schedule 3.5(a) or any other schedule attached hereto.
(b) Attached hereto as Schedule 3.5(b) is the consolidated balance
sheet (the "June Balance Sheet") of
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FiberCore and subsidiaries as of June 30, 1995 (the "Balance Sheet Date") and
the related consolidated statements of income, stockholders' equity and cash
flows for the three-month period then ended (the "Interim Financial
Statements"). The Interim Financial Statements present fairly, in all material
respects, the financial position and results of operations of FiberCore and its
Subsidiaries as of the date and for the period indicated on the Interim
Financial Statements, in accordance with GAAP, consistently applied with prior
periods, except that the Interim Financial Statements do not contain footnotes
and will be subject to normal year-end adjustments. Since June 30, 1995,
FiberCore has not disposed of any assets other than at fair value, consistent
with past practice.
(c) The parties hereto acknowledge that the financial
statements attached hereto are estimates prepared in good faith by management.
The parties agree that no liabilities shall attach hereto for any errors
therein.
3.6 Subsidiaries. Except for FiberCore Jena Gmbh, a wholly owned subsidiary of
FiberCore, Inc., and Sub, a wholly owned subsidiary of FiberCore, Inc., and
FiberCore Mid East Ltd., neither FiberCore nor Sub has any Subsidiaries or
equity investments of any kind.
3.7 No Violation or Conflict. Except as set forth in Schedule 3.7, the
execution, delivery and performance by FiberCore and Sub of this Agreement and
the Plan of Merger and the consummation by FiberCore and Sub of the transactions
contemplated hereby and thereby: (A) do not and will not violate or conflict
with any provision of law or regulation, or any writ, order, judgment or decree
of any court or governmental or regulatory authority, or any provision the
Articles of Incorporation or Bylaws of FiberCore and Sub; and (B) do not and
will not, with or without the passage of time or the giving of notice, result in
the breach of, or constitute a default, cause the acceleration of performance,
or require any consent under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of FiberCore or Sub or their
Subsidiaries pursuant to any material instrument or agreement to which FiberCore
or Sub or their Subsidiaries are a party or by which FiberCore or Sub or their
Subsidiaries or their respective properties may be bound or affected.
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3.8 Consent of Governmental Authorities. Other than in connection with the
Delaware General Statutes, no consent, approval or authorization of, or
registration, qualification or filing with any federal, state, local or foreign
governmental or regulatory authority is required to be made by FiberCore or Sub
or any of their Subsidiaries in connection with the execution, delivery or
performance by FiberCore or Sub of this Agreement and the Plan of Merger or the
consummation by FiberCore and Sub of the transactions contemplated hereby or
thereby.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF ALT
ALT represents and warrants to FiberCore and Sub as of the date hereof
and as of the Closing as follows:
4.1 Organization and Standing. ALT is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, and has the full power and authority (corporate and otherwise) to
carry on its business in the places and as it is now being conducted and to own
and lease the properties and assets which it now owns or leases except ALT is or
shortly after the Effective Time of the Merger will be qualified in
Massachussets.
4.2 Capital Structure. The authorized capital stock of ALT consists of
10,000,000 shares of ALT Capital Stock, of which approximately 3,850,000 shares
are issued and outstanding. All of the outstanding shares of ALT Capital Stock
were issued in compliance with applicable federal and state securities laws, and
no further registration, qualification or other compliance under such securities
laws is required. All of the outstanding shares of ALT Capital Stock are validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, ALT's Articles of Incorporation or By-laws or any agreement
to which ALT is a party or is bound. At or immediately before the Effective Time
of the Merger warrants and debt convertible into approximately 4.53 million
shares of ALT Capital Stock will convert such warrants and debt into ALT Capital
Stock (the "Warrant and Debt Conversion"). Except for the foregoing, for
warrants convertible into 85,250 shares, and for warrants for purchase of
100,0000 shares issued to the Connecticut Development
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Authority and warrants for the purchase of 66,667 shares issued to Connecticut
Innovations, Inc. (copies of which were previously delivered to FiberCore), and
for 275,000 incentive stock options, and except as set forth on Schedule 4.2,
there are no equity securities of any class of ALT or any security exchangeable
or convertible into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except for the foregoing or as set forth on
Schedule 4.2, there are no options, warrants, calls, rights, commitments or
agreements of any character to which ALT is a party or by which it is bound
obligating ALT to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of ALT or obligating ALT to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement.
4.3 Authority. ALT has all requisite corporate power and authority to enter into
this Agreement and, subject to approval of this Agreement by the shareholders of
ALT, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of ALT, and have been
approved by the shareholders of ALT. This Agreement has been duly executed and
delivered by ALT and, subject to such approval by shareholders of ALT,
constitutes a valid and binding obligation of ALT, enforceable against ALT in
accordance with its terms, except to the extent that their enforcement is
limited by bankruptcy, insolvency, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally and by general
principles of equity.
4.4 Brokers or Finders. ALT has not incurred, and will not incur, directly or
indirectly, any liability for any brokerage or finders' fees or agents
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
4.5 Financial Statements. (a) The unaudited balance sheets of ALT as at December
31, 1993 and December 31, 1994 and the related unaudited statements of income,
stockholders' equity and cash flows for the respective years then ended,
including the notes thereto (in the case of the 1994 financial statements), (the
"ALT Financial Statements"), are attached hereto as Schedule 4.5(a). The ALT
Financial Statements present fairly the financial
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position and the results of operations of ALT as of the dates and for the
periods indicated on the ALT Financial Statements, in each case in conformity
with generally accepted accounting principles ("GAAP"), consistently applied
during such periods. ALT and its Subsidiaries do not have any material
liabilities or obligations of any nature, which would be reflected in a current
unaudited financial statement, if available, except (1) as disclosed, reflected
or reserved against in the balance sheet dated December 31, 1994 included in the
ALT Financial Statements and the notes thereto; (2) for items explicitly
disclosed in the ALT Interim Financial Statements (as defined below); (3) for
liabilities incurred after June 30, 1995 in the ordinary course of business,
consistent with past practice; and (4) for items listed in schedule 4.5(a) or
any other schedule attached hereto.
(b) Attached hereto as Schedule 4.5(b) is the balance sheet (the "June
Balance Sheet") of ALT as of June 30, 1995 (the "Balance Sheet Date") and the
related statements of income, stockholders' equity and cash flows for the
six-month period then ended (the "ALT Interim Financial Statements"). The ALT
Interim Financial Statements present fairly, in all material respects, the
financial position and results of operations of ALT as of the date and for the
period indicated on the ALT Interim Financial Statements, in accordance with
GAAP, consistently applied with prior periods, except that the Interim Financial
Statements will be subject to normal year-end adjustments. Since June 30, 1995,
ALT has not disposed of any assets other than at fair value, consistent with
past practice and other than its stock in Allied Controls Inc. and its interest
in Allied Controls Holding LLC ("LLC").
(c) The parties hereto acknowledge that the financial statements
attached hereto are estimates prepared in good faith by management. The parties
agree that no liabilities shall attach hereto for any errors therein.
4.6 Subsidiaries. ALT has no Subsidiaries or equity investments of any kind.
4.7 No Violation or Conflict. Except as set forth on Schedule 4.7, the
execution, delivery and performance by ALT of this Agreement and the Plan of
Merger and the consummation by ALT of the transactions contemplated hereby and
thereby: (A) do not and
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will not violate or conflict with any provision of law or regulation, or any
writ, order, judgment or decree of any court or governmental or regulatory
authority, or any provision of ALT's Articles of Incorporation or Bylaws; and
(B) do not and will not, with or without the passage of time or the giving of
notice, result in the breach of, or constitute a default, cause the acceleration
of performance, or require any consent under, or result in the creation of any
lien, charge or encumbrance upon any property or assets of ALT or its
Subsidiaries pursuant to any material instrument or agreement to which ALT or
its Subsidiaries are a party or by which ALT or its Subsidiaries or their
respective properties may be bound or affected.
4.8 Consent of Governmental Authorities. Other than in connection with the
Delaware General Corporate Law, no consent, approval or authorization of, or
registration, qualification or filing with any federal, state, local or foreign
governmental or regulatory authority is required to be made by ALT or any of its
Subsidiaries in connection with the execution, delivery or performance by ALT of
this Agreement and the Plan of Merger or the consummation by ALT of the
transactions contemplated hereby or thereby.
ARTICLE 5.
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of FiberCore and Sub. During the period from the date of this
Agreement and continuing until the Effective Time of the Merger, and except as
specified in Schedules 5.1 or 3.2, FiberCore and Sub agree (except as expressly
contemplated by this Agreement or to the extent that ALT shall otherwise consent
in writing) that:
(a) Dividends; Changes in Stock. Each of FiberCore and Sub and their
Subsidiaries shall not: (i) declare, pay or promise to pay any dividends on or
make other distributions in respect of any of its capital stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of FiberCore or (iii) repurchase or otherwise
acquire any shares of its capital stock.
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(b) Issuance of Securities. Each of FiberCore and Sub and their
Subsidiaries shall not issue, deliver or sell or authorize, promise or propose
the issuance, delivery or sale of, or purchase or promise or propose the
purchase of, any shares of its capital stock or any class or securities
exercisable or convertible into or exchangeable for, or rights, warrants or
options to acquire, any such shares or other convertible securities, other than
at fair value.
(c) Governing Documents. Each of FiberCore and Sub shall not amend its
Articles of Incorporation or By-laws, except as contemplated in this Agreement
or the Plan of Merger.
(d) Accounting Practices. Each of FiberCore and Sub and their
Subsidiaries shall not alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices therein reflected.
(e) Other Agreements. Each of FiberCore and Sub shall not agree, in
writing or otherwise, to do any of the foregoing.
5.2 Covenants of ALT. During the period from the date of this Agreement and
continuing until the Effective Time of the Merger, and except as specified in
Schedule 5.2 or 4.2, ALT agrees (except as expressly contemplated by this
Agreement or to the extent that FiberCore and Sub shall otherwise consent in
writing) that:
(a) Dividends; Changes in Stock. ALT and its Subsidiaries shall not:
(i) declare, pay or promise to pay any dividends on or make other distributions
in respect of any of its capital stock, other than a distribution of its
interest in Allied Controls Holding LLC, (ii) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of capital stock of ALT
or (iii) repurchase or otherwise acquire any shares of its capital stock.
(b) Issuance of Securities. ALT and its Subsidiaries shall not issue,
deliver or sell or authorize, promise or propose the issuance, delivery or sale
of, or purchase or promise or propose the purchase of, any shares of its capital
stock or any class or securities exercisable or convertible into or exchangeable
for,
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or rights, warrants or options to acquire, any such shares or other convertible
securities, other than at fair value.
(c) Governing Documents. ALT shall not amend its Articles of
Incorporation or By-laws, except as contemplated in this Agreement or the Plan
of Merger.
(d) Accounting Practices. ALT and its Subsidiaries shall not alter the
manner of keeping its books, accounts or records, or change in any manner the
accounting practices therein reflected.
(e) Other Agreements. ALT shall not agree, in writing or otherwise, to
do any of the foregoing.
ARTICLE 6.
OMITTED
ARTICLE 7.
ADDITIONAL AGREEMENTS
7.1 Legal Conditions to the Merger. Each party will take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to the Merger and will promptly cooperate with and
furnish information to the other party in connection with any such requirements
imposed upon such other party in connection with the Merger. Each party will
take all reasonable actions to obtain (and to cooperate with the other party)
any consent, authorization, order or approval of, or any exemption by, any
governmental entity, or other third party, required to be obtained or made by
such party or its Subsidiaries in connection with the Merger or the taking of
any action contemplated thereby or by this Agreement.
7.2 Delivery of Stock Certificates. FiberCore will issue and deliver as and when
required by the provisions of this Agreement, certificates representing the
shares of FiberCore Capital Stock into which the shares of ALT outstanding
immediately prior to the Effective Time of the Merger shall have been converted
as provided herein and deliver substitute option and warrants into
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which the options and warrants outstanding immediately prior to the Effective
Time of the Merger shall have been converted as provided herein.
7.3 Tax Treatment. FiberCore, Sub, and ALT shall use best efforts to qualify the
Merger, and shall use best efforts not to take any action to cause the Merger
not to qualify, as a reorganization under Section 368(a) of the Code. From and
after the Effective Time of the Merger, (i) ALT shall continue ALT's historic
business or use a significant portion of ALT's historic business assets in a
business within the meaning of Treasury Regulation Section 1.368-1(d), and (ii)
FiberCore, Sub and ALT shall treat the Merger as a "reorganization" within the
meaning of Section 368(a) of the Code and shall file such information with their
income tax returns as may be required by Treasury Regulation Section 1.368-3 or
other applicable law.
7.4 Board of Directors. ALT will cause Mohd A. Aslami, Charles DeLuca, Hedayat
Amin-Arsala, and Steven Phillips to be the only members of its Board of
Directors immediately following the Closing.
ARTICLE 8.
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligations to Effect the Merger. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by the required affirmative vote or consent of the holders of the
outstanding shares of ALT Capital Stock and the sole shareholder of Sub Common.
(b) Government Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any governmental entity necessary for the consummation of the
transactions contemplated by this Agreement including, but not limited to, such
requirements under applicable state securities laws, shall have been filed,
occurred or been obtained, other than filings with
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and approvals by foreign governments relating to the Merger if failure to make
such filings or obtain such approvals would not be materially adverse to ALT or
its Subsidiaries taken as a whole, or FiberCore or its Subsidiaries taken as a
whole.
(c) Third-Party Approvals. Any and all consents or approvals required
from third parties shall have been obtained.
(d) Legal Action. No temporary restraining order, pre liminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against ALT, FiberCore or Sub of substantial damages
if the Merger is consummated, shall be pending which, in the good faith judgment
of ALT's, FiberCore's or Sub's Board of Directors has a reasonable probability
of resulting in such order, injunction or damages. In the event any such order
or injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(e) Statutes. No statute, rule or regulation shall have been enacted by
the government of the United States or any state or agency thereof which would
make the consummation of the Merger illegal.
(f) Appraisal Rights. Holders of no more than 2% of the outstanding
shares of ALT shall have commenced pursuit of their rights for demand for
payment or appraisal under the Delaware General Corporation Law.
(g) Registration Rights and Conversion. Other than CII, CDA, and
holders of employee stock options and holders of warrants underlying 85,250
shares, substantially all persons with registration rights with respect to ALT
common stock shall have waived such rights and substantially all persons holding
warrants and debt of ALT shall have converted such instruments into common stock
of ALT.
8.2 Conditions to Obligations of ALT. The obligations of ALT to effect the
Merger are subject to the satisfaction on or prior to
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the Closing Date of the following conditions, unless waived by ALT:
(a) Representations and Warranties. The representations and warranties
of FiberCore and Sub set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date, and ALT shall have received a certificate or certificates to such effect
signed by the Chief Executive Officer of each of FiberCore and Sub.
(b) Performance of Obligations of FiberCore. FiberCore and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement prior to the Closing Date, and ALT shall have
received a certificate signed by the Chief Executive Officers or Chief Financial
Officers of each of FiberCore and Sub to such effect.
(c) Corporate Action. ALT shall have received from FiberCore and Sub
certified copies of resolutions of Sub's shareholder and FiberCore's and Sub's
Board of Directors approving and adopting this Agreement and the transactions
contemplated hereby, and ALT shall have received certificates signed on behalf
of each of FiberCore and Sub by the corporate secretary of each such entity to
such effect.
8.3 Conditions to Obligations of FiberCore and Sub. The obligations of FiberCore
and Sub to effect the Merger are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless waived by FiberCore and Sub:
(a) Representations and Warranties. The representations and warranties
of ALT set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, and
FiberCore and Sub shall have received a certificate or certificates to such
effect signed by an executive officer of ALT.
(b) Performance of Obligations of ALT. ALT shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Closing Date, and FiberCore and Sub shall have received a
certificate signed by an executive officer of ALT.
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(c) Corporate Action. FiberCore and Sub shall have received from ALT
certified copies of resolutions of ALT's shareholders and Board of Directors
approving and adopting this Agreement and the transactions contemplated hereby,
and FiberCore and Sub shall have received a certificate signed on behalf of ALT
by the corporate secretary of such entity to such effect.
ARTICLE 9.
OMITTED
ARTICLE 10.
CLOSING
10.1 Closing Date. The Closing under this Agreement (the "Closing") shall be
held not more than two (2) business days following the later of (a) the approval
of the Merger by the shareholders of ALT and (b) satisfaction of all other
conditions precedent to the Merger specified in this Agreement, unless duly
waived by the party entitled to satisfaction thereof. The parties hereto
anticipate that the Closing will occur on or before September 15, 1995. In any
event, if the Closing has not occurred on or before September 30, 1995, this
Agreement may be terminated as provided in Article 13. Such date on which the
Closing is to be held is herein referred to as the "Closing Date." The Closing
shall be held at the offices of Coleman & Rhine, 1120 Avenue of the Americas,
New York, New York, at 10:00 a.m. on such date, or at such other time and place
as the parties may agree upon in writing.
10.2 Filing Date. Subject to the provisions of this Agreement, on the Closing
Date a fully-executed and acknowledged copy of this Agreement, if required,
along with required related certificates of ALT, FiberCore and Sub meeting the
requirements of the Delaware General Corporation Law, shall be filed with the
Delaware Secretary of State, all in accordance with the provisions of this
Agreement.
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ARTICLE 11.
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties and covenants contained in this
Agreement shall survive only up to the closing of the Merger. All
representations, warranties and covenants in or pursuant to this Agreement shall
be deemed to be conditions to the Merger, and in the event this Agreement shall
be terminated in accordance with the terms thereof, the provisions of Section 12
of this Agreement shall survive any termination of this Agreement.
ARTICLE 12.
PAYMENT OF EXPENSES
If for any reason the Merger as contemplated herein is not consummated
ALT, FiberCore, and Sub shall each pay their own out-of-pocket expenses incurred
incident to the preparation and carrying out of the transactions herein
contemplated; provided that, unless the Merger is not consummated because of a
failure of FiberCore or Sub to satisfy any of the conditions of Section 8.2,
FiberCore will reimburse ALT the actual documented costs incurred, up to a
maximum of Five Thousand Dollars $5,000, in consideration of the expenses
incurred by ALT and the termination of this Agreement and the Merger; provided
further, that if the Merger is not consummated because of a failure of ALT to
satisfy any of the conditions of Section 8.3, ALT will reimburse FiberCore
actual documented costs incurred, up to a maximum of Five Thousand Dollars
($5,000), in consideration of the expenses incurred by FiberCore and Sub and the
termination of this Agreement and the Merger.
ARTICLE 13.
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after the approval by the ALT's
or Sub's shareholders of matters presented in connection with the Merger :
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(a) by mutual written consent of ALT, Sub, and FiberCore;
(b) by ALT, on the one hand or FiberCore and Sub, on the other hand, as
the non-defaulting party or parties, if there has been a material breach of any
material representation, warranty, covenant or agreement contained in this
Agreement on the part of the other party or parties set forth in this Agreement
and, if such breach is curable, such breach has not been cured within a ten (10)
day period after written notice of such breach;
(c) by either ALT, on the one hand, or FiberCore and Sub, on the other
hand, if the Merger shall not have been consummated on or before September 30,
1995; provided, however, that if the Merger shall not be consummated on or
before September 30, 1995 because of a party's failure to satisfy any of the
conditions set forth in Sections 8.2 or 8.3, neither ALT, on the one hand, or
FiberCore and Sub, on the other hand, may rely upon such party or parties own
actions or lack thereof to terminate the Agreement;
(d) ALT, on the one hand, or FiberCore and Sub, on the other hand, if
(i) there shall be a final nonappealable order of a federal or state court in
effect preventing consummation of the Merger or (ii) there shall be any action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger by any governmental entity which would make
consummation of the Merger illegal; and
(e) ALT, on the one hand, or FiberCore and Sub, on the other hand, if
there shall be any action taken, or any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
governmental entity, which would (A) prohibit FiberCore's or Sub's ownership or
operation of all or a material portion of the business or assets of ALT or Sub
and its Subsidiaries taken as a whole, or compel FiberCore to dispose of or hold
separate all or a material portion of the business or assets of ALT and its
Subsidiaries taken as a whole or FiberCore and its Subsidiaries taken as a
whole, as a result of the Merger or (B) render ALT or FiberCore unable to
consummate the Merger, except for any waiting period provisions; or
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(f) by any party, provided however that the terminating party shall be
liable for the expenses of the non-terminating parties, in an amount not to
exceed a maximum of $5,000.
Where action is taken to terminate this Agreement pursuant to this
Section 13.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
13.2 Effect of Termination. In the event of termination of this Agreement by
either FiberCore, Sub or ALT as provided in Section 13.1, this Agreement and the
Plan of Merger shall forthwith become void and there shall be no liability or
obligation on the part of ALT, FiberCore or Sub or their respective officers or
directors except as set forth in Article 12 and Article 14.
13.3 Amendment. This Agreement may be amended by the parties hereto, by action
taken by their respective Board of Directors, at any time before or after
approval of matters presented in connection with the Merger by the shareholders
of ALT and Sub but, after any such shareholder approval, no amendment shall be
made which by law requires the further approval of shareholders without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
13.4 Extension; Waiver. At any time prior to the Effective Time of the Merger,
any party hereto, by such corporate action as shall be appropriate, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
22
<PAGE>
ARTICLE 14.
LIMITATION ON LIABILITY
14.1 Liabilities of ALT, FiberCore, and Sub. The aggregate liability of all
entities for breaches by FiberCore and Sub and their officers and directors
under this Agreement and the Plan of Merger and the transactions contemplated
hereby and thereby shall be limited to $5,000 (including the amounts set forth
in sections 12 and 13).
ARTICLE 15.
GENERAL
15.1 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and delivered personally
or sent by certified mail, postage prepaid, as follows:
If to FiberCore or Sub:
Dr. Mohd A. Aslami, President
FiberCore, Inc.
P.O. Box 206
174 Charlton Road
Sturbridge, Massachusetts 01566
If to ALT:
Automated Light Technologies, Inc.
P.O. Box 802
Tolland, Connecticut 06084
Attn: Charles DeLuca
15.2 Headings. The headings of the several sections of this Agreement are
inserted for convenience of reference only and are not intended to affect the
meaning or interpretation of this Agreement.
15.3 Counterparts. This Agreement may be executed in counter parts, and when so
executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
23
<PAGE>
15.4 Binding Nature. This Agreement shall be binding upon and inure to the
benefit of the parties hereto. Neither ALT, Sub or FiberCore may assign or
transfer any rights under this Agreement.
15.5 Other Agreements. All written agreements heretofore made between the
parties hereto in contemplation of this Agreement are superseded by this
Agreement and are hereby terminated in their entirety.
15.6 Good Faith. Each of the parties hereto agrees that it shall act in good
faith in an attempt to cause all the conditions precedent to their respective
obligations to be satisfied.
15.7 Applicable Law. This Agreement shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of New York and
each party agrees to submit to the jurisdiction of the courts of the State of
New York.
15.8 No Third Party Beneficiaries. The terms and provisions of this Agreement
are intended for the benefit of each party hereto and their respective
successors and permitted assigns, and it is not the intention of the parties to
confer third party beneficiary rights upon any other person or entity.
15.9 Severability. A determination that any portion of this Agreement is
unenforceable or invalid shall not affect the enforceability or validity of any
of the remaining portions hereof or of this Agreement as a whole. In the event
that any part of any of the covenants, sections or provisions herein may be
determined by a court of law to be overly broad or against applicable precedent
or public policy, thereby making such covenants, sections or provisions invalid
or unenforceable, the parties hereto agree, and it is their desire that, such
court shall substitute a reasonable and judicially enforceable limitation in
place of the invalid and unenforceable part of such covenants, sections or
provisions, and that, as so modified, the covenants, sections or provisions
shall be as fully enforceable as if set forth herein by the parties themselves
in the modified form. If, however, any court of law shall refuse to substitute
any reasonable and judicially enforceable provisions in their place, the parties
shall attempt to reach agreement with respect to a valid and enforceable
substitute for the deleted provisions which shall be as close in its intent and
effect as possible to the deleted portions.
24
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date first written above.
FIBERCORE, INC.
By:/s/ Mohd Aslami
------------------------
Name: Mohd Aslami
---------------------
Title: President
---------------------
ALT MERGER CO.
By:/s/ Mohd Aslami
------------------------
Name: Mohd Aslami
---------------------
Title: President
---------------------
AUTOMATED LIGHT TECHNOLOGIES, INC.
By:/s/ Mohd Aslami
------------------------
Name: Mohd Aslami
---------------------
Title: President
---------------------
25
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 12th day of September, 1995, before me personally came
Mohd Aslami, to me known, who, being by me duly sworn, did depose and say that
he has a business address at 174 Charlton Road, Sturbridge, MA ; that he is the
President of FiberCore, Inc. and ALT Merger Co., the corporations described in
and which executed the foregoing instrument; and that he signed his name thereto
by order of the board of directors of said corporations.
/s/ Maureen Mulle
--------------------
Maureen Mullen
Notary Public
26
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On the 14th day of September, 1995, before me personally came
Charles DeLuca, to me known, who, being by me duly sworn, did depose and say
that he has a business address at 174 Charlton Road, Sturbridge, MA; that he is
the Secretary of Automated Light Technologies, Inc., the corporation described
in and which executed the foregoing instrument; and that he signed his name
thereto by order of the board of directors of said corporation.
/s/ Lucille Christian
--------------------
Lucille Christian
Notary Public
A:\ALTAGREE.DOC
27
<PAGE>
EXHIBIT A
PLAN OF MERGER
THIS PLAN OF MERGER (the "Plan of Merger") is dated as of
September 18th, 1995 and is entered into by and between ALT Merger Co., a
Delaware corporation ("Acquisition Sub"), and Automated Light Technologies,
Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H
WHEREAS, the Company and Acquisition Sub and the respective
Boards of Directors thereof have approved as desirable and in the best interests
of each corporation that Acquisition Sub be merged with and into the Company by
a statutory merger upon the terms and conditions contained in this Plan of
Merger and in a certain Agreement and Plan of Reorganization, dated as of
September 18th, 1995 by and among FiberCore, Inc. ("Parent"), the Company and
Acquisition Sub (the "Merger Agreement") (which Merger Agreement shall be deemed
part of this Plan of Merger and is hereby incorporated by reference to the same
extent as if fully set forth herein), and in accordance with the applicable laws
of the State of Delaware.
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein, IT IS AGREED AS FOLLOWS:
FIRST: At the Effective Date of the Merger (as hereinafter
defined), Acquisition Sub shall be merged with and into the Company by a
statutory merger (the "Merger") in accordance with the General Corporation Law
of the State of Delaware (the "GCL") and upon the terms and conditions
hereinafter expressed. At the Effective Date of the Merger, Acquisition Sub
shall be merged with and into the Company, the separate existence of Acquisition
Sub shall cease, and the Company shall be the surviving corporation (Acquisition
Sub and the Company are hereinafter sometimes referred to as the "Constituent
Corporations," and the Company, as the party surviving the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation") all in the
manner intended by Section 251 of the GCL.
28
<PAGE>
SECOND: The Merger shall become effective at the time of
filing of the certificate of merger with the Secretary of State of the State of
Delaware (the "Certificate of Merger") in accordance with the provision of the
GCL. The date and time when the Merger shall become effective is herein referred
to as the "Effective Date."
THIRD: The manner and basis for converting the shares of the
capital stock of the Company and Acquisition Sub upon the Merger shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be as follows:
a. Each share of the Company's common stock, par value
$.01 per share, actually issued and outstanding at
the Effective Date ("Company Common Stock"), except
for Dissenting Shares (as defined below) shall, by
virtue of the Merger and without any action on the
part of the holder thereof, at the Effective Date,
be converted into the right to receive a number of
shares equal to the ratio of (x) 8,811,137 over (y)
the number of shares of Company Common Stock
outstanding on a fully diluted basis (other than
shares underlying warrants issued to the Connecticut
Development Authority and Connecticut Innovations,
Inc. and other than 85,250 shares underlying certain
warrants and 275,000 shares underlying certain
incentive stock options, but including approximately
4.53 million shares underlying warrants and debt to
be issued at the Effective Time) (the "ALT
Outstanding") immediately prior to the Merger
(hereinafter, the "Exchange Ratio" or the "Per Share
Merger Consideration") of issued and outstanding
shares of the Common Stock, par value $.001 per
share, of Parent (the "Parent Common Stock") (the
"Per Share Merger Consideration"). The exact
exchange ratio is set forth on Attachment 1. An
aggregate of 8,811,137 shares of Parent Common Stock
will be issued in the Merger if all shares of ALT
Outstanding are converted into shares of Parent
Common Stock.
29
<PAGE>
b. All payments shall be made in Parent Common Stock
pursuant to the terms and conditions of the Merger
Agreement.
c. Each share of the Company Common Stock held in the
Company's treasury at the Effective Date shall, by
virtue of the Merger, be canceled without payment of
any consideration therefor and without any
conversion thereof.
d. All shares of Company Common Stock held of record by
shareholders who shall not have voted such shares in
favor of the Merger and who shall properly exercise
rights to demand payment of the fair value of such
shares in accordance with Section 262 of the GCL
(the "Dissenting Shares"), if any, shall be canceled
upon such exercise and shall be entitled to payment
of the fair value of such shares in accordance with
the provisions of Section 262 inclusive of the GCL
(the "Dissenting Consideration").
e. After the Effective Date, each holder of an
outstanding certificate which at the Effective Date
represented outstanding shares of Company Common
Stock (the "Certificates"), upon surrender of such
Certificates, together with a transmittal letter
(which shall specify that delivery shall be
effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery
of the Certificates) shall be entitled to receive in
exchange for each share of Company Common Stock
represented thereby, the Per Share Merger
Consideration or Dissenting Consideration, as the
case may be. No interest will be paid or accrued on
the Per Share Merger Consideration or the Dissenting
Consideration, as the case may be, payable upon the
surrender of such Certificates, except to the extent
required by law.
f. After the Effective Date, there shall be no further
transfers on the stock transfer books of the
Surviving Corporation of the shares of Company
Common Stock or Options (as defined below) which
30
<PAGE>
are outstanding at the Effective Date. If, after the
Effective Date, Certificates are presented to the
Surviving Corporation for transfer, they shall be
canceled and there shall be issued to the transferee
in exchange therefor the consideration as provided
above.
g. Each share of Acquisition Sub common stock, par
value $.01 per share (the "Acquisition Sub Common
Stock"), issued and outstanding at the Effective
Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, at the
Effective Date, be converted into and exchangeable
for one fully paid and nonassessable share of
Surviving Corporation Common Stock, par value $0.01
per share (the "Surviving Corporation Common
Stock"). From and after the Effective Date, each
outstanding certificate theretofore representing
Acquisition Sub Common Stock shall be deemed for all
purposes to evidence ownership of, and to represent
the number of shares, of Surviving Corporation
Common Stock into which such shares of Acquisition
Sub Common Stock shall be converted.
h. With respect to unexpired, unexercised options,
warrants or other convertible securities
("Convertible Securities"), whether or not
exercisable or convertible at the Effective Date,
outstanding on the Effective Date, each such option,
warrant or convertible security, by virtue of the
Merger and without any action on the part of the
holder thereof other than proper execution of a
notice of exercise or conversion of such convertible
security, shall be converted into the right to
receive, for the number of shares of ALT Capital
Stock to which the warrantholder, optionholder, or
convertible security holder is entitled (the
"Underlying Share Count"), the number of shares of
Parent Capital Stock determined by multiplying the
aforesaid number by the Per Share Merger
Consideration, upon payment of an amount equal to
the exercise price specified in such Option or
Warrant or conversion price
31
<PAGE>
specified in such Convertible Security multiplied by
the Underlying Share Count, subject to the
expiration date and other terms of such Option or
Warrant or Convertible Securities.
FOURTH: Until otherwise amended in accordance with law or such
Certificate of Incorporation, the Certificate of Incorporation of the Company,
and the By-laws of the Company in effect at the Effective Date of the Merger,
shall be the Certificate of Incorporation and By-laws of the Surviving
Corporation following the Merger.
FIFTH: All officers and directors of the Company at the
Effective Date shall, from and after the Effective Date, be the officers and
directors, respectively, of the Surviving Corporation, and shall hold office
until their successors are elected or appointed and qualify as provided in the
Certificate of Incorporation and By-laws of the Surviving Corporation, or as
otherwise provided by law. At the Effective Date, all directors of the
Acquisition Sub shall cease to be directors thereof and shall be considered
removed from office. If, at the Effective Date, a vacancy shall exist on the
Board of Directors of the Surviving Corporation, such vacancy may thereafter be
filled in the manner provided in the Certificate of Incorporation and Bylaws of
the Surviving Corporation, or as otherwise provided by law.
SIXTH: At the Effective Date of the Merger, all respective
property, assets, rights, privileges, powers, franchises and immunities of each
of the Constituent Corporations shall vest in the Surviving Corporation and all
of the respective debts, liabilities and obligations of each of the Constituent
Corporations shall become the debts, liabilities and obligations of the
Surviving Corporation.
32
<PAGE>
SEVENTH: Prior to the filing of the Certificate of Merger,
this Plan of Merger may be terminated as provided in the Merger Agreement.
33
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date first written above.
AUTOMATED LIGHT TECHNOLOGIES, INC.
By: /s/ Charles DeLuca
-------------------------------
Name: Charles DeLuca
------------------------
Title: Vice President
------------------------
ALT MERGER CO.
By: /s/ Mohd Aslami
-------------------------------
Name: Mohd Aslami
------------------------
Title: President
------------------------
Agreed To:
FIBERCORE, INC.
By: /s/ Mohd Aslami
--------------------------
Name: Mohd Aslami
------------------------
Title: President
------------------------
34
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 12th day of September, 1995, before me personally came
Mohd Aslami, to me known, who, being by me duly sworn, did depose and say that
he has a business address at 174 Charlton Road, Sturbridge, MA ; that he is the
President of FiberCore, Inc. and ALT Merger Co., the corporations described in
and which executed the foregoing instrument; and that he signed his name thereto
by order of the board of directors of said corporations.
/s/ Maureen Mullen
Notary Public
35
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On the 14th day of September, 1995, before me personally came
Charles DeLuca, to me known, who, being by me duly sworn, did depose and say
that he has a business address at 174 Charlton Road, Sturbridge, MA; that he is
the Secretary of Automated Light Technologies, Inc., the corporation described
in and which executed the foregoing instrument; and that he signed his name
thereto by order of the board of directors of said corporation.
/s/ Lucille Christian
Notary Public
36
<PAGE>
Schedule 2.3
Exchange Ratio
1.051615
37
<PAGE>
Schedule 3.2
Warrants, Options and Other
Outstanding Convertible Equity Securities of FiberCore
$5,000,000 convertible debt held by AMP, Inc. plus interest
accumulating at a rate of LIBOR plus one percent may be converted into common
stock of FiberCore through April 17, 2005. For the first five years the
conversion price is $1.1576258 per share; thereafter the conversion price is
equal to the price per share paid by a third party investor in the private sale
of common stock by FiberCore immediately prior to such conversion.
348,774 employee stock options are outstanding and 305,000 additional
options are available for issuance.
1,560,305 options may be issued to a new chief operating
officer.
Additional warrants exercisable into 550,696 shares of FiberCore
Capital Stock are due to be issued to Middle Eastern Specialized Cable Company
("MESC"), upon signing of certain agreements.
238,635 shares of FiberCore Capital Stock are due to be issued to MESC
upon the exercise of the warrants listed in the above paragraph.
An additional 679,192 shares of FiberCore Capital Stock are to be
issued to MESC upon the signing of certain agreements.
An additional 367,131 shares are in the process of being issued to
MESC, upon the closing of a certain agreement.
An additional 820,996 warrants are outstanding (subject to adjustment).
Additional warrants may be due the Armand Group in an amount dependent
on the number of the Company's securities placed by them, in a contemplated
private placement.
All warrants and options reflect pre-dilution numbers. Such dilution
may have occurred from issuance of other warrants, options or sales of stock. In
addition, the terms of this agreement may further dilute options and warrants.
38
<PAGE>
Schedule 3.5(a)
Financial Statements
39
<PAGE>
Schedule 3.5(b)
Financial Statements
40
<PAGE>
Schedule 3.7
FiberCore Violations and Conflicts Arising from Merger
None.
Schedule 4.2
Warrants, Options and Other
Outstanding Equity Securities of ALT
None.
41
<PAGE>
Schedule 4.5(a)
Financial Statements
42
<PAGE>
Schedule 4.5(b)
Financial Statements
43
<PAGE>
Schedule 4.7
ALT Violations or Conflicting Agreements
ALT is required to register shares underlying certain warrants
immediately upon consummation of a merger. Such registration is supposed to be a
condition to a merger.
Schedule 5.1
FiberCore's Covenants Relating to Conduct of Business
See attached Amendment.
44
<PAGE>
Schedule 5.2
ALT's Covenants Relating to Conduct of Business
None.
45
<PAGE>
Attachment 1
Exchange Ratio
1.051615
46
Coleman & Rhine LLP
1120 Avenue of the Americas
New York, New York 10036
December 27, 1996
FiberCore, Inc.
174 Charlton Road
Sturbridge, Massachusetts 01566
Gentlemen:
We have acted as counsel to FiberCore, Inc., a Nevada corporation (the
"Company"), in connection with its Registration Statement on Form S-1 (the
"Registration Statement"), filed under the Securities Act of 1933, as amended
(the "Act"), relating to the proposed offer and sale by certain shareholders of
the Company of up to 40,791,159 shares (the "Shares") of common stock, $.001 par
value per share (the "Common Stock"), of the Company, of which 34,483,250 Shares
(the "Issued Shares") are currently issued and outstanding. Included within the
Shares are 5,757,213 shares of Common Stock (the "Underlying Shares") issuable
to holders upon: (a) conversion of a convertible note issued to AMP Incorporated
(the "AMP Note"); (b) conversion of a convertible note issued to Hedayat
Amin-Arsala (the "Arsala Note" and, together with the AMP Note, the "Notes");
(c) exercise of outstanding Common Stock Purchase Warrants (the "Warrants"); and
(d) exercise of outstanding Common Stock Purchase Options (the "Options") (the
Notes, Warrants and Options are sometimes referred to collectively as the
"Convertible Securities"). Also included within the Shares are 550,696 shares of
Common Stock (the "Other Shares") held for the benefit of or otherwise issuable
to Middle East Specialized Cables Co. ("MESC"), subject to the satisfaction of
certain conditions.
In such capacity we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Company's Certificate of
Incorporation and By-Laws as presently in effect, minutes and other instruments
evidencing actions taken by the Company's directors, the Registration Statement
and exhibits thereto and such other documents and instruments relating to the
Company and the issuance of the Issued Shares, the Underlying Shares and the
Other Shares as we have deemed necessary or appropriate under the circumstances.
We are members of the Bar of the State of New York and do not represent
ourselves to be expert in the laws of any other state or jurisdiction, except
with respect to the federal laws of the United States of America.
Based on the foregoing, it is our opinion that:
1. The Company has been duly organized and is validly existing under the
laws of Nevada and has authorized capital stock consisting of 100,000,000 shares
of Common Stock and
<PAGE>
10,000,000 shares of preferred stock, $.001 par value per share.
2. The Issued Shares have been duly and validly issued, and are fully paid
and non-assessable shares of Common Stock of the Company, with no personal
liability attached to the ownership thereof.
3. The Underlying Shares issuable upon the exercise or conversion, as the
case may be, of the Convertible Securities have been duly authorized and
reserved for issuance upon exercise or conversion of the Convertible Securities,
and such Underlying Shares, when issued and paid for upon exercise or conversion
of the Convertible Securities in accordance with the respective terms thereof,
will be legally issued, fully paid and non-assessable shares of Common Stock of
the Company.
4. The Other Shares have been duly authorized and reserved for issuance, as
appropriate, and such Other Shares, when issued to MESC upon the satisfaction of
the conditions to their issuance, will be legally issued, fully paid and
non-assessable shares of Common Stock of the Company.
We hereby consent to (i) the use of this opinion as an exhibit to the
Registration Statement and as an exhibit to any application under the securities
or other laws of any state of the United States, which relates to the offering
that is the subject of this opinion, and (ii) the reference to this firm under
the heading "Legal" in the prospectus which is contained in the Registration
Statement. By giving the foregoing consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the Act.
This opinion is as of the date hereof and is limited to the laws in effect
as of the date hereof. We undertake no obligation to advise you of any change,
whether legal or factual, in any matters set forth herein.
This opinion is furnished to you in connection with the filing of the
Registration Statement, and is not to be used, circulated, quoted or otherwise
relied upon for any other purpose, except as expressly provided in the preceding
paragraphs.
Very truly yours,
/s/ Coleman & Rhine LLP
COLEMAN & RHINE LLP
Note: The Common Stock Purchase Warrants described herein have been collaterally
assigned to the Company pursuant to the terms of a $900,000 Promissory Note,
dated January 11, 1996 between Techman International Corporation, Inc. as Payor,
and the Company, as Payee.
W-18
Void after February 1, 1998 Right to Purchase
Shares of Common Stock
(subject to adjustment) of
FiberCore, Inc.
FIBERCORE, INC.
COMMON STOCK PURCHASE WARRANT
FiberCore, Inc. (the "Company"), a Nevada corporation, hereby certifies
that, for value received, Techman International Corporation, Inc., or assigns,
is entitled, subject to the terms set forth below, to purchase from the Company
at any time on or from time to time after January 11, 1996 and before 5:00 P.M.,
Boston time, on February 1, 1998, $550,696 fully paid and non-assessable shares
of Common Stock of the Company, at the price per share (the "Purchase Price") of
$1.634. The number and character of such shares of Common Stock and the Purchase
Price are subject to adjustment as provided herein.
This Common Stock Purchase Warrant (the "Warrant") is issued to the
person specified above as the holder hereof as of January 11, 1996 and evidences
the right to purchase an aggregate of not more than the number of shares of
Common Stock of the Company specified above, subject to adjustment as provided
herein.
As used herein the following terms, unless the context otherwise
required, have the following meanings:
(a) The term "Company" includes any corporation which shall succeed to
or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all voting stock of any class or
classes (however designated)of the Company, authorized upon the Original Issue
Date or thereafter, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment
<PAGE>
of dividends and distributions on any shares entitled to preference.
(c) The "Original Issue Date" is January 11, 1996, the date as of which
the Warrants were first issued.
(d) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 6 or otherwise.
(e) The terms "registered" and "registration" refer to a registration
effected by filing a registration statement in compliance with the Securities
Act, to permit the disposition of Common Stock (or Other Securities) issued or
issuable upon the exercise of Warrants, and any post-effective amendments and
supplements filed or required to be filed to permit any such disposition.
(f) The term "Securities Act" means the Securities Act of 1933 as the
same shall be in effect at the time.
1. Sale or Exercise Without Registration. If, at any time of any
exercise, transfer or surrender for exchange of a Warrant or of Common Stock,
(or Other Securities) previously issued upon the exercise of Warrants, such
Warrant of Common Stock (or Other Securities) shall not be registered, or
qualified under the Securities Act, the Company may require, as a condition of
allowing such exercise, transfer or exchange, or the securities or "Blue Sky"
laws of any state or other jurisdiction that the holder or transferee of such
Warrant or Common Stock (or Other Securities), as the case may be, furnish to
the Company a satisfactory opinion of counsel to the effect that such exercise,
transfer or exchange may be made without registration or qualifications under
the Securities Act, or such securities or "blue sky" laws. The persons specified
above as the holder of the Warrants, by its acceptance hereof, represents to the
Company that such person is acquiring the Warrants for investment and not with a
view to the distribution thereof.
2. Exercise of Warrant; Partial Exercise.
2.1 Exercises in Full. Subject to the provisions hereof, this
Warrant may be exercised in full by the holder hereof by surrender of this
Warrant, with the form of subscription at the end hereof duly executed by such
holder, to the Company at its principal office, accompanied by payment, in cash
or by certified or official bank check payable to the
2
<PAGE>
order of the Company, in the amount obtained by multiplying the number of shares
of Common Stock called for on the face of this Warrant (without giving effect to
any adjustment therein) by the Purchase Price.
2.2 Partial Exercise. Subject to the provisions hereof, this Warrant
may be exercised in part by surrender of this Warrant in the manner and at the
place provided in subsection 2.1 except that the amount payable by the holder
upon any partial exercise shall be the amount obtained by multiplying (a) the
number of shares of Common Stock (without giving effect to any adjustment
therein) designated by the holder in the subscription at the end hereof by (b)
the Purchase Price. Upon any such partial exercise, the Company at its expense
will forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the
number of such shares designated by the holder in the subcription at the end
hereof.
2.3 Company to Reaffirm Obligations. The Company will at the time of
any exercise of this Warrant, upon the request of the holder hereof acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant provided that if the holder of
this Warrant shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford such holder any such rights.
3. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter the Company at it expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of full paid and non-assesable shares of Common Stock (or Other
Securities) to which such holder shall be entitled upon such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled
cash equal to such fraction multiplied by the then current market value of one
full share, together with any other stock or other securities and property
(including cash where applicable) to which such holder is entitled upon such
exercise pursuant to section 4 or otherwise.
4. Adjustment for Dividends in Other Stock, etc., Reclassification,
etc. In case at any time or from time to time after the Original Issue Date the
holders of Common Stock (or Other Securities) shall have received, or (on or
after the record date fixed for the determination of stockholders eligible to
receive) shall have become entitled to receive, without payment therefor
3
<PAGE>
(a) other or additional stock or other securities or property (other
than cash) by way dividend, or
(b) any cash paid or payable (including, without limitation, by way
of dividend), except out of earned surplus of the Company, or
(c) other or additional (or less) stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement.
(d) then, and in each such case the holder of this Warrant, upon the
exercise hereof as provided in section 2, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this section 4) which such holder
would hold on the date of such exercise if on the Original Issue Date he had
been the holder of record of the number of shares of Common Stock called for on
the face of this Warrant and had thereafter, during the period from the Original
Issue Date to and including the date of such exercise, retained such shares and
all such other or additional (or less) stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and (c) of this
section 4 receivable by him as aforesaid during such period giving effect to all
adjustments called for during such period by section 6 and 7 hereof.
5. Reorganization, Consolidation, Merger, etc.
5.1 General. In case the Company after the Original Issue Date shall
(a) effect a reorganization, (b) consolidate with or merge with or into any
other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company within 24 months from the date of such transfer,
then, in each such case, the holder of this Warrant, upon the exercise hereof as
provided in section 2 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall be entitled to receive (and the Company shall be entitled to
deliver), in lieu of the Common Stock (or Other Securities) issuable upon such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant immediately prior
thereto, all subject to further adjustment thereafter as provided in section 4
and 6 hereof.
5.2 Warrant to Continue in Full Force and Effect. Upon any
reorganization, consolidation, merger or transfer (and any dissolution following
any transfer)
4
<PAGE>
pursuant to section 5.1, this Warrant shall continue in full force and effect
and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable upon the exercise of this Warrant after the
consummation of such reorganization, consolidation, merger, transfer or
dissolution, as the case may be, and shall be binding upon the issuer of any
such stock or other securites, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company whether or not such person shall have expressly assumed the terms of
this Warrant.
6. Further Assurances. The Company will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock upon the exercise of all Warrants
from time to time outstanding.
7. Accountants' Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of the Warrants, the Company at its expense will
promptly cause the Company's regularly retained auditor to compute such
adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based, and the
number of shares of Common Stock outstanding or deemed to be outstanding after
giving such effect to such adjustment. The Company will forthwith mail a copy of
each such certificate to each holder of a Warrant.
8. Notices of Record Date, etc. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of detemining the holders thereof who are
entitled to receive any dividend (other than a cash dividend payable out of
earned surplus of the Company) or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to or consolidation or merger
of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then in each such event, the Company shall mail or
cause to be mailed to the holder of this warrant a prior written notice
specifying the date on which a record discussed in clause (a) is to be taken or
an event discussed in clause (b) or (c) is to occur and
5
<PAGE>
the amount and character of any stock or other securities, or rights or options
relating there to proposed to be insured or granted, the date of such proposed
issue or grant and are persons to whom suchh proposed issue or grant is to be
offered or made.
9. Reservation of Stock, etc., Issuable on Exercis of Warrants. The
Company will at all times reserve and keep available solely for issuance and
delivery upon the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable upon the exercise of the Warrants.
10. Exchange of Warrants. Subject to the provisions of paragraph 1 and
paragraph 14 hereof, upon surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its own expense will issue and deliver
to or upon the order of the holder thereof a new Warrant or Warrants of like
tenor, in the name of such holder or as such holder (upon payment by such holder
or any applicable transfer taxes) may direct, calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. Upon receipt of evidence reasonbly
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satifactory in form and amount to the
Company or, in case of such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver in lieu thereof a
new Warrant of like tenor.
12. Warrant Agent. The Company may by written notice to each holder of
a Warrant appoint an agent having an office in Boston, Massachusetts, for the
purpose of issuing Common Stock (or Other Securities) upon the exercise of the
Warrants pursuant to section 2, exchanging Warrants pursuant to section 10 and
replacing Warrants pursuant to section 11, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
13. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Restrictions on Transfer and Assignability. This Warrant is
non-assignable and non-transferable without the prior written consent of the
Company and in the event of such consent shall continue to be subject to the
provisions of Section 1 of this Warrant.
6
<PAGE>
(a) subject to the provisions hereof title to this Warrant may be
transferred by endorsement (by the holder hereof executing the form of
assignment at the end hereof).
(b) until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.
15. Notices, etc. All notices and other communications fron the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder, or, until an address is so furnished to
and at the address of the last holder of this Warrant who has so furnished an
address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of Massachusetts and
shall be construed and enforced in accordance with and governed by the laws of
such State. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.
Date: 4/1/96
---------
FIBERCORE, INC.
By /s/ Ghias Massarani, President
---------------------------------
Ghais Massarani, President
[Corporate Seal]
Attest:
- --------------------------
Secretary
7
TERM LOAN AGREEMENT
Dated as of November 27, 1996
By and Between
FIBERCORE, INC., as Borrower
and
AMP INCORPORATED, as Lender
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT ("Agreement") is made as of November 27, 1996,
by and between FIBERCORE, INC., a Nevada corporation ("Borrower"), having its
chief executive office at 174 Charlton Road, Sturbridge, MA 01566 and AMP
INCORPORATED, a Pennsylvania corporation ("Lender"), having an office at 470
Friendship Road, M/S 176-034, Harrisburg, Pennsylvania 17111.
SECTION I
DEFINITIONS
1.1 Definitions.
All capitalized terms used in this Agreement or in the Note or
in any certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:
Acquisition. Any transaction, or any series of related transactions, by
which Borrower or any of its Subsidiaries directly or indirectly (a) acquires
all or substantially all of any ongoing business or all or substantially all of
the assets of any firm, partnership, joint venture, corporation or division
thereof, whether through purchase of assets, merger or otherwise, or (b)
acquires (in one transaction or as the most recent transaction in a series of
transactions) control of at least a majority of the stock of a corporation
having ordinary voting power for the election of directors of such corporation,
or (c) acquires control of more than fifty percent (50.0%) of the ownership
interest in any partnership or joint venture.
Affiliate. With respect to any Person, (a) each Person that, directly
or indirectly, owns or controls, whether beneficially or as a trustee, guardian
or other fiduciary, five percent (5.0%) or more of the stock having ordinary
voting power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person or (c) each of such Person's officers, directors, joint
venturers and partners; provided, however, that in no case shall Lender be
deemed to be an Affiliate of Borrower for purposes of this Agreement. For the
purpose of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
ALT. Automated Light Technologies, Inc., a Delaware corporation.
AMP Affiliate. With respect to Lender, (a) each Person that, directly
or indirectly, owns or controls, whether beneficially or as a trustee, guardian
or other fiduciary, twenty percent (20.0%) or more of the stock having ordinary
voting power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person or (c) each of such Person's officers, directors, joint
venturers and partners; provided, however, that in no case shall Lender be
deemed to be an Affiliate of Borrower for purposes of this Agreement. For the
purpose of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
<PAGE>
Berliner Bank Loan. The loan made by Berliner Bank to Borrower pursuant
to the loan documents attached hereto as Exhibit K.
Business Day. Any day other than a Saturday, Sunday, legal holiday or
other day on which banks in Massachusetts or New York are required or permitted
by law to close.
Capital Expenditures. All payments made for Acquisitions or for any
fixed assets or improvements or for replacements, substitutions or additions
thereto, that have a useful life of more than one (1) year and which are
required to be capitalized under GAAP, including Capital Lease Obligations.
Capital Lease. As to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financial Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
Capital Lease Obligation. With respect to any Capital Lease, the amount
of the obligation of the lessee thereunder that, in accordance with GAAP, would
appear on a balance sheet of such lessee in respect of such Capital Lease or
otherwise be disclosed in a note to such balance sheet.
Cash Collateral. Cash Collateral has the meaning given to such term in
Section 2.4.
Change in Control. Change in Control means the occurrence, after the
date of this Agreement, of any of the following except in furtherance of the
Voting Agreement: (i) any person or two or more persons acting as a "group"
within the meaning of section 13(d) of the Exchange Act acquiring beneficial
ownership (within the meaning of Rule 13d-3 of the SEC under the Exchange Act),
directly or indirectly, of securities of Borrower (or other securities
convertible into such securities) representing 40% of more of the combined
voting power of all securities (including the securities so acquired) of
Borrower entitled to vote in the election of directors; or (ii) during any
period of up to 12 consecutive months, commencing after the date hereof,
individuals who at the beginning of such 12-month period were directors of
Borrower ceasing for any reason to constitute a majority of the Board of
Directors of Borrower unless the persons replacing such individuals were
nominated by the Board of Directors of Borrower or by Lender; or (iii) any
person or two or more persons acting as a "group" within the meaning of section
13(d) of the Exchange Act acquiring by contract or otherwise, or entering into a
contract or arrangement which upon consummation will result in its or their
acquisition of, or control over, securities or Borrower (or other securities
convertible into such securities) representing 40% or more of the combined
voting power of all securities (including the securities so acquired or
controlled) of Borrower entitled to vote in the election of directors.
Closing Date. The date of this Agreement.
Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
Collateral. Collateral means all of the collateral referred to in the
German Security Agreement.
Commitment Amount. Three Million United States Dollars (US$3,000,000).
Common Stock. Common Stock of Borrower.
2.
<PAGE>
Controlled Group. All trades or businesses (whether or not
incorporated) under common control that, together with Borrower, are treated as
a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of
ERISA.
Convertible Debenture. That certain Amended and Restated Convertible
Debenture dated as of April 17, 1995, in the original principal amount of
$2,000,000.
Current Assets. On a consolidated basis for Borrower and its
Subsidiaries, as at any date of determination, all amounts that should, in
accordance with GAAP, be included as current assets on the consolidated balance
sheet of Borrower and its Subsidiaries.
Current Liabilities. On a consolidated basis for Borrower and its
Subsidiaries, as at any date of determination, all amounts that should, in
accordance with GAAP, be included as current liabilities on the consolidated
balance sheet of Borrower and its Subsidiaries, plus, to the extent not already
included therein, all Indebtedness that is payable upon demand or within one
year from the date of determination thereof unless such Indebtedness is
renewable or extendable at the option of Borrower or any Subsidiary to a date
more than one year from the date of determination.
Debt Conversion Agreement. Amendment No. 1 to Convertible Debenture
Purchase Agreement, entered into by and between Borrower and Lender, dated as of
the date hereof.
Default. An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
EBITDA. As calculated on a consolidated basis for Borrower and its
Subsidiaries for any period as of any date of determination, the sum of (a) Net
Income, plus (b) all amounts treated as expenses for depreciation and the
amortization of intangibles of any kind to the extent included in the
determination of Net Income, plus (c) all taxes on or measured by income to the
extent included in the determination of Net Income, plus (d) Interest Expense to
the extent included in the determination of Net Income.
Encumbrances. See Section 6.4
Environmental Laws. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over Borrower or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.
Equity. On a consolidated basis for Borrower and its Subsidiaries, as
at any date of determination, the consolidated total assets of Borrower and its
Subsidiaries minus, Total Liabilities.
3.
<PAGE>
ERISA. The Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, collectively, as the same may from time to
time be supplemented or amended and remain in effect.
Event of Default. Any event described in Section 8.1.
Existing Loan Documents. The Convertible Debenture Purchase Agreement,
dated as of April 17, 1995, by and between Borrower (as successor-in-interest to
FiberCore Incorporated, a Nevada corporation) and Lender and the related
Convertible Debenture in the original principal amount of $5,000,000, as amended
from time to time.
Fiscal Quarter. Each fiscal quarter of Borrower ending on each March
31, June 30, September 30 and December 31 unless quarters ending on different
dates are consented to in writing in advance by Lender.
Fiscal Year. Each fiscal year of Borrower ending on each December 31
unless fiscal years ending on different dates are consented to in writing in
advance by Lender.
GAAP. Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
German Government Grant. The grant made by the German government to
Guarantor pursuant to the documents attached hereto as Exhibit L.
German Guaranty. That certain Subsidiary Guaranty in the form of
Exhibit D executed by Guarantor in favor of Lender.
German Security Agreement. That certain Security Agreement in the form
of Exhibit E executed by Guarantor, pursuant to which Guarantor grants to Lender
a security interest in all equipment owned by Guarantor as security for
Guarantor's obligations under the German Guaranty.
Guaranties. As applied to Borrower and its Subsidiaries, all
guarantees, endorsements or other contingent or surety obligations with respect
to obligations of others whether or not reflected on the consolidated balance
sheet of Borrower and its Subsidiaries, including any obligation to furnish
funds, directly or indirectly (whether by virtue of partnership arrangements, by
agreement to keep-well or otherwise), through the purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or loan, or
to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other person or entity.
Guarantor. FiberCore Glasfaser Jena, GmbH, a corporation organized
under the laws of Germany and a wholly-owned subsidiary of Borrower.
Hazardous Material. Any substance (i) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste"
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto
4.
<PAGE>
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and any
applicable local statutes and the regulations promulgated thereunder; (iii)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of any foreign country, the United States, any state of the
United States, or any political subdivision thereof to the extent any of the
foregoing has or had jurisdiction over Borrower; or (iv) without limitation,
which contains gasoline, diesel fuel or other petroleum products, asbestos or
polychlorinated biphenyls ("PCB's").
Indebtedness. As applied to Borrower and its Subsidiaries, means,
without duplication, (i) all obligations for borrowed money or other extensions
of credit whether or not secured or unsecured, absolute or contingent,
including, without limitation, unmatured reimbursement obligations with respect
to letters of credit or guarantees issued for the account of or on behalf of
Borrower and its Subsidiaries and all obligations representing the deferred
purchase price of property, other than accounts payable arising in the ordinary
course of business, (ii) all obligations evidenced by bonds, notes, debentures
or other similar instruments, (iii) all obligations secured by any mortgage,
pledge, security interest or other lien on property owned or acquired by
Borrower or any of its Subsidiaries whether or not the obligations secured
thereby shall have been assumed, (iv) that portion of all obligations arising
under capital leases that is required to be capitalized on the consolidated
balance sheet of Borrower and its Subsidiaries, (v) all Guaranties, and (vi) all
obligations that are immediately due and payable out of the proceeds of or
production from property now or hereafter owned or acquired by Borrower or any
of its Subsidiaries.
Interest Expense. As calculated on a consolidated basis for Borrower
and its Subsidiaries for any period as at any date of determination, cash
interest expense for such period (including, without limitation, all
commissions, discounts, fees and other charges under letters of credit and
similar instruments) classified and accounted for in accordance with GAAP.
Interest Payment Date. The last day of each March, June, September and
December.
Interest Period. A calendar quarter.
Investment. As applied to Borrower and its Subsidiaries, the purchase
or acquisition of any share of capital stock, partnership interest, evidence of
indebtedness or other equity security of any other person or entity, any loan,
advance or extension of credit to, or contribution to the capital of, any other
person or entity, any real estate held for sale or investment, any commodities
futures contracts held other than in connection with bona fide hedging
transactions, any Acquisition or commitment to make any Acquisition, any other
investment in any other person or entity, and the making of any commitment or
acquisition of any option to make an Investment.
License. Any copyright license, Patent License, trademark license or
other license of rights or interests now held or hereafter acquired by Borrower.
Loan. The loan made to Borrower by Lender pursuant to Section II of
this Agreement.
Loan Documents. This Agreement, the Note, the Debt Conversion
Agreement, the Convertible Debenture, the Warrant, the German Guaranty, the
German Security Agreement, the Voting Agreement, and any other agreements,
documents, financing statements or instruments executed by Borrower in
connection with this Agreement, as the same may be amended, modified,
supplemented or renewed from time to time.
5.
<PAGE>
Long Term Debt. On a consolidated basis for Borrower and its
Subsidiaries, as at any date of determination, all amounts that should, in
accordance with GAAP, be included as long term debt on the consolidated balance
sheet of Borrower and its Subsidiaries.
Material Adverse Effect. Any set of circumstances or events which (a)
has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of any Loan Document, (b) is or
could reasonably be expected to be material and adverse to the financial
condition or business operations or prospects of Borrower or Guarantor, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower to perform timely its Obligations, (d) materially impairs or
could reasonably be expected to materially impair the ability of Guarantor to
perform timely its obligations under the German Guaranty, (e) materially impairs
or could reasonably be expected to materially impair the value or priority of
Lender's security interest in the collateral (as described in the German
Security Agreement) or (f) materially impairs or could reasonably be expected to
materially impair the ability of Lender to enforce any of its available legal
remedies pursuant to the Loan Documents.
Maturity Date. November 27, 2006.
Mission Statement. Borrower's mission statement setforth in Exhibit H.
Net Income. As calculated on a consolidated basis for Borrower and its
Subsidiaries for any period as at any date of determination, the net income (or
loss), after provision for taxes, of Borrower and its Subsidiaries for such
period taken as a single accounting period.
Note. A promissory note of Borrower, substantially in the form of
Exhibit A hereto, evidencing the obligation of Borrower to Lender to repay the
Loan.
Obligations. Any and all obligations of Borrower to Lender under the
Loan Documents or under the Purchase Agreement, of every kind and description,
direct or indirect, absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising, regardless of how they arise, and
including obligations to perform acts and refrain from taking action as well as
obligations to pay money.
Patent License. Any of the following now owned or hereafter acquired by
Borrower: any written agreement granting any right with respect to any invention
on which a Patent is in existence.
Patents. All of the following in which Borrower now holds or hereafter
acquires any interest: (a) letters patent of the United States or any other
county, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (b) all reissues, continuations,
continuations-in-part or extensions thereof; (c) all petty patents, divisionals,
and patents of addition; and (d) all patents to issue in any such applications.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
Permitted Encumbrances. See Section 6.4.
6.
<PAGE>
Person. Any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
Plan. At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by Borrower or any member
of the Controlled Group for employees of Borrower or any member of the
Controlled Group or (ii) if such Plan is established, maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which Borrower or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.
Prime Rate. The prime rate as quoted in the Wall Street Journal on the
Business Day immediately preceding the commencement of an Interest Period.
Property. Any interest in any kind of property or asset, whether real,
personal or mixed, whether tangible or intangible.
Purchase Agreement. That certain Purchase Agreement, dated as of July
29, 1996, by and between Lender and Borrower, regarding the purchase of glass
optical fiber by Lender from Borrower.
Qualified Investments. As applied to Borrower and its Subsidiaries,
investments in (i) notes, bonds or other obligations of the United States of
America, Germany, or any agency thereof that as to principal and interest
constitute direct obligations of or are guaranteed by the United States of
America or Germany; (ii) certificates of deposit or other deposit instruments or
accounts of banks or trust companies organized under the laws of the United
States or any state thereof, or Germany, that have capital and surplus of at
least $100,000,000, (iii) commercial paper that is rated not less than prime-one
or A-1 or their equivalents by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or their successors, and (iv) any repurchase
agreement secured by any one or more of the foregoing.
Recent ALT Financing. The intercompany loan pursuant to which ALT
extended a loan to Borrower in the original principal amount of $367,000.
Subsidiary. Any corporation, association, joint stock company, business
trust or other similar organization of which 50% or more of the ordinary voting
power for the election of a majority of the members of the board of directors or
other governing body of such entity is held or controlled by Borrower or a
Subsidiary of Borrower; or any other such organization the management of which
is directly or indirectly controlled by Borrower or a Subsidiary of Borrower
through the exercise of voting power or otherwise; or any joint venture, whether
incorporated or not, in which Borrower has a 50% ownership interest.
Total Assets. As calculated on a consolidated basis for Borrower and
its Subsidiaries as of any date of determination, the total assets of Borrower
and its Subsidiaries.
Total Liabilities. As calculated on a consolidated basis for Borrower
and its Subsidiaries as of any date of determination, the total liabilities of
Borrower and its Subsidiaries.
Voting Agreement. The voting agreement in substantially the form of
Exhibit I.
7.
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Warrant. The warrant issued by Borrower to Lender in substantially the
form of Exhibit B.
1.2 Accounting Terms. All terms of an accounting character shall have
the meanings assigned thereto by generally accepted accounting principles
applied on a basis consistent with the financial statements referred to in
Section 4.6 of this Agreement, modified to the extent, but only to the extent,
that such meanings are specifically modified herein.
SECTION II
DESCRIPTION OF CREDIT
2.1 The Term Loan. Subject to the terms and conditions of this
Agreement, Lender agrees to make a single term loan (the "Loan") to Borrower on
the Closing Date in an aggregate principal amount equal to the Commitment
Amount. Amounts borrowed and repaid may not be reborrowed.
2.2 The Note. (a) The Loan shall be evidenced by the Note, payable to
the order of Lender and shall be due and payable in full on the Maturity Date.
The Note shall be dated the Closing Date and shall have the blanks therein
appropriately completed.
(b) Lender may enter in its records appropriate notations
evidencing the date and the amount of the Loan and the date and amount of each
payment of principal made by Borrower with respect thereto; and in the absence
of manifest error, such notations shall constitute conclusive evidence thereof.
No failure on the part of Lender to make any notation as provided in this
subsection (b) shall in any way affect any Loan or the rights or obligations of
Lender or Borrower with respect thereto.
2.3 Interest Rates and Payments of Interest; Payments of Principal. (a)
The Loan shall bear interest on the outstanding principal amount thereof at a
rate per annum initially equal to _______%; thereafter, on the first day of each
Interest Period, the interest rate shall be adjusted to a fixed rate for such
Interest Period equal to the Prime Rate (as quoted on the Business Day
immediately preceding the commencement of such Interest Period) plus one percent
(1%). Such interest shall be due and payable quarterly in arrears on each
Interest Payment Date and when such Loan is due (whether at maturity, by reason
of acceleration or otherwise); provided, however, that so long as no Default or
Event of Default has occurred and is continuing, (i) on each Interest Payment
Date prior to September 30, 2001, the accrued and unpaid interest for such
Interest Period shall be added to principal and thereafter interest shall accrue
on such amount and (ii) on each Interest Payment Date on or after September 30,
2001, the accrued interest for such Interest Period shall be due and payable to
Lender in immediately available funds.
2.4 Use of Proceeds. Lender shall advance the proceeds of the Loan
directly to Guarantor's deposit account with Berliner Bank, as a capital
contribution from Borrower to Guarantor. DM 3,850,000 of the Loan proceeds shall
be held by Berliner Bank as collateral (the "Cash Collateral") for the Berliner
Bank Loan and the balance will be used (i) to reimburse Borrower for its
corporate allocation in accordance with the 1996 annual budget approved by
Borrower's board of directors and (ii) to prepay indebtedness owing to ALT in
connection with the Recent ALT Financing in an amount not to exceed $367,000.
2.5 Voluntary Prepayment of the Loan. Borrower may prepay the Loan, in
whole or in part, at any time, without premium or penalty, upon thirty (30)
day's prior written notice to Lender. Any interest accrued on the amounts so
prepaid to the date of such payment must be paid at the time of any such
payment.
8.
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2.6 Mandatory Prepayment of the Loan. Borrower shall prepay the Loan in
full, together with all accrued interest, upon the earlier of (i) the Maturity
Date, (ii) the repayment of the Berliner Bank Loan, (iii) the release of the
Cash Collateral by the Berliner Bank, and (iv) acceleration of the Loan pursuant
to Section 8.2.
2.7 Method of Payment. All payments and prepayments of principal and
all payments of interest shall be made by Borrower to Lender at its office in
immediately available funds, on or before 1:00 p.m. (Pennsylvania time) on the
due date thereof, without set off and free and clear of, and without any
deduction or withholding for, any taxes or other payments of any kind
whatsoever.
2.8 Overdue Payments. Overdue principal (whether at maturity, by reason
of acceleration or otherwise) and, to the extent permitted by applicable law,
overdue interest and fees or any other amounts payable hereunder or under the
Note shall bear interest from and including the due date thereof until paid,
payable on demand, at a rate per annum equal to 2% above the rate then
applicable to Loan.
2.9 Computation of Interest and Fees. Interest and all fees payable
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day such payment may be made on the next succeeding
Business Day, and such extension, if taken, shall be included in computing
interest in connection with such payment.
2.10 Maximum Interest. Notwithstanding any provision to the contrary
herein contained, Lender shall not collect a rate of interest on any obligation
or liability due and owing by Borrower to Lender in excess of the maximum
contract rate of interest permitted by applicable law. Lender and Borrower have
agreed that the interest laws of the State of New York shall govern the
relationship between them, but in the event of a final adjudication to the
contrary, Borrower shall be obligated to pay to Lender only such interest as
then shall be permitted by the laws of the state found to govern the contract
relationship between Lender and Borrower. All interest found in excess of that
rate of interest allowed and collected by Lender shall be applied to the
principal balance in such manner as to prevent the payment and collection of
interest in excess of the rate permitted by applicable law.
SECTION III
CONDITIONS OF LOAN
3.1 Conditions Precedent to Loan. The obligation of Lender to make its
initial Loan is subject to the condition precedent that Lender shall have
received, in form and substance satisfactory to Lender and its counsel, the
following:
(a) this Agreement and the Note, duly executed by Borrower;
(b) the Warrant, duly executed by Borrower in favor of Lender;
(c) the Voting Agreement, duly executed by each of the parties
thereto;
(d) the Purchase Agreement, duly executed by each of the parties
thereto;
9.
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(e) the German Guaranty and the German Security Agreement, duly
executed by each of the parties thereto;
(f) evidence that $3,000,000 of the principal amount outstanding
under the Existing Loan Documents plus accrued interest thereon has been
converted into shares of Common Stock at the rate of $1.15762 per share pursuant
to the terms of the Debt Conversion Agreement.
(g) copies of the documentation evidencing the Berliner Bank Loan
and the German Government Grant, including (i) evidence that both the Berliner
Bank Loan and the German Government Grant have funded, will fund concurrently
with the Loan from Lender, or are available to Borrower without the satisfaction
of any further conditions, and (ii) verification that Lender has a first
priority perfected security interest, or substantial equivalent under German
law, senior to both the Berliner Bank and the German government, in Collateral
having a book value equal to or exceeding 125% of the aggregate outstanding
principal amount of the Loan.
(h) a certificate of the Secretary or an Assistant Secretary of
Borrower with respect to resolutions of the Board of Directors authorizing the
execution and delivery of this Agreement, the Note, and each other Loan Document
to which Borrower is a party, and identifying the officer(s) authorized to
execute, deliver and take all other actions required under this Agreement and
the other Loan Documents, and providing specimen signatures of such officers;
(i) a certificate of the Secretary or an Assistant Secretary of the
Guarantor with respect to resolutions of the Board of Directors authorizing the
execution and delivery of the German Guaranty and the German Security Agreement
and identifying the officer(s) authorized to execute, deliver and take all other
actions required under the German Guaranty and the German Security Agreement,
and providing specimen signatures of such officers;
(j) a copy of the articles of incorporation of Borrower and all
amendments and supplements thereto, filed with the Secretary of State of the
State of Nevada, each certified by the Nevada Secretary of State as being a true
and correct copy thereof;
(k) the Bylaws of Borrower and all amendments and supplements
thereto, certified by the Secretary or an Assistant Secretary as being a true
and correct copy thereof;
(l) a certificate of the Secretary of State of Nevada as to legal
existence and good standing of Borrower in such State;
(m) a certificate of the Secretary of State of Massachusetts as to
good standing of Borrower in such State;
(n) a certificate of the State of Nevada and Massachusetts state
taxing authorities as to the tax good standing of Borrower;
(o) an opinion addressed to it from Coleman & Rhine LLP, counsel to
Borrower, substantially in the form of Exhibit F-1 hereto;
(p) an opinion addressed to it from Rechtsanwalte Hartmann und
Partner, special German counsel to Guarantor, substantially in the form of
Exhibit F-2 hereto;
10.
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(q) such other documents, and completion of such other matters, as
counsel for Lender may deem necessary or appropriate; and
(r) the representations and warranties contained in Section IV
shall be true and accurate in all material respects on and as of the date hereof
(except to the extent that such representations and warranties expressly relate
to an earlier date), and no Default shall have occurred and be continuing, or
would result from such Loan.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce Lender to enter into this Agreement and to make the
Loan hereunder, Borrower represents and warrants to Lender that:
4.1 Organization and Qualification. Borrower and each of its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect.
4.2 Corporate Authority. (a) The execution, delivery and performance of
this Agreement, the Note, and each other Loan Document to which Borrower is a
party and the transactions contemplated hereby are within the corporate power
and authority of Borrower and have been authorized by all necessary corporate
proceedings, and do not and will not (i) require any consent or approval of the
stockholders of Borrower other than what has been obtained, (ii) contravene any
provision of the charter documents or by-laws of Borrower or any law, rule or
regulation applicable to Borrower, (iii) contravene any provision of, or
constitute an event of default or event that, but for the requirement that time
elapse or notice be given, or both, would constitute an event of default under,
any other agreement, instrument, order or undertaking binding on Borrower, other
than such as have been waived in writing or (iv) result in or require the
imposition of any Encumbrance on any of the properties, assets or rights of
Borrower other than Permitted Encumbrances.
(b) The execution, delivery and performance of the German Guaranty, the
German Security Agreement, and each other Loan Document to which Guarantor is a
party and the transactions contemplated hereby are within the corporate power
and authority of Guarantor and have been authorized by all necessary corporate
proceedings, and do not and will not (i) require any consent or approval of the
stockholders of Borrower other than what has been obtained, (ii) contravene any
provision of the charter documents or by-laws of Guarantor or any law, rule or
regulation applicable to Guarantor, (iii) contravene any provision of, or
constitute an event of default or event that, but for the requirement that time
elapse or notice be given, or both, would constitute an event of default under,
any other agreement, instrument, order or undertaking binding on Guarantor,
other than such as have been waived in writing or (iv) result in or require the
imposition of any Encumbrance on any of the properties, assets or rights of
Guarantor other than Permitted Encumbrances.
11.
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4.3 Valid Obligations. This Agreement, the Note, and each other Loan
Document to which Borrower or Guarantor is a party, and all of their respective
terms and provisions are the legal, valid and binding obligations of Borrower
and Guarantor, respectively, enforceable in accordance with their respective
terms except as limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally, and except
as the remedy of specific performance or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
4.4 Consents or Approvals. The execution, delivery and performance of
this Agreement, the Note, and each other Loan Document, and the transactions
contemplated herein do not require any approval or consent of, or filing or
registration with, any governmental or other agency or authority, or any other
party, other than such consents as have been obtained in writing.
4.5 Title to Properties; Absence of Encumbrances. Each of Borrower and
its Subsidiaries has good and marketable title to all of the Collateral, and all
of the properties, assets and rights of every name and nature now purported to
be owned by it, including, without limitation, such properties, assets and
rights as are reflected in the financial statements referred to in Section 4.6
(except such properties, assets or rights as have been disposed of in the
ordinary course of business since the date thereof), free from all Encumbrances
except Permitted Encumbrances or those Encumbrances disclosed in Schedule 4.5
hereto, and, except as so disclosed, free from all defects of title that might
have a Material Adverse Effect.
4.6 Financial Statements. Borrower has heretofore delivered to Lender
its audited consolidated balance sheet as of December 31, 1995, and its
consolidated statements of income, changes in stockholders' equity and cash flow
for the Fiscal Year then ended, and related footnotes. All such financial
statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods specified and
present fairly the financial position of Borrower and its Subsidiaries as of
such date and the results of the operations of Borrower and its Subsidiaries for
such period. There are no liabilities, contingent or otherwise, not disclosed in
such financial statements that involve a material amount.
4.7 Changes. Since the date of the financial statements referred to in
Section 4.6, there have been no changes in the properties, operations, profits,
assets, liabilities, financial condition, business or prospects of Borrower or
any of its Subsidiaries other than changes in the ordinary course of business,
the effect of which has not, in the aggregate, had a Material Adverse Effect.
4.8 Defaults. Except as disclosed in Schedule 4.8, as of the date of
this Agreement, no Default exists.
4.9 Taxes. Borrower and each Subsidiary have filed all federal, state
and other tax returns or extensions required to be filed, and all taxes,
assessments and other governmental charges due from Borrower and each Subsidiary
have been fully paid. Borrower and each Subsidiary have established on their
books reserves adequate for the payment of all federal, state and other tax
liabilities.
4.10 Litigation. Except as set forth on Schedule 4.10 hereto, there is
no litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of Borrower's or any Subsidiary's officers, threatened, against
Borrower or any Subsidiary that, if adversely determined, could result in a
material judgment not fully covered by insurance, could result in a forfeiture
of all or any substantial part of the property of Borrower or its Subsidiaries,
or could otherwise have a Material Adverse Effect.
12.
<PAGE>
4.11 Subsidiaries. As of the date of this Agreement, all the
Subsidiaries of Borrower are listed on Schedule 4.11 hereto. Borrower or a
Subsidiary of Borrower is the owner, free and clear of all liens and
encumbrances, of all of the issued and outstanding stock of each Subsidiary.
4.12 Compliance with ERISA. Borrower and each member of the Controlled
Group have fulfilled their obligations under the minimum funding standards of
ERISA and the Code with respect to each Plan and are in compliance in all
material respects with the applicable provisions of ERISA and the Code, and have
not incurred any liability to the PBGC or a Plan under Title IV of ERISA; and no
"prohibited transaction" or "reportable event" (as such terms are defined in
ERISA) has occurred with respect to any Plan.
4.13 Environmental Matters. (a) Borrower and each of its Subsidiaries
have obtained all permits, licenses and other authorizations which are required
under all Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a Material Adverse Effect.
Borrower and each of its Subsidiaries are in compliance with the terms and
conditions of all such permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a Material Adverse Effect.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by Borrower or any of its Subsidiaries to have any permit, license or
authorization required in connection with the conduct of its business or with
respect to any Environmental Laws, including, without limitation, Environmental
Laws relating to the generation, treatment, storage, recycling, transportation,
disposal or release of any Hazardous Materials.
(c) Neither Borrower nor any of its Subsidiaries nor, to the
best knowledge of Borrower, any previous owner, tenant, occupant or user of any
property owned, leased or used by Borrower or any of its Subsidiaries has (i)
engaged in or permitted any operations or activities upon or any use or
occupancy of such property, or any portion thereof, for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal (whether legal or illegal,
accidental or intentional) of any Hazardous Materials on, under, in or about
such property, except to the extent commonly used in day-to-day operations of
such property and in such case only in compliance with all Environmental Laws,
or (ii) transported any Hazardous Materials to, from or across such property
except to the extent commonly used in day-to-day operations of such property
and, in such case, in compliance with, all Environmental Laws; nor to the best
knowledge of Borrower have any Hazardous Materials migrated from other
properties upon, about or beneath such property, nor, to the best knowledge of
Borrower, are any Hazardous Materials presently constructed, deposited, stored
or otherwise located on, under, in or about such property except to the extent
commonly used in day-to-day operations of such property and, in such case, in
compliance with, all Environmental Laws.
4.14 Trademarks, Patents, Copyrights and Licenses. Each of Borrower and
Guarantor possesses and owns all necessary trademarks, trademark licenses,
copyrights, copyright licenses, Patents, and Patent Licenses which are material
to the conduct of its business as now operated. Schedule 4.14
13.
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contains a true and complete list of all trademarks, trademark licenses,
copyrights, copyright licenses, Patents, and Patent Licenses in which Borrower
or Guarantor has any right, title or interest.
4.15 Name; Location of Chief Executive Office, Principal Place of
Business and Collateral. Except as disclosed in Schedule 4.15, neither Borrower
nor Guarantor has done business under any name other than that specified on the
signature page hereof or the German Guaranty, as the case may be. The chief
executive office, principal place of business, and the place where Borrower and
Guarantor maintains their records concerning the collateral (as defined in the
German Security Agreement, the "Collateral") are presently located at the
addresses set forth on Schedule 4.15. The Collateral is presently located at the
addresses set forth on Schedule 4.15.
4.16 Capitalization.
(a) The authorized capital stock of Borrower consists of
100,000,000 shares of Common Stock, of which 31,310,284 shares are issued and
outstanding. Attached hereto as Exhibit J is a copy of Borrower's shareholder
list which contain a true and correct list of all holders of 2% or more of the
equity securities of Borrower on a fully diluted basis (including, without
limitation, all convertible debt, options, and warrants and other securities) of
Borrower on the date of this Agreement. Of the outstanding shares of Common
Stock, no shares were subject to vesting restrictions, as of November 27, 1996,
pursuant to employee stock purchase agreements entered into by and between
Borrower and various employees of Borrower. Borrower has reserved 1,727,683 and
1,382,648 shares of its Common Stock for issuance upon conversion of
Indebtedness under the Existing Loan Documents and exercise of the Warrant,
respectively. All issued and outstanding shares of capital stock have been duly
authorized and validly issued, are fully paid and nonassessable and have been
issued in compliance with applicable federal and state securities laws. The
Warrant, when issued in accordance with the terms of this Agreement, shall be
duly and validly issued, and the shares of Common Stock issuable under the
Warrant, when issued in accordance with the terms of the Warrant and this
Agreement, shall be duly authorized, validly issued, fully paid and
nonassessable.
(b) Except as set forth in this Agreement and the schedules
hereto, there are no options, warrants, conversion privileges or rights, written
or oral, presently outstanding to purchase or otherwise acquire any authorized
but unissued shares of Borrower's capital stock or other securities of Borrower.
SECTION V
AFFIRMATIVE COVENANTS
So long as any Loan or other Obligation under the Loan Documents (other
than the Convertible Debenture and the Debt Conversion Agreement) remains
outstanding, Borrower covenants as follows:
5.1 Financial Statements and other Reporting Requirements. Borrower
shall furnish to Lender:
(a) as soon as available to Borrower, but in any event within
one hundred and twenty (120) days after the end of each Fiscal Year, a
consolidated and consolidating balance sheet as of the end of, and a related
consolidated and consolidating statement of income, changes in stockholders'
equity and cash flow for, such year, audited and certified by Mottle McGrath
Braney & Flynn, PC (or other
14.
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independent certified public accountants reasonably acceptable to Lender) in the
case of such consolidated statements, and certified by the chief financial
officer in the case of such consolidating statements;
(b) as soon as available to Borrower, but in any event within
forty-five (45) days after the end of each quarter, except the last fiscal
quarter of the fiscal year which shall be within 120 days of the end of such
quarter, a consolidated and consolidating balance sheet as of the end of, and a
related consolidated and consolidating statement of income for, the period then
ended, certified by the chief financial officer of Borrower but subject,
however, to normal, recurring year-end adjustments that shall not in the
aggregate be material in amount;
(c) as soon as available to Borrower, but in any event within
forty-five (45) days after the end of each month, except the last month of the
fiscal year which shall be within 120 days of the end of such month, a
consolidated and consolidating balance sheet as of the end of, and a related
consolidated and consolidating statement of income and cashflow for, the period
then ended, certified by the chief financial officer of Borrower but subject,
however, to normal, recurring year-end adjustments that shall not in the
aggregate be material in amount;
(d) together with each delivery of financial statements
pursuant to Section 5.1(a) or (b), a certificate of the chief financial officer
in the form of Exhibit G:
(i) stating that to such officer's knowledge, based
on a reasonable examination sufficient to enable him to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default and its nature, when it occurred,
whether it is continuing and the steps being taken by such Borrower with respect
to such Default or Event of Default;
(ii) setting forth as at the end of such Fiscal
Quarter or Fiscal Year, as the case may be, the calculations required to
establish whether or not such Borrower was in compliance with the financial
covenants applicable to it set forth in Section VII hereof as at the end of each
respective period; and
(iii) stating that to such officer's knowledge, all
representations and warranties contained in this Agreement and the other Loan
Documents are true, correct and complete in all material respects except as
otherwise disclosed therein; that neither Borrower nor Guarantor is in violation
of any of the covenants contained in this Agreement and the other Loan
Documents.
(e) as soon as available to Borrower, but in any event within
forty-five (45) days after the end of each Fiscal Year, the annual forecasts of
Borrower, including three-year projections broken down by quarter for the first
of the three years; as soon as available to Borrower, any revisions to such
forecasts;
(f) as soon as available to Borrower, but in any event no
later than December 1 of each Fiscal Year, the annual budget of Borrower; as
soon as available to Borrower, any revisions to such annual budget;
(g) as soon as available to Borrower, but in any event within
forty-five (45) days after the end of each quarter, a summary of changes in the
capital structure and, as soon as available to Borrower after the end of each
month where there are material changes to the capital structure, a summary of
any such changes;
15.
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(h) promptly after the receipt thereof by Borrower, copies of
any reports submitted to Borrower by independent public accountants in
connection with any interim review of the accounts of Borrower made by such
accountants;
(i) promptly after the same are available, copies of all Board
of Directors meeting packages, proxy statements, financial statements and
reports as Borrower shall send to its directors or stockholders or as Borrower
may file with the Securities and Exchange Commission or any governmental
authority at any time having jurisdiction over Borrower or its Subsidiaries;
(j) if and when Borrower gives or is required to give notice
to the PBGC of any "Reportable Event" (as defined in Section 4043 of ERISA) with
respect to any Plan that might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that any member of the Controlled Group or the
plan administrator of any Plan has given or is required to give notice of any
such Reportable Event, a copy of the notice of such Reportable Event given or
required to be given to the PBGC;
(k) promptly upon becoming aware of the existence of any
condition or event that constitutes a Default, written notice thereof specifying
the nature and duration thereof and the action being or proposed to be taken
with respect thereto;
(l) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened in writing against Borrower or any of its Subsidiaries of which it
has notice, the outcome of which might reasonably have a materially adverse
effect on the assets, business or prospects of Borrower or Borrower and its
Subsidiaries on a consolidated basis, written notice thereof and the action
being or proposed to be taken with respect thereto;
(m) promptly upon becoming aware of any investigative
proceedings by a governmental agency or authority commenced or threatened
against Borrower or any of its Subsidiaries regarding any potential violation of
Environmental Laws or any spill, release, discharge or disposal of any Hazardous
Material, written notice thereof and the action being or proposed to be taken
with respect thereto;
(n) from time to time, such other financial data and
information about Borrower or its Subsidiaries as Lender may reasonably request;
and
(o) upon Lender's request, and no less frequently than once
per calendar quarter, deliver to Lender an updated list of all Patents,
trademarks, copyrights and licenses not previously disclosed to Lender in which
Borrower then has any right, title or interest.
5.2 Conduct of Business. Each of Borrower and its Subsidiaries shall:
(a) duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets, and shall maintain and keep in full
force and effect all licenses and permits necessary in any material respect to
the proper conduct of its business;
(b) maintain its corporate existence; and
(c) remain engaged substantially in the business of the
manufacture of optical fiber, pre-forms, and monitoring systems and ancillary
products.
16.
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5.3 Maintenance and Insurance. Except as provided in Schedule 5.3,
Borrower and each of its Subsidiaries shall maintain the Collateral and its
properties in good repair, working order and condition as required for the
normal conduct of its business. Borrower and each of its Subsidiaries shall at
all times maintain liability and casualty insurance with financially sound and
reputable insurers in such amounts as the officers of Borrower in the exercise
of their reasonable judgment deem to be adequate. In the event of failure to
provide and maintain insurance as herein provided, Lender may, at its option,
provide such insurance and charge the amount thereof to the account of Borrower
or any of its Subsidiaries with Lender. Borrower shall furnish to Lender
certificates or other evidence satisfactory to Lender of compliance with the
foregoing insurance provisions.
5.4 Taxes. Borrower shall pay or cause to be paid all taxes,
assessments or governmental charges on or against it or any of its Subsidiaries
or its or their properties on or prior to the time when they become due;
provided that this covenant shall not apply to any tax, assessment or charge
that is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established and are being
maintained in accordance with generally accepted accounting principles if no
lien shall have been filed to secure such tax, assessment or charge.
5.5 Inspection by Lender. Borrower shall permit Lender or its
designees, at any reasonable time and reasonable frequency, and upon reasonable
notice (or if a Default shall have occurred and is continuing, at any time and
without prior notice), to (i) visit and inspect the properties of Borrower and
its Subsidiaries, (ii) examine and make copies of and take abstracts from the
books and records of Borrower and its Subsidiaries, (iii) conduct periodic
audits of the Collateral, and (iv) discuss the affairs, finances and accounts of
Borrower and its Subsidiaries with their appropriate officers, employees and
accountants. In handling such information Lender shall exercise the same degree
of care that it exercises with respect to its own proprietary information of the
same types to maintain the confidentiality of any non-public information thereby
received or received pursuant to Sections 5.1 except that disclosure of such
information may be made (i) to the subsidiaries of Lender or AMP Affiliates in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees, assignees or purchasers, permitted under
Section 9.8, of an interest in the Loan who execute a confidentiality agreement
reasonably acceptable to Borrower, and (iii) as required by law, regulation,
rule or order, subpoena, judicial order or similar order.
5.6 Maintenance of Books and Records. Each of Borrower and its
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with generally
accepted accounting principles consistently applied and applicable law.
5.7 ALT. If ALT does not remain cash neutral to Borrower on an
operating basis, Borrower will look to divest ALT in a commercially reasonable
manner.
5.8 Composition of Board of Directors. Borrower's Board of Directors
shall consist of seven directors, (a) three of whom shall be "inside" directors
nominated by the current board of directors of Borrower and who, initially,
shall be Dr. Mohd Aslami, Mr. Chuck DeLuca, and Mr. Hans Moeller, (b) one of
whom shall be nominated by Lender, and (c) three of whom shall be designated as
"outside" directors (i.e. directors who are not members of the management of
Borrower or any affiliate of Borrower) nominated and acceptable to the other
four, one of whom shall be M. Mahud Awan, all to be elected by Borrower's
shareholders. Borrower shall hold meetings of its Board of Directors no less
frequently than quarterly and shall distribute to each director promptly, and in
any event within three (3) weeks after the date of each meeting, copies of the
minutes of such meeting and of any reports or other materials
17.
<PAGE>
distributed at such meeting to the directors. Mr. Steven Phillips may attend
meetings of the Board of Directors in an advisory capacity.
5.9 Proceeds of Berliner Bank Loan. The proceeds of the Berliner Bank
Loan shall be used to purchase not less than $2,000,000 of upgrades to existing
equipment or additional equipment, upon which Lender shall have a first
priority, perfected security interest, except to the extent that Lender agrees
to subordinate its security interest pursuant to the terms and conditions of the
German Security Agreement.
5.10 Post-closing covenant. Within ten calendar days after the Closing
Date, Borrower shall provide Lender with an English translation of the list of
Collateral.
5.11 Further Assurances. At any time and from time to time Borrower
shall, and shall cause each of its Subsidiaries to, execute and deliver such
further instruments and take such further action as may reasonably be requested
by Lender to effect the purposes of this Agreement, the Note, and the other Loan
Documents, including without limitation, to establish and maintain a perfected
first priority security interest in the Collateral.
SECTION VI
NEGATIVE COVENANTS
So long as the Loan or any other Obligation under the Loan Documents
(other than the Convertible Debenture and the Debt Conversion Agreement) remains
outstanding, Borrower covenants as follows:
6.1 Indebtedness. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness other than the following:
(a) Indebtedness of Borrower or any of its Subsidiaries to
Lender or any AMP Affiliate;
(b) Indebtedness existing as of the date of this Agreement and
specifically disclosed on Schedule 4.5 hereto or in the financial statements
referred to in Section 4.6;
(c) Indebtedness secured by Permitted Encumbrances; and
(d) other Indebtedness of Borrower or any of its Subsidiaries
consistent with Borrower's Mission Statement and which does not have a Material
Adverse Effect.
6.2 Contingent Liabilities. Neither Borrower nor any of its
Subsidiaries shall create, incur, assume, guarantee or remain liable with
respect to any Guaranties other than the following:
(a) Guaranties in favor of Lender or any of its affiliates;
(b) Guaranties existing on the date of this Agreement and
disclosed on Schedule 4.5 hereto or in the financial statements referred to in
Section 4.6;
(c) Guaranties resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business; and
18.
<PAGE>
(d) Guaranties with respect to surety, appeal performance and
return-of-money and other similar obligations incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money or which
are consistent with Borrower's Mission Statement) not exceeding in the aggregate
at any time $100,000.
6.3 Sale and Leaseback. Neither Borrower nor any of its Subsidiaries
shall enter into any arrangement, directly or indirectly, whereby it shall sell
or transfer all or substantially all property owned by it in order to lease such
property or lease other property that Borrower or any such Subsidiary intends to
use for substantially the same purpose as the property being sold or
transferred.
6.4 Encumbrances. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("Encumbrances"), or assign or otherwise convey any right to
receive income, including the sale or discount of accounts receivable with or
without recourse, except the following ("Permitted Encumbrances"):
(a) Encumbrances in favor of Lender or any of its affiliates;
(b) Encumbrances existing as of the date of this Agreement and
specifically disclosed in Schedule 4.5 hereto;
(c) liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of Section 5.4;
(d) landlords' and lessors' liens in respect of rent not in
default or liens in respect of pledges or deposits under workmen's compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA) or in connection with appeal and similar bonds incidental to litigation;
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent; liens securing the performance of
bids, tenders, contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business;
(e) judgment liens that shall not have been in existence for a
period longer than 30 days after the creation thereof or, if a stay of execution
shall have been obtained, for a period longer than 30 days after the expiration
of such stay;
(f) rights of lessors under capital leases;
(g) Subordinated Liens on the Collateral to the extent
permitted under the German Security Agreement;
(h) Encumbrances in respect of any purchase money obligations
for tangible property used in its business that at any time shall not exceed
$100,000 in the aggregate unless otherwise consistent with the Mission
Statement, provided that any such Encumbrances shall not extend to the
Collateral or to property and assets of Borrower or any such Subsidiary not
financed by such a purchase money obligation; and
19.
<PAGE>
(i) easements, rights of way, restrictions and other similar
charges or Encumbrances relating to real property and not interfering in a
material way with the ordinary conduct of its business.
6.5 Merger; Consolidation; Sale or Lease of Assets; Change in Line of
Business. Neither Borrower nor any of its Subsidiaries shall sell, lease or
otherwise dispose of assets or properties, other than sales of inventory in the
ordinary course of business and sales of worn and obsolete equipment; or
liquidate, merge or consolidate into or with any other person or entity,
provided that any Subsidiary of Borrower, other than Guarantor, may merge or
consolidate into or with (i) Borrower if no Default has occurred and is
continuing or would result from such merger and if Borrower is the surviving
company, or (ii) any other wholly-owned Subsidiary of Borrower; or change its
line of business in any material respect from that set forth in Section 5.2(c).
6.6 Equity Distributions. Borrower shall not pay any dividends on any
class of its capital stock or make any other distribution or payment on account
of or in redemption, retirement or purchase of such capital stock; provided that
this Section shall not apply to (i) the issuance, delivery or distribution by
Borrower of shares of its common stock pro rata to its existing shareholders and
(ii) the purchase or redemption by Borrower of its capital stock with the
proceeds of the issuance of additional shares of capital stock.
6.7 Investments. Neither Borrower nor any of its Subsidiaries shall
make or maintain any Investments other than (i) existing Investments in
Subsidiaries, (ii) Qualified Investments, or (iii) Investments which are
consistent with Borrower's Mission Statement and which do not have a Material
Adverse Effect.
6.8 Capital Expenditures. Neither Borrower nor any of its Subsidiaries
shall make or incur any Capital Expenditures in any Fiscal Year in excess of the
amount included for such purposes in the annual budget, and any revisions
thereof, as approved by Borrower's Board of Directors.
6.9 ERISA. Neither Borrower nor any member of the Controlled Group
shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of Borrower or any of its
Subsidiaries pursuant to Section 4068 of ERISA.
6.10 Loans or Advances to ALT. Neither Borrower nor any subsidiary
shall use the proceeds of the Loan to make loans or advances to ALT, except to
the extent that money borrowed by Borrower from ALT in connection with the
Recent ALT Financing shall be repaid to ALT.
6.11 Collateral Coverage. Neither Borrower nor Guarantor shall permit
the aggregate book value of the Collateral upon which Lender has a first
priority perfected Lien, to equal an amount which is less than 125% of the sum
of (a) the aggregate outstanding principal amount of the Loan and (b) the
aggregate accrued but unpaid interest on the Loan.
6.12 Change in Key Management. Neither Borrower nor Guarantor shall
permit any changes in key management, except as approved by Borrower's or
Guarantor's Board of Directors, respectively.
6.13 Transactions with Affiliates. Borrower shall not, and shall not
permit any of Borrower's Subsidiaries to, enter into or be a party to any
agreement or transaction with any Affiliate of Borrower, unless (i) consistent
with Borrower's Mission Statement or (ii) in the ordinary course of and pursuant
to
20.
<PAGE>
the reasonable requirements of Borrower's or Borrower's Subsidiaries' business,
and, in each case, upon fair and reasonable terms that are approved by
Borrower's Board of Directors, and no less favorable to such Borrower or
Borrower's Subsidiary than would obtain in a comparable arm's length transaction
with a Person not an Affiliate of Borrower of equal bargaining power.
6.14 No Amendment or Waiver of Charter Documents. Borrower shall not
amend, alter, repeal or terminate, and shall not permit any Subsidiary to amend,
alter, repeal or terminate, its respective Certificate of Incorporation (or
comparable charter documents) without the prior written consent of Lender if the
effect of such amendment, alteration, repeal, or termination is adverse to the
interests of the Lender, as determined by Lender in its sole discretion.
SECTION VII
FINANCIAL COVENANTS
So long as the Loan or any other Obligation under the Loan Documents
(other than the Convertible Debenture and the Debt Conversion Agreement) remains
outstanding, Borrower covenants as follows, tested annually on the last day of
each fiscal year of Borrower, beginning December 31, 1997:
7.1 Minimum Assets to Equity. Borrower shall maintain a ratio of Total
Assets to Equity of at least 4.0 to 1.0
7.2 Maximum Total Liabilities to Equity. Borrower shall maintain a
ratio of Total Liabilities to Equity of not more than 3.5 to 1.0.
7.3 Maximum Long Term Debt to Equity. Borrower shall maintain a ratio
of Long Term Debt to Equity of not more than 3.0 to 1.0
7.4 Minimum Current Ratio. Borrower shall maintain a ratio of Current
Assets to Current Liabilities of at least 1.0 to 1.0.
SECTION VIII
DEFAULTS
8.1 Events of Default. There shall be an Event of Default hereunder if
any of the following events occurs:
(a) Borrower shall fail to pay when due (i) any amount of
principal of the Loan, or (ii) any amount of interest thereon or any fees or
expenses payable hereunder or under the Note and such failure shall continue for
three (3) business days after written notice of such default is given by Lender
to Borrower; or
(b) Borrower shall fail to perform any term, covenant or
agreement contained in Sections 5.1(j), 5.3, 5.5, 5.9, 6.1 through 6.14, or 7.1
through 7.4; or
21.
<PAGE>
(c) Borrower or Guarantor shall fail to perform any term,
covenant or agreement (other than in respect of Sections 8.1(a) and (b) hereof)
contained in this Agreement, any other Loan Document, or any other agreement
between Borrower and Lender or Guarantor and Lender, as the case may be, and
such default shall continue for twenty (20) days after written notice of such
default is given by Lender to Borrower and Guarantor; or
(d) any representation or warranty of Borrower or Guarantor
made in this Agreement, the Note or in any other Loan Document or any other
documents or agreements executed in connection with the transactions
contemplated by this Agreement or in any certificate delivered hereunder shall
prove to have been false in any material respect upon the date when made or
deemed to have been made; or
(e) there shall occur any material adverse change in the
assets, liabilities, financial condition, or business of Borrower, Guarantor, or
Borrower and its Subsidiaries, taken as a whole; or
(f) Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligations for borrowed
monies or advances, or for the use of real or personal property, or fail to
observe or perform any term, covenant or agreement evidencing or securing such
obligations for borrowed monies or advances, all in excess of $100,000, or
relating to such use of real or personal property, the result of which failure
is to permit the holder or holders of such Indebtedness to cause such
Indebtedness to become due prior to its stated maturity upon delivery of
required notice, if any; or
(g) Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar official of itself or of all or a
substantial part of its property, (ii) be generally not paying its debts as such
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) take any action or commence any case or
proceeding under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, or any other law providing for
the relief of debtors, (vi) fail to contest in a timely or appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
under the Federal Bankruptcy Code or other law, (vii) take any action under the
laws of its jurisdiction of incorporation or organization similar to any of the
foregoing, or (viii) take any corporate action for the purpose of effecting any
of the foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of Borrower or any of its Subsidiaries in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets, or (iii) similar relief in respect
of it, under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts or any other law providing for
the relief of debtors, and such proceeding or case shall continue undismissed,
or unstayed and in effect, for a period of 30 days; or an order for relief shall
be entered in an involuntary case under the Federal Bankruptcy Code, against
Borrower or such Subsidiary; or action under the laws of the jurisdiction of
incorporation or organization of Borrower or any of its Subsidiaries similar to
any of the foregoing shall be taken with respect to Borrower or such Subsidiary
and shall continue unstayed and in effect for any period of 30 days; or
(i) a judgment or order for the payment of money shall be
entered against Borrower or any of its Subsidiaries by any court, or a warrant
of attachment or execution or similar process shall be issued or levied against
property of Borrower or such Subsidiary, that in the aggregate exceeds $100,000
22.
<PAGE>
in value and such judgment, order, warrant or process shall continue
undischarged or unstayed for 30 days; or
(j) a material breach by Borrower under the Purchase
Agreement; or
(k) any Change in Control shall have occurred; or
(l) Lender's nominee to the Board of Directors, if any, should
fail to be elected to the Board of Directors of Borrower; or
(m) at least a majority of the Board of Directors should fail
to be "Outside Directors" (as defined in the Voting Agreement).
8.2 Remedies. Upon the occurrence of an Event of Default described in
Sections 8.1(g) and (h), immediately and automatically, and upon the occurrence
of any other Event of Default, at any time thereafter while such Event of
Default is continuing, at Lender's election, without notice of election and
without demand:
(a) the unpaid principal amount of the Loan together with
accrued interest and all other Obligations shall become immediately due and
payable without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived; and
(b) Lender may exercise any and all rights it has under this
Agreement, the Note, any other Loan Document, or any other documents or
agreements executed in connection herewith, or at law or in equity, and proceed
to protect and enforce Lender's rights by any action at law, in equity or other
appropriate proceeding.
(c) Without notice to Borrower, set off and apply to the
Obligations any and all indebtedness at any time owing to or for the credit or
the account of Borrower.
SECTION IX
MISCELLANEOUS
9.1 Notices. Unless otherwise specified herein, all notices hereunder
to any party hereto shall be in writing and shall be deemed to have been given
when delivered by hand, when properly deposited in the mails postage prepaid,
when sent by telex, answerback received, or electronic facsimile transmission,
or when delivered to the overnight courier, addressed to such party at its
address indicated below:
If to Borrower, at
FiberCore, Inc.
--------------------
--------------------
--------------------
Phone: (508) 347-7744
Fax: (508) 347-2778
with a copy to:
23.
<PAGE>
Coleman & Rhine
1120 Avenue of the Americas
New York, N.Y. 10036-6700
Phone: (212) 840-3330
Fax: (212) 840-3744
Attention: Bruce S. Coleman, Esq.
If to Lender, at
AMP Incorporated
470 Friendship Road
M/S 176-034
Harrisburg, PA 17111
Phone: (717) 592-6651
Fax: (717) 592-6655
or at any other address specified by such party in writing.
9.2 Expenses. Borrower will pay within 30 days of demand all reasonable
expenses of Lender in connection with (a) the waiver or amendment of this
Agreement, the Note, the Loan Documents, or other documents executed in
connection therewith, (b) or the default or collection of the Loan or other
Obligations under the Loan Documents, or default, collection in connection with
Lender's exercise, preservation or enforcement of any of its rights, remedies or
options thereunder, including, without limitation, reasonable fees of outside
legal counsel, accounting, consulting, brokerage or other similar professional
fees or expenses, and any fees or expenses associated with any travel or other
costs relating to any appraisals or examinations conducted in connection with
the Obligations or any collateral therefor, and the amount of all such expenses
shall, until paid, bear interest at the rate applicable to principal hereunder
(including any default rate).
9.3 Set-Off. Regardless of the adequacy of any collateral or other
means of obtaining repayment of the Obligations, any sums due from Lender to
Borrower may, at any time and from time to time after the occurrence of an Event
of Default hereunder, without notice to Borrower or compliance with any other
condition precedent now or hereafter imposed by statute, rule of law, or
otherwise (all of which are hereby expressly waived) be set off, appropriated,
and applied by Lender against any and all obligations of Borrower to Lender or
any of its affiliates in such manner as Lender in its sole discretion may
determine, and Borrower hereby grants Lender a continuing security interest in
such sums for the payment and performance of all such obligations.
9.4 Term of Agreement. This Agreement shall continue in force and
effect so long as the Loan or any Obligation under the Loan Documents (other
than the Convertible Debenture and the Debt Conversion Agreement) shall be
outstanding.
9.5 No Waivers. No failure or delay by Lender in exercising any right,
power or privilege hereunder or under the Note or under any other documents or
agreements executed in connection herewith shall operate as a waiver thereof;
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein and in the Note provided are cumulative and not
exclusive of any rights or remedies otherwise provided by agreement or law.
24.
<PAGE>
9.6 Governing Law. THIS AGREEMENT, THE GERMAN GUARANTY, AND THE NOTE
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER SEAL AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF NEW YORK (WITHOUT GIVING EFFECT TO
ANY CONFLICTS OF LAWS PROVISIONS CONTAINED THEREIN); PROVIDED, HOWEVER, THAT THE
GERMAN SECURITY AGREEMENT SHALL BE GOVERNED BY THE LAWS OF GERMANY.
9.7 Amendments. Neither this Agreement, the Note, any other Loan
Document, nor any provision hereof or thereof may be amended, waived, discharged
or terminated except by a written instrument signed by Lender and, in the case
of amendments, by Borrower.
9.8 Binding Effect of Agreement. This Agreement shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and assigns; provided that Borrower may not assign or transfer its rights or
obligations hereunder. Lender may sell, transfer or grant participations in the
Note to any AMP Affiliate of Lender without the prior written consent of
Borrower, and Borrower agrees that any transferee or participant shall be
entitled to the benefits of this Agreement to the same extent as if such
transferee or participant were Lender hereunder; provided that notwithstanding
any such transfer or participation, Borrower may, for all purposes of this
Agreement, treat Lender as the person entitled to exercise all rights hereunder
and under the Note and to receive all payments with respect thereto.
9.9 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
9.10 Partial Invalidity. The invalidity or unenforceability of any one
or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
9.11 Captions. The captions and headings of the various sections and
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.
9.12 Arbitration. Any dispute that cannot be settled amicably by
mediation will be heard, settled and decided under the Commercial Rules of the
American Arbitration Association by three arbitrators chosen in accordance with
such Rules. Service of any matters in reference to such arbitration will be
given in the manner described in Section 9.1. Such arbitration will be conducted
in New York, New York. The award in such arbitration will be final and
enforceable in any court of competent jurisdiction. The costs of arbitration
will be paid as directed by the arbitrators.
9.13 Entire Agreement. This Agreement, the Note and the documents and
agreements executed in connection herewith constitute the final agreement of the
parties hereto and supersede any prior agreement or understanding, written or
oral, with respect to the matters contained herein and therein.
25.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
Borrower: FIBERCORE, INC.
By: /s/ Mohd Aslami
-------------------------
Name: Mohd Aslami
Title: Chairman and CEO
Lender: AMP INCORPORATED
By: /s/ James E. Marley
-------------------------
Name: James E. Marley
Title: Chairman of the Board
26.
<PAGE>
EXHIBITS
EXHIBIT A - Form of Promissory Note
EXHIBIT B - Form of Warrant
EXHIBIT C - Intentionally omitted.
EXHIBIT D - Form of German Guaranty
EXHIBIT E - Form of German Security Agreement
EXHIBIT F - Form of Opinion of Counsel to Lender
EXHIBIT G - Form of Compliance Certificate
EXHIBIT H - Borrower's Mission Statement
EXHIBIT I - Form of Voting Agreement
EXHIBIT J - Capitalization Table
EXHIBIT K - Berliner Bank Loan Documents
EXHIBIT L - German Government Grant Documents
SCHEDULES
SCHEDULE 4.5 - Indebtedness; Encumbrances
SCHEDULE 4.8 - Defaults
SCHEDULE 4.10 - Litigation
SCHEDULE 4.11 - Subsidiaries
SCHEDULE 4.14 - Trademarks, Trademark Licenses, Patents,
Patent Licenses, Copyrights, and Copyright
Licenses
SCHEDULE 4.15 - Borrower's Trade Names; Location of
Collateral
SCHEDULE 5.3 - Maintenance and Insurance
i
<PAGE>
SCHEDULE 4.5
INDEBTEDNESS; ENCUMBRANCES
ALL EQUIPMENT AND PATENTS PURCHASED FROM SICO QUARZSCHMELZE JENA GMBH ("SICO")
COULD REVERT TO SICO IN THE EVENT THE COMPANY MOVES OUT OF THE JENA FACILITY
PRIOR TO THE YEAR 2001.
ALL OTHER EQUIPMENT AND PATENTS ARE SUBJECT TO THE SECURITY INTEREST OF AMP
INCORPORATED, UNDER THIS LOAN AGREEMENT AND A PREVIOUS LOAN AGREEMENT DATED
APRIL 17, 1995.
ii.
<PAGE>
SCHEDULE 4.8
INDEBTEDNESS; ENCUMBRANCES
NONE
iii.
<PAGE>
SCHEDULE 4.10
LITIGATION
Litigation against FiberCore, Inc.
None
Litigation against Subsidiaries
1. COIA GmbH v. Fibercore Glasfaser Jena GmbH
iv.
<PAGE>
SCHEDULE 4.11
SUBSIDIARIES
Automated Light Technologies (Delaware)
Fibercore Glasfaser Jena GmbH (Germany)
FiberCore Mid East Ltd. (Cayman Islands)
Infoglass Incorporated (Delaware)
v.
<PAGE>
SCHEDULE 4.15
SCHEDULE OF BORROWER'S TRADE NAMES AND LOCATION OF COLLATERAL
THE BORROWER HAS BEEN PREVIOUSLY KNOWN BY THE NAMES FIBERCORE INCORPORATED AND
VENTURECAP, INC.
THE COLLATERAL IS LOCATED AT THE JENA FACILITY IN JENA, GERMANY.
THE ADDRESS OF THE JENA FACILITY IS
FiberCore Jena GmbH
Goschwitzer Str. 20, D-07745
Jena
vi.
<PAGE>
SCHEDULE 5.13
SCHEDULE OF EXCEPTIONS TO MAINTENANCE AND INSURANCE
NONE
vii.
FIBERCORE, INC.
TERM PROMISSORY NOTE
November 27, 1996
US$3,000,000 New York, New York
For value received, the undersigned hereby promises to pay to AMP
Incorporated, a Pennsylvania corporation ("Lender"), or order, at the office of
Lender at 470 Friendship Road, M/S 176-034, Harrisburg, Pennsylvania 17111, the
principal amount of THREE MILLION UNITED STATES DOLLARS (US$3,000,000) or such
lesser amount as shall equal the principal amount outstanding hereunder,
together with accrued and unpaid interest thereon, payable on the dates and in
the manner set forth in the Agreement (defined below.)
Overdue payments of principal (whether at stated maturity, by
acceleration or otherwise), and, to the extent permitted by law, overdue
interest, shall bear interest, payable on demand in immediately available funds,
at a rate per annum equal to two percent (2%) above the rate that would
otherwise be applicable to principal hereunder.
This Note is issued pursuant to, and entitled to the benefits of, and
is subject to, the provisions of a certain Term Loan Agreement dated as of
November 27, 1996 by and between the undersigned and Lender (herein, as the same
may from time to time be amended or extended, referred to as the "Agreement"),
but neither this reference to the Agreement nor any provision thereof shall
affect or impair the absolute and unconditional obligation of the undersigned
maker of this Note to pay the principal of and interest on this Note as herein
provided. Capitalized terms not otherwise defined herein have the meanings given
to such terms in the Agreement.
As provided in the Agreement, this Note is supported by a German
Guaranty, which German Guaranty is secured by certain personal property of the
Guarantor.
In case an Event of Default (as defined in the Agreement) shall occur,
the aggregate unpaid principal of and accrued interest on this Note shall become
or may be declared to be due and payable in the manner and with the effect
provided in the Agreement.
The undersigned may at its option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Agreement.
The undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
THIS INSTRUMENT SHALL HAVE THE EFFECT OF AN INSTRUMENT EXECUTED UNDER
SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW
YORK (WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PROVISIONS CONTAINED
THEREIN).
1.
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LENDER FIBERCORE, INC.
By: /s/ James E. Marley By: /s/ Mohd Aslami
----------------------- ----------------------
Name: James E. Marley Name: Mohd Aslami
---------------------- ----------------------
Title: Chairman of the Board Title: Chairman and CEO
----------------------- -------------------
2.
AMENDMENT NO. 1
TO CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
This Amendment No. 1 to Convertible Debenture Purchase Agreement
("Amendment") is entered into as of November 27, 1996, by and between FiberCore,
Inc., a Nevada corporation (the "Borrower") having its chief executive office at
174 Charleston Road, Sturbridge, MA 01566 and AMP INCORPORATED, a Pennsylvania
corporation (the "Lender"), having an office at 470 Friendship Road, M/S
176-034, Harrisburg, Pennsylvania 17111.
RECITALS OF FACT.
A. Borrower and FiberCore Incorporated, a Nevada corporation ("Old
FiberCore"), previously entered into that certain Convertible Debenture Purchase
Agreement, dated as of April 17, 1995 (the "Purchase Agreement"), pursuant which
Borrower issued to Lender that certain Convertible Debenture dated as of April
17, 1995, in the original principal amount of $5,000,000, secured by that
certain Collateral Assignment, Patent Mortgage and Security Agreement, dated as
of April 17, 1995, made by Old FiberCore in favor of Lender (collectively, the
"Existing Loan Documents").
B. On July 18, 1995, Old FiberCore merged into Venturecap, Inc., a
Nevada corporation ("Vencap"), with Vencap (i.e. Borrower) as the surviving
corporation (the "Merger"). Simultaneously with the consummation of the Merger,
Vencap changed its name to "FiberCore, Inc."
C. Borrower assumed the obligations of Old FiberCore, including without
limitation, the obligations under the Existing Loan Documents, by operation of
law in the Merger.
D. The aggregate principal amount outstanding under the Existing Loan
Documents is $5,000,000 (the "Existing Loan") and the aggregate accrued interest
on the Existing Loan as of the date hereof is $541,883.55 with interest
currently accruing at a rate of $898.97 per day ("Accrued Interest").
E. This Amendment sets forth the manner in which a portion of the
indebtedness owed by Borrower to Lender shall be converted into equity of
Lender.
NOW THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. PARTIAL CONVERSION OF THE EXISTING LOAN. Lender agrees to convert
$3,000,000 of the Existing Loan and $540,984.58 of Accrued Interest into
3,058,833 shares of Common Stock of Borrower (the "Shares").
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2. ISSUANCE OF STOCK CERTIFICATES. Upon execution of this Agreement,
Borrower shall issue to Lender (i) a stock certificate representing the Shares
and (ii) a new convertible debenture in the form of Exhibit A hereto (the "New
Debenture").
3. REAFFIRMATION OF CONVERTIBLE DEBENTURE PURCHASE AGREEMENT. Borrower
hereby affirms that there will remain outstanding, after partial conversion of
the Existing Loan pursuant to Section 1 above, $2,000,000 of principal and
$898.97 of accrued interest as of the date hereof (with interest currently
accruing at the rate of $898.97 per day), which indebtedness shall be evidenced
by the New Debenture and shall be subject to the terms and conditions of the
Existing Loan Documents, as amended hereby.
4. BORROWER'S REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Amendment in the manner provided herein, Borrower
represents and warrants to the Lender that the following statements are true,
and correct and complete:
a. Authorization of Agreements. The execution and delivery of
this Amendment and the performance of the Purchase Agreement, as amended, have
been duly authorized by all necessary corporate action on the part of Borrower.
b. Incorporation of Representations and Warranties From
Purchase Agreement. The representations and warranties contained in Section 3 of
the Purchase Agreement are and will be true and correct in all material respects
on and as of the date hereof to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true and correct in all
material respects on and as of such earlier date.
c. Absence of Default. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment that would constitute a default under the Purchase Agreement.
5. REAFFIRMATION OF SECURITY INTEREST. That certain Collateral
Assignment, Patent Mortgage and Security Agreement, made as of April 17, 1995,
by Old FiberCore in favor of Lender (the "Security Agreement") shall remain in
full force and effect and is hereby ratified and confirmed by Borrower. Exhibit
B hereto contains a true and complete list of all patents and patent
applications of Borrower as of the date hereof, domestic and foreign. With
limitation of the terms and conditions of the Security Agreement, Borrower
hereby agrees from time to time to file any and all necessary or desirable (i)
Uniform Commercial Code filings and
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<PAGE>
(ii) filings or recordations with the United States Patent and Trademark Office
or any other government agency, in order to perfect or maintain the perfection
and first priority of Lender's security interest in the "Collateral" as defined
in the Security Agreement.
6. MISCELLANEOUS.
a. Reference To And Effect On The Purchase Agreement.
i. On and after the date hereof, each reference in
the Purchase Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import in the Existing Loan Documents referring to the Purchase
Agreement, shall mean and be a reference to the Purchase Agreement, as amended
by this Amendment.
ii. Except as specifically amended by this Amendment,
the Purchase Agreement and the other Existing Loan Agreements shall remain in
full force and effect and are hereby ratified and confirmed.
iii. The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy of the
Lender under the Purchase Agreement or any of the other Existing Loan
Agreements.
b. Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
c. Applicable Law. The Amendment shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
commonwealth of Massachusetts, without regard to conflicts of laws principles.
d. Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date set forth above.
Borrower: FIBERCORE, INC.
By: /s/ Mohd Aslami
-------------------------
Name: Mohd Aslami
Title: Chairman and CEO
Lender: AMP INCORPORATED
By: /s/ James E. Marley
-------------------------
Name: James E. Marley
Title: Chairman of the Board
Exhibit A - Convertible Debenture
Exhibit B - List of Patents and Patent Applications
4
SUBSIDIARY GUARANTY
This continuing Subsidiary Guaranty ("Guaranty") is made as of November
27, 1996, by FIBERCORE GLASFASER JENA GMBH, a corporation incorporated under
the laws of Germany ("Guarantor"), in favor of AMP INCORPORATED, a Pennsylvania
corporation ("Lender").
RECITALS
A. Pursuant to that certain Term Loan Agreement dated of even date
herewith (as the same may from time to time be amended, modified or
supplemented, the "Loan Agreement") by and among FiberCore, Inc., a Nevada
corporation ("Borrower") and Lender, Lender has agreed to make certain advances
of money and to extend certain financial accommodations to Borrower in the
amounts and manner set forth in the Loan Agreement (collectively, the "Loan").
B. Guarantor is a wholly-owned Subsidiary of Borrower and will obtain
substantial direct and indirect benefit from the making of the Loan by Lender to
Borrower.
C. Lender is willing to make the Loan to Borrower on and after the date
of the Loan Agreement, but only upon the condition, among others, that Guarantor
shall have executed this Guaranty and delivered same to Lender.
D. In order to induce, and in consideration of the agreement of Lender
to make the Loan to Borrower, Guarantor is willing to execute and deliver this
Guaranty guaranteeing the full payment and performance by Borrower of all of its
Obligations under the Loan Agreement and each of the other Loan Documents (other
than the Debt Conversion Agreement and the Convertible Debenture) (collectively,
the "Loan Obligations").
NOW, THEREFORE, in consideration of the foregoing recitals, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Guarantor hereby
represents, warrants, covenants and agrees as follows:
1. Definitions. All capitalized terms used but not defined herein shall
have the meanings given to them in the Loan Agreement. Guarantor hereby
acknowledges having received a copy of the Loan Agreement.
2. Guaranty.
2.1 Guaranty. In consideration of the foregoing, Guarantor
hereby irrevocably, absolutely and unconditionally guarantees to Lender the
prompt and complete payment when due (whether by stated maturity, by
acceleration or otherwise) of all of the Loan Obligations, together with the
prompt payment of all expenses, including reasonable attorneys' fees, incidental
to the collection of the Loan Obligations and the enforcement or protection of
1.
<PAGE>
Lender's security interest in the collateral described in the German Security
Agreement (the "Collateral") and the prompt performance of all of Borrower's
Loan Obligations. (The Loan Obligations and all other obligations and covenants
to be performed by Guarantor under this Guaranty shall hereinafter be
collectively referred to as the "Guaranty Obligations.")
2.2 Expenses. Guarantor agrees to pay all expenses incurred by
Lender in connection with the enforcement of Lender's rights under this
Guaranty, including, without limitation, reasonable attorneys' fees and legal
expenses.
2.3 Joint and Several Liability. The obligations of Guarantor
hereunder shall be joint and several with the obligations of any others who may
execute any guaranty respecting the Loan Obligations, notwithstanding any
relationship or contract of co-obligation by or among such guarantors. Lender's
enforcement of the Guaranty Obligations is not conditioned upon Lender obtaining
from any other person a guaranty of all or any part of the Loan Obligations.
2.4 Separate Obligations. The Guaranty Obligations of
Guarantor arising hereunder are independent of and separate from any and all
obligations of Borrower to Lender arising under the Loan Agreement and the other
Loan Documents.
3. Payments. All payments to be made by Guarantor to Lenders hereunder
shall be made in lawful money of the United States of America, in immediately
available funds, addressed to Lender at the address set forth in the Loan
Agreement (or such other address as Lender may hereafter specify to the
Guarantor) and shall be accompanied by a notice from Guarantor stating that such
payments are made under this Guaranty.
4. Absolute Guaranty. Guarantor agrees that the liability hereunder
shall be the immediate and direct obligation of Guarantor and shall not be
contingent upon Lender's exercise or enforcement of any remedy it may have
against Borrower or any other person, or against the Collateral or any security
for the Guaranty Obligations. To the fullest extent permitted by law and without
limiting the generality of the foregoing, the Guaranty Obligations shall remain
in full force and effect without regard to and shall not be impaired or affected
by, nor shall Guarantor be exonerated or discharged by, any of the following
events:
(a) Insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition, assignment for the benefit of creditors, death,
liquidation, winding up or dissolution of Borrower, Guarantor or any other
guarantor of the Loan Obligations;
(b) Any limitation, discharge, or cessation of the liability
of Borrower, Guarantor or any other guarantor for the Loan Obligations due to
any statute, regulation, or rule of law, or any invalidity or unenforceability
in whole or in part of the documents evidencing the Loan Obligations or any
other guaranty of the Loan Obligations;
(c) Any merger, acquisition, consolidation or change in
structure of Borrower, Guarantor or any other guarantor of the Loan Obligations
or any sale, lease, transfer, or other
2.
<PAGE>
disposition of any or all of the assets or shares of Borrower, Guarantor or any
other guarantor of the Loan Obligations;
(d) Any assignment or other transfer, in whole or in part, of
Lender's interests in and rights under this Guaranty, the Loan Agreement or any
of the other Loan Documents, including, without limitation, Lender's right to
receive payment or performance of the Loan Obligations or the Guaranty
Obligations, as the case may be, or any assignment or other transfer, in whole
or in part, of Lender's interest in and to the Collateral securing the Loan
Obligations or any security for the Guaranty Obligations;
(e) Any claim, defense, counterclaim, or set-off, other than
that of payment not yet being due or of prior performance, that Borrower,
Guarantor or any other guarantor of the Loan Obligations may have or assert,
including, but not limited to, any defense of incapacity or lack of corporate or
other authority to execute any documents relating to the Loan Obligations, the
Collateral securing the Loan Obligations or any security for the Guaranty
Obligations;
(f) Lender's amendment, modification, renewal, extension,
renunciation or cancellation of any documents or agreements relating to the Loan
Agreement, the Loan Obligations, the Collateral securing the Loan Obligations or
any security for the Guaranty Obligations, or Lender's exchange, release, or
waiver of any Collateral securing the Loan Obligations, or of any security for
the Guaranty Obligations;
(g) Lender's exercise or nonexercise of any power, right or
remedy with respect to the, the Collateral securing the Loan Obligations, the
Guaranty Obligations or any security for the Guaranty Obligations, including,
but not limited to, Lender's compromise, release, settlement or waiver with or
of Borrower, Guarantor (except in its capacity as Guarantor respecting the
Guaranty Obligations) or any other Person;
(h) Lender's vote, claim, distribution, election, acceptance,
action or inaction in any bankruptcy case related to the Loan Obligations, the
Collateral securing the Loan Obligations, the Guaranty Obligations or any
security for the Guaranty Obligations; and
(i) Any impairment or invalidity of the Collateral securing
the Loan Obligations or any security for the Guaranty Obligations, or any
failure to perfect any of Lender's liens thereon or therein.
5. Representations and Warranties. Guarantor hereby represents and
warrants to Lender and agrees that each of said warranties and representations
shall be deemed to survive until full and complete and indefeasible payment and
performance of the Loan Obligations and shall apply anew to each borrowing under
the Loan Agreement:
(a) Guarantor is a corporation duly organized and validly
existing in good standing under the laws of Germany and is duly qualified and
licensed as a foreign corporation, authorized to do business in each
jurisdiction within the United States where its ownership of
3.
<PAGE>
property or conduct of business requires such qualification and the failure to
so qualify would have a Material Adverse Effect, and in each jurisdiction within
the United States where Guarantor maintains an office; Guarantor has the
corporate power and authority, rights and franchises to own its property and
assets and to carry on its business as now conducted; Guarantor has the
corporate power and authority to execute, deliver and perform the terms of the
Loan Documents to which it is a party and all other instruments and documents to
which it is a party contemplated hereby or thereby.
(b) The execution, delivery and performance by Guarantor of
this Guaranty (i) are within Guarantor's powers and have been duly authorized by
all necessary action; (ii) do not contravene Guarantor's charter documents or
any law or any contractual restriction binding on or affecting Guarantor or by
which Guarantor's property may be affected; (iii) do not require any
authorization or approval or other action by, or any notice to or filing with,
any governmental authority or any other person under any indenture, mortgage,
deed of trust, lease, agreement or other instrument to which Guarantor is a
party or by which Guarantor or any of its property is bound except such as have
been obtained or made; and (iv) do not, except as contemplated by the Loan
Agreement or this Guaranty, result in the imposition or creation of any lien
upon the property of Guarantor.
(c) This Guaranty and each of the Loan Documents to which
Guarantor is a party constitute the legal, valid and binding obligations of
Guarantor, enforceable against Guarantor in accordance with their respective
terms, except as the enforceability thereof may be subject to or limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws relating to or affecting the rights of creditors generally and by the
application of general equitable principles.
(d) There are no material claims, actions, suits, proceedings
or other litigation pending or, to the best of Guarantor's knowledge, after due
inquiry, threatened against Guarantor or Borrower or any of their Subsidiaries
at law or in equity before any governmental agency or, to the best of
Guarantor's knowledge, after due inquiry, any material investigation by any
governmental agency of Guarantor's or Borrower's or any of their Subsidiaries'
affairs, Properties or assets. Guarantor does not have any contingent
liabilities which would, if adversely determined, have a Material Adverse Effect
and which are not provided for or disclosed in the financial statements
delivered to Lender pursuant to the Loan Agreement.
(e) The Guaranty Obligations are not subject to any offset or
defense against Lender or Borrower of any kind.
(f) The financial statements of Guarantor, as shown in the
audited consolidated financial statements of Borrower, dated as of December 31,
1995 and the company prepared consolidated financial statements of Borrower
dated as of September 30, 1996, copies of which have been furnished to Lender,
fairly present in all material respects the financial position and results of
operations for Guarantor for the periods purported to be covered thereby, all in
4.
<PAGE>
accordance with GAAP, and there has been no material adverse change in the
financial position or operations of Guarantor since the date of such financial
statements.
(g) The incurrence of Guaranty Obligations under this Guaranty
will not cause Guarantor to (i) become insolvent; (ii) be left with unreasonably
small capital for any business or transaction in which Guarantor is presently
engaged or plans to be engaged; or (iii) be unable to pay its debts as such
debts mature.
(h) All representations and warranties contained in this
Guaranty shall be true, accurate and complete in all material respects at the
time of Guarantor's execution of this Guaranty, and shall continue to be true,
accurate and complete in all material respects until the Guaranty Obligations
have been paid or otherwise satisfied in full.
6. Independent Analysis. Guarantor acknowledges that it has,
independently of and without reliance on Lender, made its own credit analysis of
Borrower and the Collateral in which a security interest has been granted to
Lender under the Loan Documents, performed its own legal review of this
Guaranty, the Loan Documents and all related filings and is not relying on
Lender with respect to any of the aforesaid items. Guarantor has established
adequate means of obtaining from Borrower on a continuing basis financial and
other information pertaining to Borrower's financial condition and the value of
the Collateral and status of Lender's lien on such property. Guarantor agrees to
keep adequately informed from such means of any facts, events or circumstances
which might in any way affect Guarantor's risks hereunder, and Guarantor further
agrees that Lender shall have no obligation to disclose to Guarantor information
or material with respect to Borrower or the Collateral acquired in the course of
Lender's relationships to Borrower. Lender makes no representation, express or
implied, with respect to the Collateral or its interest in, or the priority or
perfection of its lien on the Collateral. Guarantor acknowledges that its
obligation hereunder will not be affected by (a) Lender's failure properly to
create a lien on the Collateral, or any of it, (b) Lender's failure to create or
maintain a priority with respect to the lien created on the Collateral, or any
of it or (c) any act or omission of Lender (whether negligent or otherwise)
which adversely affects the value of the Collateral or Lender's lien thereon or
the priority of such lien.
7. Events of Default.
7.1 Events of Default. It shall be an "Event of Default"
hereunder upon the occurrence of any one or more of the following events:
(a) The occurrence and continuation of an Event of
Default under and as defined in the Loan Agreement;
(b) Any representation or warranty of Guarantor made
under this Guaranty or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false, misleading or
incomplete in any material respect when made;
5.
<PAGE>
(c) Guarantor fails or neglects to perform, keep or
observe any covenant or provision of this Guaranty and the same has not been
cured to Lender's satisfaction within twenty (20) days after Guarantor shall
become aware thereof, whether by written notice from Lender or otherwise;
(d) The commencement by Guarantor of a voluntary case
under the United States or any foreign bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal, state, or foreign
bankruptcy, insolvency or similar law; or the consent by Guarantor to the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, agent or other similar official for Guarantor for any substantial
part of its property; or the making by Guarantor of any assignment for the
benefit of creditors; or any case or proceeding is commenced by Guarantor for
its dissolution, liquidation or termination; or the taking of any action by or
on behalf of Guarantor in furtherance of any of the foregoing; or
(e) (i) The filing of a petition with a court having
jurisdiction over Guarantor to commence an involuntary case for Guarantor under
the United States or any foreign bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal, state, or foreign
bankruptcy, insolvency or similar law; or the appointment of a receiver,
liquidator, assignee, custodian, trustee, agent, sequestrator or other similar
official for Guarantor or for any substantial part of its property; or any
substantial part of Guarantor's property is subject to any levy, execution,
attachment, garnishment or temporary protective order; or the ordering of the
dissolution, liquidation or winding up of Guarantor's affairs; and (ii) in each
case set forth above, the failure to obtain the dismissal of such petition or
appointment or the continuance of such decree or order unstayed and in effect,
as the case may be, for a period of thirty (30) days from the date of such
filing, appointment, or entry of such order or decree.
7.2 Acceleration of the Obligations. Upon and after an Event
of Default hereunder, then and in either such event all or any part of the Loan
Obligations may, at the option of Lender and without demand, notice, or legal
process of any kind, be declared, and immediately shall become, due and payable.
8. Continuing Guaranty. This Guaranty shall be a continuing guaranty
and shall remain in effect until the Guaranty Obligations have been indefeasibly
paid in full, and all Guaranty Obligations have been satisfactorily performed.
Any other guarantors of all or any part of the Loan Obligations may be released
without affecting the liability of Guarantor hereunder.
9. Tolling of Statute of Limitations. Guarantor agrees that any payment
or performance of any of the Loan Obligations or Guaranty Obligations or other
acts which tolls any statute of limitations applicable to the Loan Obligations
or the Guaranty Obligations shall also toll the statute of limitations
applicable to Guarantor's liability under this Guaranty.
10. Waivers. To the fullest extent permitted by law, Guarantor hereby
expressly waives (a) diligence, presentment, demand for payment, protest,
benefit of any statute of limitations affecting Borrower's liability under the
Loan Documents or the enforcement of this
6.
<PAGE>
Guaranty; (b) discharge due to any disability of Borrower; (c) any defenses of
Borrower to obligations under the Loan Documents not arising under the express
terms of the Loan Documents or from a material breach thereof by Lender which
under the law has the effect of discharging Borrower from the Loan Obligations
as to which this Guaranty is sought to be enforced; (d) the benefit of any act
or omission by Lender which directly or indirectly results in or aids the
discharge of Borrower from any of the Loan Obligations by operation of law or
otherwise; (e) except as otherwise provided herein, all notices whatsoever,
including, without limitation, notice of acceptance of this Guaranty and the
incurring of the Loan Obligations; and (f) any requirement that Lender exhaust
any right, power or remedy or proceed against Borrower or any other security
for, or any other guarantor of, or any other party liable for, any of the Loan
Obligations or any portion thereof. Guarantor specifically agrees that it shall
not be necessary or required, and Guarantor shall not be entitled to require,
that Lender (i) file suit or proceed to assert or obtain a claim for personal
judgment against Borrower, for the Loan Obligations; (ii) make any effort at
collection or enforcement of the Loan Obligations from the Borrower, (iii)
foreclose against or seek to realize upon the Collateral or any other security
now or hereafter existing for the Loan Obligations, (iv) file suit or proceed to
obtain or assert a claim for personal judgment against Guarantor or any other
guarantor or other party liable for the Loan Obligations; (v) make any effort at
collection of the Loan Obligations from any such party; (vi) exercise or assert
any other right or remedy to which Lender are or may be entitled in connection
with the Loan Obligations or any security or guaranty relating thereto or
assert; or (vii) file any claim against assets of Borrower before or as a
condition of enforcing the liability of Guarantor under this Guaranty.
11. Reinstatement. Notwithstanding any provision of the Loan Agreement
to the contrary, the liability of Guarantor hereunder shall be reinstated and
revived and the rights of Lender shall continue if and to the extent that for
any reason any payment by or on behalf of Borrower is rescinded, or must be
otherwise restored by Lender, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, all as though such amount had not
been paid. The determination as to whether any such payment must be rescinded or
restored shall be made by Lender in its sole discretion; provided, however, that
if Lender chooses to contest any such matter at the request of Guarantor,
Guarantor agrees to indemnify and hold harmless Lender from all costs and
expenses (including, without limitation, reasonable attorneys' fees) of such
litigation. To the extent any payment is rescinded or restored, the Guaranty
Obligations shall be revived in full force and effect without reduction or
discharge for that payment.
12. No Waiver; Amendments. No failure on the part of Lender to
exercise, no delay in exercising and no course of dealing with respect to, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. This Guaranty may
not be amended or modified except by written agreement between Guarantor,
Lender, and no consent or waiver hereunder shall be valid unless in writing and
signed by Lender.
7.
<PAGE>
13. Compromise and Settlement. No compromise, settlement, release,
renewal, extension, indulgence, change in, waiver or modification of any of the
Loan Obligations or the release of Guarantor (except in its capacity as
Guarantor of Guaranty Obligations, by Lender) or discharge of Borrower or
Guarantor from the performance of any of their respective obligations under the
Loan Documents to which they are a party, shall release or discharge Guarantor
from this Guaranty (except in its capacity as Guarantor of Guaranty
Obligations).
14. Notice. Except as otherwise provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be delivered by hand, with receipt acknowledged, or sent by telex,
telegraph, electronic facsimile transmission, overnight delivery, or by United
States mail, registered or certified, return receipt requested, postage prepaid
and addressed to the addresses set forth on the signature pages hereto or at
such other address as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall be deemed to have
been duly given or served when delivered by hand, when properly deposited in the
mails postage prepaid, when sent by telex, answerback received, or electronic
facsimile transmission, or when delivered to the telegraph company or overnight
courier, addressed to the party entitled to receive same, at its address set
forth on the signature pages hereto.
15. Entire Agreement. This Guaranty and the other Loan Documents to
which the Guarantor is a party constitute and contain the entire agreement of
the parties with respect to the matters set forth therein, and supersedes any
and all prior agreements, negotiations, correspondence, understandings and
communications among Guarantor, Lender, whether written or oral, respecting the
subject matter hereof.
16. Severability. If any provision of this Guaranty is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of Guarantor, Lender to the extent
possible. In any event, all other provisions of this Guaranty shall be deemed
valid and enforceable to the full extent possible.
17. Subordination of Indebtedness. Any indebtedness or other obligation
of Borrower now or hereafter held by or owing to Guarantor is hereby
subordinated in time and right of payment to all Obligations of Borrower to
Lender, except as such indebtedness or other obligation is permitted to be paid
under the Loan Agreement; and such indebtedness of Borrower to Guarantor is
assigned to Lender as security for this Guaranty, and if an Event of Default has
occurred and is continuing under the Loan Agreement and if Lender so requests
shall be collected, enforced and received by Guarantor in trust for Lenders and
to be paid over to Lender on account of the Obligations of Borrower to Lender,
but without reducing or affecting in any manner the liability of Guarantor under
the other provisions of this Guaranty. Any notes now or hereafter evidencing
such indebtedness of Borrower to Guarantor shall be marked with a legend that
the same are subject to this Guaranty and shall be delivered to Lender.
Guarantor hereby grants Lender a security interest in and to proceeds from any
such notes. Guarantor shall, and Lender is hereby authorized to, in the name of
Guarantor from time to time, execute and file financing
8.
<PAGE>
statements and continuation statements and execute such other documents and take
such other action as Lender deems necessary or appropriate to perfect, preserve
and enforce its rights hereunder.
18. Right of Set-Off. Upon the occurrence and during the continuance of
any Event of Default, Lender is hereby authorized at any time and from time to
time, without notice to Guarantor (any such notice being expressly waived by
Guarantor), to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other obligations at any
time owing by Lender or any of its affiliates to or for the credit of the
account of Guarantor against the Guaranty Obligations of Guarantor to Lender now
or hereafter existing irrespective of whether or not Lender shall have made any
demand under this Guaranty, the Loan Agreement or any of the other Loan
Documents and although such obligations may be unmatured. The rights of Lender
under this Section 18 are in addition to all other rights and remedies
(including, without limitation, other rights of set-off) which Lender may have.
Guarantor grants to Lender a security interest in any and all such deposit
accounts as security for satisfaction of the foregoing obligations, provided
that such security interest shall not preclude Guarantor from withdrawing funds
in the ordinary course from any such account prior to the occurrence of an Event
of Default.
19. Successors and Assigns; Governing Law. This Guaranty shall be
binding upon and inure to the benefit of Guarantor, Lender and their respective
successors and assigns as permitted under Section 9.8 of the Loan Agreement,
except that Guarantor may not assign its rights hereunder or any interest herein
without the prior written consent of each Lender. This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of New York
as applied to contracts made and performed entirely within the State of New York
by residents of such State.
20. Indemnity. In addition to and without limiting or impairing in any
manner whatsoever Guarantor's other obligations under this Guaranty, Guarantor
agrees to indemnify Lender and each of Lender's Affiliates for, from and against
any and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Guaranty), except
claims, losses or liabilities resulting from such Lender's or Lender's
Affiliate's gross negligence or willful misconduct.
21. Waiver of Specific Rights. GUARANTOR HEREBY IRREVOCABLY WAIVES AND
RELEASES TO THE EXTENT PERMITTED BY LAW:
(a) ANY AND ALL RIGHTS IT MAY HAVE AT ANY TIME (WHETHER
ARISING DIRECTLY OR INDIRECTLY, BY OPERATION OF LAW, CONTRACT OR OTHERWISE) TO
REQUIRE THE MARSHALING OF ANY ASSETS OF BORROWER, WHICH RIGHT OF MARSHALING
MIGHT OTHERWISE ARISE FROM ANY SUCH PAYMENTS MADE OR OBLIGATIONS PERFORMED; AND
9.
<PAGE>
(b) ANY AND ALL RIGHTS THAT WOULD RESULT IN GUARANTOR BEING
DEEMED A "CREDITOR", UNDER THE UNITED STATES BANKRUPTCY CODE, OF THE BORROWER OR
ANY OTHER PERSON, ON ACCOUNT OF PAYMENTS MADE OR OBLIGATIONS PERFORMED BY
GUARANTOR RELATING TO THIS GUARANTY.
(c) ANY CLAIM, RIGHT OR REMEDY WHICH GUARANTOR MAY NOW HAVE OR
HEREAFTER ACQUIRE AGAINST BORROWER THAT ARISES HEREUNDER AND/OR FROM THE
PERFORMANCE BY ANY GUARANTOR HEREUNDER INCLUDING, WITHOUT LIMITATION, ANY CLAIM,
REMEDY OR RIGHT OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION,
INDEMNIFICATION, OR PARTICIPATION IN ANY CLAIM, RIGHT OR REMEDY OF LENDER
AGAINST BORROWER OR ANY SECURITY WHICH LENDER NOW HAVE OR HEREAFTER ACQUIRES,
WHETHER OR NOT SUCH CLAIM, RIGHT OR REMEDY ARISES IN EQUITY, UNDER CONTRACT, BY
STATUTE, UNDER COMMON LAW OR OTHERWISE.
IF ANY AMOUNT SHALL BE PAID TO GUARANTOR IN VIOLATION OF THE PRECEDING SENTENCES
AND THE GUARANTY OBLIGATIONS SHALL NOT HAVE BEEN PAID IN FULL, SUCH AMOUNT SHALL
BE DEEMED TO HAVE BEEN PAID TO GUARANTOR FOR THE BENEFIT OF, AND HELD IN TRUST
FOR THE BENEFIT OF, LENDER AND SHALL FORTHWITH BE PAID TO LENDER TO BE CREDITED
AND APPLIED UPON THE GUARANTY OBLIGATIONS, WHETHER MATURED OR UNMATURED, IN
ACCORDANCE WITH THE TERMS OF THE LOAN AGREEMENT.
10.
<PAGE>
IN WITNESS WHEREOf, the parties hereto have executed and delivered this
Guaranty as of the date first written above.
GUARANTOR: FIBERCORE GLASFASER JENA GMBH
By: /s/ Mohd Aslami
----------------------------
Name: Mohd Aslami
---------------------------
Title: Chairman and CEO
--------------------------
Accepted and Acknowledged by:
LENDER AMP INCORPORATED
By: /s/ James E. Marley
----------------------------
Name: James E. Marley
---------------------------
Title: Chairman of the Board
--------------------------
11.
SECURITY INTEREST AGREEMENT
Between FiberCore Glasfaser Jena GmbH (hereinafter "FiberCore")and AMP
Incorporated (hereinafter "AMP").
1. FiberCore transfers title to current and future assets to AMP in
consideration of securing the loan for a capital investment granted from AMP to
FiberCore, Inc. in the amount of US$3,000,000 up to 125% of said amount.
2. FiberCore guarantees that it is, without limitations, entitled to dispose of
the assets and that no third party rights are in existence with regard to said
assets. The transfer of title will comprise with priority of the latest acquired
machinery and equipment.
3. If banks or other creditors shall request a security interest, FiberCore
guarantees that AMP's security interest will always have first ranking during
the term of this agreement.
4. AMP provides FiberCore the free of charge use of the assets relating to this
agreement. FiberCore provides insurance coverage for such assets on its own
expense against all risks.
5. This agreement remains in force in the event of a change of the shareholders
of FiberCore or any other changes in the company's legal structure.
6. AMP and FiberCore shall terminate this agreement without limitations if:
a) both parties agree to a termination; or
b) the loan, including interest, is completely paid back
to AMP.
<PAGE>
AMP can terminate this agreement upon its own choice if AMP can sell FiberCore,
Inc. stock in the equivalent of US$3,000,000 plus an annual interest rate of
10%.
7. If any provision of this agreement is considered to be invalid all other
provisions remain unaffected.
8. Venue is Wiesbaden.
FiberCore Glasfaser Jena GMBH
By:/s/ Michael J. Beecher
---------------------------
Michael J. Beecher
FiberCore, Inc.
By:/s/ Michael J. Beecher
---------------------------
Michael J. Beecher
AMP Incorporated
By:/s/ James E. Marley
---------------------------
James E. Marley
Chairman of the Board
PATENT SECURITY AGREEMENT
THIS PATENT SECURITY AGREEMENT is made on the 27th day of November,
1996, by FIBERCORE, INC., a Nevada corporation, having its chief executive
office at 174 Charlton Road, P.O. Box 206, Sturbridge, MA 01566 ("Grantor"), in
favor of AMP INCORPORATED, a Pennsylvania corporation, having its chief
executive office at 470 Friendship Road, M/S 176-034, Harrisburg, PA 17111
("Secured Party").
WHEREAS, pursuant to that certain Convertible Debenture Purchase
Agreement dated April 17, 1995 (as the same may be amended, modified or
supplemented from time to time, the "Purchase Agreement") by and between Grantor
and Secured Party, Secured Party has agreed to make certain advances of money
and to extend certain financial accommodations to Grantor in the amounts and
manner set forth in the Purchase Agreement (collectively, the "Debt"). Secured
Party is willing to extend the Debt to Grantor, but only upon the condition,
among others, that Grantor shall assign to Secured Party, for the benefit of
Secured Party, certain patent rights to secure the obligations of Grantor under
the Purchase Agreement.
WHEREAS, pursuant to the terms of the Collateral Assignment, Patent
Mortgage and Security Agreement dated as of April 17, 1995 (the "Security
Agreement") which is hereby incorporated by reference, Grantor has granted to
Grantor a security interest in all of Grantor's entire and exclusive right,
title and interest, whether presently existing or hereafter arising or acquired,
in, to and under all of the Grantor's Collateral (as defined in the Purchase
Agreement).
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and intending to be legally bound, as collateral
security for the prompt and complete payment when due of its obligations under
the Loan Agreement and the Notes, Grantor hereby represents, warrants, covenants
and agrees as follows:
1. Unless otherwise defined herein, the terms defined in the
Purchase Agreement are used herein as therein defined.
2. To secure its obligations under the Purchase Agreement,
Grantor does hereby mortgage and pledge to Secured Party, and
grant to Secured Party a security interest in, all of
Grantor's right, title and interest in, to and under its
Patents, Patent Licenses whether now or hereafter owned and
including without limitation each Patent and Patent
application listed on Schedules A, B, C and D hereto,
including without limitation all proceeds thereof (such as, by
way of example but not by way of limitation, license royalties
and proceeds of infringement suits), the right to sue for
past, present and future infringements, all rights
corresponding thereto throughout the world and all re-issues,
divisions, continuations, renewals, extensions and
continuations-in-part thereof (the "Collateral"). The security
interest granted hereby shall be and remain a first and prior
security interest in all of the Collateral.
1.
<PAGE>
This security interest is granted in conjunction with the security
interest granted to Secured Party under the Security Agreement. The rights and
remedies of Secured Party with respect to the security interest granted hereby
are in addition to those set forth in the Security Agreement and the other Loan
Documents, and those which are now or hereafter available to Secured Party as a
matter of law or equity. Each right, power and remedy of Secured Party provided
for herein or in the Security Agreement or the Purchase Agreement or any of the
other Loan Documents, or now or hereafter existing at law or in equity shall be
cumulative and concurrent and shall be in addition to every right, power or
remedy provided for herein and the exercise by Secured Party of any one or more
of the rights, powers or remedies provided for in this Patent Security
Agreement, the Security Agreement or the Purchase Agreement or any of the other
Loan Documents, or now or hereafter existing at law or in equity, shall not
preclude the simultaneous or later exercise by any person, including Secured
Party, of any or all other rights, powers or remedies.
Following the termination of the Purchase Agreement in accordance with
its terms and full payment and satisfaction under the Loan Documents, the
security interest in Patents, Patent Licenses, Patent applications and any and
all financing statements filed on behalf of Secured Party will be terminated,
and Secured Party will execute such instruments as may be reasonably requested
to evidence such termination, which shall be without warranty by or recourse to
Secured Party, and shall be at the expense of Grantor.
2.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Patent Security
Agreement to be duly executed by its officers thereunto duly authorized as of
the date first written above.
GRANTOR FIBERCORE, INC.
By: /s/ Mohd Aslami
---------------------
Name: Mohd Aslami
-------------------
Title: Chairman and CEO
------------------
Accepted and acknowledged by:
AMP INCORPORATED, AS SECURED PARTY
By: /s/ James E. Marley
---------------------------
Name: James E. Marley
--------------------------
Title: Chairman of the Board
-------------------------
3.
<PAGE>
SCHEDULE A
ISSUED U.S. PATENTS
<TABLE>
<CAPTION>
Patent Title Assignment Owner of Author/ Issue Comments
------ ----- ---------- --------- ------- ----- --------
No. History Record Inventor Date
--- ------- ------ -------- ----
<S> <C> <C> <C> <C> <C>
4596589 Method for producing Reassignment: Fibercore, Inc. Perry, Gregory 6/24/86
single mode fiber 11-08-93 (signed)
preform 10-11-94 (recorded)
Assignor: Perry G.
Assignee: Fibercore
04-17-95 (signed)
04-24-95 (recorded)
Assignor: Fibercore
Assignee: AMP Inc.
4,480,251 Apparatus to monitor Norscan Instr Ltd to Automated Light McNaughton, 10/30/84
electrical cables, Automated Light Technologies, Inc. John P.
including splice joints Technologies, Inc. to Domenco,
and the like, for the Connecticut Innovations Wayne E.
ingress of moisture Incorporated and Vokey, David E
Connecticut Development
Authority
5,077,526 Cable Failure Detection Automated Light Automated Light Vokey, David E. 12/31/91
System Technologies, Inc. Technologies, Inc. Sontag, Kenneth
4,947,469 Resistive Fault Location Automated Light Automated Light Vokey, David E. 08/07/90
Method and Device for Technologies, Inc. to Technologies, Inc. Sontag, Kenneth
use on electrical cables Connecticut Innovations Chamberlain,
Incorporated and John C.
Connecticut Development LaVallee,
Authority Ronald L.
</TABLE>
1.
<PAGE>
<TABLE>
<CAPTION>
Patent Title Assignment Owner of Author/ Issue Comments
------ ----- ---------- --------- ------- ----- --------
No. History Record Inventor Date
--- ------- ------ -------- -----
<C> <C> <C> <C> <C> <C>
5,369,518 Optical Communication Automated Light Automated Light Aslami, Mohd 11/29/94
System and Method; Technolgoies Inc. Technologies, Inc. LaVallee,
Electrical Power Ronald L.
Transmission thereof
4,480,251 Apparatus to monitor Norscan Instr. Ltd. Automated Light Mcnaughton, 04/22/80
electrical cables Technologies, Inc. John
Domenco,
Wayne
Vokey, David
5410929 Devise for recycling a Fibercore Recycle Fibercore Recycle Wallace, Marcus 05/02/95
- ------- tube Systems, Inc. Systems, Inc.
</TABLE>
2.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
U.S. PATENT APPLICATIONS
Patent Date Title Assignment History Owner of Author/
------ ---- ----- ------------------ -------- -------
Pending No. Record Inventor
- ----------- ------ --------
<S> <C> <C> <C> <C> <C>
0004999 12/02/94 FABR of OPT Fiber Preform Fibercore, Mohd A.
utilizing rod/tape concept Inc. Aslami
0005999 Being Manufacturing process for high Fibercore, Mohd A.
researched quality vycor tubing for application Inc. Aslami
in producing optical fiber preforms
0004228 12/01/95 Method and Apparatus for Fibercore, Mohd A.
Appl # producing optical fiber preform Inc. Aslami
PCT/US95/
15685-
European
Conv.
=================== ==================== ========================================== =======================================
</TABLE>
1.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE C
ISSUED FOREIGN PATENTS
Patent No. Country Title Assignment History Owner of Author/ Issue Comments
- ---------- ------- ----- ------------------ -------- ------- ----- --------
Record Inventor Date
------ -------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
GB2082406 United Apparatus to Domenco, Wayne Domenco, 06/13/84 Patent
Kingdom monitor electrical David Wayne ceased
cables, including McNaughton, John David through
splice joints and the Paul McNaught non-
like, for the ingress Vokey, David Ernest on, John payment
of moisture Paul
Vokey,
David
Ernest
CA1168707 Canada Apparatus to Norscan Instr. Ltd Domenco, 06/05/84
- ---------
monitor electrical Wayne
cables David
McNaught
on, John
Paul
Vokey,
David
Ernest
EP336036 Europe Cable Failure Vokey, David Ernest Vokey, 12/15/93
Detection System Sontag, Kenneth N. David
Ernest
</TABLE>
1.
<PAGE>
<TABLE>
<CAPTION>
Patent No. Country Title Assignment History Owner of Author/ Issue Comments
- ---------- ------- ----- ------------------ -------- ------- ----- --------
Record Inventor Date
------ -------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
AT98780 Austria Cable Failure Vokey, David Ernest Vokey, 01/15/94
Detection System Sontag, Kenneth N. David
Ernest
Sontag,
Kenneth
N.
CA1317355 Canada Cable Failure Norscan Instr. Ltd. Vokey, 05/04/93
- ---------- Detection System David
Ernest
Sontag,
Kenneth
N.
DE3886380 Germany Cable Failure Vokey, David Ernest Vokey, 01/27/94
- --------- Detection System Sontag, Kenneth N. David
Ernest
Sontag,
Kenneth
N.
ES2058298 Spain Cable Failure Vokey, David Ernest Vokey, 11/01/94
- --------- Detection System Sontag, Kenneth N. David
Ernest
Sontag,
Kenneth
N.
EP327191 Europe Resistive Fault Automated Light Vokey, 05/10/95 Patent
- -------- Location Method Technologies David ceased
and use on Ernest through
electrical cables Chamberla non-
in, Jim C. payment
LaVallee,
Ronald
Sontag,
Kenneth
</TABLE>
2.
<PAGE>
<TABLE>
<CAPTION>
Patent No. Country Title Assignment History Owner of Author/ Issue Comments
- ---------- ------- ----- ------------------ -------- ------- ----- --------
Record Inventor Date
<S> <C> <C> <C> <C> <C> <C> <C>
AT122468 Austria Resistive Fault Automated Light Vokey, 05/15/95
-------- Location Method Technologies David
Ernest
Chamberla
in, Jim C.
LaVallee,
Ronald
Sontag,
Kenneth
CA1283704 Canada Resistive Fault Vokey,David E. Vokey, 04/30/91
- --------- Location Method David
Ernest
Chamberla
in, Jim C.
LaVallee,
Ronald
Sontag,
Kenneth
DE68922503 Germany Resistive Fault Automated Light Vokey, 06/14/95
- ---------- Location Method Technologies, Inc. David
Ernest
Chamberla
in, Jim C.
LaVallee,
Ronald
Sontag,
Kenneth
</TABLE>
3.
<PAGE>
<TABLE>
<CAPTION>
Patent No. Country Title Assignment History Owner of Author/ Issue Comments
- ---------- ------- ----- ------------------ -------- ------- ----- --------
Record Inventor Date
------ -------- ----
<S> <C> <C> <C> <C> <C> <C>
GB8800081 United Resistive Fault Automated Light Vokey, 02/10/88
- --------- Kingdom Location Method Technologies, Inc. David
Ernest
Chamberla
in, Jim C.
LaVallee,
Ronald
Sontag,
Kenneth
AU9458523 Australia Optical Automated Light Aslami, 07/19/94
- --------- Communication Technologies I Mohd
System and Method LaVallee,
Ronald
WO9415415 World I.P. Optical Automated Light Aslami, 07/07/94
- --------- Organization Communication Technologies I Mohd
System and Method LaVallee,
Ronald
WO9616911 World I.P. Making a single Fibercore Inc. Aslami, 06/06/96 Patent
- --------- Organization mode fibre preform M.A. ceased
Perry, through
G.A. non-
payment
EP716047 Europe Making a single Fibercore, Inc. Aslami, 10/09/96
--------- mode fibre preform M.A.
Perry,
G.A.
AU9645957 Austria Making a single Fibercore, Inc. Aslami, 06/19/96
- ---------- mode fibre preform M.A.
Perry,
G.A.
=============================== ===================== ===================== ========= =========== ============ ==================
</TABLE>
4.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE D
FOREIGN PATENT APPLICATIONS
Patent Pending Date Country Title Assignment Owner of Author/
- -------------- ---- ------- ----- ---------- -------- -------
No. History Record Inventor
--- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
236767/89 Japan Resistive Fault Location
---------- Method
9616911 India Method and Apparatus
------- for producing optical
fiber preform
716047 Europe Method and Apparatus
------ for producing optical
fiber preform
0004056 12/07/95 India Method and Apparatus Mohd. A.
Application # for producing optical Aslami
1616/MAS/95 fiber preforms
0336036 12/15/93 Spain Cable Failure Detection
United Kingdom System
Italy
9645957 AU Method and Apparatus
-------- for producing optical
fiber preforms.
- ---------------------------- ---------------------- ------------------------- ------------- --------------- -------------------
</TABLE>
1.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MINIMUM OF
1,382,648 SHARES OF COMMON STOCK OF
FIBERCORE, INC.
---------------
(Void after November 27, 2001)
This certifies that AMP Incorporated (the "Holder"), or its assigns,
for value received, is entitled to purchase from FiberCore, Inc., a Nevada
corporation (the "Company"), having a place of business at 174 Charlton Road,
Sturbridge, MA 01566, a number of fully paid and nonassess able shares of the
Company's Common Stock ("Common Stock") determined in accordance with Section 3
hereof, at a purchase price per share determined in accordance with Section 3
hereof (the "Stock Purchase Price") at any time or from time to time up to and
including 5:00 p.m. (Eastern time) on November 27, 2001 (the "Expiration Date"),
upon surrender to the Company at its principal office (or at such other location
as the Company may advise the Holder in writing) of this Warrant properly
endorsed with the Form of Subscription attached hereto duly filled in and signed
and, if applicable, upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. The Common Stock to be
issued upon exercise of this Warrant will be authorized prior to the date
hereof.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
1.1 General. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Common Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the shares
of Common Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which (i) this Warrant shall have been surrendered,
properly endorsed, (ii) the completed, executed Form of Subscription shall have
been delivered and (iii) payment made for such shares. Certificates for the
shares of Common Stock so purchased, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable
1.
<PAGE>
time after the rights represented by this Warrant have been so exercised. In
case of a purchase of less than all the shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be reasonably requested by the Holder
hereof and shall be registered in the name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's Common
Stock is greater than the Stock Purchase Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at
the date of such calculation)
A = the fair market value of one share of the Company's
Common Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
closing price per share as quoted on the Nasdaq National Market on the business
day preceding exercise of the Warrant.
2. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the
2.
<PAGE>
Company will at all times have authorized and reserved, for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant,
a sufficient number of shares of authorized but unissued Common Stock, or other
securities and property, when and as required to provide for the exercise of the
rights represented by this Warrant. The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Common Stock may
be listed; provided, however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to such
exercise.
3. Number of Shares; Stock Purchase Price and Adjustment. This Warrant
shall be exercisable for the number of shares equal to the number resulting from
the division of $2,000,000 by the Stock Purchase Price. The Stock Purchase Price
shall initially be set at one dollar, forty-four cents and sixty-five hundredths
of one cent ($1.4465) and the Stock Purchase Price and the number of shares
purchasable upon the exercise of this Warrant shall thereafter be subject to
adjustment from time to time upon the occurrence of certain events described in
this Section 3. Upon each adjustment of the Stock Purchase Price, the Holder of
this Warrant shall thereafter be entitled to purchase, at the Stock Purchase
Price resulting from such adjustment, the number of shares obtained by dividing
two million dollars ($2,000,000) by the Stock Purchase Price resulting from such
adjustment.
3.1 Price Target. If the closing price of the Company's Common
Stock as quoted on the NASDAQ National Market during the first two (2) years
subsequent to the date hereof does not equal or exceed $2.1697 (as adjusted for
stock splits, stock dividends or other recapitalization pursuant to this Section
3) for a period of thirty (30) consecutive trading days within which period the
Holder is not restricted from selling the Common Stock issuable upon exercise of
this Warrant by any federal or state securities laws or by contract with the
Company, then the Stock Purchase Price shall be adjusted effective as of the
second anniversary of the date hereof by multiplying $1.4465 by a fraction the
denominator of which is 2.1697 and the numerator of which is the average closing
price per share of the Company's Common Stock as quoted on the NASDAQ National
Market during the thirty (30) trading days preceding the second anniversary of
the date hereof; provided however that the Stock Purchase Price as adjusted
pursuant to this Section 3.1 shall not be less than $0.7232 per share (as
adjusted for stock splits, stock dividends or other recapitalization pursuant to
this Section 3). Notwithstanding the foregoing, in lieu of an adjustment of the
Stock Purchase Price pursuant to this Section 3.1, the Company may offer to
purchase the Warrant and any shares of Common Stock purchased hereunder on the
second anniversary of the date hereof for a purchase price of one million
($1,000,000) dollars; provided, however, that the Holder shall have the right
not sell the Warrant and any shares of Common Stock purchased hereunder to the
Company, but if the Holder exercises such right, then there shall be no
adjustment to the Stock Purchase Price under this Section 3.1.
3.2 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Stock
3.
<PAGE>
Purchase Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock of the Company shall be combined into a smaller number of shares,
the Stock Purchase Price in effect immediately prior to such combination shall
be proportionately increased.
3.3 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment (including, without limitation, payment in the form of past
services rendered) therefor,
(A) Common Stock or any shares of stock or other
securities which are at any time directly or indirectly convertible into or
exchangeable for Common Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Common Stock or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than (i) shares of Common Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 3.2 above or (ii) an
event for which adjustment is otherwise made pursuant to Section 3.4 below),
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Common
Stock receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Common Stock as of the date on which holders of Common Stock received or became
entitled to receive such shares or all other additional stock and other
securities and property.
3.4 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock,
securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented
4.
<PAGE>
hereby; provided, however, that in the event the value of the stock, securities
or other assets or property (determined in good faith by the Board of Directors
of the Company) issuable or payable with respect to one share of the Common
Stock of the Company immediately theretofore purchas able and receivable upon
the exercise of the rights represented hereby is in excess of the Stock Purchase
Price hereof effective at the time of the merger and securities received in such
reor ganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to the reorganization. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolida tion,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
3.5 Notice of Adjustment. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares purchasable
upon the exercise of this Warrant, the Company shall give written notice thereof
in the manner described in Section 13 below. The notice shall be signed by the
Company's chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
3.6 Other Notices. If at any time:
(1) the Company shall declare any cash dividend upon
its Common Stock;
(2) the Company shall declare any dividend upon its
Common Stock payable in stock or make any special dividend or other distribution
to the holders of its Common Stock;
(3) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
5.
<PAGE>
(5) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of
Company securities;
then, in any one or more of said cases, the Company shall give, in the manner
described in Section 11 below, (a) at least thirty (30) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto. Any
notice given in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consoli dation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
3.7 Certain Events. If any change in the outstanding Common
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
4. Demand Registration.
4.1 Subject to the conditions of this Section, if the Company
shall receive a written request from the Holder that the Company file a
registration statement under the Securities Act covering the registration of all
or part of the shares of Common Stock now or hereafter held by the Holder,
including, without limitation, the shares of Common Stock issuable pursuant to
the Warrant (collectively, the "AMP Shares"), then the Company shall, subject to
the limitations of this Section, use its best efforts to effect, as soon as
practicable, the registration under the Securities Act of all AMP Shares that
the Holder requests to be registered.
6.
<PAGE>
4.2 If the Holder intends to distribute the AMP Shares covered
by its request by means of an underwriting, it shall so advise the Company as a
part of its request made pursuant to this Section 4 and shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Holder (which underwriter or underwriters
shall be reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 4, if the underwriter advises the Company that
marketing factors require a limitation of the number of AMP Shares to be
underwritten then the Company shall so advise the Holder and the number of AMP
Shares to be underwritten will be reduced accordingly. Any AMP Shares excluded
or withdrawn from such underwriting shall be withdrawn from the registration.
4.3 The Company shall not be required to effect a registration
pursuant to this Section:
(A) prior to the Company's initial public offering
and listing of the Company's Common Stock on the Nasdaq National Market;
(B) after the Company has effected one registration
pursuant to this Section 4, and such registration has been declared or ordered
effective;
(C) during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining to the Company's initial
public offering; provided that the Company makes reasonable good faith efforts
to cause such registration statement to become effective; or
(D) if the Company shall furnish to the Holder
requesting a registration pursuant to this Section 4, a certificate signed by
the Chairman of the Board stating that in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
and its shareholders for such registration to be effected at such time, in which
event the Company shall have the right to defer such filing for a period of not
more than ninety (90) days after receipt of the request of the Holder; provided
that such right to delay a request shall be exercised by the Company not more
than once in any twelve (12) month period.
5. Piggyback Registration.
5.1 General. The Company shall notify the Holder in writing at
least thirty (30) days prior to the filing of any registration statement under
the Securities Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans or with respect to corporate
reorganizations or other transactions under Rule 145 of the Securities Act) and
will afford each such Holder an opportunity to include in such registration
statement all or part of the AMP Shares or any other shares of the Company's
Common Stock held by the Holder ("Registrable Securities"). If the Holder
desires to include in any such registration statement all or any part of the
Registrable Securities, it shall
7.
<PAGE>
notify the Company in writing within fifteen (15) days after the above-described
notice from the Company. Such notice shall state the intended method of
disposition of the Registrable Securities by such Holder. If the Holder decides
not to include all of the Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(A) Underwriting. If the registration statement under
which the Company gives notice under this Section 5 is for an underwritten
offering, the Company shall so advise the Holder. In such event, the right of
the Holder to be included in a registration pursuant to this Section 5 shall be
conditioned upon such Holder's participation in such underwriting, the inclusion
of such Holder's Registrable Securities in the underwriting to the extent
provided herein and the Holder entering into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holder; and third, to any shareholder of the Company
(other than the Holder) on a pro rata basis. No such reduction shall reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting, and in no event shall the amount of
securities of the Holder included in the registration be reduced below
twenty-five percent (25%) of the total amount of securities included in such
registration, unless such offering is the initial public offering and such
registration does not include shares of any other selling shareholders, in which
event any or all of the Registrable Securities of the Holder may be excluded in
accordance with the immediately preceding sentence. In no event will shares of
any other selling shareholder be included in such registration which would
reduce the number of shares which may be included by the Holder without the
written consent of the Holder.
(B) Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this Section 5 prior to the effectiveness of such registration whether or
not any Holder has elected to include securities in such registration. The
expenses of such withdrawn registration shall be borne by the Company.
6. The registration rights granted to the Holder pursuant to Sections 4
and 5 hereof shall terminate upon the earlier of (i) ten years after the
Company's initial public offering; or (ii) when all the AMP Shares held by the
Holder can be sold pursuant to Rule 144 of the Securities Act.
7. Issue Tax. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder for
any issue tax (other than any applicable income taxes) in respect thereof;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the
8.
<PAGE>
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
8. Closing of Books. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
9. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such Holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
10. Warrants Transferable. Subject to compliance with applicable
federal and state securities laws, this Warrant and all rights hereunder are
transferable to an Affiliate (defined below) of the Holder, in whole or in part,
without charge to the Holder hereof (except for transfer taxes), upon surrender
of this Warrant properly endorsed. For purposes of this Warrant, "Affiliate"
means with respect to any person, (a) each person that, directly or indirectly,
owns or controls, whether beneficially or as a trustee, guardian or other
fiduciary, [twenty percent (20.0%)] or more of the stock having ordinary voting
power in the election of directors of such person, (b) each person that
controls, is controlled by or is under common control with such person or any
Affiliate of such person or (c) each of such person's officers, directors, joint
venturers and partners. For the purpose of this definition, "control" of a
person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise. Each taker and holder
of this Warrant, by taking or holding the same, consents and agrees that this
Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder
hereof, when this Warrant shall have been so endorsed, may be treated by the
Company, at the Company's option, and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered owner hereof
as the owner for all purposes.
10.1 Financial Information. The Company will furnish the
following information to the Holder for so long as he or it is a holder of this
Warrant or a new warrant or warrants (in the case of a purchase of less than all
shares which may be purchased under this Warrant pursuant to Section 1.1):
9.
<PAGE>
(A) As soon as practicable after the end of each
year, and in any event within one hundred twenty (120) days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as of
the end of such year, and a consolidated statement of income and a consolidated
statement of changes in financial position of the Company and its subsidiaries,
if any, for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and with an audit opinion thereon
from existing or other independent public accountants of recognized regional or
national standing selected by the Company.
(B) As soon as practicable after the end of each
fiscal quarter of the Company, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
any, as at the end of such fiscal quarter, and a consolidated statement of
income of the Company and its subsidiaries, if any, for such fiscal quarter, and
for the current fiscal year to date, in each case setting forth in comparative
form the Company's and its subsidiaries', if any, consolidated balance sheets
and consolidated statements of income for the corresponding periods (as prepared
pursuant to subparagraph 10.1(A)), prepared in accordance with generally
accepted accounting principles, all in reasonable detail and certified, subject
to changes resulting from year-end audit adjustments, by the principal financial
officer of the Company; provided, however, that any financial statements
provided hereunder need not contain any footnotes.
11. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Sections 3, 4, 5, 6 and 12, shall survive the exercise of this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, having specified next day
delivery, with written verification of receipt. All communications shall be sent
to the Company and to the Holder at the address set forth below or at such other
address as the Company or Holder may designate by ten (10) days advance written
notice to the other party hereto.
14. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger or consolidation. All of the
obligations of the Company relating to the Common Stock issuable upon the
exercise of this Warrant shall survive
10.
<PAGE>
the exercise and termination of this Warrant. All of the covenants and
agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.
15. Descriptive Headings and Governing Law. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of New York.
16. Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
17. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
11.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 27th day of November,
1996.
FIBERCORE, INC.
a Nevada corporation
/s/ Mohd Aslami
-------------------------------------
Mohd A. Aslami
President and Chief Executive Officer
ATTEST:
/s/ Charles DeLuca
- ---------------------------
Charles DeLuca, Secretary
12.
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
_________________, 19___
FiberCore, Inc.
Ladies and Gentlemen:
o The undersigned hereby elects to exercise the warrant issued by
FiberCore, Inc. (the "Company") and dated November 27, 1996 (the
"Warrant") and to purchase thereunder shares of the Common Stock of the
Company (the "Shares") at a purchase price of _____________________
(______) per share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "Purchase
Price").
o The undersigned hereby elects to surrender _______________________
percent (____%) of the value of the Warrant pursuant to the provisions
of Section 1.2 of the Warrant in payment of the purchase price for
___________________ shares of Common Stock of the Company upon exercise
of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer
or on a net issuance basis as described in Section 1 of the Warrant. The
undersigned also makes the representations set forth on the attached Exhibit B
of the Warrant.
Very truly yours,
---------------------------
By
-------------------------
Title
---------------------
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS DEBENTURE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
QUALIFIED UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING THIS DEBENTURE AND/OR SUCH SECURITIES, OR THE
HOLDER FURNISHES AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE
QUALIFICATION REQUIREMENTS UNDER STATE LAW.
FIBERCORE, INC.
Amended and Restated Convertible Debenture
$2,000,000 Dated as of April 17, 1995
1. OBLIGATION. FOR VALUE RECEIVED, FiberCore, Inc., a Nevada
corporation (the "Corporation"), hereby promises to pay to AMP INCORPORATED (the
"Holder"), on April 17, 2005 the principal sum of Two Million Dollars
($2,000,000), together with interest on such principal sum from the date hereof
until payment in full of the principal computed as set forth below. Interest
shall be due at maturity and shall be computed by adding simple interest at the
Applicable Rate for each Interest Period. The first Interest Period shall
commence on the date hereof and end on June 30, 1995. Each successive Interest
Period shall commence on the first day of the calendar quarter (i.e., January 1,
April 1, July 1, and October 1) and end on the last day of such calendar
quarter; provided however, the final Interest Period shall end on the date of
payment in full of the principal sum hereof. The Applicable Rate for each
Interest Period shall be determined by adding 1% to the London Interbank Offered
Rate (LIBOR) for three month deposits as quoted in The Wall Street Journal dated
the business day immediately preceding the commencement of such Interest Period.
2. PREPAYMENT. Upon not less than 30 days prior written notice to the
Holder, the Corporation may prepay this Debenture at any time and from time to
time, in whole or in part without penalty by payment of the principal sum to be
prepaid together with interest on such sum to the date of such prepayment. The
Corporation shall be required to prepay the entire principal sum and accrued
interest of this Debenture upon not less than thirty day's notice from the
Holder demanding such prepayment, which notice may be given only after the right
of conversion of this Debenture terminates pursuant to the fifth sentence of
Section 3 hereof.
3. CONVERSION. All outstanding principal and accrued interest on this
Debenture is convertible, at the option of the Holder, at any time into fully
paid and nonassessable shares of the Corporation's Common Stock at the
conversion rate (the "Conversion Rate") of $1.15762 per share. Any such
conversion shall be in the minimum amount of $1,000,000 and integral multiples
of $250,000; provided, however, the final conversion may be for all of the
remaining principal and accrued interest. Any partial conversion of this
Debenture shall be deemed a conversion of
1.
<PAGE>
the principal sum hereof until the entire principal amount is converted.
Thereafter, any conversion shall be of accrued interest. If the Corporation is
the issuer of securities to be sold by it under an effective registration
statement pursuant to the Securities Act of 1933, as amended, the Corporation
will provide no less than ten days prior notice thereof to the Holder and all
conversion rights hereunder will terminate upon the closing of the sale by the
Corporation of the securities covered by said registration statement unless the
Holder shall have converted this Debenture before said date. In the event the
Common Stock is split, subdivided or combined, the Conversion Rate thereafter in
effect shall be appropriately adjusted by the Corporation to provide the Holder
with the number of shares of Common Stock upon conversion such Holder would have
received on such split, subdivision or combination if it had converted this
Debenture immediately prior thereto. In the event the Common Stock is
reclassified or the Corporation merges or combines with another entity in a
transaction in which the holders of Common Stock receive securities or other
consideration in respect of such Common Stock, the Holder shall be entitled
after such event to convert this Debenture into the kind and type of securities
it would have received had the Holder converted this Debenture immediately prior
to such event.
4. GUARANTEED VALUE. Notwithstanding anything herein to the contrary,
if the closing price of the Corporation's Common Stock as quoted on the Nasdaq
National Market during the first two (2) years subsequent to the date hereof
does not equal or exceed $1.7364 (as adjusted for stock splits, stock dividends
or other recapitalization events) for a period of thirty (30) consecutive
trading days within which period the Holder is not restricted from selling the
Common Stock issuable upon conversion of the Debenture by any federal or state
securities laws or by contract with the Corporation, then effective on the
second anniversary hereof, an additional number of shares of the Corporation's
Common Stock shall be issued to the Holder and an adjustment shall be made in
the Conversion Rate for the outstanding balance of the debenture such that the
total number of shares (i) issued upon partial conversion of that certain
Convertible Debenture, dated as of April 17, 1995 (i.e. 3,058,833 shares), (ii)
held by the Holder as a result of the conversion or partial conversion of this
Debenture, and (iii) issuable to Holder upon conversion of the outstanding
principal balance and accrued interest under this Debenture, would have a market
value (based on the average closing price of the Corporation's shares of Common
Stock during the last thirty (30) trading days preceding the second anniversary
hereof) equal to $7,500,000; provided, however that not more than 6,478,810
shares of the Corporation's Common Stock (as adjusted for stock splits, stock
dividends or other recapitalization events) will be issued or issuable to the
Holder as a result of the conversion of this Debenture and this Section 4. In
the alternative, the Corporation may satisfy this guaranty on the second
anniversary hereof by offering or arranging for its designee to offer to
purchase from the Holder the converted shares and the outstanding balance of
this debenture, including accrued interest, for $7,500,000, reduced pro rata for
any intervening sales of shares by the Holder. Such offer to purchase shall be
for cash only or other immediately available funds.
5. SURRENDER AND CANCELLATION OF DEBENTURE. Upon written notice of a
conversion by the Holder together with delivery of this Debenture to the
Corporation or its transfer agent, the applicable amount of outstanding
principal and accrued interest on this Debenture shall be converted. The
Corporation shall not be obligated to issue certificates evidencing the shares
of the securities issuable upon such conversion unless this Debenture is
2.
<PAGE>
either delivered to the Corporation or its transfer agent, or the Holder
notifies the Corporation or its transfer agent that this Debenture has been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection with this Debenture. The Corporation shall, as soon as practicable
after such delivery, or such agreement and indemnification, issue and deliver at
such office to the Holder of this Debenture, a certificate for the securities to
which the Holder shall be entitled. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of closing of the
transaction causing conversion or the date of receipt of written notice by the
Corporation from the Holder causing conversion. The person entitled to receive
the securities issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such securities on such date.
6. COLLATERAL. This Debenture is issued to the Holder pursuant to a
Convertible Debenture Purchase Agreement dated as of April 17, 1995, as amended
November 27, 1996 (as amended, supplemented, or restated from time to time, the
"Purchase Agreement") and amends and restates in its entirety that certain
convertible debenture dated as of April 17, 1995, in the original principal
amount of $5,000,000. As of November 25, 1996, $5,393.82 of interest has accrued
and remains unpaid hereunder (with interest currently accruing at a rate of
$898.97 per day). Pursuant to the Purchase Agreement, this Debenture is secured
by certain collateral.
7. DEBENTURE CONFERS NO RIGHTS AS SHAREHOLDER. The Holder shall not
have any rights as a shareholder of the Corporation with regard to the shares
issuable hereunder prior to actual conversion hereunder.
8. WAIVERS. The Corporation hereby waives presentment, demand for
performance, notice of non-performance, protest, notice of protest and notice of
dishonor. No delay on the part of Holder in exercising any right hereunder shall
operate as a waiver of such right or any other right.
9. ASSIGNMENT. The Holder shall not assign this Debenture without the
prior written consent of the Corporation which consent shall not be withheld
except for valid business reasons.
3.
<PAGE>
10. APPLICABLE LAW. This Debenture shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts applicable to
contracts between Massachusetts residents entered into and to be performed
entirely within the State of Massachusetts.
FIBERCORE, INC.
By: /s/ Mohd Aslami
-----------------
Mohd Aslami
President
4.
FIBERCORE INC.
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into this
27th day of November, 1996, by and among FIBERCORE, INC., a Nevada corporation
(the "Company"), AMP INCORPORATED, a Pennsylvania corporation ("AMP"), and Mohd
Aslami, Charles DeLuca and Dr. M. Mahmud Awan (the "Key Shareholders").
RECITAL
WHEREAS, AMP and each of the Key Shareholders hold shares of the
capital stock of the Company; and
WHEREAS, AMP and the Key Shareholders desire to provide for the future
voting of their shares of the Company's capital stock as set forth below;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
VOTING
1.1 AMP and the Key Shareholders each agree to hold all shares
of voting capital stock of the Company (including but not limited to all shares
of Common Stock issued upon exercise of Warrants) registered in their respective
names or beneficially owned by them as of the date hereof, and any and all other
securities of the Company legally or beneficially, directly or indirectly,
acquired by AMP and each of the Key Shareholders after the date hereof
(hereinafter collectively referred to as the "Shares") subject to, and to vote
the Shares in accordance with, the provisions of this Agreement.
1.2 The Company, AMP and the Key Shareholders shall consult
each other and shall vote their respective shares of the Company's voting stock
to elect the Board of Directors of the Company (the "Board") which shall consist
of: (i) one (1) nominee of AMP, (ii) three (3) nominees of the Key Shareholders,
initially to be Mohd Aslami, Charles DeLuca, and Hans Moeller, and (iii) three
(3) nominees mutually acceptable to AMP and the Key Shareholders, one of whom
shall be Dr. M. Mahmud Awan. If AMP opts not to nominate a director, the seventh
nominee shall be mutually acceptable to AMP and the Key Shareholders and shall
qualify as an "Outside Director" as defined below.
1.3 Directors who are not employees of or consultants to the
Company, except for Dr. M. Mahmud Awan, shall be defined as "Outside Directors."
The nominee of AMP shall
1.
<PAGE>
be deemed to be an Outside Director. At all times, the majority of the Board
shall consist of Outside Directors. If the number of directors on the Board
shall be increased or decreased from seven (7) directors, each of the Company,
AMP and the Key Shareholders agree to increase or decrease the number of Outside
Directors so that the majority of the Board continues to consist of Outside
Directors, provided however, that any change in the number of directors shall
not interfere with AMP's right to nominate a director.
1.4 Should an Outside Director resign, die, decide not to
stand for election or be removed, each of the Company, AMP and the Key
Shareholders agree to vote their shares for the election of a new Outside
Director.
1.5 Except as provided by this Agreement, AMP and each Key
Shareholder shall exercise the full rights of a shareholder with respect to the
Shares.
ARTICLE II
COVENANTS
2.1 At its option, AMP may elect not to nominate a
representative to the Board pursuant to Section 1.2. If AMP elects not to
appoint a nominee to the Board, the Company agrees to grant AMP the right to
have an observer at all meetings of the Board and such observer shall be
entitled to receive all notices of meetings and all information provided to the
Board including notices of actions by written consent.
2.2 Except for the AMP nominee, if any, or in the alternative
Dr. M. Mahmud Awan, each of the Outside Directors shall have been elected to the
Board for a three year term within three months of the date hereof. The AMP
nominee, if any, or in the alternative Dr. M. Mahmud Awan, shall be elected to
an initial one year term and shall be elected to a three (3) year term
thereafter.
2.3 The number of seats on the Board shall not be increased
above seven (7) without the written consent of AMP.
2.4 The Company shall maintain a classified and staggered
Board, with each director serving for a term of three years, except for the
first election after the date hereof. At such election Hans Moeller and the
nominee of AMP, if any, or if AMP chooses not to nominate a director, then Dr.
M. Mahmud Awan, shall be elected to an initial one year term ("Class I"); Mohd
Aslami and Charles DeLuca shall be elected to an initial two year term ("Class
II") and the three mutually acceptable Outside Directors sahll be elected to an
initial three year term ("Class III"). Following their initial terms, directors
shall thereafter be elected to three year terms.
2.
<PAGE>
ARTICLE III
TERMINATION
3.1 This Agreement shall continue in full force and effect
from the date hereof through the earliest of the following dates, on which it
shall terminate in its entirety:
(a) the date of the closing of an underwritten public
offering of the Company's Common Stock pursuant to a registration statement
filed with, and declared effective under the Securities Act of 1933, as amended,
covering the offer and sale of the Common Stock and raising net proceeds to the
Company of at least $5,000,000; or
(b) the date as of which AMP and the Key Shareholders
hereto terminate this Agreement by mutual written consent; or
(c) the date on which all Obligations of the Company
under that certain Term Loan Agreement, dated as of November 27, 1996, by and
between AMP and the Company, have been paid in full.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Each Key Shareholder represents and warrants to AMP that
it (a) owns the Shares free and clear of liens or encumbrances, and has not,
prior to or on the date of this Agreement, executed or delivered any proxy or
entered into any other voting agreement or similar arrangement other than one
which has expired or terminated prior to the date hereof, and (b) it has full
power and capacity to execute, deliver and perform this Agreement, which has
been duly executed and delivered by, and evidences the valid and binding
obligation of such Key Shareholder, enforceable in accordance with its terms.
ARTICLE V
MISCELLANEOUS
5.1 The parties hereto hereby declare that it is impossible to
measure in money the damages that will accrue to a party hereto or to their
heirs, personal representatives or assigns by reason of a failure to perform any
of the obligations under this Agreement and agree that the terms of this
Agreement shall be specifically enforceable. If any party hereto or his heirs,
personal representatives or assigns institutes any action or proceeding to
specifically enforce the provisions hereof, any person against whom such action
or proceeding is brought hereby waives the claim or defense therein that such
party or such personal representative has an adequate remedy at law, and such
person shall not offer in any such action or proceeding the claim or defense
that such remedy at law exists.
3.
<PAGE>
5.2 This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
New York as such laws apply to agreements among New York residents made and to
be performed entirely within the State of New York.
5.3 This Agreement may be amended only by an instrument in
writing signed by the Company, AMP and a majority in interest of the Key
Shareholders.
5.4 If any provision of this Agreement is held to be invalid
or unenforceable, the validity and enforceability of the remaining provisions of
this Agreement shall not be affected thereby.
5.5 This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors, assigns,
administrators, executors and other legal representatives.
5.6 In the event that subsequent to the date of this Agreement
any shares or other securities (other than any shares or securities of another
corporation issued to the Company's shareholders pursuant to a plan of merger)
are issued on, or in exchange for, any of the Shares by reason of any stock
dividend, stock split, consolidation of shares, reclassification or
consolidation involving the Company, such shares or securities shall be deemed
to be Shares, as the case may be, for purposes of this Agreement.
5.7 This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
5.8 No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
5.9 In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party shall be entitled
to all reasonable out-of-pocket costs and expenses of maintaining such suit or
action, including reasonable attorneys' fees.
5.10 In the event that, at any time after the date of this
Agreement, any further action is necessary or desirable in order to carry out
the purposes of this Agreement, the parties hereto agree to take all such lawful
and necessary action.
5.11 The Company and AMP each agree to use their best efforts
to ensure that the rights given to the parties hereunder are effective and that
the parties enjoy the benefits thereof. Such actions include, without
limitation, the use of the Company's and AMP's best efforts to cause the
nomination and election of the Directors as provided in Article I. The Company
and AMP will not, by any voluntary action, avoid or seek to avoid the observance
or
4.
<PAGE>
performance of any of the terms to be performed hereunder by the Company or AMP,
but will at all times in good faith assist in the carrying out of all of the
provisions of this Agreement.
5.12 Should the provisions of this Voting Agreement be
construed to constitute the granting of proxies, such proxies shall be deemed
coupled with an interest and, to the extent permitted by law, are irrevocable
for the term of this Voting Agreement.
5.13 The voting of shares pursuant to this Voting Agreement
may be effected in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
5.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
FIBERCORE, INC., AMP INCORPORATED,
a Nevada corporation a Pennsylvania corporation
By:/s/ Mohd Aslami By:/s/ James E. Marley
-------------------------- ----------------------------
Mohd Aslami James E. Marley
Chief Executive Officer Its: Chairman of the Board
---------------------------
KEY SHAREHOLDERS:
/s/ Mohd Aslami
- ----------------------------
MOHD ASLAMI
/s/ Charles DeLuca
- ----------------------------
CHARLES DELUCA
/s/ M. Mahmud Awan
- ----------------------------
DR. M. MAHMUD AWAN
VOTING AGREEMENT
6.
EXHIBIT 23.1
CONSENT AND REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANT
The Boards of Directors and Stockholders
FiberCore, Inc. and Subsidiaries
We hereby consent to the use in this Registration Statement of our report dated
July 29, 1996, except for the eighth paragraph of Note 15, as to which the date
is December 18, 1996, relating to the consolidated financial statements of
FiberCore Inc. and Subsidiaries, and to the reference to our Firm under the
caption "Experts", in the Prospectus.
MOTTLE McGRATH BRANEY & FLYNN, P.C.
Worcester, Massachusetts
December 27, 1996
EXHIBIT 23.2
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Form S-1 of our reports dated July 1, 1995
and July 12, 1995 of our examination of the financial statements of Venturecap,
Inc.
We also consent to the reference to our firm under the caption "Experts".
/s/ Duane V. Midgley
Duane V. Midgley
Certified Public Accountant
December 27, 1996
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