UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ____
-----------------------
COMMISSION FILE NUMBER: 0-21823
FIBERCORE, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0445729
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
253 Worcester Road, P.O. Box 180
Charlton, MA 01507
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(Address and Zip Code of principal executive offices)
(508) 248-3900
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
- ---------------------------------------
(Title of Class)
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
Yes X No
and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 12, 1998: $10,293,639.
Number of shares outstanding as of March 12, 1998: 35,774,822.
DOCUMENTS INCORPORATED BY REFERENCE
None
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FIBERCORE, INC.
TABLE OF CONTENTS
PAGE
----
PART I................................................................... 3
ITEM 1. BUSINESS.............................................. 3
ITEM 2. PROPERTIES............................................ 16
ITEM 3. LEGAL PROCEEDINGS..................................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS............................................... 16
PART II ................................................................ 17
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS........................... 17
ITEM 6. SELECTED FINANCIAL DATA............................... 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK..................................... 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........... 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................... 55
PART III ................................................................ 56
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT............................................ 56
ITEM 11. EXECUTIVE COMPENSATION................................ 57
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT........................................ 60
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........ 62
PART IV ................................................................ 65
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K........................................... 65
SIGNATURES............................................................... 68
2
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PART I
ITEM 1. BUSINESS
GENERAL
FiberCore, Inc. ("FiberCore" or 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 telecommunications and data
communications industry.
The Company's 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 wholly owned subsidiary,
Automated Light Technologies, Inc. ("ALT"), the Company manufactures patented
cable monitoring systems, a patented long range fault locator, cable protection
devices, and electro-optical talk sets.
In June 1994, the Company formed a wholly owned subsidiary in Germany,
FiberCore Glasfaser Jena GmbH ("FCJ"), which leased a manufacturing facility in
Jena, Germany ("the Jena Facility") for a fixed monthly sum, and acquired
certain equipment located in that facility from SICO Quarzschmelze Jena GmbH
("SICO"). Until the year 2001, the Company's ownership of the equipment is
subject to the right of the German government, from which 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 issuance of 2,221,141 shares of Common Stock to SICO in
exchange for the equipment. The Jena Facility is an existing 26,500 square foot
optical fiber manufacturing plant which has been in operation since 1986.
On July 18, 1995, FiberCore, Incorporated, the predecessor to
FiberCore, Inc., incorporated under the laws of the State of Nevada in November
1993, merged into Venturecap, Inc. ("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,
Incorporated and, as a result, Venturecap issued a total of 24,617,133 shares
for all of the outstanding shares of FiberCore, Incorporated. After the merger,
Venturecap changed its name to FiberCore, Inc.
On September 18, 1995, the Company acquired Automated Light
Technologies, Inc. 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.
In January 1996, the Company established a subsidiary, InfoGlass
Incorporated ("InfoGlass"), through which it intends eventually to conduct its
North American fiber optic business. InfoGlass is currently inactive.
In November, 1997, the Company entered into a joint-venture agreement
with PNB Equity Resource Corporation Sdn. Bhd. ("PERC") and Federal Power Sdn.
Bhd. ("FDP"), both of which are Malaysian corporations, to form FiberCore Asia
Sdn. Bhd. ("FCA"). FCA, which is incorporated in Malaysia, was established to
construct and operate a manufacturing facility in Malaysia for the production of
optical fiber and optical fiber preforms. The Company owns 51% of FCA, and FDP
and PERC own 37% and 12%, respectively.
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BUSINESS (CONTINUED)
The Company granted FCA a license to use the Company's technology for
its 51% ownership, while FDP and PERC contributed cash and notes for their
respective ownership interest. FCA is in the process of raising the additional
debt financing required to construct and operate the plant and it is expected
that production will begin in 1999. The products of FCA will be marketed
principally in the Pacific Rim.
The following is an organizational chart depicting the Company's
principal subsidiaries and ownership percentage.
<TABLE>
<CAPTION>
FIBERCORE, INC.
CORPORATE STRUCTURE
HEADQUARTERS
( USA )
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<S> <C> <C> <C> <C> <C>
FIBERCORE ASIA FOI (PVT.) LTD. FIBERCORE GLASFASER JENA GMBH INFOGLASS, INC. FIBERCORE MIDEAST LTD. ALT, INC.
SDN. BHD. (PAKISTAN) (GERMANY) (USA) (ASIA) (USA)
(MALAYSIA) 30% OWNED 100% OWNED 100% OWNED 100% OWNED 100% OWNED
51% OWNED MIDDLE EAST FIBER CABLES CO. BY FCI
15% OWNED BY
FIBERCORE MID EAST LTD.
</TABLE>
Company and ALT sales by product group for the last three years were as follows
(includes sales of ALT prior to its acquisition by the Company):
Years Ended December 31
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(dollars in thousands)
1995 1996 1997
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Optical Fiber and Preform....... $3,009 $7,907 $6,855
ALT Products.................... 246 189 223
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Total.................. $3,255 $8,096 $7,078
====== ====== ======
RECENT DEVELOPMENTS
In April 1995, the Company issued a note to AMP, Incorporated ("AMP")
(the "AMP Note"). The AMP Note is a ten year $5,000,000 convertible note. AMP, a
company listed on the New York Stock Exchange, with worldwide sales in excess of
$5.7 billion in 1997, is a manufacturer of electrical and optical connection
devices, systems and other equipment including fiber optic cable. 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 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. On November 27, 1996 AMP converted
$3,000,000 of principal plus $540,985 of accrued interest into 3,058,833 shares
of Common Stock of the Company.
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BUSINESS (CONTINUED)
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 AMP received a 10 year note and 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 $4,280,000, which has been funded
contemporaneously with the new $3,000,000 AMP loan. The Company also agreed to
issue AMP additional shares of Common Stock in the event the Company's share
price does not exceed $2.17 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 De Luca, 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. The proposed slate of
directors initially consists of Mohd A. Aslami, Charles De Luca, 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.
In 1995, the Company, through its subsidiary, FiberCore MidEast Ltd.
("FME"), entered into a joint venture agreement (the "MidEast JV Agreement")
with Middle East Fiber Optic Manufacturing Company Limited ("MEOFC"), a Saudi
Arabian company and John Royle and Sons, Inc. ("Royle"), a manufacturer of cable
manufacturing systems. Pursuant to the agreement, the parties jointly own Middle
East Fiber Cables Co., ("MEFC"), a Saudi Arabian joint venture company. MEFC
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 MEFC. MEOFC contributed
$2,330,000 and holds a 70% interest. The Company and MEFC have entered into a
long-term supply agreement for MEFC to purchase and the Company to supply fiber
and preforms totaling approximately $33,000,000 over the next five years.
Shipments under this agreement began in 1997. The Company may not transfer its
interest in MEFC to any entity other than Royle or MEOFC without the permission
of such parties.
In connection with the Company's participation in MEFC, on October 5,
1995, Middle East Specialized Cables Co., ("MESC") a Saudi Arabian Company in
which the owners of MEOFC have an interest, purchased 367,131 shares of Common
Stock at an aggregate price of $500,000. In November 1996, MESC purchased a
second block of 367,131 shares of Common Stock for an additional $500,000. The
proceeds of this sale were used as the Company's capital contribution to MEFC,
described above. In 1997, MESC was also issued 312,061 shares of Common Stock
and was granted Warrants to purchase 550,696 shares of Common Stock at an
exercise price of $1.63 per share through April 13, 1997, upon delivery of a
supply agreement, valued at $33 million, between the Company and MEFC. The
warrants expired without exercise.
5
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BUSINESS (CONTINUED)
On November 1, 1995, the Company entered into an International
Distributor Agreement with Techman International Corp. ("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 $200,000,000. Dr. M. Mahmud Awan, a former director of the
Company, is president and sole shareholder of Techman.
On January 11, 1996, pursuant to a 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. The Warrants expired without exercise.
Additionally, Techman would be issued 312,061 shares of Common Stock upon the
delivery of a supply agreement between Fiber Optic Industries (Pvt.) Ltd.,
("FOI") and the Company. FOI is a joint venture between the Company and Techman
which was formed for the purpose of constructing and operating a fiberdraw and
optical fiber cable manufacturing facility in Pakistan. In 1996, the 734,260
shares and the 312,061 shares, above, were issued to Techman in exchange for the
payment of $1,000,000 and the delivery by Techman of a twenty year supply
agreement between the Company and FOI. The Company used $500,000 of the proceeds
as an additional capital contribution in FOI. The Company maintains a 30%
ownership interest in FOI. Due to a delay in the construction of the
manufacturing plant, in 1997 the supply agreement was canceled and the 312,061
shares have been canceled. The Company may enter into a new supply agreement in
the future with FOI when the plant is completed.
On July 31, 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 9.5%) and are
due on July 31, 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.
In September 1997, the Company borrowed $150,000 from Techman
International Corporation. The note bears interest at prime plus 1% per year and
matures on September 17, 1998. In conjunction with the note, Techman was granted
warrants to purchase 69,132 common shares of the Company at an exercise price of
$0.625 per share.
In April 1997, the Company borrowed $250,000 from Techman under a note
maturing in 2000. The annual interest rate on the note is the prime rate plus
1%, adjustable quarterly and payable quarterly. In conjunction with the note,
Techman was granted warrants to purchase 115,220 common shares of the Company at
an exercise price of $0.78 per share.
In addition to the above two notes with Techman, in 1997, the Company
borrowed $345,000 for working capital from the Chief Executive Officer,
shareholders, and certain companies of which certain directors of FiberCore are
shareholders. The loans bear interest at the prime rate plus one (1) percent per
year, and mature in 1998 ($125,000) and 2000 ($220,000).
In 1997, the expansion of the Jena facility was substantially
completed, more than doubling the production capacity of that plant. The
expansion was funded by German government grants and loans as described above.
6
<PAGE>
BUSINESS (CONTINUED)
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 fiber, carries less bandwidth and is more
expensive. It is generally used over relatively short distances in wiring
buildings and groups 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.
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,
7
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BUSINESS (CONTINUED)
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.
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 MEFC and FOI, 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 doped1 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
Celsius, 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 preform, 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
manufacturing 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 were minimized as a
result of management's knowledge and experience in fiber production and machine
design.
- ------------
1Doping means adding other glass materials, such as germanium dioxide to the
silica glass.
8
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BUSINESS (CONTINUED)
ALT PRODUCTS
The Company's ALT subsidiary has four principal products, all of which
are manufactured at the Company's Charlton, Massachusetts facility and are
marketed by independent sales representatives.
ALT's Fiber Optic Cable Monitoring Systems ("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 Item 3. Legal
Proceedings)
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 Corp. 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.
RESEARCH AND DEVELOPMENT
The Company conducts research and development ("R&D") activities at its
Jena Facility and Charlton, Massachusetts offices. Additionally, the Company is
conducting product development R&D under two contracts with two scientific
research laboratories in Russia. The Company's research and development
activities consist primarily of optical fiber manufacturing process improvements
and optical fiber product development. The Company is currently conducting
research in Germany under three grants from the German government totaling
approximately $388,287.
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BUSINESS (CONTINUED)
The Company incurred costs of $434,000, $420,000, and $75,000 for
research and process development for the fiscal years ended December 31, 1997,
1996, and 1995, respectively. 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.
Seven of the Company's employees devote substantially all 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.
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
The Company is seeking to increase market penetration in optical fiber
markets through strategic alliances and/or joint ventures similar to the MEFC
joint venture. 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 alliances are underway in India, China and several
other countries, although there can be no assurances that such discussions will
lead to the consummation of any transactions.
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.
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BUSINESS (CONTINUED)
CUSTOMERS REPRESENTING OVER 10% OF SALES
The following table is based on the total sales of the Company for all
periods presented.
% OF SALES
1997
Customer A 42%
Customer B 18%
Customer C Less than 10%
1996
Customer A 56%
Customer B 15%
Customer C Less than 10%
1995
Customer A 60%
Customer B Less than 10%
Customer C 10%
The Company believes that only the loss of Customers A and B would have
a material adverse effect on the Company.
BACKLOG, SALES AND ADVERTISING
At December 31, 1997 the Company had a backlog of orders approximating
$4.1 million ($7.4 million at December 31, 1996). The decrease in backorders is
principally due to a decrease in demand for single mode fiber from one customer
in Germany and the delay in the start-up of MEFC. During 1997, four of the
Company's employees were engaged in sales activities as part of their duties,
and the Company utilized manufacturers sales representatives in certain
geographic markets. In 1998, the Company is planning to employ a full-time
international marketing/sales manager and one full time sales person for the
European market. Also in 1998, the Company intends to expand its independent
sales representative organization to provide broader representation primarily in
the Pacific Rim. Assisted by local representatives, management intends 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.
Due to the nature of the industry, the Company does not currently
engage in extensive advertising. The Company promotes its products principally
through direct mailings to potential customers, distribution of product
brochures through sales representatives and exhibiting at industry trade shows.
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BUSINESS (CONTINUED)
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 Corporation ("SpecTran"), 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 multi-mode preforms 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 Incorporated,
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,
they 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.
12
<PAGE>
BUSINESS (CONTINUED)
ALT PRODUCTS
The Company's management believes there is limited or no direct
competition for its FOCMS product line except Norscan. 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 Underwriters
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.
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 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. 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 the use of SICO patents and technology,
the Company's expense in manufacturing optical fiber and optical fiber preforms
could increase substantially.
In 1997, the Company filed a patent application in the U.S. for a
process which the Company believes will improve the cost and efficiency of
producing optical fiber preforms. The Company is currently in the process of
preparing additional patent applications for the production of optical fiber and
preforms which are expected to be filed in 1998.
13
<PAGE>
BUSINESS (CONTINUED)
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
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, other parties may claim that the
Company's patents 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. (See Item 3. Legal Proceedings).
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 Germany subsidiary, FCJ, 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 joint venture, FCA, in Malaysia is
subject to similar international risks, including the currency fluctuations
recently experienced in the Pacific Rim region. The Company's participation in
MEFC 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. In 1997, 1996 and 1995, FCJ
accounted for 97%, 98%, and 90% of the Company's sales, respectively.
14
<PAGE>
BUSINESS (CONTINUED)
TRADEMARKS
FCJ is the owner of the registered trademark InfoGlass(R) under which
it markets its optical fiber products. In 1997, the Company filed for
registration of the trademarks "EconoGrade" and "ValueGrade" for products it
intends to begin marketing in 1998. ALT 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 marketed by 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 1995, the Company's optical
fiber and preform business purchased approximately 90% of its key glass tubing
raw material from one supplier. This supplier accounted for over 46% and 50% of
the Company's glass tube requirements in 1996 and 1997, respectively. 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. To limit future shortages of key
materials, the Company successfully identified other suppliers of this material.
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 December 31, 1997, the Company employed 84 persons, of whom 4 are
executives, 10 are engaged in sales and administration, 63 are engaged in
manufacturing and 7 are engaged principally in research and development.
Seventy-five (75) of the Company's employees are located in Jena, Germany. The
Company is not party to any collective bargaining agreements and the Company
does not maintain a pension plan. The Company considers its relations with
employees to be satisfactory and believes that its employee turnover does not
exceed the industry average.
15
<PAGE>
ITEM 2. PROPERTIES
The Company leases 5,000 square feet of office space as its Corporate
Headquarters in Charlton, Massachusetts. The monthly rent is $2,250 and the
lease expires on September 30, 1998. The Company plans to renew the lease.
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. The
lease expires in 2000 and is renewable for additional terms aggregating 25
years. 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.
ITEM 3. LEGAL PROCEEDINGS
In January 1998, Corning, Incorporated ("Corning") filed an action
against the Company claiming that the Company infringed a Corning patent by
marketing and selling certain optical fiber products in the United States. In
March 1998 the Company and Corning concluded a settlement agreement wherein the
Company has acknowledged the validity of Corning's patent and agreed, prior to
the expiration of the patent, not to make, market, and sell or offer to sell
infringing optical fiber or optical fiber preforms in the United States in
violation of Corning's patent except to certain customers. In turn, Corning has
agreed not to seek damages and will dismiss the action. The Company maintains
that it has not sold any significant amounts of fiber and preforms in the United
States in violation of Corning's patent which expires in July, 1999. Management
believes that the result of this action will not have a material adverse impact
on the Company.
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 ("COIA"), a
former customer, claiming damages of approximately $200,000 arising from
FiberCore Jena's alleged failure to comply with a sales contract. The case was
dismissed by the lower court and COIA appealed this decision. On appeal the
court found that although there was a contract, COIA was not entitled to
damages. COIA may seek fulfillment of the claimed contract. 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 affect on the business of the
Company.
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. Although no litigation has commenced as of the date of this report with
respect to this dispute, ALT would be the claimant in any lawsuit brought in
connection with this matter. Failure by ALT and Norscan to resolve this dispute
could have a material adverse affect on the future sales of ALT Products.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's stock is traded on the Over the Counter (OTC) Bulletin
Board. There were 224 holders of record and approximately 800 beneficial owners
of Common Stock as of March 12, 1998. 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.
STOCK PRICE AND DIVIDEND POLICY
Period High Bid Low Bid
------ -------- -------
1996
----
1st quarter $3.12 $2.00
2nd quarter $7.25 $1.75
3rd quarter $7.44 $3.00
4th quarter $4.13 $2.63
1997
----
1st quarter $6.25 $0.63
2nd quarter $1.50 $0.44
3rd quarter $1.06 $0.50
4th quarter $0.88 $0.31
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.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data of the Company for each of the
years 1997, 1996, 1995, 1994, and 1993, has been derived from the audited
financial statements and notes thereto of the Company and its predecessors. 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 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------------
1997(1) 1996(1) 1995(1) 1994(2)(3) 1993(2)(3)
<S> <C> <C> <C> <C>
Operating Data:
Net sales............................... $ 7,078 $ 8,096 $ 3,094 $ 231 ---
------- ------- ------- -------
Costs and expenses:
Cost of sales........................... 5,702 7,200 4,509 1,064 ---
Research and development................ 434 420 75 90 ---
Selling, general, and administrative.... 3,148 4,324 2,100 700 $ 1
Interest expense, net................... 638 387 368 7 ---
Other expense (income), net............. 234 (102) 51 (5) ---
------- ------- ------- ------- ------
Loss before provision for income taxes.. (3,078) (4,133) (4,009) (1,625) (1)
Provision for income taxes.............. --- --- --- --- ---
------- ------- ------- ------- ------
Net loss................................ $ (3,078) $(4,133) $(4,009) $(1,625) $ (1)
======== ======= ======= ======== ==========
Basic and diluted loss per share.......... $ (0.09) $ (0.13) $ (0.15) $ (0.07) ---
======== ======= ======= ========
Weighted average shares
outstanding............................. 35,744,182 31,695,693 26,584,630 22,873,322 21,309,323
========== ========== ========== ========== ===========
Balance Sheet Data:
Working capital (deficit)............... 8,091 191 (277) (519) 403
Total assets............................ 26,107 17,642 14,783 4,270 645
Long-term obligations................... 9,851 4,587 5,000 456 ---
Total liabilities....................... 13,351 7,618 8,415 1,687 4
Minority interest....................... 3,217 --- --- --- ---
Accumulated deficit..................... (12,850) (9,772) (5,638) (1,628) (3)
Stockholders' equity.................... 9,539 10,024 6,368 2,583 641
</TABLE>
- ---------
1. Includes the results of ALT from September 18, 1995.
2. Does not include the results of ALT.
3. Reflects the Venturecap merger as of the beginning of the period.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollars and Deutsche Marks in Thousands)
BACKGROUND
Certain statements in this Form 10-K 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. The important factors
that could cause actual results to differ materially from those indicated by
such forward-looking statements include, but are not limited to (i) the
information being of a preliminary nature and therefore subject to further
adjustment; (ii) the ability of the Company to contain costs, to grow internally
or by acquisition and to integrate acquired businesses into the Company's group
of companies; (iii) the uncertainties of litigation; (iv) the Company's
dependence on significant customers; (v) changing conditions in the optical
fiber industry which could adversely affect the Company's business; (vi)
unsettled economic conditions in several of the countries in which the Company
operates; (vii) competitive actions by other companies, including the
development by competitors of new or superior services or products or the entry
into the market of new competitors; (viii) the ability of the Company to deal
with the Year 2000 Issue on a timely basis; (ix) all the risks inherent in the
development, introduction, and implementation of new products and services; and
other factors both referenced and not referenced in this Form 10-K. When used in
this Form 10-K, the words "estimate", "project", "anticipate", "expect",
"intend", "believe", and similar expressions are intended to identify
forward-looking statements, and the above described risks inherent therein.
FiberCore, Incorporated, the predecessor to the Company, was organized
under the laws of the State of Nevada on November 5, 1993. Venturecap, Inc. 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, Incorporated on July 18, 1995. The Venturecap
Merger has been accounted for as a pooling of interests. Subsequent to the
Venturecap Merger, Venturecap changed its name to FiberCore, Inc. (hereinafter
"FiberCore" or the "Company").
The Company operates primarily through its FiberCore Jena subsidiary.
The Company maintains its headquarters in Charlton, Massachusetts which is
staffed by executive, research and 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, 1997, 1996 and 1995.
RESULTS OF OPERATIONS
Year Ended December 31, 1997
Total revenues for the year ended December 31, 1997 were $7,078 or
12.6% lower than revenues
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
in 1996. The decrease was principally due to a decline in the value of the
German mark versus the U.S. dollar of 13.3%. Average selling prices were 26%
higher in 1997 compared to 1996, due to an increase in sales volume of
multi-mode fiber and a decrease in sales volume of single-mode fiber.
Substantially, all of the Company's sales are through its German subsidiary,
FiberCore Jena.
Cost of sales decreased by 20.8% from 1996 to 1997. This decrease was
attributable to the decline in the value of the German mark and a lower per unit
cost of production resulting from upgrades to the production equipment and
production process improvements. As a result of these improvements gross profit
for the year ended December 31, 1997 was $1,376 or 19.4% of sales compared to
$896 or 11.1% of sales in 1996.
Selling, general, and administrative costs decreased $1,176 in 1997
from 1996 or 27.2%. This decrease was principally due to the costs incurred in
1996 of $846 for the value of options granted to employees and $421 for the
costs associated with the registration of the Company's common stock with the
Securities and Exchange Commission. Additionally, FiberCore Jena's
administrative costs increased by approximately $135 after giving effect to the
decline in value of the mark. This increase was principally due to an increase
in administrative personnel and other administrative costs.
Interest expense increased 69.0% to $664 in 1997 compared to $393 in
1996. This increase was due to the increase in interest on the AMP loans of $172
resulting from a higher average interest rate on these loans in 1997 compared to
1996. Additionally, the Company incurred an increase in interest costs of $62 on
loans borrowed for working capital purposes, and approximately $40 of interest
and fees on the Berliner Bank loan. Interest of $176 on the Berliner Bank loan
was capitalized during the year for the expansion of the German plant.
Other expense was $234 in 1997 compared to other income-net of $102 in
1996. This change was principally due to an increase in foreign currency
exchange losses of $294 on the German mark deposit with the Berliner Bank that
is security for the loan and a decrease in German research grants of $58.
The net loss for the year 1997 was $3,078 compared to $4,133 for 1996,
a decrease of $1,055 or 25.5%. The primary cause of the decrease was the
increase in gross profit, the decrease in administration costs, offset by the
increase in interest expense and other expenses as described above.
Year Ended December 31, 1996
Total revenues for the year ended December 31, 1996 were $8,096
compared with revenues of $3,094 for the year ended December 31, 1995, an
increase of 162%. 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 year ended December 31, 1996 was $896 compared to
a loss of $1,415 for the year ended December 31, 1995. This difference was
attributable to the higher volume of production and 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.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Selling, general and administrative expenses were $4,324 for the year
ended December 31, 1996 compared to $2,100 for the year ended December 31, 1995,
an increase of 106%. This increase was due primarily to non-cash compensation
expense of $846 incurred in connection with the grant to employees and others of
options to acquire 382,184 shares of common stock of the Company, the
acquisition of ALT in September, 1995, which accounted for $704 of the increase
and approximately $421 of legal, accounting, and other costs incurred in
connection with the Company's registering its common stock with the Securities
and Exchange Commission. 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 year ended December 31, 1996 was $393 compared
to $516, a decrease of 24% 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.
Interest income was $6 for the year ended December 31, 1996 compared to
$148 in 1995. The decrease of $142 or 96% was principally due to the interest
earned on the short-term investment of the $5,000 AMP loan in 1995. The AMP loan
proceeds were used in 1995 to repay a line of credit and investments in the Jena
Facility.
Other income, net of other expense, was $102 for the year ended
December 31, 1996 compared to net expense of $51 in 1995. The increase in other
income in 1996 was principally due to the receipt of research grants of $109 in
Germany.
The net loss for the year ended December 31, 1996 was $4,133, an
increase of $124 (3%) from the loss of $4,009 in the corresponding period in
1995. The primary cause of the increase was the improvement in sales and gross
profit at the Jena Facility offset by the changes in administrative and interest
income and expense as described above.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company expects to continue to incur operating losses until such
time as the Jena Facility's recent expansion is fully operational, 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 expansion of the Jena Facility, recently
completed, 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. Management anticipates that
these increased sales combined with lower per unit production costs will lead to
profitability.
The Company, therefore, has sought additional financing for working
capital, expansion and technology development from one or more of the following
sources: (i) issuance of convertible
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
instruments or stock in private or public offerings; (ii) exercise of stock
Options and Warrants; and (iii) 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. Additionally, the
Company, through its Malaysian subsidiary FCA, is in the process of raising
approximately $40.0 million in debt financing to finance the construction of the
FCA manufacturing plant. The Company's plan to construct the facility in
Malaysia, despite the current economic situation in the Pacific Rim, is
considered to be a long-term investment strategy. Management believes that the
Malaysian economy, despite recent events, is basically stable, and stronger than
the economies of other countries in the region. Additionally, the region
continues to invest in infrastructure projects of which optical fiber is a part.
Demand for the Company's products is projected to continue to grow in the
Pacific Rim region at a faster rate than in other major markets. Substantially
all of the products that are planned to be produced in the Malaysian facility
are targeted for export outside of Malaysia.
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, in 1996 the Company 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 $4,280). These funds 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 has been used as
collateral for the Berliner Bank Loan. As part of the AMP loan, AMP also
converted $3,000 of principal plus interest on 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 $7,182. 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 $80 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 in April 2005.
Similarly, under the $3,000 AMP loan, payments of interest are deferred 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
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
$4,100 which is scheduled to be shipped in 1998. The backlog at December 31,
1996 and 1995 was approximately $7,400 and $4,800, respectively. The decrease in
backorders is principally due to a decrease in demand for single-mode fiber from
one customer in Germany and the delay in the start-up of MEFC. 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. These include supply agreements with MEFC, AMP, FOI
for Oman Fiber Optics Company and others. Pursuant
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 that actual sales will reach this amount.
Shipments to MEFC began in the fourth quarter 1997 and shipments to AMP in the
U.S. are expected to begin in 1998.
The following changes in balance sheet amounts are net of the effect of
the change in the currency exchange rates from December 31, 1996 to December 31,
1997.
Year Ended December 31, 1997
During the year ended December 31, 1997, the Company used $1,724 net of
depreciation and amortization for operations, before changes in working capital.
Accounts receivable increased by $354 principally due to the sales of ALT
products and a large sale to MEFC in December 1997. Inventories increased by
$1,398 as a result of the increase in production in FiberCore Jena and lower
than expected shipments of preforms to MEFC. This lower shipment was due to MEFC
not having completed the installation of their draw tower. The increase in other
receivables of $202 was due to an outstanding receivable for German government
grants of $422 reduced by a decrease in VAT taxes receivable.
Accounts payable increased $260, principally due to advances received
and to be repaid to one of the partners in FCA. Accrued liabilities increased by
$37 primarily due to increases in accrued interest for loans.
Cash used in investing activities was $2,551 for the year ended
December 31, 1997. This was principally due to the investment for expansion of
the Jena facility of $4,211 reduced by grants received from the German
government of $1,775.
Cash received from financing activities included $328 received from the
exercise of employee stock options and $394 in short-term borrowings for working
capital. The Company drew down $4,280 on the Berliner Bank loan for the
expansion of the Jena plant. Additionally, the Company borrowed $470 in
long-term loans to finance operations. Long-term interest payable increased $418
due to the interest on the AMP loans which is payable at maturity.
Year Ended December 31, 1996
During the year ended December 31, 1996, the Company used net cash of
$1,972 for operating activities, principally resulting from the loss for the
period of $4,133 reduced by depreciation and amortization of $1,226 and non-cash
compensation expense of $846. Inventory increased $514 due to the higher volume
of production during the year. Accounts payable was reduced by $159, while
accrued expenses increased by $829. The increase in accrued expenses is
principally attributable to an increase in accrued salaries, legal and audit
fees. Certain officers deferred payment of their salaries during the year to
improve the Company's cash available for other purposes. Also, during the period
the Company utilized cash in investing activities of $1,150, principally for
equipment ($1,161) and investments in joint ventures ($950), reduced by grants
from the German government ($960) used to acquire equipment. Cash
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
generated through financing totaled $2,479, principally from the sale of stock
($1,500) and new borrowings ($3,700), reduced by collateral for a bank loan to
finance investments in the Jena Facility ($2,498), and repayment of a note
($200).
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 payment of $1,000 resulted in an increase in equity and
was used as working capital, improving the Company's ability to meet its current
obligations, and as a capital contribution for the FOI joint venture ($450). The
sale of stock to MESC ($500) was used as a capital contribution to the MEFC
joint venture.
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. In 1997, ALT received and filled an order from Pakistan
Telecom in the amount of $165, for a test installation of the fiber optic cable
monitoring system. The Company anticipates that Pakistan Telecom will place an
order for additional installations estimated to be valued at approximately
$1,600, although there can be no assurance that such sales will be realized.
Additionally, the Company plans to engage a full-time sales manager for ALT in
1998 which management believes will result in increased sales of ALT products.
YEAR 2000 ISSUES
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer systems that have time-sensitive software or hardware may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company is in the process of reviewing its systems and programs to
identify those that could potentially have an impact on the Company's
operations. In 1997, the Company's principal operating subsidiary, FiberCore
Jena, installed new accounting and administrative software and hardware which
the supplier has assured the Company is Year 2000 compliant. The Company will
verify this in 1998. The Company has not as yet completed an assessment of the
cost to bring other operating systems into compliance.
The Company does not have significant interface application with
customers, suppliers and others. However, the Company has initiated
communications with all of its significant suppliers and large customers to
determine the extent to which the Company's systems and operations are
vulnerable to those third parties' failure to remediate their own Year 2000
Issue. There can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted and would not have an
adverse effect on the Company's systems.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company will utilize both internal and external resources to
reprogram, or replace, and test its software for Year 2000 modifications. The
Company anticipates completing the Year 2000 project not later than June 30,
1999, which is prior to any anticipated impact on its operating systems. The
total cost to the Company of these Year 2000 Compliance activities has not been
and is not anticipated to be material to its financial position or results of
operations in any given year.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that changes in comprehensive income be shown in a
financial statement that is displayed with the same prominence as other
financial statements. Also in June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information", which
changes the way public companies report information about segments. These
statements are effective for 1998. Management is currently evaluating the
effects of these statements on the Company's financial statements, however,
these statements will only effect disclosure and presentation in the financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
25
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Reports..............................................27-28
Consolidated Balance Sheets at December 31, 1997 and 1996.................. 29
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995...................................... 30
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1997, 1996 and 1995................................ 31
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995...................................... 32
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1997, 1996 and 1995...................................... 33
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
FiberCore, Inc.
Charlton, Massachusetts
We have audited the accompanying consolidated balance sheets of FiberCore, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, changes in stockholders' equity 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 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, such consolidated financial statements present fairly, in all
material respects, the financial position of FiberCore, Inc. and subsidiaries as
of December 31, 1997 and 1996, and the results of their operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Hartford, Connecticut
March 27, 1998
27
<PAGE>
LETTERHEAD OF MOTTLE MCGRATH BRANEY & FLYNN, P.C.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
FiberCore, Inc. and Subsidiaries
We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity, and cash flows of FiberCore, Inc. and Subsidiaries for
the year ended December 31, 1995. 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 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 consolidated financial statements referred to above present
fairly, in all material respects, the results of operations, changes in
stockholders' equity, and cash flows of FiberCore, Inc. and Subsidiaries for the
year ended December 31, 1995 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
28
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
(Dollars in thousands except share data) 1997 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash....................................................................................... $ 2,128 $ 190
Accounts receivable, less allowance for doubtful accounts of $33 in 1997 and
$36 in 1996.............................................................................. 937 675
Notes receivable from joint venture partners............................................... 4,883 --
Other receivables.......................................................................... 564 418
Inventories................................................................................ 3,057 1,921
Prepaid and other current assets........................................................... 22 18
------- -------
Total current assets................................................................... 11,591 3,222
------- -------
Property and equipment.......................................................................... 6,559 5,244
Less accumulated depreciation................................................................... 1,751 1,473
------- -------
Property and equipment - net........................................................... 4,808 3,771
------- -------
Other assets:
Restricted cash............................................................................ 2,140 2,498
Patents, less accumulated amortization of $1,520 in 1997 and $861 in 1996.................. 6,014 6,648
Investments in joint ventures.............................................................. 1,425 1,375
Other...................................................................................... 129 128
-------- -------
Total other assets..................................................................... 9,708 10,649
------- -------
Total assets........................................................................... $26,107 $17,642
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.............................................................................. $ 594 $ 200
Accounts payable........................................................................... 1,778 1,653
Accrued expenses........................................................................... 1,128 1,178
------- -------
Total current liabilities.............................................................. 3,500 3,031
Long-term interest payable...................................................................... 460 42
Long-term debt.................................................................................. 9,391 4,545
------- -------
Total liabilities...................................................................... 13,351 7,618
------- -------
Minority interest .............................................................................. 3,217 ---
------- -------
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $.001 par value, authorized 10,000,000 shares; no shares issued
and outstanding............................................................................ --- ---
Common stock, $.001 par value, authorized 100,000,000 shares; shares issued and
outstanding: 35,774,822 in 1997 and 35,233,250 in 1996.................................... 36 35
Additional paid in capital................................................................. 23,221 19,545
Accumulated deficit........................................................................ (12,850) (9,772)
Accumulated translation adjustment......................................................... (868) 216
------- -------
Total stockholders' equity............................................................. 9,539 10,024
------- -------
Total liabilities and stockholders' equity............................................. $26,107 $17,642
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in thousands except share data)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales............................................... $ 7,078 $ 8,096 $ 3,094
Cost of sales .......................................... 5,702 7,200 4,509
--------------- --------------- ---------------
Gross profit (loss)................................ 1,376 896 (1,415)
Operating expenses:
Selling, general and administrative expenses ......... 3,148 4,324 2,100
Research and development.............................. 434 420 75
---------------- --------------- -----------------
Loss from operations............................... (2,206) (3,848) (3,590)
Interest income......................................... 26 6 148
Interest expense........................................ (664) (393) (516)
Other (expense) income.................................. (234) 102 (51)
--------------- --------------- ----------------
Net loss........................................... $ (3,078) $ (4,133) $ (4,009)
============== ============== ==============
Basic and diluted loss per share of common stock........ $ (0.09) $ (0.13) $ (0.15)
=============== =============== ===============
Weighted average shares outstanding..................... 35,744,182 31,695,693 26,548,630
=============== =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
(Dollars in thousands except share data)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Common Stock:
Balance, beginning of year.................................... $ 35 $ 30 $ 25
Stock issued for acquisition of ALT........................... 5
Sale of stock for cash........................................ 2
Reissuance of stock for conversion of debt.................... 3
Stock issued on exercise of options and warrants.............. 1
--------- --------- --------
Balance, end of year.......................................... $ 36 $ 35 $ 30
========= ========= ========
Additional Paid in Capital:
Balance, beginning of year.................................... $ 19,545 $ 11,761 $ 4,677
Issuance of stock for services................................ 44
Reissuance of treasury stock as loan incentive................ (455)
Stock issued for acquisition of ALT........................... 6,995
Sale of stock for cash........................................ 1,498 500
Issuance of stock for conversion of debt...................... 4,052
Issuance of stock for investment in joint venture............. 425 425
Discount on AMP note for value of warrants.................... 963
Compensation cost of options issued to employees.............. 846
Stock issued on exercise of options and warrants.............. 328
Contribution of capital in Malaysia joint venture (FCA)....... 3,348
Stock canceled on cancellation of supply agreement with FOI... (425)
--------- --------- ---------
Balance, end of year.......................................... $ 23,221 $ 19,545 $ 11,761
========= ========= ========
Accumulated Translation Adjustment:
Balance, beginning of year.................................... $ 216 $ 215 $ 10
Change in translation adjustment for the year................. (1,084) 1 205
--------- --------- --------
Balance, end of year.......................................... $ (868) $ 216 $ 215
========= ========= ========
Accumulated Deficit:
Balance, beginning of year.................................... $ (9,772) $ (5,639) $ (1,630)
Loss for the year............................................. (3,078) (4,133) (4,009)
--------- -------- --------
Balance, end of year.......................................... $ (12,850) $ (9,772) $ (5,639)
========= ======== ========
Treasury Stock:
Balance, beginning of year.................................... $ 0 $ 0 $ (500)
Issuance of stock as loan incentive........................... 0 0 500
--------- --------- --------
Balance, end of year.......................................... $ 0 $ 0 $ 0
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements
31
<PAGE>
<TABLE>
<CAPTION>
FIBERCORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(Dollars in thousands except share data) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................................... $(3,078) $(4,133) $(4,009)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ..................................... 1,354 1,226 747
Compensation cost for stock options ............................... --- 846 ---
Foreign currency translation loss and other ........................ 319 105 73
Changes in assets and liabilities:
Accounts receivable .............................................. (354) (93) (555)
Other receivables .................................................. (202) (132) 11
Inventories ....................................................... (1,398) (514) (1,131)
Prepaid and other current assets ................................... (6) 11 (20)
Accounts payable ................................................... 260 (159) 853
Accrued expenses ................................................... 37 829 799
------- ------ -------
Net cash used in operating activities ............................ (3,068) (2,014) (3,232)
------- ------ -------
Cash flows from investing activities:
Purchase of property and equipment ................................. (4,211) (1,161) (1,817)
Reimbursement from government grant 1,775 960 ---
Investments in joint ventures ...................................... (50) (950) (54)
Other .............................................................. (65) 1 224
------- ------ -------
Net cash used in investing activities ........................... (2,551) (1,150) (1,647)
------- ------ -------
Cash flows from financing activities:
Cash contribution by minority shareholders in FCA .................. 1,683 --- ---
Proceeds from issuance of common stock on exercise of
options ......................................................... 328 1,500 500
Proceeds from long-term debt ....................................... 4,750 3,500 5,000
Restricted long-term cash deposits.................................. --- (2,498) ---
Proceeds from notes payable ........................................ 394 200 ---
Repayment of notes payable ......................................... --- (200) (7)
Increase in long-term interest payable.............................. 418 42 ---
Other............................................................... --- (23) (39)
------- ------ -------
Net cash provided by financing activities 7,573 2,521 5,454
------- ------ -------
Effect of foreign exchange rate change on cash......................... (16) --- ---
------- ------ -------
Increase (decrease) in cash............................................ 1,938 (643) 575
Cash, beginning of year ............................................... 190 833 258
------- ------ -------
Cash, end of year ..................................................... $ 2,128 $ 190 $ 833
======= ====== =======
Supplemental disclosure:
Cash paid during the year for interest $ 222 $ 18 $ 183
Shares issued for investment in joint venture $ 425 $ --- $ ---
Reduction of equipment book value due to
cancellation of capitalized lease $ --- $ --- $ 499
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Incorporation and nature of operations
FiberCore, Inc. (the "Company") is involved in the research, development,
production and sales of optical fiber and optical fiber preforms for the
telecommunications industry. FiberCore Glasfaser Jena GmbH ("FCJ"), the
Company's principal operating subsidiary located in Germany, manufactures
optical fiber and optical fiber preforms. Automated Light Technologies, Inc.
("ALT"), a wholly-owned subsidiary of the Company, is a manufacturer and
distributor of fiber optic cable monitoring and fault locating systems for the
telecommunications industry. FiberCore Asia Sdn. Bhd. ("FCA") was formed in 1997
to construct an optical-fiber manufacturing facility in Malaysia.
FiberCore Incorporated, the predecessor to FiberCore, Inc. was organized under
the laws of the State of Nevada on November 5, 1993. On July 18, 1995, FiberCore
Incorporated merged with Venturecap, Inc., ("Venturecap"), an inactive company
organized in the State of Nevada in 1987. Following the merger Venturecap
changed its name to FiberCore, Inc. The merger was 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. In January, 1997 the Company registered all its then
outstanding shares under an S-1 filing with the Securities and Exchange
Commission. The Company's common stock is traded on the
Over-The-Counter-Bulletin Board under the symbol "FBCE".
(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
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.
(d) Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out method.
(e) Property and equipment
Property and equipment is stated at cost, net of grants received applicable to
acquisitions. 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.
33
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
In 1996 and 1997 the Company received grants from the German government to be
used in the expansion of the FCJ facility. All grant proceeds received have been
netted against the cost of the assets acquired.
Property and equipment is depreciated using the straight-line method over the
estimated useful lives of the assets.
(f) Restricted Cash
In connection with the expansion of the FCJ facility, the Company obtained a
loan from the Berliner Bank in Germany. Cash in the amount of German Marks 3,850
(U.S. $2,140), has been deposited with this institution as collateral for this
loan.
(g) Patents
Patents are amortized on a straight-line basis over seventeen years. The Company
evaluates the recoverability of patents from expected future cash flows.
(h) Investments in joint ventures
The Company has a 30% ownership interest in Fiber Optic Industries (Pvt.) Ltd.
("FOI"), which is accounted for using the equity method of accounting.
The Company's 15% ownership interest in Middle East Optical Fiber Cable Co.
("MEFC") is carried at cost.
The Company holds a 51% ownership in FCA which is consolidated in the Financial
Statements. Minority interest on the balance sheet reflects the Malaysian
partners' 49% ownership. There is no minority interest impact on the results of
operations as FCA had no activity in 1997.
(i) Fair value of financial instruments
The Company has 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 principal amount of the long-term debt approximates fair value because the
interest rates on these instruments approximate current market rates.
(j) Translation of foreign currencies
The translation of foreign subsidiaries financial statements 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
34
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
accounts using an average exchange rate for the period. Unrealized gains or
losses resulting from translation are included in stockholders' equity.
(k) Revenue
Revenue is recognized when earned which is principally when products are
shipped.
(l) Income taxes
The Company accounts for income taxes in accordance with the asset and liability
method. Deferred taxes are recognized for the future tax consequences
attributable to the differences between the book and tax basis of assets and
liabilities.
(m) Loss per share of common stock
Basic loss per share of common stock is computed based on the weighted average
shares outstanding during the year. The stock purchase warrants and stock
options have not been included in the computation of basic loss per share since
the effect would be anti-dilutive.
(n) Stock based compensation
FASB Statement No. 123 "Accounting for Stock-Based Compensation" defines a fair
value based method of accounting for an employee stock option or similar equity
instrument. However, the Company will 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".
(o) Reclassifications
Certain amounts in the prior year financial statements have been reclassified to
conform to the 1997 presentation.
(2) EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards No. 128
"Earnings Per Share", issued by the Financial Accounting Standards Board. The
statement established new standards for computing and disclosure of earnings per
share ("EPS") and requires restatement of prior years EPS information. The
statement requires dual presentation of "basic" EPS and "diluted" EPS. Basic EPS
is based on the weighted average number of common shares outstanding, excluding
common stock equivalents. Diluted EPS reflects the potential dilution of EPS
that could occur if securities or other contracts to issue common shares were
exercised or converted. At December 31, 1997, 1996 and 1995,
35
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(2) EARNINGS PER SHARE (CONTINUED):
there would have been no difference between basic and diluted earnings per share
due to the losses of the Company.
The following table shows securities outstanding as of December 31, that could
potentially dilute basic EPS in the future that were not included in the
computation of diluted EPS because to do so would have been antidilutive.
1997 1996 1995
---- ---- ----
Employee stock options 1,387,778 978,434 577,893
Warrants to acquire common stock 4,968,818 4,549,249 1,238,615
Common stock to be issued for
convertible debt 2,060,308 1,881,446 4,319,281
--------- --------- ---------
Total 8,416,904 7,409,129 6,135,789
========= ========= =========
(3) ACQUISITIONS AND STRATEGIC INVESTMENTS
In November, 1997, the Company entered into a joint-venture agreement with
Federal Power Sdn. Bhd. ("FDP") and PNB Equity Resource Corporation ("PERC") to
form FiberCore Asia Sdn. Bhd. ("FCA") in Malaysia. FCA was established to
construct and operate an optical fiber preform manufacturing facility in
Malaysia. The Company owns 51% of FCA, and FDP and PERC own 37% and 12%,
respectively.
The Company granted FCA a license to use the Company's technology for the
Company's ownership, and FDP and PERC contributed cash of $1,683 and notes of
$4,883 for their ownership. As part of the joint venture agreement, the Company
has entered into a put option agreement with FDP and PERC wherein the Company
has agreed to purchase FDP's and PERC's shares, at their option, in the event
that certain production benchmarks are not achieved.
The Company also entered into a support contract with FCA to provide design and
construction management for the facility, marketing services and administrative
support services.
On September 18, 1995, the Company acquired all the outstanding stock of ALT.
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. The acquisition, valued at
approximately $7,000, 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, of which
approximately $7,500 is attributable to patents developed or acquired by ALT.
36
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(3) 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"). As part of the agreement the Company
issued to MESC 734,262 shares of common stock for $1,000, (approximately $1.36
per share). The agreement also provides that MESC will receive 312,061 shares of
common stock upon the completion and execution of a product supply contract
between the Company and MEFC. The agreement was completed and the shares issued
in 1997. The Company invested $500 of the $1,000 purchase price in MEFC as a
capital contribution to the joint venture, as required by the agreement, and in
the process acquired a 15% interest in MEFC. MEFC constructed it's manufacturing
facility in 1996 and 1997 and began operations in late 1997. The Company is a
co-guarantor with the other joint venture partners for certain credit facilities
provided by banks to MEFC. These credit facilities are also collateralized by
the assets of MEFC. At December 31, 1997 the Company was contingently liable for
these loans in the amount of $792.
On January 11, 1996, as part of a share purchase agreement with Techman
International Corporation ("Techman"), a related party, a joint venture was
established between the Company and Techman. The joint venture, FOI, is located
in Pakistan. The Company has a 30% ownership interest in FOI. The Company
acquired its interest in FOI by making a $500 capital contribution to the joint
venture and issuing 312,061 shares of Company common stock to Techman valued at
approximately $1.36 per share, ($425) for a long term agreement to supply fiber
and preforms to FOI. FOI was formed in 1996 and had no significant operations in
1996 or 1997. In December 1997, due to a delay in the construction of the
manufacturing plant, the supply agreement was canceled and the 312,061 shares
have been canceled. The Company may enter into a new supply agreement with FOI
when the plant is completed.
(4) RECEIVABLES
Activity in the allowance for doubtful accounts consisted of the following for
the years ended December 31:
1997 1996 1995
---- ---- ----
Balance at beginning of period.......... $ 36 $ 39 $ --
Additions charged to expense............ 1 28
Additions - Other....................... -- 11
Deductions.............................. 3(1) 4 --
---- ---- ----
Balance at end of period................ $ 33 $ 36 $ 39
==== ==== ====
(1) Includes the effect of foreign currency exchange rate changes.
37
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(4) RECEIVABLES (CONTINUED):
Other receivables consist of the following at December 31:
1997 1996
---- ----
German government grants........... $423 $ --
Value added tax.................... 112 181
MEFC............................... -- 219
Other.............................. 29 18
---- ----
Total..................... $564 $418
==== ====
Notes receivable of $4,883 are due from the minority shareholders in FCA for the
balance of their capital contribution and are due in 1998.
(5) INVENTORIES
Inventories consist of the following at December 31:
1997 1996
---- ----
Raw materials............... $ 997 $ 841
Work-in-process............. 315 403
Finished goods.............. 1,745 677
------ ------
Total.............. $3,057 $1,921
====== ======
(6) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
ESTIMATED
USEFUL LIVES 1997 1996
------------ ---- ----
Office equipment................. 2-5 years $ 243 $ 156
Machinery and equipment.......... 2-12 years 5,619 5,068
Furniture and fixtures........... 5-7 years 21 18
Leasehold improvements........... 3-10 years 7 7
Construction in progress......... 3,267 955
------ ------
9,157 6,204
Less grant proceeds received..... (2,598) (960)
------ ------
Total................... $6,559 $5,244
====== ======
38
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(6) PROPERTY AND EQUIPMENT (CONTINUED):
Depreciation on property and equipment charged to expense was $560 in 1997, $548
in 1996, and $523 in 1995. During 1997 the Company capitalized interest costs of
$178 on the expansion project at FiberCore Jena.
(7) ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
1997 1996
---- ----
Accrued interest......................... $ 116 $ 30
Accrued wages, benefits & taxes.......... 547 568
Accrued legal and audit.................. 80 170
Other.................................... 385 410
------ ------
Total........................... $1,128 $1,178
====== ======
39
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(8) NOTES PAYABLE
Notes payable consist of the following at December 31:
1997 1996
---- ----
Convertible note payable to a director of ALT, interest at
the prime rate plus 1% (9.5%, at December 31, 1997)with
principal and interest due April 1, 1998, all principal and
accrued interest, if any, convertible into common stock of
the Company at approximately $1.36 per share. $218 $200
Note payable to an officer of the Company, interest at prime
plus 1%, due September 17, 1998. 50 ---
Note payable to Techman International Corporation with
interest at prime plus 1% due September 17, 1998. 150 ---
Note payable with interest at prime plus 1% due on
September 30, 1998. A director of the Company is a
principal of the lender. 25 ---
Notes payable with interest at prime plus 1% due on
September 30, 1998. 12 ---
Amount outstanding under a revolving line of credit from the
Berliner Bank with interest at 8.5%. 139 ---
---- ----
Total $594 $200
==== ====
In September 1997, the Company borrowed $150 from Techman International
Corporation. The note bears interest at prime plus 1% per year and matures on
September 17, 1998. In conjunction with the note, Techman was granted warrants
to purchase 69,132 common shares of the Company at an exercise price of $0.625
per share. Dr. M. Mahmud Awan, a former director of the Company is the President
and sole shareholder of Techman. In 1997, the Company incurred interest expense
of $4 on this note.
Also, during the year the Company borrowed $50 from the President of the
Company. The interest rate is prime plus 1% and the note matures on September
17, 1998. In conjunction with the note the lender was issued warrants to
purchase 62,500 common shares of the Company at an exercise price of $0.6875 per
share. Interest expense on this note was $1 in 1997.
In September and November, 1997 the Company also borrowed $75 under various
notes with interest at prime plus 1%. The notes mature on the earlier of the
receipt of proceeds from any new financing received by the Company or September
30, 1998. In conjunction with the notes the lenders were granted warrants to
purchase 55,000 common shares of the Company at an exercise price of $0.6875 per
share.
40
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(8) NOTES PAYABLE (CONTINUED):
Mr. Steven Phillips, a director of the Company, is a principal of one of the
lenders. In December, 1997 the Company repaid $38 of these notes. Interest
expense on these notes was $2 in 1997.
During the year the Company's subsidiary, FiberCore Jena, drew down $139 under a
$556 revolving line of credit with the Berliner Bank. The note bears interest at
8.5% and the weighted average interest rate for 1997 was 8.5%.
All of the proceeds of the notes were used for working capital.
(9) LONG-TERM DEBT
Long-term debt consists of the following at December 31: 1997 1996
---- ----
Note payable to Berliner Bank, interest at 6.25%, due
September 30, 2006. $4,280 $ ---
Convertible note payable to AMP Incorporated ("AMP"),
interest at 3-month London Interbank Offered Rate plus
one percent (6.78% at December 31, 1997), due April 17,
2005. 2,000 2,000
Note payable to AMP, interest at prime plus one percent
(9.5% at December 31, 1997), due November 27, 2006. 3,000 3,000
Discount attributable to warrants issued in conjunction
with the $3,000 note above. (859) (955)
Note payable with interest at prime plus 1% (9.5% at
December 31, 1997) due March 6, 2000. 220 ---
Note payable to Techman International Corporation with
interest at prime plus 1% (9.5% at December 31, 1997),
due April 16, 2000. 250 ---
Notes payable to the spouses of officers of the
Company, with interest at prime plus one percent (9.5%
at December 31, 1997), due July 31, 1999. 500 500
------ -------
Total $9,391 $ 4,545
======= =======
During the year ended December 31, 1997, the Company drew down 7,700 German
Marks
41
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(9) LONG-TERM DEBT (CONTINUED):
(approximately $4,280) under a loan agreement with the Berliner Bank. The
proceeds were used to fund the expansion of the Company's plant in Germany. The
loan bears interest at 6.25% annually and is due on September 30, 2006. The loan
is collateralized by a deposit with the bank of approximately $2,140.
In April 1995, FiberCore Incorporated issued to AMP, a floating rate,
collateralized, ten year debenture in the amount of $5,000, due April 17, 2005,
with interest, at an annualized rate adjusted quarterly, equal to the 3-month
London Interbank Offered Rate plus 1%, (6.78% at December 31, 1997). 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. On
November 27, 1996, AMP converted $3,000 of principal and $541 of accrued
interest relating to the original $5,000 ten year debenture, into shares of
common stock of the Company at the rate of approximately $1.16 per share
(3,058,833 shares) and entered into a multi-year supply agreement. The AMP notes
are collateralized by the Company's patents, patent applications, licenses,
rights and royalties resulting from such patents and the equipment of FCJ.
The remaining principal balance remained 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;
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 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 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, on November 27, 1996, AMP issued to the
Company $3,000 under a ten-year note, secured by equipment owned by the Company,
with interest at prime plus one percent, (9.5% at December 31, 1997). Terms of
the debenture state that interest shall be accrued, but not paid, for the first
five years of the loan and a portion of the proceeds are required to be used as
collateral for the German bank loan of approximately $4,280 for the expansion of
its FCJ facility. 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. The loan agreement contains restrictive covenants including
financial
42
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(9) LONG-TERM DEBT (CONTINUED):
ratio covenants. At December 31, 1997 the Company did not meet one of the
financial ratio covenants. AMP has agreed to waive this financial requirement
for the year ended December 31, 1997.
In conjunction with the $3,000 note above, AMP was issued five year warrants to
acquire 1,382,648 shares 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; provided, however, that AMP shall have
the right not to sell, in which case the guarantee will no longer be available.
Interest expense on the AMP notes was $418, $335, and $248, for the years ended
December 31, 1997, 1996 and 1995, respectively.
Also, during the year ended December 31, 1997, the Company borrowed $220 from a
shareholder under a note maturing in 2000. The annual interest rate on the note
is the prime rate plus 1% adjustable quarterly and payable quarterly. In
conjunction with the note, the lender was granted warrants to purchase 69,132
shares of common stock of the Company at an exercise price of $1.53 per share.
The warrants expire on March 7, 2002. The proceeds of the note were used for
working capital. Interest expense on this note was $14 in 1997.
In April 1997, the Company borrowed $250 from Techman under a note maturing in
2000. The annual interest rate on the note is the prime rate plus 1%, adjustable
quarterly and payable quarterly. In conjunction with the note, Techman was
granted warrants to purchase 115,220 common shares of the Company at an exercise
price of $0.78 per share. Dr. M. Mahmud Awan, a former director of the Company
is the sole shareholder of Techman. Interest expense on this note was $17 in
1997.
On July 31, 1996, the Company borrowed $500 under two loan agreements from the
spouses of Dr. Aslami and Mr. De Luca. The loans are in the amount of $250 each
and bear interest at the prime rate plus one percent (currently 9.5%), and are
due on July 31, 1999. In conjunction with
43
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(9) LONG-TERM DEBT (CONTINUED):
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.
Interest expense on these notes was $48 and $17 in 1997 and 1996, respectively.
Scheduled principal maturities of long-term debt are as follows at December 31,
1997:
1999............................... $ 500
2000............................... 470
2005............................... 2,000
2006............................... 7,280
-------
Total............ $10,250
=======
(10) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have entered into various leases for its office
and production space. The Company's office lease has a monthly rental of $2 and
expires on September 30, 1998. The Company plans to renew this lease.
FCJ conducts its operations from premises under an operating lease with SICO
Quarzschmelze Jena GmbH ("SICO"). The lease has fixed monthly rental payments of
$30 through its expiration in June, 2000, and contains various renewal options.
Future minimum lease payments under noncancelable operating leases (with minimum
or remaining lease terms in excess of one year) are as follows:
FISCAL YEAR ENDING DECEMBER 31, AMOUNT
------------------------------- ------
1998..................................... $ 401
1999..................................... 381
2000..................................... 208
2001..................................... 31
------
Total........................... $1,021
======
Included in the statements of operations for the years ended December 31, 1997,
1996 and 1995 is rent expense of $411, $456 and $413, respectively.
Substantially all lease payments are to a related party, SICO.
44
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(10) COMMITMENTS AND CONTINGENCIES (CONTINUED):
In January 1998, Corning, Incorporated ("Corning") filed an action against
the Company claiming that the Company infringed a Corning patent by marketing
and selling certain optical fiber products in the United States. In March 1998
the Company and Corning concluded a settlement agreement wherein the Company has
acknowledged the validity of Corning's patent and agreed, prior to the
expiration of the patent, not to make, market, and sell or offer to sell
infringing optical fiber or optical fiber preforms in the United States in
violation of Corning's patent except to certain customers. In turn, Corning has
agreed not to seek damages and will dismiss the action. The Company maintains
that it has not sold any significant amounts of fiber and preforms in the United
States in violation of Corning's patent which expires in July, 1999. Management
believes that the result of this action will not have a material adverse impact
on the Company.
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 ("COIA"), a
former customer, claiming damages of approximately $200 arising from FiberCore
Jena's alleged failure to comply with a sales contract. The case was dismissed
by the lower court and COIA appealed this decision. On appeal the court found
that although there was a contract, COIA was not entitled to damages. COIA may
seek fulfillment of the claimed contract. 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 affect on the financial position or results of operations of
the Company.
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.
Although no litigation has commenced as of the date of this report with respect
to this dispute, ALT would be the claimant in any lawsuit brought in connection
with this matter. Failure by ALT and Norscan to resolve this dispute could have
a material adverse affect on the future sales of ALT Products.
ALT is contingently liable for debt of a former subsidiary, Allied Controls,
Inc. ("Allied"), approximating $900, 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 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 financing of Allied from the State of Connecticut,
acting through
45
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(10) COMMITMENTS AND CONTINGENCIES (CONTINUED):
CDA, dated as of June 9, 1992, CDA received a guarantee from two key officers of
ALT.
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 SBA loan dated May 29, 1989, (originally in the
amount of $1,000) 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.
Allied is current with its payments under this loan. In addition, Allied
management has been in discussions with several potential buyers of Allied
which, if successful, would eliminate the aforementioned guarantees that have
been provided by ALT.
The Company is a co-guarantor with the other joint venture partners for certain
credit facilities provided by banks to MEFC. These credit facilities are also
collateralized by the assets of MEFC. At December 31, 1997 the Company was
contingently liable for these loans in the amount of $792.
46
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(11) STOCKHOLDERS' EQUITY
The following represents the stock option activity during the years ended
December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK OPTIONS $.003 $0.68 $1.09 $1.16 $1.36 $1.43 $1.45 $1.50 $1.51 $1.58 $2.00
- ------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Balance,
Dec. 31, 1994 220,278 -- -- -- -- -- -- -- -- -- --
Granted in 1995 36,713 -- 33,042 -- -- -- -- -- -- -- --
Granted in 1995
in connection
with the ALT
acquisition -- -- -- -- -- 67,188 -- 41,993 178,679 -- --
-----------------------------------------------------------------------------------------------------------------
Balance,
Dec. 31, 1995 256,991 -- 33,042 -- -- 67,188 -- 41,993 178,679 -- --
Granted in 1996 18,357 64,248 -- 87,492 55,193 -- 148,709 -- -- -- 26,542
-----------------------------------------------------------------------------------------------------------------
Balance,
Dec. 31, 1996 275,348 64,248 33,042 87,492 55,193 67,188 148,709 41,993 178,679 -- 26,542
Granted in 1997 -- -- -- -- -- -- -- -- -- 709,500 --
Exercised in 1997 (201,921)(10,000) (33,042) -- (55,193) -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1997 73,427 54,248 0 87,492 0 67,188 148,709 41,993 178,679 709,500 26,542
====== ====== = ====== = ====== ======= ====== ======= ======= ======
Options
exercisable 36,713 54,248 0 87,492 0 67,188 148,709 41,993 178,679 430,500 26,542
====== ====== = ====== = ====== ======= ====== ======= ======= ======
</TABLE>
Options vest at rates stated in each employees contract, principally at the
grant date or the anniversary date of the employee's date of hire. The options
have no expiration dates.
47
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(11) STOCKHOLDERS' EQUITY (CONTINUED)
A summary of the status of the Company's stock options and weighted average
prices are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance beginning of
year 978,434 $0.98 577,893 $0.81 220,278 $.003
Exercised (300,156) $0.40 --- $ --- --- $ ---
Granted 709,500 $1.58 400,541 $1.22 357,615 $1.30
-------- ------- -------
Balance
end of year 1,387,778 $1.41 978,434 $0.98 577,893 $0.81
========= ======= =======
Exercisable at end
of year 1,072,064 $1.42 905,008 $1.06 456,740 $1.02
========= ======= =======
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RANGE OF OPTIONS EXERCISE REMAINING OPTIONS EXERCISE
EXERCISE PRICE OUTSTANDING PRICE YEARS (1) EXERCISABLE PRICE
-------------- ----------- ----- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
$.003 73,427 $.003 -- 36,713 $.003
$0.68 - $1.16 141,740 $0.98 -- 141,740 $0.98
$1.43 - $2.00 1,172,611 $1.55 -- 893,611 $1.54
--------- ---- --------- -----
$.003 - $2.00 1,387,778 $1.41 -- 1,072,064 $1.42
========= ==== ========= =====
</TABLE>
(1) Options granted and exercisable have no expiration date.
48
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(11) STOCKHOLDERS' EQUITY (CONTINUED)
The Company applies APB Opinion 25 in accounting for its stock compensation
plans. Compensation cost charged to operations was $846 in 1996 related to
options granted at an exercise price less than the market price of the shares at
the dates of the grants. Had compensation cost been determined on the basis of
fair value pursuant to FASB Statement No. 123, net loss and loss per share would
have been as follows:
1997 1996 1995
---- ---- ----
Net loss
- --------
As reported $(3,078) $(4,133) $(4,009)
======= ======= =======
Pro forma $(3,174) $(4,295) $(4,535)
======= ======= =======
Basic and diluted loss per share
- --------------------------------
As reported $ (0.09) $ (0.13) $ (0.15)
======= ======= =======
Pro forma $ (0.09) $ (0.14) $ (0.17)
======= ======= =======
The weighted average fair value of options granted during 1997, 1996 and 1995
was $0.14, $2.52 and $1.48 per share, respectively.
The fair value of each option granted is estimated on the grant date using the
Black-Scholes model. The following assumptions were made in estimating fair
value:
Stock
Assumptions Plan
----------- ----
Dividend yield --
Risk-free interest rate 5.5%
Expected life 2 years
Expected volatility 20% in 1997 and 40% in 1996 and 1995
49
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(11) STOCKHOLDERS' EQUITY (CONTINUED)
The following warrants to purchase common stock have been issued during the
years ended December 31, 1997, 1996, and 1995, at the exercise prices indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WARRANTS $0.63 $0.69 $0.78 $0.82 $0.95 $1.31 $1.43 $1.45 $1.53 $1.63 $1.81
- -------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Balance,
Dec. 31, 1994 479,565
Issued in 1995 83,985 118,858 5,511 550,696
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1995 83,985 598,423 5,511 550,696
Issued in 1996 1,382,648 697,546 230,440
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1996 83,985 598,423 5,511 1,382,648 1,248,242 230,440
Issued in 1997 69,132 117,500 115,220 640,445 101,394
Expired in 1997 (550,696)
Exercised in 1997 (73,426)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1997 69,132 117,500 115,220 640,445 83,985 524,997 5,511 1,382,648 101,394 697,546 230,440
====== ======= ======= ======= ====== ======= ===== ========= ======= ======= =======
</TABLE>
The weighted average fair value of warrants granted during 1997, 1996 and 1995
was $0.18, $1.05 and $1.63 based on total warrants of 1,043,691, 2,310,634 and
759,050 granted in 1997, 1996 and 1995, respectively. The warrants are
exercisable from the date of the grant and expire at various dates from January,
1998 to September 2002.
(12) INCOME TAXES
The significant components of the net deferred tax asset as of December 31, 1997
and 1996 were as follows:
1997 1996
---- ----
Net operating loss carry forwards $ 3,687 $ 2,687
Less valuation allowance (3,687) (2,687)
------- -------
Net deferred tax asset $ 0 $ 0
======= =======
The Company has incurred losses in 1995 through 1997, and, accordingly there is
no income tax provision.
50
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(12) INCOME TAXES (CONTINUED)
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. Accordingly, a full valuation allowance has
been recorded due to the historical losses of the Company.
The Company has net operating loss carry forwards available of approximately
$6,802, at December 31, 1997 for federal and state tax purposes. The majority of
the net operating loss carry forward expires in the years 2009 through 2012.
FCJ has net operating loss carry forwards at December 31, 1997 of approximately
$2,147 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.
In addition, ALT has pre-acquisition net operating loss carry forwards available
of approximately $4,278, at December 31, 1997 for federal and state tax
purposes. The loss carry forwards expire between the years 2001 through 2010.
(13) MAJOR CUSTOMERS AND SUPPLIERS
The major customers listed below accounted for approximately the following
amounts and related percentages of the trade accounts receivable balance of the
Company at December 31:
CUSTOMER 1997 1996
-------- ---- ----
AMOUNT % AMOUNT %
------ - ------ -
A $ -- -- $ 167 23
B 87 9 211 30
C 37 4 109 15
E 381 39 --- ---
51
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(13) MAJOR CUSTOMERS AND SUPPLIERS (CONTINUED)
The approximate net product sales by the Company to its major customers and the
related percentages are as follows:
CUSTOMER 1997 1996 1995
-------- ---- ---- ----
AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -
A $2,990 42 $4,524 56 $1,855 60
B 1,238 17 1,217 15 --- --
D --- -- --- -- 319 10
The Company purchases raw materials from various suppliers and in some cases
there are a limited number of suppliers for certain materials. In 1997, 1996 and
1995 one supplier accounted for 50%, 46% and 90%, respectively, of the Company's
requirement of one particular item. Although the Company maintains a good
relationship with this supplier the loss of this supplier could have a material
impact on the Company's ability to manufacture its required volume of product.
The Company has identified alternative sources for this material and continues
to seek alternative sources of supply.
(14) RELATED PARTY TRANSACTIONS
On August 19, 1995 and amended in January 1996, a capital lease agreement
between SICO and FCJ was revised. It was agreed that SICO would keep 2,221,141
shares, originally held as collateral, of the Company as payment for an
obligation under a capital lease. The outstanding lease obligation, which
amounted to $499 on August 19, 1995, was canceled. As a result, the net book
value of the assets was reduced by $499. The managing director of FCJ was the
controlling shareholder of SICO. In November 1995, this officer resigned from
his position with FCJ.
52
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(14) RELATED PARTY TRANSACTIONS (CONTINUED)
Transactions with SICO during the years ended December 31, 1997, 1996 and 1995
consist of the following:
1997 1996 1995
---- ---- ----
Rent of premises................................... $331 $356 $315
Purchase of services and utilities................. 286 611 874
Purchase of materials.............................. --- 351
Interest........................................... --- --- 26
Other expenses..................................... 17 --- 22
Purchase price reduction of property and
equipment under capital lease.................... --- --- 499
Sales of fibers.................................... 49 176 131
In January 1996, the Company reached an agreement with Techman, whereby Techman
purchased 734,260 shares for $1 million ($1.36 per share). Techman is a related
party as the president and sole shareholder of Techman is a former director of
the Company. Upon acceptance of the offer and delivery of the 734,260 shares,
the Company delivered 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 warrants expired in January, 1998.
The Company maintains a consulting agreement with Techman under which Techman
provides administration, marketing, technical and personnel advisory services to
the Company. The agreement is on a month to month basis at a monthly fee of $4
in 1997 and $3 in 1996 and 1995 and is terminable at any time by the Company.
For the years ended December 31, 1997, 1996 and 1995, the Company incurred costs
of $54, $36 and $21, respectively, for such services.
The Company has a consulting agreement with Mr. Steven Phillips, a director,
wherein Mr. Phillips provides services as a senior financial advisor. For the
years ended December 31, 1997, 1996 and 1995, the Company incurred costs of $46,
$65, and $26, respectively for such services.
53
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(15) FOREIGN OPERATIONS
The Company has operations in three principal geographic areas: the United
States (Company and ALT), Germany (FCJ), and Malaysia (FCA). Following is a
summary of information by area for the years ended December 31, 1997, 1996 and
1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Net sales to customers:
<S> <C> <C> <C>
United States..................................... $ 231 $ 196 $ 305
Germany........................................... 6,847 7,900 2,789
------- -------- --------
Net sales as reported in the accompanying
consolidated statements of operations............. $ 7,078 $ 8,096 $ 3,094
======= ======== ========
Income (loss) from operations:
United States .................................... (2,515) $ (3,893) $ (1,757)
Germany........................................... 309 45 (1,833)
------- -------- --------
(2,206) (3,848) (3,590)
Interest income..................................... 26 6 148
Interest expense.................................... (664) (393) (516)
Other income (expense).............................. (234) 102 (51)
------- -------- --------
Net loss as reported in the accompanying
consolidated statements of operations............. $(3,078) $ (4,133) $ (4,009)
======= ======== ========
Identifiable assets:
United States..................................... $10,508 $ 8,441
Germany........................................... 9,384 9,201
Malaysia.......................................... 6,215 ---
------- --------
Total assets as reported in the accompanying
consolidated balance sheets ................... $26,107 $17,642
======= =======
</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. FCA (Malaysia) had no significant operations in 1997.
54
<PAGE>
FIBERCORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
(16) ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which requires that changes in comprehensive income be shown in a
financial statement that is displayed with the same prominence as other
financial statements. Also in June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information", which
changes the way public companies report information about segments. These
statements are effective for 1998. Management is currently evaluating the
effects of these statements on the Company's financial statements, however,
these statements will only effect disclosure and presentation in the financial
statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
55
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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 December
31, 1997.
NAME AGE POSITION
Dr. Mohd A. Aslami 51 Chairman of the Board of Directors, Chief
Executive Officer, President and Director
Charles De Luca 60 Executive Vice President, Secretary and
Director of the Company and General Manager
of the Company's ALT subsidiary
Michael J. Beecher 53 Chief Financial Officer and Treasurer
Hans F.W. Moeller 68 Managing Director of FiberCore Glasfaser Jena
GmbH
Steven Phillips 52 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 Cincinnati (1974).
Mr. De Luca is a co-founder, Executive Vice President, Secretary and a
director of the Company. Mr. De Luca also co-founded and became an Executive
Vice President and director of ALT in 1986. Mr. De Luca received his MBA in
marketing and business management from St. Johns University in 1974.
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
56
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED):
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. Phillips became a director of the Company in May 1995 and became a
director of ALT in 1989. Since co-founding the Winstar Government Securities
Company L. P., a registered U.S. Government securities dealer which specializes
in odd-lot securities transactions, Mr. Phillips has served as Chief Financial
Officer, Secretary, and a Director. 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.
ITEM 11. EXECUTIVE COMPENSATION
Following is a summary of the compensation earned and/or paid to the Company's
Chief Executive Officer and its most highly compensated executive officers for
the last three years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION AWARDS
- -----------------------------------------------------------------------------------------------------------------------------
Name and Principal Position Fiscal Salary Bonus Other Restricted Securities
Year $ $ Annual Stock Underlying
Compensation Award(s) Options/
$ SARs(#)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Dr. Mohd Aslami 1997 146,500 -- -- 359,752
Chairman, Chief Executive 1996 146,500 -- -- 60,913
Officer & President 1995 146,500 -- -- --
- ----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Charles De Luca (1) 1997 98,398 -- -- 189,502
Executive Vice President 1996 98,398 -- -- 46,050
& Secretary 1995 28,699 -- -- --
- ----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Michael J. Beecher (2) 1997 85,000 -- -- 120,000
Chief Financial Officer 1996 53,708 -- -- 64,248
& Treasurer 1995 -- -- -- --
- ----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
Hans Moeller (3) 1997 120,000 -- -- 300,000
Managing Director, 1996 98,596 -- -- 55,193
FiberCore Glasfaser Jena GmbH 1995 7,227 -- -- 33,042
- ----------------------------------------- --------- ----------- --------- ----------------- --------------- --------------
</TABLE>
(1) From September 18, 1995 with the acquisition of ALT.
(2) Started employment on April 15, 1996.
(3) Started employment on October 1, 1995.
57
<PAGE>
EXECUTIVE COMPENSATION (CONTINUED):
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- -------------------------------------
<TABLE>
<CAPTION>
The following table lists the options granted to the executive officers during
the year ended December 31, 1997.
----------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------------------------------------
Name Number of % of Total Exercise Expiration Potential Potential
---- Securities Options/ or base Date realized values realized
Underlying SARs Granted price ---- at assumed values at
Options/ to Employees ($/Share) annual rates of assumed
SARs in Fiscal --------- stock price annual rates
Granted Year apprec. for of stock
(#) ---- option term price
--- ----------- apprec. for
5%($) option term
10% ($)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Mohd Aslami (b) 359,752 29% $0.82 2002 $ 6,191 $ 84,924
--------------------- -------------- -------------- ------------ ------------- ------------------ --------------
Charles De Luca (b) 189,502 15% $0.82 2002 $ 3,262 $ 44,735
--------------------- -------------- -------------- ------------ ------------- ------------------ --------------
Michael Beecher (a, 120,000 10% $1.58 --- $ 21,752 $ 77,100
c)
--------------------- -------------- -------------- ------------ ------------- ------------------ --------------
Hans Moeller 300,000 24% $1.58 --- $ 54,381 $192,751
(a, c)
--------------------- -------------- -------------- ------------ ------------- ------------------ --------------
</TABLE>
Table
- -----
a. The term of options used in the potential realized value calculation is
five years.
b. The market value per share at the date of grant was $0.66.
c. The market value per share at the date of grant was $1.38.
58
<PAGE>
EXECUTIVE COMPENSATION (CONTINUED):
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTIONS/SAR VALUES
The following table lists the options/SARs exercised during the year and the
options/SARs held by the executive officers that were unexercised at December
31, 1997.
<TABLE>
<CAPTION>
- ------------------------- ------------------- -------------- -------------------------------- --------------------------------
Value of unexercised
Number of Securities in-the-money
underlying unexercised options/SARs at
Shares acquired Value options/SARs at FY-end (#) FY-end ($)
Name on exercise (#) realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ------------ ------------------------- -------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. Mohd Aslami --- --- 420,665/0 (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------
Charles De Luca --- --- 235,552/0 (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Michael J. Beecher 10,000 $34,440 94,248/80,000 (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Hans Moeller 88,235 $(6,299) 200,000/100,000 (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------
Note 1 - At December 31, 1997 the fair value was less than the exercise price.
</TABLE>
COMPENSATION OF DIRECTORS
- -------------------------
The Company does not maintain any standard compensation arrangements or
plans for directors.
The Company, however, maintains a consulting agreement with Techman under
which Techman provides administration, marketing, technical and personnel
advisory services to the Company. Dr. M. Mahmud Awan, a former director of the
Company, is the President and sole shareholder of Techman. The agreement is on a
month to month basis at a monthly fee of $4,500 and is terminable at any time by
the Company. For the year ended December 31, 1997, Techman was paid $54,000 for
such services.
The Company has a consulting agreement with Mr. Phillips, a director of the
Company, wherein Mr. Phillips provides services as a senior financial advisor.
Mr. Phillips receives 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
is adjusted quarterly based on actual hours of service. The agreement is for one
year from January 1, 1997 and is automatically renewed for one year periods
unless terminated by written notice 90 days prior to the expiration of each
renewal period. For the year ended December 31, 1997, Mr. Phillips' fee was
$45,665.
59
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SECURITY HOLDERS
The following table sets forth certain information regarding the ownership
of the Common Stock as of March 12, 1998, 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 %
ADDRESS(1) OWNED OWNED
---------- ----- -----
Mohd Aslami................................ 7,789,948 (2), (9) 17.6
Charles De Luca............................ 4,765,778 (3), (9) 10.8
Steven Phillips............................ 964,090 (4) 2.2
Hans F.W. Moeller.......................... 388,235 (5) 0.9
Michael J. Beecher......................... 174,248 (6) 0.4
AMP Incorporated........................... 6,169,154 (7),(9) 14.0
Techman International Corporation.......... 2,469,308 (8), (9) 5.6
All directors and executive officers
as a group (5 persons)................... 14,082,299 31.9%
- ----------------------------
(1) The addresses of the persons and entities named in this table are as
follows: Messrs. Aslami, De Luca, Phillips, Moeller, and Beecher, c/o
FiberCore, Inc., P. O. Box 180, 253 Worcester Road, Charlton, MA 01507; M.
Mahmud Awan, 240 Sturbridge Road, Charlton, MA 01507; AMP Incorporated, 470
Friendship Road, Harrisburg, PA 17105.
(2) Includes 117,482 shares and Warrants to purchase 115,220 shares held by Dr.
Aslami's wife, 723,473 shares held by Dr. Aslami's children, 1,587,569,
104,296 and 608,914 shares held respectively by the Ariana Trust,
Children's Trust, and the Kabul Foundation, trusts of which Dr. Aslami's
wife and/or Dr. Aslami are trustees 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. De Luca'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 483,165
currently exercisable options and warrants to purchase shares of the
Company.
60
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTINUED):
(3) Includes 1,395,097 shares and Warrants to purchase 115,220 shares held by
Elizabeth De Luca, Mr. De Luca's wife, 357,715 shares held by Mr. De Luca's
children, 608,914 shares held by the Dawn Foundation, a trust of which Mrs.
De Luca is trustee and of which Mr. De Luca's children are beneficiaries,
and 174,053 shares held by the Raja Foundation, a trust of which Dr.
Aslami's wife and Mr. De Luca's wife are trustees and of which various
organizations and family members are beneficiaries. Mr. De Luca disclaims
beneficial ownership of all shares. Also includes 235,552 currently
exercisable options.
(4) Includes 132,937 currently exercisable options and warrants issued to One
Financial Group, Incorporated and 27,500 warrants issued to Income Partners
LP. Mr. Phillips is a principal of these Companies
(5) Includes 300,000 options.
(6) Includes 174,248 options.
(7) Includes shares into which the AMP Note is convertible at $1.16 per share
and Warrants to purchase 1,382,648 shares.
(8) The shares are owned by Techman International Corporation and includes
shares issuable to Techman or its designee upon exercise of Warrants
(550,696), and shares (1,000,000) to be issued ratably as commissions on
Company sales up to $200 million. Dr. M. Mahmud Awan is the president and
sole shareholder of Techman, and a former director of the Company.
(9) Under the AMP loan, the Company, Mohd A. Aslami, Charles De Luca, 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 De Luca, Hans Moeller, one nominee of AMP and three outside
directors.
61
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DEALINGS WITH SICO
Since June 1994, FiberCore Jena has leased its office and manufacturing
facility in Germany from SICO Quarzschmelze Jena GmbH ("SICO"). The lease
payment is fixed for the initial term of the lease (which expires on June 30,
2000) at DM 50,205 per month (approximately $27,909). In 1995, SICO accounted
for approximately 10% and in 1996 and 1997 less than 1%, respectively, of
Company total sales.
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 former
director of the Company. Techman specializes in sales of fiber optic products
and telecommunication systems.
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. Such shares will be issued
upon receipt of the proceeds of any such sales.
Pursuant to the Techman Share Purchase Agreement dated January 11, 1996,
Techman purchased 734,260 shares of Common Stock for $1,000,000 (approximately
$1.36 per share) and was granted Warrants exercisable into 550,696 shares of
Common Stock at $1.63 per share. Additionally, the Company issued an additional
312,061 shares of Common Stock to Techman on (i) the formation of FOI (a joint
venture), in which the Company holds a 30% ownership interest, and (ii) the
completion of a supply agreement between FOI and the Company. Under the
agreement, $500,000 of the $1,000,000 share purchase price was invested by
Techman for the Company in FOI as an additional capital contribution. Due to a
delay in the construction of the manufacturing plant, in 1997 the supply
agreement was canceled and the 312,061 shares were canceled.
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.
62
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED):
In September 1997, the Company borrowed $150,000 from Techman International
Corporation. The note bears interest at prime plus 1% per year and matures on
September 17, 1998. In conjunction with the note, Techman was granted warrants
to purchase 69,132 common shares of the Company at an exercise price of $0.625
per share.
In April 1997, the Company borrowed $250,000 from Techman under a note
maturing in 2000. The annual interest rate on the note is the prime rate plus
1%, adjustable quarterly and payable quarterly. In conjunction with the note,
Techman was granted warrants to purchase 115,220 common shares of the Company at
an exercise price of $0.78 per share.
The Company maintains a consulting agreement with Techman under which
Techman provides administration, marketing, technical and personnel advisory
services to the Company. The agreement is on a month to month basis at a current
monthly fee of $4,500 and is terminable at any time by the Company. For the
years ended December 31, 1997, 1996 and 1995, Techman was paid $54,000, $36,000
and $21,000, respectively, for such services.
DEALINGS WITH AMP
In April 1995, the Company issued the AMP Note, which is a ten year
$5,000,000 convertible note, to AMP, Incorporated, 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 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.
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. 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. 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 $2.17 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.
63
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED):
LOANS
On July 31, 1996, the Company borrowed $500,000 under two loan agreements
from the spouses of Dr. Aslami and Mr. De Luca. The loans are in the amount of
$250,000 each and bear interest at the prime rate plus one percent (currently
9.5%), and are due on July 31, 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.
Also, during the year the Company borrowed $50,000 from Dr. Aslami. The
interest rate is prime plus 1% and the note matures on September 17, 1998. In
conjunction with the note the lender was issued warrants to purchase 62,500
common shares of the Company at an exercise price of $0.6875 per share.
In September and November, 1997 the Company also borrowed $37,500 under a
note with interest at prime plus 1%. The note matures on the earlier of the
receipt of proceeds from any new financing received by the Company or September
30, 1998. In conjunction with the notes the lender was granted warrants to
purchase 27,500 common shares of the Company at an exercise price of $0.6875 per
share. Mr. Steve Phillips, a director of the Company, is a principal of the
lender. In December, 1997 the Company repaid $12,500 of these notes.
CONSULTING
The Company has a consulting agreement with Mr. Phillips, a director of the
Company, wherein Mr. Phillips provides services as a senior financial advisor.
Mr. Phillips receives 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
is adjusted quarterly based on actual hours of service. The agreement is for one
year from January 1, 1997 and is automatically renewed for one year periods
unless terminated by written notice 90 days prior to the expiration of each
renewal period. For the year ended December 31, 1997, Mr. Phillips' fee was
$45,665.
64
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
--------------------
See Item 8 of this Report
2. FINANCIAL STATEMENT SCHEDULES
The required disclosures are included in the footnotes to the
Financial Statements
3. EXHIBITS
(+ denotes incorporated herein by reference to the Annual Report
on Form 10-K for the year ended December 31, 1996, filed with the
Commission on March 26, 1997)
(x denotes filed herewith)
EXHIBIT
NUMBER
+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,
Inc. and FiberCore Incorporated.
+2.3 Agreement and Plan of Reorganization dated as of September 18,
1995 between the FiberCore, Inc. Alt Merger Co., and Automated
Light Technologies, Inc. ("ALT").
+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.
+10.1 Loan Agreement dated August 2, 1990 between ALT and Connecticut
Innovations, Inc. ("CII").
+10.2 Promissory Note issued by ALT to CII.
+10.3 Security Agreement dated as of August 1990 between ALT and CII.
+10.4 Subordination executed August 2, 1990 between CII, Mohd Aslami,
and Charles De Luca.
+10.5 Collateral Assignment and Security Agreement dated August 2, 1990
between ALT and CII.
+10.6 Loan Agreement dated December 5, 1990 between ALT and the
Connecticut Development Authority
("CDA").
+10.7 Promissory Note dated December 5, 1990 issued by ALT to CDA.
+10.8 Guaranty dated December 5, 1990 issued to CDA by Mohd Aslami and
Charles De Luca.
+10.9 Collateral Assignment and Security Agreement dated December 5,
1990 between ALT and CDA.
+10.10 Security Agreement dated as of December 5, 1990 between ALT and
CDA.
+10.11 Subordination dated November 5, 1990 between CDA, Mohd Aslami and
Charles De Luca.
+10.12 Form of Warrant issued by ALT to CDA.
+10.13 Form of Warrant issued by Agreement between ALT to Connecticut
Innovations Incorporated.
+10.14 Form of Warrant issued by ALT.
+10.15 Form of FiberCore Incorporated Warrant.
+10.16 Assignment dated November 8, 1993 by Gregory Perry to FiberCore
Incorporated of U.S. Patent No. 4,596,589.
+10.17 Lease executed January 31, 1994 between Cobra Realty Trust,
FiberCore Incorporated, Mohd Aslami and Charles De Luca.
65
<PAGE>
+10.18 Agreement dated June 7, 1994 between Sico Quarzschmelze Jena,
GmbH ("Sico")and FiberCore Inc., to lease building and equipment
and to manufacture optical fiber and optical fiber preform.
+10.19 Agreement dated August 19, 1995 between Sico and FiberCore
Glasfaser Jena GmbH, with supplemental agreement by Walter
Nadrag.
+10.20 Cooperation Agreement dated December 19, 1995 between Sico and
FiberCore, Inc.
+10.21 Lease dated August 19, 1995 between Sico and FiberCore Glasfaser
Jena GmbH.
+10.22 Agreement dated January 25, 1996 between FiberCore, Inc.,
FiberCore Glasfaser, Jena and Sico.
+10.23 Share Purchase Agreement dated January 11, 1996 between
FiberCore, Inc. and Techman International, Corp. ("Techman").
+10.24 Escrow Agreement dated as of April 13, 1995 between FiberCore
Incorporated, Middle East Specialized Cables Co. ("MESC") and
Shawmut Bank, N.A.
+10.25 Escrow Amending Agreement dated September 15, 1995 between
FiberCore, Inc., Middle East Specialized Cables Co. ("MESC") and
Shawmut Bank, N.A.
+10.26 Share Purchase Agreement dated as of April 13, 1995 between
FiberCore Incorporated and MESC.
+10.27 Share Purchase Amending Agreement dated September 15, 1995
between the Registrant and MESC.
+10.28 onvertible Debenture Purchase Agreement effective as of April
17, 1995 between AMP Incorporated and FiberCore Incorporated,
with form of Convertible Debenture Attached, as Exhibit A.
+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 FiberCore, Inc. to Techman to purchase up to
550,696 shares of Common Stock.
+10.31 Agreement dated July 1, 1994 between FiberCore Incorporated and
FiberCore Glasfaser Jena GmbH.
+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.
+10.33 Convertible Note Purchase Agreement and Convertible Promissory
Note between FiberCore, Inc. and Hedayat Amin-Arsala in the
amount of $200,000, each dated March 15, 1996.
+10.34 Joint Venture Agreement dated May 21, 1995 between the Company,
Techman and the other parties named therein.
+10.35 International Distributor Agreement between Techman and the
Company, dated November 1, 1995.
+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. 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 De Luca and Dr. M. Mahmud Awan dated November 27,
1996.
+10.46 Supply contract between AMP Incorporated and FiberCore, Inc.
dated July 29, 1996.
+10.47 Loan Agreement between FiberCore, Inc. and Berliner Bank AG for
the amount of DM 7,700,000 dated September 6, 1996.
+10.48 Grants Agreements between FiberCore Glasfaser Jena GmbH and the
Ministry of Economics and
66
<PAGE>
Infrastructure in the amount of DM 2,300,000 dated June 12, 1996
and December 30, 1995.
+10.49 Intercompany Loan Agreement between FiberCore, Inc. and FiberCore
Glasfaser Jena GmbH in connection with the loan from Berliner
Bank AG dated July 10, 1996.
+10.50 Form of Warrant issued by FiberCore, Inc. to Techman to exercise
up to 1,000,000 shares of Common Stock pursuant to the
International Distributor Agreement dated November 1, 1995.
+10.51 Note Purchase and Warrant Agreement between FiberCore, Inc. and
Bereshkai S. Aslami in the amount of $250,000 and granting
Warrants to purchase up to 115,220 shares of Common Stock.
+10.52 Note Purchase and Warrant Agreement between FiberCore, Inc. and
Elizabeth De Luca in the amount of $250,000 and granting Warrants
to purchase up to 115,220 shares of Common Stock.
+10.53 Forbearance Agreement between ALT and CDA Authority and granting
of Warrants dated August 27, 1996.
+10.54 Forbearance Agreement between ALT and CII and granting of
Warrants dated July 31, 1996.
+10.55 Long Term Preform Supply Agreement between FiberCore, Inc. and
Fiber Optic Industries (Pvt.) Limited dated July 25, 1996.
+10.56 Long-term supply agreement between FiberCore, Inc. and Middle
East Optical Fiber Cable Co. (MEFC) dated November 1, 1996.
x10.57 Joint Venture Agreement dated November 17, 1997 between
FiberCore, Inc., Federal Power Sdn. Bhd., and PNB Equity Resource
Corporation Sdn. Bhd.
x10.58 Put Option Agreement dated November 17, 1997 between FiberCore,
Inc., Federal Power Sdn. Bhd. and PNB Equity Resource Corporation
Sdn. Bhd.
x10.59 Note Purchase and Warrant Agreement dated September 17, 1997
between FiberCore, Inc. and Income Partners LP.
x10.60 Note Purchase and Warrant Agreement dated September 17, 1997
between FiberCore, Inc. And Techman International Corporation.
x10.61 Note Purchase and Warrant Agreement dated April 16, 1997 between
FiberCore, Inc. and Techman International Corporation.
x10.62 Note Purchase and Warrant Agreement dated September 17, 1997
between FiberCore, Inc. and Mohd A. Aslami.
x10.63 Consulting Agreement dated January 1, 1997 between One Financial
Group Incorporated and FiberCore, Inc.
+14.0 Copy of patents purchased from Sico.
x22 List of subsidiaries of FiberCore, Inc.
x27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information
purposes only.
(b) REPORTS ON FORM 8-K
None.
67
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIBERCORE, INC.
(Registrant)
By: /s/ Mohd A. Aslami
--------------------------------------- March 26, 1998
Dr. Mohd A. Aslami
Chairman, Chief Executive Officer
and President (Principal Executive Officer)
By: /s/ Michael J. Beecher
--------------------------------------- March 26, 1998
Michael J. Beecher
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Mohd A. Aslami Chairman of the Board, March 26, 1998
- ------------------- President
Dr. Mohd A. Aslami Chief Executive Officer,
Director
(Principal Executive Officer)
/s/ Charles De Luca Executive Vice President March 26, 1998
- -------------------- Secretary and Director
Charles De Luca
/s/ Steven Phillips Director
- --------------------
Steven Phillips March 26, 1998
68
EXHIBIT 10.57
DATED THIS 17th DAY OF NOVEMBER 1997
BETWEEN
PNB EQUITY RESOURCE CORPORATION SDN. BHD.
(COMPANY NO 197031-X)
AND
FEDERAL POWER SDN., BHD.
(COMPANY NO. 17892-V)
AND
FIBERCORE INC.
*********************************
JOINT VENTURE AGREEMENT
*********************************
ABDULLAH, ABD. RAHMAN & CO.
(ADVOCATES & SOLICITORS)
17th Floor, Wisma Lee Rubber
Jalan Melaka
50100 Kuala Lumpur
(REF: AM/DL/SM/MISC/1703/97)
69
<PAGE>
JOINT VENTURE AGREEMENT
-----------------------
THIS JOINT VENTURE AGREEMENT (hereinafter referred to as the
"Agreement") is made and entered into this 17th day of November, 1997 Between
PNB EQUITY RESOURCE CORPORATION SDN. BHD. (COMPANY NO 197031-X) a company
incorporated in Malaysia and having its registered office at 4th Floor, Balai
PNB, 201-A, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia (hereinafter referred
to as "PERC") And FEDERAL POWER SDN. BHD. (COMPANY NO. 17892-V), a company
incorporated in Malaysia and having its registered office at Lot 8, Jalan Ragum
15/17, P.O. Box 7016, 40702 Shah Alam, Selangor Darul Ehsan, Malaysia
(hereinafter referred to as "FP"), jointly forming a Malaysian Consortium
(hereinafter referred to as "MC") And FIBERCORE INC., a Nevada corporation
incorporated under the laws of the United States of America with offices at 253
Worcester Road, P.O. Box 180, Charlton, Massachusetts 01507 United States of
Amenca (hereinafter referred to as "FCI").
WHEREAS, MC is interested in establishing a manufacturing facility for
optical fiber preforms and optical fiber (hereinafter referred to as the
"Products") in Malaysia; and
WHEREAS, FCI owns certain United States and other patents and possesses
extensive experience and know-how covering the manufacture of Products and
currently operates a production facility for the Products in Jena, Germany; and
WHEREAS, MC and FCI desire to establish a joint venture company
(hereinafter referred to as "FCM") to set up, own and operate a facility to
manufacture the Products in Malaysia;
NOW IT IS HEREBY AGREED as follows:
1. Definitions
-----------
In this Agreement unless the contrary intention appears
1.1 "Party " refers to any one of PERC, FP or FCI.
1.2 "Parties" refer to PERC, FP and FCI collectively.
1.3 "Completion Date" shall mean the date on which the parties
executed this Agreement.
1.4 "Product" refers to optical fiber and preforms.
1.5 "Board" or "Board of Directors" shall mean the Board of
Directors of FCM.
1.6 "Ringgit Malaysian and the symbol "RM" refers to the lawful
currency of Malaysia.
70
<PAGE>
1.7 US Dollar" and the symbol "US$" refers to the lawful currency
of the United States of Amenca.
1.8 The singular includes the plural and vice versa.
1.9 The masculine gender includes the feminine and neuter genders.
2.0 Words denoting person includes corporations and vice versa.
2. Formation of Company
--------------------
2.1 MC and FCI shall cause a company to be incorporated in
accordance with the laws of Malaysia, under the name FIBERCORE
(M) SDN. BHD. (hereinafter called "FCM").
2.2 Upon the execution of this Agreement and subject to the terms
and conditions hereinafter contained, the parties hereto shall
cause FCM and FCM shall inter alia carry out the joint venture
contemplated herein to carry on the business of manufacturing
distributing marketing exporting and sale of the FCM Products.
2.3 The parties hereto hereby agree that FCM shall be operated and
managed in accordance to the Memorandum and Articles of
Association of FCM and in accordance with the terms and
conditions herein contained.
2.4 In the event of any conflict between the provisions of the
Memorandum and Articles of Association of FCM and that of this
Agreement, the provisions of this Agreement shall prevail.
2.5 The parties hereto hereby covenant to do all acts and to
execute all documents and all that is necessary, through their
nominees on the Board of Directors of FCM or otherwise,
including but not limited to the amendment of the Memorandum
and Articles of Association of FCM to ensure consistency with
the terms of this Agreement, to give effect to the provisions
of this Agreement.
2.6 The main objective of FCM shall inter alia be:
(a) To manufacture, distribute, market and sell the
products in Malaysia.
(b) To export and sell the products worldwide through
such sales and distribution networks that have been
established by FCI in various countries worldwide or
that may be established by FCM in the future.
(c) To conduct research and develop projects related or
connected to the optical fiber and communication.
71
<PAGE>
(d) To do any other business incidental thereto
(hereinafter called the business").
2.7 Notwithstanding anything contained herein, the objects clause
of the Memorandum and Articles of Association of FCM shall
stipulate every possible kind of business that may be
undertaken by FCM
2.8 The parties hereto hereby agree and covenant with each other
that, unless otherwise stated in this Agreement, they will not
do any acts or take any action(s) which will be detrimental to
FCM contemplated herein.
2.9 FCM shall be in the business of manufacturing and marketing
optical fiber preforms and optical fiber and performing
directly related functions including, for example, research
and development projects.
2.10 The costs of preparing incorporation documents and related
contracts and this Agreement shall be advanced by the Parties,
subject to reimbursement by FCM.
3. Capitalization
--------------
3.1 FCM's initial share capital shall be Ringgit Malaysia Fifty
Two Million Thirty Seven Thousand Four Hundred and Eighty Six
(RM52,037,486) divided into ordinary shares and preference
shares as provided in Section 3.2 below.
3.2 The capital of FCM shall be apportioned, initially, as
follows:
PERC: 1,863,809 ordinary shares and 4,207,231 preference
shares for which it will pay Ringgit Malaysia Six Million
Seventy One Thousand and Forty (RM6,071,040).
FP: 5,964,190 ordinary shares and 13,463,138 preference shares
for which it will pay Ringgit Malaysia Nineteen Million Four
Hundred Twenty Seven Thousand Three Hundred and Twenty Eight
(RM19,427,328).
FCI: 8,147,509 ordinary shares and 18,391,609 preference
shares issued in exchange for technology as defined in Section
3.4 below, valued at Ringgit Malaysia Twenty Six Million Five
Hundred Thirty Nine Thousand One Hundred and Eighteen
(RM26,539,118).
3.3 At the Completion Date, PERC and FP shall purchase the
ordinary and preference shares by depositing a total of
Ringgit Malaysia Twenty Five Million Four Hundred Ninety Eight
Thousand Three Hundred and Sixty Eight (RM25,498,368) in FCM's
Malaysian bank account.
72
<PAGE>
3.4 At the Completion Date, FCI shall be issued the ordinary and
preference shares in Section 3.2 above in exchange for a
non-exclusive, royalty-free license for the technology
provided by FCI to FCM in accordance with a License Agreement
as in Exhibit "D" under which FCI shall provide its technology
to FCM.
3.5 During the first twelve (12) months after the Completion Date,
FCI shall have the right to subscribe up to 2,662,585
additional ordinary shares and 6,010,329 additional preference
shares for Ringgit Malaysia Eight Million Six Hundred Seventy
Two Thousand Nine Hundred and Fourteen (RM8,672,914).
3.6 The ordinary shares shall be voting, shares.
3.7 The preference shares shall be non-voting shares and shall be
converted into ordinary shares on a one preference share for
one ordinary share basis in accordance with the schedule and
achievement of certain bench marks as in Exhibit "C". The
conversion of each parties preference shares shall be
concurrent with the conversion of the other Parties'
preference shares in the same ratio as each Parties' initial
ordinary share ownership so as to maintain the initial
ownership percentage and ratio.
3.8 In the event that the preference shares are not converted into
ordinary shares in accordance with the schedule as in Exhibit
"C", the preference shares held by PERC and FP shall be
entitled to a preference dividend of nine percent
(9(degree)/O) on Purchase Price of preference shares (RM1.00
per share) for each year after Year 1" (as defined in the
Support Contract Exhibit "A") for as long as the preference
shares remain not converted.
3.9 The share capital of PERC and FP is subject to the Put Option
Agreement attached hereto as Exhibit `'F".
4. Condition Precedent
-------------------
4.1 Notwithstanding anything contained herein to the contrary the
joint-venture contemplated herein shall be conditional upon
the attainment of the written approvals of:
(a) The Ministry of International Trade & Industry
(hereinafter called "MITI") by FCM in respect of the
joint-venture contemplated herein subject to the
terms and conditions contained herein or such other
terms and conditions as may be reasonably acceptable
to the parties hereto.
(b) Such other governmental approval as may be necessary
from any competent authority in Malaysia in
connection with the joint venture contemplated herein
and FCI, PERC and FP participation in the equity
73
<PAGE>
4.2 FCI shall take all reasonable steps to submit the applications
for the approvals as soon as practicable after the execution
of this Agreement. PERC and FP undertake that they will take
all necessary steps to assist FCI in procuring the approvals
for FCM. FCM shall reimburse ail parties for all reasonable
costs and expenses incurred in relation to the approvals.
4.3 Upon the receipt by the parties hereto of the approvals, this
Agreement shall be unconditional (the date of which shall be
referred to as the Effective Date"). Provided always that if
the approvals or any one thereof shall be granted subject to
conditions attached to the approvals or any one thereof shall
be reasonably acceptable to the party adversely affected
thereby.
4.4 In the event that the approvals or any one thereof shall not
be obtained within one (1) year from the date of this
Agreement or such extended period as may be agreed in writing
by the parties hereto, any party hereto shall be entitled to
terminate this Agreement by notice in writing to the other
parties hereto and this Agreement shall thereafter have no
further force and effect and no parties hereto shall have any
claims against the other Parties in respect of this Agreement.
5. Management
----------
5.1 The registered office of FCM (Company No. 435423-P) shall be
at c/o Ontime Management Services, Suite 4.02, 4th Floor,
Wisma Yap Ka, No 480, 3rd Mile, Jalan Ipoh, 52100 Kuala
Lumpur, Malaysia or as the Board of Directors of FCM may
choose from time to time.
5.2 The Board of Directors of FCM shall be comprised of not more
than five (5) Directors. The Board shall have ultimate
responsibility for the management and operation of FCM and
shall act in accordance with the terms and conditions of the
Articles of Association
5.3 MC shall have the right to appoint two (2) Directors, each
Director to be appointed from PERC and FP. FCI shall have the
right to appoint three (3) Directors. The right to appoint
such Directors shall include the right to remove any director
so appointed and appoint other Director(s).
5.4 The travel expenses of Directors traveling on the business of
FCM shall be paid by FCM , but the Directors shall receive no
remuneration for their services, except as may be approved by
the Board of Directors of FCM in accordance with the laws of
Malaysia.
5.5 Three (3) Directors, of whom at least one shall be from MC and
two from FCI, shall constitute a quorum for Board meetings.
Board meetings shall be held quarterly, unless otherwise
decided by the Board.
74
<PAGE>
5.6 The Board of Directors shall appoint a Chairman who shall
serve in a non-executive capacity, at the discretion of the
Board.
5.7 At the Completion Date, the Board shall cause FCM to enter
into a Support Contract with FCI as in Exhibit "A", which
provides, among others things, for the management of FCM.
Pursuant to the Support Contract, FCI shall have the sole
responsibility for the management of FCM for the period
specified in the Support Contract. To implement the management
policy and initiatives contained in the management portion of
the Support Contract, the Board shall appoint the Chief
Executive Officer.
5.8 MC may propose to FCI a list of qualified candidates for the
position of Chief Financial Officer or any executives to be
employed by FCM.
5.9 MC shall have the right to inspect the books and records of
FCM.
5.10 All funds received by FCM shall be deposited in FCM's Malaysia
bank account. FCM's Board of Directors shall appoint the
authorized signatories to the account. The signatories to
cheque shall be in the manner as set out below:
(a) For amounts up to Ringgit Malaysia One Million
(RM1,000,000) two (2) signatories namely either the
Chief Executive Officer or the Chief Financial
Officer and other officer to be appointed by FCM's
Board of Directors
(b) For amounts exceeding Ringgit Malaysia One Million
(RM1,000,000) two (2) signatories namely one (1)
Director representing FCI and another Director
representing either PERC or FP
6. Financial Requirements
----------------------
6.1 As provided in Exhibit "A" the sum of US Dollars Three Million
Eight Hundred Thousand (US$3,800,000) shall be paid to FCI for
design services and contract management. The details of such
services shall be as in the Support Contract. Of that sum US
Dollars Five Hundred and Twenty Thousand (US$520,000) shall be
paid to FCI by FCM, in cash, within ten (10) days of the
Completion Date. The balance shall be paid in accordance with
the Support Contract.
6.2 As provided in Exhibit "B", the projected financial
requirements and project budget of FCM shall be based on data
available at the time the projections were prepared. It is
recognized that revisions will be required as more detailed
specifications are developed and as costs change with time
75
<PAGE>
6.3 As shown in Exhibit "B" the Project Budget shall include
estimates of the cost of machinery and equipment to be
installed in FCM's facility. Within thirty (30) days after the
completion date, these estimates shall be revised by FCI and
presented to FCM's Board of Directors for approval.
6.4 As provided in Exhibit "B" there shall be a firm bank loan
commitment, in the amount of US Dollars Forty Million
(US$40,000,000) or equivalent in Ringgit Malaysia representing
a portion of the project financing.
7. Warranties, Representations and Undertakings
--------------------------------------------
7.1 PERC and FP represent and warrant that they are entities
legally constituted under the laws of Malaysia and that they
and their representatives, individually, are authorized to
take the actions specified in this Agreement.
7.2 FCI represents and warrants that it is a duly existing
corporation formed and in good standing under the laws of
Nevada and that it and its representatives, individually, are
authorized to take the actions specified in this Agreement.
7.3 Each Party undertakes to advise the other Parties and take
appropriate remedial action in the event that any
representation or warranty by such Party contained in Section
7.1 and 7.2 become untrue during the term of this Agreement.
7.4 Under no circumstances shall PERC or FP take any action or
cause FCM to take any action that would cause any Party, or
any affiliated or associated person or company to be deemed in
violation of the United States Export Administration Act or
those provisions of the Federal Income Tax Law or Regulations,
non-compliance with which would increase or accelerate the
U.S. tax liability or that of any affiliated or associated
person or company with respect to income earned under this
Agreement or pursuant to the transactions contemplated by this
Agreement. FCI represents and warrants that the proprietary
information referred to in Section 15.1 and 15.2 are the
original works of authorship of FCI and that it owns the
proprietary information, including all intellectual property
rights, free and clear of all liens, encumbrances, and claims
or demands of third parties; and that it knows of no patent,
trade secret rights or copyrights of others which would be
infringed by acts contemplated by this Agreement.
7.5 Each Party undertakes and agrees that it shall not, and shall
not permit FCM directly or indirectly to, offer, pay, promise
to pay or authorize the payment or giving of any money, or
anything of ,value (i) to any official of any government of
any instrumentality thereof, or (ii) to any person, while
knowing or having reason to know that all or a portion of such
money or thing of value will be offered, given, or promised,
directly or indirectly, to any official of any government or
any instrumentality thereof, for the purposes of:
76
<PAGE>
(a) influencing any act or decision of such official in
his official capacity including a decision to fail to
perform his official functions or
(b) inducing such official to use his influence with any
government or any instrumentality thereof to affect
or influence any act or decision of such government
or instrumentality, in order to obtain or retain
business for or with, or direct business to, any
person.
7.6 Under no circumstance may one Party sign any document, perform
any act, or make any commitment, undertaking, warranty or
representation on behalf of the other Parties without the
express written consent of such other Parties. No Party may
sign any document, perform any act, or make any commitment,
understanding, warranty or representation on behalf of FCM
without the express prior written consent of the other
Parties, except as provided in the Support Contract with
respect to FCI.
7.7 Each Party agrees to indemnify and hold harmless the other
Parties and FCM from and against any loss, liability, cost or
expense any of them may suffer or incur as a result of the
indemnifying Party's breach of any representation, warranty or
undertaking contained in this Agreement.
8. Mutual Covenants Regarding Business Opportunities and Dealings
with FCM
8.1 No Party shall make any representation to the other Parties as
to the likely success or profitability of FCM and no Party
shall be responsible to the other for any losses suffered or
liabilities incurred by FCM, except to the extent he or it is
liable therefor by virtue of holding its interest in FCM.
8.2 Except as otherwise provided for in the Support Contract, FCM
may contract, upon terms which are commercially competitive,
with any Party for the supply of goods and services including
without limitation;
(a) design, engineering and construction services;
(b) construction equipment materials, supplies and tools;
(c) housing and office space;
(d) translation services; and
(e) technical assistance and consulting.
8.3 FCI shall retain the right to enter into ventures similar to
FCM in areas outside Malaysia. FCI shall give FCM the right of
first offer to participate in any such new ventures in the
ASEAN area, unless such participation inhibits the new venture
from being consummated.
77
<PAGE>
9. Exclusion 0f Partnership
------------------------
9.1 Nothing contained or implied in this Agreement shall
constitute or be deemed to constitute a partnership between
the parties hereto and neither party shall have any authority
to bind or commit the other party.
9.2 Except as specifically provided in this Agreement:
(a) Nothing herein contained shall be deemed to
constitute any party the legal representative or
agent of the other party(s) or any of them; and
(b) No party shall have any authority to act for or to
assume any obligation, responsibility or liability in
behalf of the other party(s) or any one of them FCM.
10. Dividends
---------
10.1 It is hereby agreed by the parties hereto that all net profits
of FCM (after setting aside a portion thereof as reserves) for
each and every accounting year shall be distributed by way of
dividends to its shareholders PROVIDED ALWAYS all current and
accumulated losses, actual and contingent, of FCM shall have
first been absorbed and taken into account AND PROVIDED ALWAYS
the amount of the dividends to be declared by FCM shall be
agreed by the parties hereto in writing. The portion of net
profits to be set aside as reserves shall be determined by the
Board of Directors of FCM.
10.2 Any sums which FCM shall be required to withhold under the
Malaysian Tax law for the account of each of the parties
hereto in connection with the dividends payable shall be
withheld and shall be paid by FCM on behalf the parties hereto
to the appropriate tax authorities of Malaysia. FCM shall
furnish to the parties hereto the official tax receipts issued
by such authorities for such taxes paid by FCM on behalf of
the parties hereto.
11. Shareholders Consent
--------------------
11.1 The Board of Directors of FCM shall obtain the prior unanimous
approval of the Shareholders' in general meeting in respect of
the following matters:
(a) Amendment to the Memorandum and Articles of
Association of FCM including the increase or
reduction of the authorized and issued share capital
or the variation of any rights attaching to such
shares;
(b) Except as provided in Section 3.5 any new issue of
shares of FCM;
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<PAGE>
(c) The amalgamation, merger or subject to Section 1 102
or Section 12, the winding-up of FCM;
(d) Formation of any subsidiary or investment in another
company or any other form of business organization
where (i) the purposes of formation is other than for
purposes of marketing and sourcing raw materials and
(ii) which investment exceeds more than ten percent
(10%)of the net tangible asset value of FCM based on
the latest audited accounts of FCM;
(e) FCM entering into partnership;
(f) The declaration and distribution of dividends of
fifty percent (50%) or more of the net profits of
FCM;
(g) The (i) making of any agreement, deed, guarantee or
contract whatsoever not in the ordinary course of
business of FCM which values in excess of Ringgit
Malaysia Five Million (RM5,000,000) (ii) the
borrowing from any third party providing any
guarantee or indemnity for a third party's obligation
not in the ordinary course of business of FCM which
values in excess of Ringgit Malaysia Five Million
(RM5,000,000) or (iii) creation of mortgages,
charges, pledges or other securities not in the
ordinary course of business of FCM which values in
excess of Ringgit Malaysia Five Million
(RM5,000,000). Without limiting the generality of
ordinary course of business", the aforesaid
transactions shall exclude any transaction for the
sale and purchase of stock in trade (including raw
materials, semi-finished products);
(h) The purchase, sale, transfer or disposal of any
property or other assets:
(i) during the Construction Stage with a value
excess of Ringgit Malaysia Ten Million
(RM10,000,000) only. "Construction stage"
means the stage of the joint venture where
the factory of FCM for the manufacture of
the FCM's Products is being constructed;
(ii) during the Operation Stage, with a value in
excess of Ringgit Malaysia Five Million
(RM5,000,000) only. "Operation Stage" means
from the commencement of the business;
11.2 Should there be a deadlock (as defined below) as to the
passing of resolutions requiring unanimous approval pursuant
to Section 11.1, any Proposing Party (as defined below) may
give notice to FCM and the board of directors of FCM shall
convene an extraordinary general meeting ("EGM") to wind up
FCM, any Proposing Party may elect to purchase the shares of
all the other parties in accordance with Section 11.6,
whereupon the EGM to be convened for winding up of FCM shall
lapse but without prejudice to any Proposing Party giving a
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<PAGE>
further notice. In this Section, the expression "deadlock"
means any proposed resolution pursuant to Section 11.6 which
is proposed and/or supported by shareholders (singularly
"Proposing Party") holding in aggregate sixty percent (60%) or
more the total issued and paid up share capital in FCM, but
which resolution is opposed by the remaining shareholders at
two (2) consecutive meetings of the shareholders.
11.3 To the extent permitted by-law, the shareholders may pass
resolutions without a meeting upon written consent of
shareholders representing 70% or more of the then outstanding
shares.
11.4 At all general, special and/or annual meetings of the
shareholders, shareholders representing 60% of the outstanding
shares, in person or by proxy, shall constitute a quorum.
11.5 If within one hour from the time appointed for the meeting a
quorum is not present, the meeting shall stand adjourned to a
date which is seven (7) days from the date of such meeting at
the same time and place. If at the adjourned meeting the
quorum is still lacking after one hour from the time appointed
for holding the adjourned meeting, the members holding in
aggregate 60% of the shares in FCM in person or by proxy shall
constitute a quorums.
11.6 The purchase of shares by the proposing Party pursuant to
Section 11.2 shall be in accordance with the following
provisions:
(a) The Proposing Party shall give notice in writing to
FCM of its desire to purchase the shares stating the
sum which it fixes as the fair value of the shares.
The fair value so fixed by the Proposing Party shall
be determined by an intentionally recognized
investment banking firm as to be the fair value
thereof as between a willing buyer and a willing
seller having taken into consideration, inter alia,
the relative interests of the shareholders, FCM's
earnings potential, goodwill, book value and
contingencies at the relevant time.
(b) The costs of the values certification shall be done
by the Proposing Party and a copy of such
certification shall be given to FCM. The notice
hereunder shall appoint FCM as the Proposing Party's
agent for the purchase of the shares specified
therein at the price so fixed.
(c) The offer made by such notice shall remain open for
at least thirty (30) days. FCM upon receipt of the
Proposing Party's notice as aforementioned in Section
11.6(a) hereof shall forthwith by notice in writing
inform the other shareholders ("Offerees") of the
Proposing Party's offer.
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<PAGE>
(d) If all (and not part only) of the shares are agreed
to be sold by the offerors within the period of
thirty (30) days after such notice as aforesaid has
been given and notice of such acceptance has been
given to the Proposing Party, the Offerees shall be
bound upon the purchase price for all (and not part
only of the shares being paid to it within thirty
(30) days from the date of the last acceptance by the
Offerees, to transfer the shares concerned to the
Proposing Party. If the Proposing Party is required
to obtain approval from the relevant authorities to
purchase the said shares, and provided that the time
for obtaining all the approvals shall not be later
than ninety (90) days from the date of the last
acceptance or such extended time as the Proposing
Party or the Offerees may agree upon in writing, the
time for payment of the purchase price and transfer
of the shares hereunder shall be thirty (30) days
from the date all approvals are obtained.
(e) The parties hereto shall take all steps necessary to
ensure that the purchaser of shares of FCM pursuant
to this Section 11.6 is promptly registered by FCM as
the holder of those shares.
12. Termination
-----------
12.1 This Agreement shall take effect upon execution and shall
continue in full force and effect until FCM shall be wound up
or otherwise cease to exist as a separate corporate entity
unless terminated earlier pursuant to Clause 12.2 hereof.
12.2 Notwithstanding anything contained herein to the contrary,
this Agreement may be terminated forthwith by FCI, PERC or FP
by notice in writing to the other parties:
(a) FCI, PERC or FP shall:
(i) commit any breach of its obligations under this
Agreement and shall fail to make good such breach
within thirty (30) days of receipt of notice from the
other party requiring it to do so; or
(ii) go into liquidation(except in the case of voluntary
liquidation for the purpose of reconstruction or
amalgamation upon terms previously approved in
writing by the other parties) or be declared bankrupt
or if receiver is appointed over any of its assets;
or
(b) If any order is made or a effective resolution is passed or
analogous proceeding are taken for the winding up of FCM
except as provided in Section 11.2 and 11.6, above; or
(c) If all or substantially all of the assets of FCM are
expropriated or Otherwise placed under the direct control of
any government or if FCM is unable to pay its
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<PAGE>
debts or make a general assignment for the benefit of its
creditors or has a receiver or manager appointed over all or a
substantial part of its undertaking or assets; or
(d) If any relevant approvals of license with respect to the joint
venture, Business or FCM is not received.
13. Assistance by the Parties
-------------------------
13.1 At the request of FCI or otherwise provided in this Agreement.
MC shall provide assistance to FCM in connection with the
start-up and operation of FCM, subject to such additional
terms and conditions as the Parties may from time to time
agree. Such assistance may include but not be limited to:
(a) locating land for the facility;
(b) obtaining necessary licenses or permits required by
the Malaysian government;
(c) participating in management of FCM through the Board
of Directors and other means as defined in the
Articles of Association;
(d) recruiting local personnel;
(e) providing advice to the Board and the executive
officer(s) as to how problems involving any Malaysian
government official or agency should best be
resolved; and
(f) providing advice to the Board and the executive
officer(s) as to how problems involving any Malaysian
national or local resident should best be resolved.
13.2 FCI shall provide ongoing assistance to FCM under the Support
Contract as provided in Exhibit "A".
14. Responsibilities of FCM
-----------------------
14.1 Immediately upon execution of this Agreement and the formation
of FCM the Board of Directors shall cause FCM to:
(a) with FCI, identify and select a suitable site for
current and future needs and select a contractor to
construct a building to specifications developed by
FCI;
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<PAGE>
(b) as a priority, obtain Multimedia Super Corridor
status approval. Such status shall be obtained if at
all possible prior to construction of the facility;
(c) develop, with FCI, a schedule for construction of the
facility and for installation and commissioning of
all equipment recruit personnel as required; and
(d) obtain all necessary governmental licenses and
permits.
14.2 At the direction of the Board and when appropriate, FCM shall
use its best efforts to be publicly listed on an appropriate
stock exchange.
14.3 To assure that FCM keeps pace with state of the art
technology, FCM will fund ongoing research and development by
FCI at 3% for year two (2) and year three (3) and at 5%
thereafter of its gross sales subject to the approval of FCM's
Board. FCI shall grant FCM a royalty-free license covering all
improvements to the technology at FCM such as upgrading and
training, documentation and new process methods, new product
development such as multi-mode fiber, etc.
15. Confidentiality
---------------
15.1 FCI has developed, in the course of its business, a number of
trade secrets, including formulas, methods, processes,
techniques, designs, information, knowledge, know-how and
trade practices in various forms, including computer software
(hereinafter referred to as "Proprietary Information").
Notwithstanding anything to the contrary contained in this
Agreement, the Parties agree that FCI is and shall remain, at
all times, the sole owner of all Proprietary Information that
the Proprietary Information shall be made available to FCM by
way of the License Agreement, and that the Proprietary
Information shall be returned to FCI as provided in Section
17. Neither MC nor FCM shall disclose Proprietary Information
except as permitted in Section 15.2 below. Proprietary
Information shall not include any information which is
generally available for public use, unless such information
has become available to the public due to unauthorized
disclosure of such information by a Party or FCM.
15.2 If any Proprietary Information is (or has, prior to the date
of this Agreement, been) communicated by FCI or FCM to another
Party the following provisions shall apply:
(a) the receiving Party shall take every reasonable
precaution to safeguard and keep secret all such
Proprietary Information and shall comply with all
reasonable and specific precautions which may be
requested by FCI or FCM as to its non-disclosure; and
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<PAGE>
(b) the receiving Party will disclose Proprietary
Information only to such of its employees who require
the information in the performance of their duties,
and all personnel likely to receive Proprietary
Information shall be advised of its secret and
confidential nature and of the restrictions on its
use and further disclosure.
15.3 Section 15 shall survive the termination of this Agreement.
16. Transfers, Termination
----------------------
16.1 This Agreement shall remain in full force and effect with
respect to each Party until such time as this Agreement is
terminated pursuant to this Section or as otherwise provided
herein or that Party ceases to have a stock ownership interest
in FCM or FCM is dissolved, whichever occurs first;
16.2 No Party shall sell, pledge, devise, give or otherwise
transfer any of its shares to any third party without the
prior written consent of the other Parties. Any such transfer
or attempted transfer shall be null and void.
16.3 Unless otherwise herein expressly provided, no Party which has
transferred his or its shares in accordance with the
provisions of this Agreement shall be bound by its terms and
conditions after the date of such transfer, provided that the
Party to which such shares have been transferred agrees in
writing with the other Parties, in a form reasonably
acceptable to the other Parties, that the transferee shall be
bound by the terms and conditions of this Agreement.
16.4 If FCM is dissolved or liquidated for any reason, this
Agreement shall be terminated automatically at the end of such
liquidation except for the obligations under any provisions
hereof which are expressed to survive this Agreement including
but not limited to the terms contained in Section 15.
16.5 Any disagreement between the Parties shall be resolved in
accordance with and pursuant to Section 21.
16.6 In the event that FCI is acquired by another party, MC shall
have the right of the first offer to sell its shares in FCM.
16.7 The restriction contained in this Section 16 shall not apply
to any transfer to (i) in the case of PERC and/or FP to FCI in
accordance with the terms of the Put Option Agreement, any
(ii) by PERC, to its related corporations within the meaning
of the Malaysian Companies Act 1965 and it is hereby agreed
that PERC may in addition by notice to the other parties
transfer the whole of its shareholding to any unit trust
managed by PERC's holding company, Permodalan Nasional Berhad
("PNB") or managed by any of PNB's wholly owned subsidiaries.
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17. Procedure Upon Termination
--------------------------
17.1 In the event a Party fails to perform any of its obligations
under this Agreement subject to reasonable time to remedy such
default whether this Agreement is terminated or not, the other
Party shall be entitled to recover from the defaulting Party
reasonable attorney's fees on a solicitor and client basis and
necessary disbursements in addition to any other relief to
which it may be entitled.
17.2 Upon termination of this Agreement, the Parties shall cause
FCM to promptly return to FCI all relevant documents, data,
drawings, sketches and other information disclosed to FCM by
FCI in accordance with this Agreement or Technical Assistance
Agreement, and further cause FCM to stop its business which
used the technical assistance. Upon termination of this
Agreement, all relevant documents, data, drawings, sketches
and other information generated at FCM shall be owned by and
promptly delivered to FCI.
17.3 In the event that the Parties shall elect to dissolve FCM upon
the termination of this Agreement, then the Parties shall
proceed as promptly as practicable to wind-up the affairs of
FCM and distribute its assets. A final accounting shall be
made by the Parties and FCM's auditors shall review the
financial accounting and shall render their opinion with
respect thereto.
17.4 In case at the time of termination of this Agreement, FCI is
required by governmental order or court to transfer its shares
to MC or in case that the Parties agree that FCI's shares be
transferred to MC, the price of the shares shall be determined
on going concern basis by an independent internationally
recognized certified public accountant acceptable to the
parties.
18. Force Majeure
-------------
18.1 No Party shall be liable for the non-performance or for delays
in the performance of this Agreement owing to compliance with
policies, laws, orders or regulations of Malaysia or the
United States of America or owing to acts of God, wars, armed
conflicts, riots, embargoes, sabotage, blockades, epidemics,
hijackings, kidnappings, other acts of terrorism, strikes and
other labor disturbances or any other cause beyond the
reasonable control of that Party
19. Fees and Costs: Taxes
---------------------
19.1 All costs paid in connection with the preparation of this
Agreement shall be borne by FCM. If MC or FCI incur costs in
connection with the preparation of this Agreement, they shall
be reimbursed by FCM. Such reimbursement to MC shall not
exceed US$5,000. Reimbursement to FCI shall not exceed
US$10,000.
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<PAGE>
19.2 Except as otherwise expressly agreed in writing, eactl Party
shall be solely responsible for payment of any Malaysian tax
it is obligated to pay by reason of its participation in FCM.
Each Party may authorize FCM to make such payments for the
Party's account and FCM shall be required to provide the Party
with proper accounting for such payments.
20. Governing Law
-------------
20.1 This Agreement shall be governed by and construed in
accordance with the laws of Malaysia. Nothing in this
Agreement shall be construed to require FCI to take or omit to
take any action if such act or omission is contrary to the
laws of Malaysia.
21. Dispute Resolution
------------------
21.1 The parties hereto shall first use their endeavors to resolve,
through mutual consultation between the parties hereto without
involving any third party or parties, any disputes that might
arise between the parties hereto in relation to this
Agreement. All disputes which may arise under, out of, or in
connection with or in relation to this agreement and which
cannot be resolved amicably shall be submitted to the
arbitrator of Kuala Lumpur Regional Arbitration Center under
and in accordance with its rules at the date hereof. The
arbitration shall be conducted in the English Language. The
parties hereto agree that service of any notices in the course
of such arbitration at its addresses as given in this
Agreement shall be valid and sufficient, the parties hereto
agreeing to submit to the jurisdiction of such arbitration and
to any award thereunder. This Agreement shall be governed by
and construed and enforced in accordance with the laws of
Malaysia.
22. Notices
-------
22.1 Any notices given hereunder shall be deemed to be sufficiently
given if in writing and delivered by postpaid registered mail
or international air courier or facsimile addressed as
follows:
(i) in the case of PNB Equity Resource Corporation Sdn.
Bhd.:
Balai PNB
4th Floor
201-A, Jalan Tun Razak
50400 Kuala Lumpur, Malaysia
FAX: 03-261-0963,
Attention: Mior Abdul Rahman/Chief Operating Officer
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<PAGE>
(ii) in the case of Federal Power. Sdn. Bhd.:
Lot 8, Jalan Ragum 15/17
P.O. Box 7016
40702 Shah Alam
Selangor Darul Ehsan, Malaysia
FAX: 03 559-8020
Attention: Misron Bin Yusof/Managing Director
(iii) in the case of FIBERCORE, INC.
253 Worcester Road
P.O. Box 180
Charlton, Massachusetts 01507
United States of America
FAX: (508) 248-5588
Attention: Mohd A. Aslami/Chairman/CEO
or to such other address or facsimile number or person as a
Party may hereafter designate.
22.2 A notice shall be deemed to have been given and received: (i)
when left at the appropriate address if sent by registered
mail or international air courier; or (ii) when actually
received or when dispatched and safe receipt is acknowledged
by the receiving facsimile machine, if sent by facsimile.
23. Effect of Headings
------------------
23.1 The headings used throughout this Agreement are inserted for
reference purposes only and are not to be considered or taken
into account in construing the terms and provisions of any
paragraph nor to be deemed in any way to qualify, modify or
explain the effects of any such provisions or terms.
24. Miscellaneous
-------------
24.1 In the event of any conflict or inconsistency between the
provisions of this Agreement and the Articles of Association
of FCM, the following order of precedence shall prevail as
between the Parties: this Agreement and then the Articles of
Association and for the purpose of avoiding doubts the
provision of this agreement shall prevail. This Agreement also
shall prevail over Put Option Agreement, Support Contract
Agreement and Technology License Agreement in the event of any
conflict
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<PAGE>
24.2 If any provisions of this Agreement are found to be
inconsistent with Of void under applicable law, the validity
of the remaining provisions shall not be adversely affected.
In such case the Parties shall re-negotiate in good faith
concerning the ineffective provision with the object of
replacing it as closely as possible with a provision affording
the same basic rights, obligations and economic effects, both
to the Parties and to FCM.
24.3 This Agreement constitutes the full understanding and entire
agreement among the Parties and defines all rights granted
herein and all obligations assumed by each party at the date
of execution of this Agreement. No modification or amendment
to this Agreement shall be effective as to any Party who has
not consented thereto in the form of a written addendum to
this Agreement signed by the authorized representative of that
Party.
24.4 This Agreement shall inure to the benefit of and be binding
upon the Parties and their respective heirs, successors and
permitted assigns.
24.5 The Parties declare that they have not concluded, and shall
not conclude, any contracts or agreements which are
inconsistent with the provisions of this Agreement.
24.6 This Agreement has been prepared and executed by the parties
in the English language in seven (7) original counterparts.
Unless mutually agreed otherwise, the English text shall
govern and each document, certificate, statements report,
accounts, agenda, minutes and other written material referred
to in this Agreement, shall be in the English language or
shall be accompanied by a certified English translation
thereof.
24.7 The failure of any Party to enforce any of the provisions of
this Agreement at any time shall not be construed to be a
waiver of such provision unless so notified by such Party
explicitly in writing. No waiver of any breach of this
Agreement shall be held to be a waiver of any other breach.
24.8 FCM shall act in full compliance with the provisions of this
Agreement and shall have full responsibility for and assume
all the risks of all matters relating to the business scope of
FCM described in Section 2.6 hereof. For the ratification of
this Agreement by FCM, the Parties shall cause this Agreement
to be signed by a duly authorized officer of FCM upon
incorporation of FCM and thereafter FCM shall be deemed to be
a party to this Agreement and shall be bound by the terms and
conditions thereof in so far as the same applies to it.
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<PAGE>
24.9 Nothing in this Agreement shall be construed to imply the
existence of a partnership between the Parties other than as
shareholders in FCM in the terms of this Agreement or to make
one Party the representative or agent of the other Party and
no Party shall so hold itself out, nor shall any Party be
liable Of bound by any act or omission of the other Party.
IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands and seal
the day and year first above written.
The Common Seal of )
PNB EQUITY RESOURCE )
CORPORATION SDN. BHD. )
(COMPANY NO 197031-X) was )
hereunto duly affixed in the )
presence of: )
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Dato Mohd Hilmey bin Modh Taib /s/ Meriam Binte Haji Jaacob
----------------------------------- -----------------------------------
Director Secretary
Name: Dato Mohd Hilmey bin Modh Taib Name: Meriam Binte Haji Jaacob
Nric No: 4460859 Nric No.: 2439153
The Common Seal of )
FEDERAL POWER SDN. BHD. )
(COMPANY NO. 17892-V) was )
hereunto duly affixed in the )
presence of: )
/s/ Tan Sri Abu Zarim bi Oman /s/ Ahmad @ Misron bin Yusof
------------------------------ -----------------------------
Chairman Director
Name: Tan Sri Abu Zarim bi Oman Name: Ahmad @ Misron bin Yusof
Nric No: 240126-05-5035 Nric No.: 430618-01-5037
Signed by MOHD. AFZAL ASLAMI )
PASSPORT NO: 014068651 (USA) for )
and on behalf of FIBERCORE INC. )
in the presence of: ) /s/ Mohd Aslami.
-----------------------------
MOHD. AFZAL ASLAMI
PASSPORT NO: 014068651 (USA)
/s/ Trevor Kidd
------------------------------
TREVOR JOHN KIDD
PASSPORT NO: 004354001 (GREAT BRITAIN)
</TABLE>
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<PAGE>
FIBERCORE (M) SDN. BHD. HEREBY RATIFIES AND AGREES TO BE BOUND BY THIS AGREEMENT
AS IF IT WERE A PARTY HERETO.
/S/ DR. MOHD A. ASLAMI /S/ IR AHMAD/@ MISRON BIN YUSOF
- --------------------------- --------------------------------
Dr. Mohd A. Aslami Ir Ahmad/@ Misron bin Yusof
Director Director
90
EXHIBIT 10.58
EXHIBIT "F"
-----------
DATED THIS 17TH DAY OF NOVEMBER 1997
BETWEEN
FIBERCORE INC.
AND
PNB EQUITY RESOURCE CORPORATION SDN. BHD.
(Company No. 197031-X)
AND
FEDERAL POWER SDN. BHD.
(Company No. 17892-V)
***************************************
PUT OPTION AGREEMENT
***************************************
ABDULLAH, ABD. RAHMAN & CO.
(Advocates & Solicitors)
17th Floor, Wisma Lee Rubber
Jalan Melaka
50100 Kuala Lumpur
(REF: AM/DL/SM/MISC/1703/97)
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<PAGE>
THE PUT OPTION AGREEMENT is made the 17TH day of NOVEMBER 1997 BETWEEN
FIBERCORE INC., a Nevada corporation under the laws of the United States of
America with offices at 253 Worcester Road, P.O. Box 180, Charlton,
Massachusetts 01507 United States of America (hereinafter referred to as "FCI")
and PNB EQUITY RESOURCE CORPORATION SDN. BERHAD (COMPANY NO. 197031-X) a company
incorporated under the laws of Malaysia with its registered office at 4th Floor,
Balai PNB, 201-A, Jalan Tun Razak, 50400 Kuala Lumpur (hereinafter called
"PERC") of the first part, FEDERAL POWER SDN. BHD. (COMPANY NO. 17892-V) a
company incorporated in Malaysia with its registered office at Lot 8, Jalan
Ragum 15/17, P.O. Box 7016, 40702 Shah Alam, Selangor Darul Ehsan (hereinafter
referred to as "FP").
WHEREAS
A. FIBERCORE (M) SDN. BHD. (hereinafter "called the joint-venture
Company"), incorporated in Malaysia, has an authorized share capital of
Ringgit Malaysia One Hundred Million (RM100,000,000) divided into
30,700,000 ordinary shares of RM1.00 each and 69,300,000 convertible
preference shares of per value RM0.05 each. The initial paid up capital
of the Company is Ringgit Malaysia Fifty Two Million Thirty Seven
Thousand Four Hundred and Eighty Six (RM52,037,486) divided into
15,975,508 ordinary shares of par value at RM1.00 each and 36,061,978
preference shares of par value at RM1.00 each.
B. The shareholders of a Joint Venture Company have entered into the Joint
Venture Agreement of even date (hereinafter referred to as the
Joint-Venture Agreement") under which the parties thereto have agreed
that the issued and paid up capital of the Joint Venture Company shall
be Ringgit Malaysia Fifty Two Million Thirty Seven Thousand Four
Hundred and Eighty Six (RM52,037,486) as follows:
<TABLE>
<CAPTION>
NO. OF SHARES PERCENTAGE
------------- ----------
ORDINARY % PREFERENCE %
-------- - ---------- -
<S> <C> <C> <C> <C>
FCI 8,147,509 51.00 18,391,609 51.00
FP 5,964,190 37.00 13,463,138 37.00
PERC 1,863,809 12.00 4,207,231 12.00
----------- ------- ----------- -------
15,975,508 100.00 36,061,978 100.00
</TABLE>
C. In accordance with the terms of the Joint-Venture Agreement FCI has
agreed to grant to PERC and/or FP a Put Option requiring FCI to
purchase all or any of PERC's and/or FP shares in the joint venture
Company on the terms contained herein. This Put Option is conditional
upon the joint-venture Company being unable to produce market
acceptable product as defined in Exhibit "C" of the Joint-Venture
Agreement after commissioning of the facility.
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<PAGE>
D. This Put Option Agreement shall be null and void upon the conversion of
the preference shares in accordance with Section 3.7 and Exhibit "C" of
the Joint Venture Agreement
SECTION 1 INTERPRETATION
--------------
1.1 This Agreement is divided into Section and the Sections are divided
into Clauses.
1.2 In this Agreement, except where the context otherwise requires:
"THE JOINT VENTURE shall mean FIBERCORE (M) SDN. BHD.
COMPANY" (COMPANY NO. 435423-P) a company incor-
porated incorporated in Malaysia and
having its registered office at c/o
Ontime Management Services, Suite 4.02,
4th Floor, Wisma Yap Ka, No. 480, 3rd
Mile, Jalan Ipoh, 52100 Kuala Lumpur;
"FCI" shall mean FIBERCORE INC., a Nevada
corporation incorporated under the laws
of the United States of America with
offices at 253 Worcester Road, P.O. Box
180, Charlton, Massachusetts 01507 United
States of America:
"EXERCISE PERIODS" shall mean the period beginning on the
1st day of January 2002 and ending on the
31 st day of January 2004;
"EXERCISE PRICE" shall mean the amount by which the
Adjusted Cost exceeds the Dividends on
the relevant Settlement Date;
"ADJUSTED COST" shall mean the amount of any Malaysian
Ringgit paid as subscription money for
Optioned Shares, compounded annually at
the rate of nine per cent per annum (9%
p.a.) from the date of payment to the
relevant Settlement Date (calculated in
the case of any period of less than a
year on the basis that each complete
calendar month comprised in such period
shall be regarded as one-twelfth of a
year, and each day in such period which
is not part of a complete calendar month
comprised therein shall be regarded as
one 360th of a year);
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<PAGE>
"DIVIDENDS" shall mean the amount of Malaysian Ringgit
equal to cash dividends (if any) paid by
the joint venture Company on or in
respect of the Optioned Shares;
"NOTICE OF EXERCISE" shall mean a notice given by PERC and/or
FP to FCI pursuant to Clause 2.1.2, which
shall set forth as a minimum:
(a) the number of Optioned Shares to be
purchased by FCI and to be sold by PERC
and/or FP;
(b) the estimated amount of the relevant
Exercise Price;
(c) the relevant Settlement Date;
(d) the Settlement Place;
"OPTION" shall mean PERC's and/or FP right to sell
to FCI the optioned Shares as provided in
Clause 2.11;
"OPTIONED SHARES" shall mean:
(a) all Ordinary Shares and/or Preference
Shares subscribed by PERC and/or FP;
(b) all Ordinary Shares and/or Preference
Shares subscribed or equipped by PERC
and/or FP pursuant in relation to any
such ordinary Shares as are referred to
in paragraph (a) above;
(c) all Ordinary Shares and/or Preference
Shares received by PERC and/or FP as a
result of the subdivision for
consolidation of, or any capitalization
issued made in respect of, any such
Ordinary Shares as are referred to in
paragraph (a) or (b) above;
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<PAGE>
(d) all Ordinary Share and/or Preference
Shares received by PERC and/or FP in
exchange, replacement or substitution for
any such Ordinary Shares are referred to
in paragraph (a), (b) or (c) above;
"ORDINARY SHARES" shall mean Ordinary Shares at par value
RM1.00 each in the capital of the joint
venture Company (and shall include shares
in the capital of the joint venture
Company resulting from the subdivision or
consolidation of Ordinary Shares);
"PREFERENCE SHARES" shall mean the shares by whatever name
called, which does not entitle the holder
thereof to the right to vote at a general
meeting or to any right to participate
beyond a specified amount in any
distribution whether by way of dividend,
or on redemption, in a winding-up, or
otherwise;
"PERC" shall mean PNB EQUITY RESOURCE
CORPORATION SDN. BHD. (COMPANY NO.
197031-X) a company incorporated under
the laws of Malaysia with its registered
office at 4th Floor, Balai PNB, 201-A,
Jalan Tun Razak, 50400 Kuala Lumpur;
"FP" shall mean FEDERAL POWER SDN. BHD.
(COMPANY NO. 17892-V) a company
incorporated in Malaysia with its
registered office at Lot 8, Jalan Ragum,
15/17, PO Box 7016, 40702 Shah Alam,
Selangor Darul Ehsan.
"SETTLEMENT DATE" shall mean the date specified in the
relevant Notice of Exercise for making
payment of the relevant Exercise Prioe
and transferring title to the relevant
Optioned Shares which shall be neither
less than 180 days nor more than 365 days
after the relevant Notice of Exercise
shall have been given.
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<PAGE>
THE WORD "RINGGIT MALAYSIA" shall respectively denote Ringgit in the
AND THE SYMBOL "RM" currency of Malaysia;
1.3 "person" and words denoting persons include bodies corporate and vice
versa the masculine gender includes the feminine and the singular
includes the plural and vice versa
1.4 reference of Recitals, Sections and Clauses are to Recitals, Sections
and Clauses of this Agreement.
1.5 The heading and Index are inserted in this Agreement for convenience of
reference only and shall nor affect the construction of this Agreement.
SECTION 2 PUT OPTION
----------
2.1.1 PERC and/or FP shall have the right, at its option, at any time and
from time to time during the Exercise Period, to sell to FCI all or any
of the Optioned Shares.
2.1.2 PERC and/or FP shall exercise such right by serving a Notice of
Exercise or Notices of Exercise upon FCI at any time during the
Exercise Period
2.1.3 Upon such exercise by PERC and/or FP, FCI shall purchase the Optioned
Shares specified in the relevant Notice of Exercise, such Optioned
Shares to be purchased at the relevant Exercise Price provided that in
the event of any dispute or disagreement between the parties hereto
concerning the Exercise Price, such Exercise Price shall be fixed by
the auditors for the time being of the joint venture Company acting as
experts and not as arbitrators, whose decision shall be final and
binding on the parties hereto.
2.1.4 Each such purchase shall be completed as follows
2.1.4.1 FCI shall pay the relevant Exercise Price multiplied
by the number of Optioned Shares referred to in the
Notice of Exercise to PERC and/or FP on the
Settlement Date; and
2.1.4.2 upon compliance by FCI with paragraph 2 1041 above
PERC and/or FP shall deliver the respective share
certificate or certificates and executed transfer
form in respect of the Optioned Shares to or to the
order of FCI, such Optioned Shares to be free and
clear of all liens, charge and encumbrances.
2.2 Without prejudice to any remedies available to PERC and/or FP under
this Agreement or otherwise and notwithstanding the provisions of the
Joint Venture Agreement, in the event that FCI shall fail to purchase
and pay for all or any of the Optioned Shares as herein provided PERC
and/or FP shall be free to sell, transfer or otherwise dispose of such
unpurchased and unpaid Optioned Shares to any third party without
affecting any
96
<PAGE>
rights PERC and/or FP may have against FCI.
2.3 Except as provided in the Joint Venture Agreement, nothing in this
Agreement shall limit the right of PERC and/or FP, at any time, to
sell, transfer or otherwise alienate all or any the Optioned Shares of
which PERC and/or FP may for the time being, be the holder, as are not
then subject to a Notice of Exercise.
SECTION 3 SPECIFIC PERFORMANCE
3.1 If FCI shall refuse to comply with the terms of this Agreement PERC and/or
FP shall be entitled to seek the remedy of specific performance in law or
to damages.
SECTION 4 MISCELLANEOUS
4.1 Any notice to be given under this Agreement may be given by sending the
same by post by the quickest mail available or by telefax or fax (if
the addressee has telex or fax facilities) addressed to the party
concerned at its address as given in Section 4.3 or at such other
address and any notice so given shall be deemed to have been served ten
(10) days after it was posted or as the case may be, on the day on
which it was delivered by hand or sent by telex or fax as aforesaid.
4.2 Any legal process may be served by sending the same by registered post
by the quickest mail available addressed to the party concerned at its
address as given in Section 4.3 or at such other address and any notice
so given shall be deemed to have been served ten (10) days after it was
posted.
4.3 The addresses referred to in the preceding Sections are as follows:
FCI: 253 Worcester Road
P.O. Box 180
Charlton, Massachusetts 01507
United States of America
Fax: (508) 248-5588
FP: Lot 8, Jalan Ragum 15/17,
P.O. Box 7016
40702 Shah Alam,
Selangor Darul Ehsan, Malaysia
Fax: (03) 559-8020
PERC: 4th Floor, Balai PNB
201-A, Jalan Tun Razak
50400 Kuala Lumpur
Fax: (03) 2610963
97
<PAGE>
4.4 Any provision in this Agreement which is or may become prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, or unenforceability
without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction.
4.5 Save with the previous written consent of PERC and/or FP, FCI shall not
be entitled to assign or transfer in whole or in part any of its rights
or obligations hereunder.
4.6 Save as PERC and/or FP may otherwise agree, all notices certificates,
reports, information and documents given to PERC and/or FP pursuant to
this Agreement shall be in the English language.
4.7 This Agreement may be executed in several counter parts, each of which
shall be an original but all of which shall together constitute one and
the same instrument
4.8 This Agreement and its performance shall be governed and construed in
all respects in accordance with the laws of Malaysia.
4.9 FCI agrees that any legal action or proceeding arising out of or in
connection with this Agreement may be brought in the courts in Malaysia
and irrevocably submits to the non-exclusive jurisdiction of such
Court.
4.10 The submission to such jurisdiction shall not (and shall not be
construed so as to) limit the right of PERC and/or FP to take
proceedings against FCI in the United States of America or whatever
other jurisdiction it shall consider appropriate nor shall the taking
or proceedings in any one or more jurisdiction preclude the taking of
proceedings in any other jurisdiction, whether concurrently or not.
[Remainder of this page is intentionally left blank]
98
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands and seal
the day and year first above written
The Common Seal of )
PNB EQUITY RESOURCE )
CORPORATION SDN. BHD. )
(COMPANY NO 197031-X) was )
hereunto duly affixed in the )
presence of: )
<TABLE>
<CAPTION>
<S> <C>
/s/ Dato Mohd Hilmey bin Mohd Taib /s/ Miriam Binte Haji Jaacob
---------------------------------- -----------------------------------
Director Director/Secretary
Name: Dato Mohd Hilmey bin Mohd Taib Name: Miriam Binte Haji Jaacob
Nric No: 4460859 Nric No.: 2439153
The Common Seal of )
FEDERAL POWER SDN. BHD. )
(COMPANY NO. 17892-V) was )
hereunto duly affixed in the )
presence of: )
/s/ Tan Sai Abu Zarim bin Omar /s/ Misron bin Yusof
----------------------------------- --------------------------
Chairman Director
Name: Tan Sai Abu Zarim bin Omar Name: Misron bin Yusof
Nric No: 240726-05-5035 Nric No.: 430618-01-5037
Signed by MOHD. AFZAL ASLAMI )
PASSPORT NO: 014068651 (USA) for )
and on behalf of FIBERCORE INC. )
in the presence of: ) /s/ Mohd Aslami.
----------------------------
MOHD. AFZAL ASLAMI
PASSPORT NO: 014068651 (USA)
/s/ Trevor J. Kidd
-----------------------------------
TREVOR JOHN KIDD
PASSPORT NO: 004354001 (GREAT BRITAIN)
</TABLE>
99
EXHIBIT 10.59
NOTE PURCHASE AND WARRANT AGREEMENT
THIS AGREEMENT made as of this 17th day of September, 1997 between
Income Partners LP (the "Purchaser") and FIBERCORE, INC. and its affiliates (the
"Company") a Nevada Corporation.
WHEREAS, the Company is desirous of obtaining working capital through
the short-term financing of certain of its assets,
WHEREAS, the Company is willing to issue certain short-term, secured
promissory notes (the "Notes") with warrants to several purchasers, in order to
obtain such working capital, and
WHEREAS, each such purchaser who acquires the Notes will be subject to
the same Note Purchase and Warrant Agreement.
NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the parties agree as follows:
1. Offer
-----
1.1. The Purchaser hereby agrees to purchase the Note subject to the
conditions hereinafter set forth:
Upon execution and delivery of this Agreement by both parties and the
execution and delivery of the Note (Exhibit A) by the Company to the Purchaser,
the Purchaser will commit to pay to the Company up to Fifty Thousand ($50,000)
dollars, in not more than four (4) equal monthly installments of Twelve-Thousand
Five Hundred ($12,500) dollars, with the first installment due and payable on
the date hereof. The amount of Purchaser's outstanding commitment under this
Agreement, at any time, will be Purchaser's pro-rata participation in the
aggregate amount of all Notes sold under the same terms and conditions, less the
sum of (a) Purchaser's pro-rata participation in the aggregate amount of funds
received under Section 1 (a) and (b) for all Notes and (b) Purchaser's pro-rata
participation in the aggregate amount funded.
1.3. The Company grants the Purchaser warrants (the "Warrant") to
purchase common stock of the Company for a purchase price of $.6875 per share,
(the closing price of the Company's common as of the date hereof), exercisable
in whole or in part at any time. Each Warrant which expires on September 30,
2002 shall entitle the Purchaser to acquire one (1) share of common stock and
shall be in form and substance as Exhibit B attached hereto. The Purchaser shall
receive that number of Warrants equal to 10% of the commitment amount plus that
number of Warrants equal to 60% of the amount funded.
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<PAGE>
2. Acceptance
----------
2.1. The Company agrees to sell to the Purchaser the Note subject to
the terms and conditions of this Agreement and to grant the Warrants referred to
in Section 1.3.
3. Delivery of Warrants
--------------------
3.1. The execution of this Agreement shall constitute the registration
of Warrants in the Purchaser's name.
4. Representations and Warranties of the Company
---------------------------------------------
4.1. The Company hereby represents and warrants to the Purchaser as
follows:
(a) Organization and Standing of the Company. The Company is a
corporation duly organized and validly existing under the laws
of the State of Nevada and is in good standing under such
laws. The Company is not in violation of its Certificate of
Incorporation or Bylaws. The Company has all requisite
corporate power and authority for the ownership and operation
of its properties and assets, and to carry on its business as
presently conducted or now proposed to be conducted.
(b) Corporate Action. The Company has all the necessary corporate
power and has taken the corporate action required to enter
into this Agreement and to consummate the transactions
contemplated hereby. All corporate action on the part of the
Company for the authorization, execution, delivery and
performance of this Agreement by the Company, the
authorization, sale, issuance, and delivery of the Note and
Warrants and the performance of the Company's obligations
hereunder has been taken, except such acts as may be required
to effectuate the provisions of this Note, Warrant and
Agreement, which actions are authorized in Section 6.7. This
Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligations of the
Company enforceable in accordance with its terms. The issuance
of the Note and Warrant does not require any further corporate
action, will not be subject to preemptive rights or other
preferential rights in any present stockholders of the Company
and will not conflict with any provisions of any agreement to
which the Company is a part or by which it is bound.
(c) Government Approvals. No authorization, consent, approval,
license, exemption, from or filing of registration with any
court or governmental department, commission, board, bureau,
agency or instrumentality, domestic, or foreign, is or will be
necessary for the execution and delivery by the Company of
this Agreement, and except for certain filings under state
securities laws, the offer and sale of the shares will be
exempt from the registration requirements of applicable
federal and state securities laws.
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<PAGE>
(d) Compliance with Other Instruments. Neither the execution,
issuance and delivery of this Agreement or the Note, nor the
consummation by the Company of any transaction contemplated
hereby or thereby, constitutes or results in or will
constitute or result in a default or violation of any term or
provision of the Certificate of Incorporation and By-laws of
the Company, as amended and in effect, and the terms and
provisions of the mortgages, indentures, leases, agreements
and other instruments and of all judgments, decrees,
governmental orders, statutes, rules or regulations by which
the Company or its properties are bound.
5. Purchaser Representations
-------------------------
5.1 In connection with this subsection, the Purchaser hereby makes the
following acknowledgments and representations:
(a) The execution of this Agreement has been duly authorized by
all necessary action on the part of the Purchaser, has been
duly executed and delivered, and constitutes a valid, legal,
binding, and enforceable agreement of the Purchaser;
(b) The Purchaser is acquiring the Note and the Warrants for its
own account, for investment, and not with a view to any
"distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "Act");
(c) The Purchaser understands that because the Note and the
Warrants have not been registered under the Act, it cannot
dispose of any of the Note and Warrants unless such Note and
the Warrants are subsequently registered under the Act or
exemptions from such registration are available. The Purchase
acknowledges and understands (i) that it has no right to
require the Company to register the Note, the Warrants or any
shares obtained through the conversion or exercise of the
foregoing or (ii) that exemptions from such registration may
not be available. The Purchaser further understands that the
Company may, as a condition to the transfer of any part of the
Note or Warrants, require that the request for transfer be
accompanied by an opinion of counsel, in form and substance
satisfactory to the Company, to the effect that the proposed
transfer does not result in a violation of the Act, unless
such transfer is covered by an effective registration
statement under the Act. The Purchaser understands that each
certificate representing the shares will bear the following
legend or one substantially similar thereto:
The securities represented by this certificate have not been
registered under the Securities Act of 1933. These securities
have been acquired by investment and not with a view to
distribution or resale, and may not be sold, mortgaged,
pledged, hypothecated or otherwise transferred without an
effective registration statement for such shares under the
Securities Act of 1933, or an opinion of counsel satisfactory
to the corporation that registration is not required under
such Act.
102
<PAGE>
(d) The Purchaser understands the offering is being made pursuant
to the exemption from registration with the Securities and
Exchange Commission (the "Commission") afforded by Section
4(2) of the Act and/or Regulation D adopted by the Commission
relating to transactions by an issuer not involving any public
offering, and similar federal, state, and foreign laws or
policies. Consequently, any offering materials have not been
subject to review and comment by the staff of the commission
or by any state or foreign securities commission.
(e) The Purchaser acknowledges that during the course of this
transaction and prior to sale, it has had the opportunity to
ask questions of any receive answers from the Company
concerning the terms and conditions of its investment, and to
obtain any additional information of the same kind that is
specified in Part I of a Registration Statement on Form SB-2
under the Act. The Purchaser or its purchaser representative
has examined the information furnished by the Company and,
through discussions and examination of such materials as the
Purchaser has requested, has obtained sufficient information
upon which to make an investment decision. The Purchaser is
familiar with the type of investment which the shares
constitutes, and has reviewed the merit and risks of this
investment to the extent deemed advisable by the Purchaser.
The Purchaser has such knowledge and experience in financial
and business affairs that it is capable of evaluating the
merits and risk of investing in the shares, and acknowledges
that it is able to bear the economic risks of this investment.
Further, the Purchaser understands all matters in the
Agreement.
(f) The investment in the Company by the Purchaser does not
constitute a principal portion of the Purchaser's total assets
and the Purchaser is able to afford a complete loss of the
investment contemplated herein.
6. Covenants of the Company
------------------------
6.1. Annual Reports. The Company agrees to use its best efforts to
deliver to the Purchaser, as soon as practicable after the end of each fiscal
year and in any event within 120 days thereafter, a consolidated balance sheet
of the Company as at the end of such fiscal year, a consolidated statement of
operations and a consolidated statement of cash flow of the Company for such
year, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
independent public accountants selected by the Company.
6.2. Quarterly Reports. The Company agrees to use its best efforts to
deliver to the Purchaser as soon as practicable after the end of each of the
first three quarterly fiscal periods in each fiscal year and in any event within
60 days thereafter, a consolidated balance sheet of the Company as at the end of
such period, a consolidated statement of operations and a consolidated statement
of cash flow of the Company for such period, in each case prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in comparative form the figures for the corresponding periods of the
previous fiscal year, all in reasonable detail
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<PAGE>
and certified, subject to changes resulting from audit adjustments, by the
principal financial or accounting officer of the Company.
6.3. Inspection. The Company agrees to permit any authorized
representative of the Purchaser to visit the Company to discuss its affair and
finances with its officers, all upon reasonable notice to the Company, at such
reasonable times and as often as may be reasonable requested.
6.4. Purchaser's Right to Receive Reports. The Company shall deliver
the reports or give the rights specified in Paragraph 6.1., 6.2., and 6.3. to
the Purchaser until the earlier of (i) the closing date of the Company's first
underwritten public offering pursuant to an effective registration statement
filed under the Act; or (ii) until the Purchaser no longer holds the Note or any
Warrants.
6.5. Distributions and Payments. The Company shall not (i) pay any
dividend or make any other distribution to its equity holders or (ii) make any
principal or interest payments on any loans that are subordinate to this Note
unless and until the full principal amount of, and interest on, this Note shall
have been paid in full.
6.6 Indemnification. The Company shall indemnify the Payee and hold it
harmless from and against any liabilities, obligations, losses, costs and
expenses (including without limitation attorneys' fees and expenses) arising out
of or incurred in connection with (i) the breach by the Company of any of the
representations contained in Section 4, and (ii) the enforcement of this
indemnity.
6.7. Company Action. The Company shall authorize and empower such
officers as may be necessary to enter into, execute and deliver any and all
documents and certificates, and to make all filings necessary to effectuate this
Agreement , the Note, and the Warrant.
6.8. Statement of Anticipated Funds Usage. The Company shall deliver to
the Purchaser, ten (10) days prior to a scheduled monthly funding installment, a
reasonably detailed statement showing the uses for such funding.
6.9 Inter-Creditor Dealings. The Company shall treat the Purchaser, in
all respects, in a manner consistent with that of other purchasers, including
but limited to the fact that all payments and distributions shall be made to
each purchaser in accordance with their pro-rata participation.
7. No Waiver
---------
7.1. Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the Purchaser, the Purchaser does
not thereby or in any other manner waive any rights granted to it under Federal
and state securities laws.
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8. Survival of Representation, Warranties and Agreements
-----------------------------------------------------
Notwithstanding any investigation made by any party to this Agreements,
all covenants, agreements representations, and warranties made by the Company
and the Purchaser herein shall survive the execution of this Agreement, the
delivery to the Purchaser of the shares being purchased and the payment
therefore.
9. Transferability
---------------
9.1. The Purchaser agrees not to transfer or assign this Agreement, or
any of its interest herein, and further agrees that any assignment or transfer
of the shares shall be made only in accordance with applicable securities laws
and that an appropriate legend with respect thereto may be placed by the Company
on any certificate evidencing such shares.
10. Miscellaneous
Notices. All notices or other communications given or made hereunder
shall be in writing and shall be delivered:
to the Purchaser at:
Income Partners LP
96 The Intervale
Roslyn, NY 11576
and to the Company:
253 Worcester Road
P. O. Box 180
Charlton, MA 01507
10.2. Governing Law. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws.
10.3. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
10.4. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and by the Purchaser.
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<PAGE>
10.5. Heading. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
10.6. Severability. In case any provision contained in this Agreement
should be invalid, illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
10.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other party.
10.8. Pronouns. All pronouns shall be deemed to refer to the masculine,
feminine neuter, singular or plural, as the identity of the person or persons,
firm or other entity may require in the context thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives the day and year first above
written.
FIBERCORE, INC.
BY: /s/ Steven Phillips BY: /s/ Michael J. Beecher
------------------------ ----------------------------------------
TITLE: Chief Financial Officer and
-----------------------------------
Treasurer
-----------------------------------
106
<PAGE>
The Note Purchase and Warrant Agreement
Exhibit A
SECURED PROMISSORY NOTE
$50,000.00 Charlton, MA
Due September 30, 1998 Dated: September 17, 1997
FOR VALUE RECEIVED, FiberCore, Inc., a Nevada corporation and its affiliates
"Payer" or the "Company"), hereby promises to pay to the order of Income
Partners LP ("Payee") 96 The Intervale, Roslyn, New York 11576, the principal
sum of Fifty Thousand ($50,000.00), or such lesser amount if the amount advanced
under this Note is less than the principal sum, together with any unpaid
interest thereon. Said principal and interest shall be payable as provided
herein.
1. Payment of Principal and Interest
---------------------------------
All or any part of the principal amount of this Note together with
accrued and unpaid interest, if any, shall be payable on the earlier of:
The receipt of proceeds, as and when received from the sale, financing,
liquidation or any other disposal of any part or all of the inventory listed in
Schedule 1, annexed hereto, or
The receipt of proceeds from any new funding arrangement/venture (which
includes, by way of example and not limitation, stock and debt issuance's in
respect of investments in the Company, and collection of fees for services), or
(c) September 30, 1998
2. Interest
--------
This Note shall bear interest at the initial rate of 9.5% for the
period September 17, 997 to September 30, 1997. Thereafter, the Note shall bear
interest for each 3-month period beginning October 1, 1997, at the prime
interest rate as published in the Wall Street Journal on the business day
immediately preceding the 3-month period plus one-percent (1%). Interest will be
payable quarterly on the 1st day of the month following the 3-month interest
period (April 1, July 1, October 1, and January 1) during the term hereof.
In the event the Payer fails to make a quarterly interest payment when
due, the Payer agrees to pay an additional amount equal to 1/2 of 1% (.5%) on
the then outstanding principal as a late payment fee. The failure to make a
quarterly interest payment shall not constitute an Event
107
<PAGE>
of Default, as defined below.
3. Prepayments
-----------
The principal amount of this Note may be prepaid in whole at any time
or in part from time to time, with accrued interest on the amount repaid to the
date of repayment, in each case without penalty or premium.
4. Conversion
----------
The outstanding principal amount of this Note including any accrued and
unpaid interest is convertible, at the option of the Payee, at any time prior to
repayment into common shares of the Company at the rate of $0.6875 per share.
5. Security
--------
To secure all payments of the Company to the Payee, the Company hereby
grants and conveys to the Payee a first perfected security interest in (a) all
the inventory, work-in-process, returned goods and goods in transit and (b) all
accounts receivable.
6. Events of Default
-----------------
Upon the occurrence of any of the following:
(a) The Company shall fail to pay any of the principal of or
interest on this Note when due; or
(b) The Company shall fail to perform any other covenant,
agreement or promise whether contained in this Note or the
Agreement which is incorporated by reference herein; or
(c) The filing by or against the Company of a petition in
bankruptcy, reorganization, insolvency, arrangement, or other
similar proceeding; or
(d) The Company shall sell all or any substantial part of its
assets, shall merge or consolidate with or into any other
entity, or more than 25% of the equity ownership of the
Company shall be sold to an unaffiliated third party
purchaser; or
(e) Mohd Aslami and/or Charles De Luca shall cease to directors
and/or officers of the Company and/or the number of common
shares held or beneficially owned by each of them,
respectively, decreases by more than 25%; then , in any of
those events (each such event being hereinafter referred to as
an "Event of Default"), this Note, although not yet due,
shall, upon written notice of acceleration from the Payee of
this Note to the Company (or automatically in the
108
<PAGE>
case of an Event of Default described in subsection (c))
become and immediately be due and payable both as to principal
and accrued and unpaid interest, without presentment, demand,
protest or notice of any kind, all of which is expressly
waived, as set forth in Section 8.
7. Obligations Unconditional
-------------------------
The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment, or adjustment whatever, whether or not the
holder of this Note is a holder in due course. No forbearance, indulgence, delay
or failure by the Payee to exercise any right or remedy with respect to this
Note, nor any course of dealing between the Company and Payee, shall operate as
a waiver, nor as an acquiescence in any default, nor shall any single or partial
exercise of any right or remedy preclude any other or further exercise thereof
or the exercise of any other right or remedy. This Note may not be modified or
discharged orally, but only in writing duly executed by the Company and the
Payee.
8. Waiver
------
The Company hereby expressly waives any presentment, demand, protest or
notice of any kind now or hereafter required by law in connection with this
Note.
9. Governing Law
-------------
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to conflicts of law
rules and principles.
TO INDUCE HOLDER TO ENTER INTO THE COMMERCIAL TRANSACTION EVIDENCED BY
THIS NOTE AND THE SAID AGREEMENT, EACH MAKER, ENDORSER AND GUARANTOR HEREOF
AGREES THAT THIS TRANSACTION IS COMMERCIAL AND NOT A CONSUMER TRANSACTION AND,
TO THE EXTENT ALLOWED BY LAW, WAIVES ANY RIGHT TO NOTICE OF HEARING ON THE RIGHT
OF THE HOLDER UNDER ANY STATUTE OR STATUTES AFFECTING PREJUDGEMENT REMEDIES AND
AUTHORIZES HOLDER'S ATTORNEY TO ISSUE A WRIT FOR PREJUDGEMENT REMEDY WITHOUT
COURT ORDER, PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF THE WAIVER.
109
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed and delivered as of the date set forth above.
FiberCore, Inc.
By: /s/ Michael J. Beecher
--------------------------------------
Michael J. Beecher
Chief Financial Officer and Treasurer
110
EXHIBIT 10.60
NOTE PURCHASE AND WARRANT AGREEMENT
THIS AGREEMENT made as of this 17th day of September 1997 between
Techman International Corp. ("the Purchaser") and FIBERCORE, INC. ("the
Company") a Nevada Corporation.
WHEREAS, the Purchaser and the Company have agreed to purchase and sale
of the Company's $150,000 note (the "Note"); and
NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties agree as follows:
1. Offer
-----
1.1 The Purchaser hereby agrees to purchase the Note subject to the
conditions hereinafter set forth;
1.2 Upon execution and delivery of this Agreement by both parties and
the execution and delivery of the Note (Exhibit A) by the Company to the
Purchaser, the Purchaser will pay to the Company the sum of One Hundred Fifty
Thousand U.S. Dollars ($150,000).
1.3 In addition to the foregoing, the Company grants the Purchaser
warrants (the "Warrant") granting the Purchaser the right to purchase 69,132
common shares of the Company for a purchase price of $0.625 per share
exercisable in whole or in part at any time within a five-year period to
September 17, 2002.
2. Acceptance
----------
2.1 The Company agrees to sell to the Purchaser the Note subject to the
terms and conditions of this Agreement and to grant the Warrants referred to in
clause 1.3.
3. Delivery of Warrants
--------------------
3.1 Upon payment of the purchase price for the Note, this agreement
shall constitute the Warrants registered in Purchaser's name.
4. Representations and Warranties of the Company
---------------------------------------------
4.1 The Company hereby represents and warrants to, and covenants with
the Purchaser as follows:
(a) Organization and Standing of the Company. The Company is a
corporation duly organized and validly existing under the laws of the State of
Nevada and is in good standing
111
<PAGE>
under such laws. The Company is not in violation of its Certificate of
Incorporation or Bylaws. The Company has all requisite corporate power and
authority for the ownership and operation of its properties and assets, and to
carry on its business as presently conducted or now proposed to be conducted.
(b) Corporate Action. The Company has all the necessary corporate power
and has taken the corporate action required to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company for the authorization, execution, delivery and performance
of this Agreement by the Company, the authorization, sale, issuance, and
delivery of the Note and Warrants and the performance of the Company's
obligations hereunder has been taken. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and biding obligations
of the Company enforceable in accordance with its terms. The issuance of the
Note and Warrant does not require any further corporate action, will not be
subject to preemptive rights or other preferential rights in any present
stockholders of the Company and will not conflict with any provisions of any
agreement to which the Company is a part or by which it is bound.
(c) Government Approvals. No authorization, consent, approval, license,
exemption, from or filing of registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic, or
foreign, is or will be necessary for the execution and delivery by the Company
of this Agreement, and except for certain filings under state securities laws,
the offer and sale of the shares will be exempt from the registration
requirements of applicable federal and state securities laws.
(d) Compliance with Other Instruments. Neither the execution, issuance
and delivery of this Agreement or the Note, nor the consummation by the Company
of any transaction contemplated hereby or thereby, constitutes or results in or
will constitute or result in a default or violation of any term or provision of
the charter and By-laws of the Company, as amended and in effect, and the terms
and provisions of the mortgages, indentures, leases, agreements and other
instruments and of all judgments, decrees, governmental orders, statutes, rules
or regulations by which the Company or its properties are bound.
5. Purchaser Representations
-------------------------
5.1 In connection with this subjection, the Purchaser hereby makes the
following acknowledgment and representations:
(a) The execution of this Agreement has been duly authorized by all
necessary action on the part of the Purchaser, has been duly executed and
delivered, and constitutes a valid, legal, binding, and enforceable agreement of
the Purchaser;
(b) The Purchaser is acquiring the Note and the Warrants for its own
account, for investment, and not with a view to any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Act");
112
<PAGE>
(c) The Purchaser understands that because the Note and the Warrants
have not been registered under the Act, it cannot dispose of any of the Note and
Warrants unless such Note and the Warrants are subsequently registered under the
Act or exemptions from such registration are available. The Purchase
acknowledges, and understands that, it has no right to require the Company to
register under the Act or exemptions from such registration are available. The
Purchase acknowledges, and understands that, it has no right to require the
Company to register the Note, the Warrants or any shares obtained through the
conversion or exercise of the foregoing. The Purchaser further understands that
the Company may, as a condition to the transfer of any of the Note or Warrants,
require that the request for transfer by accompanied by an opinion of counsel,
in form and substance satisfactory to the Company, to the effect that the
proposed transfer does not result in a violation of the Act, unless such
transfer is covered by an effective registration statement under the Act. The
Purchaser understands that each certificate representing the shares will bear
the following legend or one substantially similar thereto:
The securities represented by this certificate have not been registered
under the Securities Act of 1933. These securities have been acquired
by investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such shares under the
Securities Act of 1933, or an opinion of counsel satisfactory to the
corporation that registration is not required under such Act.
(d) The Purchaser understands the offering is being made pursuant to
the exemption from registration with the Securities and Exchange Commission (the
"Commission") afforded by Section 4(2) of the Act and/or Regulation D adopted by
the Commission relating to transactions by an issuer not involving any public
offering, and similar federal, state, and foreign laws or policies.
Consequently, any offering materials have not been subject to review and comment
by the staff of the commission or by any state or foreign securities commission.
(e) The Purchaser acknowledges that during the course of this
transaction and prior to sale, it has had the opportunity to ask questions of
any receive answers from the Company concerning the terms and conditions of its
investment, and to obtain any additional information of the same kind that is
specified in part I of a registration Statement on Form SB-2 under the Act. The
Purchaser or its purchaser representative has examined the information furnished
by the Company and, through discussions and examination of such materials as the
Purchaser has requested, has obtained sufficient information upon which to make
an investment decision. The Purchaser is familiar with the type of investment
which the shares constitutes, and has reviewed the merit and risks of this
investment to the extent deemed advisable by the Purchaser. The Purchaser has
such knowledge and experience in financial and business affairs that it is
capable of evaluation the merits and risk of investing in the shares, and
acknowledges that it is able to hear the economic risks of this investment.
Further, the Purchaser understands all matters in the Agreement.
(f) The investment in the Company by the Purchaser does not constitute
a principal portion of the Purchaser's total assets and the Purchaser is able to
afford a complete loss of the investment contemplated herein.
113
<PAGE>
6. Covenants of the Company
------------------------
6.1 Annual Reports. The Company agrees to use its best efforts to
deliver to the Purchaser, as soon as practicable after the end of each fiscal
year and in any event within 120 days thereafter, a consolidated balance sheet
of the Company as at the end of such fiscal year, a consolidated Statement of
Cash Flow of the Company for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by independent public accountants selected by
the Company.
6.2 Quarterly Reports. The Company agrees to use its best efforts to
deliver to the Purchaser as soon as practicable after the end of each of the
first three quarterly fiscal periods in each fiscal year and in any event within
60 days thereafter, a consolidated balance sheet of the Company as at the end of
such period, a consolidated statement of operations and a consolidated statement
of Cash Flow of the Company for such period, in each case prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in comparative form the figures for the corresponding periods of the
previous fiscal year, all in reasonable detail and certified; subject to changes
resulting from audit adjustments, by the principal financial or accounting
officer of the Company.
6.3 Inspection. The Company agrees to permit any authorized
representative of the purchaser to visit the Company to discuss its affair and
finances with its officers, all upon reasonable notice to the Company, at such
reasonable times and as often as may be reasonable requested.
6.4 Purchaser's Right to Receive Reports. The Company shall deliver
the reports or give the rights specified in Paragraph 6.1., 6.2., and 6.3. to
the Purchaser until the earlier of (I) the closing date of the Company's first
underwritten public offering pursuant to an effective registration statement
filed under the Act; or (ii) until the Purchaser no longer holds the Note or any
Warrants.
7. No Waiver
---------
7.1 Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the Purchaser, the Purchaser does
not thereby or in any other manner waive any rights granted to it under Federal
and state securities laws.
8. Survival of Representation, Warranties and Agreements
-----------------------------------------------------
Notwithstanding any investigation made by any party to this Agreements,
all covenants, agreements representations, and warranties made by the Company
and the Purchaser herein shall survive the execution of this Agreement, the
delivery to the Purchaser of the shares being purchased and the payment
therefore.
114
<PAGE>
9. Transferability
---------------
9.1 The purchaser agrees not to transfer or assign this Agreement, or
any of its interest herein, and further agrees that nay assignment or transfer
of the shares shall be made only in accordance with applicable securities laws
and that an appropriate legend with respect thereto may be placed by the Company
on any certificate evidencing such shares.
10. Miscellaneous
-------------
10.1 Notices. All notices or other communications given or made
hereunder shall be in writing and shall be delivered to the Purchaser at:
Rt. 20, Charlton, MA 01507
and to the Company:
253 Worcester Road
P. O. Box 180
Charlton, MA 01507
10.2 Governing Law. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws.
10.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
10.4 Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and by the Purchaser.
10.5 Heading. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
10.6 Severability. In case any provision contained in this Agreement
should be invalid, illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other party.
115
<PAGE>
10.8 Pronouns. All pronouns shall be deemed to refer to the masculine,
feminine neuter, singular or plural, as the identity of the person or persons,
firm or other entity may require in the context thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives the day and year first above
written.
Techman International Corp. FIBERCORE, INC.
BY:/s/ M. Mahmud Awan BY:/s/ Mohd Aslami.
--------------------------------- -----------------------------------
Dr. M. Mahmud Awan Mohd Aslami
TITLE: President TITLE: Chairman, CEO
WITNESSED BY: /s/ Charles De Luca
----------------------
Charles De Luca
TITLE: Executive Vice President
DATE: September 17, 1997
116
<PAGE>
EXHIBIT A - TO THE NOTE PURCHASE AND WARRANT AGREEMENT
- ------------------------------------------------------
PROMISSORY NOTE
$150,000 CHARLTON, MA
DUE: SEPTEMBER 17, 1998 DATED: SEPTEMBER 17, 1997
FOR VALUE RECEIVED, FiberCore, Inc., a Nevada corporation ("Payor" or the
"Company"), hereby unconditionally promises to pay to the order of Techman
International Corp. ("Payee") Charlton, MA 01507, the principal sum of ONE
HUNDRED FIFTY THOUSAND DOLLARS ($150,000) together with any unpaid interest
thereon, on the repayment date or maturity date as defined below.
1. Repayment and Maturity Date:
---------------------------
The principal amount of the note together with accrued and unpaid
interest, if any, will be payable on the earlier of:
1.1 The receipt of proceeds of any new financing received by the
Company which includes proceeds to be used as unrestricted working capital;
1.2 A change in control of the Company which is defined as (I) the
number of common shares of the Company held or beneficially owned in combination
by Mohd Aslami, Charles De Luca, being less than 25% of the outstanding common
shares of the Company; except that the voluntary sale of shares by the Payee
shall be disregarded when determining the decrease in the percentage owned, or,
(ii) Mohd Aslami is removed by the Board of Directors of the Company from the
position of Chairman and/or Chief Executive Officer, except if such removal is
at the request of or voluntarily by Aslami.
1.3 The final maturity date September 17, 1998;
1.4 This Promissory Note may be prepaid in whole or in part at any time
or from time to time without penalty or premium, together with interest accrued
on the amount so prepaid.
2. Interest:
--------
This Note shall bear interest at the initial rate of 9.50% for the
period September 17, 1997 to September 30, 1997. Thereafter the note will bear
interest for each 3-month period beginning October 1, 1997, at the rate of the
prime interest rate as published in the Wall Street Journal on the business day
immediately preceding the 3-month period plus one-percent (1%). Interest will be
payable quarterly on the 1st day of the month following the 3-month interest
period (April 1, July1, October 1, January 1) during the term hereof.
In the event the Payor is unable to make the interest payments when due
the Payor agrees to pay an additional amount equal to 1/2 of 1% (.5%) on the
then outstanding principal as a late
117
<PAGE>
payment fee. In no event, however, shall the failure of the Payor to make an
interest payment when due be an event of default. All principal and unpaid
interest shall be due at maturity, September 17, 1998.
3. Conversion:
----------
This outstanding amount of the note including any unpaid principal and
interest is convertible, at the option of the payee, at any time prior to
repayment, into common shares of the Company at the rate of $0.625 per share.
4. Defaults:
--------
The principal amount of this Promissory Note and interest accrued
thereon shall become immediately due and payable, without presentation, protest,
notice or further demand, all of which are expressly waived, in the event of the
filing by or against the Payor of a petition in bankruptcy or reorganization or
insolvency. No event of default shall occur until Payor receives written notice
of an alleged default and, after 30 days, such default has not been remedied or
cured.
IN WITNESS WHEREOF, the undersigned has caused the Promissory Note to
be duly executed and delivered as of the date set forth above.
FiberCore, Inc.
By: /s/ Mohd Aslami
------------------------------
Mohd Aslami
TITLE: President
Witnessed:
By: /s/ Charles De Luca
- ----------------------------------
Charles De Luca
TITLE: Executive Vice President
DATE: September 17, 1997
118
EXHIBIT 10.61
NOTE PURCHASE AND WARRANT AGREEMENT
THIS AGREEMENT made as of this 16th day of April 1997 between Techman
International Corp. ("the Purchaser") and FIBERCORE, INC. ("the Company") a
Nevada Corporation.
WHEREAS, the Purchaser and the Company have agreed to purchase and sale
of the Company's $250,000 note (the "Note"); and
NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties agree as follows:
1. Offer
-----
1.1 The Purchaser hereby agrees to purchase the Note subject to the
conditions hereinafter set forth;
1.2 Upon execution and delivery of this Agreement by both parties and
the execution and delivery of the Note (Exhibit A) by the Company to the
Purchaser, the Purchaser will pay to the Company the sum of $250,000.
1.3 In addition to the foregoing, the Company grants the Purchaser
warrants (the "Warrant") granting the Purchaser the right to purchase 115,220
common shares of the Company for a purchase price of $0.78 per share exercisable
in whole or in part at any time within a five-year period to April 16, 2002.
2. Acceptance
----------
2.1 The Company agrees to sell to the Purchaser the Note subject to the
terms and conditions of this Agreement and to grant the Warrants referred to in
clause 1.3.
3. Delivery of Warrants
--------------------
3.1 Upon payment of the purchase price for the Note, this agreement
shall constitute the Warrants registered in Purchaser's name.
4. Representations and Warranties of the Company
---------------------------------------------
4.1 The Company hereby represents and warrants to, and covenants with
the Purchaser as follows:
(a) Organization and Standing of the Company. The Company is a
corporation duly organized and validly existing under the laws of the State of
Nevada and is in good standing
119
<PAGE>
under such laws. The Company is not in violation of its Certificate of
Incorporation or Bylaws. The Company has all requisite corporate power and
authority for the ownership and operation of its properties and assets, and to
carry on its business as presently conducted or now proposed to be conducted.
(b) Corporate Action. The Company has all the necessary corporate power
and has taken the corporate action required to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company for the authorization, execution, delivery and performance
of this Agreement by the Company, the authorization, sale, issuance, and
delivery of the Note and Warrants and the performance of the Company's
obligations hereunder has been taken. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and biding obligations
of the Company enforceable in accordance with its terms. The issuance of the
Note and Warrant does not require any further corporate action, will not be
subject to preemptive rights or other preferential rights in any present
stockholders of the Company and will not conflict with any provisions of any
agreement to which the Company is a part or by which it is bound.
(c) Government Approvals. No authorization, consent, approval, license,
exemption, from or filing of registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic, or
foreign, is or will be necessary for the execution and delivery by the Company
of this Agreement, and except for certain filings under state securities laws,
the offer and sale of the shares will be exempt from the registration
requirements of applicable federal and state securities laws.
(d) Compliance with Other Instruments. Neither the execution, issuance
and delivery of this Agreement or the Note, nor the consummation by the Company
of any transaction contemplated hereby or thereby, constitutes or results in or
will constitute or result in a default or violation of any term or provision of
the charter and By-laws of the Company, as amended and in effect, and the terms
and provisions of the mortgages, indentures, leases, agreements and other
instruments and of all judgments, decrees, governmental orders, statutes, rules
or regulations by which the Company or its properties are bound.
5. Purchaser Representations
-------------------------
5.1 In connection with this subjection, the Purchaser hereby makes the
following acknowledgment and representations:
(a) The execution of this Agreement has been duly authorized by all
necessary action on the part of the Purchaser, has been duly executed and
delivered, and constitutes a valid, legal, binding, and enforceable agreement of
the Purchaser;
(b) The Purchaser is acquiring the Note and the Warrants for its own
account, for investment, and not with a view to any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Act");
120
<PAGE>
(c) The Purchaser understands that because the Note and the Warrants
have not been registered under the Act, it cannot dispose of any of the Note and
Warrants unless such Note and the Warrants are subsequently registered under the
Act or exemptions from such registration are available. The Purchase
acknowledges, and understands that, it has no right to require the Company to
register under the Act or exemptions from such registration are available. The
Purchase acknowledges, and understands that, it has no right to require the
Company to register the Note, the Warrants or any shares obtained through the
conversion or exercise of the foregoing. The Purchaser further understands that
the Company may, as a condition to the transfer of any of the Note or Warrants,
require that the request for transfer by accompanied by an opinion of counsel,
in form and substance satisfactory to the Company, to the effect that the
proposed transfer does not result in a violation of the Act, unless such
transfer is covered by an effective registration statement under the Act. The
Purchaser understands that each certificate representing the shares will bear
the following legend or one substantially similar thereto:
The securities represented by this certificate have not been registered
under the Securities Act of 1933. These securities have been acquired
by investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such shares under the
Securities Act of 1933, or an opinion of counsel satisfactory to the
corporation that registration is not required under such Act.
(d) The Purchaser understands the offering is being made pursuant to
the exemption from registration with the Securities and Exchange Commission (the
"Commission") afforded by Section 4(2) of the Act and/or Regulation D adopted by
the Commission relating to transactions by an issuer not involving any public
offering, and similar federal, state, and foreign laws or policies.
Consequently, any offering materials have not been subject to review and comment
by the staff of the commission or by any state or foreign securities commission.
(e) The Purchaser acknowledges that during the course of this
transaction and prior to sale, it has had the opportunity to ask questions of
any receive answers from the Company concerning the terms and conditions of its
investment, and to obtain any additional information of the same kind that is
specified in part I of a registration Statement on Form SB-2 under the Act. The
Purchaser or its purchaser representative has examined the information furnished
by the Company and, through discussions and examination of such materials as the
Purchaser has requested, has obtained sufficient information upon which to make
an investment decision. The Purchaser is familiar with the type of investment
which the shares constitutes, and has reviewed the merit and risks of this
investment to the extent deemed advisable by the Purchaser. The Purchaser has
such knowledge and experience in financial and business affairs that it is
capable of evaluation the merits and risk of investing in the shares, and
acknowledges that it is able to hear the economic risks of this investment.
Further, the Purchaser understands all matters in the Agreement.
(f) The investment in the Company by the Purchaser does not constitute
a principal portion of the Purchaser's total assets and the Purchaser is able to
afford a complete loss of the investment contemplated herein.
121
<PAGE>
6. Covenants of the Company
------------------------
6.1 Annual Reports. The Company agrees to use its best efforts to
deliver to the Purchaser, as soon as practicable after the end of each fiscal
year and in any event within 120 days thereafter, a consolidated balance sheet
of the Company as at the end of such fiscal year, a consolidated Statement of
Cash Flow of the Company for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by independent public accountants selected by
the Company.
6.2 Quarterly Reports. The Company agrees to use its best efforts to
deliver to the Purchaser as soon as practicable after the end of each of the
first three quarterly fiscal periods in each fiscal year and in any event within
60 days thereafter, a consolidated balance sheet of the Company as at the end of
such period, a consolidated statement of operations and a consolidated statement
of Cash Flow of the Company for such period, in each case prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in comparative form the figures for the corresponding periods of the
previous fiscal year, all in reasonable detail and certified; subject to changes
resulting from audit adjustments, by the principal financial or accounting
officer of the Company.
6.3 Inspection. The Company agrees to permit any authorized
representative of the purchaser to visit the Company to discuss its affair and
finances with its officers, all upon reasonable notice to the Company, at such
reasonable times and as often as may be reasonable requested.
6.4 Purchaser's Right to Receive Reports. The Company shall deliver the
reports or give the rights specified in Paragraph 6.1., 6.2., and 6.3. to the
Purchaser until the earlier of (I) the closing date of the Company's first
underwritten public offering pursuant to an effective registration statement
filed under the Act; or (ii) until the Purchaser no longer holds the Note or any
Warrants.
7. No Waiver
---------
7.1 Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the Purchaser, the Purchaser does
not thereby or in any other manner waive any rights granted to it under Federal
and state securities laws.
8. Survival of Representation, Warranties and Agreements
-----------------------------------------------------
Notwithstanding any investigation made by any party to this Agreements,
all covenants, agreements representations, and warranties made by the Company
and the Purchaser herein shall survive the execution of this Agreement, the
delivery to the Purchaser of the shares being purchased and the payment
therefore.
122
<PAGE>
9. Transferability
---------------
9.1 The purchaser agrees not to transfer or assign this Agreement, or
any of its interest herein, and further agrees that nay assignment or transfer
of the shares shall be made only in accordance with applicable securities laws
and that an appropriate legend with respect thereto may be placed by the Company
on any certificate evidencing such shares.
10. Miscellaneous
-------------
10.1 Notices. All notices or other communications given or made
hereunder shall be in writing and shall be delivered to the Purchaser at:
240 Sturbridge Road
Box 727
Charlton City, MA 01508-0727
and to the Company:
253 Worcester Road
P. O. Box 180
Charlton, MA 01507
10.2 Governing Law. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws.
10.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
10.4 Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and by the Purchaser.
10.5 Heading. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
10.6 Severability. In case any provision contained in this Agreement
should be invalid, illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other party.
123
<PAGE>
10.8 Pronouns. All pronouns shall be deemed to refer to the masculine,
feminine neuter, singular or plural, as the identity of the person or persons,
firm or other entity may require in the context thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives the day and year first above
written.
Techman International Corp. FIBERCORE, INC.
BY:/s/ M. Mahmud Awan BY:/s/ Michael J. Beecher
--------------------------------- ----------------------------------------
Dr. M. Mahmud Awan
President TITLE: Chief Financial Officer & Treasurer
124
<PAGE>
EXHIBIT A - TO THE NOTE PURCHASE AND WARRANT AGREEMENT
- ------------------------------------------------------
PROMISSORY NOTE
$250,000 STURBRIDGE, MA
DUE: APRIL 16, 2000 DATED: APRIL 16, 1997
FOR VALUE RECEIVED, FiberCore, Inc., a Nevada corporation ("Payor"), hereby
unconditionally promises to pay to the order of Techman International Corp.
("Payee") 240 Sturbridge Rd., Charlton City, MA 01508-0727, the principal sum of
TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) together with any unpaid interest
thereon, on April 16, 2000.
This Note shall bear interest at the initial rate of 9.50% for the
period April 16, 1997 to June 30, 1997. Thereafter the note will bear interest
for each 3-month period beginning July 1, 1997, at the rate of the prime
interest rate as published in the Wall Street Journal on the business day
immediately preceding the 3-month period plus one-percent (1%). Interest will be
payable quarterly on the 1st day of the month following the 3-month interest
period (July1, October 1, January 1 and April 1) during the term hereof.
In the event the Payor is unable to make the interest payments when due
the Payor agrees to pay an additional amount equal to 1/2 of 1% (.5%) on the
then outstanding principal as a late payment fee. In no event, however, shall
the failure of the Payor to make an interest payment when due be an event of
default. All principal and unpaid interest shall be due at maturity, April 16,
2000.
This Promissory Note may be prepaid in whole or in part at any time or
from time to time without penalty or premium, together with interest accrued on
the amount so prepaid.
The principal amount of this Promissory Note and interest accrued
thereon shall become immediately due and payable, without presentation, protest,
notice or further demand, all of which are expressly waived, in the event of the
filing by or against the Payor of a petition in bankruptcy or reorganization or
insolvency. No event of default shall occur until Payor receives written notice
of an alleged default and, after 30 days, such default has not been remedied or
cured.
IN WITNESS WHEREOF, the undersigned has caused the Promissory Note to
be duly executed and delivered as of the date set forth above.
FiberCore, Inc.
By: /s/ Michael J. Beecher
------------------------------------------
Michael J. Beecher
Chief Financial Officer and Treasurer
125
EXHIBIT 10.62
NOTE PURCHASE AND WARRANT AGREEMENT
THIS AGREEMENT made as of this 17th day of September, 1997 between Mohd
A. Aslami ("the Purchaser") and FIBERCORE, INC. ("the Company") a Nevada
Corporation.
WHEREAS, the Purchaser and the Company have agreed to purchase and sale
of the Company's $50,000 note (the "Note"); and
NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties agree as follows:
1. Offer
-----
1.1. The Purchaser hereby agrees to purchase the Note subject to the
conditions hereinafter set forth;
1.2. Upon execution and delivery of this Agreement by both parties and
the execution and delivery of the Note (Exhibit A) by the Company to the
Purchaser, the Purchaser will pay to the Company the sum of Fifty Thousand U.S.
Dollars ($50,000).
1.3. In addition to the foregoing, the Company grants the Purchaser
warrants (the "Warrant") granting the Purchaser the right to purchase 62,500
common shares of the Company for a purchase price of $0.6875 per share
exercisable in whole or in part at any time within a five-year period to
September 17, 2002.
1.4 As additional consideration, the Company agrees that in the event
that a financing as provided for in section 1.1 of the Note is consumated and
proceeds receigved by the Company, then any and all other Notes, accrued
salaries or other liabilities due the Purchaser or his/her spouse from the
Company shall be repaid from the proceeds of such financing.
2. Acceptance
----------
2.1 The Company agrees to sell to the Purchaser the Note subject to the
terms and conditions of this Agreement and to grant the Warrants referred to in
clause 1.3.
3. Delivery of Warrants
--------------------
3.1. Upon payment of the purchase price for the Note, this agreement
shall constitute the Warrants registered in Purchaser's name.
126
<PAGE>
4. Representations and Warranties of the Company
---------------------------------------------
4.1. The Company hereby represents and warrants to, and covenants with
the Purchaser as follows:
(a) Organization and Standing of the Company. The Company is a
corporation duly organized and validly existing under the laws of the State of
Nevada and is in good standing under such laws. The Company is not in violation
of its Certificate of Incorporation or Bylaws. The Company has all requisite
corporate power and authority for the ownership and operation of its properties
and assets, and to carry on its business as presently conducted or now proposed
to be conducted.
(b) Corporate Action. The Company has all the necessary corporate power
and has taken the corporate action required to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company for the authorization, execution, delivery and performance
of this Agreement by the Company, the authorization, sale, issuance, and
delivery of the Note and Warrants and the performance of the Company's
obligations hereunder has been taken. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and biding obligations
of the Company enforceable in accordance with its terms. The issuance of the
Note and Warrant does not require any further corporate action, will not be
subject to preemptive rights or other preferential rights in any present
stockholders of the Company and will not conflict with any provisions of any
agreement to which the Company is a part or by which it is bound.
(c) Government Approvals. No authorization, consent, approval, license,
exemption, from or filing of registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic, or
foreign, is or will be necessary for the execution and delivery by the Company
of this Agreement, and except for certain filings under state securities laws,
the offer and sale of the shares will be exempt from the registration
requirements of applicable federal and state securities laws.
(d) Compliance with Other Instruments. Neither the execution, issuance
and delivery of this Agreement or the Note, nor the consummation by the Company
of any transaction contemplated hereby or thereby, constitutes or results in or
will constitute or result in a default or violation of any term or provision of
the charter and By-laws of the Company, as amended and in effect, and the terms
and provisions of the mortgages, indentures, leases, agreements and other
instruments and of all judgments, decrees, governmental orders, statutes, rules
or regulations by which the Company or its properties are bound.
5. Purchaser Representations
-------------------------
5.1 In connection with this subjection, the Purchaser hereby makes the
following acknowledgment and representations:
127
<PAGE>
(a) The execution of this Agreement has been duly authorized by all
necessary action on the part of the Purchaser, has been duly executed and
delivered, and constitutes a valid, legal, binding, and enforceable agreement of
the Purchaser;
(b) The Purchaser is acquiring the Note and the Warrants for its own
account, for investment, and not with a view to any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Act");
(c) The Purchaser understands that because the Note and the Warrants
have not been registered under the Act, it cannot dispose of any of the Note and
Warrants unless such Note and the Warrants are subsequently registered under the
Act or exemptions from such registration are available. The Purchase
acknowledges, and understands that, it has no right to require the Company to
register under the Act or exemptions from such registration are available. The
Purchase acknowledges, and understands that, it has no right to require the
Company to register the Note, the Warrants or any shares obtained through the
conversion or exercise of the foregoing. The Purchaser further understands that
the Company may, as a condition to the transfer of any of the Note or Warrants,
require that the request for transfer by accompanied by an opinion of counsel,
in form and substance satisfactory to the Company, to the effect that the
proposed transfer does not result in a violation of the Act, unless such
transfer is covered by an effective registration statement under the Act. The
Purchaser understands that each certificate representing the shares will bear
the following legend or one substantially similar thereto:
The securities represented by this certificate have not been registered
under the Securities Act of 1933. These securities have been acquired
by investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such shares under the
Securities Act of 1933, or an opinion of counsel satisfactory to the
corporation that registration is not required under such Act.
(d) The Purchaser understands the offering is being made pursuant to
the exemption from registration with the Securities and Exchange Commission (the
"Commission") afforded by Section 4(2) of the Act and/or Regulation D adopted by
the Commission relating to transactions by an issuer not involving any public
offering, and similar federal, state, and foreign laws or policies.
Consequently, any offering materials have not been subject to review and comment
by the staff of the commission or by any state or foreign securities commission.
(e) The Purchaser acknowledges that during the course of this
transaction and prior to sale, it has had the opportunity to ask questions of
any receive answers from the Company concerning the terms and conditions of its
investment, and to obtain any additional information of the same kind that is
specified in part I of a registration Statement on Form SB-2 under the Act. The
Purchaser or its purchaser representative has examined the information furnished
by the Company and, through discussions and examination of such materials as the
Purchaser has requested, has obtained sufficient information upon which to make
an investment decision. The Purchaser is familiar with the type of investment
which the shares constitutes, and has reviewed the merit and risks of this
investment to the extent deemed advisable by the Purchaser.
128
<PAGE>
The Purchaser has such knowledge and experience in financial and business
affairs that it is capable of evaluation the merits and risk of investing in the
shares, and acknowledges that it is able to hear the economic risks of this
investment. Further, the Purchaser understands all matters in the Agreement.
(f) The investment in the Company by the Purchaser does not constitute
a principal portion of the Purchaser's total assets and the Purchaser is able to
afford a complete loss of the investment contemplated herein.
6. Covenants of the Company
------------------------
6.1. Annual Reports. The Company agrees to use its best efforts to
deliver to the Purchaser, as soon as practicable after the end of each fiscal
year and in any event within 120 days thereafter, a consolidated balance sheet
of the Company as at the end of such fiscal year, a consolidated Statement of
Cash Flow of the Company for such year, prepared in accordance with generally
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by independent public accountants selected by
the Company.
6.2. Quarterly Reports. The Company agrees to use its best efforts to
deliver to the Purchaser as soon as practicable after the end of each of the
first three quarterly fiscal periods in each fiscal year and in any event within
60 days thereafter, a consolidated balance sheet of the Company as at the end of
such period, a consolidated statement of operations and a consolidated statement
of Cash Flow of the Company for such period, in each case prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in comparative form the figures for the corresponding periods of the
previous fiscal year, all in reasonable detail and certified; subject to changes
resulting from audit adjustments, by the principal financial or accounting
officer of the Company.
6.3. Inspection. The Company agrees to permit any authorized
representative of the purchaser to visit the Company to discuss its affair and
finances with its officers, all upon reasonable notice to the Company, at such
reasonable times and as often as may be reasonable requested.
6.4. Purchaser's Right to Receive Reports. The Company shall deliver
the reports or give the rights specified in Paragraph 6.1., 6.2., and 6.3. to
the Purchaser until the earlier of (I) the closing date of the Company's first
underwritten public offering pursuant to an effective registration statement
filed under the Act; or (ii) until the Purchaser no longer holds the Note or any
Warrants.
7. No Waiver
---------
7.1. Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the Purchaser, the Purchaser does
not thereby or in any other manner waive any rights granted to it under Federal
and state securities laws.
129
<PAGE>
8. Survival of Representation, Warranties and Agreements
-----------------------------------------------------
Notwithstanding any investigation made by any party to this Agreements,
all covenants, agreements representations, and warranties made by the Company
and the Purchaser herein shall survive the execution of this Agreement, the
delivery to the Purchaser of the shares being purchased and the payment
therefore.
9. Transferability
---------------
9.1. The purchaser agrees not to transfer or assign this Agreement, or
any of its interest herein, and further agrees that nay assignment or transfer
of the shares shall be made only in accordance with applicable securities laws
and that an appropriate legend with respect thereto may be placed by the Company
on any certificate evidencing such shares.
10. Miscellaneous
-------------
10.1. Notices. All notices or other communications given or made
hereunder shall be in writing and shall be delivered to the Purchaser at:
7 Laurel Hill Road
Sturbridge, MA 01566
and to the Company:
253 Worcester Road
P. O. Box 180
Charlton, MA 01507
10.2. Governing Law. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts without giving effect to the
conflict of laws.
10.3. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
10.4. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and by the Purchaser.
10.5. Heading. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
10.6. Severability. In case any provision contained in this Agreement
should be invalid, illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
130
<PAGE>
10.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other party.
10.8. Pronouns. All pronouns shall be deemed to refer to the masculine,
feminine neuter, singular or plural, as the identity of the person or persons,
firm or other entity may require in the context thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives the day and year first above
written.
Mohd A. Aslami FIBERCORE, INC.
BY: /s/ Mohd A. Aslami BY: /s/ Michael J. Beecher
-------------------------- --------------------------------
Mohd A. Aslami
TITLE: Chief Financial Officer & Treasurer
131
<PAGE>
EXHIBIT A - TO THE NOTE PURCHASE AND WARRANT AGREEMENT
- ------------------------------------------------------
PROMISSORY NOTE
$50,000 CHARLTON, MA
DUE SEPTEMBER 17, 1998 DATED: SEPTEMBER 17, 1997
FOR VALUE RECEIVED, FiberCore, Inc., a Nevada corporation ("Payor or the
"Company"), hereby unconditionally promises to pay to the order of Mohd A.
Aslami ("Payee") 7 Laurel Hill Rd., Sturbridge, MA 01566, the principal sum of
FIFTY THOUSAND DOLLARS ($50,000) together with any unpaid interest thereon, on
the repayment date or maturity date as defined below.
1. Repayment and Maturity Date:
----------------------------
The principal amount of the Note together with accrued and unpaid interest, if
any, will be payable on the earlier of:
1.1 The receipt of the proceeds of any new financing received by
the Company which includes proceeds to be used as unrestricted
working capital;
1.2 The liquidation and receipt of proceeds on the sale or other
disposal of the inventory on hand at FiberCore Jena GmbH as of
August 31, 1997 (approximately $1.3 million);
1.3 A change in control of the Company which is defined as (I) the
number of common shares of the Company held or beneficially
owned in combination by Mohd Aslami, Charles De Luca, M.
Mahmoud Awan and AMP, Incorpoated being less than 45% of the
outstanding common shares of the Company; except that the
voluntary sale of shares by the Payee shall be disregarded
when determining the decrease in the percentage owned, or,
(ii) Mohd A. Aslami is removed by the Board of Directors of
the Company from the position of Chairman and/or Chief
Executive Officer, except if such removal is at the request of
or voluntarily by Aslami.
1.4 The final maturity date September 17, 1998;
1.5 This Promissory Note may be prepaid in whole or in part at any
time or from time to time without penalty or premium, together
with interest accrued on the amount so prepaid.
2. Interest:
---------
This Note shall bear interest at the initial rate of 9.5% for the
period September 17, 1997 to September 30, 1997. Thereafter the note will bear
interest for each 3-month period beginning October 1, 1997, at the rate of the
prime interest rate as published in the Wall Street Journal on
132
<PAGE>
the business day immediately preceeding the 3-month period plus one-percent
(1%). Interest will be payable quarterly on the 1st day of the month following
the 3-month interest period (April 1, July 1, October 1, and January 1) during
the term hereof.
In the event the Payor is unable to make the interest payments when due
the Payor agrees to pay an additional amount equal to 1/2 of 1% (.5%) on the
then outstanding principal as a late payment fee. In no event, however, shall
the failure of the Payor to make an interest payment when due be an event of
default. All principal and unpaid interest shall be due at maturity, September
17, 1998.
3. Conversion:
-----------
This outstanding amount of the note including any unpaid principal and
interest is convertible, at the option of the payee, at any time prior to
repayment, into common shares of the Company at the rate of $0.6875 per share.
4. Security:
---------
This note shall be secured by a first priority lien on the inventory
and accounts receivable of the Company and its wholly owned subsidiaries,
subject to the prior liens of others, if any.
4. Defaults:
---------
The principal amount of this Promissory Note and interest accrued
thereon shall become immediately due and payable, without presentation, protest,
notice or further demand, all of which are expressly waived, in the event of the
filing by or against the Payor of a petition in bankruptcy or reorganization or
insolvency. No event of default shall occur until Payor receives written notice
of an alleged default and, after 30 days, such default has not been remedied or
cured.
IN WITNESS WHEREOF, the undersigned has caused the Promissory Note to
be duly executed and delivered as of the date set forth ab ove.
FiberCore, Inc.
By: /s/ Michael J. Beecher
-----------------------------------------
Michael J. Beecher
Chief Financial Officer and Treasurer
133
EXHIBIT 10.63
CONSULTING AGREEMENT
This Consulting Agreement is made as of January 1, 1997 by and between
FiberCore, Inc., a Nevada corporation with its principal office at 253 Worcester
Road, Charlton, MA 01507 ("FCI") and One Financial Group Incorporated, a New
York Corporation with its principal office at 3 Barker Avenue, White Plains, NY
10601 ("OFG").
WHEREAS, OFG has been providing consulting services to FCI and its
affiliates (collectively "FCI"), and FCI is desirous of continuing the services
of OFG; and
WHEREAS, FCI and OFG desire to enter into a new agreement to provide
for the retention of OFG as a consultant to FCI, upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual undertakings contained
herein, the parties agree as follows:
1. Retention and Services. FCI hereby agrees to retain OFG, and
OFG hereby agrees to provide consulting services to FCI, upon
the terms and conditions set forth in this Agreement for the
period beginning on the date hereof and ending as provided in
Section 3 (the "Consulting Period"). FCI agrees to give OFG
reasonable notice prior to requesting services. FCI
acknowledges that OFG has other clients that it performs
similar services for and, accordingly, nothing in this
Agreement shall prohibit OFG or any officer or shareholder
thereof from investing in, rendering similar services to, or
becoming involved with any other company. Notwithstanding the
foregoing, OFG agrees that it will not perform services for
companies that compete with FCI, except upon receiving written
approval of FCI.
2. Compensation: During the Consulting period, OFG shall receive
a monthly retainer fee of $5,000. The retainer fee which is
based on an hourly rate of $185 is subject to a quarterly
adjustment for the actual number of consulting hours provided.
The retainer fee shall be paid by the fifteenth day of each
month. Adjustments, if any, shall be made to the retainer fee
payable in the first month following the end of each calendar
quarter. For example, any adjustment attributable to the first
quarter, shall be added to or subtracted from the April
retainer fee or if necessary, in the case of a subtraction, to
the following month(s). OFG shall be reimbursed for reasonable
out-of-pocket expenses incurred in connection with the
consulting services performed for FCI, including, by way of
example and not limitation, travel, lodging, entertainment,
and communications. Such expenses shall be paid at the same
time as the monthly retainer fee.
134
<PAGE>
3. Term: The Consulting Period shall end on December 31, 1997 and
shall extend for additional one year periods (the "Renewal
Period"), unless written notice of termination is received by
either party ninety (90) days prior to the commencement of a
Renewal Period.
4. Confidential Information: OFG acknowledges that the
information and data obtained by it while performing services
for FCI concerning business and affairs of FCI that are not
generally available to the public are the property of FCI. OFG
agrees that it shall treat such information as confidential.
Notwithstanding the foregoing, if OFG becomes legally
compelled to disclose confidential information pursuant to
judicial or administrative subpoena or process or other legal
obligation, OFG may make such disclosure to comply with such
subpoena, process or legal obligation.
5. Miscellaneous:
--------------
(a) Notice - All notices or other communication to be given or
delivered under or by reason of the provisions of this
Agreement shall be in writing and shall be deemed to have been
given when delivered personally, one business day following
when sent via a nationally recognized overnight courier, or
when sent via facsimile confirmed in writing to the recipient.
(b) Severability - Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any
other jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been
contained herein.
(c) Entire Agreement - This Agreement embodies the complete
agreement and understanding between the parties and supersedes
and preempts any prior understandings or agreements, written
or oral, which may have related to the subject matter hereof
in any way.
(d) Amendments and Waivers - Any provision of this Agreement
may be amended or waived only with the prior written consent
of the parties.
(e) Governing Law - This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
New York without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New
York or any other jurisdiction).
(f) Counterparts - This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
135
<PAGE>
instrument.
(g) Headings - The headings contained in this Agreement are
for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement or of any term
or provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
Fiber Core, Inc.
By: /s/ Michael J. Beecher
--------------------------------------------
Michael J. Beecher
Title: Chief Financial Officer and Treasurer
-----------------------------------------
One Financial Group Incorporated
By: /s/ Steven Phillips
--------------------------------------------
Steven Phillips
Title: President
136
EXHIBIT 22
LIST OF SUBSIDIARIES
OF
FIBERCORE, INC.
InfoGlass Incorporated (Delaware)
FiberCore Glasfaser Jena GmbH (Germany)
Automated Light Technologies (Delaware)
FiberCore Mid East Ltd. (Cayman Islands)
FiberCore Asia Sdn. Bhd. (Malaysia)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
financial statements for the year ended December 31, 1997 and is qualified in
its entirety by reference to such financial statements. Prior years financial
data schedules have not been restated because there would be no change in basic
and diluted EPS.
</LEGEND>
<CIK> 0000917770
<NAME> FIBERCORE, INC.
<MULTIPLIER> 1,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,128
<SECURITIES> 0
<RECEIVABLES> 970
<ALLOWANCES> (33)
<INVENTORY> 3,057
<CURRENT-ASSETS> 11,591
<PP&E> 6,559
<DEPRECIATION> (1,751)
<TOTAL-ASSETS> 26,107
<CURRENT-LIABILITIES> 3,500
<BONDS> 9,851
0
0
<COMMON> 36
<OTHER-SE> 9,503
<TOTAL-LIABILITY-AND-EQUITY> 26,107
<SALES> 7,078
<TOTAL-REVENUES> 7,104
<CGS> 5,702
<TOTAL-COSTS> 9,284
<OTHER-EXPENSES> 234
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 664
<INCOME-PRETAX> (3,078)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,078)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,078)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
