-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LRiTEEsgrDueTaMoNuCbPHkZFDuRKsNjXkw1fy6JwdfBa+EpA9cmy45x8P+Kds54 GA8KJx9N6BERNRwCwz6xBQ== 0000950123-99-006730.txt : 19990722 0000950123-99-006730.hdr.sgml : 19990722 ACCESSION NUMBER: 0000950123-99-006730 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19990721 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRAN CORP CENTRAL INDEX KEY: 0000718487 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 042729372 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: SEC FILE NUMBER: 005-34595 FILM NUMBER: 99668207 BUSINESS ADDRESS: STREET 1: 50 HALL ROAD CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083472261 MAIL ADDRESS: STREET 1: 50 HALL ROAD CITY: STURBRIDGE STATE: MA ZIP: 01566 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRAN CORP CENTRAL INDEX KEY: 0000718487 STANDARD INDUSTRIAL CLASSIFICATION: GLASS, GLASSWARE, PRESSED OR BLOWN [3220] IRS NUMBER: 042729372 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 50 HALL ROAD CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083472261 MAIL ADDRESS: STREET 1: 50 HALL ROAD CITY: STURBRIDGE STATE: MA ZIP: 01566 SC 14D9 1 SPECTRAN CORPORATION 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ SPECTRAN CORPORATION (NAME OF SUBJECT COMPANY) ------------------------ SPECTRAN CORPORATION (NAME OF PERSON FILING STATEMENT) ------------------------ COMMON STOCK, $.10 PAR VALUE (TITLE OF CLASS OF SECURITIES) ------------------------ 847598109 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ CHARLES B. HARRISON CHIEF EXECUTIVE OFFICER SPECTRAN CORPORATION 50 HALL ROAD STURBRIDGE, MASSACHUSETTS 01566 (508) 347-2261 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT) ------------------------ COPIES TO: IRA S. NORDLICHT, ESQ. NORDLICHT & HAND 645 FIFTH AVENUE NEW YORK, NEW YORK 10022 (212) 421-6500 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INTRODUCTION This Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9") relates to an offer by Seattle Acquisition Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Lucent Technologies Inc., a Delaware corporation ("Lucent"), to purchase all of the Shares (as defined below) of SpecTran Corporation, a Delaware corporation (the "Company"). ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is SpecTran Corporation. The address of the principal executive office of the Company is 50 Hall Road, Sturbridge, Massachusetts 01566. The title of the class of equity securities to which this Schedule 14D-9 relates is the common stock of the Company, par value $.10 per share (the "Shares"). ITEM 2. TENDER OFFER OF THE BIDDER. This Schedule 14D-9 relates to the tender offer (the "Offer") disclosed in the Tender Offer Statement on Schedule 14D-1 dated July 21, 1999 (as amended or supplemented, the "Schedule 14D-1") filed with the Securities and Exchange Commission (the "Commission") by Lucent and the Purchaser, relating to an offer by the Purchaser to purchase all outstanding Shares at a price of $9.00 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated July 21, 1999, a copy of which is filed as Exhibit (a)(1) hereto (the "Offer to Purchase"), and the related Letter of Transmittal, a copy of which is filed as Exhibit (a)(2) hereto. The principal executive offices of each of Lucent and the Purchaser are located at 600 Mountain Avenue, Murray Hill, New Jersey 07974. The Offer is being made pursuant to an Agreement of Merger, dated as of July 15, 1999 (the "Agreement of Merger"), among the Company, Lucent and the Purchaser. A copy of the Agreement of Merger is filed as Exhibit (c)(1) hereto and is hereby incorporated by reference. The Agreement of Merger provides that, among other things, as soon as practicable after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Agreement of Merger and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware ("Delaware Law" or the "DGCL"), the Purchaser will be merged with the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will become a wholly owned subsidiary of Lucent. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares (i) owned or held in treasury by the Company, (ii) owned by the Purchaser or Lucent, (iii) remaining outstanding held by any subsidiary of the Company or Lucent or (iv) owned by stockholders who shall have demanded properly and perfected appraisal rights, if any, under Delaware Law) will be canceled and converted automatically into the right to receive the Offer Price (the "Merger Consideration"). The Agreement of Merger is summarized in Section 12 of the Offer to Purchase. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of the Company, which is the person filing this Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise requires, references to the Company in this Schedule 14D-9 are to the Company and its subsidiaries, viewed as a single entity. (b) Certain contracts, agreements, arrangements or understandings known to the Company between the Company or its affiliates and (i) certain of the Company's executive officers, directors or affiliates or (ii) certain of Lucent's executive officers, directors or affiliates are described in the Information Statement of the Company attached to this Schedule 14D-9 as Annex A (the "Information Statement"). Other such contracts, arrangements and understandings known to the Company are summarized in Item 4(b) below and are incorporated herein by reference. The Information Statement is being furnished to the Company's stockholders pursuant to Section 14(f) of the Securities Exchange Act of 1934 (the "Exchange Act"), and Rule 14f-1 issued under the Exchange Act in connection with the Purchaser's right (after consummation of 1 3 the Offer) to designate persons to be appointed to the Board of Directors of the Company other than at a meeting of the stockholders of the Company. The Information Statement is hereby incorporated by reference herein. The transactions discussed in this Schedule will result in an acceleration of benefits to executive officers and directors and certain consultants and employees under the Company's Incentive Stock Option Plans, Supplemental Retirement Agreements and Retirement Plan for Outside Directors. In addition, certain executive officers have certain benefits under employment agreements although the executive officers have acknowledged that the consummation of the Agreement of Merger will not constitute a Change in Control as defined in each executive's employment agreement. For further information see in the attached Information Statement the sections entitled "Employment Agreements and Change-In-Control Arrangements," "Supplemental Retirement Benefits," "Incentive Stock Option Plan" and "Retirement Plan for Outside Directors", and Section 6.5 of the Agreement of Merger requiring prior to completion of the Merger the termination of, among other things, the Supplemental Retirement Agreement and retirement plans including the Retirement Plan for Outside Directors, and the payout of accrued benefits in accordance with procedures set forth therein. The information contained under the caption "Purpose of the Offer; The Merger Agreement" in Section 12 of the Offer to Purchase is incorporated herein by reference. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (A) RECOMMENDATION OF THE BOARD OF DIRECTORS The Board of Directors of the Company has unanimously approved the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company and unanimously recommends that stockholders of the Company accept the Offer and tender their Shares to the Purchaser pursuant to the terms of the Offer. This recommendation is based in part upon an opinion of Lazard Freres & Co. LLC ("Lazard"), the Company's investment banker, that as of the date of the Agreement of Merger the $9.00 per Share in cash to be received by the Company's stockholders in the Offer and the Merger is fair to such stockholders from a financial point of view (the "Fairness Opinion"). The Fairness Opinion contains a description of the factors considered, the assumptions made, and the scope of the review undertaken by Lazard in rendering its opinion. The full text of the opinion of Lazard is attached hereto as Annex B to this Schedule 14D-9 and is incorporated herein by reference. STOCKHOLDERS ARE URGED TO READ SUCH OPINION OF LAZARD IN ITS ENTIRETY. As set forth in the Agreement of Merger, the Purchaser will purchase Shares tendered prior to the close of the Offer if the conditions to the Offer have been satisfied (or waived). Under Delaware Law, the approval of the Board and the affirmative vote of the holders of a majority of the outstanding Shares (unless at least 90% of the outstanding Shares are held by the Purchaser) are required to approve the Merger. Accordingly, if the minimum condition of and the other conditions to the Offer are satisfied, the Purchaser will have sufficient voting power to cause the approval of the Merger without the affirmative vote of any other stockholder. Under Delaware Law, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the then outstanding Shares, the Purchaser will be able to approve and adopt the Agreement of Merger and the Merger, without a vote of the Company's stockholders. Lucent, the Purchaser and the Company have agreed to use their reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other transactions contemplated by the Agreement of Merger. If the Purchaser does not acquire at least 90% of the then outstanding Shares pursuant to the Offer or otherwise and a vote of the Company's stockholders is required under Delaware Law, a longer period of time will be required to effect the Merger. The initial expiration date for the Offer is 12:00 Midnight, New York City time, on August 17, 1999, unless the Purchaser extends the period of time for which the Offer is open. Lucent and Purchaser have agreed that if the minimum condition of and the other conditions to the Offer are not satisfied on any scheduled 2 4 expiration date of the Offer then, provided that all such conditions are reasonably capable of being satisfied, Purchaser shall extend the Offer from time to time until such conditions are satisfied or waived, provided that Purchaser shall not be required to extend the Offer beyond September 30, 1999. A copy of the press release jointly prepared by Lucent and Issuer and released by Lucent on July 15, 1999 announcing the Merger and the Offer is filed as Exhibit (a)(3) hereto and is incorporated herein by reference in its entirety. (B) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION. Background of the Relationship. The Company has a long-standing relationship with Lucent both as a supplier of optical fiber to Lucent and a licensee of technology from Lucent. Supply Relationship with Lucent The Company and Lucent have a three-year supply agreement (the "Supply Agreement") terminating December 31, 1999, under which Lucent is required to make certain annual minimum purchases of optical fiber. Lucent has satisfied its minimum annual purchase obligations under the Supply Agreement through and including 1999. In 1998, Lucent purchased quantities of optical fiber in excess of the required annual minimum. In September 1998, the Company and Lucent began discussions regarding quantities of optical fiber Lucent anticipated purchasing from the Company in 1999. In the course of these discussions, the parties discussed the possibility of entering into a new supply agreement to replace the Supply Agreement. Those discussions continued through January 1999 when Lucent stated that it would not enter a new supply agreement but would (and did) make additional purchases under the terms of the Supply Agreement on an as needed basis. On June 1, 1999, Lucent advised the Company that, due to excess inventories, for the remainder of the year Lucent would decrease significantly the amount of optical fiber it would purchase from the Company. During the calendar years ended December 31, 1998 and 1997, the Company sold (the Company recognizes revenue when a product is shipped) approximately $26 million and $6.6 million, respectively, of optical fiber to Lucent. During the six month period ended June 30, 1999, the Company sold approximately $9.5 million of optical fiber to Lucent. Licensee Relationship with Lucent The Company has been a licensee of Lucent's and its predecessor companies' optical fiber patents since 1981. From mid 1997 until October 30, 1998, the Company and Lucent discussed the possibility of entering into a further patent license agreement. On October 30, 1998, the Company and Lucent established a new worldwide, non-exclusive license exchanging rights under their optical fiber patents issued prior to January 1, 1998, and additional patents related to multimode fiber based on applications filed through October 1998. The Company is licensed by Lucent to make optical fiber at its existing factories for worldwide use and sale and export from the United States. The license contains some product limitations including certain exclusions to make or sell select specialty fibers for some applications. Lucent receives non-exclusive, royalty-free worldwide rights. The Company agreed to pay Lucent a $4.0 million license fee in installments and, beginning in 2000, a royalty on sales. On January 31, 1999, the Company paid the first license fee installment of $750,000 and will be making a further $500,000 payment on July 31, 1999. An additional $1,000,000 is due in 2000, $1,000,000 in 2001 and $750,000 in 2002. Lucent has the right to terminate the agreement if the Company is acquired by an optical fiber manufacturer. For the six months ended June 30, 1999, the Company made no royalty payments to Lucent. For the fiscal years ending December 31, 1998, 1997 and 1996, the Company made aggregate royalty payments to Lucent of approximately $60,000, $890,000 and $760,000, respectively. All such royalty payments were in respect of sales by SpecTran Communication Fiber Technologies, Inc., a subsidiary of the Company. 3 5 Background of the Offer The Company has been in the process of substantially expanding its capacity at its manufacturing facilities and completing the development of and implementing a new optical fiber manufacturing process, which has required significantly more funds and more time than anticipated. In addition, there were operational and inventory issues at a subsidiary in part related to its relocation and expansion. Sales growth and gross profit in 1998 were adversely affected by highly competitive market conditions and pricing pressures caused by an industry-wide oversupply situation. The Company has financed its capital and operational needs through a combination of cash flow from operations and borrowings under its loan agreements. The Company violated certain covenants contained in both its revolving credit agreement and senior secured notes as a result of its second quarter 1998 results. In the third quarter of 1998, the Company entered negotiations with its lenders to revise those covenants and began exploring various financial and strategic alternatives including seeking additional capital or entering into strategic alliances in an attempt to reduce its debt. During the fourth quarter of 1998 the Company received an unsolicited proposal from a company (Company A) seeking to make a minority equity investment in the Company at an unattractive price coupled with substantial governance and management controls. The Company determined to explore retaining expert advice to assist the Company in evaluating this proposal as well as to explore other financial and strategic alternatives. In late November 1998, Mr. Robert A. Schmitz, a director of the Company, who was also serving as a financial advisor to the Company, contacted Lazard and suggested that Lazard meet with the Board of Directors of the Company. In December 1998, the Company signed an agreement with its lenders to amend certain covenants contained in both the revolving credit agreement and the senior secured notes. In connection with the signing of that agreement, all violations of the original agreements were waived. The Company has continued to finance its capital and operational needs through a combination of cash flow from operations and borrowings and expects to continue to do so, assuming the Company continues to meet its lenders revised covenants. While the Company has been in compliance with all the revised covenants, there continues to be no assurance that the Company would be able to remain in compliance with all the revised covenants. On January 7, 1999, representatives of Lazard made a presentation to the Board of Directors of the Company. After representatives of Lazard were excused, the directors present voted unanimously to engage Lazard to explore and advise the Board of Directors concerning financial and strategic alternatives for the Company and on January 25, 1999, the Company entered into an agreement with Lazard to do so. On February 1, 1999, because of the Company's significant business relationships with Lucent, a representative of Lazard and Mr. Charles B. Harrison, President, Chief Executive Officer and Chairman of the Board of Directors of the Company, pursuant to a confidentiality agreement later signed, met with Mr. Robert Mohalley, Strategy Vice President for Lucent's Network Products Group, and Mr. Denys Gounot, Chief Operating Officer of Lucent's Network Products Group, to inform them that Lazard had been engaged to explore financial and strategic alternatives for the Company. In early February, at the request of the Company, Lazard began contacting prospective strategic and financial partners and, during the months of February and March, contacted 34 parties (including Lucent) and supplied a number of them with non-public information pursuant to confidentiality and non-disclosure agreements. During February, management and representatives of Lazard met with some of the 34 contacted parties who expressed potential interest in pursuing various types of transactions. On February 17, 1999, Lazard and management provided to the Board of Directors a status report of their efforts to explore financial and strategic alternatives for the Company. In late February and early March, twelve interested parties submitted non-binding preliminary indications of interest for a variety of proposed transactions. These interested parties were invited to conduct detailed due diligence reviews, including meetings with Company management, review of additional non-public information and tours of the Company's facilities. 4 6 In early March 1999, although Lucent stated it did not expect to submit a proposal, Lucent indicated interest in meeting with senior management and visiting the Company's facilities. During March and April, management and representatives of Lazard met with those companies who had given preliminary indications of interest in pursuing various types of transactions. On March 18, 1999, Lazard and management provided to the Board of Directors a status report on their efforts to explore financial and strategic alternatives for the Company. On March 24 and 25, 1999, representatives from Lucent conducted due diligence on the Company and visited the Company's facilities. In late April and early May, the Company received second non-binding indication of interest letters from six interested parties describing various alternative transactions, including a supply agreement with warrants to purchase common stock, cash purchase of different subsidiaries of the Company, a minority cash investment with a supply agreement and substantial governance rights, a merger of optical fiber assets and two proposals to acquire the Company, one for stock and one for cash. On April 21, 1999, Lazard and management provided to the Board of Directors a status report on their efforts to explore financial and strategic alternatives for the Company. In late April, Lucent informed Lazard that it was not going to submit a proposal, but might be interested under the right circumstances in pursuing a supply agreement. On May 10, 1999, a representative from Lucent (Mr. Mohalley) sent the Company a letter stating that upon further review Lucent might be interested in pursuing a transaction. On May 11, 1999, during a telephone conversation, Mr. Mohalley asked Mr. Harrison for at least an additional two weeks to conduct more due diligence before submitting an indication of interest letter. On May 11, 1999, the Board of Directors of the Company met to discuss the indication of interest letters and Lucent's request for additional time. All of the Company's directors were present, as were representatives of Lazard. At the meeting the directors discussed the non-binding proposals contained in those letters and determined that each of the proposals had drawbacks. The proposed minority investment from Company A was for an inadequate per share price coupled with significant management and governance controls. The Board rejected the two proposals to purchase only the specialty subsidiary since it was viewed as having substantial growth potential, the prices were inadequate and stockholder value was not adequately enhanced. One letter referred to a merger but Lazard and the Company were unable to obtain a firm proposal. Regarding an offer for a supply agreement with warrants, the supply agreement was at below current market prices for optical fiber and the offer did not provide the capital infusion that the Company desired. The Board directed the Company's management and Lazard to continue to pursue a possible transaction with Lucent and further refine and clarify the other two proposals, one involving the sale of the Company for cash (Company C) and the other involving the sale of the Company for stock (Company B). On May 17-18, 1999, representatives of Lucent, including Mr. Terrence Bentley, Director Corporate Development of Lucent, and Mr. Richard Sullivan, Network Products Group Director Business Development of Lucent, visited the Company to conduct further due diligence. Subsequently, there were a number of calls among representatives of Lucent, the Company and Lazard to review various due diligence items. On May 19, 1999, senior management of the Company and representatives of Lazard visited Company B to conduct due diligence on Company B. Subsequently, there were a number of calls among representatives of Company B, the Company and Lazard to review various items related to due diligence both by the Company on Company B and by Company B on the Company. On May 20-21, 1999, representatives of Company C visited the Company to conduct further due diligence. Subsequently, there were a number of calls among representatives of Company C, the Company and Lazard to review various due diligence items. On May 28, 1999, at the Annual Meeting of the Company's stockholders, the Company publicly announced its 1999 projected net sales of more than $90 million and projected growth rates of sales and 5 7 earnings through 2003, information which had been shared under confidentiality agreement with each of the prospective strategic and financial partners. At a June 4, 1999, meeting of the Board of Directors, senior management of the Company and representatives of Lazard reported on the status of their efforts to explore financial and strategic alternatives for the Company, including reviewing the non-binding proposals submitted to the Company and reporting that there was serious interest being expressed by Lucent, but that certain persons at Lucent believed the Company to be worth approximately $6 per share if the value of Lucent's purchases of optical fiber from the Company were eliminated. On June 14, 1999, senior executives from Lucent visited the Company to meet with senior management of the Company and to tour the facilities. On June 15, 1999, Company C informed Lazard that Company C was withdrawing from the process until after the Company's results for the quarter ended September 30, 1999 were available and subject to additional discussions and diligence. On June 15, 1999, Company B sent a letter reducing its proposed exchange ratio. On the same day, Mr. Bentley indicated to Mr. Harrison that Lucent would be willing to offer $8.00 per Share in cash subject to due diligence. Concurrently, a representative of Lucent reviewed different valuations of the Company's stock. On June 16, 1999, a representative of Lazard contacted Mr. Bentley and suggested that Lucent submit a proposal in writing to acquire the Company for Lucent stock at a price higher than $8.00 per Share. On June 17, 1999, a representative of Lucent informed a representative of Lazard that Lucent had completed its purchases of optical fiber from the Company for the year. Later that day, Lucent submitted a non-binding indication of interest letter for the acquisition of the Company for $8.00 - $8.75 per Share. At a June 18, 1999 telephonic meeting of the Board of Directors, a representative of Lazard reported that the Company had received a non-binding indication of interest letter from Lucent for $8.00 - $8.75 per Share and that Lucent had stated that it had completed its purchases of optical fiber from the Company for the year. A representative of Lazard added that it was unclear if Lucent's proposal contemplated stock or cash consideration. He then reported that Company C had determined to defer proceeding further until after the Company's results in the quarter ended September 30, 1999 were available and subject to additional discussions and diligence. A representative of Lazard also reported that Company B had reduced its stock offer. A representative of Lazard observed that Company B's stock was highly illiquid, had limited institutional ownership and no equity research coverage and should the Company's stockholders receive such stock, and wish to liquidate their position, they may be unable to do so without realizing a significant discount. In addition, Lazard informed the Board of Directors that Lazard was unable to evaluate Company B, including its market price, with any reasonable degree of assurance. The Board discussed the Lucent proposal, expressed concern about the price and the strong desire that any offer be for stock consideration. On June 21, 1999, Mr. Harrison met with Mr. Bentley, indicated that Lucent's offer was insufficient and that the Company strongly preferred a stock transaction. During this meeting, the Company's auditors by telephone informed Mr. Harrison and Mr. Bentley that any business combination in which the Company was involved would not be eligible to be accounted for on a pooling of interests basis. At the end of the meeting, Mr. Bentley indicated that Lucent would be willing to increase its previous non-binding indication of interest to $9.00 per Share in cash but did not want to pursue a stock transaction. On June 21, 1999, the Board of Directors met by conference telephone call in the evening (one director was unavailable) and discussed Mr. Harrison's report of his meeting with Lucent. The Board directed Mr. Harrison to discuss a possible stock transaction again with Mr. Bentley. On June 22, 1999, the Company and Lucent executed a revised non-disclosure agreement. On the morning of June 22, 1999, Mr. Harrison spoke with Mr. Bentley. Mr. Harrison reported again that the Company's Board strongly preferred a stock transaction. Mr. Bentley reiterated that Lucent would not agree to a stock transaction but would be interested in pursuing a $9 per Share cash transaction. 6 8 On June 22, 1999 at 5:00 p.m., the Board of Directors of the Company met and was updated by Mr. Harrison. The Board repeated its preference for a stock transaction. The Board directed Mr. Harrison to attempt again to ascertain whether Lucent would be willing to acquire the Company for stock, but also authorized Mr. Harrison to proceed with discussions regarding a cash transaction for $9 per Share or higher. Later that evening, Mr. Harrison raised the matter of a stock transaction again with Mr. Bentley. On June 23, 1999, Mr. Bentley informed Mr. Harrison that Lucent was strongly disinclined to do a stock transaction for a number of reasons, including added costs to Lucent in time and expense. Mr. Bentley stated that he would consider discussing with the CFO of Lucent an acquisition of the Company at a per Share price of $8 in Lucent stock but advised Mr. Harrison that he did not believe such a transaction would be approved and that the environment for obtaining such approval from Lucent's senior management was very unfavorable. Mr. Harrison stated he would discuss the matter with the Company's directors and advise Mr. Bentley. Mr. Harrison polled the Board and the unanimous sense was to proceed with negotiations for a $9 per Share cash transaction. Mr. Harrison so informed Mr. Bentley that same day. On June 25, 1999, Company C sent a letter to the Company confirming in writing its June 15, 1999 conversation with a representative of Lazard. On June 28 and June 29, 1999, representatives from Lucent visited the Company to meet with senior management of the Company, to tour the facilities and to continue due diligence. On June 30, 1999, the parties agreed to proceed on a non-binding basis. From July 1 to July 14, 1999, representatives of Lucent conducted further due diligence. The representatives also negotiated the Agreement of Merger with representatives of the Company. During negotiations, the Company requested and Lucent agreed to eliminate several deal protection measures including an option to acquire up to 19.9% of the Company's Shares under certain conditions, agreements from directors and officers to tender their Shares and vote in favor of the Merger and a reduction in the break-up fee in the event the transaction was not completed for certain reasons from $2.5 million to $2.0 million. On July 14, 1999, the Board of Directors of the Company held a meeting to consider the Offer, the Merger and the Agreement of Merger. At the meeting, the Board of Directors reviewed the Offer, the terms of the Agreement of Merger with its legal counsel and representatives of Lazard. The Board of Directors of the Company heard presentations by its legal counsel with respect to the terms of the proposed offer, the Merger and the Agreement of Merger, and legal counsel advised the Board of Directors that the negotiations for the Agreement of Merger were substantially complete. The Board of Directors also heard a presentation by representatives of Lazard with respect to the financial terms of the Offer and the Merger and Lazard's valuation analysis. The Board of Directors, with the participation of the representatives of Lazard, reviewed again the alternatives for the Company. At the conclusion of the presentation, representatives of Lazard delivered Lazard's oral opinion that, as of the date of the Agreement of Merger, and based upon the procedures followed, matters considered, assumptions made and limitations of the review undertaken in connection with such opinion, the $9.00 in cash per Share to be paid to the stockholders of the Company pursuant to the Offer and the Merger was fair to such stockholders from a financial point of view. Lazard subsequently delivered a written opinion dated the date of the Agreement of Merger to the same effect. Based upon such discussion, presentations and opinion, the Board of Directors of the Company has unanimously approved the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company and unanimously recommends that stockholders of the Company accept the Offer and tender their Shares to the Purchaser pursuant to the terms of the Offer. 7 9 Reasons for the Recommendation. In reaching its determination described above, the Board of Directors of the Company considered a number of factors, including, without limitation, the following: (i) the possible alternatives to the Offer and the Merger (including the possibility of continuing to operate the Company as an independent entity), the range of possible benefits to the Company's stockholders of such alternatives and the timing and the likelihood of accomplishing any of such alternatives; (ii) the Company's prospects if it were to remain independent, its growth potential, the risks inherent in remaining independent, the Company's existing debt and the need for capital to achieve its longer term business plan; (iii) the competitive advantage in the industry of large optical fiber manufacturers and the competitive advantage of large integrated optical fiber, optical cable and systems manufacturers, including Lucent, with substantial financial resources; (iv) the dependence of the Company for its sales of multimode optical fiber on relatively few customers, some of whom, including Lucent, are licensors and competitors of the Company. In particular, the Board considered whether, in light of Lucent's decreased demand for fiber, if the acquisition did not occur, Lucent would increase its own capacity to manufacture current or new optical fiber designs itself; (v) in view of the extensive efforts of both the Company and Lazard to find financial and strategic partners and potential acquirors, that it was highly unlikely that any other party would propose to enter into a more favorable transaction to the Company and its stockholders; (vi) the presentation of Lazard at the July 14, 1999 meeting of the Board of Directors and the opinion of Lazard to the effect that, as of such date, the $9 in cash per Share to be paid to the stockholders of the Company pursuant to the Offer and in the Merger was fair to such stockholders from a financial point of view. A copy of the written opinion of Lazard, which sets forth the procedures followed, matters considered, assumptions made and limitations of the review undertaken by Lazard, is attached hereto as Annex B. STOCKHOLDERS ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY; (vii) current financial market conditions, volatility and trading information with respect to the Shares of the Company and the historical prices for the Shares, including the fact that, although the proposed purchase price of $9 per Shares is less than recent NASDAQ National Market closing prices for the Share, representing a discount of approximately 21.7% over the July 14, 1999 market price of $11.50 per Share and discounts of approximately 14.0% and 4.0% over the one and two months average closing prices of $10.46 and $9.37 per Share, respectively, the $9 per Share purchase price represents: a premium of approximately 10.2% over the three month average closing price of $8.17 per Share; a premium of approximately 38.2% over the six month average closing price of $6.51 per Share; a premium of approximately 40.2% over the average closing price since January 1, 1999; and a premium of approximately 56.6% over the one year average closing price of $5.75. (viii) the likelihood that the proposed acquisition would be consummated, in light of the experience, reputation and the financial strength of Lucent and the absence of any financing condition in the Offer; (ix) the financial and other terms and conditions of the Offer, the Merger and the Agreement of Merger, including, without limitation, the fact that the terms of the Agreement of Merger will not prevent other third parties from making certain bona fide proposals subsequent to execution of the Agreement of Merger, will not prevent the Board of Directors from determining, in the exercise of its fiduciary duties in accordance with the Agreement of Merger, to provide information to and engage in negotiations with such third parties and will permit the Company, subject to the non-solicitation provisions and the payment of the termination fee of $2.0 million, to enter into a transaction with a third party that would be more favorable to the Company's stockholders than the Offer and the Merger; and 8 10 (x) the anticipated benefits of the Merger to the Company's employees and the communities in which the Company operates. The foregoing discussion of the information and factors considered and given weight by the Board of Directors is not intended to be exhaustive. The Board did not assign relative weights to the above factors or determine that any factor was of particular importance relative to other factors. Rather, the Board viewed its position and recommendations as being based on the totality of the information presented to and considered by it during the process followed by the Board. In addition, it is possible that different members of the Board assigned different weights to the different factors. The Board recognized that there can be no assurance as to the level of growth or profits to be attained by Company, if it remained independent, or by the Surviving Corporation in the future. It is expected that, if the Shares are not purchased by Lucent in accordance with the terms of the Offer or if the Merger is not consummated, the Company's current management, under the general direction of the Board, will continue to manage the Company as an ongoing business. THE FULL TEXT OF THE WRITTEN FAIRNESS OPINION OF LAZARD IS FILED AS EXHIBIT (a)(4) TO THIS SCHEDULE 14D-9 AND IS ALSO ATTACHED HERETO AS ANNEX B. STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. SUCH OPINION WAS PRESENTED FOR THE INFORMATION OF THE BOARD IN CONNECTION WITH THEIR CONSIDERATION OF THE AGREEMENT OF MERGER AND IS DIRECTED ONLY TO THE FAIRNESS (FROM A FINANCIAL POINT OF VIEW) OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF SHARES (OTHER THAN LUCENT AND ITS AFFILIATES) PURSUANT TO THE OFFER AND THE MERGER. SUCH OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER SHARES IN THE OFFER OR HOW TO VOTE WITH RESPECT TO THE MERGER. IN LIGHT OF THE FACTORS SET FORTH ABOVE, THE BOARD RESOLVED UNANIMOUSLY TO APPROVE THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RESOLVED UNANIMOUSLY TO RECOMMEND THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. In connection with Lazard's services as investment banker to the Company, the Company has paid Lazard a $250,000 retention fee and will pay Lazard a fee equal to a customary percentage of the transaction value upon the consummation of the Offer and the Merger. The Company has agreed to reimburse Lazard for its reasonable out-of-pocket expenses incurred in connection with rendering financial advisory services, including fees and disbursements of its legal counsel. The Company also has agreed to indemnify Lazard and its directors, officers, agents, employees and controlling persons for certain costs, expenses and liabilities, including certain liabilities under the federal securities laws. Except as set forth above, neither the Company nor any person acting on its behalf has or currently intends to employ, retain or compensate any person to make solicitations or recommendations to the stockholders of the Company on its behalf with respect to the Offer, except that such solicitations or recommendations may be made by directors, officers or employees of the Company, for which services no additional compensation will be paid. 9 11 ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) During the past 60 days, no transactions in Shares have been effected by the Company or, to the Company's knowledge, by any of its executive officers, directors, affiliates or subsidiaries, except as follows: 1. The Company has granted options to purchase Shares, and issued Shares upon exercise of options held by, employees and consultants under its stock plans. 2. In accordance with the Company's automatic payroll deduction employee stock purchase plan, Charles B. Harrison purchased 241 Shares in April 1999 for $3.875 per share, 238 Shares in May 1999 for $7.875 per Share, 185 Shares in June 1999 at $10.125 per Share and 157 Shares in July 1999 at $11.9375 per Share. 3. The following executive officers of the Company were granted options to purchase Shares on the dates and at the per Share exercise prices set forth below:
NAME EXERCISE PRICE GRANT DATE OPTION SHARES - ---- -------------- ------------ ------------- Charles Harrison.......................... $9.25 May 28, 1999 25,000 John Chapman.............................. $9.25 May 28, 1999 14,000 Martin Seifert............................ $9.25 May 28, 1999 14,000
- --------------- (b) To the Company's knowledge, all of the Company's executive officers and directors who own Shares currently intend to tender all of their Shares (other than Shares, if any, held by such person that, if tendered, could cause such person to incur liability under the provisions of Section 16(b) of the Exchange Act) pursuant to the Offer. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. Except as set forth above or in Item 3(b) or (c) or 4(a) above, no negotiation is being undertaken or is underway by the Company in response to the Offer which relates to or would result in: (i) an extraordinary transaction, such as a merger or reorganization involving the Company or any subsidiary thereof; (ii) a purchase, sale or transfer of a material amount of assets by the Company or any subsidiary thereof; (iii) a tender offer for or other acquisition of securities by or of the Company; or (iv) any material change in the present capitalization or dividend policy of the Company. (b) Except as described above or in Item 3(b) or (c) or 4(a) above, there are no transactions, Board of Directors resolutions, agreements in principle or signed contracts in response to the Offer that relate to or would result in one or more of the events referred to in Item 7(a) above. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. LITIGATION. After the announcement of the Agreement of Merger by the Company and Lucent on July 15, 1999, two putative class action lawsuits relating to the Merger were filed in the Court of Chancery for the State of Delaware: Chase v. Harrison et. al., C.A. No. 17312-NC and Airmont Associates et. al., v. SpecTran Corporation et. al., C.A. No. 17314-NC. The lawsuits were filed by plaintiffs claiming to be stockholders of the Company, purportedly on behalf of all the Company's stockholders, against the Company, members of the board of directors of the Company and Lucent. The plaintiffs in both lawsuits allege, among other things, that the terms of the proposed Merger were not the result of an auction process or active market check, that the $9.00 per share price offered by Lucent is inadequate, and that the Company's directors breached their fiduciary duties to the stockholders of the Company in connection with the Agreement of Merger. Both lawsuits seek to have the Merger enjoined or, if the Merger is completed, to have it rescinded and to recover unspecified damages, fees and expenses. The Company and Lucent intend to vigorously oppose these lawsuits. 10 12 ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated July 21, 1999. (a)(2) Letter of Transmittal. (a)(3) Press Release jointly prepared by Lucent and the Company and issued by Lucent on July 15, 1999. (a)(4)(1) Opinion of Lazard Freres & Co. LLC dated July 15, 1999. (a)(5) Letter to Stockholders, dated July 21, 1999, from Charles B. Harrison, Chairman of the Board of Directors and President and Chief Executive Officer of the Company.* (c)(1) Agreement of Merger, dated as of July 15, 1999, among Lucent, the Purchaser and the Company. (c)(2)(2) The Company's Information Statement pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder. (c)(3) Contractual Agreement between Lucent Technologies Inc. and SpecTran Corporation, dated October 3, 1996. The Company has been granted confidential treatment for portions of this Exhibit. (c)(4) Patent License Agreement between Lucent Technologies and SpecTran Corporation dated as of October 30, 1998. The Company has been granted confidential treatment for portions of this Exhibit. - --------------- * Included in copies mailed to stockholders. (1) Attached hereto as Annex B. (2) Attached hereto as Annex A. 11 13 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and accurate. SPECTRAN CORPORATION By: /s/ CHARLES B. HARRISON ------------------------------------ Charles B. Harrison President, Chief Executive Officer and Chairman of the Board of Directors Dated: July 21, 1999 12 14 ANNEX A SPECTRAN CORPORATION SPECTRAN INDUSTRIAL PARK 50 HALL ROAD STURBRIDGE, MASSACHUSETTS 01566 INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14f-1 THEREUNDER This Information Statement is being mailed on or about July 21, 1999, as a part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") of SpecTran Corporation (the "Company") to the holders of record of shares of Common Stock, par value $0.10 per share, of the Company (the "Shares") at the close of business on or about July 21, 1999. You are receiving this Information Statement in connection with the possible appointment following consummation of the Offer (as defined below), of persons designated by the Purchaser (as defined below) to a majority of the seats on the Board of Directors of the Company. On July 15, 1999, the Company, Lucent Technologies Inc., a Delaware corporation ("Parent") and Seattle Acquisition Inc., a Delaware corporation and wholly owned subsidiary of Parent (the "Purchaser"), entered into an Agreement of Merger (the "Merger Agreement") in accordance with the terms and subject to the conditions of which (i) Parent will cause the Purchaser to commence a tender offer (the "Offer") for all outstanding Shares at a price of $9.00 per Share, net to the seller in cash and without interest thereon and (ii) the Purchaser will be merged with and into the Company (the "Merger"). As a result of the Offer and the Merger, the Company will become a wholly owned subsidiary of Parent. The Merger Agreement requires the Company to cause the directors designated by Parent to be elected to the Board of Directors under the circumstances described therein. See "Board of Directors and Executive Officers of the Company." This Information Statement is required by Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 thereunder. You are urged to read this Information Statement carefully. You are not, however, required to take any action at this time. Capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Schedule 14D-9. Pursuant to the Merger Agreement, the Purchaser commenced the Offer on July 21, 1999. The Offer is scheduled to expire at 12:00 Midnight, New York City time, on August 17, 1999, unless the Offer is extended. BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY GENERAL The Shares are the only class of voting securities of the Company outstanding. Each Share has one vote. As of July 14, 1999, there were 7,040,930 Shares outstanding. The Company's Board of Directors currently consists of three classes with seven (7) members. At each annual meeting of stockholders, all of the directors in the class being voted upon are elected for three-year terms. The officers of the Company serve at the discretion of the Board. Pursuant to the Merger Agreement, upon the acceptance for payment of, and payment for, Shares by Purchaser pursuant to the Offer, Purchaser will be entitled to designate such number of directors on the Board of Directors of the Company (the "Parent Designees"), as will give Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Company's Board of Directors equal to the product of (i) the total number of directors on the Company's Board of Directors and (ii) the percentage that the number of Shares purchased by Purchaser in the Offer bears to the number of Shares outstanding, and the Company will, at such time, cause the Parent Designees to be so elected by its existing Board of Directors; A-1 15 provided, however, that in the event that the Parent Designees are elected to the Board of Directors of the Company, until the Effective Time such Board of Directors will have at least two directors who are directors of the Company on the date of the Merger Agreement and who are not officers of the Company or any of its subsidiaries (the "Independent Directors") and; provided, further that, in such event, if the number of Independent Directors will be reduced below two for any reason whatsoever, the remaining Independent Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of the Merger Agreement or, if no Independent Directors then remain, the other directors of the Company will designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its subsidiaries, or officers or affiliates of Parent or any of its subsidiaries, and such persons will be deemed to be Independent Directors for purposes of the Merger Agreement. Parent has informed the Company that it will choose the Parent Designees from persons listed below. Parent has informed the Company that each of the Parent Designees has consented to act as a director, if so designated. Biographical information concerning each of the Parent Designees is presented below. The following biographical information provided herein regarding Parent, the Purchaser, and any Parent Designees has been furnished by Parent, and the Company assumes no responsibility for the accuracy or completeness of such information.
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME FIVE YEAR EMPLOYMENT HISTORY - ---- --------------------------------------------- William R. Spivey.................... Group President, Network Products Group business unit of Parent since October 1997 and President of the Purchaser since June 1999. Previously Dr. Spivey was Vice President, Systems and Components, Microelectronics business unit of Parent. Joined AT&T in 1994. Previously Dr. Spivey was President of Tektronix Development Company for Tektronix, Inc. based in Oregon. He has also held senior management positions for Honeywell, Inc. and General Electric in various systems control, computer and semiconductor units. Age: 53. Carol E. Kirby....................... Corporate Counsel for the Network Products Group of Parent since 1998 and Director and Vice President of the Purchaser since June 1999. Corporate counsel for Parent and AT&T Corp. since 1991. Age: 45. Pamela F. Craven..................... Vice President -- Law of Parent since 1996 and Secretary of Parent since February 1999. Director and Vice President of the Purchaser since June 1999. Joined AT&T Corp. Law Division in 1991. Age: 45. Justin C. Choi....................... Corporate Counsel in the Mergers and Acquisitions Law Group of Parent since 1997 and Director and Secretary of the Purchaser since June 1999. Associate at Paul, Hastings, Janofsky & Walker (law firm) (1990-1997). Citizen of the Republic of Korea. Age: 33.
None of the Parent Designees (i) is currently a director of, or holds any position with, the Company, (ii) has a familial relationship with any of the directors or executive officers of the Company or (iii) to Parent's knowledge, beneficially owns any securities (or rights to acquire any securities) of the Company. The A-2 16 Company has been advised by Parent that, to Parent's knowledge, none of the Parent Designees has been involved in any transaction with the Company or any of its directors, executive officers or affiliates which is required to be disclosed pursuant to the rules and regulations of the Commission, except as may be disclosed herein or in the Schedule 14D-9. Biographical information concerning each of the Company's current directors and executive officers as of July 14, 1999 is as follows:
NAME AGE POSITION - ---- --- -------- Charles B. Harrison................ 62 President, Chief Executive Officer and Chairman of the Board of Directors George J. Roberts.................. 54 Senior Vice President, Chief Financial Officer, Secretary and Treasurer John E. Chapman.................... 44 Senior Vice President -- Technology, Director and President, SpecTran Communication Fiber Technologies, Inc. Ira S. Nordlicht................... 50 Assistant Secretary, Director Dr. Paul D. Lazay.................. 60 Director Richard M. Donofrio................ 61 Director Dr. Lily K. Lai.................... 58 Director Robert A. Schmitz.................. 58 Director Martin F. Seifert.................. 40 Vice President, President of SpecTran Specialty Optics Company
Mr. Harrison was appointed President and Chief Executive Officer of the Company April 13, 1998 and is also Chief Executive Officer and a Director of each of the Company's wholly-owned subsidiaries. Mr. Harrison became Chairman of the Board of Directors of the Company on January 1, 1999. Previously, Mr. Harrison served as an Engineering and Management Consultant to Rockwell International on a number of programs. Among other consulting assignments for Rockwell, he served in Moscow from December 1995 to July 1996 as Senior Executive of CIS affairs. Mr. Harrison retired from Rockwell International as Corporate Vice President Engineering in April 1995. In the two years preceding his retirement, Mr. Harrison served as Corporate Vice President Engineering, having primary responsibility for engineering and research activities across Rockwell's Aerospace and Defense operations with a special focus on identifying opportunities and establishing joint U.S./Russian defense conversion projects. From 1991 to 1993, he served as Vice President of Advanced Technology and Engineering for Defense Electronics responsible for research, product development, and large systems engineering contracts in Rockwell's five defense related divisions. During this time, he also had the senior executive responsibility for Rockwell's Electro Optics Center. From 1984-1991, he served as Chief Technology Officer and as Vice President of the Network for Southern New England Telephone (SNET) directing the conversion to all electronic switching and fiber optic backbone and local transmission systems. He also served for two years as President of Sonecor Systems for SNET. From 1968-1984 he held increasingly responsible positions with Collins Radio/Rockwell International concluding as Vice President and General Manager Switching Systems Division. Mr. Harrison received a B.S. degree in Electrical Engineering from Oklahoma State University, and a M.S. degree in Engineering from Southern Methodist University. Mr. Roberts joined the Company as Senior Vice President, Chief Financial Officer, Secretary and Treasurer as of April 1, 1999. From 1996 to that time he served as Senior Vice President, Chief Financial Officer, Treasurer and Chief Operation Officer for the Microelectronics & Computer Technology Corporation, a unique consortium of 10 major U.S. corporations cooperating in the areas of information technology to gain a sustainable competitive advantage over foreign competition. For the preceding 30 years Mr. Roberts held a number of positions at the General Electric Company, with his last position being Vice President, Finance and Controller of Systems Support Services of GE Capital's Technology Management Services Business. He has a B.S., Finance from Siena College and completed Graduate Studies in Global Business Management at Insead Institute, France. A-3 17 Mr. Chapman, appointed in October 1995 President of SpecTran Communication Fiber Technologies, Inc., a wholly-owned subsidiary of the Company, is also Senior Vice President -- Technology, SpecTran Corporation. Mr. Chapman joined the Company in July 1983 as a Project Leader working on the development of automated test equipment. In July 1985 he assumed the position of Director of Equipment Technology and in October 1986 became Director of Quality Assurance and Management Information Systems. Mr. Chapman was appointed Director of Manufacturing and then Vice President of Manufacturing and Engineering in December 1987, and in May 1990 was appointed Senior Vice President of Manufacturing and Technology. Mr. Chapman was appointed Chief Operating Officer, Executive Vice President and Director of the Company in January 1994. After the reorganization of the Company in 1995, Mr. Chapman was appointed to the positions he holds presently. Mr. Chapman is also a Director of the Company's wholly-owned subsidiaries, SpecTran Specialty Optics Company and SpecTran Communication Fiber Technologies, Inc. Prior to joining the Company he was employed by Valtec Corporation, an optical fiber manufacturer and cabler, from March 1979 in various engineering positions related to the design of optical fiber and the development of special optical measurement equipment. Mr. Chapman holds a B.S. degree in Physics from the University of Lowell and a M.S. degree in Electrical Engineering from Northeastern University. Mr. Nordlicht is a partner in the law firm of Nordlicht & Hand, which provides legal services to the Company. See "Compensation Committee Interlocks and Insider Participation." Prior to entering the private practice of law, Mr. Nordlicht served as Counsel and Foreign Policy Advisor to the Chairman, U.S. Senate Foreign Relations Committee, counsel to the U.S. Senate Foreign Relations Subcommittee on Foreign Economic Policy and Senior Trial Attorney for the Federal Trade Commission. From 1980-1982 he served as a Secretary of Energy appointee to the National Petroleum Council. Mr. Nordlicht is also a Director of the Company's wholly owned subsidiaries, SpecTran Specialty Optics Company and SpecTran Communication Fiber Technologies, Inc. He holds a B.A. in Economics from Harpur College (State University of New York at Binghamton) and a J.D. from New York University School of Law. In June 1997, Mr. Nordlicht was named Legal Advocate of the Year by the U.S. Small Business Administration for his work in helping to create the Angel Capital Electronic Network, a means of financing small businesses using the Internet. Mr. Nordlicht is also a Director of The Fund for Peace, a non-profit foreign policy association. Dr. Lazay is currently an advisor to and investor in technology based companies. Prior to September 1997 he was the CEO and Director of Advanced Telecommunications Modules, Ltd. of Cambridge, UK and Santa Clara, CA. From April 1995 to December 1996 he was General Manager and Vice President of Cisco Systems, responsible for its ATM Switching Division in Chelmsford, MA. Dr. Lazay was a consultant to technology companies from October 1993 to April 1995. Prior to this he served as President, Chief Executive Officer and Director to Telco Systems, Inc., a designer of high speed digital fiber optic transmission terminals and multiplexing equipment until October 1993. Prior to joining Telco Systems in May 1986 as Vice President of Engineering, Dr. Lazay spent four years with ITT's Electro-Optical Products Division, first as Director of Fiber Optic Development and then as Vice President, Director of Engineering. From 1969 until 1982 he worked for Bell Telephone Laboratories, assuming a number of increasingly responsible positions at its Material Research Laboratory. Dr. Lazay is also a Director of the Company's wholly-owned subsidiaries SpecTran Specialty Optics Company and SpecTran Communication Fiber Technologies, Inc. He holds a B.S. degree from Trinity College and a Ph.D. degree in Physics from the Massachusetts Institute of Technology. Mr. Donofrio is a retired Senior Vice President of Southern New England Telecommunications Corporation (SNET) based in New Haven, Connecticut. During his 32 year career with SNET, as part of the Bell System, he served in increasingly responsible operating and executive positions at SNET and AT&T Corp. until his retirement in May 1993. At SNET, Mr. Donofrio served as Vice President of Revenue Requirements and Regulatory, as well as Vice President of Human Resources. During more recent years, he held a number of Senior and Group Vice President positions, and served as President of SNET Diversified Group. He also served a term as President of LIGHTNET, an SNET and CSX Corp. joint venture which constructed and operated an extensive fiber optics telecom network in the eastern half of the U.S. While at AT&T Corporate headquarters in New York, he was a Division head in the Marketing Plans Dept. and in the Federal Relations Dept. His other affiliations include: Past President of United Way of New Haven, Board of Directors of the University of New Haven, Griffin Health Services Corp. and National Engineering A-4 18 Consortium. Mr. Donofrio is also a Director of the Company's wholly-owned subsidiaries, SpecTran Specialty Optics Company and SpecTran Communication Fiber Technologies, Inc. Mr. Donofrio holds a B.S. degree in Economics from Norwich University, and attended the M.B.A. program at the University of Hartford. Dr. Lai is President and Chief Executive Officer of First American Development Corporation, a management consulting and international business development company, and a Board member of several companies and universities. Previously, Dr. Lai headed the Corporate Planning and Development Department at Pitney Bowes, Inc. from 1989 to 1993. She was the Chief Financial and Planning Officer and the Vice President of Asia/Pacific Operations at U.S. West International from 1987 to 1989. Dr. Lai worked for AT&T from 1971 to 1987 in various management positions including Director of Corporate Strategy and Development (1983-1986), responsible for AT&T's global business development activities, and Director of International Public Affairs and Public Relations (1986-1987), responsible for managing AT&T's relationships with all international constituents (governments, partners, trade associations, presses, advertising agencies, employees, etc.). Dr. Lai is also a Director of the Company's wholly-owned subsidiaries, SpecTran Specialty Optics Company and SpecTran Communication Fiber Technologies, Inc. Dr. Lai is an MIT Sloan Fellow and holds a Ph.D. and an M.A. in Economics from the University of Wisconsin-Madison, as well as a B.S. and a M.S. in Agricultural Economics from the National Taiwan University and the University of Kentucky, respectively. Mr. Schmitz has operated his own private investment firm since early 1998. Prior to that time, he was managing director of Trust Company of the West, one of the nation's largest investment counseling firms, serving five years as a senior partner of TCW Capital, the firm's private equity group. In this capacity, Mr. Schmitz was directly responsible for several new investments, led two successful build-ups of existing portfolio companies and orchestrated several restructurings and turnarounds. He also provided administrative oversight for an investment portfolio of 22 companies. Mr. Schmitz served on the Board of Directors of eleven companies at TCW Capital. Mr. Schmitz has also been an advisor to a specialized investment firm that co-invests with Soros Fund Management and as such helped the firm's founder identify and evaluate investment opportunities in public and private companies. From 1983 to 1989, Mr. Schmitz was chairman and chief executive officer of Richard D. Irwin, Inc. a wholly-owned textbook publishing subsidiary of Dow Jones & Co. He also served as a vice president of Dow Jones and a member of its management committee. At McKinsey & Company from 1970 to 1982, Mr. Schmitz directed strategy, organization and diversification assignments for CEOs of large companies in the U.S. and overseas, and managed the firm's worldwide financial strategy practice. He was elected a principal of the firm in 1976. Mr. Schmitz is also a Director of the Company's wholly-owned subsidiary, SpecTran Specialty Optics Company. Mr. Schmitz graduated from the University of Michigan in 1963 with a B.A. in Economics and earned a M.S. in Business from the Sloan School of Management at the Massachusetts Institute of Technology in 1965. Mr. Seifert joined the Company and SpecTran Specialty Optics Company in his current positions as of August 25, 1998. Most recently, Mr. Seifert served as Chief Operating Officer of Schweitzer Engineering Labs, a privately owned company that designs and makes relays, controls, software and communications equipment for the electric power industry. Prior to joining Schweitzer in 1997, he served with Rockwell International as Manager of Rockwell Automation's Power Quality & Automation business and Global Marketing Manager of Rockwell's Allen-Bradley Drives Division. Earlier in his business career, he was Manager of Drives and Power Systems for Bucyrus-Erie Co., a mining equipment producer. He graduated from the University of British Columbia in 1982 and speaks several languages, including his native German. BOARD MEETINGS AND COMMITTEES There are three standing committees of the Board of Directors: the Audit and Finance Committee, the Compensation and Incentive Stock Option Committee, and the Nominating Committee.(1) The Audit and - --------------- (1) On May 29, 1998, the Finance Committee, composed of Dr. Raymond E. Jaeger and Dr. Lily K. Lai, and Messrs. Bruce A. Cannon and Richard M. Donofrio, and the Audit Committee, composed of all of the Company's outside Directors (Drs. Lazay and Lai, and Messrs. Nordlicht and Donofrio), were consolidated into the Audit and Finance Committee, composed solely of the outside directors. Mr. Harrison had served A-5 19 Finance Committee, composed of all of the Company's current outside Directors, Dr. Lazay, Chair of the Committee, Dr. Lai and Messrs. Nordlicht, Donofrio, and Schmitz, confers with KPMG LLP, the Company's external auditors, regarding the scope and results of their audits and any recommendations they may have with respect to internal accounting controls and other matters related to accounting and auditing, and advises the Board of Directors with regard to financial matters referred to it from time to time by the Directors. The Company's outside Directors, with Mr. Donofrio serving as Chair of the Committee, also comprise the Compensation and Incentive Stock Option Committee which administers the Company's Incentive Stock Option Plan, reviews and recommends executive compensation and administers the Company's executive compensation plans.(2) The Nominating Committee, the members of which are Drs. Lazay and Lai and Mr. Donofrio(3), recommends persons for nomination by the Board of Directors for Directorships. The Nominating Committee will consider candidates proposed by security holders. Generally, candidates must be highly qualified and be both willing and affirmatively desirous of serving on the Board. They should represent the interests of all security holders and not those of a special interest group. A security holder wishing to nominate a candidate should forward the candidate's name and a detailed background of the candidate's qualifications to the Secretary of the Company during the Company's last fiscal quarter. During the year ended December 31, 1998, the Board of Directors met thirteen times, the Audit Committee met once, the Finance Committee did not meet, the Audit and Finance Committee met three times, the Nominating Committee did not meet, and the Compensation and Incentive Stock Option Committee met eight times. During 1998 each Director attended at least seventy-five percent of the aggregate of (1) the total number of meetings of the Board of Directors and (2) the total number of meetings held by all committees of the Board on which he or she served. COMPENSATION OF DIRECTORS Each Director who is not an employee of the Company receives an annual retainer of $6,000, payable quarterly, a fee of $300 for each Board meeting attended and a fee of $400 for each committee meeting attended (except that no fee is paid for those meetings of the Incentive Stock Option Committee or Compensation and Incentive Stock Option Committee ("CISOC") relating solely to the issuance of stock options) in addition to being reimbursed for reasonable out-of-pocket travel expenses in connection with attendance at those meetings. Each outside member of the Board of Directors on May 21, 1991 was automatically granted a nonqualified option to purchase 5,000 shares at a per share purchase price equal to the fair market value of the stock on that day. Thereafter, every person who becomes an outside member of the Board of Directors, without any action of the CISOC, receives an initial grant of a nonqualified option to purchase, at the fair market value of the stock on the date the option is granted, 5,000 shares on the last business day in December in the year in which the outside Director was elected a Director by the stockholders for the first time. Each such nonqualified option to purchase 5,000 shares becomes exercisable one year after the date of grant, and continues in effect for ten years. In addition, on the last business day of December in each year, each outside Director then in office is to be granted, without any action by the CISOC, a nonqualified option to purchase 1,000 shares at the fair market value of the stock on that day. Such nonqualified options to purchase 1,000 shares become exercisable in three equal annual installments beginning one year after the date of grant and continue in effect for ten years from the date of the grant. All options granted to an outside Director become exercisable (a) upon the occurrence of a Change in Control of the Company (as defined in the Company's Incentive Stock Option Plan) or (b) when such Director ceases to - -------------------------------------------------------------------------------- on the Audit Committee until his appointment as President and Chief Executive Officer of the Company on April 13, 1998. Mr. Schmitz became a member of the Audit and Finance Committee in July 1998 after his appointment as a Director of the Company. (2) Mr. Harrison served on the Compensation and Incentive Stock Option Committees until his appointment as President and Chief Executive Officer of the Company on April 13, 1998. Mr. Schmitz became a member of the Compensation and Incentive Stock Option Committee in July 1998 after his appointment as a Director of the Company. (3) Mr. Nordlicht served on the Nominating Committee until July 23, 1998. A-6 20 serve as a Director for any reason, except termination for cause, as long as such Director has then served as a Director of the Company for two consecutive years, including, for this purpose, time served as a Director before the adoption of this Plan. RETIREMENT PLAN FOR OUTSIDE DIRECTORS To attract and retain experienced and knowledgeable individuals to serve as outside Directors of the Company and its affiliates, the Company implemented in December 1995 a Retirement Plan For Outside Directors (the "Retirement Plan") under which outside (non-management) Directors, after the completion of five full calendar years of service as an outside Director, will be entitled to an annual amount equal to the lesser of $1,000 for each year of service as an outside Director or $10,000. The benefit is payable for ten years in monthly installments, commencing upon the later of an outside Director's 65th birthday or retirement from the Board. While any benefits are paid under the Retirement Plan the former outside Director will be available to consult for the Company. The benefit will be accelerated and discounted for present value if the outside Director leaves the Board within 12 months of a Change in Control (as defined in the Retirement Plan), or if the Company is acquired through merger or consolidation or the sale of assets and the acquiring party does not agree to assume the Corporation's obligations under the Retirement Plan. The benefit is subject to forfeiture if the outside Director is removed for Cause (as defined in the Retirement Plan) or, as described in the Retirement Plan, competes with the Company. The Retirement Plan is not intended to be a Qualified Plan under the Internal Revenue Code of 1986 as amended. A-7 21 COMPENSATION OF EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE Set forth below is the remuneration for all services in all capacities to the Company for the fiscal year ended December 31, 1998 of (a) all individuals serving as the Company's Chief Executive Officer or acting in a similar capacity during the fiscal year ended December 31, 1998, regardless of compensation level, and the two other most highly compensated executive officers of the Company and its Subsidiaries who were serving as executive officers as of December 31, 1998 and whose total annual salary and bonus exceeded $100,000, and (b) one additional individual who, although no longer serving as an executive officer of the Company or its Subsidiaries as of December 31, 1998, received an annual salary and bonus in excess of $100,000 for the year and for whom disclosure would have been provided had he been serving as an executive officer as of December 31, 1998.
LONG TERM COMPENSATION AWARDS(4) ------------ SECURITIES ANNUAL COMPENSATION UNDERLYING ALL OTHER NAME AND ----------------------- OTHER ANNUAL OPTIONS COMPENSATION PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) (#) ($) - ------------------ ---- ------------ -------- --------------- ------------ ------------ Charles B. Harrison......... 1998 173,418 0 30,000(9) 100,000 0 Chairman of the Board 1997 N/A N/A N/A N/A N/A Chief Executive Officer 1996 N/A N/A N/A N/A N/A and President(5) Raymond E. Jaeger,.......... 1998 241,785 0 (3) 74,247 0(2) Chairman of the Board 1997 212,792 92,860(6) (3) 16,000 9,034(2) Chief Executive Officer 1996 198,967 123,388 (3) 16,000 6,000(2) and President, Consultant(5) Bruce A. Cannon............. 1998 141,452 0 (3) 17,242 0(2) Chief Financial Officer 1997 134,743 38,457(6) (3) 10,000 5,801(2) SpecTran Corporation(7) 1996 122,122 59,102 (3) 8,000 5,394(2) John E. Chapman............. 1998 192,567 8,652 (3) 31,650 0(2) President, SpecTran 1997 182,786 77,080(6) (3) 14,000 8,051(2) Communication Fiber 1996 166,112 100,932 (3) 10,000 6,000(2) Technologies, Inc. John Rogers................. 1998 145,168 0 (3) 0 0 Acting Chief Financial 1997 N/A N/A N/A N/A N/A Officer SpecTran 1996 N/A N/A N/A N/A N/A Corporation(8)
- --------------- (1) Included amounts deferred at officer's election pursuant to section 401(k) of the Internal Revenue Code accrued during 1998, 1997 and 1996, respectively, as follows: Mr. Harrison, $10,000, $0 and $0; Dr. Jaeger, $10,000, $9,360 and $9,360; Mr. Cannon, $9,660, $9,500 and $9,500; and Mr. Chapman, $9,480, $9,480, and $9,480. (2) Company contributions to 401(k) and the defined contribution plan. (3) The aggregate amount of perquisites and other person benefits did not exceed the lesser of either $50,000 or 10% of the total of annual salary and bonus reported for the named executive officer, and the named executive officer had no additional "other annual compensation". (4) As of December 31, 1998, none of the individuals named in the Summary Compensation Table were awarded any shares of restricted stock of the Company. (5) Dr. Jaeger served as Chief Executive Officer and President until April 1998, when Mr. Harrison assumed those positions. At that time Dr. Jaeger became a consultant to the Company. Dr. Jaeger served as Chairman of the Board during 1998; Mr. Harrison became Chairman effective January 1, 1999. In March 1999, Dr. Jaeger resigned as a director of the Company and its subsidiaries, while remaining a consultant to the Company. A-8 22 (6) As per agreement with the Compensation and Incentive Stock Option Committee, half of the bonus earned under the Key Employee Incentive Plan otherwise payable in cash was instead paid in the form of a grant of incentive stock options made in 1998. (7) Mr. Cannon who had previously resigned from his executive positions, entered into an agreement with the Company during the first quarter of 1999, effective as of December 1, 1998, memorializing his resignation as an officer and a director of the Company and its subsidiaries. Mr. Cannon remains a consultant to the Company. (8) Mr. Rogers served as Acting Chief Financial Officer of the Company from November 1, 1998 through March 31, 1999 and had previously during 1998 provided financial consulting services to the Company. Mr. Rogers is an employee of Primary, The One For Solutions ("Primary"), a consultant to the Company. His services were provided pursuant to an agreement between the Company and Primary. All payments attributed to Mr. Rogers in the Summary Compensation Table were paid to Primary. (9) Includes $30,000 in relocation expenses reimbursed by the Company. INCENTIVE STOCK OPTION PLAN Under the Company's 1991 Incentive Stock Option Plan, as amended (the "Plan"), options to purchase up to 1,545,490 shares of Common Stock may be granted to key employees of the Company who are deemed to be significant contributors to the Company's operations or to directors who are not full-time employees of the Company or any subsidiary ("outside directors"). Of these shares, no more than 129,000 may be issued as nonqualified options. The Compensation and Incentive Stock Option Committee (the "CISOC") of the Board of Directors, which, except as described below with respect to grants to outside directors, administers the Plan, is composed of Mr. Donofrio, Chair of the Committee, Mr. Nordlicht, Dr. Lazay, Dr. Lai, and Mr. Schmitz. The award of an option, when made by the CISOC, is made based in each case on an evaluation of an employee's past or potential contribution to the Company. Approximately 67 employees of the Company and its subsidiaries are currently eligible to participate in the Plan. The stock options granted to key employees by the CISOC under the Plan may be either incentive stock options conforming to the provisions of Section 422 of the Internal Revenue Code, or nonqualified options. However, to the extent that the aggregate fair market value (determined at the time an option is granted) of stock with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year exceeds $100,000, such options shall be treated as non-qualified options. The stock options to be granted to outside directors must be nonqualified options. With respect to options granted to key employees, the purchase price for shares under each option (incentive or nonqualified) is determined by the CISOC, but will not be less than 100% of the fair market value of the stock on the date of the grant. Such options become exercisable in the manner determined by the CISOC, or, if no schedule for exercise is established, in three equal annual installments, beginning one year after the date of grant and continue in effect for ten years. If an employee, at the time the option is granted, owns more than 10% of the Company's voting stock, the option price for incentive stock options will be not less than 110% of the fair market value of the Common Stock on the date of grant, and the option will continue in effect for not more than five years. Exercisable options may be exercised at any time an optionee is continuously employed by the Company and for three months after termination of employment (unless employment is terminated for cause involving personal misconduct in the judgement of the CISOC). No options may be granted under the Plan after ten years from the effective date of the Plan. With respect to all options which may granted under the Plan, upon exercise of an option, the exercise price must be paid in full either in cash or in shares of Common Stock of the Company. Options are nontransferable, except by will or by the laws of descent and distribution. Each outside member of the Board of Directors on May 21, 1991 was automatically granted a nonqualified option to purchase 5,000 shares at a per share purchase price equal to the fair market value of the stock on that day. Each person who subsequently becomes an outside member of the Board of Directors, without any action of the CISOC, shall receive an initial grant of a nonqualified option at the fair market value A-9 23 of the stock on the date the option is granted to purchase 5,000 shares on the last business day in the year in which the outside director was elected a director by the stockholders for the first time. Each such nonqualified option for 5,000 shares becomes exercisable one year after the date of grant, and continues in effect for ten years. In addition, on the last business day of December in each year, each outside director then in office is to be granted, without any action by the CISOC, a nonqualified option to purchase 1,000 shares. Such nonqualified options to purchase 1,000 shares become exercisable in three equal annual installments, beginning one year after the date of grant and continue in effect for ten years. All options granted to an outside director become exercisable when such director ceases to serve as a director for any reason, except termination for cause, as long as such director has then served as a director of the Company for two consecutive years, including, for this purpose, time served as a director before the adoption of the Plan. The Plan replaced the Company's prior incentive stock option plan (the "Old Plan") under which options could no longer be granted after November 11, 1991. As of July 14, 1999, options to purchase 7,636 shares remained outstanding under the Old Plan at an average per share price of $3.38, and options to purchase 1,066,183 shares were outstanding under the Plan at an average per share price of $9.56. As of July 14, 1999, 374,097 shares remained available for grant under the Plan. As of July 14, 1999, the market value of a share underlying an option granted under the Plan was $11.50, and the aggregate market value of all shares reserved for the Plan was $16,563,220 on that date. The number of options to be granted in 1999 and the value of such options are indeterminable at this time. The Plan may be amended from time to time by the Board of Directors, subject to the approval of the stockholders for certain types of amendments. OPTION GRANTS IN LAST FISCAL YEAR The following table shows information regarding stock options granted during the fiscal year ended December 31, 1998 with respect to (a) all individuals serving as the Company's Chief Executive Officer or acting in a similar capacity during the fiscal year ended December 31, 1998, regardless of compensation level, and the two other most highly compensated executive officers of the Company and its Subsidiaries who were serving as executive officers as of December 31, 1998 and whose total annual salary and bonus exceeded $100,000, and (b) one additional individual who, although no longer serving as an executive officer of the Company or its Subsidiaries as of December 31, 1998, received an annual salary and bonus in excess of A-10 24 $100,000 for the year and for whom disclosure would have been provided had he been serving as an executive officer as of December 31, 1998. The Company has never granted any stock appreciation rights. INDIVIDUAL GRANTS
POTENTIAL REALIZABLE VALUE AT % OF TOTAL ASSUMED ANNUAL NUMBER OF OPTIONS RATES OF STOCK PRICE SECURITIES GRANTED TO APPRECIATION UNDERLYING EMPLOYEES FOR OPTION TERM** OPTIONS IN FISCAL EXERCISE EXPIRATION --------------------- NAME GRANTED(#)* YEAR PRICE($/SH) DATE 5%($) 10%($) - ---- ----------- ---------- ----------- ---------- --------- --------- Charles B. Harrison............. 50,000 12.86% 7.25 4-13-08 199,850 492,250 25,000 6.43% 6.0465 10-13-08 5,163 86,463 25,000 6.43% 20.00 10-13-08 (343,675) (262,375) Raymond E. Jaeger(1)............ 50,000 12.86% 8.125 6-1-08 223,950 551,650 24,247 6.24% 8.125 3-13-08 108,602 267,517 Bruce A. Cannon(2).............. 8,000 2.06% 8.125 6-1-08 35,832 88,264 9,242 2.40% 8.125 3-13-08 41,395 101,967 John E. Chapman................. 14,000 3.60% 8.125 6-1-08 62,706 154,462 17,650 4.54% 8.125 3-13-08 79,054 194,732 John Rogers(3).................. 0 0% N/A N/A N/A N/A
- --------------- (1) Dr. Jaeger served as Chief Executive Officer and President until April 1998, when Mr. Harrison assumed those positions. At that time Dr. Jaeger became a consultant to the Company. Dr. Jaeger served as Chairman of the Board during 1998; Mr. Harrison became Chairman effective January 1, 1999. In March 1999, Dr. Jaeger resigned as a director of the Company and its subsidiaries, while remaining a consultant to the Company. (2) Mr. Cannon who had previously resigned from his executive positions, entered into an agreement with the Company during the first quarter of 1999, effective as of December 1, 1998, memorializing his resignation as an officer and a director of the Company and its subsidiaries. Mr. Cannon remains a consultant to the Company. (3) Mr. Rogers served as Acting Chief Financial Officer of the Company from November 1, 1998 through March 31, 1999 and had previously during 1998 provided financial consulting services to the Company. Mr. Rogers is an employee of Primary, The One For Solutions ("Primary"), a consultant to the Company. His services were provided pursuant to an agreement between the Company and Primary. All payments attributed to Mr. Rogers in the Summary Compensation Table were paid to Primary. * Except for the 25,000 options granted to Mr. Harrison at 150% of fair market value and the 25,000 options granted to Mr. Harrison at an exercise price of $20.00 per share, shown above, all options set forth were granted under the Company's Stock Option Plan at 100% of the fair market value of the shares at the time the options were granted are intended to be, and with few exceptions, will be, incentive stock options. All options are exercisable in full three years from the date of grant in cumulative annual installments of 33 1/3% commencing one year after the date of grant, and expire ten years after the date of grant. ** The dollar gains under these columns result from calculations assuming 5% and 10% growth rates as set by the Securities and Exchange Commission and are not intended to forecast future price appreciation of the Common Stock of the Company. The gains reflect a future value based upon growth at these prescribed rates. The Company did not use an alternative formula for a grant date valuation, an approach which would state gains at present, and therefore lower, value. The Company is not aware of any formula which will determine with reasonable accuracy a present value based on future unknown or volatile factors. A-11 25 Options have value to the listed executives and to all option recipients only if the stock price advances beyond the grant date price shown in the table during the effective option period. AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE The following table shows information regarding stock options exercised during the fiscal year ended December 31, 1998 with respect to (a) all individuals serving as the Company's Chief Executive Officer or acting in a similar capacity during the fiscal year ended December 31, 1998, regardless of compensation level, and the two other most highly compensated executive officers of the Company and its Subsidiaries who were serving as executive officers as of December 31, 1998 and whose total annual salary and bonus exceeded $100,000, and (b) one additional individual who, although no longer serving as an executive officer of the Company or its Subsidiaries as of December 31, 1998, received an annual salary and bonus in excess of $100,000 for the year and for whom disclosure would have been provided had he been serving as an executive officer as of December 31, 1998. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS SHARES AT FY-END( ) AT FY-END($) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ----------- ----------- ----------- ------------- ----------- ------------- Charles B. Harrison......... 0 0 333 100,667 0 0 Raymond E. Jaeger(1)........ 0 0 76,000 90,247 0 0 Bruce A. Cannon(2).......... 0 0 53,667 26,575 0 0 John E. Chapman............. 0 0 81,333 44,317 0 0 John Rogers(3).............. 0 0 0 0 0 0
- --------------- (1) Dr. Jaeger served as Chief Executive Officer and President until April 1998, when Mr. Harrison assumed those positions. At that time Dr. Jaeger became a consultant to the Company. Dr. Jaeger served as Chairman of the Board during 1998; Mr. Harrison became Chairman effective January 1, 1999. In March 1999, Dr. Jaeger resigned as a director of the Company and its subsidiaries, while remaining a consultant to the Company. (2) Mr. Cannon who had previously resigned from his executive positions, entered into an agreement with the Company during the first quarter of 1999, effective as of December 1, 1998, memorializing his resignation as an officer and a director of the Company and its subsidiaries. Mr. Cannon remains a consultant to the Company. (3) Mr. Rogers served as Acting Chief Financial Officer of the Company from November 1, 1998 through March 31, 1999 and had previously during 1998 provided financial consulting services to the Company. Mr. Rogers is an employee of Primary, The One For Solutions ("Primary"), a consultant to the Company. His services were provided pursuant to an agreement between the Company and Primary. All payments attributed to Mr. Rogers in the Summary Compensation Table were paid to Primary. PENSION PLAN TABLE The Company has in effect a career average defined benefit plan (the "Defined Benefit Plan") for employees of the Company and its subsidiaries. Generally, after completing five years of participation in the Defined Benefit Plan or upon normal retirement at age 65, whichever is earlier, a participant is entitled to a pension under the Defined Benefit Plan based on the average annual compensation received during the ten consecutive highest paid years in which he was a plan participant, or such shorter period as he was employed by the Company. The following table shows, as of December 31, 1998, estimated annual benefits payable upon A-12 26 retirement under the Company's Defined Benefit Plan (including amounts attributable to any defined benefit supplementary or excess pension award plan) in specified compensation and years of service classifications: YEARS OF SERVICE
REMUNERATION 15 20 25 30 35 - ------------ ------ ------ ------ ------ ------ 125,000............................... 20,517 27,356 34,195 34,195 34,195 150,000............................... 25,767 34,356 42,945 42,945 42,945 175,000............................... 27,867 37,156 46,445 46,445 46,445 200,000............................... 27,867 37,156 46,445 46,445 46,445 225,000............................... 27,867 37,156 46,445 46,445 46,445 250,000............................... 27,867 37,156 46,445 46,445 46,445 275,000............................... 27,867 37,156 46,445 46,445 46,445 300,000............................... 27,867 37,156 46,445 46,445 46,445 400,000............................... 27,867 37,156 46,445 46,445 46,445 450,000............................... 27,867 37,156 46,445 46,445 46,445 500,000............................... 27,867 37,156 46,445 46,445 46,445
A participant's eligible compensation for purposes of the Defined Benefit Plan generally includes all of his annual cash compensation including amounts deferred by the participant pursuant to the Company's 401(k) plan. The only difference between the covered compensation covered by the Defined Benefit Plan and the annual compensation reported in the Summary Compensation Table is the timing of bonus payments. The benefits listed in the table have been computed on a straight life annuity basis and are not subject to any deduction for social security or other offset amounts. As of December 31, 1998, Mr. Harrison, Dr. Jaeger and Messrs. Cannon and Chapman had 1, 17, 15 and 14 years of credited service respectively. In addition to the Company's Defined Benefit Plan, the Company has a defined contribution plan under which annual contributions may be authorized by the Compensation and Incentive Stock Option Committee of the Board for all employees with at least one year of service (the "Defined Contribution Plan"). Contributions of 3% of annualized salary were authorized for 1996, including $4,500 for Dr. Jaeger, $4,046 for Mr. Cannon and $4,500 for Mr. Chapman. Contributions of 2% of annualized salary were authorized for 1997, including $6,694 for Dr. Jaeger, $3,867 for Mr. Cannon and $5,681 for Mr. Chapman. No Contributions were authorized for any executive officers for 1998. Mr. Rogers who served as Acting Chief Financial Officer from November 1, 1998 through March 31, 1999, is an employee of Primary, The One For Solutions, a consultant to the Company, and is not eligible for participation in the Defined Benefit Plan or the Defined Contribution Plan. SUPPLEMENTAL RETIREMENT BENEFITS The Company has agreements with Dr. Jaeger, Mr. Cannon and Mr. Chapman, which provide retirement benefits designed to be supplemental to other retirement benefits payable to them. These payments are intended to compensate these executives for restrictions imposed on highly compensated executives by the Internal Revenue Code, the result of which is that the percentage of spendable retirement income these executives are eligible to receive under the Company's retirement programs relative to their current levels of compensation is less then that of employees at lower salary levels. The amount of the supplemental retirement benefit is calculated by multiplying the Executive's average annual compensation (including 401(k) payments and bonus payments up to a certain limitation) over a three year period when his compensation is highest by a percentage based on the number of years the executive is employed by the Company (the "Annual Percentage Amount"). The product is reduced by the amount of other retirement benefits payable to the executive, resulting in the annual supplemental retirement benefit payable to the executive. Under the agreements with Messrs. Cannon and Chapman, the Annual Percentage Amount is 40% if the executive works for the Company for 15-19 years; 60% if the executive works for the Company for 20 to 24 years and 65% if the A-13 27 executive works for the Company for 25 years or more. Under the agreement with Dr. Jaeger, the Annual Percentage Amount is 60% if Dr. Jaeger works for the Company for 15 years with the Annual Percentage Amount increasing two percent for each additional year he works for the Company up to a maximum of 70% for 20 or more years of service. In April 1999, in connection with the appointment of Mr. Harrison as President and CEO of the Company, Dr. Jaeger's Supplemental Retirement Agreement was amended to provide that a bonus paid in stock options as opposed to cash, will be considered as if paid in cash for the purpose of determining the amount of bonus payments he received in calculating his supplemental retirement benefit. No benefit is payable under any of the agreements if the executive works for the Company for less than 15 years, except as described below. Under each of the agreements, the supplemental retirement benefits are payable over 15 years in equal monthly installments after the executive's retirement, which will normally occur upon his 65th birthday. However, the executives, upon commencement of the agreements, have been given the option to prospectively elect to have benefits commence upon their 60th birthday if they elect early retirement. The supplemental retirement benefit is subject to forfeiture if the executive is terminated for cause or competes with the Company. The Company has obtained corporate owned variable universal life insurance policies on each of the executives which are being used to fund the supplemental retirement benefits. The following table shows for each executive the percentage of average annual compensation, assuming bonus payments up to the limitation, that would be paid under all retirement programs (including the Supplemental Retirement Agreement) and under the Supplemental Retirement Agreements alone:
AT AGE 60 AT AGE 65 ------------------------------------- ------------------------------------- YEARS TOTAL SUPPLEMENTAL YEARS TOTAL SUPPLEMENTAL OF RETIREMENT RETIREMENT OF RETIREMENT RETIREMENT SERVICE % % SERVICE % % ------- ---------- ------------ ------- ---------- ------------ Dr. Jaeger(1)............. 17 64.0% 39.0% 20 70.0% 51.7% Mr. Cannon(2)............. 17 40.0% 9.4% 17 40.0% 9.4% Mr. Chapman............... 32 65.0% 46.0% 37 65.0% 39.9%
- --------------- (1) Dr. Jaeger has entered into a Restated Employment Agreement with the Company which provides, among other things, for him to render services through June 12, 2001 at which date Dr. Jaeger would have a total of twenty years of service with the Company. That agreement is described more fully below in the section entitled "Employment Agreements and Change-in-Control Arrangements." (2) Mr. Cannon has entered an agreement with the Company dated as of December 1, 1998 which provides, among other things, for him to render consulting services through December 1, 2000 at which date Mr. Cannon would have a total of seventeen full years of service with the Company. That agreement is described more fully below in the section entitled "Employment Agreements and Change-in-Control Arrangements." Under each of the Supplemental Retirement Agreements, if the executive leaves the Company in the 12 month period after a Change in Control, or an entity which acquires the Company, through merger, consolidation or the purchase of assets either does not retain the executive or does not agree to assume the Company's obligations under these agreements, the executives who have at least six years of service to the Company will be entitled to a supplemental retirement benefit, with the Annual Percentage Amount to be 4% for six years of service and increasing in increments of 4% for each additional year of service up to 15 years, at which point the normal method of calculating the Annual Percentage Amount is applied. In such circumstances, the payment of the supplemental retirement benefit is accelerated and paid in a lump sum, subject to a discount for the then present value of the benefit. Moreover, if the supplemental retirement benefit paid under these circumstances is considered to be a "Parachute Payment" and when combined with all other payments to be made to the executive by the Company considered to be a Parachute Payment would result in an Excess Parachute Payment under the Internal Revenue Code, the amount of the supplemental retirement benefit will be reduced so that the total of all Parachute Payments to the executive do not constitute an Excess Parachute Payment; provided, however, that if the total Parachute Payments received by the executive from the Company exceed 120% of the amount of all Parachute Payments not including any amount that would be A-14 28 considered an Excess Parachute Payment, the supplemental retirement will not be reduced. Under IRS regulations, an Excess Parachute Payment results in the Company being prohibited from taking a deduction for all Parachute Payments and an excise tax of 20% of the payment is imposed upon the recipient of the Parachute Payment. EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS The Company has employment agreements with Mr. Harrison and Mr. Chapman. Mr. Harrison, effective April 13, 1998, became President and Chief Executive Officer of the Company and Chief Executive Officer of each of its wholly-owned subsidiaries. He also became a Director of General Photonics, LLC, and, effective January 1, 1999, Chairman of the Board of Directors of the Company. Mr. Chapman is President of SpecTran Communication Fiber Technologies, Inc., a wholly-owned subsidiary of the Company, and Senior Vice President-Technology of the Company. Dr. Jaeger served as President and Chief Executive Officer of the Company and Chief Executive Officer of each of its wholly owned subsidiaries until April 13, 1998 when he became a consultant to the Company. He remained Chairman of the Board of Directors of the Company through December 31, 1998. Dr. Jaeger resigned from the Board of Directors of the Company and each of its wholly owned subsidiaries and from the Board of General Photonics, LLC in March 1999. The Company's employment agreement with Dr. Jaeger was superceded on April 13, 1998 by a Restated Employment Agreement. Mr. Cannon was Senior Vice President, Chief Financial Officer, Secretary and Treasurer of the Company and Secretary and Treasurer of each of the Company's wholly owned subsidiaries until he resigned from all of his positions with the Company during the last quarter of 1998. The Company's employment agreement with Mr. Cannon was superceded by another agreement entered into during the first quarter of 1999 effective as of December 1, 1998 memorializing his resignation as an officer and director of the Company and its subsidiaries. The employment agreement with Mr. Harrison has a base term of one year from April 13, 1998 to April 12, 1999. The base term for this agreement is automatically renewed on a daily basis so that there is always a remaining term of one year, unless the outside members of the Board of Directors terminate the automatic renewal feature and set a termination date, which must be one year from the Board's resolution to terminate. The Company has agreed to use its best efforts to nominate Mr. Harrison for election to the Board of Directors. While Mr. Harrison's employment agreement provides for an annual salary currently equal to $250,000, with future increases as determined by the Board of Directors, during the second half of 1998, Mr. Harrison voluntarily reduced his salary by 10%, to $225,000 as part of the Company's cost control initiatives. In accordance with Mr. Harrison's employment agreement, (a) at the first meeting of the Compensation and Incentive Stock Option Committee after his first day as a full time employee of the Corporation, he was granted stock options to purchase fifty thousand shares of Common Stock of the Company at an exercise price equal to market price on date of grant and, (b) six months later, he was granted options to purchase up to an additional fifty thousand shares of Common Stock, twenty five thousand of which to be at a per share exercise price equal to 150% of the closing price on date of grant, with the second twenty five thousand at a per share exercise price of $20.00. Mr. Harrison's employment agreement also provides that at the Company's request, for a one year period following the termination of his employment, Mr. Harrison, will not solicit any past, present or future customers of the Company in any way relating to any business in which the Company was engaged during the term of his employment or planned during the term of his employment to enter, or induce or actively attempt to influence any other employee or consultant to the Company to terminate his or her employment or consulting with the Company. During such one year period, Mr. Harrison will receive compensation at 75% of the level received during the last year of employment with the Company and benefits paid or maintained in the same fashion and in amounts not less than those received during his last year of employment and will provide consulting services at the Company's request. Additional provisions of Mr. Harrison's employment agreement are described below. The employment agreement with Mr. Chapman has a base term of one year from June 1, 1992 to May 31, 1993. The base term for this agreement is automatically renewed on a daily basis so that there is always a remaining term of one year, unless the outside members of the Board of Directors terminate the automatic renewal feature and set a termination date, which must be one year from the Board's resolution to A-15 29 terminate. Mr. Chapman's employment agreement provides for an annual salary currently equal to $196,464, with future increases as determined by the Board of Directors. The employment agreement with Mr. Chapman provides that for one year following the termination of employment, he will not solicit any customers of the Company or induce any employee to leave the Company. Additional provisions of Mr. Chapman's employment agreement are described below. Under their employment agreements, Messrs. Harrison and Chapman are eligible for annual bonuses to be awarded by the Board of Directors in its discretion and are entitled to participate in any pension, profit-sharing, insurance or other benefit plan of the Company if eligible under such plan or program. They have agreed to transfer to the Company any interest in any inventions developed while employed by the Company. Each of them also agreed not to disclose any trade secrets of the Company. Each of their employment agreements further provide that if the executive suffers a partial disability, or a total disability that has continued for less than six months, that executive continues to receive salary and benefits until the end of the employment period. If his total disability continues for six months or more, then he will be paid at the rate of 75% of his salary for so long during the employment period as the total disability lasts, or one year, whichever is longer. If the executive dies, one year's salary will be paid to his spouse or estate. The employment agreements also provide that if the Company dismisses either of them without cause, the Company will pay such executive his salary and maintain his benefits for six months or the balance of the employment period, whichever is longer and, if said executive takes other employment during the six-month period, the Company's obligation to him is limited to salary alone for the remainder of the six months. If either of them takes other employment later than six months from dismissal by the Company but before the end of the employment period, the Company's obligations to that executive then cease. The employment agreements with Messrs. Harrison and Chapman further provide that if there is a Change in Control and either (i) the executive is dismissed without cause up to and including twelve months from such Change in Control, or (ii) the executive voluntarily leaves the employ of the Company up to and including twelve months from such Change in Control, then in either case the Company will pay the executive his salary and maintain his benefits for twelve months from his dismissal or voluntary departure. If, however, the executive takes other employment during that twelve month period, the Company's obligation to him is limited to salary alone. A "Change in Control" is defined as [A] the date of public announcement that a person has become, without the approval of the Company's Board of Directors, the beneficial owner of 20% or more of the voting power of all securities of the Company then outstanding; [B] the date of the commencement of a tender offer or tender exchange by any person, without the approval of the Company's Board of Directors, if upon the consummation thereof such person would be the beneficial owner of 20% or more of the voting power of all securities of the Company then outstanding; or [C] the date on which individuals who constituted the Board of Directors of the Company on the date the employment agreement was adopted cease for any reason to constitute a majority thereof, provided that any person becoming a Director subsequent to such date whose election or nomination was approved by at least three quarters of such incumbent Board of Directors shall be considered as though such person were an incumbent Director. Messrs. Harrison and Chapman have acknowledged that the consummation of the Merger Agreement will not constitute a Change in Control, as defined above. During 1998 Dr. Jaeger had two different employment agreements with the Company: an Employment Agreement that had been in effect since 1992 (the "Employment Agreement") covering the period January 1, 1998 through April 12, 1998; and a Restated Employment Agreement (the "Restated Employment Agreement") covering the remainder of 1998, entered in conjunction with the appointment of Mr. Harrison as President and CEO of the Company. The Employment Agreement provided for an annual salary then equal to $217,000 with Dr. Jaeger being eligible for annual bonuses to be awarded by the Board of Directors in its discretion and being entitled to participate in any pension, profit-sharing, insurance or other benefit plan of the Company if he were eligible under such plan or program. Dr. Jaeger agreed to transfer to the Company any interest in any inventions he developed while employed by the Company and agreed not to disclose any trade secrets of the Company and not to solicit any customers of the Company or induce any employee to leave the Company for one year following termination of his employment. The Employment Agreement also had the same provisions for death, disability, partial disability, dismissal without cause and Change in Control as the A-16 30 employment agreements (described above) with Messrs. Harrison and Chapman. Under the Restated Employment Agreement, which supercedes the Employment Agreement and extends from April 13, 1998 until June 12, 2001, Dr. Jaeger shall provide advice and assistance to the Board of Directors and the Chief Executive Officer and perform such projects as reasonably requested and mutually agreed, with it being anticipated that he will take an active role in providing advice and counsel with respect to the Company's patent and technology position and licensing arrangements, including those with Corning Incorporated and Lucent Technologies Inc., as well as consulting support for partnering and alliances with other firms for strategic purposes. In addition, Dr. Jaeger will continue to serve as the Company's representative to the International Wire and Cable Symposium Committee, among other things. The Restated Employment Agreement provides that Dr. Jaeger will have the same benefits as provided in the Employment Agreement except that (a) he will be paid a fixed annual salary of $250,000 and (b) for the 1998 calendar year only, Dr. Jaeger was eligible to participate in the Company's Employee Profit Sharing Plan and was eligible for a target bonus of 25% of his base salary under the Company's Key Employee Incentive Plan, to be awarded at the discretion of the Board of Directors based upon his performance during 1998. Thereafter, Dr. Jaeger is not eligible to participate in the all employee Profit Sharing Plan or the Key Employee Incentive Plan. In accordance with the Restated Employment Agreement, Dr. Jaeger was also granted options to purchase 50,000 shares of the Company's Common Stock under the Company's Incentive Stock Option Plan. As in the Employment Agreement, the Restated Employment Agreement provides that Dr. Jaeger agreed to transfer to the Company any interest in any inventions he developed while employed by the Company and agreed not to disclose any trade secrets of the Company and not to solicit any customers of the Company or induce any employee to leave the Company for one year following termination of his employment. The Restated Employment Agreement contains the same provisions for death, disability, partial disability, dismissal without cause and Change in Control as the employment agreements described above with Messrs. Harrison and Chapman and also provides that Dr. Jaeger will be covered under the Company's medical and dental insurance programs, or provided with identical or substantially similar coverage, until age 65. During 1998 Mr. Cannon had two different employment agreements with the Company: an Employment Agreement that had been in effect since 1992 (the "Cannon Employment Agreement") covering the period January 1, 1998 through November 30, 1998; and an Agreement (the "Cannon Agreement") covering the remainder of 1998. The Cannon Employment Agreement provided for an annual salary then equal to $144,300 with Mr. Cannon being eligible for annual bonuses to be awarded by the Board of Directors in its discretion and being entitled to participate in any pension, profit-sharing, insurance or other benefit plan of the Company if he were eligible under such plan or program. Mr. Cannon agreed to transfer to the Company any interest in any inventions he developed while employed by the Company and agreed not to disclose any trade secrets of the Company and not to solicit any customers of the Company or induce any employee to leave the Company for one year following termination of his employment. The Cannon Employment Agreement also had the same provisions for death, disability, partial disability, dismissal without cause and Change in Control as the employment agreements (described above) with Messrs. Harrison and Chapman. Under the Cannon Agreement, which supercedes the Cannon Employment Agreement and which extends from December 1, 1998 to December 1, 2000, Mr. Cannon memorialized the terms of his resignation as an officer and director of the Company and its subsidiaries and agreed to provide advice and assistance to the Board of Directors, Chief Executive Officer and/or Chief Financial Officer of the Corporation, to perform such projects as reasonably requested and mutually agreed and to remain available to act as a consultant to the Company. Mr. Cannon shall be paid annual compensation at the rate of $86,589 during the term of the Cannon Agreement. Any options previously granted to Mr. Cannon that have not yet vested will continue to vest in their normal course, but any options not vested by December 1, 1999 shall expire as of such date. In addition, all options not exercised on or before March 31, 2001 at 5:00 p.m. shall expire at such time. Mr. Cannon is not entitled to any automobile allowance pursuant to the agreement, but the Cannon Agreement otherwise provides for the same benefits contained in the Cannon Employment Agreement. If Mr. Cannon elects to terminate the Cannon Agreement or takes other employment on or before November 30, 1999, then Mr. Cannon shall only be entitled to annual compensation and benefits earned up to the date of his departure. If Mr. Cannon terminates the Cannon Agreement or takes other employment on or after December 1, 1999, the Company will continue to pay Mr. Cannon annual compensation but no benefits through the end of the term. If the Company A-17 31 terminates the Cannon Agreement without cause, as defined therein, the Company shall continue to provide Mr. Cannon with full compensation and benefits for the remainder of the term. The Company may accelerate the payments under the Cannon Agreement, in its discretion, but such acceleration does not affect Mr. Cannon's eligibility to receive benefits for the remainder of the term. The Cannon Agreement also provides that Mr. Cannon not solicit any customers of the Company or induce any employees to leave the Company. In the event Mr. Cannon becomes either partially or totally disabled during the term of the Cannon Agreement the Company shall continue, during the term of the Cannon Agreement, to pay Mr. Cannon his annual compensation and benefits. If Mr. Cannon dies, the payments of annual compensation will be made to his spouse or estate. Unlike the Cannon Employment Agreement, the Cannon Agreement does not contain a provision relating to a termination of his employment in connection with a Change in Control of the Company. INDEPENDENT CONTRACTOR AGREEMENT The Company was party to an Independent Contractor Agreement with Primary, The One For Solutions ("Primary"), which, among other things, provided for John Rogers, an employee of Primary to provide financial consulting services to the Company and, beginning November 1, 1998, to serve as Acting Chief Financial Officer of the Company. Mr. Rogers held that position from November 1, 1998 through March 31, 1999, at which time the Independent Contractor Agreement expired. Under the Independent Contractor Agreement, for weeks in which Primary provided services of less than 40 man hours, the Company paid Primary at the rate of $200 per hour for each man hour worked. In weeks in which Primary provided services in excess of 40 man hours but less than 55 man hours, Primary was paid a fixed fee of $8,000 for the week. In weeks in which Primary provided services in excess of 55 man hours, the Company paid Primary $8,000 plus $200 per hour for each hour worked during the week in excess of 55 man hours. In addition, the Company reimbursed Primary for its reasonable expenses incurred in connection with service performed for the Company. The Company and Primary each agreed to treat the other party's proprietary information that was disclosed to it as confidential. In addition, the Company and Primary each agreed that during the term of the Agreement and for a period of two years thereafter, it would not solicit, divert, take away, or attempt to solicit, divert or take away, any of the other party's clients, customers, employees or independent contractors. Primary will continue to provide transitional consulting services to the Company on substantially similar terms as provided in the agreement through all or part of April 1999 and may provide additional services as requested by the Company and mutually agreed. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation and Incentive Stock Option Committee is currently composed of the Company's outside (i.e., non-employee) Directors, Mr. Donofrio, Chair of the Committee, Dr. Lazay, Mr. Nordlicht, Dr. Lai and Mr. Schmitz (Mr. Harrison served on the Compensation and Incentive Stock Option Committee until his appointment as President and Chief Executive Officer of the Company on April 13, 1998). None of the outside Directors is currently, or has ever been, an officer or employee of the Company, or has had any relationship, or has been a party to any transaction, with the Company as to which disclosure is required, except as set forth in prior proxy statements or below. Mr. Nordlicht is a member of the law firm of Nordlicht & Hand, which has provided and continues to provide legal services to the Company. During 1998, the Company paid Nordlicht & Hand legal fees for services rendered and disbursements advanced in the amount of $164,960. Mr. Schmitz's Company, Quest Capital was paid $40,132.58 by the Company for financial consulting services. COMPENSATION AND INCENTIVE STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation and Incentive Stock Option Committee (the "Compensation Committee") has been delegated responsibility for all matters relating to the compensation of senior executives of the Company, such as the Chief Executive Officer, Chief Financial Officer, Senior Vice Presidents and the Presidents of the Company's operating subsidiaries, including establishing and administering the Company's policies and plans governing annual and long-term compensation. The Compensation Committee and its members also become involved in hiring, retention and performance reviews of this senior executive group. It reports to the Board of A-18 32 Directors, which periodically reviews and approves or ratifies committee actions where necessary or appropriate. The Committee is composed of the Company's outside Directors, currently, Mr. Donofrio, Chair of the Committee, Dr. Lazay, Mr. Nordlicht, Dr. Lai and Mr. Schmitz. Mr. Harrison served on the Compensation and Incentive Stock Option Committee until his appointment as President and Chief Executive Officer of the Company on April 13, 1998. COMPENSATION PHILOSOPHY The fundamental objective of the Company's executive compensation policy is to increase shareholder value and to align executives' and shareholders' interests both in the near and longer terms. Executives are compensated with cash and stock options. The Company's goal is to pay competitive base salaries coupled with performance based incentive compensation. Incentive compensation is a function of three factors: the first and most heavily weighted is growth in earnings before interest, taxes, depreciation and amortization (EBITDA), essentially a cash flow calculation, less the Company's cost of capital; the second and next most significant factor is the achievement of individual goals and projects (or the achievement of a certain percentage of those goals and projects if they are more than a year's duration) specifically identified at the beginning of a year; the third factor is a discretionary element designed to reward exceptional performance not recognized elsewhere, such as seizing an unanticipated opportunity which provides substantial benefit to the Company not foreseen at the beginning of the year. While maintaining primary focus on the overall, consolidated results of the Company, the Committee believes that there should be an element of reward for exceptional performance at the operating subsidiary level under certain circumstances. The underlying philosophy is that these elements will produce a stronger more economically successful company in the near and longer-term which in turn will be reflected in the Company's stock price. The Company has and will continue to grant stock options (at market price or higher on date of grant); executives benefit only if the stock price rises. COMPONENTS OF COMPENSATION, PROGRAMS AND PRACTICES Overview. Executive compensation is composed of three elements: base salary; incentive cash awards and stock options. The Company attempts to structure its base salary so that it is competitive, meaning that base salaries approximate the fiftieth percentile (50%) of the base salaries (not total compensation) of comparable companies. Incentive cash awards and stock options are used so that executives' total compensation is below the fiftieth percentile for comparable companies if they have achieved less-than-desired-results, at or about the fiftieth percentile for expected performance, and above the fiftieth percentile for superior, excellent or outstanding performance. Base Salaries. The Company generally attempts to establish annual base salaries for executives, including the Chief Executive Officer, competitive with base salaries for executives of similarly situated companies within the industry. The objective is to pay to an executive who is fully competent and meets normal expectations for performance in his or her position a base salary at the fiftieth percentile level of the range of base salaries paid to executives holding comparable positions at similarly situated companies. Base salaries at approximately the fiftieth percentile level, in conjunction with the balance of the compensation package, permits the Company to attract and retain top quality people while meeting the Company's affordability requirements. In determining executive compensation, the Company reviewed and analyzed reports and surveys of executive compensation at comparably sized high technology companies, including those in the electronics industry. Incentive Cash Compensation. The Company has developed programs under which key executives can earn bonus cash compensation, dependent upon performance, that places them at less than, equal to or greater than the fiftieth percentile level of compensation paid to similar executives in similar companies. Key executives participate in two plans: the Employee Profit Sharing Plan ("EPSP") in which all employees participate and the Key Employee Incentive Plan ("Key Employee Plan"). Officers and selected director-level employees of the Company and each of its subsidiaries participate in the Key Employee Plan (although any employee may be eligible for an award under the discretionary portion of the Key Employee Plan, as described below). A-19 33 The Employee Profit Sharing Plan ("EPSP"). All employees, including key personnel, participate in the EPSP, which awards performance for operating subsidiary employees based upon the results of their operating subsidiary and for parent company employees based upon consolidated results. The Committee and the Board believe that it is advisable for key personnel and all other employees to share certain identical incentives. Employees of an operating subsidiary or the parent company can earn a bonus equal to one percent (1%) of their salary if the operating subsidiary that employs that person (or the consolidated corporate results for parent company employees) produces at least an eight percent (8%) return on net revenues ("ROR"). A nine percent (9%) ROR will result in a bonus equal to two percent (2%) of salary. If the relevant entity produces an ROR greater than nine percent (9%) then half of each additional percent is added to the two percent (2%), up to a maximum bonus equal to ten percent (10%) of salary. To achieve the maximum bonus, a subsidiary or the parent company, as applicable, would need to generate approximate a twenty five percent (25%) ROR. No bonuses will be paid to employees of an entity if it earns less than an eight percent (8%) ROR. Bonuses can be paid out under the EPSP to employees of an operating subsidiary which individually earns at least an eight percent (8%) ROR, even if the Company's consolidated results or the results of other subsidiaries produce an ROR of less than eight percent (8%) or a loss; the underlying philosophical concept is to provide an award for employees for those results that they can influence and control directly. Key Employee Incentive Plan ("Key Employee Plan"). Under the Key Employee Plan, a bonus pool is created by a specified percentage of the excess of the Company's consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), essentially a cash flow calculation, over a cost of capital charge. Participants are high level employees of the Company (currently the Company's officers, Presidents and Vice Presidents of the operating subsidiaries, and specified director-level employees of the Company or its subsidiaries, totaling 15 individuals in 1998), with the exception of the discretionary portion of the bonus pool (described below) which may be paid out to any employee as determined by the Compensation Committee. The bonus pool will be distributed among participants as follows. Seventy percent (70%) is essentially dependent upon how much EBITDA exceeds the cost of capital. An additional seventeen and one half percent (17.5%) is based upon the achievement of individual goals and projects (or the achievement of a certain percentage of those goals and projects if they are more than a year's duration) specifically identified at the beginning of the year. The remaining twelve and one half percent (12.5%) constitutes a pool to be used for discretionary bonuses, to be awarded or not to any employee, whether a participant in the remainder of the Key Employee Plan or not, if the Compensation Committee determines that such employee made an exceptional contribution to the Company's performance not recognized elsewhere. To determine how much each participant may be paid from the bonus pool, he or she is assigned a target bonus percentage which will be used in determining how much of the bonus pool is allocated to that individual, which percentage will be adjusted downwards (including to zero) if specified levels of EBITDA return on operating assets (for the operating subsidiary or the Company, or a blend of the two, as appropriate for the individual) are not achieved. While the intent of the Key Employee Plan is to permit participants to earn total compensation potentially in excess of the fiftieth percentile when compared to comparable employees in comparable companies as a result of excellent performance, the Key Employee Plan establishes a maximum amount that can be paid to any participant under the non-discretionary portions of the Key Employee Plan to attempt to avoid excessive awards. The Key Employee Plan also can result in total compensation at or less than the fiftieth percentile if performance is not excellent. No payments will be made under the Key Employee Plan unless the Company is profitable after the payments. There is no obligation to pay out either the discretionary portion of the bonus pool or any remaining balance if the total of all bonuses distributed is less than the total bonus pool; disposition of such amounts will be determined by the Compensation Committee. Stock Options. Stock option grants are designed to create continued and long-term incentives for executives and employees to attempt to increase equity values consistent with the expectations and interests of public shareholders. All stock option awards are granted under the Company's Incentive Stock Option Plan. The exercise price of all options so granted is the market price or higher on the date of grant, with options generally vesting annually in equal amounts over three years. The amount of grants attempt to place recipients in approximately the fiftieth percentile (50%) percentile when compared to comparable employees in comparable companies for long-term compensation. Recipients benefit only if the stock price rises after the date of grant and after the options vest. A-20 34 Chief Executive Officer Compensation. Dr. Raymond E. Jaeger served as Chief Executive Officer until April 13, 1998 when Mr. Charles B. Harrison assumed that position. As described above, Dr. Jaeger had two different employment agreements with the Company during 1998. Under the Restated Employment Agreement Dr. Jaeger was eligible to participate in the Company's Employee Profit Sharing Plan and was eligible for a target bonus of 25% of his base salary under the Company's Key Employee Incentive Plan, to be awarded at the discretion of the Board of Directors based upon his performance during 1998. Thereafter, Dr. Jaeger is not eligible to participate in either of these two plans. Mr. Harrison became Chief Executive Officer on April 13, 1998 and served in that capacity through year-end (and currently) in accordance with an employment agreement described above. While Mr. Harrison's employment agreement provides for an annual salary currently equal to $250,000, with future increases as determined by the Board of Directors, during the second half of 1998, Mr. Harrison voluntarily reduced his salary by 10%, to $225,000 as part of the Company's cost control initiatives. In determining Chief Executive Officer compensation for 1998, the Compensation and Incentive Stock Option Committee determined that the Company's performance was below expectations and awarded no bonus or other incentive compensation to either Dr. Jaeger or Mr. Harrison. Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to its chief executive officer and its four other most highly compensated executives. It is unlikely, at this point in the Company's history, that the Company will pay executive compensation that might not be deductible under that Section. Nevertheless, the Company continues to review this matter and whenever it is advisable will take whatever steps it deems necessary in this regard. Richard M. Donofrio, Chair Paul D. Lazay Ira S. Nordlicht Lily K. Lai Robert A. Schmitz A-21 35 STOCKHOLDER RETURN In the graph set forth below, the yearly change for the last five fiscal years in the Company's cumulative total stockholder return on its Common Stock is compared with the cumulative total return as shown in the Russell 2000 index, and in an index of peer issuers selected by the Company(1). COMPARATIVE FIVE-YEAR TOTAL RETURNS(2) SPECTRAN CORP., RUSSELL 2000, PEER GROUP (PERFORMANCE RESULTS THROUGH 12/31/98) COMPARATIVE FIVE-YEAR RETURNS GRAPH
SPTR RUSSELL PEER GROUP ---- ------- ---------- '1993' 100.00 100.00 100.00 '1994' 41.49 98.18 130.95 '1995' 46.81 126.10 137.59 '1996' 185.11 146.90 147.28 '1997' 81.92 179.75 125.22 '1998' 35.11 175.17 119.57
Assumes $100 invested at the close of trading on the last trading day preceding the first day of the fifth preceding fiscal year in the Company's Common Stock, RUSSELL 2000, and Peer Group. - --------------- (1) The peer group selected by the Company includes the following companies engaged in the sale of optical fiber or related products: ADC Telecommunications, Corning Incorporated, FiberCore, Inc., Galileo Electro-Optics, Hitachi, Ltd., OptelCom, Optical Cable Company and Ortel Corporation. (2) Cumulative total return assumes reinvestment of dividends. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding beneficial ownership of the Company's Common Stock on July 14, 1999 with respect to (a) each person or group known to the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (b) each Director of the Company, (c) each executive officer of the Company named in the following section entitled "Compensation A-22 36 of Executive Officers and Directors" and (d) all such named executive officers and Directors of the Company as a group. Except as set forth below, all of such shares are held of record and beneficially.
BENEFICIAL PERCENT OF NAME AND ADDRESS OWNERSHIP COMMON STOCK(1) - ---------------- ----------- --------------- Wellington Management Company, LLP...................... 685,000 (2) 9.73% 75 State Street Boston, Massachusetts 02109 Wellington Trust Company, N.A........................... 465,000 (3) 6.60% 75 State Street Boston, Massachusetts 02109 EQSF Advisers, Inc. and Martin J. Whitman............... 490,600(4) 6.97% 767 Third Avenue New York, New York 10017-2023 Dimensional Fund Advisors Inc........................... 402,500 (5) 5.72% 1299 Ocean Avenue, 11th Floor Santa Monica, California 90401 Dana H. and Doris B. Dalton............................. 368,100 (6) 5.23% 11800 Sunrise Valley Drive, 6th Floor Reston, Virginia 20191 Raymond E. Jaeger....................................... 217,931 (7) 3.10% 25 Old Village Road Sturbridge, Massachusetts 01566 Charles B. Harrison..................................... 57,821 (8) * SpecTran Industrial Park 50 Hall Road Sturbridge, Massachusetts 01566 Ira S. Nordlicht........................................ 17,332 (9) * 645 Fifth Avenue New York, New York 10022 Paul D. Lazay........................................... 11,000 (10) * 1704 Oak Creek Drive Palo Alto, California 94304 Bruce A. Cannon......................................... 68,414 (11) * 125 Adam Street Holliston, Massachusetts 01746 Richard M. Donofrio..................................... 9,500 (12) * 93 Ansonia Road Woodbridge, Connecticut 06525 John E. Chapman......................................... 114,883 (13) 1.63% SpecTran Industrial Park 50 Hall Road Sturbridge, Massachusetts 01566 Lily K. Lai............................................. 7,000 (14) * 50 Stonebridge Road Summit, New Jersey 07901
A-23 37
BENEFICIAL PERCENT OF NAME AND ADDRESS OWNERSHIP COMMON STOCK(1) - ---------------- ----------- --------------- Robert A. Schmitz....................................... 0 (15) 0 Quest Capital One Dock Street Stamford, Connecticut 06902 John Rogers............................................. 0 0 SpecTran Industrial Park 50 Hall Road Sturbridge, Massachusetts 01566 All Directors and executive officers as a group......... 528,217 (16) 7.50% (ten persons)
- --------------- * Less than 1% (1) Percentage of beneficial ownership is based on the 7,040,930 of shares of Common Stock outstanding on July 14, 1999. Shares of Common Stock subject to stock options and warrants that are exercisable within 60 days of July 14, 1999 are deemed outstanding for computing the percentage of the person or group holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person or group. (2) This information is based upon information reported by Wellington Management Company, LLP ("WMC") on a Schedule 13G dated December 31, 1998 and filed with the U.S. Securities and Exchange Commission as of February 10, 1999. WMC states that in its capacity as an investment adviser, it may be deemed to have beneficial ownership of 685,000 shares of Common Stock which are owned of record by its clients, including Wellington Trust Company, NA. (3) This information is based upon information reported by Wellington Trust Company, NA ("WTC") on a Schedule 13G dated December 31, 1998 and filed with the U.S. Securities and Exchange Commission as of February 11, 1999. WTC states that in its capacity as an investment adviser, it may be deemed to have beneficial ownership of 465,000 shares of Common Stock which are owned of record by its clients, including Wellington Management Company, LLP. (4) This information is based upon information reported by EQSF Advisers, Inc. ("EQSF") and Martin J. Whitman (the Schedule is considered a joint filing of both EQSF and Mr. Whitman) on a Schedule 13G dated February 12, 1999 and filed with the U.S. Securities and Exchange Commission as of February 16, 1999 and amended on April 12, 1999. EQSF states that it beneficially owns 490,600 shares of Common Stock. Martin J. Whitman, the Chief Executive Officer and controlling person of EQSF, disclaims beneficial ownership of all such shares. Third Avenue Small-Cap Fund has the right to receive dividends from and the proceeds from the sale of these 490,600 shares. (5) This information is based upon information reported by Dimensional Fund Advisors Inc. ("Dimensional") on a Schedule 13G dated February 12, 1999 and filed with the U.S. Securities and Exchange Commission as of February 11, 1999. Dimensional states that in its role as investment advisor and investment manager it possesses both voting and investment power over 402,500 shares of Common Stock, but disclaims beneficial ownership of such securities. (6) This information is based upon information reported by Dana H. and Doris B. Dalton on a Schedule 13G dated March 25, 1999 and filed with the U.S. Securities and Exchange Commission as of March 29, 1999. (7) Includes 111,416 shares subject to options exercisable within 60 days. Does not include 54,831 shares subject to options not exercisable within 60 days. (8) Includes 47,000 shares subject to options exercisable within 60 days. Does not include 109,000 shares subject to options not exercisable within 60 days. (9) Includes 11,000 shares subject to options exercisable within 60 days. Does not include 2,000 shares subject to options not exercisable within 60 days. A-24 38 (10) Includes 11,000 shares subject to options exercisable within 60 days. Does not include 2,000 shares subject to options not exercisable within 60 days. (11) Includes 65,414 shares subject to options exercisable within 60 days. Does not include 14,828 shares subject to options not exercisable within 60 days. (12) Includes 9,000 shares subject to options exercisable within 60 days. Does not include 2,000 shares subject to options not exercisable within 60 days. (13) Includes 114,883 shares subject to options exercisable within 60 days. Does not include 25,767 shares subject to options not exercisable within 60 days. (14) Includes 7,000 shares subject to options exercisable within 60 days. Does not include 2,000 shares subject to options not exercisable within 60 days. (15) Does not include 1,000 shares subject to options not exercisable within 60 days. (16) Includes 401,713 shares subject to options exercisable within 60 days. Does not include 188,426 shares subject to options not exercisable within 60 days. CERTAIN TRANSACTIONS The matters set forth elsewhere in this Information Statement and in Item 3 of the Schedule 14D-9 are hereby incorporated by reference. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's executive officers and directors and persons who own more than ten percent of a registered class of the Company's equity securities to file reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the "SEC"). Such officers, directors and ten percent stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such forms received by it to date, or written representations from certain reporting persons that Forms 5 have been filed for such persons as required, the Company believes that, during the year ended December 31, 1998, all reporting persons complied with Section 16(a) filing requirements applicable to them. A-25 39 ANNEX B LAZARD FRERES LH July 15, 1999 The Board of Directors SpecTran Corporation 50 Hall Road Sturbridge, Massachusetts 01566 Dear Members of the Board: We understand that SpecTran Corporation (the "Company"), Lucent Technologies Inc. (the "Acquiror") and its wholly-owned subsidiary, Seattle Acquisition Inc. (the "Merger Subsidiary"), have entered into an Agreement of Merger dated as of July 15, 1999 (the "Agreement"), pursuant to which the Acquiror will commence an offer (the "Offer") to purchase all of the issued and outstanding shares of the Company's common stock, $0.10 par value (the "Shares"), at a price of $9.00 per Share net to the seller in cash. The Agreement also provides that, following consummation of the Offer, Merger Subsidiary will be merged with and into the Company in a transaction (the "Merger") in which each remaining Share issued and outstanding prior to the effective time of the Merger (other than shares to be cancelled, Shares owned by any subsidiaries of either the Company or the Acquiror (other than the Merger Subsidiary) and dissenting shares, as provided in the Agreement) will be converted into the right to receive $9.00 in cash. You have requested our opinion as to the fairness, from a financial point of view, to the holders of Shares (other than Merger Subsidiary and its affiliates) of the $9.00 per Share in cash to be received by such holders in the Offer and the Merger. In connection with this opinion, we have: (i) Reviewed the financial terms and conditions of the Agreement; (ii) Analyzed certain historical business and financial information relating to the Company; (iii) Reviewed various financial forecasts and other data provided to us by the Company; (iv) Held discussions with members of the senior management of the Company with respect to the business and prospects of the Company and its strategic objectives; (v) Reviewed public information with respect to certain other companies in lines of businesses we believe to be generally comparable to the Company; (vi) Reviewed the financial terms of certain business combinations involving companies in lines of businesses we believe to be generally comparable to that of the Company, and in other industries generally; (vii) Reviewed the historical stock prices and trading volumes of the Company's Shares; and (viii) Conducted such other financial studies, analyses and investigations as we deemed appropriate. We have relied upon the accuracy and completeness of the foregoing information, and have not assumed any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets or liabilities of the Company or the Acquiror, or concerning the solvency or fair value of either of the foregoing entities. With respect to financial forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of B-1 40 management of the Company as to the future financial performance of the Company. We assume no responsibility for and express no view as to such forecasts or the assumptions on which they are based. Further, our opinion is necessarily based on accounting standards, economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof. In rendering our opinion, we have assumed that the Offer and the Merger will be consummated on the terms described in the Agreement, without any waiver of any material terms or conditions by the Company and that obtaining the necessary regulatory approvals for the Offer and the Merger will not have an adverse effect on the Company. Our opinion does not address the relative merits of the transaction contemplated by the Agreement as compared to any alternative business transaction that might be available to the Company. Lazard Freres & Co. LLC is acting as investment banker to the Board of Directors of the Company in connection with the Offer and Merger and will receive a fee for our services a substantial portion of which is contingent upon the closing of the Offer and the Merger. Our engagement and the opinion expressed herein are for the benefit of the Company's Board of Directors and our opinion is rendered to the Company's Board of Directors in connection with its consideration of the transaction. This opinion is not intended to and does not constitute a recommendation to any holder of Shares as to whether such holder should tender such Shares in the Offer or vote for the Merger. It is understood that this letter may not be disclosed or otherwise referred to without our prior consent, except as may otherwise be required by law or by a court of competent jurisdiction. Based on and subject to the foregoing, we are of the opinion that as of the date hereof the $9.00 per Share in cash to be received by the holders of Shares (other than Merger Subsidiary and its affiliates) in the Offer and the Merger is fair to such holders from a financial point of view. Very truly yours, LAZARD FRERES & CO. LLC By James L. Kempner ------------------------------------ James L. Kempner Managing Director B-2 EX-99.A.1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF SPECTRAN CORPORATION AT $9.00 NET PER SHARE BY SEATTLE ACQUISITION INC. A WHOLLY OWNED SUBSIDIARY OF LUCENT TECHNOLOGIES INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 17, 1999, UNLESS EXTENDED. THE BOARD OF DIRECTORS OF SPECTRAN CORPORATION HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS AND ANY OTHER RIGHTS TO ACQUIRE SHARES ON THE DATE OF PURCHASE) AND (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. IMPORTANT If you wish to tender all or any portion of your Shares in SpecTran Corporation, you must do one of the following: - If you are the record holder of your Shares and hold certificates for your Shares, (a) complete and sign the Letter of Transmittal (or a facsimile copy) following the instructions in the Letter of Transmittal, (b) have your signature on the Letter of Transmittal guaranteed if required by Instruction 1 to the Letter of Transmittal, and (c) mail or deliver the Letter of Transmittal (or a facsimile copy), the certificates for your Shares and any other required documents to The Bank of New York - If you are the record holder of your Shares and delivery of the Shares is to be made by book-entry transfer, (a) transmit an agent's message (as described in Section 2 below) and any other required documents, to The Bank of New York and (b) deliver your Shares pursuant to the procedure for book-entry transfer set forth in Section 2 below - If your Shares are registered in the name of a broker, dealer, bank, trust company or other nominee, you must contact and request your broker, dealer, bank, trust company or other nominee to tender your Shares If you desire to tender your Shares and your certificates for your Shares are not immediately available or you cannot comply in a timely manner with the procedures for book-entry transfer, or you cannot deliver all the required documents to The Bank of New York prior to the expiration of the Offer, you may tender your Shares by following the procedure for guaranteed delivery described in Section 2. If you have any questions or if you need assistance or additional copies of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery, please call Morrow & Co. at its address and telephone number set forth on the back cover of this Offer to Purchase. ------------------------ The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue 5th Floor New York, NY 10022 July 21, 1999 2 TABLE OF CONTENTS
PAGE ---- Introduction..................................................... 1 1. Terms of the Offer.......................................... 2 2. Procedure for Tendering Shares.............................. 4 3. Withdrawal Rights........................................... 6 4. Acceptance for Payment and Payment for Shares............... 7 5. Certain Federal Income Tax Consequences..................... 8 6. Price Range of the Shares; Dividends on the Shares.......... 9 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations.... 9 8. Certain Information Concerning the Company.................. 10 9. Certain Information Concerning the Purchaser and Parent..... 13 10. Source and Amount of Funds.................................. 14 11. Contacts with the Company; Background of the Offer.......... 14 12. Purpose of the Offer; The Merger Agreement.................. 17 13. Dividends and Distributions................................. 25 14. Certain Conditions of the Offer............................. 26 15. Certain Legal Matters....................................... 27 16. Fees and Expenses........................................... 29 17. Miscellaneous............................................... 29
Schedule I -- Directors and Executive Officers of Parent and the Purchaser i 3 TO THE HOLDERS OF COMMON STOCK OF SPECTRAN CORPORATION: INTRODUCTION Seattle Acquisition Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Lucent Technologies Inc., a Delaware corporation ("Parent"), is offering to purchase all outstanding shares (the "Shares") of Common Stock, par value $.10 per share ("Common Stock"), of SpecTran Corporation, a Delaware corporation (the "Company"), at $9.00 per Share (the "Offer Price"), net to the seller, in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase dated July 21, 1999 and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). If you have Shares registered in your name that you tender directly, you will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. If you hold your Shares through a broker or bank, you should consult with them to determine if there are any fees applicable to a tender of the Shares. The Purchaser will pay all fees and expenses of The Bank of New York, which is acting as the Depositary (the "Depositary") and Morrow & Co., Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. The Company has advised the Purchaser that Lazard Freres & Co. LLC ("Lazard") has delivered to the board of directors of the Company its written opinion to the effect that, as of the date of such opinion, the $9.00 in cash per Share to be received by the holders of Shares in the Offer and the Merger is fair to such holders from a financial point of view. That opinion is set forth in full as an exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to you with this Offer to Purchase. YOU ARE URGED TO, AND SHOULD, READ SUCH OPINION CAREFULLY IN ITS ENTIRETY. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1) THAT NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS FOR ALL OUTSTANDING STOCK OPTIONS AND ANY OTHER RIGHTS TO ACQUIRE SHARES ON THE DATE OF PURCHASE) (THE "MINIMUM CONDITION") AND (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR ACT") APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. THE PURCHASER RESERVES THE RIGHT (SUBJECT TO OBTAINING THE CONSENT OF THE COMPANY AND THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")), WHICH IT PRESENTLY HAS NO INTENTION OF EXERCISING, TO WAIVE OR REDUCE THE MINIMUM CONDITION AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER, LESS THAN THE NUMBER OF SHARES REQUIRED TO SATISFY THE MINIMUM CONDITION. SEE SECTIONS 1 AND 14. The Offer is being made pursuant to the Agreement of Merger, dated as of July 15, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the Company, pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the merger (as such, the "Surviving Corporation") as a wholly owned subsidiary of Parent (the "Merger"). In the Merger, each Share issued and outstanding immediately prior to the Merger (other than Shares (1) owned or held in treasury by the Company, (2) owned by Parent or the Purchaser, (3) remaining outstanding held by any subsidiary of the Company or Parent or (4) owned by stockholders, if any, who are entitled to and who properly exercise dissenters' rights 1 4 under Delaware law) will be converted into the right to receive in cash, without interest, the per Share price paid in the Offer (the "Merger Consideration"). See Section 12. The Merger is subject to a number of conditions, including approval by stockholders of the Company, if such approval is required by applicable law. If the Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser will effect the Merger pursuant to the short-form merger provisions of the Delaware General Corporation Law (the "DGCL"), without prior notice to, or any action by, any other stockholder of the Company. See Section 12. Once the Minimum Condition has been satisfied and the Purchaser accepts for payment Shares tendered pursuant to the Offer, the Purchaser will be able to elect a majority of the members of the Company's board of directors and to effect the Merger without the affirmative vote of any other stockholder of the Company. The Merger Agreement is more fully described in Section 12. Certain Federal income tax consequences of the sale of Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5. 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 midnight, New York City time, on Tuesday, August 17, 1999, unless the Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. Subject to the terms of the Merger Agreement (see Section 12) and the applicable rules and regulations of the Commission, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 14 hereof shall have occurred or shall have been determined by the Purchaser to have occurred, (1) to extend the period of time during which the Offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (2) to amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If by 12:00 midnight, New York City time, on Tuesday, August 17, 1999 (or any other date or time then set as the Expiration Date), any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Commission, (1) to terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders, (2) to waive all the unsatisfied conditions (other than the Minimum Condition and the condition that any waiting period under the HSR Act shall have expired or been terminated) and, subject to complying with the terms of the Merger Agreement and the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (3) to extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (4) to amend the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer (other than as required by the Merger Agreement). Any extension, waiver, amendment or termination will be followed as promptly as practicable by public announcement. In the case of an extension, Rule 14e-l(d) under the Securities Exchange Act of 1934 (the "Exchange Act"), requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act which require that any 2 5 material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser currently intends to make such public announcement by issuing a press release to the Dow Jones News Service and making any appropriate filing with the Commission. In the Merger Agreement, the Purchaser has agreed that it will not, without the prior consent of the Company, extend the Offer, except that, without the consent of the Company, the Purchaser may extend the Offer (1) if at the Expiration Date any of the conditions to the Purchaser's obligations to accept Shares for payment are not satisfied or waived, until such time as such conditions are satisfied or waived, (2) for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer or any period required by applicable law and (3) on one or more occasions for an aggregate period of not more than 10 business days beyond the latest expiration date that would otherwise be permitted under clause (1) or (2) of this sentence, if on such expiration date there shall not have been tendered at least 90% of the outstanding Shares. The Merger Agreement further provides that if all the conditions to the Offer are not satisfied on any scheduled expiration date of the Offer then, provided that all such conditions are reasonably capable of being satisfied, the Purchaser will extend the Offer from time to time until such conditions are satisfied or waived, provided that the Purchaser will not be required to extend the Offer beyond September 30, 1999. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. In addition, the Purchaser has agreed in the Merger Agreement that it will not, without the consent of the Company, (1) reduce the number of Shares subject to the Offer, (2) reduce the Offer Price, (3) amend or add to the Offer conditions any terms that are adverse to the holders of the Shares, (4) extend the Offer, except as provided in the preceding paragraph, (5) change the form of consideration payable in the Offer or (6) amend any other term of the Offer in any manner adverse to the holders of the Shares. If the Purchaser extends the Offer or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its acceptance for payment of or payment for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 3. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, with the Company's consent, a waiver of the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-l under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. CONSUMMATION OF THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED BY THE HSR ACT AND THE OTHER CONDITIONS SET FORTH IN SECTION 14. Subject to the terms and conditions contained in the Merger Agreement, the Purchaser reserves the right (but shall not be obligated) to waive any or all such conditions. The Company has provided the Purchaser with the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of the Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares 3 6 and will be furnished by the Purchaser to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR TENDERING SHARES. VALID TENDER. For a stockholder to tender Shares validly pursuant to the Offer, either (1) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined in the second succeeding paragraph), and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedure for book-entry transfer set forth below (and a Book-Entry Confirmation (as defined in the next paragraph) received by the Depositary), in each case, prior to the Expiration Date, or (2) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL OR ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal if (1) the Letter of Transmittal is signed by the registered holder (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith unless such registered holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (2) such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each of the foregoing being referred to as an "Eligible 4 7 Institution"). In all other cases, all signatures on the Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be issued to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instruction 5 to the Letter of Transmittal. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser is received by the Depositary, as provided below, prior to the Expiration Date; and (3) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other documents required by the Letter of Transmittal, are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange, Inc. (the "NYSE") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (1) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (2) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (3) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. APPOINTMENT. By executing a Letter of Transmittal, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after July 15, 1999. All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies or consents may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be 5 8 empowered to exercise all voting rights with respect to such Shares or other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, or otherwise, and may execute any written consent, and may otherwise act as an attorney-in-fact and proxy concerning any matter as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders then scheduled. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of, or payment for, any Shares which acceptance or payment, in the opinion of the Purchaser's counsel, may be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in any tender with respect to any particular Shares, whether or not similar defects or irregularities are waived in the case of other Shares. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. BACKUP FEDERAL INCOME TAX WITHHOLDING. IN ORDER TO AVOID "BACKUP WITHHOLDING" OF FEDERAL INCOME TAX ON PAYMENTS OF CASH PURSUANT TO THE OFFER, A STOCKHOLDER SURRENDERING SHARES IN THE OFFER MUST, UNLESS AN EXEMPTION APPLIES, PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") ON A SUBSTITUTE FORM W-9 AND CERTIFY UNDER PENALTY OF PERJURY THAT SUCH TIN IS CORRECT AND THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING. IF A STOCKHOLDER DOES NOT PROVIDE ITS CORRECT TIN OR FAILS TO PROVIDE THE CERTIFICATIONS DESCRIBED ABOVE, THE INTERNAL REVENUE SERVICE ("IRS") MAY IMPOSE A PENALTY ON SUCH STOCKHOLDER AND PAYMENT OF CASH TO SUCH STOCKHOLDER PURSUANT TO THE OFFER MAY BE SUBJECT TO BACKUP WITHHOLDING OF 31%. ALL STOCKHOLDERS SURRENDERING SHARES PURSUANT TO THE OFFER SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL TO PROVIDE THE INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING (UNLESS AN APPLICABLE EXEMPTION EXISTS AND IS PROVEN IN A MANNER SATISFACTORY TO THE PURCHASER AND THE DEPOSITARY). CERTAIN STOCKHOLDERS (INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS AND ENTITIES) ARE NOT SUBJECT TO BACKUP WITHHOLDING. NONCORPORATE FOREIGN STOCKHOLDERS SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND A FORM W-8, CERTIFICATE OF FOREIGN STATUS, A COPY OF WHICH MAY BE OBTAINED FROM THE DEPOSITARY, IN ORDER TO AVOID BACKUP WITHHOLDING. SEE INSTRUCTION 9 TO THE LETTER OF TRANSMITTAL. 3. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 3, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after September 18, 1999. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 2, any notice of withdrawal must also specify the name and number of the account at the Book Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with the Book Entry Transfer Facility's 6 9 procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and, promptly after the Expiration Date, will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 3. Any determination concerning the satisfaction of such terms and conditions will be within the sole discretion of the Purchaser, and such determination will be final and binding on all tendering stockholders. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply with any applicable law, including, without limitation, the HSR Act. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer). Parent has filed a Notification and Report Form with respect to the Offer under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th calendar day after such filing, unless early termination of the waiting period is granted. In addition, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from Parent. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by Parent with such request. See Section 15 for additional information concerning the HSR Act and the applicability of the antitrust laws to the Offer. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as described in Section 2), (2) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and (3) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser is delayed in its acceptance for payment of or payment for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares. Any such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. 7 10 If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or otherwise, certificates for any such Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in Section 2, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to one or more direct or indirect wholly owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to the Offer. Any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash pursuant to the Offer or the Merger will constitute a taxable transaction for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also constitute a taxable transaction under applicable state, local, foreign and other tax laws. As a result, a tendering stockholder will generally recognize gain or loss for Federal income tax purposes in an amount equal to the difference between the amount of cash received by the stockholder pursuant to the Offer or the Merger and such stockholder's aggregate adjusted tax basis in the Shares tendered and purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer (or canceled pursuant to the Merger). If tendered Shares are held by a tendering stockholder as capital assets, any gain or loss recognized by the tendering stockholder will constitute capital gain or loss, and will constitute long-term capital gain or loss if the tendering stockholder held the underlying Shares for more than 12 months as of the date of disposition. There are limits on the deductibility of capital losses. A stockholder (other than certain exempt stockholders including, among others, all corporations and certain foreign individuals) that tenders Shares may be subject to backup withholding at a rate of 31% unless the stockholder provides its correct TIN (or certifies that it is awaiting a TIN) and certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A stockholder that does not furnish its correct TIN in the prescribed manner or that does not otherwise establish a basis for an exemption from backup withholding may be subject to a penalty imposed by the IRS, and the gross proceeds of the Offer or the Merger payable to such stockholder may be subject to backup withholding at a rate of 31%. Each stockholder should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding. If backup withholding applies to a stockholder, the Depositary is required to withhold 31% from payments to such stockholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF SUCH PERSON'S INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER. 8 11 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. The Shares are traded on The Nasdaq National Market System under the symbol "SPTR." The following table sets forth, for each of the periods indicated, the high and low reported sale prices per Share, as reported by the Nasdaq National Market.
SHARES ------------- HIGH LOW ---- --- FISCAL YEAR ENDED DECEMBER 31, 1997 First Quarter............................................... $25 $12 5/8 Second Quarter.............................................. 21 11 1/4 Third Quarter............................................... 20 3/4 13 3/4 Fourth Quarter.............................................. 15 1/4 8 5/8 FISCAL YEAR ENDED DECEMBER 31, 1998 First Quarter............................................... $11 1/8 $ 6 7/8 Second Quarter.............................................. 10 1/4 6 15/16 Third Quarter............................................... 7 13/16 4 5/32 Fourth Quarter.............................................. 7 5/8 3 9/16 FISCAL YEAR ENDED DECEMBER 31, 1999 First Quarter............................................... $ 7 $ 3 1/4 Second Quarter.............................................. 12 7/8 3 1/2 Third Quarter (through July 20, 1999)....................... 12 8 5/8
On July 14, 1999, the last full day of trading before the public announcement of the execution of the Merger Agreement, the reported last sale price of the Shares on the Nasdaq National Market was $11 1/2 per Share. On July 20, 1999, the last full day of trading before the commencement of the Offer, the reported last sale price of the Shares on the Nasdaq National Market was $8 25/32 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "Form 10-K"), the Company has not paid cash dividends on Common Stock to date and does not plan to pay cash dividends to its stockholders in the foreseeable future. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. MARKET FOR SHARES. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in the Nasdaq National Market (the top tier market of The Nasdaq Stock Market). According to published guidelines for the Nasdaq National Market, the Shares might no longer be eligible for quotation on the Nasdaq National Market if, among other things, (1) either (a) the number of Shares publicly held was fewer than 750,000, there were fewer than 400 holders of round lots, the aggregate market value of publicly held Shares was less than $5,000,000, net tangible assets were less than $4,000,000 and there were fewer than two registered and active market makers for the Shares, or (b) the number of Shares publicly held was fewer than 1,100,000, there were fewer than 400 holders of round lots and the aggregate market value of publicly held Shares was less than $15,000,000, (2) either (a) the Company's market capitalization was less than $50,000,000 or (b) the total assets and total revenue of the Company for the most recently completed fiscal year or two of the last three most recently completed fiscal years was less than $50,000,000 or 9 12 (3) there were fewer than four registered and active market makers. If these standards are not met, the Shares might nevertheless continue to be included in The Nasdaq Stock Market with quotations published in the Nasdaq "additional list" or in one of the "local lists," but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting and The Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to the Company, as of July 14, 1999, there were approximately 650 holders of record of Shares (including one holder in "street name" representing approximately 5,240 stockholders) and 7,040,930 Shares were outstanding. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements of the NASD for continued inclusion in The Nasdaq Stock Market or the Nasdaq National Market, as the case may be, the market for Shares could be adversely affected. If the Shares no longer meet the requirements of the NASD for quotation through any tier of The Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would depend, however, upon the number of holders of Shares remaining at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. EXCHANGE ACT REGISTRATION. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the shortswing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, may be impaired or eliminated. The Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If registration of the Shares is not terminated prior to the Merger, then the Shares will cease to be reported on The Nasdaq Stock Market and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. MARGIN REGULATIONS. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a Delaware corporation with its principal executive offices at 50 Hall Road, Sturbridge, Massachusetts 01566. According to the Form 10-K, the Company operates through two wholly owned subsidiaries, 10 13 SpecTran Communication Fiber Technologies, Inc. ("SpecTran Communication") and SpecTran Specialty Optics Company ("SpecTran Specialty"). The Company, through its subsidiary SpecTran Communications, develops, manufactures and markets multimode and single-mode optical fiber for data communications and telecommunications applications and through its subsidiary SpecTran Specialty, develops, manufactures and markets specialty multimode and single-mode fiber and value-added fiber optic products for industrial, military/aerospace, communication and medical applications. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries excerpted or derived from the information contained in the Form 10-K or the Company's Form 10-Q for the quarter ended March 31, 1999. More comprehensive financial information is included in those reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to those reports and such other documents and all the financial information (including any related notes) contained therein. Those reports and such other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information." 11 14 SPECTRAN CORPORATION AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, ------------------ ------------------ 1999 1998 1998 1997 ------- ------- ------- ------- (UNAUDITED) STATEMENT OF INCOME DATA: Net sales......................................... $20,380 $15,112 $70,856 $62,057 Cost of sales..................................... 15,059 10,001 51,976 38,781 ------- ------- ------- ------- Gross profit.................................... 5,321 5,111 18,880 23,276 Selling and administrative expenses............... 3,082 3,134 13,818 13,966 Research and development costs.................... 755 1,176 5,493 3,289 ------- ------- ------- ------- Income (loss) from operations..................... 1,484 801 (431) 6,021 ------- ------- ------- ------- Other income (expense) Interest income................................. 28 114 224 1,372 Interest expense................................ (736) (124) (1,419) (747) Other net....................................... (12) 842 3,372 510 ------- ------- ------- ------- Other income (expense), net..................... (720) 832 2,177 1,090 ------- ------- ------- ------- Income before income taxes and equity in joint venture......................................... 764 1,633 1,746 7,111 Loss from joint venture........................... (382) (252) (974) (287) ------- ------- ------- ------- Income before income taxes........................ 382 1,381 772 6,842 Income tax expense................................ 149 517 249 1,982 ------- ------- ------- ------- Net income........................................ 233 864 523 4,842 ------- ------- ------- ------- Other comprehensive income (loss)................. -- (11) (11) (6) ------- ------- ------- ------- Comprehensive income.............................. $ 233 $ 853 $ 512 $ 4,826 ------- ------- ------- ------- Net earnings per common share Basic........................................... $ .03 $ .12 $ .07 $ .72 Diluted......................................... $ .03 $ .12 $ .07 $ 68
AT MARCH 31, AT DECEMBER 31, ------------ ------------------- 1999 1998 1997 ------------ -------- ------- (UNAUDITED) BALANCE SHEET DATA Total current assets...................................... $ 30,201 $ 26,106 $27,400 Investment in joint venture(1)............................ 2,857 3,239 4,213 Property, plant and equipment, net........................ 67,851 68,495 55,407 Total assets.............................................. 108,234 105,419 92,105 Long-term debt............................................ 31,800 30,800 24,000 Total stockholders' equity................................ 57,545 57,312 56,759
- --------------- (1) On June 30, 1999, the Company sold its interest in its joint venture with General Cable Corporation, General Photonics, LLC, to BICC General Cable Industries, Inc. for $2,367,200. General Photonics, LLC, which is a manufacturer of optical fiber cables, was formed by the Company and General Cable Corporation in 1996. 12 15 AVAILABLE INFORMATION. The Company is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located in the Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be obtainable, by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Such reports, proxy and information statements and other information may be found on the Commission's web site, the address of which is: http://www.sec.gov. Such information should also be on file at The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or based upon publicly available documents on file with the Commission and other publicly available information. Although the Purchaser and Parent do not have any knowledge that any such information is untrue, neither the Purchaser nor Parent takes any responsibility for the accuracy or completeness of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT. The Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, was organized to acquire the Company and has not conducted any unrelated activities since its organization. The principal offices of the Purchaser are located at 600 Mountain Avenue, Murray Hill, New Jersey, 07974. All outstanding shares of capital stock of the Purchaser are owned by Parent. Parent designs, builds and delivers a wide range of public and private networks, communications systems and software, data networking systems, business telephone systems and microelectronic components. Parent is a global leader in the sale of public communications systems, and is a supplier of systems or software to most of the world's largest network operators. Parent is also a global leader in the sale of business communications systems and in the sale of microelectronic components for communications applications to manufacturers of communications systems and computers. Parent conducts its research and development activities through Bell Laboratories, one of the world's foremost industrial research and development organizations. Parent is a Delaware corporation with its principal offices located at 600 Mountain Avenue, Murray Hill, New Jersey, 07974. Financial information with respect to Parent and its subsidiaries is included in Parent's Annual Report on Form 10-K for the fiscal year ended September 30, 1998, as amended by Amendment No. 1 thereto filed on Form 10-K/A on May 17, 1999, Parent's Quarterly Reports on Form 10-Q for the quarters ended December 31, 1998 and March 31, 1999, Parent's Form 8-K filed on January 8, 1999, Parent's Form 8-K filed on March 5, 1999 as amended by Amendment 1 thereto filed on Form 8-K/A on May 18, 1999, Parent's Form 8-K filed on June 28, 1999 and other documents filed by Parent with the Commission. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information." Neither the Purchaser nor Parent (together, the "Corporate Entities") or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I or any associate or majority-owned subsidiary of the Corporate Entities or any of the persons so listed, beneficially owns any equity security of the Company, and none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the other persons 13 16 referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Except as described in this Offer to Purchase, (1) there have not been any contacts, negotiations or transactions between the Corporate Entities, any of their respective subsidiaries or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I, on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the Commission and (2) none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Company. Except as described in this Offer to Purchase, during the last five years, none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I (1) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (2) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. The name, business address, present principal occupation or employment, five-year employment history and citizenship of each of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I. AVAILABLE INFORMATION. Parent is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, stock options granted to them, the principal holders of Parent's securities and any material interest of such persons in transactions with Parent is disclosed in proxy statements distributed to Parent's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the Commission, and copies thereof should be obtainable from the Commission, in the same manner as set forth with respect to information concerning the Company in Section 8. Such material should also be available for inspection at the library of the NYSE, 20 Broad Street, New York, New York 10005. 10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay fees and expenses related to the Offer and the Merger is estimated to be approximately $64.2 million. The Purchaser plans to obtain all funds needed for the Offer and the Merger through a capital contribution which will be made by Parent to the Purchaser. Parent intends to provide to the Purchaser the funds required to consummate the Offer and the Merger from its available cash, which includes revenues from customers and the proceeds of short-term commercial paper issued to finance current assets. Parent generally repays commercial paper out of cash flow generated by Parent from operations and through the issuance of equity or long-term debt when advantageous opportunities arise. 11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER. The Company has a long-standing relationship with Parent both as a supplier of optical fiber to Parent and a licensee of technology from Parent. SUPPLY RELATIONSHIP WITH THE COMPANY. The Company and Parent have a three-year supply agreement (the "Supply Agreement") terminating December 31, 1999, under which Parent is required to make certain annual minimum purchases of optical fiber. Parent has satisfied its minimum annual purchase obligations under the Supply Agreement through and including 1999. In 1998, Parent purchased quantities of optical fiber in excess of the required annual minimum. For the calendar years ending December 31, 1998 and 1997, Parent purchased from the Company approximately $26.0 million and $6.6 million, respectively, of optical fiber. 14 17 From January 1, 1999 through June 30, 1999, Parent purchased from the Company approximately $9.5 million of optical fiber. In the fall of 1998, the Company and Parent's Network Products Group had discussions regarding the quantities of optical fiber Parent would need in the future. The Company was invited to respond to a request for quotes regarding Parent's optical fiber needs for 1999 along with two other bidders. The Company's bid was above the two other bidders and the Company was invited to rebid but the Company's bid continued to remain above that of the two other bidders. Parent continued to purchase under the Supply Agreement during the first two calendar quarters of 1999. On June 1, 1999, Parent advised the Company that, due to excess inventories, Parent would decrease significantly the amount of optical fiber it would purchase from the Company for the remainder of the year. On June 17, 1999, a representative of Parent informed a representative of Lazard that Parent had completed its purchases of optical fiber from the Company for the year. LICENSE AGREEMENTS WITH THE COMPANY. The Company has been a licensee of Parent's and its predecessor company's optical fiber patents since 1981. Between mid-1997 and October 30, 1998, the Company and Parent discussed the possibility of entering into an additional patent license agreement. On October 30, 1998, the Company and Parent established a new worldwide, non-exclusive license exchanging rights under their optical fiber patents issued prior to January 1, 1998 and additional patents related to multimode fiber based on applications filed through October 1998. The Company is licensed by Parent to make optical fiber at its existing factories for worldwide use, sale and export from the United States. The license contains some product limitations including certain exclusions to make or sell select specialty fibers for some applications. Parent receives non-exclusive, royalty-free worldwide rights to the licensed Company patents. The Company agreed to pay Parent a $4.0 million license fee in installments and, beginning in 2000, a royalty on sales. On January 31, 1999, the Company paid the first license fee installment of $750,000 and will be making a further $500,000 payment on July 31, 1999. An additional $1.0 million is due in 2000, $1.0 million in 2001 and $750,000 in 2002. Parent has the right to terminate the agreement if the Company is acquired by an optical fiber manufacturer. For the six months ended June 30, 1999, the Company made no royalty payments to Parent. For the fiscal years ending December 31, 1998, 1997 and 1996, the Company made aggregate royalty payments to Parent of approximately $60,000, $890,000 and $760,000, respectively. All such royalty payments were in respect of sales by SpecTran Communication. MERGER NEGOTIATIONS WITH THE COMPANY. In early 1999, Parent's Network Products Group was contacted by Mr. Charles B. Harrison, President, Chief Executive Officer and Chairman of the Board of the Company, as part of an auction process conducted by Lazard, the Company's investment bank. Mr. Harrison met with Mr. Denys Gounot, Chief Operating Officer of Parent's Network Products Group, and Mr. Robert Mohalley, Strategy Vice President for Parent's Network Products Group, at Parent's Network Products Group's offices in Atlanta, Georgia on February 1, 1999. The parties signed a non-disclosure agreement on March 5, 1999. On March 24 and 25, 1999, representatives of Parent's Network Products Group met at the Company's offices with Mr. Harrison, Mr. John Chapman, President of SpecTran Communication, Mr. Martin Siefert, President of SpecTran Specialty, and other managers of the Company, to review the Company and gather initial due diligence information. On April 20, 1999, Lazard, on behalf of the Company, corresponded with Parent's Network Products Group to formally invite participation in an auction of the Company and to forward to Parent the Offering Memorandum of the Company. Parent informed Lazard that it was not going to submit a proposal, but that, under the right circumstances, Parent might be interested in pursuing a supply agreement with the Company. On May 10, 1999, Mr. Mohalley sent the Company a letter stating that upon further review Parent might be interested in pursuing a transaction. On May 11, 1999, during a telephone conversation, Mr. Mohalley 15 18 asked Mr. Harrison for at least an additional two weeks to conduct more due diligence before submitting an indication of interest letter. On May 17 and 18, 1999, representatives of Parent, including Mr. Terence Bentley, Director Corporate Development of Parent, and Mr. Richard Sullivan, Network Products Group Director Business Development of Parent, visited the Company's headquarters in Sturbridge, Massachusetts to conduct a preliminary due diligence review of the Company. Messrs. Bentley and Sullivan also met with Messrs. Harrison, Chapman, Siefert, and George Roberts, Chief Financial Officer of the Company, to discuss a potential acquisition by Parent of the Company. Due diligence by Parent continued throughout May and June. On June 14, 1999, Mr. William Spivey, President of Parent's Network Products Group, Mr. Gounot and Mr. Bentley visited the Company's manufacturing facilities and met with managers of the Company. On June 15, 1999, senior officers of Parent met and, after being briefed, approved formal negotiation relating to the purchase of the Company. Mr. Bentley indicated to Mr. Harrison of the Company that Parent would be willing to offer $8.00 per Share in cash, subject to due diligence. Parent and the Company executed a revised non-disclosure agreement on June 22, 1999. On June 16 and 17, 1999, representatives of Parent, including Mr. Bentley, the Company and Lazard had discussions regarding the form of consideration, the structure of the transaction and other material terms relating to the transaction, including human resources and real estate matters. On June 17, 1999, Parent submitted a non-binding proposal to acquire the Company for between $8.00 and $8.75 per Share. On Monday, June 21, 1999, Mr. Bentley and Mr. Harrison met in Murray Hill, New Jersey, to discuss various acquisition structures. Negotiations with respect to structure, prices, form of consideration and other material terms continued throughout the morning. Mr. Bentley indicated that Parent would be willing to increase its previous proposal to $9.00 per Share in cash but did not want to pursue a stock transaction. On the evening of June 21, 1999, the board of directors of the Company met by conference telephone call (one director was unavailable) and discussed Mr. Harrison's report of his meeting with Parent. The Board directed Mr. Harrison to discuss a possible stock transaction again with Mr. Bentley. On the morning of June 22, 1999, Mr. Harrison spoke with Mr. Bentley and reported that the Company's board of directors strongly preferred a stock transaction. Mr. Bentley reiterated that Parent would not agree to a stock transaction but would be interested in pursuing a $9.00 per Share cash transaction. On June 22, 1999 at 5:00 p.m., the board of directors of the Company met and was updated by Mr. Harrison. The Board reiterated its interest in a stock transaction. The board directed Mr. Harrison to attempt again to ascertain whether Parent would be willing to acquire the Company for stock, but also authorized Mr. Harrison to proceed with discussions regarding a cash transaction for $9.00 per Share or higher. Later that evening Mr. Harrison raised the matter of a stock transaction again with Mr. Bentley. On June 23, 1999, Mr. Bentley informed Mr. Harrison that Parent was strongly disinclined to enter into a stock transaction for a number of reasons, including additional cost and time to complete the acquisition. Mr. Bentley stated that he would consider discussing with Parent's Chief Financial Officer an acquisition of the Company at a per Share price of $8.00 in Parent stock but advised Mr. Harrison that he did not believe such a transaction would be approved and that the environment for obtaining such approval from Parent's senior management was very unfavorable. Mr. Harrison stated he would discuss the matter with the Company's directors and advise Mr. Bentley. Mr. Harrison polled the board and the unanimous sense was to proceed with negotiations for a $9.00 per Share cash transaction. Mr. Harrison so informed Mr. Bentley that same day. On June 28 and June 29, 1999, a due diligence team from Parent visited the Company to meet with management of the Company, to tour the Company's facilities and to continue due diligence. 16 19 From July 1 to July 14, 1999, representatives of Parent conducted further due diligence. These representatives also negotiated the Merger Agreement with representatives of the Company. During the negotiations, the Company requested and Parent agreed to eliminate several measures designed to make it more likely that a transaction would be completed if an agreement were reached, including granting Parent an option to acquire up to 19.9% of the Company's Shares under certain conditions and agreements from officers and directors to tender their Shares and vote in favor of the Merger. The Company also requested, and Parent agreed to, a reduction in the break-up fee payable to Parent in the event the transaction was not completed for certain reasons from $2.5 million to $2.0 million. On July 14, 1999, the board of directors of the Company held a meeting to consider the Offer, the Merger and the Merger Agreement. At the meeting, the board of directors of the Company heard presentations by its legal counsel with respect to the terms of the proposed offer, the Merger and the Merger Agreement, and legal counsel advised the board of directors that the negotiations for the Merger Agreement were substantially complete. The board of directors also heard a presentation by representatives of Lazard with respect to the financial terms of the Offer and the Merger and Lazard's valuation analysis. The board of directors, with the participation of the representatives of Lazard, reviewed again the alternatives for the Company. At the conclusion of the presentation, representatives of Lazard delivered Lazard's oral opinion that, as of the date of the Merger Agreement, the $9.00 in cash per Share to be paid to the stockholders of the Company pursuant to the Offer and the Merger was fair to such stockholders from a financial point of view. Lazard subsequently delivered a written opinion, dated the date of the Merger Agreement, to the same effect. On July 15, 1999, Parent, the Purchaser and the Company executed and delivered the Merger Agreement. Based upon such discussion, presentations and opinion, the Board of Directors of the Company has unanimously approved the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company and unanimously recommends that stockholders of the Company accept the Offer and tender their Shares to the Purchaser pursuant to the terms of the Offer. 12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT. PURPOSE OF THE OFFER. The purpose of the Offer is to enable Parent to acquire control of, and the entire equity interest in, the Company. Following the consummation of the Offer, the Purchaser and Parent intend to acquire any remaining equity interest in the Company not acquired in the Offer by consummating the Merger. The Offer is subject to certain terms and conditions. Notwithstanding anything to the contrary set forth in the Offer to Purchase, any determination concerning the satisfaction of such terms and conditions will be within the reasonable discretion of the Purchaser. THE MERGER AGREEMENT. The Merger Agreement provides that following the satisfaction or waiver of the conditions described below under "Conditions to the Merger," the Purchaser will be merged with and into the Company, and each then outstanding Share (other than Shares (1) owned or held in treasury by the Company, (2) owned by the Purchaser or Parent, (3) remaining outstanding held by any subsidiary of the Company or Parent or (4) owned by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law), will be converted into the right to receive an amount in cash, without interest, equal to the price per Share paid pursuant to the Offer. VOTE REQUIRED TO APPROVE MERGER. The DGCL requires, among other things, that the adoption of any plan of merger or consolidation of the Company must be approved by the board of directors of the Company and, if the "short form" merger procedure described below is not available, by the holders of a majority of the Company's outstanding Shares. The board of directors of the Company has approved the Offer, the Merger and the Merger Agreement; consequently, the only additional action of the Company that may be necessary to effect the Merger is approval by such stockholders if the "short-form" merger procedure described below is not available. Under the DGCL, the affirmative vote of holders of a majority of the outstanding Shares (including any Shares owned by the Purchaser), is generally required to approve the Merger. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least a majority of the outstanding Shares (which would be the case if the Minimum Condition were satisfied and the Purchaser were to accept 17 20 for payment Shares tendered pursuant to the Offer), it would have sufficient voting power to effect the Merger without the vote of any other stockholder of the Company. However, the DGCL also provides that if a parent company owns at least 90% of each class of stock of a subsidiary, the parent company can effect a "short-form" merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if, as a result of the Offer or otherwise, the Purchaser acquires or controls the voting power of at least 90% of the outstanding Shares, the Purchaser could (and, under the Merger Agreement, is required to) effect the Merger using the "short-form" merger procedures without prior notice to, or any action by, any other stockholder of the Company. CONDITIONS TO THE MERGER. The Merger Agreement provides that the respective obligations of Parent, the Purchaser and the Company to consummate the Merger are subject to the satisfaction of each of the following conditions: (1) if required by applicable law, the Merger Agreement having been approved and adopted by the affirmative vote of holders of a majority of the outstanding Shares, (2) no judgment, order, decree, statute, law, ordinance, rule or regulation enacted, enforced or issued by any court or other governmental entity of competent jurisdiction or other legal restraint or prohibition (collectively, "Restraints") shall be in effect, and there shall not be pending any suit, action or proceeding by any governmental entity (a) preventing the consummation of the Merger or (b) which is otherwise reasonably likely to have a material adverse effect on the Company or Parent, as applicable, arising out of the Merger Agreement or the transactions contemplated by the Merger Agreement; provided, that each of the parties shall have used its reasonable best efforts to prevent the entry of any such Restraints and to appeal as promptly as possible any such Restraints that may be entered and (3) the Purchaser shall have previously accepted for payment and paid for the Shares pursuant to the Offer. The obligations of Parent and Purchaser to consummate the Merger are also subject to the fulfilment or satisfaction at or prior to the effective time of the Merger that (1) the Company shall have performed and complied in all material respects with all agreements and conditions contained in the Merger Agreement that are required to be performed or complied with it prior to or at the effective time of the Merger, (2) each of the representations and warranties of the Company contained in the Merger Agreement that are qualified by material adverse effect, shall be true and correct and each of the representations and warranties of the Company to the extent it is not so qualified by material adverse effect, shall be true and correct in all material respects, in each case, on and as of the effective time of the Merger, (3) no event or events shall have occurred that could reasonably be expected to have a material adverse effect on the Company and (4) the Company shall have received all necessary consents or waivers, in form and substance satisfactory to Parent and the Purchaser, from the other parties to each contract, lease or agreement to which the Company is a party, except where the failure to receive such consent would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the Company. The obligations of the Company to consummate the Merger are also subject to the fulfilment or satisfaction at or prior to the effective time of the Merger that (1) Parent and Purchaser shall have performed and complied in all material respects with all agreements and conditions contained in the Merger Agreement that are required to be performed or complied with them prior to or at the effective time of the Merger and (2) each of the representations and warranties of the Purchaser and Parent contained in the Merger Agreement that are qualified by material adverse effect shall be true and correct and each of the representations and warranties of the Purchaser and Parent to the extent it is not so qualified by material adverse effect, shall be true and correct in all material respects, in each case, on and as of the effective time of the Merger. TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated at any time prior to the effective time of the Merger (the "Effective Time"), whether before or after approval and adoption of the Merger Agreement by the stockholders of the Company or the stockholder of Purchaser (provided, that if Shares are purchased pursuant to the Offer, neither Parent nor Purchaser may in any event terminate the Merger Agreement), (1) by the agreement of each of the boards of directors of Parent, the Purchaser and the Company, (2) by Parent, the Purchaser or the Company if (a) the Purchaser has not accepted for payment any Shares pursuant to the Offer prior to December 31, 1999, provided, that the right to terminate the Merger Agreement pursuant to this clause (2)(a) will not be available to any party whose failure to fulfill any 18 21 obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Purchaser to accept for payment any Shares on or before such date, or (b) any court of competent jurisdiction in the United States or other governmental authority shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action has become final and nonappealable, (3) by Parent, if the Company or any of its directors or officers shall participate in discussions or negotiations in breach (other than an immaterial breach) of the covenants of the Company described under "No Solicitation by the Company; Takeover Proposals" in this Section 12, (4) by the Company prior to the meeting of the stockholders of the Company to approve the Merger ("Company Stockholders Meeting") if in response to a takeover proposal which constitutes a Superior Proposal (as defined in "No Solicitation by the Company; Takeover Proposals" in this Section 12 below) which was not solicited by the Company and which did not otherwise result from a breach of the covenants of the Company described under "No Solicitation by the Company; Takeover Proposals" in this Section 12; (5) by the Company, in the event Parent or the Purchaser materially breaches its obligations under the Merger Agreement, unless such breach is cured within 15 days after notice to Parent by the Company, (6) by Parent or the Purchaser, in the event the Company materially breaches its obligations under the Merger Agreement, unless such breach is cured within 15 days after notice to the Company by Parent or the Purchaser, or (7) by Parent or the Purchaser prior to the purchase of Shares pursuant to the Offer in the event of a breach or failure to perform by the Company of any representation, warranty, covenant or other agreement contained in the Merger Agreement which (a) would give rise to the failure of a condition set forth below in paragraph (4) or (5) described below in Section 14 and (b) cannot be cured, or has not been cured within 15 days after the Company receives written notice from Parent of such breach or failure to perform. NO SOLICITATION BY THE COMPANY; TAKEOVER PROPOSALS. The Merger Agreement provides that the Company will not, nor will it permit any of it subsidiaries to, nor will it authorize or permit any of its, directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its subsidiaries to, directly or indirectly, (1) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes a Takeover Proposal (as defined below) or (2) participate in any discussions or negotiations regarding any Takeover Proposal. Notwithstanding the foregoing, if prior to the Company Stockholders Meeting, the board of directors of the Company determines in good faith, after consultation with outside counsel, that it is legally advisable to do so in order to comply with its fiduciary duties to the Company's stockholders under applicable law, the Company, in response to a Superior Proposal (as defined below) which was not solicited by it or which did not result from a breach by the Company of its non-solicitation obligations, and subject to compliance with the Merger Agreement, may furnish information with respect to the Company and its subsidiaries to any person making a Superior Proposal pursuant to a customary confidentiality agreement and participate in discussions or negotiations regarding such Superior Proposal. For purposes of the Merger Agreement, a "Takeover Proposal" means any inquiry, proposal or offer from any person (1) relating to any direct or indirect acquisition or purchase of (a) a business that constitutes 15% or more of the net revenues, net income or the assets of the Company and its subsidiaries, taken as a whole, (b) 20% or more of any class of equity securities of the Company or (c) any material equity interest in any subsidiary of the Company, (2) relating to any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of the Company or any material equity interest in any of its subsidiaries, or (3) relating to any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, other than the transactions contemplated by the Merger Agreement. For purposes of the Merger Agreement, "Superior Proposal" means any proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the Shares then outstanding or all or substantially all the assets of the Company and otherwise on terms which the board of directors of the Company determines in its good faith judgment (based on the advice of a financial advisor of 19 22 nationally recognized reputation) to be more favorable to the Company's stockholders than the Merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the board of directors of the Company, is reasonably capable of being obtained by such third party. The Merger Agreement provides further that neither the board of directors of the Company nor any committee thereof may (1) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by such board of directors or such committee of the Offer, the Merger or the Merger Agreement, (2) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal or (3) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Takeover Proposal other than any such agreement entered into concurrently with the termination of the Merger Agreement by the Company to facilitate such action. See "Termination of the Merger Agreement" in this Section 12. The Merger Agreement provides that the Company must promptly advise Parent orally and in writing of any Takeover Proposal or any request for information by any person which the Company reasonably believes is in connection with the preparation of a Takeover Proposal, the material terms and conditions of the Takeover Proposal or the information requested by the person making the request and the identity of the person making the Takeover Proposal or request for information. The Company must promptly inform Parent of any change in the status and material terms and conditions (including amendments or proposed amendments) of any such Takeover Proposal or request for information. The Merger Agreement provides that nothing contained therein will prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if, in the good faith judgment of the board of directors of the Company, after consultation with outside counsel, failure so to disclose would be inconsistent with its obligations under applicable law; provided, that, except as expressly permitted by the Merger Agreement, neither the Company nor its board of directors nor any committee thereof may withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Offer, the Merger Agreement or the Merger or approve or recommend, or propose to approve or recommend, a Takeover Proposal. FEES AND EXPENSES; TERMINATION FEE. The Merger Agreement provides that all fees and expenses incurred in connection with the Offer, the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement will be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated except that each of Parent and the Company shall bear and pay one-half of (1) the cost and expenses incurred in connection with the filing, printing and mailing of any proxy statement of the Company in connection with any meeting of the stockholders of the Company to approve the merger (including Commission filing fees) and (2) the filing fees for the pre-merger notification and report forms under the HSR Act. The Merger Agreement provides that the Company shall pay in same day funds to Parent $2,000,000 under the circumstances and terms set forth below: (1) A bona fide Superior Proposal shall have been made directly to the stockholders of the Company generally or shall have otherwise become publicly known or any Person shall have publicly announced an intention (whether or not conditional) to make a Superior Proposal and thereafter the Merger Agreement is terminated by any of Parent, the Purchaser or the Company because the Purchaser shall not have accepted for payment any Shares pursuant to the Offer prior to December 31, 1999, provided that the $2,000,000 is only payable to Parent if, within twelve months of the termination of the Merger Agreement, the Company or any of its subsidiaries enters into any definitive agreement with respect to, or consummates, any Superior Proposal; (2) The Merger Agreement is terminated by Parent or the Purchaser prior to the purchase of Shares pursuant to the Offer in the event of a breach or a failure to perform by the Company of any representation, warranty, covenant or other agreement contained in the Merger Agreement which (a) would give rise to a failure of condition (4) or (5) as set forth below in Section 14 and (b) cannot be 20 23 cured, or has not been cured within 15 days after the Company receives written notice from Parent of such breach or failure to perform; (3) The Merger Agreement is terminated by the Company prior to the Company Stockholder Meeting in response to a Superior Proposal which was not solicited by the Company and which does not otherwise result from a breach of the non-solicitation covenants of the Company described above under "No Solicitation by the Company; Takeover Proposals" in this Section 12; or (4) The Merger Agreement is terminated by Parent because the Company or any of its directors or officers participated in discussions or negotiations in breach (other than an immaterial breach) of the Company's covenants described under "No Solicitation by the Company; Takeover Proposals" in this Section 12. CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that until the consummation of the Merger, the Company will (and will cause each of its Subsidiaries to): (1) maintain its existence in good standing; (2) maintain the general character of its business and properties and conduct its business in the ordinary and usual manner consistent with past practices, except as expressly permitted by the Merger Agreement; (3) maintain business and accounting records consistent with past practices; and (4) use its reasonable best efforts (a) to preserve its business intact, (b) to keep available to the Company the services of its present officers and employees and (c) to preserve for the Company or such subsidiary the goodwill of its suppliers, customers and others having business relations with the Company or such subsidiary. In addition, the Merger Agreement provides that unless provided for in the Merger Agreement or approved by Parent in writing, until the consummation of the Merger, the Company will not (and will not permit any of its Subsidiaries to): (1) amend or otherwise change its certificate of incorporation or by-laws; (2) issue or sell or authorize for issuance or sale (other than any issuance of Common Stock upon the exercise of any outstanding option or warrant to purchase Common Stock which option or warrant was issued prior to the date of the Merger Agreement in accordance with the terms of the relevant stock option or warrant agreement), or grant any options or warrants or make other agreements with respect to, any shares of its capital stock or any other of its securities or warrants; (3) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise with respect to any of its capital stock; (4) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (5) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except (a) short-term borrowings (including borrowings under the Company's existing line of credit with Fleet National Bank) incurred in the ordinary course of business (or to refinance existing or maturing indebtedness) and (b) intercompany indebtedness between the Company and any of its subsidiaries or between subsidiaries; (6) (a) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any corporation, partnership, other business organization or any division thereof or any material amount of assets; (b) enter into any contract or agreement other than in the ordinary course of business, consistent with past practice; (c) authorize any capital commitment which is in excess of $50,000 or capital expenditures which are, in the aggregate, in excess of $100,000, except as otherwise disclosed in 21 24 the Merger Agreement; or (d) enter into or amend any contract, agreement, commitment or arrangement with respect to any of the foregoing matters described in these clauses (5) and (6); (7) mortgage, pledge or subject to lien, any of its assets or properties or agree to do so except for liens permitted by the Merger Agreement; (8) sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its properties or assets (including securitizations), other than sales or licenses of finished goods in the ordinary course of business consistent with past practice; (9) assume, guarantee or otherwise become responsible for the obligations of any other person or agree to so do; (10) enter into or agree to enter into any employment agreement; (11) except as otherwise disclosed in the Merger Agreement, take any action, other than in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivables); (12) make any tax election or settle or compromise any material federal, state, local or foreign income tax liability; (13) settle or compromise any pending or threatened suit, action or claim which is material or which relates to any of the transactions contemplated by the Merger Agreement; (14) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the most recently audited balance sheet contained in documents of the Company filed with the Commission or subsequently incurred in the ordinary course of business and consistent with past practice; (15) except in connection with the sale of the Company's products in the ordinary course of business and consistent with past practice, sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of the Company's intellectual property rights; (16) except as required by law or contemplated hereby, enter into, adopt or amend in any material respect or terminate any Company benefit plan or any other agreement, plan or policy involving the Company or its subsidiaries, and one or more of its directors, officers or employees, or materially change any actuarial or other assumption used to calculate funding obligations with respect to any pension plan, or change the manner in which contributions to any pension plan are made or the basis on which such contributions are determined; (17) except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not materially increase benefits or compensation expenses of the Company or its subsidiaries, or as contemplated by the Merger Agreement or by the terms of any employment agreement in existence on the date of the Merger Agreement, increase the cash compensation of any director, executive officer or other key employee or pay any benefit or amount not required by a plan or arrangement as in effect on the date of the Merger Agreement to any such Person; or (18) announce an intention, commit or agree to do any of the foregoing. BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment for, Shares by the Purchaser pursuant to the Offer, the Purchaser will be entitled to designate such number of directors on the board of directors of the Company as will give the Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Company's board of directors equal to the product of (1) the total number of directors on the Company's board of directors and (2) the percentage that the number of Shares purchased by the Purchaser in the Offer bears to the number of Shares outstanding, and the Company will, at such time, cause the Purchaser's designees to be selected by its existing 22 25 board of directors. Subject to applicable law, the Company has agreed to take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Merger Agreement further provides that in the event that the Purchaser's designees are elected to the board of directors of the Company, until the effective time of the Merger, the board of directors of the Company will have at least two independent directors who were directors on the date of the Merger Agreement and who are not officers of the Company or any of its subsidiaries. The Merger Agreement also provides that the Company will promptly, at the option of Parent, either increase the size of the Company's board of directors and/or obtain the resignation of such number of its current directors as is necessary to enable the Purchaser's designees to be elected or appointed to, and to constitute a majority of, the Company's board of directors as provided above. STOCK OPTIONS; WARRANTS. The Merger Agreement provides that the board of directors of the Company (or, if appropriate, any committee administering the Company stock plans) will adopt such resolutions and take such other actions as may be required to terminate the Company stock plans as of the effective time of the Merger and each then outstanding Company stock option granted under the Company stock plans, whether vested or unvested, will be cancelled and converted into a right to receive an amount in cash, without interest, equal to the product of (1) the number of shares of Common Stock represented by such Company stock option immediately prior to such cancellation and conversion multiplied by (2) the excess, if any, by which the Offer Price exceeds the exercise price per share with respect to such Company stock option (such payment to be net of all applicable federal, state, local or foreign taxes). Prior to the effective time of the Merger, the Company will obtain all necessary consents from, and provide (in a form acceptable to Parent) any required notices to, holders of Company stock options and amend the terms of the Company stock plans, in each case, as is necessary to give effect to the immediately preceding sentence. The Merger Agreement also provides that, prior to the effective time of the Merger, the Company will take all actions to receive from each holder of an outstanding warrant to purchase shares of Common Stock an agreement that, as of the effective time of the Merger, such warrant will be converted into a right of such holder to receive from the Depositary the consideration set forth in the next sentence at the same time that each such holder is entitled to receive payment for shares of Common Stock from the Surviving Corporation in connection with the Merger. Each holder of a warrant will be entitled to receive from the Depositary in respect of the shares of Common Stock to be issued upon the exercise of such warrant, an amount in cash, without interest, equal to the product of (1) the number of shares of Common Stock subject to such warrant immediately prior to the effective time of the Merger and (2) the excess, if any, by which the Offer Price exceeds the exercise price per share that was applicable with respect to such warrant. EMPLOYEE MATTERS. The Merger Agreement provides that as soon as practicable after the Merger, Parent will provide, or cause to be provided, employee benefit plans, programs and arrangements to employees of the Company that are the same as those made generally available to non-represented employees of Parent who are hired by Parent after December 31, 1998. Until then, Parent will provide, or cause to be provided, the employee benefit plans, programs and arrangements of the Company provided to employees of the Company as of the date of the Merger Agreement. The Merger Agreement also provides that with respect to each benefit plan, program practice, policy or arrangement maintained by Parent in which employees of the Company subsequently participate, for purposes of determining vesting and entitlement to benefits, including for severance benefits and vacation entitlement (but not for accrual of pension benefits), service with the Company (or predecessor employers to the extent the Company provides past service credit) will be treated as service with Parent, provided, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any pre-existing condition limitations. Each Parent plan will waive pre-existing condition limitations to the same extent waived under the applicable Company benefit plan. Company employees will be given credit for amounts paid under a corresponding benefit plan during the same period for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Parent plan. 23 26 The Merger Agreement provides that, prior to the Merger, the Company shall take all necessary actions or agreements to terminate the retirement plan for employees of the Company in accordance with its terms. The effective date of such termination will in no event be later than the effective time of the Merger. Prior to such termination, the Company shall file with respect thereto a determination letter application on Form 5310 with the IRS. In connection with such termination, the assets of such plan (including any excess assets), net of expenses, will be allocated among participants based on the accrued benefit obligation. The Merger Agreement also provides that prior to the Merger, the Company will terminate its supplemental retirement agreements. In connection therewith, accrued benefits will be paid to each participant in such plan in accordance with the procedures described in each such supplemental retirement agreement. Also prior to the Merger, the Company will terminate its retirement plan for outside directors in accordance with the terms of such plan. In connection therewith, accrued benefits will be paid to each participant in the retirement plan in accordance with the procedures described in that plan. INDEMNIFICATION. From and after the consummation of the Offer, Parent will, or will cause the Surviving Corporation to, fulfill and honor in all respects the obligations of the Company to indemnify each person who is or was a director or officer (an "Indemnified Party") of the Company or any of its subsidiaries pursuant to any indemnification provision of the Company's certificate of incorporation or by-laws as each is in effect on the date of the Merger Agreement. In addition, the Merger Agreement provides that, for a period of six years after the consummation of the Offer, Parent shall cause to be maintained in effect the current officers' and directors' liability insurance maintained by the Company with respect to the Indemnified Parties (provided that Parent may elect either (1) to require the Company to obtain prior to the Merger coverage of the type contemplated by section 10 of the Company's existing directors, officers and corporate liability insurance policy or (2) to substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are no less advantageous to the Indemnified Parties than such existing insurance) covering acts or omissions occurring prior to the effective time of the Merger. REASONABLE BEST EFFORTS. Upon the terms and subject to the conditions set forth in the Merger Agreement, Parent, the Purchaser and the Company have each agreed to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with each other in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other transactions contemplated by the Merger Agreement, including (1) the taking of all reasonable acts necessary to cause the conditions of the Offer to be satisfied, (2) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from governmental entities and the making of all necessary registrations and filings and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental entity, (3) the obtaining of all necessary consents, approvals or waivers from third parties, (4) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the transactions contemplated by the Merger Agreement, including seeking to have any stay or temporary restraining order entered by any court or other governmental entity vacated or reversed, and (5) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, the Merger Agreement. In connection with and without limiting the foregoing, but subject to the terms and conditions of the Merger Agreement, the Company and its board of directors will (1) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement, and (2) if any state takeover statute or similar statute or regulation becomes applicable to the Offer, the Merger, the Merger Agreement or any other transaction contemplated by the Merger Agreement, take all action necessary to ensure that the Offer, the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement may be consummated as promptly as practicable on the terms contemplated by the Offer and the Merger Agreement and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement. The Merger Agreement further provides that the Company will give prompt notice to Parent, and Parent will give prompt notice to the Company, of (1) the occurrence, or non-occurrence, of any event which would 24 27 be likely to cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate in any material respect or any covenant, condition or agreement contained in the Merger Agreement not to be complied with or satisfied or (2) any failure of the Company, Parent or the Purchaser to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement; provided that no such notification will limit or otherwise affect the remedies available to the party receiving the notice. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties. The foregoing summary of the Merger Agreement is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as Exhibit (c)(1) to the Purchaser's Tender Offer Statement on Schedule 14D-1 filed with the Commission on the date hereof (the "Schedule 14D-1") and incorporated by reference herein. The Merger Agreement should be read in its entirety for a more complete description of the matters summarized above. APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. If the statutory procedures were complied with, such rights could lead to a judicial determination of the fair value required to be paid in cash to such dissenting holders for their Shares. In determining the fair value of the Shares, the court is required to take into account all relevant factors. Accordingly, any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price or the market value of the Shares, including the asset value and investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his right to appraisal, as provided in the DGCL, the Shares of such stockholder will be converted into the Merger Consideration in accordance with the Merger Agreement. The foregoing discussion is not a complete statement of law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any applicable Federal law operative at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority stockholders be filed with the Commission and disclosed to minority stockholders prior to consummation of the Merger. OTHER MATTERS. Except as otherwise described in this Offer to Purchase, the Purchaser and Parent have no current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company or any of its subsidiaries, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, any change in the present board of directors of the Company or management of the Company, any material change in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. 13. DIVIDENDS AND DISTRIBUTIONS. Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the next paragraph, and nothing herein shall constitute a waiver by the Purchaser or 25 28 Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If, on or after the date of the Merger Agreement, any stock split, combination, reclassification or stock dividend with respect to the outstanding Shares, any change or conversion of outstanding shares of Common Stock into other securities or any other dividend or distribution with respect to the outstanding Shares should occur, appropriate and proportionate adjustments shall be made to the Merger Consideration. 14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (1) the Minimum Condition shall have been satisfied and (2) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. Furthermore, the Purchaser will not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may, in accordance with the provisions of the Merger Agreement described in the subsection entitled "Termination of the Merger Agreement" in Section 12 above, terminate the Merger Agreement or amend the Offer with the consent of the Company, if, upon the scheduled expiration date of the Offer (as extended, if required, pursuant to the provisions discussed in the fifth paragraph of Section 1 above), any of the following conditions exists and is continuing and does not result principally from the breach by Parent or the Purchaser of any of their obligations under the Merger Agreement: (1) there shall be instituted or pending by any governmental entity any suit, action or proceeding (a) challenging the acquisition by Parent or the Purchaser of any Shares under the Offer, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement or seeking to obtain from the Company, Parent or the Purchaser any damages that are material in relation to the Company and its subsidiaries as a whole, (b) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of Parent's subsidiaries of all or a portion of the business or assets of the Company or Parent and its subsidiaries, taken as a whole, or to compel the Company or Parent and its subsidiaries to dispose of or hold separate all or a portion of the business or assets of the Company or Parent and their subsidiaries, taken as a whole, in each case as a direct result of the Offer or any of the other transactions contemplated by the Merger Agreement, (c) seeking to impose material limitations on the ability of Parent or the Purchaser to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer, including, without limitation, the right to vote such Shares on all matters properly presented to the stockholders of the Company, (d) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any material respect any material portion of the business or operations of the Company, (e) that could reasonably be expected to require the divestiture by Parent or the Purchaser of Shares, in the case of any of the foregoing in clauses (b), (c) or (d), which could reasonably be expected, individually or in the aggregate, to have a material adverse effect on the businesses of the Company and its subsidiaries, or (f) that could reasonably be expected to result in a material adverse effect on the Company or Parent; (2) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, by any governmental entity or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that would result in any of the consequences referred to in clauses (a) through (f) of paragraph (1) above; (3) there shall have occurred any events or changes which have had or which could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company; 26 29 (4) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case, at the date of the Merger Agreement and at the scheduled or extended expiration of the Offer; (5) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under the Merger Agreement, which failure to perform or comply cannot be cured, or has not been cured within 15 business days after the Company receives written notice from Parent of such breach or failure to perform; (6) the Merger Agreement shall have been terminated in accordance with its terms; (7) any consent (other than the filing of the Certificate of Merger or Company Stockholder Approval if required by the DGCL) required to be filed, occurred or been obtained by the Company or any of its Subsidiaries in connection with the execution and delivery of the Merger Agreement, the Offer and the consummation of the transactions contemplated by the Merger Agreement shall not have been filed or obtained or shall not have occurred, except where the failure to obtain such consent could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company; (8) the Company's board of directors (a) shall have withdrawn, or modified or changed in a manner adverse to Parent or the Purchaser (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement or the Merger, (b) shall have recommended a Superior Proposal, (c) shall have adopted any resolution to effect any of the foregoing or (d) upon request of Parent or the Purchaser, shall fail to reaffirm its approval of recommendation of the Offer, the Merger Agreement or the Merger; or (9) any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act), other than Parent, the Purchaser or their affiliates or any group of which any of them is a member, shall have acquired or announced its intention to acquire beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the Shares; and, in the good faith judgment of Parent or the Purchaser, in its sole discretion, make it inadvisable to proceed with such acceptance of Shares for payment or the payment therefor. The Merger Agreement provides that the foregoing conditions are for the sole benefit of Parent and the Purchaser and (except for the Minimum Condition), subject to the terms of the Merger Agreement, may be waived by Parent and the Purchaser in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS. Based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, neither the Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action, except as otherwise described in this Section 15, by any governmental entity that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Parent currently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws". Except as otherwise expressly described in this Section 15, while the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other 27 30 action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places or business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law, and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders; provided that such laws were applicable only under certain conditions. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined generally as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) unless, among other things, the corporation's board of directors has given its prior approval to either the business combination or the transaction which resulted in the stockholder becoming an "interested stockholder." The Company's board of directors has approved the Merger Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore, Section 203 of the DGCL is inapplicable to the Offer and the Merger. Based on information supplied by the Company, the Purchaser does not believe that any other state takeover statutes purport to apply to the Offer, the Merger or the Merger Agreement. Neither the Purchaser nor Parent has currently complied with any state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer, the Merger or the Merger Agreement and nothing in this Offer to Purchase or any action taken in connection with the Offer, the Merger or the Merger Agreement is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer, the Merger or the Merger Agreement and if an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Merger or the Merger Agreement, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, the Purchaser may not be obliged to accept for payment or pay for any Shares tendered pursuant to the Offer. ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. Parent is in the process of making such filing. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from Parent concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. 28 31 The Merger would not require an additional filing under the HSR Act if the Purchaser owns 50% or more of the outstanding Shares at the time of the Merger or if the Merger occurs within one year after the HSR Act waiting period applicable to the Offer expires or is terminated. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's purchase of Shares pursuant to the Offer, the Antitrust Division or FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of Parent or its subsidiaries, or the Company or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the results thereof. LITIGATION. After the announcement of the Merger Agreement by Parent and the Company on July 15, 1999, two putative class action lawsuits relating to the Merger were filed in the Court of Chancery for the State of Delaware: Chase v. Harrison et. al., C.A. No. 17312-NC and Airmont Plaza Associates et. al. v. SpecTran Corporation et. al., C.A. No. 17314-NC. The lawsuits were filed by plaintiffs claiming to be stockholders of the Company, purportedly on behalf of all the Company's stockholders, against the Company, members of the board of directors of the Company and Parent. The plaintiffs in both lawsuits allege, among other things, that the terms of the proposed Merger were not the result of an auction process or active market check, that the $9.00 per share price offered by Parent is inadequate, and that the Company's directors breached their fiduciary duties to the stockholders of the Company in connection with the Merger Agreement. Both lawsuits seek to have the Merger enjoined or, if the Merger is completed, to have it rescinded and to recover unspecified damages, fees and expenses. The Company and Parent intend to vigorously oppose these lawsuits. 16. FEES AND EXPENSES. The Purchaser has retained Morrow & Co., Inc. to act as the Information Agent and The Bank of New York to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the Federal securities laws. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Information Agent and the Depositary) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding materials to their customers. 17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Neither the Purchaser or Parent is aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser will amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. 29 32 The Purchaser or Parent has filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. In addition, the Company has filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Sections 8 and 9 (except that they will not be available at the regional offices of the Commission). SEATTLE ACQUISITION INC. July 21, 1999 30 33 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Parent are set forth below. Unless otherwise indicated, the business address of each such director and each such executive officer is 600 Mountain Avenue, Murray Hill, New Jersey 07974. Except as set forth below, the directors and executive officers listed below are citizens of the United States.
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS EMPLOYEE 5-YEAR EMPLOYMENT HISTORY ------------------------- ---------------------------------- Paul A. Allaire...................... Director of Parent since 1996. Chairman of the Board of Xerox Corporation Xerox Corporation (document processing services and 800 Long Ridge Road products) since 1991. Chief Executive Officer of Xerox P.O. Box 1600 Corporation (1990-April 1999). Director of Sara Lee Corp., Stamford, CT 06904 SmithKline Beecham p.l.c., J.P. Morgan & Co., Inc. and Priceline.com Incorporated. Committees: Member of the Audit and Finance and Corporate Governance and Compensation Committees. Age: 61. Carla A. Hills....................... Director of Parent since 1996. Chairman of the Board and Hills & Company Chief Executive Officer of Hills & Company (international 1200 Nineteenth St., N.W. consultants) since 1993 and United States Trade Washington, DC 20036 Representative (1989-1993). Director of American International Group, Inc., Chevron Corp. and Time Warner Inc. Committees: Member of the Corporate Governance and Compensation Committee. Age: 65. Drew Lewis........................... Director of Parent since 1996. Retired Chairman of the Board Box 70 and Chief Executive Officer of Union Pacific Corporation Lederach, PA 19450 (1987-1996). Director of Aegis Communications Group, Inc., American Express Company, FPL Group, Inc., Gannett Co., Inc., Millennium Bank, Union Pacific Resources Group Inc. and Gulfstream Aerospace Corporation. Committees: Member of the Audit and Finance and Corporate Governance and Compensation Committees. Age: 67. Richard A. McGinn.................... Chairman of the Board and Chief Executive Officer of Parent since February 1998, Chief Executive Officer and President of Parent since October 1997 and Director of Parent since 1996. President and Chief Operating Officer of Parent (1996-1997). Executive Vice President of AT&T and Chief Executive Officer of the AT&T Network Systems Group (1994-1996) and President and Chief Operating Officer of the AT&T Network Systems Group (1993-1994). Director of Oracle Corporation and American Express Company. Age: 52. Paul H. O'Neill...................... Director of Parent since 1996. Chairman of the Board of ALCOA Alcoa Inc. (production of aluminum) since 1987. Chief 201 Isabella Street Executive Officer of Alcoa Inc. (1987-May 1999). Chairman of Pittsburgh, PA 15212-5858 the Rand Corporation. Director of Eastman Kodak Company, the National Association of Securities Dealers, Inc., the Gerald R. Ford Foundation and Manpower Demonstration Research Corporation. Committees: Member of the Audit and Finance and Corporate Governance and Compensation Committees. Age: 63.
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POSITION WITH PARENT; PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS EMPLOYEE 5-YEAR EMPLOYMENT HISTORY ------------------------- ---------------------------------- Donald S. Perkins.................... Director of Parent since 1996. Retired Chairman of the Board One First National Plaza and Chief Executive Officer of Jewel Companies, Inc. 21 South Clark Street (diversified retailer) (1970-1980). Non-Executive Chairman Chicago, IL 60603-2006 of Kmart Corp. (1995). Director of Aon Corp., LaSalle Hotel Properties and Nanophase Technologies Corporation. Committees: Chairman of the Audit and Finance Committee and Member of the Corporate Governance and Compensation Committee. Age: 72. Donald K. Peterson................... Executive Vice President and Chief Financial Officer of Parent since 1996. Joined AT&T in 1995 as Vice President and Chief Financial Officer of AT&T's Communications Services Group. Joined Northern Telecom, Inc. in 1976 and served in various executive positions there including President of Nortel Communications Systems, Inc. (1993-1995). Age: 49. Richard J. Rawson.................... Senior Vice President and General Counsel of Parent since 1996. Secretary of Parent from 1996 to February 1999. Joined AT&T Law Division in 1984 and was appointed Vice President, Law -- AT&T Network Systems Group in 1992. Age: 46. Patricia F. Russo.................... Executive Vice President, Strategy, Business Development and Corporate Operations of Parent since 1998. Executive Vice President, Corporate Staff Operations of Parent (1997-1998), Executive Vice President, Chief Staff Officer of Parent (1996-1997) and President, Business Communications Systems business unit of Parent (1996). President, Global Business Communications Systems of AT&T (1993-1996). Age: 46. Henry B. Schacht..................... Director of Parent since 1996. Chairman of the Board of E.M. Warburg, Pincus & Parent (1996-1998). Chief Executive Officer of Parent Co., LLC (1996-1997). Director and Senior Advisor of E.M. Warburg, 466 Lexington Avenue Pincus & Co., LLC since March 1999 (global venture capital New York, NY 10017 company). Chairman (1977-1995) and Chief Executive Officer (1973-1994) of Cummins Engine Company, Inc. (designer and manufacturer of diesel engines). Director of The Chase Manhattan Corporation and The Chase Manhattan Bank, N.A., Alcoa Inc., Cummins Engine Company, Inc., Johnson & Johnson, Knoll, Inc. and the New York Times Co. Age: 64. Daniel C. Stanzione.................. Executive Vice President and Chief Operating Officer of Parent since 1997, President, Broadband Networks Group of Parent (since January 1999), Bell Laboratories (since 1996) and Network Systems business unit of Parent (1996-1997). President, AT&T Bell Laboratories (1995-1996) and President, Global Public Networks (1994-1995) and Switching Systems (1993-1994), both units of the AT&T Network Systems Group. Age: 53. Franklin A. Thomas................... Director of Parent since 1996. Consultant to the TFF Study TFF Study Group Group since 1996 (a non-profit initiative assisting Fuller Building development in southern Africa). Retired President of The 595 Madison Avenue Ford Foundation (1979-1996). Director of Alcoa Inc., New York, NY 10022 Citigroup N.A., Cummins Engine Company, Inc. and PepsiCo, Inc. Committees: Chairman of the Corporate Governance and Compensation Committee and Member of the Audit and Finance Committee. Age: 65.
I-2 35
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS EMPLOYEE 5-YEAR EMPLOYMENT HISTORY ------------------------- ---------------------------------- Ben J. M. Verwaayen.................. Executive Vice President and Chief Operating Officer of Parent since 1997 and Executive Vice President-President International (1997). President of PTT Telecom (national telecommunications operator of the Netherlands) from 1988 through September 1997. Co-founder of Unisource (pan-European alliance of Telia of Sweden, Swiss Telecom and PTT Telecom). Citizen of The Netherlands. Age: 47. John A. Young........................ Director of Parent since 1996. Vice Chairman of Novell, Inc. Hewlett-Packard Co. since 1997 (provider of directory-enabled networking 3200 Hillview Avenue software). Retired President and Chief Executive Officer of Palo Alto, CA 94304 Hewlett-Packard Company (manufacturer of measurement and computation products) (1978-1992). Director of Wells Fargo Bank, Wells Fargo & Co., Chevron Corp., International Integration Incorporated, SmithKline Beecham p.l.c., Affymetrix, Inc. and Novell, Inc. Committees: Member of the Corporate Governance and Compensation Committee. Age: 67.
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser are set forth below. The business address of the directors and executive officers listed below is 600 Mountain Avenue, Murray Hill, New Jersey 07974. Except as set forth below, the directors and executive officers listed below are citizens of the United States.
POSITION WITH THE PURCHASER; PRINCIPAL OCCUPATION OR NAME EMPLOYEE 5-YEAR EMPLOYMENT HISTORY - ---- ---------------------------------- William R. Spivey.................... Group President, Network Products Group of Parent since October 1997 and President of the Purchaser since June 1999. Previously Dr. Spivey was Vice President, Systems and Components, Microelectronics business unit of Parent. Joined AT&T in 1994. Previously Dr. Spivey was President of Tektronix Development Company for Tektronix, Inc. based in Oregon. He has also held senior management positions for Honeywell, Inc. and General Electric in various systems control, computer and semiconductor units. Age: 53. Carol E. Kirby....................... Corporate Counsel for the Network Products Group of Parent since 1998 and Director and Vice President of the Purchaser since June 1999. Corporate counsel for Parent and AT&T Corp. since 1991. Age: 45. Pamela F. Craven..................... Vice President -- Law of Parent since 1996 and Secretary of Parent since February 1999. Director and Vice President of the Purchaser since June 1999. Joined AT&T Corp. Law Division in 1991. Age: 45. Justin C. Choi....................... Corporate Counsel in the Mergers and Acquisitions Law Group of Parent since 1997 and Director and Secretary of the Purchaser since June 1999. Associate at Paul, Hastings, Janofsky & Walker (law firm) (1990-1997). Citizen of the Republic of Korea. Age: 33.
I-3 36 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile: By Hand/Overnight Courier: (for Eligible Institutions Tender & Exchange Department only) Tender & Exchange Department P.O. Box 11248 (212) 815-6213 101 Barclay Street Church Street Station Receive and Delivery Window New York, New York 10286-1248 Confirm by Telephone New York, New York 10286 1-800-507-9357
Questions or requests for assistance may be directed to the Information Agent at its address and telephone number listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. A stockholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue 5th Floor New York, NY 10022 Banks and Brokerage Firms call: (800) 662-5200 Shareholders please call: (800) 566-9061 EX-99.A.2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF SPECTRAN CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED JULY 21, 1999 BY SEATTLE ACQUISITION INC. A WHOLLY OWNED SUBSIDIARY OF LUCENT TECHNOLOGIES INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 17, 1999 UNLESS EXTENDED. The Depositary for the Offer is: THE BANK OF YORK By Mail: By Facsimile: By Hand or Overnight Courier: Tender & Exchange Department (For Eligible Institutions Only) Tender & Exchange Department P.O. Box 11248 (212) 815-6213 101 Barclay Street Church Street Station Receive and Deliver Window New York, New York 10286-1248 Confirmation by Telephone: New York, New York 10286 1-800-507-9357
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Shares - ------------------------------------------------------------------------------------------------------------------------ (1) Need not be completed by Book-Entry Stockholders. (2) Unless otherwise indicated, it will be assumed that all Shares described herein are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------
2 This Letter of Transmittal is to be used either if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Section 2 of the Offer to Purchase (as defined below)) is utilized, if delivery of Shares is to be made by book-entry transfer to an account maintained by the Depositary at the Book-Entry Transfer Facility (as defined in and pursuant to the procedures set forth in Section 2 of the Offer to Purchase). Stockholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other Stockholders are referred to herein as "Certificate Stockholders." Stockholders whose certificates for Shares are not immediately available or who cannot deliver either the certificates for, or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase) with respect to, their Shares and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares in accordance with the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution The Depository Trust Company Account Number Transaction Code Number [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s) Date of Execution of Notice of Guaranteed Delivery If delivered by book-entry transfer check box: [ ] The Depository Trust Company Account Number Transaction Code Number 2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Seattle Acquisition Inc., a Delaware corporation (the "Purchaser") which is a wholly owned subsidiary of Lucent Technologies Inc., a Delaware corporation ("Parent"), the above-described shares of Common Stock, par value $.10 per share (the "Shares"), of SpecTran Corporation, a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated July 21, 1999 (the "Offer to Purchase"), and this Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged. Upon the terms of the Offer, subject to, and effective upon, acceptance for payment of, and payment for, the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect thereof on or after July 15, 1999), and irrevocably constitutes and appoints The Bank of New York (the "Depositary"), the true and lawful agent and attorney-in-fact of the undersigned, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to the full extent of the undersigned's rights with respect to such Shares (and any such other Shares or securities or rights), (a) to deliver certificates for such Shares (and any such other Shares or securities or rights) or transfer ownership of such Shares (and any such other Shares or securities or rights) on the account books maintained by the Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser, (b) to present such Shares (and any such other Shares or securities or rights) for transfer on the Company's books and (c) to receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any such other Shares or securities or rights), all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares (and any and all other shares or other securities or rights issued or issuable in respect of such Shares on or after July 15, 1999) and, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good title thereto, free and clear of all liens, restrictions, claims and encumbrances, and the same will not be subject to any adverse claim. The undersigned, upon request, will execute any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares (and any and all such other Shares or securities or rights). All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Justin C. Choi and Carol E. Kirby, and each of them, and any other designees of the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's stockholders or otherwise in such manner as each such attorney-in-fact and proxy or his substitute shall in his or her sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, the Shares tendered hereby that have been accepted for payment by the Purchaser prior to the time any such action is taken and with respect to which the undersigned is entitled to vote (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after July 15, 1999). This appointment is effective when, and only to the extent that, the Purchaser accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by the undersigned with respect to such Shares (and any such other Shares or securities or rights) will, without further action, be revoked and no 3 4 subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be deemed effective) by the undersigned. The undersigned understands that the valid tender of Shares pursuant to any of the procedures described in Section 2 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both "Special Delivery Instructions" and "Special Payment Instructions" are completed, please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and any accompanying documents, as appropriate) in the name of, and deliver such check and/or return such certificates (and any accompanying documents, as appropriate) to, the person or persons so indicated. Please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility. The undersigned recognizes that the Purchaser has no obligation pursuant to "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. [ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11. Number of Shares represented by the lost or destroyed certificates: __________. 4 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned. Issue: [ ] Check [ ] Certificate(s) to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned, or to the undersigned at an address other than that above. Mail: [ ] Check [ ] Certificate(s) to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) ------------------------------------------------------------ 5 6 SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF STOCKHOLDER(S)) Dated: - --------------------------- , 1999 (Must be signed by registered holder(s) as name(s) appear(s) on the certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. - ---------------------------------------------------------------------------- Employer Identification or Social Security Number - ---------------------------------------------------------------- (SEE SUBSTITUTE FORM W-9) GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Name of Firm - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Daytime Area Code and Telephone No. - ---------------------------------------------------------------------------- Dated: - --------------------------- , 1999 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) of Shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (such participant, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or, unless an Agent's Message (as defined below) is utilized, if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in Section 2 of the Offer to Purchase. For a stockholder to validly tender Shares pursuant to the Offer, either (a) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth herein (and a Book-Entry Confirmation received by the Depositary), in each case prior to the Expiration Date, or (b) the tendering stockholder must comply with the guaranteed delivery procedures set forth below and in Section 2 of the Offer to Purchase. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such procedures, (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, must be received by the Depositary prior to the Expiration Date and (c) the certificates for all tendered Shares in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery as provided in Section 2 of the Offer to Purchase. A "trading day" is any day on which the New York Stock Exchange, Inc. is open for business. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT 7 8 REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (Applicable to Certificate Stockholders Only). If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In any such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the acceptance for payment of, and payment for, the Shares tendered herewith. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder of the Shares tendered hereby, the signature must correspond with the name as written on the face of the certificate(s) without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not tendered or accepted for payment are to be issued to, a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the certificates listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any person(s) other than the registered owner(s), or if tendered certificates are registered in the name(s) of any person(s) other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered owner(s) or such person(s)) payable on account of the transfer to such person(s) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for Shares not accepted for payment are to be returned to, a person other than the signer of this 8 9 Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. 8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its sole discretion to waive any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered, except for the condition that such number of Shares representing a majority of the outstanding Shares (determined on a fully diluted basis for all outstanding stock options and any other rights to acquire Shares on the date of the purchase) be validly tendered and not withdrawn prior to the expiration of the Offer, which condition may not be waived without the prior written consent of the Company. 9. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below in this Letter of Transmittal and certify under penalty of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and the payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. Backup withholding is not an additional income tax. Rather, the amount of the backup withholding can be credited against the U.S. federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at its address set forth below. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary by checking the box immediately preceding the special payment/special delivery instructions and indicating the number of Shares lost. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE, PRIOR TO THE EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 9 10 IMPORTANT TAX INFORMATION Under Federal income tax law, a stockholder is required to provide the Depositary such stockholder's TIN (i.e., social security number or employer identification number) on Substitute Form W-9 (or otherwise establish a basis for exemption from backup withholding) and certify under penalty of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If the Shares are held in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. If the Depositary is not provided with a stockholder's correct TIN, the stockholder or other payee may be subject to a penalty imposed by the Internal Revenue Service. In addition, any amounts payable to such stockholder in connection with the Offer may be subject to backup withholding at a 31% rate. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments made prior to the time a properly certified TIN is provided to the Depositary. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 10 11 - ---------------------------------------------------------------------------------------------------------------------------- PAYER'S NAME: THE BANK OF NEW YORK - ---------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT ------------------------------- FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE OR PAYER'S REQUEST FOR ------------------------------- TAXPAYER IDENTIFICATION Employer Identification NUMBER (TIN) Number(s) ----------------------------------------------------------------------------------------- PART 2 -- Certification -- Under penalties of perjury, I certify that: PART 3 -- (1) the number shown on this form is my correct Awaiting TIN Taxpayer Identification Number (or I am waiting for a number to be issued to me) and [ ] (2) I am not subject to backup withholding because --------------------------------- (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding PART 4 -- as a result of a failure to report all interest Exempt TIN or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding. [ ] ----------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under reporting interest or dividends on your tax returns. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out such item (2). If you are exempt from backup withholding, check the box in Part 4 above. - ---------------------------------------------------------------------------------------------------------------------------- Signature --------------------------------------------------------------------------------------------------------------------------- Date --------------------------------------------------------------------------------------------------------------------------------- , 1999 - ----------------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalty of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that, if I do not provide a taxpayer identification number to the Depositary by the time of payment, 31% of all reportable payments made to me thereafter will be withheld until I provide a properly certified taxpayer identification number to the Depositary. - ------------------------------------------------------------ -------------------------------, 1999 Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION. 12 The Information Agent for the Offer is: MORROW & CO., INC. 445 Park Avenue 5th Floor New York, NY 10022 Banks and Brokerage Firms please call: (800) 662-5200 Shareholders please call: (800) 566-9061 EX-99.A.3 4 PRESS RELEASE 1 News Release [LUCENT LOGO] Bill Price Roger Frizzell Michael Polyviou Lucent Technologies Lucent Technologies Porter, LeVay & Rose, Inc. 908-582-4820 (office) 972-745-4831 (office) (For Spectran) 973-515-5038 (home) 972-539-6653 (home) 212-564-4700
LUCENT TECHNOLOGIES TO PURCHASE SPECTRAN CORPORATION, A LEADING MANUFACTURER OF WORLD-CLASS OPTICAL FIBER AND FIBER OPTIC PRODUCTS FOR IMMEDIATE RELEASE: THURSDAY, JULY 15, 1999 MURRAY HILL, N.J. - Lucent Technologies (NYSE:LU) today announced it has signed an agreement to acquire SpecTran Corporation (NASDAQ, NM:SPTR), an industry leader in the design and manufacture of specialty optical fibers and fiber optic products, for about $64 million or $9 a share, plus the assumption of $35 million in SpecTran debt, in an all-cash tender offer. SpecTran, based in Sturbridge, Mass., employs approximately 500 people in two divisions. The first, SpecTran Communication Fiber Technologies in Sturbridge, manufactures high-performance optical fiber for premises data communications and telecommunications applications. SpecTran Specialty Optics Company, located in Avon, Conn., develops custom-engineered fiber solutions and cable components for industrial automation, data communications, military/aerospace and medical applications. Lucent and SpecTran are building off an established relationship. Last year, the two companies signed an agreement giving SpecTran rights to certain Lucent fiber patents for use in the company's manufacturing operations. In addition, Lucent has been one of SpecTran's major customers. The transaction is expected to be completed by the end of the quarter ending Sept. 30, 1999. The impact of the purchase on earnings is expected to be immaterial. "The communications revolution is fueling strong worldwide demand for optical fiber," said Bill Spivey, president of the Network Products Group for Lucent Technologies. "Our acquisition of SpecTran will support continued growth in our business by providing us with new fiber products, additional expertise and new market niches within the optical fiber industry." "SpecTran and Lucent have a number of important synergies that should make this match successful," said Charles B. Harrison, president and chief executive officer of SpecTran. "Working with Lucent and the unmatched technical capabilities of Bell Labs, we have the opportunity to deliver world-class fiber solutions." Harrison intends to stay with Lucent for a transition period to ensure a successful integration of the businesses. Under the terms of the definitive agreement, which has been approved by SpecTran's board of directors, Lucent will begin a cash tender offer for all outstanding shares of SpecTran common stock for $9 a share. The offer is expected to commence on July 21. Any shares not purchased in the offer will be acquired for the same price in cash, in a second-step merger. The offer and merger are subject to the purchase of the majority of the outstanding shares of SpecTran. Lazard Freres & Co. LLC has acted as investment banker to SpecTran Corporation. 2 Lucent's Optical Fiber Business Lucent Technologies is one of the world's leading manufacturers of fiber, with 13 fiber and cable manufacturing operations and joint ventures around the world. Earlier this year, Lucent announced a joint venture in Russia with SviaStroy-1 to produce optical fiber cable. In addition, Lucent has a $350 million expansion program underway at its manufacturing facility in Atlanta, as well as expansion programs under way at other sites in Denmark and China. Lucent's extensive fiber product line is designed by the company's research and development organization, Bell Laboratories, which holds more than 1,600 patents in optical networking. Lucent's Bell Labs invented nonzero-dispersion (NZDF) fiber with its award-winning TrueWave(R) fiber offering. Lucent remains the industry leader in providing fiber for high-capacity networks. To date, Lucent has produced more than 6 billion meters of its TrueWave fiber -- enough fiber to wrap around the world 150 times. About SpecTran Corporation SpecTran Corporation is a leading manufacturer of high-performance multimode and single-mode optical fiber for data communications, telecommunications, CATV and industry applications worldwide. Founded in 1981, the company's application-specific optical fiber and cable products also serve industrial, aerospace and medical markets. For additional information about SpecTran, visit the company's web site at http://www.spectran.com. About Lucent Technologies Lucent Technologies designs, builds and delivers a wide range of public and private networks, communications systems and software, data networking systems, business telephone systems and microelectronics components. Bell Labs is the research and development arm for the company. More information about Lucent Technologies, headquartered in Murray Hill, N.J., is available on its Web site at http://www.lucent.com. EX-99.A.5 5 LETTER TO STOCKHOLDERS 1 SpecTran Letterhead LETTER TO STOCKHOLDERS DATED JULY 21, 1999 TO THE STOCKHOLDERS OF SPECTRAN CORPORATION Dear Stockholder: I am pleased to report that on July 15, 1999, SpecTran Corporation ("SpecTran") entered into a Agreement of Merger with Lucent Technologies Inc., a Delaware corporation ("Lucent"), and its wholly owned subsidiary, Seattle Acquisition Inc., a Delaware corporation ("Purchaser"), that provides for the acquisition of all of the common stock, par value $.10 per share (the "Shares"), of SpecTran by Purchaser at a price of $9 per Share in cash, net to the seller, without interest. Under the terms of the proposed transaction, Purchaser has commenced a tender offer (the "Tender Offer") for all outstanding shares of SpecTran Common Stock at $9 per Share. The Tender Offer is currently scheduled to expire at 12:00 Midnight, New York City time, on August 17, 1999. Following the successful completion of the Tender Offer, upon approval by stockholder vote, if required, Purchaser will be merged with and into SpecTran (the "Merger"), and all Shares not purchased in the Tender Offer will be converted into the right to receive $9 per Share in cash, net to the seller, without interest. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE TENDER OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE TENDER OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, SPECTRAN STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT ALL SPECTRAN STOCKHOLDERS ACCEPT THE TENDER OFFER AND TENDER THEIR SHARES TO THE PURCHASER PURSUANT TO THE TERMS OF THE TENDER OFFER. The recommendation of the Board of Directors is described in the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") filed by SpecTran with the Securities and Exchange Commission and enclosed with this letter. In arriving at its recommendation, the Board of Directors gave careful consideration to a number of factors. These factors included the opinion of Lazard Freres & Co. LLC, investment banker to SpecTran, a copy of which is attached as an annex to the Schedule 14D-9. We urge you to read carefully the Schedule 14D-9 in its entirety so that you will be more informed as to the Board's recommendation. A copy of the Offer to Purchase and related materials, including a Letter of Transmittal for use in tendering Shares, accompanies this letter. These documents set forth the terms and conditions of the Tender Offer and provide instructions as to how to tender your Shares. We urge you to read each of the enclosed materials carefully. The management and the Board of Directors of SpecTran thank you for the support you have given the Company. Sincerely, Charles Harrison Signature -------------------------------------- Charles B. Harrison President, Chief Executive Officer and Chairman of the Board of Directors EX-99.C.1 6 AGREEMENT OF MERGER 1 EXHIBIT (c)(1) CONFORMED COPY ----------------------------------------------------------------- AGREEMENT OF MERGER BY AND AMONG LUCENT TECHNOLOGIES INC., SEATTLE ACQUISITION INC., AND SPECTRAN CORPORATION ------------------------------------------- Dated as of July 15, 1999 ------------------------------------------- 2 TABLE OF CONTENTS
Page ---- 1. The Offer......................................................................... -2- 1.1. The Offer................................................................ -2- 1.2. Company Actions.......................................................... -4- 2. The Merger........................................................................ -4- 2.1. General.................................................................. -4- 2.2. Certificate of Incorporation............................................. -5- 2.3. By-Laws.................................................................. -5- 2.4. Directors and Officers................................................... -5- 2.5. Conversion of Securities................................................. -6- 2.6. Adjustment of the Merger Consideration................................... -6- 2.7. Dissenting Shares........................................................ -6- 2.8. Surrender of Shares; Stock Transfer Books................................ -7- 2.9. No Further Ownership Rights in Company Capital Stock..................... -9- 2.10. Return of Payment Fund................................................... -9- 2.11. Further Assurances....................................................... -9- 3. Representations and Warranties of the Company..................................... -9- 3.1. Organization............................................................. -10- 3.2. Subsidiaries............................................................. -10- 3.3. Capital Structure........................................................ -10- 3.4. Authority................................................................ -12- 3.5. No Conflict.............................................................. -12- 3.6. SEC Documents; Undisclosed Liabilities................................... -13- 3.7. Schedule 14D-9; Company Proxy Statement.................................. -14- 3.8. Absence of Certain Changes............................................... -14- 3.9. Properties............................................................... -16- 3.10. Leases................................................................... -16- 3.11. Contracts................................................................ -17- 3.12. Absence of Default....................................................... -18- 3.13. Litigation............................................................... -18- 3.14. Compliance with Law...................................................... -19- 3.15. Intellectual Property; Year 2000......................................... -19- 3.16. Taxes.................................................................... -20- 3.17. Benefit Plans............................................................ -21- 3.18. ERISA Compliance......................................................... -21- 3.19. Employment Matters....................................................... -23- 3.20. Environmental Laws....................................................... -24-
-i- 3 3.21. Accounts Receivable; Inventory........................................... -24- 3.22. Customers and Suppliers.................................................. -24- 3.23. Voting Requirements...................................................... -25- 3.24. State Takeover Statutes.................................................. -25- 3.25. Brokers.................................................................. -25- 3.26. Opinion of Financial Advisor............................................. -26- 3.27. Complete Copies of Materials............................................. -26- 3.28. Disclosure............................................................... -26- 4. Representations and Warranties of Lucent and Acquisition.......................... -26- 4.1. Organization, Standing and Corporate Power............................... -26- 4.2. Authority................................................................ -26- 4.3. No Conflict.............................................................. -27- 4.4. Information Supplied..................................................... -27- 4.5. Brokers.................................................................. -28- 5. Conduct Pending Closing........................................................... -28- 5.1. Conduct of Business Pending Closing...................................... -28- 5.2. Prohibited Actions Pending Closing....................................... -38- 5.3. Other Actions............................................................ -30- 6. Additional Agreements............................................................. -31- 6.1. Access; Documents; Supplemental Information.............................. -31- 6.2. No Solicitation by the Company........................................... -32- 6.3. Preparation of the Company Proxy Statement; Company Stockholders Meeting............................................. -34- 6.4. Reasonable Best Efforts.................................................. -35- 6.5. Stock Options; Warrants.................................................. -35- 6.6. Employee Benefit Plans; Existing Agreement............................... -36- 6.7. Indemnification.......................................................... -37- 6.8. Directors................................................................ -37- 6.9. Fees and Expenses........................................................ -38- 6.10. Public Announcements..................................................... -39- 6.11. Stockholder Litigation................................................... -39- 7. Conditions Precedent.............................................................. -39- 7.1. Conditions Precedent to Each Party's Obligation to Effect the Merger..... -39- 7.2. Conditions Precedent to Obligations of Acquisition and Lucent............ -40- 7.3. Conditions Precedent to the Company's Obligations........................ -41- 8. Non-Survival of Representation and Warranties..................................... -41- 8.1. Representations and Warranties........................................... -41-
-ii- 4 9. Contents of Agreement; Parties in Interest; etc................................... -41- 10. Assignment and Binding Effect..................................................... -42- 11. Termination....................................................................... -42- 12. Definitions....................................................................... -43- 13. Notices........................................................................... -45- 14. Amendment......................................................................... -46- 15. Extensions; Waiver................................................................ -47- 16. Governing Law..................................................................... -47- 17. No Benefit to Others.............................................................. -47- 18. Severability...................................................................... -47- 19. Section Headings.................................................................. -47- 20. Schedules and Exhibits............................................................ -48- 21. Counterparts...................................................................... -48- Glossary of Defined Terms.................................................................. i
-iii- 5 AGREEMENT OF MERGER AGREEMENT OF MERGER ("Agreement") dated as of July 15, 1999 by and among LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"), SEATTLE ACQUISITION INC., a Delaware corporation ("Acquisition"), and SPECTRAN CORPORATION, a Delaware corporation (the "Company"). BACKGROUND A. The Company is a Delaware corporation with its registered office located at 9 East Lockerman Street, Dover, Delaware 19901 and has authorized 20,000,000 shares of common stock with voting rights, par value $.10 per share (the "Company Voting Common Stock"), of which 7,040,930 shares of Company Voting Common Stock are issued and outstanding, and 250,000 shares of common stock with no voting rights, par value $.10 per share (the "Company Non-Voting Common Stock" and together with the Company Voting Common Stock, the "Company Common Stock"), of which no shares of Company Non-Voting Common Stock are issued and outstanding. The Company is engaged principally in the design, development, production, marketing, distribution, maintenance and support of multi-mode and single-mode optical fiber for data communications and telecommunications applications. B. Lucent is a Delaware corporation with its registered office located at 1013 Centre Road, Wilmington, Delaware. C. Acquisition is a wholly-owned subsidiary of Lucent and was formed to merge with and into the Company so that, as a result of the merger, the Company will survive and become a wholly-owned subsidiary of Lucent. Acquisition is a Delaware corporation with its registered office located at 1013 Centre Road, Wilmington, Delaware and has authorized an aggregate of 1,000 shares of common stock, no par value per share (the "Acquisition Common Stock"). D. In furtherance of the acquisition of the Company by Lucent on the terms and subject to the conditions set forth in this Agreement, Lucent proposes to cause Acquisition to make a tender offer (as it may be amended from time to time as permitted under this Agreement, the "Offer") to purchase all the outstanding shares of Company Common Stock (the "Shares"), at a purchase price of $9.00 per Share (the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Agreement. E. The Board of Directors of each of Lucent, Acquisition and the Company has determined that the Offer, this Agreement and the merger of Acquisition with and into the Company (the "Merger") in accordance with the provisions of the Delaware General Corporation Law, as amended (the "DGCL"), and, subject to the terms and conditions of this Agreement, is advisable and in the best interests of Lucent, Acquisition and the Company and their respective 6 stockholders. The Board of Directors of each of Lucent, Acquisition and the Company have approved the Offer, this Agreement and the Merger. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound do hereby agree as follows: 1. The Offer. 1.1. The Offer. (a) Subject to the provisions of this Agreement, as promptly as practicable but in no event later than five business days after the date of the public announcement by Lucent and the Company of this Agreement, Acquisition shall, and Lucent shall cause Acquisition to, commence the Offer. The initial expiration date for the Offer shall be the 20th business day following the commencement of the Offer. The obligation of Acquisition to accept for payment, and pay for, any Shares tendered pursuant to the Offer shall be subject only to the conditions set forth in Exhibit A (the "Offer Conditions") (any of which may be waived in whole or in part by Acquisition in its sole discretion; provided that, without the prior written consent of the Company, Acquisition shall not waive the Minimum Condition (as defined in Exhibit A)) and to the terms and conditions of this Agreement. Acquisition expressly reserves the right to modify the terms of the Offer, except that, without the consent of the Company, Acquisition shall not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) amend or add to the Offer Conditions any terms that are adverse to the holders of the Shares, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) amend any other term of the Offer in any manner adverse to the holders of the Shares. Notwithstanding the foregoing, Acquisition may, without the consent of the Company, (A) extend the Offer, if at the scheduled or extended expiration date of the Offer any of the Offer Conditions shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer or any period required by applicable law and (C) extend the Offer on one or more occasions for an aggregate period of not more than 10 business days beyond the latest expiration date that would otherwise be permitted under clause (A) or (B) of this sentence, if on such expiration date there shall not have been tendered at least 90% of the outstanding Shares. Lucent and Acquisition agree that if all the Offer Conditions are not satisfied on any scheduled expiration date of the Offer then, provided that all such conditions are reasonably capable of being satisfied, Acquisition shall extend the Offer from time to time until such conditions are satisfied or waived; provided that Acquisition shall not be required to extend the Offer beyond September 30, 1999. Subject to the terms and conditions of the Offer and this Agreement, Acquisition shall, and Lucent shall cause Acquisition to, accept for payment, and pay for, all Shares validly tendered and not withdrawn pursuant to the Offer that Acquisition becomes obligated to accept for payment and pay for, pursuant to the Offer as promptly as practicable after the expiration of the Offer. -2- 7 (b) On the date of commencement of the Offer, Lucent and Acquisition shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer shall be made, together with any supplements or amendments thereto, the "Offer Documents"). Lucent and Acquisition agree that the Offer Documents shall comply as to form in all material respects with the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations promulgated thereunder and the Offer Documents, on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by Lucent or Acquisition with respect to information supplied by the Company or any of its stockholders specifically for inclusion or incorporation by reference in the Offer Documents. Each of Lucent, Acquisition and the Company agree promptly to correct any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and Lucent and Acquisition further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to the Company's stockholders, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given reasonable opportunity to review and comment upon the Offer Documents prior to their filing with the SEC or dissemination to the stockholders of the Company. Lucent and Acquisition agree to provide the Company and its counsel any comments Lucent, Acquisition or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. (c) Lucent shall provide or cause to be provided to Acquisition on a timely basis the funds necessary to accept for payment, and pay for, any Shares that Acquisition becomes obligated to accept for payment, and pay for, pursuant to the Offer. 1.2. Company Actions. (a) The Company hereby approves of and consents to the Offer and represents that the Board of Directors of the Company, at a meeting duly called and held, duly and unanimously adopted resolutions approving this Agreement, the Offer and the Merger, determining, as of the date of such resolutions, that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's stockholders, recommending that the Company's stockholders accept the Offer, tender their shares pursuant to the Offer and approve this Agreement (if required) and approving the acquisition of Shares by Acquisition pursuant to the Offer and the other transactions contemplated by this Agreement. The Company has been advised by each of its directors and executive officers who owns Shares (each of whom is listed in Item 1.2(a) of the Company Disclosure Schedule) that such person currently intends to tender all Shares (other than Shares, if any, held by such person that, if tendered, could cause such person to incur liability under the provisions of Section 16(b) of the Exchange Act) owned by such person pursuant to the Offer. -3- 8 (b) On the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as supplemented or amended from time to time, the "Schedule 14D-9") containing, subject to the terms of this Agreement, the recommendation described in paragraph (a) and shall mail the Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9 shall comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Company with respect to information supplied by Lucent or Acquisition specifically for inclusion in the Schedule 14D-9. Each of the Company, Lucent and Acquisition agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's stockholders, in each case as and to the extent required by applicable federal securities laws. Lucent and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the SEC or dissemination to stockholders of the Company. The Company agrees to provide Lucent and its counsel any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. (c) In connection with the Offer and the Merger, the Company shall cause its transfer agent to furnish Acquisition promptly with mailing labels containing the names and addresses of the record holders of Shares as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Shares, and shall furnish to Acquisition such information and assistance (including updated lists of stockholders, security position listings and computer files) as Lucent may reasonably request in communicating the Offer to the Company's stockholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Lucent and Acquisition and each of their agents shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will deliver, and will use their reasonable efforts to cause their agents to deliver, to the Company all copies and any extracts or summaries from such information then in their possession or control. -4- 9 2. The Merger. 2.1. General. (a) Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time, (i) Acquisition shall be merged with and into the Company, (ii) the separate corporate existence of Acquisition shall cease and (iii) the Company shall be the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Acquisition in accordance with the DGCL. At the election of Lucent, to the extent that any such action would not cause a failure of a condition to the Offer or the Merger, any direct or indirect wholly owned Subsidiary of Lucent may be substituted for and assume all of the rights and obligations of Acquisition as a constituent corporation in the Merger. In either such event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing. (b) The Merger shall become effective at the time of filing of the certificate of merger with the Secretary of State of the State of Delaware substantially in the form of Exhibit B attached hereto (the "Certificate of Merger") in accordance with the provisions of Section 251 of the DGCL or such later time as may be stated in the Certificate of Merger or such later date as the parties may mutually agree (the "Effective Time"). Subject to the terms and conditions of this Agreement, the Company and Acquisition shall duly execute and file the Certificate of Merger with the Secretary of State of the State of Delaware at the time of the Closing. The closing of the Merger (the "Closing") shall take place at the offices of Sidley & Austin, 875 Third Avenue, New York, N.Y. at 10:00 A.M., two business days after the date on which the last of the conditions set forth in Article 7 shall have been satisfied or waived, or on such other date, time and place as the parties may mutually agree (the "Closing Date"). (c) At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Acquisition shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Acquisition shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. 2.2. Certificate of Incorporation. The certificate of incorporation of Acquisition, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein and by law except that Article I of such certificate of incorporation shall be amended to read as follows: "The name of the Corporation is: SpecTran Corporation." 2.3. By-Laws. The by-laws of Acquisition, as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Corporation until thereafter amended as provided therein and by law. -5- 10 2.4. Directors and Officers. From and after the Effective Time, (a) the directors of Acquisition immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and by-laws of the Surviving Corporation, and (b) the officers of Acquisition immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case, until their respective successors are duly elected or appointed and qualified. 2.5. Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Lucent, Acquisition, the Company or the holders of any of the following securities: (a) Each issued and outstanding share of common stock of Acquisition shall be converted into one validly issued, fully paid and nonassessable share of Common Stock, $.10 par value per share, of the Surviving Corporation; (b) Each Share that is owned or held in treasury by the Company and each Share that is owned by Acquisition or Lucent shall automatically be canceled and retired and shall cease to exist without any conversion thereof and no payment or distribution shall be made with respect thereto. Each Share that is owned by any Subsidiary of either the Company or Lucent (other than Acquisition) shall remain outstanding without change; and (c) Subject to the provisions of Section 2.6, each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be canceled or to remain outstanding in accordance with Section 2.5(b) and other than Dissenting Shares) shall be converted into the right to receive from the Surviving Corporation in cash, without interest, the price per share paid in the Offer (the "Merger Consideration"). As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of record of a certificate representing any such Shares shall cease to have any rights with respect thereto other than the right to receive the Merger Consideration, without interest. 2.6. Adjustment of the Merger Consideration. In the event that, subsequent to the date of this Agreement but prior to the Effective Time, any stock split, combination, reclassification or stock dividend with respect to the outstanding shares of Company Common Stock, any change or conversion of outstanding shares of Company Common Stock into other securities or any other dividend or distribution with respect to the outstanding shares of Company Common Stock should occur, appropriate and proportionate adjustments shall be made to the Merger Consideration, and thereafter all references to the Merger Consideration shall be deemed to be to the Merger Consideration as so adjusted. 2.7. Dissenting Shares. (a) Notwithstanding any provision of this Agreement to the contrary, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and which are held by stockholders who shall not have voted in favor of the -6- 11 Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the "Dissenting Shares") shall not be converted into or represent the right to receive the consideration set forth in Section 2.5(c). Such stockholders shall instead be entitled to receive such consideration as is determined to be due with respect to such Dissenting Shares in accordance with the provisions of Section 262, except that all Dissenting Shares held by such stockholders who shall have failed to perfect or who effectively shall have withdrawn their demand for appraisal or lost their rights to appraisal of such shares under Section 262, after the Effective Time, shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Merger Consideration in Section 2.5(c), without any interest thereon, upon surrender, in the manner provided in Section 2.8, of the certificate or certificates that formerly evidenced by such Dissenting Shares. (b) The Company shall give Lucent (i) prompt notice of any demands for appraisal of Shares received by the Company, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by the Company and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Lucent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. 2.8. Surrender of Shares; Stock Transfer Books. (a) Prior to the Effective Time, Lucent shall designate The Bank of New York, or another bank or trust company designated by Lucent, to act as paying agent in the Merger (the "Paying Agent"), and, from time to time, on, prior to or after the Effective Time, Lucent shall make available, or cause the Surviving Corporation to make available, to the Paying Agent cash in the amounts and at the times necessary for the prompt payment of the Merger Consideration upon surrender of certificates representing outstanding shares of Company Common Stock (the "Certificates") as part of the Merger pursuant to Section 2.5, and such amounts as and when so made available shall hereinafter be referred to as the "Payment Fund" (it being understood that any and all interest earned on funds deposited with the Paying Agent pursuant to this Agreement shall be turned over to Lucent). (b) As soon as practicable after the Effective Time, Lucent shall use its reasonable best efforts to cause the Paying Agent to send to each Person who was, at the Effective Time, a holder of record of Certificates, a letter of transmittal which (i) shall specify that delivery shall be effected and risk of loss and title to such Certificates shall pass, only upon actual delivery thereof to the Paying Agent and (ii) shall contain instructions for use in effecting the surrender of the Certificates. Upon surrender to the Paying Agent of Certificates for cancellation, together with such letter of transmittal duly completed and validly executed in accordance with the instructions thereto and such other documents as the Paying Agent may reasonably require, such holder shall be entitled to receive in exchange therefor the applicable -7- 12 Merger Consideration, and the Certificates so surrendered shall then be canceled. Such Merger Consideration shall be mailed as promptly as practicable after the satisfaction by such holder of the foregoing. Subject to Section 2.8(c), until surrendered as contemplated by this Section 2.8(b), each Certificate, from and after the Effective Time, shall be deemed to represent only the right to receive, upon such surrender, the Merger Consideration. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. (c) If payment of any portion of the Merger Consideration is to be made to any Person other than the registered holder of the Certificate surrendered in exchange therefor, it shall be a condition to such payment that such surrendered Certificate shall be properly endorsed and otherwise in proper form for transfer and such Person either (i) shall pay to the Paying Agent any transfer or other taxes required as a result of the payment of the Merger Consideration to such Person or (ii) shall establish to the satisfaction of the Surviving Corporation that such taxes have been paid or are not applicable. Lucent, Acquisition or the Paying Agent, as the case may be, shall be entitled to deduct and withhold from the Merger Consideration or Company Stock Option Consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock or holder of Company Stock Options such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Lucent, Acquisition or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of shares of Company Common Stock or holder of Company Stock Options, in respect of which such deduction and withholding was made by Lucent, Acquisition or the Paying Agent. All amounts in respect of taxes received or withheld by Lucent, Acquisition or the Paying Agent shall be disposed of by Lucent, Acquisition or the Paying Agent in accordance with the Code or such state, local or foreign tax law, as applicable. (d) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and subject to such other conditions as the Board of Directors of the Surviving Corporation may impose, the Paying Agent shall pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect of such Certificate as determined in accordance herewith. When authorizing such payment of the Merger Consideration in exchange for such Certificate, the Board of Directors of the Surviving Corporation (or any authorized officer thereof) may, in its reasonable discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to deliver to the Surviving Corporation a bond in such sum as the Surviving Corporation may reasonably require as indemnity against any claim that may be made against Lucent, the Surviving Corporation or the Paying Agent with respect to the Certificate alleged to have been lost, stolen or destroyed. (e) At the close of business on the day on which the Effective Time occurs, the stock transfer books of the Company shall be closed and thereafter there shall be no further -8- 13 registration of transfers of shares of Company Common Stock on the records of the Company. From and after the Effective Time, the holders of shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares except as otherwise provided herein or by applicable law. (f) Neither Lucent nor the Company shall be liable to any former holder of Company Capital Stock for any Merger Consideration which is delivered to a public official pursuant to an official request under any applicable abandoned property, escheat or similar law. 2.9. No Further Ownership Rights in Company Capital Stock. The Merger Consideration shall be deemed to have been delivered (and paid) in full satisfaction of all rights pertaining to the Company Common Stock previously represented by such surrendered Certificates. 2.10. Return of Payment Fund. Any portion of the Payment Fund which remains undistributed to the former holders of Company Common Stock for six months after the Effective Time shall be delivered to Lucent, upon its request, and any such former holders who have not theretofore surrendered to the Paying Agent their Certificates in compliance herewith shall thereafter look only to Lucent for payment of their claim for their portion of the Payment Fund. Neither Lucent, Acquisition, the Paying Agent or the Company shall be liable to any former holder of Company Common Stock for any portion of the Payment Fund which is delivered to a public official pursuant to an official request under any applicable abandoned property, escheat or similar law. 2.11. Further Assurances. If at any time after the Effective Time the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of either the Company or Acquisition or (b) otherwise to carry out the purposes of this Agreement, the Surviving Corporation and its proper officers and directors or their designees shall be authorized to execute and deliver, in the name and on behalf of either the Company or Acquisition, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of the Company or Acquisition, all such other acts and things necessary, desirable or proper to vest, perfect or confirm its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of the Company or Acquisition, as applicable, and otherwise to carry out the purposes of this Agreement. 3. Representations and Warranties of the Company. Except as set forth on the Disclosure Schedule delivered by the Company to Lucent prior to the execution of this Agreement (the "Company Disclosure Schedule") and making reference to the particular subsection of this Agreement to which exception is being taken, the Company represents and warrants to Lucent and Acquisition as follows: -9- 14 3.1. Organization. Each of the Company and its Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite power and authority and all necessary governmental approval to carry on its business as it has been and is now being conducted. Except as set forth in Item 3.1 of the Company Disclosure Schedule, each of the Company and its Subsidiaries is duly qualified or licensed as a foreign corporation to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction where the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing, would not have a Material Adverse Effect. The Company has made available to Lucent prior to the execution of this Agreement complete and correct copies of its certificate of incorporation and by-laws and the charter documents for each of its Subsidiaries in each case, as amended to the date hereof. 3.2. Subsidiaries. Item 3.2 of the Company Disclosure Schedule contains (i) the name and jurisdiction of incorporation of each Subsidiary of the Company, (ii) the total number of shares of each class of capital stock of (or other equity interests in) each Subsidiary authorized, the number of shares (or other equity interests) outstanding and the number of shares (or other equity interests) owned by the Company or any other Subsidiary of the Company and (iii) a complete list of the directors and officers of the Company and each Subsidiary. All the issued and outstanding capital stock of (or other equity interests in) each Subsidiary have been duly and validly authorized and issued and are fully paid, nonassessable and free of pre-emptive rights. None of the outstanding capital stock of (or other equity interests in) any Subsidiary has been issued in violation of the preemptive rights of any equity holder of such Subsidiary. The capital stock of (or other equity interests in) each Subsidiary were issued in compliance in all material respects with all applicable federal and state securities laws and regulations, are owned free and clear of all Liens (except as set forth in Item 3.2 of the Company Disclosure Schedule) and are free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interest. 3.3. Capital Structure. (a) The authorized capital stock of the Company consists of 20,000,000 shares of Company Voting Common Stock and 250,000 shares of Company Non-Voting Common Stock. At the close of business on July 14, 1999, (i) 7,040,930 shares of Company Voting Common Stock were issued and outstanding; (ii) no shares of Company Non-Voting Common Stock were issued and outstanding; (iii) no shares of Company Common Stock were held by the Company in its treasury; (iv) 150,000 shares of Company Common Stock were reserved for issuance upon exercise of the Warrants; and (v) 1,411,836 shares of Company Common Stock were reserved for issuance pursuant to the SpecTran Corporation 1991 Incentive Stock Option Plan and the SpecTran Corporation Incentive Stock Option Plan (collectively, the "Company Stock Plans") (of which 1,037,739 shares are subject to outstanding Company Stock Options as of July 14, 1999). -10- 15 (b) Except as set forth in paragraph (a), at the close of business on July 14, 1999, no shares of capital stock or other voting securities of the Company were issued, reserved for issuance or outstanding. There are no outstanding stock appreciation rights ("SARs") or rights (other than outstanding stock options or other rights to purchase or receive Company Common Stock granted under the Company Stock Plans (collectively, "Company Stock Options")) to receive shares of Company Common Stock on a deferred basis granted under the Company Stock Plans or otherwise and no warrants to purchase shares of capital stock of the Company at any time or upon the occurrence of any stated event. The Company has delivered to Lucent a complete and correct list, as of June 30, 1999, of the number of shares of Company Common Stock subject to Company Stock Options and the exercise prices thereof. (c) As of the date of this Agreement, no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote are issued or outstanding. All outstanding shares of capital stock of the Company are, and all shares which may be issued upon the exercise of the Warrants will be, when issued, duly authorized, validly issued, fully paid and nonassessable, not subject to preemptive rights and were issued in compliance in all material respects with all applicable federal and state securities laws. (d) Except as set forth in this Section 3.3 and except for changes since July 14, 1999 resulting from the issuance of shares of Company Common Stock pursuant to Company Stock Options outstanding as of July 14, 1999, there are not issued, reserved for issuance or outstanding (i) any shares of capital stock or other voting securities of the Company, (ii) any securities of the Company convertible into or exchangeable or exercisable for shares of capital stock or voting securities of the Company, (iii) any warrants, calls, options or other rights to acquire from the Company or any Subsidiary, and no obligation of the Company or any Subsidiary to issue, any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company. Except as set forth in this Section 3.3, on the date hereof there are not any outstanding obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. The Company is not a party to any voting agreement with respect to the voting of any such securities. (e) There are no outstanding (i) securities of the Company or any Subsidiary convertible into or exchangeable or exercisable for shares of capital stock or other voting securities or ownership interests in any Subsidiary, (ii) warrants, calls, options or other rights to acquire from the Company or any Subsidiary, and no obligation of the Company or any Subsidiary to issue, any capital stock, voting securities or other ownership interests in, or any securities convertible into or exchangeable or exercisable for any capital stock, voting securities or ownership interests in, any such Subsidiary or (iii) obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any such outstanding securities of such Subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or sold, any such -11- 16 securities. Except for the Company's ownership of the Subsidiaries, the Company does not, directly or indirectly, have any ownership or other interest in, or control of, any Person, nor is the Company or any Subsidiary controlled by or under common control with any Person. 3.4. Authority. The Company has all requisite corporate power and authority to enter into this Agreement and, subject to Company Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Company, and except, in the case of this Agreement, for (i) Company Stockholder Approval and (ii) the filing and recordation of appropriate merger documents as required by the DGCL, no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the transactions contemplated by this Agreement. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 3.5. No Conflict. (a) Except as set forth in Item 3.5 of the Company Disclosure Schedule, the execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under, (i) the certificate of incorporation or by-laws of the Company or the comparable organizational documents of any of its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license or similar authorization applicable to the Company or any of its Subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in paragraph (b), any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses or Liens that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on the Company. (b) No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any federal, state, local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental self-regulatory agency, commission or authority (each a "Governmental Entity") is required by or with respect to the Company or any of its Subsidiaries in connection -12- 17 with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and any applicable filings and approvals under similar foreign antitrust laws and regulations; (ii) the filing with the SEC and The Nasdaq National Market ("Nasdaq") of (A) the Schedule 14D-9, (B) a proxy statement relating to the Company Stockholders Meeting for the approval by the stockholders of the Company of the Merger (such proxy statement, as amended or supplemented from time to time, the "Company Proxy Statement"), and (C) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business; and (iv) such consents, approvals, orders or authorizations which if not made or obtained, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on the Company. 3.6. SEC Documents; Undisclosed Liabilities. Except as set forth in Item 3.6 of the Company Disclosure Schedule, the Company has filed with the SEC since January 1, 1997 or, with respect to the Offer, will file with the SEC all required registration statements, reports, schedules, forms, statements, proxy or information statements and other documents (including exhibits and all other information incorporated therein) (the "Company SEC Documents"). As of their respective dates, the Company SEC Documents complied or, with respect to those not yet filed, will comply in all material respects with the requirements of the Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as the case may be, and, in each case, the rules and regulations of the SEC promulgated thereunder and, except to the extent that information contained in any Company SEC Document has been revised and superseded by a later filed Company SEC Document, did not or, with respect to those not yet filed, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company SEC Documents comply as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments). Except for liabilities (i) reflected in such financial statements or in the notes thereto, (ii) incurred in the ordinary course of business consistent with past practice since the date of the most recent audited financial statements included in the Company SEC Documents filed and publicly available prior to the date of this Agreement (as amended to the date of this Agreement, the "Company Filed -13- 18 SEC Documents"), (iii) incurred in connection with this Agreement or the transactions contemplated hereby, or (iv) disclosed in Item 3.6 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Company. 3.7. Schedule 14D-9; Company Proxy Statement. None of the information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be filed by the Company in connection with the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or (iv) the Company Proxy Statement, if any, will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or, in the case of the Company Proxy Statement, if any, at the date the Company Proxy Statement is first mailed to the Company's stockholders and at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-9, the Information Statement and the Company Proxy Statement, if any, will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Lucent specifically for inclusion or incorporation by reference therein. 3.8. Absence of Certain Changes. Except for liabilities incurred in connection with this Agreement or the transactions contemplated hereby and except as disclosed in the Company Filed SEC Documents, since December 31, 1998, the Company and its Subsidiaries have conducted their business only in the ordinary course, and there has not been: (a) any event or occurrence which could reasonably be expected to have a Material Adverse Effect on the Company; (b) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of the Company's capital stock; (c) any split, combination or reclassification of any of the Company's capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution, for shares of the Company's capital stock, except for issuances of Company Common Stock upon the exercise of Company Stock Options under the Company Stock Plans, in each case awarded prior to the date hereof in accordance with their present terms; -14- 19 (d) (i) Except as set forth in Item 3.8(d)(i) of the Company Disclosure Schedule, any granting by the Company or any of its Subsidiaries to any current or former director, executive officer or other key employee of the Company or its Subsidiaries of any increase in compensation, bonus or other benefits, except for normal increases in cash compensation in the ordinary course of business consistent with past practice or as was required under any employment agreements in effect as of the date of the most recent audited financial statements included in the Company Filed SEC Documents, (ii) any granting by the Company or any of its Subsidiaries to any such current or former director, executive officer or key employee of any increase in severance or termination pay, except in the ordinary course of business consistent with past practice, (iii) except as set forth in Item 3.8(d)(iii) of the Company Disclosure Schedule, any entry by the Company or any of its Subsidiaries into, or any amendments of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director, executive officer or key employee, or (iv) any amendment to, or modification of, any Company Stock Option; (e) except insofar as may have been required by a change in generally accepted accounting principles, any change in accounting methods, principles or practices by the Company; (f) any tax election that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect on the Company or any of its tax attributes or any settlement or compromise of any material income tax liability; (g) any impairment, damage, destruction, loss or claim, whether or not covered by insurance, or condemnation or other taking which could reasonably be expected to have a Material Adverse Effect on the Company; (h) any issuance, delivery or agreement (conditionally or unconditionally) to issue or deliver any bonds, notes or other debt securities, or the incurrence of or agreement to incur any indebtedness for borrowed money, other than in the ordinary course of business consistent with past practice or the entry into any lease the obligations of which, in accordance with GAAP, would be capitalized; (i) any material amendment or termination of any agreement to which the Company or any of its Subsidiaries is a party and is or should be set forth on Item 3.11 of the Company Disclosure Schedule; (j) except as set forth in Item 3.8(j) of the Company Disclosure Schedule, any undertaking or commitment to undertake capital expenditures exceeding $100,000 for any single project or related series of projects; (k) except as set forth in Item 3.8(k) of the Company Disclosure Schedule, any sale, lease (as lessor), transfer or other disposition of, mortgage, pledge, or imposition of any -15- 20 Lien on, any of the assets reflected on the Company's most recent audited financial statement included in the Company Filed SEC Documents or any assets acquired by the Company or any of its Subsidiaries after the date of such audited financial statement, except for inventory and personal property sold or otherwise disposed of for fair value in the ordinary course of its business consistent with past practice and except for Permitted Liens; (l) cancellation of any debts owed to or claims held by the Company or any of its Subsidiaries (including the settlement of any claims or litigation) other than in the ordinary course of its business consistent with past practice; (m) except as set forth in Item 3.8(m) of the Company Disclosure Schedule, acceleration or delay in collection of accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of its business consistent with past practice; (n) acceleration or delay in payment of any account payable or other liability beyond or in advance of its due date or the date when such liability would have been paid in the ordinary course of its business consistent with past practice; and (o) entry into or commitment to enter into any other material transaction except in the ordinary course of business. 3.9. Properties. (a) Each of the Company and its Subsidiaries has good and valid title to or a valid leasehold interest in all its properties and assets reflected on the most recently audited balance sheet contained in the Company Filed SEC Documents or acquired after the date thereof except for (i) properties and assets sold or otherwise disposed of in the ordinary course of business since the date of such balance sheet, (ii) properties and assets the loss of which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect on the Company and (iii) properties and assets sold in connection with the transaction referred to in Item 3.8(k) of the Company Disclosure Schedule. (b) Except as set forth in Item 3.9(b) of the Company Disclosure Schedule, neither the Company nor any or its Subsidiaries owns any real property. 3.10. Leases. Item 3.10 of the Company Disclosure Schedule lists all outstanding leases, both capital and operating, or licenses, pursuant to which the Company or any of its Subsidiaries has (i) obtained the right to use or occupy any real or tangible personal property under arrangements where the remaining obligation is more than $50,000, inclusive of any renewal rights or (ii) granted to any other Person the right to use any material item of machinery, equipment, furniture, vehicle or other personal property of the Company or any of its Subsidiaries having an original cost of $50,000 or more. -16- 21 3.11. Contracts. Item 3.11 of the Company Disclosure Schedule lists any of the following not otherwise listed on any other item of the Company Disclosure Schedule: (a) each written contract or commitment which creates an obligation on the part of the Company or any of its Subsidiaries in excess of $100,000; (b) each written debt instrument, including, without limitation, any loan agreement, line of credit, promissory note, security agreement or other evidence of indebtedness, where the Company or any of its Subsidiaries is a lender, borrower or guarantor, in a principal amount in excess of $100,000; (c) each written contract or commitment restricting the Company or any of its Subsidiaries from engaging in any industry or in any line of business in any location; (d) each written contract or commitment in excess of $10,000 to which the Company or any of its Subsidiaries is a party for any charitable contribution; (e) each written joint venture or partnership agreement to which the Company or any of its Subsidiaries is a party; (f) each written agreement in excess of $25,000 to which the Company or any of its Subsidiaries is a party with respect to any assignment, discounting or reduction of any receivables of the Company or such Subsidiary; (g) each written distributorship, sales agency, sales representative, reseller or marketing agreement to which the Company or any of its Subsidiaries is a party, and each sales representative agreement is substantially identical to the form previously delivered to Lucent; (h) each value added reseller, original equipment manufacturing, technology transfer, source code license or other license or each other agreement containing the right to sublicense software and/or technology, in each case, to which the Company or any of its Subsidiaries is a party, other than "off-the-shelf" software; (i) each agreement, option or commitment or right with, or held by, any third party to acquire any assets or properties, or any interest therein, of the Company or any of its Subsidiaries, having a value in excess of $100,000, except for contracts for the sale of inventory, machinery or equipment in the ordinary course of business; (j) each written employment contract entered into by the Company or any of its Subsidiaries; and -17- 22 (k) each supply agreement to which the Company or any of its Subsidiaries is a party that the Company or such Subsidiary could not readily replace without a Material Adverse Effect on the Company. There are (i) no oral contracts or commitments of the types described in this Section 3.11 which create an obligation on the part of the Company or any of its Subsidiaries in excess of $25,000, (ii) no contracts or commitments between the Company or any of its Subsidiaries and any Affiliate (other than a wholly-owned Subsidiary) and (iii) no contracts or commitments which would create rights to any Person against Lucent or any of its Affiliates (other than rights against the Company and its Subsidiaries as in effect on the Closing Date). 3.12. Absence of Default. Except as set forth in Item 3.12 of the Company Disclosure Schedule, each of the leases, contracts and other agreements listed or required to be listed in Items 3.10 and 3.11 of the Company Disclosure Schedule that create obligations on any Person in excess of $100,000 constitutes a valid and binding obligation of the parties thereto and is in full force and effect and will continue in full force and effect after the Effective Time, in each case, without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder and without the consent, approval or act of, or the making of any filing with, any other Person. Each of the Company and its Subsidiaries has fulfilled and performed in all material respects its obligations under each such lease, contract or other agreement to which it is a party to the extent such obligations are required by the terms thereof to have been fulfilled or performed through the date hereof (except for any such lease, contract or other agreement which, by its terms, will expire prior to the Effective Time) and neither the Company nor any such Subsidiary is, and, neither the Company nor any such Subsidiary is alleged in writing to be, in breach or default under, nor is there or is there alleged in writing to be any basis for termination of, any such lease, contract or other agreement. To the best knowledge of the Company, no other party to any such lease, contract or other agreement has breached or defaulted thereunder. No event has occurred and no condition or state of facts exists which, with the passage of time or the giving of notice or both, would constitute such a default or breach by the Company or, to the best knowledge of the Company, by any such other party. The Company is not currently renegotiating any such lease, contract or other agreement or paying liquidated damages in lieu of performance thereunder. Complete and correct copies of each such lease, contract or other agreement and any amendments thereto have heretofore been delivered to Lucent. 3.13. Litigation. Item 3.13 of the Disclosure Schedule sets forth (i) any actions, suits, arbitrations, legal or administrative proceedings or investigations pending or, to the best knowledge of the Company, threatened against the Company or any of its Subsidiaries; (ii) any judgment, order, writ, injunction or decree of any court, governmental agency or arbitration tribunal as to which any of the assets, properties or business of the Company or any of its Subsidiaries is subject; and (iii) any actions, suits, arbitrations or proceedings as to which the Company or any such Subsidiary is the plaintiff or the Company or any such Subsidiary is contemplating commencing legal action against any other Person. None of the matters, if any, -18- 23 listed on Item 3.13 of the Disclosure Schedule could reasonably be expected to have a Material Adverse Effect on the Company. 3.14. Compliance with Law. (a) Each of the Company and its Subsidiaries has complied in all material respects with, and is not in violation of, in any material respect, any law, ordinance or governmental rule or regulation (collectively, "Laws") to which it or its business is subject; (b) Each of the Company and its Subsidiaries has obtained all licenses, permits, certificates or other governmental authorizations (collectively "Authorizations") necessary for the ownership or use of its assets and properties or the conduct of its business other than Authorizations (i) which are ministerial in nature and which the Company or such Subsidiary has no reason to believe would not be issued in due course and (ii) which, the failure of the Company or such Subsidiary to possess, would not subject the Company and its Subsidiaries to penalties other than fines not to exceed $50,000 in the aggregate ("Immaterial Authorizations"); and (c) Neither the Company nor any of its Subsidiaries has received notice of violation of, or knows of any violation of, any Laws to which it or its business is subject or any Authorization necessary for the ownership or use of its assets and properties or the conduct of its business (other than Immaterial Authorizations). 3.15. Intellectual Property; Year 2000. (a) Except as set forth in Item 3.15 of the Company Disclosure Schedule, the Company and its Subsidiaries own, or are validly licensed or otherwise have the right to use, all patents, patent rights, trademarks, trade secrets, trade names, service marks, copyrights and other proprietary intellectual property rights and computer programs (the "Intellectual Property Rights") which are material to the conduct of the business of the Company and its Subsidiaries as presently conducted. (b) To the Company's best knowledge, neither the Company nor any of its Subsidiaries has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property Rights or other proprietary information of any other Person. Neither the Company nor any of its Subsidiaries has received any written charge, complaint, claim, demand or notice alleging any such interference, infringement, misappropriation or violation (including any claim that the Company or any such Subsidiary must license or refrain from using any Intellectual Property Rights or other proprietary information of any other Person) which has not been settled or otherwise fully resolved. To the Company's best knowledge, no other Person has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property Rights or other proprietary information of the Company or any of its Subsidiaries. -19- 24 (c) Assuming that Lucent continues to operate the business of the Company and its Subsidiaries as presently conducted and proposed to be conducted by the Company then, to the Company's best knowledge, Lucent's use of the Intellectual Property Rights or other proprietary information which is material to the conduct of the business of the Company and its Subsidiaries, taken as a whole, will not interfere with, infringe upon, misappropriate or otherwise come into conflict with the Intellectual Property Rights or other proprietary information of any other Person. (d) Each employee, agent, consultant or contractor who has materially contributed to or participated in the creation or development of any copyrightable, patentable or trade secret material on behalf of the Company, any of its Subsidiaries or any predecessor in interest thereto either: (i) is a party to a "work-for-hire" agreement under which the Company or such Subsidiary is deemed to be the original owner/author of all property rights therein; or (ii) has executed an assignment or an agreement to assign in favor of the Company, such Subsidiary or such predecessor in interest, as applicable all right, title and interest in such material. (e) The Company has taken all necessary steps reasonably to assure that the year 2000 date change will not adversely affect its operations or the systems and facilities that support the operations of the Company and its Subsidiaries, except as could not reasonably be expected to have a Material Adverse Effect on the Company. 3.16. Taxes. (a) Each of the Company and its Subsidiaries has filed all material tax returns and reports required to be filed by it and all such returns and reports are complete and correct in all material respects, or requests for extensions to file such returns or reports have been timely filed, granted and have not expired, except to the extent that such failures to file, to be complete or correct or to have extensions granted that remain in effect individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. The Company and each of its Subsidiaries has paid (or the Company has paid on its behalf) all Taxes shown as due on such returns, and the most recent financial statements contained in the Company Filed SEC Documents reflect an adequate reserve for all taxes payable by the Company and its Subsidiaries for all taxable periods and portions thereof accrued through the date of such financial statements. (b) No deficiencies for any taxes have been proposed, asserted or assessed against the Company or any of its Subsidiaries that are not adequately reserved for, except for deficiencies that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on the Company. (c) The Company Benefit Plans and other Company employee compensation arrangements in effect as of the date of this Agreement have been designed so that the disallowance of a material deduction under Section 162(m) of the Code for employee remuneration will not apply to any amounts paid or payable by the Company or any of its Subsidiaries under any such plan or arrangement and, to the best knowledge of the Company, no -20- 25 fact or circumstance exists that could reasonably be expected to cause such disallowance to apply to any such amounts. (d) Neither the Company nor any of its Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (x) in the two years prior to the date of this Agreement or (y) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the Merger. (e) Neither the Company nor any of its Subsidiaries is a party (other than as an investor) to any outstanding industrial development bond. 3.17. Benefit Plans. (a) Item 3.17 of the Company Disclosure Schedule contains a list and brief description of all "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to as "Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) (sometimes referred to as "Welfare Plans") and all other Benefit Plans (together with the Pension Plans and Welfare Plans, the "Company Benefit Plans") maintained, or contributed to, by the Company, any of its Subsidiaries or any Person that, together with the Company or any of its Subsidiaries, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (the Company, such Subsidiaries and each such other Person, a "Commonly Controlled Entity") for the benefit of any current or any former employees, officers or directors of the Company. The Company has made available to Lucent true, complete and correct copies of (i) each Company Benefit Plan (or, in the case of any unwritten Company Benefit Plans, descriptions thereof), (ii) the most recent annual report on Form 5500 filed with the Internal Revenue Service (the "IRS") with respect to each Company Benefit Plan (if any such report was required), (iii) the most recent summary plan description for each Company Benefit Plan for which such summary plan description is required, (iv) each trust agreement and group annuity contract relating to any Company Benefit Plan and (v) all correspondence with the IRS or the United States Department of Labor relating to any outstanding controversy or audit. (b) Since the date of the most recent audited financial statements included in the Company Filed SEC Documents, there has not been any adoption or amendment in any material respect by the Company, any of its Subsidiaries or any Commonly Controlled Entity of any Company Benefit Plans, or any material change in any actuarial or other assumption used to calculate funding obligations with respect to any Pension Plans of the Company, or any change in the manner in which contributions to any Pension Plans of the Company are made or the basis on which such contributions are determined. -21- 26 3.18. ERISA Compliance. (a) With respect to the Company Benefit Plans, no event has occurred and, to the best knowledge of the Company, there exists no condition or set of circumstances, in connection with which the Company or any of its Subsidiaries could be subject to any liability under ERISA, the Code or any other applicable law that individually or in the aggregate could reasonably be expected to have a Material Adverse Effect under ERISA, the Code or any other applicable law. (b) Each Benefit Plan has been administered in accordance with its terms, except for any failures so to administer any Benefit Plan that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on the Company. The Company, its Subsidiaries and all the Company Benefit Plans are in compliance with the applicable provisions of ERISA, the Code, all regulations promulgated thereunder, all other applicable laws, regulations and other pronouncements, and the terms of all applicable collective bargaining agreements, except for any failures to be in such compliance that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. Each Benefit Plan that is intended to be qualified under Section 401(a) or 401(k) of the Code has received a favorable determination letter from the IRS that it is so qualified and each trust established in connection with any Company Benefit Plan that is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that such trust is so exempt. To the best knowledge of the Company, no fact or event has occurred since that date of any determination letter from the IRS which could reasonably be expected to affect adversely the qualified status of any such Benefit Plan or the exempt status of any such trust. There are no pending or, to the best knowledge of the Company, threatened lawsuits, claims, grievances, investigations or audits of any Benefit Plan that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has engaged in a transaction with respect to any Company Benefit Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject it to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA. (c) Neither the Company nor any of its Subsidiaries has incurred any liability under Title IV of ERISA (other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course). No Benefit Plan has incurred an "accumulated funding deficiency" (within the meaning of Section 302 of ERISA or Section 412 of the Code) whether or not waived. To the best knowledge of the Company, there are no facts or circumstances that could reasonably be expected to materially change the funded status of any Benefit Plan that is a "defined benefit" plan (as defined in Section 3(35) of ERISA) since the date of the most recent actuarial report for such plan. No notice of a "reportable event", within the meaning of Section 4043 of ERISA, for which the 30-day reporting requirement has not been waived has been required to be filed within the 12-month period ending on the date hereof. No Benefit Plan is a "multiemployer plan" within the meaning of Section 3(37) of ERISA. -22- 27 (d) Under each Benefit Plan that is a "defined benefit" plan (as defined in Section 3(35) of ERISA) as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all "benefit liabilities", within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in such plan's most recent actuarial valuation), did not exceed the then current value of the assets of such plan. (e) Except as set forth in Item 3.18(e) of the Company Disclosure Schedule, no employee of the Company will be entitled to any additional benefits or any acceleration of the time of payment or vesting of any benefits under any Benefit Plan as a result of the transactions contemplated by this Agreement. Except as set forth in Item 3.18(e) of the Company Disclosure Schedule, no amount payable, or economic benefit provided, by the Company or its Subsidiaries (including any acceleration of the time of payment or vesting of any benefit) could be considered an "excess parachute payment" under Section 280G of the Code as a result of the transactions contemplated by this Agreement. No Person is entitled to receive any additional payment from the Company or its Subsidiaries or any other Person (a "Parachute Gross-Up Payment") in the event that the excise tax of Section 4999 of the Code is imposed on such Person. The Board of Directors of the Company or any of its Subsidiaries has not granted to any Person any right to receive any Parachute Gross-Up Payment. (f) Except as set forth in Item 3.18(f) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has any liability or obligation under any "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) to provide life insurance or medical benefits after termination of employment to any employee or dependent other than as required by Part 6 of Title I of ERISA. 3.19. Employment Matters. (a) Each of the Company and its Subsidiaries has complied in all material respects with all applicable laws, rules and regulations respecting employment and employment practices, terms and conditions of employment, wages and hours, and neither the Company nor any of its Subsidiaries is liable for any arrears of wages or any taxes or penalties for failure to comply with any such laws, rules or regulations; (b) the Company believes that the Company's and its Subsidiaries' relations with their respective employees is satisfactory; (c) there are no controversies pending or, to the best knowledge of the Company, threatened between the Company or any of its Subsidiaries and any of their respective employees, which controversies have or could have a Material Adverse Effect on the Company; (d) neither the Company nor any Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to Persons employed by the Company or any such Subsidiary, nor, to the best knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees; (e) there are no unfair labor practice complaints pending against the Company or any of its Subsidiaries before the National Labor Relations Board or any current union representation questions involving employees of the Company or any of its Subsidiaries; (f) there is no strike, slowdown, work stoppage or lockout existing, or, to the best knowledge of the Company, threatened, by or with respect to any employees of the -23- 28 Company or any of its Subsidiaries; (g) except as set forth in Item 3.19(g) of the Company Disclosure Schedule, no charges are pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices with respect to the Company or any of its Subsidiaries; (h) there are no claims pending against the Company or any of its Subsidiaries before any workers' compensation board which could reasonably be expected to have a Material Adverse Effect on the Company; and (i) neither the Company nor any of its Subsidiaries has received notice that any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws intends to conduct an investigation of or relating to the Company or any of its Subsidiaries and, to the best knowledge of the Company, no such investigation is in progress. 3.20. Environmental Laws. The Company has not received any notice or claim (and is not aware of any facts that would form a reasonable basis for any claim), or entered into any negotiations or agreements with any other Person, and, to the best knowledge of the Company, neither the Company nor any of its Subsidiaries is the subject of any investigation by any governmental or regulatory authority, domestic or foreign, relating to any material or potentially material liability or remedial action under any Environmental Laws. There are no pending or, to the best knowledge of the Company, threatened, actions, suits or proceedings against the Company, any of its Subsidiaries or any of their respective properties, assets or operations asserting any such material liability or seeking any material remedial action in connection with any Environmental Laws. 3.21. Accounts Receivable; Inventory. (a) Except as set forth in Item 3.21(a) of the Company Disclosure Schedule, all accounts receivable of the Company and its Subsidiaries (i) have arisen from bona fide transactions by the Company or its Subsidiaries in the ordinary course of its business and represent and will represent bona fide claims against debtors for sales and other charges and (ii) are not subject to discount except for normal cash and immaterial trade discount. The amount carried for doubtful accounts and allowances accrued on the books of the Company and its Subsidiaries is sufficient to provide for any losses that may be sustained on realization of the accounts receivable of the Company and its Subsidiaries. (b) The inventories (and any reserves established with respect thereto) of the Company and its Subsidiaries as of December 31, 1998 are described in Item 3.21(b) of the Company Disclosure Schedule. All such inventories (net of any such reserves) are properly reflected on the Company's most recent audited financial statement included in the Company Filed SEC Documents in accordance with GAAP and, to the best knowledge of the Company, are of such quality as to be useable and saleable in the ordinary course of business (subject, in the case of work-in-process inventory, to completion in the ordinary course of business) and are reflected in the books and records of the Company or its Subsidiaries at the lower of cost (based on a first-in-first-out basis) or market value. Such inventories are located at the locations set forth in Item 3.21(b) of the Company Disclosure Schedule. -24- 29 3.22. Customers and Suppliers. Neither the Company's nor any of its Subsidiaries' customers which individually accounted for more than 5% of the Company's or such Subsidiary's gross revenues during the 12-month period preceding the date hereof has terminated any agreement with the Company or such Subsidiary. Except as set forth in Item 3.22 of the Company Disclosure Schedule, as of the date hereof, no material supplier of the Company or any of its Subsidiaries has notified the Company in writing that it will stop, or decrease the rate of, supplying materials, products or services to the Company or such Subsidiary. Neither the Company nor any of its Subsidiaries has knowingly breached, so as to provide a benefit to the Company or any of its Subsidiaries that was not intended by the parties, any agreement with, or engaged in any fraudulent conduct with respect to, any customer or supplier of the Company or any of its Subsidiaries. 3.23. Voting Requirements. Pursuant to the provisions of the DGCL, the certificate of incorporation of the Company, the by-laws of the Company and any other applicable law, the affirmative vote of the holders of a majority of the voting power of all outstanding shares of Company Common Stock at the Company Stockholders Meeting to adopt this Agreement (the "Company Stockholder Approval") is the only vote of the holders of any class or series of the Company's capital stock necessary to approve and adopt the Merger, this Agreement and the transactions contemplated by this Agreement. The Board of Directors of the Company (at a meeting duly called and held) has (i) unanimously approved the Offer, this Agreement and the transactions contemplated by this Agreement, (ii) determined that the Offer and the Merger are fair to and in the best interests of the Company's stockholders, (iii) resolved (subject to Section 6.2) to recommend this Agreement, the Offer and the Merger to such holders for approval and adoption and (iv) directed (subject to Section 6.2) that this Agreement be submitted to the Company's stockholders. The Company hereby agrees to the inclusion in the Schedule 14D-9 and the Company Proxy Statement of the recommendation of such Board of Directors. 3.24. State Takeover Statutes. The Board of Directors of the Company (including the disinterested directors thereof) has unanimously approved the Offer, this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement and such approval is sufficient to render inapplicable to the Offer, the Merger, this Agreement and the transactions contemplated by this Agreement the provisions of Chapter 203 of the DGCL. To the Company's knowledge, no other state takeover statute is applicable to the Offer, the Merger, this Agreement or the transactions contemplated by this Agreement and no provision of the certificates of incorporation, by-laws or other governing instruments of the Company or any of its Subsidiaries would, directly or indirectly, restrict or impair the ability of Lucent to vote, or otherwise exercise the rights of a stockholder with respect to, shares of capital stock or other equity interest of the Company and its Subsidiaries that may be acquired or controlled by Lucent as contemplated by this Agreement. 3.25. Brokers. No broker, investment banker, financial advisor or other Person, other than Lazard Freres & Co. LLC, the fees and expenses of which will be paid by the -25- 30 Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The Company has furnished to Lucent true and complete copies of all agreements under which any such fees or expenses are payable and all indemnification and other agreements related to the engagement of the Persons to whom such fees are payable. 3.26. Opinion of Financial Advisor. The Company has received the opinion of Lazard Freres & Co. LLC, dated the date of this Agreement, to the effect that, as of such date, the consideration to be received in the Offer and the Merger by the Company's stockholders is fair from a financial point of view to the Company's stockholders (other than Lucent and its Affiliates), a signed copy of which opinion has been or will promptly be delivered to Lucent. 3.27. Complete Copies of Materials. The Company has delivered or made available to Lucent true and complete copies of each material document related to the Company or its business in connection with their legal and accounting review of the Company. 3.28. Disclosure. None of the representations or warranties of the Company contained herein, none of the information contained in the Company Disclosure Schedule, and none of the other information or documents furnished or to be furnished to Lucent or Acquisition by the Company or any of its Subsidiaries or pursuant to the terms of this Agreement, when taken as a whole, contains, or at the Effective Time will contain, any untrue statement of a material fact or omits, or at the Effective Time will omit, to state a material fact required to be stated herein or therein necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading in any material respect. 4. Representations and Warranties of Lucent and Acquisition. Except as set forth on the Disclosure Schedule delivered by Lucent to the Company prior to the execution of this Agreement (the "Lucent Disclosure Schedule") and making reference to the particular subsection of this Agreement to which exception is being taken, Lucent and Acquisition represent and warrant to the Company as follows: 4.1. Organization, Standing and Corporate Power. Each of Lucent and Acquisition is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power, as the case may be, and authority to carry on its business as now being conducted, except for those jurisdictions where the failure to be so organized, existing or in good standing individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on Lucent. Each of Lucent and Acquisition is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where -26- 31 the failure to be so qualified or licensed or to be in good standing individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on Lucent. 4.2. Authority. Each of Lucent and Acquisition has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Lucent and Acquisition and the consummation by Lucent and Acquisition of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Lucent and Acquisition. This Agreement has been duly executed and delivered by Lucent and Acquisition and, constitutes the legal, valid and binding obligation of Lucent and Acquisition, enforceable against each of them in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 4.3. No Conflict. (a) The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and the compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of Lucent or Acquisition or any of Lucent's other Subsidiaries under, (i) the charter documents of Lucent or Acquisition, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license or similar authorization applicable to Lucent or Acquisition or any of Lucent's other Subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in Section 4.3(b), any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Lucent or any of its Subsidiaries or their respective properties or assets, other than, in the case of paragraph (b), any such conflicts, violations, defaults, rights, losses or Liens that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on Lucent. (b) No consent, approval, order or authorization of, action by, or in respect of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Lucent or Acquisition in connection with the execution and delivery of this Agreement by Lucent and Acquisition or the consummation by Lucent and Acquisition of the transactions contemplated by this Agreement, except for (i) the filing of a premerger notification and report form by Lucent under the HSR Act and any applicable filings and approvals under similar foreign antitrust laws and regulations; (ii) the filing with the SEC of (A) the Offer Documents and (B) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which Lucent is qualified to do business; and (iv) such consents, approvals, orders or authorizations the failure -27- 32 of which to be made or obtained individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on Lucent. 4.4. Information Supplied. None of the information supplied or to be supplied by Lucent specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the Company Proxy Statement, if any, will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or, in the case of the Company Proxy Statement, if any, at the date the Company Proxy Statement is first mailed to the Company's stockholders and at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Lucent or Acquisition with respect to statements made or incorporated by reference therein based on information supplied by the Company specifically for inclusion or incorporation by reference therein. 4.5. Brokers. No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Lucent. 5. Conduct Pending Closing. 5.1. Conduct of Business Pending Closing. From the date hereof until the Closing, the Company shall (and shall cause each of its Subsidiaries to): (a) maintain its existence in good standing; (b) maintain the general character of its business and properties and conduct its business in the ordinary and usual manner consistent with past practices, except as expressly permitted by this Agreement; (c) maintain business and accounting records consistent with past practices; and (d) use its reasonable best efforts (i) to preserve its business intact, (ii) to keep available to the Company the services of its present officers and employees, and (iii) to preserve for the Company or such Subsidiary the goodwill of its suppliers, customers and others having business relations with the Company or such Subsidiary. -28- 33 5.2. Prohibited Actions Pending Closing. Unless otherwise provided for herein or approved by Lucent in writing, from the date hereof until the Closing, the Company shall not (and shall not permit any of its Subsidiaries to): (a) amend or otherwise change its certificate of incorporation or by-laws; (b) issue or sell or authorize for issuance or sale (other than any issuance of Company Common Stock upon the exercise of any outstanding option or warrant to purchase Company Common Stock which option or warrant was issued prior to the date hereof in accordance with the terms of the relevant stock option or warrant agreement), or grant any options or warrants or make other agreements with respect to, any shares of its capital stock or any other of its securities or warrants; (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise with respect to any of its capital stock; (d) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (e) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person, or make any loans or advances, except (i) short-term borrowings (including borrowings under the Company's existing line of credit with Fleet National Bank) incurred in the ordinary course of business (or to refinance existing or maturing indebtedness) and (ii) intercompany indebtedness between the Company and any of its Subsidiaries or between Subsidiaries; (f) (i) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any corporation, partnership, other business organization or any division thereof or any material amount of assets; (ii) enter into any contract or agreement other than in the ordinary course of business, consistent with past practice; (iii) authorize any capital commitment which is in excess of $50,000 or capital expenditures which are, in the aggregate, in excess of $100,000, except as contemplated in Item 3.8(j) of the Company Disclosure Schedule; or (iv) enter into or amend any contract, agreement, commitment or arrangement with respect to any matter set forth in Section 5.2(e) or this Section 5.2(f); (g) mortgage, pledge or subject to Lien, any of its assets or properties or agree to do so except for Permitted Liens; (h) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets (including securitizations), other than sales or licenses of finished goods in the ordinary course of business consistent with past practice; -29- 34 (i) assume, guarantee or otherwise become responsible for the obligations of any other Person or agree to so do; (j) enter into or agree to enter into any employment agreement; (k) except as set forth in Item 5.2(k) of the Company Disclosure Schedule, take any action, other than in the ordinary course of business and consistent with past practice, with respect to accounting policies or procedures (including, without limitation, procedures with respect to the payment of accounts payable and collection of accounts receivables); (l) make any Tax election or settle or compromise any material federal, state, local or foreign income Tax liability; (m) settle or compromise any pending or threatened suit, action or claim which is material or which relates to any of the transactions contemplated by this Agreement; (n) pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the most recently audited balance sheet contained in the Company SEC Documents or subsequently incurred in the ordinary course of business and consistent with past practice; (o) except in connection with the sale of the Company's products in the ordinary course of business and consistent with past practice, sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of the Intellectual Property Rights; (p) except as required by law or contemplated hereby, enter into, adopt or amend in any material respect or terminate any Company Benefit Plan or any other agreement, plan or policy involving the Company or its Subsidiaries, and one or more of its directors, officers or employees, or materially change any actuarial or other assumption used to calculate funding obligations with respect to any pension plan, or change the manner in which contributions to any pension plan are made or the basis on which such contributions are determined; (q) except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not materially increase benefits or compensation expenses of the Company or its Subsidiaries, or as contemplated hereby or by the terms of any employment agreement in existence on the date hereof, increase the cash compensation of any director, executive officer or other key employee or pay any benefit or amount not required by a plan or arrangement as in effect on the date of this Agreement to any such Person; or (r) announce an intention, commit or agree to do any of the foregoing. -30- 35 5.3. Other Actions. The Company shall not take any action that would reasonably be expected to result in (i) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the Offer Conditions not being satisfied. 6. Additional Agreements. 6.1. Access; Documents; Supplemental Information. (a) From and after the date hereof until the Closing, the Company shall afford, shall cause its Subsidiaries to afford and, with respect to clause (ii) below, shall use its reasonable best efforts to cause the independent certified public accountants for the Company to afford, (i) to the officers, independent certified public accountants, counsel and other representatives of Acquisition and Lucent, upon reasonable advance notice, free and full access at all reasonable times to the properties, books and records including tax returns filed and those in the process of being prepared by the Company or any of its Subsidiaries and the right to consult with the officers, employees, accountants, counsel and other representatives of the Company or any of its Subsidiaries in order that Acquisition and Lucent may have full opportunity to make such investigations as they shall reasonably desire to make of the operations, properties, business, financial condition and prospects of the Company and its Subsidiaries, (ii) to the independent certified public accountants of Acquisition and Lucent, upon reasonable advance notice, free and full access at all reasonable times to the work papers and other records of the accountants relating to the Company and its Subsidiaries, and (iii) to Acquisition and Lucent and their representatives, such additional financial and operating data and other information as to the properties, operations, business, financial condition and prospects of the Company and its Subsidiaries as Acquisition and Lucent shall from time to time reasonably require. (b) From the date of this Agreement through and including the Closing, Acquisition, Lucent and the Company agree to furnish to each other copies of any notices, documents, requests, court papers, or other materials received from any governmental agency or any other third party with respect to the transactions contemplated by this Agreement, except where it is obvious from such notice, document, request, court paper or other material that the other party was already furnished with a copy thereof. (c) Except as required by law, the Company and Lucent shall not, and shall not permit any of their respective Subsidiaries to, voluntarily take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of such party set forth in this Agreement that are qualified as to materiality becoming untrue at the Effective Time, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect at the Effective Time, or (iii) any of the conditions to the Merger set forth in Article 7 not being satisfied. -31- 36 (d) The Company shall give prompt notice to Lucent, and Lucent shall give prompt notice to the Company, of (a) the occurrence, or non-occurrence, of any event which would be likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied; and (b) any failure of the Company, Lucent or Acquisition, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided that the delivery of any notice pursuant to this Section 6.1(d) shall not limit or otherwise affect the remedies available to the party receiving such notice. (e) The Company shall notify Lucent of any filing made by the Company with the SEC under the Exchange Act, including, without limitation, any Form 10-Q, 8-K or 10-K, not later than five business days after the date of such filing. 6.2. No Solicitation by the Company. (a) The Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any of its directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries to, directly or indirectly through another Person, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes a Takeover Proposal (as defined below) or (ii) participate in any discussions or negotiations regarding any Takeover Proposal; provided, that if, at any time prior to the date of the Company Stockholders Meeting (the "Applicable Period"), the Board of Directors of the Company determines in good faith, after consultation with outside counsel, that it is legally advisable to do so in order to comply with its fiduciary duties to the Company's stockholders under applicable law, the Company may, in response to a Superior Proposal (as defined below) which was not solicited by it or which did not otherwise result from a breach of this Section 6.2, and subject to providing prior written notice of its decision to take such action to Lucent (a "Section 6.2 Notice") and complying with Section 6.2(c), (A) furnish information with respect to the Company and its Subsidiaries to any Person making a Superior Proposal pursuant to a customary confidentiality agreement (as determined by the Company after consultation with its outside counsel) and (B) participate in discussions or negotiations regarding such Superior Proposal. For purposes of this Agreement, a "Takeover Proposal" means any inquiry, proposal or offer from any Person (i) relating to any direct or indirect acquisition or purchase of (A) a business that constitutes 15% or more of the net revenues, net income or the assets of the Company and its Subsidiaries, taken as a whole, (B) 20% or more of any class of equity securities of the Company or (C) any material equity interest in any Subsidiary of the Company (i.e., in excess of 20% of the outstanding capital stock of such Subsidiary), (ii) relating to any tender offer or exchange offer that if consummated would result in any Person beneficially owning 20% or more of any class of equity securities of the Company or any material equity interest in any of its Subsidiaries, or (iii) relating to any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement. -32- 37 (b) Except as expressly permitted by this Section 6.2, neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Lucent, the approval or recommendation by such Board of Directors or such committee of the Offer, the Merger or this Agreement, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") related to any Takeover Proposal, other than any such agreement entered into concurrently with a termination pursuant to the next sentence in order to facilitate such action. Notwithstanding the foregoing, during the Applicable Period, in response to a Superior Proposal which was not solicited by the Company and which did not otherwise result from a breach of Section 6.2(a), the Board of Directors of the Company may (subject to this and the following sentences) terminate this Agreement (and concurrently with or after such termination, if it so chooses, cause the Company to enter into any Acquisition Agreement with respect to any Superior Proposal), but only at a time that is during the Applicable Period and is after the third business day following Lucent's receipt of written notice advising Lucent that the Board of Directors of the Company is prepared to accept a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the Person making such Superior Proposal. For purposes of this Agreement, a "Superior Proposal" means any proposal made by a third party to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction, for consideration consisting of cash and/or securities, more than 50% of the combined voting power of the shares of Company Common Stock then outstanding or all or substantially all the assets of the Company and otherwise on terms which the Board of Directors of the Company determines in its good faith judgment (based on the advice of a financial advisor of nationally recognized reputation) to be more favorable to the Company's stockholders than the Merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board of Directors of the Company, is reasonably capable of being obtained by such third party. (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 6.2, the Company shall promptly advise Lucent orally and in writing of any Takeover Proposal or any request for information by any Person which the Company reasonably believes is in connection with the preparation of a Takeover Proposal, the material terms and conditions of such Takeover Proposal or the information requested by any such Person and the identity of the Person making such Takeover Proposal or request for information. The Company will promptly inform Lucent of any change in the status and material terms and conditions (including amendments or proposed amendments) of any such Takeover Proposal or request for information. (d) Nothing contained in this Section 6.2 shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if, in the good faith judgment of the Board of Directors of the Company, after -33- 38 consultation with outside counsel, failure so to disclose would be inconsistent with its obligations under applicable law; provided, that, except as expressly permitted by this Section 6.2, neither the Company nor its Board of Directors nor any committee thereof shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Offer, this Agreement or the Merger or approve or recommend, or propose publicly to approve or recommend, a Takeover Proposal. 6.3. Preparation of the Company Proxy Statement; Company Stockholders Meeting. (a) If the Company Stockholder Approval is required by law, the Company shall, as soon as practicable following the expiration of the Offer, prepare and file with the SEC a preliminary Company Proxy Statement and shall use its reasonable best efforts to respond to any comments of the SEC or its staff and to cause the Company Proxy Statement to be mailed to the Company's stockholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. No filing of, or amendment or supplement to, the Company Proxy Statement will be made by the Company without providing Lucent the opportunity to review and comment thereon. The Company shall notify Lucent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Company Proxy Statement or for additional information and will supply Lucent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Company Proxy Statement or the Merger. If at any time prior to the Company Stockholders Meeting there shall occur any event or information that should be set forth in an amendment or supplement to the Company Proxy Statement, so that the Company Proxy Statement would not include any misstatement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Company shall notify Lucent and shall promptly prepare and mail to its stockholders and file with the SEC an appropriate amendment or supplement describing such information. The Company shall not mail any Company Proxy Statement or any amendment or supplement thereto, to which Lucent reasonably objects. (b) If the Company Stockholder Approval is required by law, the Company shall, as soon as practicable following the expiration of the Offer, duly call, give notice of, convene and hold a meeting of its stockholders (the "Company Stockholders Meeting") for the purpose of obtaining the Company Stockholder Approval and shall, through its Board of Directors, recommend to its stockholders the approval and adoption of the Offer, this Agreement, the Merger and the other transactions contemplated hereby. Without limiting the generality of the foregoing but subject to its rights to terminate this Agreement pursuant to Section 6.2(b), the Company agrees that its obligations pursuant to the first sentence of this Section 6.3(b) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company of any Takeover Proposal. Notwithstanding the foregoing, if Acquisition or any other Subsidiary of Lucent shall acquire at least 90% of the outstanding Shares, the parties shall take all necessary and appropriate action to cause the Merger to become effective as soon as -34- 39 practicable after the expiration of the Offer without a Stockholders Meeting in accordance with Section 253 of the DGCL. (c) Lucent agrees to cause all Shares purchased pursuant to the Offer and all other Shares owned by Lucent or any Subsidiary of Lucent to be voted in favor of the Merger, this Agreement and the transactions contemplated hereby. 6.4. Reasonable Best Efforts. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other transactions contemplated by this Agreement, including (i) the taking of all reasonable acts necessary to cause the Offer Conditions to be satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (iii) the obtaining of all necessary consents, approvals or waivers from third parties, (iv) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (v) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. (b) In connection with and without limiting the foregoing, the Company and its Board of Directors shall (i) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the Offer, the Merger, this Agreement or any of the other transactions contemplated by this Agreement and (ii) if any state takeover statute or similar statute or regulation becomes applicable to the Offer, the Merger, this Agreement or any other transaction contemplated by this Agreement, take all action necessary to ensure that the Offer, the Merger, this Agreement and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by the Offer and this Agreement and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger or this Agreement and the other transactions contemplated by this Agreement. 6.5. Stock Options; Warrants. (a) The Board of Directors of the Company (or, if appropriate, any committee administering the Company Stock Plans) shall adopt such resolutions and take such other actions as may be required to terminate the Company Stock Plans as of the Effective Time and each then outstanding Company Stock Option granted under the Company Stock Plans, whether vested or unvested, shall be cancelled and converted into a right of the holder thereof to receive in respect of such Company Stock Option an amount in cash, without interest (the "Company Stock Option Consideration"), equal to the product of (i) the -35- 40 number of shares of Company Common Stock represented by such Company Stock Option immediately prior to such cancellation and conversion multiplied by (ii) the excess, if any, by which the Offer Price exceeds the exercise price per share with respect to such Company Stock Option (such payment to be net of all applicable federal, state, local or foreign taxes). (b) Prior to the Effective Time, the Company shall (i) obtain all necessary consents from, and provide (in a form acceptable to Lucent) any required notices to, holders of Company Stock Options and (ii) amend the terms of the Company Stock Plans, in each case, as is necessary to give effect to the provisions of Section 6.5(a). (c) Prior to the Effective Time, the Company shall take all actions to receive from each holder of an outstanding warrant (each, a "Warrant") to purchase shares of Company Common Stock an agreement that, as of the Effective Time, such Warrant shall be converted into a right of such holder to receive from the Paying Agent the consideration set forth in the next sentence at the same time that each such holder is entitled to receive payment for shares of Company Common Stock from the Surviving Corporation in connection with the Merger. Each holder of a Warrant shall be entitled to receive from the Paying Agent in respect of the shares of Company Common Stock to be issued upon the exercise of such Warrant, an amount in cash, without interest (the "Warrant Consideration"), equal to the product of (i) the number of shares of Company Common Stock subject to such Warrant immediately prior to the Effective Time and (ii) the excess, if any, by which the Offer Price exceeds the exercise price per share that was applicable with respect to such Warrant. 6.6. Employee Benefit Plans; Existing Agreement. (a) As soon as practicable after the Effective Time (the "Benefits Date"), Lucent shall provide, or cause to be provided, employee benefit plans, programs and arrangements to employees of the Company that are the same as those made generally available to non-represented employees of Lucent who are hired by Lucent after December 31, 1998. From the Effective Time to the Benefits Date (which the parties acknowledge may occur on different dates with respect to different plans, programs or arrangements of the Company) (the "Continuation Period"), Lucent shall provide, or cause to be provided, the employee benefit plans, programs and arrangements of the Company provided to employees of the Company as of the date hereof. (b) With respect to each benefit plan, program practice, policy or arrangement maintained by Lucent (the "Lucent Plans") in which employees of the Company subsequently participate, for purposes of determining vesting and entitlement to benefits, including for severance benefits and vacation entitlement (but not for accrual of pension benefits), service with the Company (or predecessor employers to the extent the Company provides past service credit) shall be treated as service with Lucent; provided, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any pre-existing condition limitations. Each Lucent Plan shall waive pre-existing condition limitations to the same extent waived under the applicable Company Benefit Plan. -36- 41 Company Employees shall be given credit for amounts paid under a corresponding benefit plan during the same period for purposes of applying deductibles, copayments and out- of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Lucent Plan. (c) Prior to the Effective Time, the Company shall take all necessary actions or agreements to terminate the retirement plan for employees of the Company in accordance with its terms. The effective date of such termination shall in no event be later than the Effective Time. Prior to such termination, the Company shall file with respect thereto a determination letter application on Form 5310 with the IRS. In connection with such termination, the assets of such plan (including any excess assets), net of expenses, shall be allocated among participants based on the accrued benefit obligation. (d) Prior to the Effective Time, the Company shall terminate its supplemental retirement agreements. In connection therewith, accrued benefits shall be paid to each participant in such plan in accordance with the procedures described in Section 10.2 of each such supplemental retirement agreement. (e) Prior to the Effective Time, the Company shall terminate its retirement plan for outside directors in accordance with the terms of such plan. In connection therewith, accrued benefits shall be paid to each participant in such plan in accordance with the procedures described in Section 16 of such plan. 6.7. Indemnification. (a) From and after the consummation of the Offer, Lucent shall, or shall cause the Surviving Corporation to, fulfill and honor in all respects the obligations of the Company to indemnify each Person who is or was a director or officer (an "Indemnified Party") of the Company or any of its Subsidiaries pursuant to any indemnification provision of the Company's certificate of incorporation or by-laws as each is in effect on the date hereof. (b) For a period of six years after the consummation of the Offer, Lucent shall cause to be maintained in effect the current officers' and directors' liability insurance maintained by the Company with respect to the Indemnified Parties; provided that Lucent may elect either (i) to require the Company to obtain prior to the Effective Time coverage of the type contemplated by Section 10 of the Company's existing directors, officers and corporate liability insurance policy or (ii) to substitute therefor policies of at least the same coverage and amounts (containing terms and conditions which are no less advantageous to the Indemnified Parties than such existing insurance) covering acts or omissions occurring prior to the Effective Time. The current annual premium paid by the Company for its existing coverage is set forth in Item 6.7(b) of the Company Disclosure Schedule. (c) This Section 6.7 shall survive the closing of all the transactions contemplated hereby, is intended to benefit the Indemnified Parties and their respective heirs and -37- 42 personal representative (each of which shall be entitled to enforce this Section 6.7 against Lucent and the Surviving Corporation, as the case may be, as a third-party beneficiary of this Agreement), and shall be binding on all successors and assigns of Lucent and the Surviving Corporation. 6.8. Directors. Promptly upon the acceptance for payment of, and payment for, Shares by Acquisition pursuant to the Offer, Acquisition shall be entitled to designate such number of directors on the Board of Directors of the Company as will give Acquisition, subject to compliance with Section 14(f) of the Exchange Act, representation on the Company's Board of Directors equal to the product of (i) the total number of directors on the Company's Board of Directors and (ii) the percentage that the number of Shares purchased by Acquisition in the Offer bears to the number of Shares outstanding, and the Company shall, at such time, cause Acquisition's designees to be so elected by its existing Board of Directors; provided, that in the event that Acquisition's designees are elected to the Board of Directors of the Company, until the Effective Time such Board of Directors shall have at least two directors who are directors of the Company on the date of this Agreement and who are not officers of the Company or any of its Subsidiaries (the "Independent Directors") and; provided further that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Directors then remain, the other directors of the Company on the date hereof shall designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its Subsidiaries, or officers or affiliates of Lucent or any of its Subsidiaries, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable law, the Company shall take all action requested by Lucent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Acquisition shall have provided to the Company on a timely basis all information required to be included in the Information Statement with respect to Acquisition's designees). In connection with the foregoing, the Company will promptly, at the option of Lucent, either increase the size of the Company's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable Acquisition's designees to be elected or appointed to, and to constitute a majority of the Company's Board of Directors as provided above. 6.9. Fees and Expenses; Termination Fee. (a) Except as provided in this Section 6.9, all fees and expenses incurred in connection with the Offer, the Merger, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated, except that each of Lucent and the Company shall bear and pay one-half of (i) the costs and expenses incurred in connection with the filing, printing and mailing of the Company Proxy Statement (including SEC filing fees) and (ii) the filing fees for the pre-merger notification and report forms under the HSR Act. -38- 43 (b) In the event that (i) a bona fide Superior Proposal shall have been made directly to the stockholders of the Company generally or shall have otherwise become publicly known or any Person shall have publicly announced an intention (whether or not conditional) to make a Superior Proposal and thereafter this Agreement is terminated by any of Lucent, Acquisition or the Company pursuant to Section 11(b)(i), or (ii) this Agreement is terminated (A) by Lucent or Acquisition pursuant to Section 11(g), (B) by the Company pursuant to Section 11(d) or (C) by Lucent pursuant to Section 11(c), then the Company shall promptly, but in no event later than the date of such termination, pay Lucent a fee equal to $2,000,000 (the "Termination Fee"), payable by wire transfer of same day funds; provided, that no Termination Fee shall be payable to Lucent pursuant to clause (i) of this Section 6.9(b) unless within twelve (12) months of such termination the Company or any of its Subsidiaries enters into any definitive agreement with respect to, or consummates, any Superior Proposal. The Company acknowledges that the agreements contained in this Section 6.9(b) are an integral part of the transactions contemplated by this Agreement and that, without these agreements, Lucent would not enter into this Agreement. Accordingly, if the Company fails promptly to pay the amount due pursuant to this Section 6.9(b), and, in order to obtain such payment, Lucent commences a suit which results in a final, non-appealable judgment against the Company for the fee set forth in this Section 6.9(b), the Company shall pay to Lucent its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the fee at the prime rate of Citibank, N.A. in effect on the date such payment was required to be made. 6.10. Public Announcements. Lucent and the Company will consult with each other before issuing, and provide each other the opportunity to review, comment upon and concur with, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as either party may determine is required by applicable law (including Rule 14d-9 promulgated under the Exchange Act), court process or by obligations pursuant to any listing agreement with any national securities exchange or national trading system or as contemplated or provided elsewhere herein. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. 6.11. Stockholder Litigation. The Company agrees that it shall not settle any litigation commenced after the date hereof against the Company or any of its directors by any stockholder of the Company relating to the Offer, the Merger or this Agreement without the prior written consent of Lucent, which consent shall not be unreasonably withheld. The Company shall give Lucent the opportunity to participate in the defense or settlement of any stockholder litigation against the Company and/or its directors relating to the transactions contemplated by this Agreement. In addition, the Company shall not voluntarily cooperate with any third party that may hereafter seek to restrain or prohibit or otherwise oppose the Offer, the Merger or the transactions contemplated by this Agreement and shall cooperate with Lucent and Acquisition to -39- 44 resist any such effort to restrain or prohibit or otherwise oppose the Offer, the Merger or the transactions contemplated by this Agreement. 7. Conditions Precedent. 7.1. Conditions Precedent to Each Party's Obligation to Effect the Merger. The respective obligations of each party hereto to effect the Merger shall be subject to the fulfillment or satisfaction, prior to or on the Closing Date of the following conditions: (a) Stockholder Approval. If required by applicable law, the Company Stockholder Approval shall have been obtained. (b) No Litigation. No judgment, order, decree, statute, law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued by any court or other Governmental Entity of competent jurisdiction or other legal restraint or prohibition (collectively, "Restraints") shall be in effect, and there shall not be pending any suit, action or proceeding by any Governmental Entity (i) preventing the consummation of the Merger or (ii) which otherwise is reasonably likely to have a Material Adverse Effect on the Company or Lucent, as applicable, arising out of this Agreement or the transactions contemplated hereby; provided, that each of the parties shall have used its reasonable best efforts to prevent the entry of any such Restraints and to appeal as promptly as possible any such Restraints that may be entered. (c) Purchases of Shares. Acquisition shall have previously accepted for payment and paid for Shares pursuant to the Offer. 7.2. Conditions Precedent to Obligations of Acquisition and Lucent. All obligations of Acquisition and Lucent under this Agreement are subject to the fulfillment or satisfaction, prior to or on the Closing Date, of each of the following conditions precedent: (a) Performance of Obligations. The Company shall have performed and complied in all material respects with all agreements and conditions contained in this Agreement that are required to be performed or complied with by it prior to or at the Closing. (b) Representations and Warranties. Each of the Company's representations and warranties contained in Section 3 of this Agreement to the extent it is qualified by Material Adverse Effect shall be true and correct and each of the Company's representations and warranties to the extent it is not so qualified by Material Adverse Effect, shall be true and correct in all material respects, in each case, on and as of the Closing with the same effect as though such representations and warranties were made on and as of the Closing, except for changes permitted by this Agreement and except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be as of such earlier date. Lucent and Acquisition shall have received a certificate dated the Closing -40- 45 Date and signed by the Chairman, President or a Vice-President of the Company, certifying that, the conditions specified in clauses (a) and (b) of this Section 7.2 have been satisfied. (c) No Material Adverse Change. No event or events shall have occurred that could reasonably be expected to have a Material Adverse Effect on the Company, and Lucent shall have received a certificate signed on behalf of the Company by its Chief Executive Officer and Chief Financial Officer to such effect. (d) Consents. The Company shall have received all necessary consents or waivers, in form and substance satisfactory to Lucent and Acquisition, from the other parties to each contract, lease or agreement to which the Company is a party, except where the failure to receive such consent would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Company. 7.3. Conditions Precedent to the Company's Obligations. All obligations of the Company under this Agreement are subject to the fulfillment or satisfaction, prior to or on the Closing Date, of each of the following conditions precedent: (a) Performance of Obligations. Acquisition and Lucent shall have performed and complied in all material respects with all agreements and conditions contained in this Agreement that are required to be performed or complied with by them prior to or at the Closing. (b) Representations and Warranties. Each of the representations and warranties of Acquisition and Lucent contained in Section 4 of this Agreement to the extent it is qualified by Material Adverse Effect shall be true and correct and each of the representations and warranties of Acquisition and Lucent to the extent it is not so qualified by Material Adverse Effect shall be true and correct in all material respects, in each case, on and as of the Closing with the same effect as though such representations and warranties were made on and as of the Closing except for changes permitted by this Agreement and except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be as of such earlier date. The Company shall have received certificates dated the Closing Date and signed by the President or a Vice-President of Acquisition and an authorized signatory of Lucent, certifying that the conditions specified in clauses (a) and (b) of this Section 7.3 have been satisfied. 8. Non-Survival of Representation and Warranties. 8.1. Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time or, in the case of the Company, shall survive the acceptance of payment for, Shares by Acquisition pursuant to the Offer. This Section shall not limit any covenant or agreement by the parties which contemplates performance after the Effective Time. -41- 46 9. Contents of Agreement; Parties in Interest; etc. This Agreement and the agreements referred to or contemplated herein and the letter agreement dated June 18, 1999, concerning confidentiality (the "Confidentiality Agreement") set forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and, except as set forth in this Agreement, such other agreements and the Exhibits hereto and the Confidentiality Agreement, there are no representations or warranties, express or implied, made by any party to this Agreement with respect to the subject matter of this Agreement and the Confidentiality Agreement. Except for the matters set forth in the Confidentiality Agreement, any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement and the agreements referred to or contemplated herein. 10. Assignment and Binding Effect. This Agreement may not be assigned by either party hereto without the prior written consent of the other party; provided, that Acquisition may assign its rights and obligations under this Agreement to any directly or indirectly wholly-owned Subsidiary of Lucent, upon written notice to the Company if the assignee shall assume the obligations of Acquisition hereunder and Lucent shall remain liable for its obligations hereunder. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. 11. Termination. This Agreement may be terminated, and the Merger may be abandoned at any time prior to the Effective Time whether before or after the approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company or the stockholder of Acquisition (provided that if the Shares are purchased pursuant to the Offer, neither Lucent nor Acquisition may in any event terminate this Agreement): (a) by the agreement of each of the Board of Directors of Lucent, Acquisition and the Company; (b) by Lucent, Acquisition or the Company if (i) Acquisition shall not have accepted for payment any Shares pursuant to the Offer prior to December 31, 1999; provided that the right to terminate this Agreement under this Section 11(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of Acquisition to accept for payment any Shares on or before such date; or (ii) any court of competent jurisdiction in the United States or other United States governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree, ruling or other action shall have become final and nonappealable; (c) by Lucent, if the Company or any of its directors or officers shall participate in discussions or negotiations in breach (other than an immaterial breach) of Section 6.2; -42- 47 (d) by the Company in accordance with Section 6.2(b); provided that, in order for the termination of this Agreement pursuant to this paragraph (d) to be deemed effective, the Company shall have complied with all provisions of Section 6.2, including the notice provisions therein, and with applicable requirements, including the payment of the Termination Fee; (e) by the Company, in the event Lucent or Acquisition materially breaches its obligations under this Agreement, unless such breach is cured within 15 days after notice to Lucent by the Company; (f) by Lucent or Acquisition, in the event the Company materially breaches its obligations under this Agreement unless such breach is cured within 15 days after notice to Company by Lucent or Acquisition; or (g) by Lucent or Acquisition prior to the purchase of Shares pursuant to the Offer in the event of a breach or failure to perform by the Company of any representation, warranty, covenant or other agreement contained in this Agreement which (i) would give rise to the failure of a condition set forth in paragraph (d) or (e) of Exhibit A and (ii) cannot be cured, or has not been cured within 15 days after the Company receives written notice from Lucent of such breach or failure to perform. 12. Definitions. As used in this Agreement the terms set forth below shall have the following meanings: (a) "Affiliate" of a Person means any other Person who directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, such Person. As used in this definition, "control" means the possession of the power, directly or indirectly, to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. (b) "Benefit Plan" shall mean any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other material plan, arrangement or understanding (whether or not legally binding) providing material benefits to any current or former employee, officer or director of the Company. (c) "best knowledge" of any Person which is not an individual means, with respect to any specific matter, the knowledge, after due inquiry, of such Person's executive officers and any other officer or persons having primary responsibility for such matter. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended. (e) "Environmental Laws" shall mean all applicable federal, state, local or foreign laws, rules and regulations, orders, decrees, judgments, permits, filings and licenses -43- 48 relating (i) to protection and clean-up of the environment and activities or conditions related thereto, including those relating to the generation, handling, disposal, transportation or release of Hazardous Substances and (ii) the health or safety of employees in the workplace environment, all as amended from time to time, and shall also include any common law theory based on nuisance, trespass, negligence or other tortious conduct. (f) "GAAP" shall mean generally accepted accounting principles. (g) "Hazardous Substances" shall mean any and all hazardous and toxic substances, wastes or materials, any pollutants, contaminants, or dangerous materials (including, but not limited to, polychlorinated biphenyls, PCBs, friable asbestos, volatile and semi-volatile organic compounds, oil, petroleum products and fractions, and any materials which include hazardous constituents or become hazardous, toxic, or dangerous when their composition or state is changed), or any other similar substances or materials which are included under or regulated by any Environmental Laws. (h) "Liens" shall mean any mortgage, pledge, lien, security interest, conditional or installment sale agreement, encumbrance, charge or other claims of third parties of any kind. (i) "Material Adverse Effect" on a Person shall mean (unless otherwise specified) any condition or event that: (i) has a material adverse effect on the assets, business, financial condition, operations or prospects of such Person and its Subsidiaries, taken as a whole, other than any condition or event (A) relating to the economy in general, (B) relating to the industries in which such party operates in general, (C) arising out of or resulting from actions contemplated by the parties in connection with, or which is attributable to, the announcement of this Agreement and the transactions contemplated hereby (including loss of personnel, customers or suppliers or the delay or cancellation of orders for products) or (D) in the case of the Company, litigation brought or threatened against the Company or any member of its Board of Directors in respect of this Agreement; (ii) materially impairs the ability of such Person to perform its obligations under this Agreement; or (iii) prevents or materially delays the consummation of transactions contemplated under this Agreement. (j) "Permitted Liens" shall mean (i) Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business that are not yet due and payable or are being contested in good faith; (ii) pledges or deposits made in the ordinary course of business; (iii) Liens of mechanics, materialmen, warehousemen or other like Liens securing obligations incurred in the ordinary course of business that are not yet due and payable or are being contested in good faith; and (iv) similar Liens and encumbrances which are incurred in the ordinary course of business and which do not in the aggregate materially detract from the value of such assets or properties or materially impair the use thereof in the operation of such business. -44- 49 (k) "Person" shall mean any individual, corporation, partnership, limited partnership, limited liability company, trust, association or entity or government agency or authority. (l) "reasonable best efforts" shall mean prompt, substantial and persistent efforts as a prudent Person desirous of achieving a result would use in similar circumstances; provided that the Company, Lucent or Acquisition, as applicable, shall be required to expend only such resources as are commercially reasonable in the applicable circumstances. (m) "Subsidiary" of a Person shall mean any corporation, partnership, joint venture or other entity in which such Person (i) owns, directly or indirectly, 50% or more of the outstanding voting securities or equity interests or (ii) is a general partner. (n) "Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall include all (i) federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or environmental tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any governmental authority, (ii) liability for the payment of any amounts described in (i) as a result of being a member of an affiliated, consolidated, combined or unitary group and (iii) liability for the payment of any amounts as a result of being party to any tax sharing agreement or as a result of any express or implied obligation to indemnify any other Person with respect to the payment of any amounts of the type described in clause (i) or (ii). (o) "Tax Return" shall mean any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. 13. Notices. Any notice, request, demand, waiver, consent, approval, or other communication which is required or permitted to be given to any party hereunder shall be in writing and shall be deemed given only if delivered to the party personally or sent to the party by facsimile transmission (promptly followed by a hard-copy delivered in accordance with this Section 13) or by registered or certified mail (return receipt requested), with postage and registration or certification fees thereon prepaid, addressed to the party at its address set forth below: -45- 50 If to Acquisition or Lucent: Lucent Technologies Inc. 2000 Northeast Expressway Norcross, Georgia 30071 Att: President, NPG Telephone No: separately supplied Facsimile No: separately supplied with copies to: Lucent Technologies Inc. 600 Mountain Avenue Room 6A 311 Murray Hill, NJ 07974 Att: Pamela F. Craven Vice President-Law Telephone No: separately supplied Facsimile No: separately supplied If to the Company: SpecTran Corporation 50 Hall Road Sturbridge, MA 01566 Att: President Telephone No: separately supplied Facsimile No: separately supplied with a copy to: Nordlicht & Hand 645 Fifth Avenue New York, New York 10022 Att: Ira S. Nordlicht, Esq. Telephone No: separately supplied Facsimile No: separately supplied or to such other address or Person as any party may have specified in a notice duly given to the other party as provided herein. Such notice, request, demand, waiver, consent, approval or other -46- 51 communication will be deemed to have been given as of the date so delivered, telegraphed or mailed. 14. Amendment. This Agreement may be amended, modified or supplemented at any time before or after obtaining the Company Stockholder Approval, provided that (i) after any such approval, there shall not be made any amendment that by Law requires further approval by the stockholders of the Company or the approval of the stockholders of Lucent without the further approval of such stockholders and (ii) after the purchase of the Shares pursuant to the Offer, there shall not be made any amendment which decreases the Merger Consideration. Any amendment, modification or revision of this Agreement and any waiver of compliance or consent with respect hereto shall be effective only by a written instrument executed by each of the parties hereto. Following the election or appointment of Acquisition's designees pursuant to Section 6.8 and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors then in office shall be required by the Company to (i) amend or terminate this Agreement by the Company, (ii) exercise or waive any of the Company's rights or remedies under this Agreement, (iii) extend the time for performance of Lucent and Acquisition's respective obligations under this Agreement or (iv) take any action to amend or otherwise modify the Company's certificate of incorporation or by-laws (or similar governing instruments of the Company's Subsidiaries) in violation of Section 6.7. 15. Extensions; Waiver. At any time prior to the Effective Time, a party may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 14, waive compliance by the other party with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute shall not constitute a waiver of such rights. 16. Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of Delaware as applied to contracts made and fully performed in such state. 17. No Benefit to Others. The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto, and their respective successors and assigns, and they shall not be construed as conferring, and are not intended to confer, any rights on any other Person. -47- 52 18. Severability. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of the Agreement shall remain in full force and effect. Upon such determination, the parties hereto shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the parties to the fullest extent permitted by applicable law. 19. Section Headings. All section headings are for convenience only and shall in no way modify or restrict any of the terms or provisions hereof. 20. Schedules and Exhibits. All Schedules and Exhibits referred to herein are intended to be and hereby are specifically made a part of this Agreement. 21. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and the Company, Acquisition and Lucent may become a party hereto by executing a counterpart hereof. This Agreement and any counterpart so executed shall be deemed to be one and the same instrument. -48- 53 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have duly executed this Agreement as of the date first above written. LUCENT TECHNOLOGIES INC. By: /s/ William R. Spivey ________________________________ Name: William R. Spivey Title: Group President, Networks Products Group SEATTLE ACQUISITION INC. By: /s/ William R. Spivey ________________________________ Name: William R. Spivey Title: President SPECTRAN CORPORATION By: /s/ Charles B. Harrison ________________________________ Name: Charles B. Harrison Title: President, Chief Executive Officer and Chairman of the Board of Directors 54 EXHIBIT A Conditions of the Offer: Notwithstanding any other term of the Offer or this Agreement, Acquisition shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Acquisition's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer such number of Shares that would constitute at least a majority of the outstanding Shares (determined on a fully diluted basis for all outstanding stock options and any other rights to acquire Shares on the date of purchase) (the "Minimum Condition") and (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. Furthermore, Acquisition shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may, in accordance with Section 11, terminate this Agreement or amend the Offer with the consent of the Company, if, upon the scheduled expiration date of the Offer (as extended, if required, pursuant to the second to the last sentence of Section 1.1(a)), any of the following conditions exists and is continuing and does not result principally from the breach by Lucent or Acquisition of any of their obligations under this Agreement: (a) there shall be instituted or pending by any Governmental Entity any suit, action or proceeding (i) challenging the acquisition by Lucent or Acquisition of any Shares under the Offer, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement or seeking to obtain from the Company, Lucent or Acquisition any damages that are material in relation to the Company and its Subsidiaries taken as a whole, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Lucent or any of Lucent's Subsidiaries of all or a portion of the business or assets of the Company or Lucent and its Subsidiaries, taken as a whole, or to compel the Company or Lucent and its Subsidiaries to dispose of or hold separate all or a portion of the business or assets of the Company or Lucent and their Subsidiaries, taken as a whole, in each case as a direct result of the Offer or any of the other transactions contemplated by this Agreement or (iii) seeking to impose material limitations on the ability of Lucent or Acquisition to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer including, without limitation, the right to vote such Shares on all matters properly presented to the stockholders of the Company; (iv) seeking to prohibit Lucent or any of its Subsidiaries from effectively controlling in any material respect any material portion of the business or operations of the Company; (v) that could reasonably be expected to require the divestiture by Lucent or Acquisition of Shares, in the case of any of the foregoing in clauses (ii), (iii) or (iv), which could reasonably be expected, individually or in the aggregate, to have a material adverse effect on the businesses of the Company and its Subsidiaries; or (vi) that could reasonably be expected to result in a Material Adverse Effect on the Company or Lucent; 55 (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, by any Governmental Entity or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that would result in any of the consequences referred to in clauses (i) through (vi) of paragraph (a) above; (c) there shall have occurred any events or changes which have had or which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company; (d) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case at the date of this Agreement and at the scheduled or extended expiration of the Offer; (e) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under this Agreement, which failure to perform or comply cannot be cured, or has not been cured within 15 days after the Company receives written notice from Lucent of such breach or failure to perform; (f) this Agreement shall have been terminated in accordance with its terms; (g) any consent (other than the filing of the Certificate of Merger or Company Stockholder Approval if required by the DGCL) required to be filed, occurred or been obtained by the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement, the Offer and the consummation of the transactions contemplated by this Agreement shall not have been filed or obtained or shall not have occurred, except where the failure to obtain such consent could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company; (h) the Company's Board of Directors (i) shall have withdrawn, or modified or changed in a manner adverse to Lucent or Acquisition (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement or the Merger, (ii) shall have recommended a Superior Proposal, (iii) shall have adopted any resolution to effect any of the foregoing or (iv) upon request of Lucent or Acquisition, shall fail to reaffirm its approval of recommendation of the Offer, the Merger Agreement or the Merger; or (i) any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act), other than Lucent, Acquisition or their Affiliates or any group of which any of them is a member, shall have acquired or announced its intention to acquire beneficial ownership -ii- 56 (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the Shares. and, in the good faith judgment of Lucent or Acquisition, in its sole discretion, make it inadvisable to proceed with such acceptance of Shares for payment or the payment therefor; The foregoing conditions are for the sole benefit of Lucent and Acquisition and (except for the Minimum Condition), subject to the terms of this Agreement, may be waived by Lucent and Acquisition in whole or in part at any time and from time to time in their sole discretion. The failure by Lucent or Acquisition at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Terms used but not defined herein shall have the meanings assigned to such terms in the Agreement to which this Exhibit A is a part. -iii- 57 GLOSSARY OF DEFINED TERMS Defined Term Location of Definition - ------------ ---------------------- Acquisition........................................... Preamble Acquisition Agreement................................. Section 6.2(b) Acquisition Common Stock ............................. Recitals Affiliate............................................. Section 12(a) Agreement............................................. Preamble Applicable Period..................................... Section 6.2(a) Authorizations........................................ Section 3.14(b) Benefit Plan.......................................... Section 12(b) Benefits Date ........................................ Section 6.6 best knowledge........................................ Section 12(c) Certificate of Merger................................. Section 2.1(b) Certificates.......................................... Section 2.8(a) Closing............................................... Section 2.1(b) Closing Date.......................................... Section 2.1(b) Code.................................................. Section 12(d) Commonly Controlled Entity............................ Section 3.17(a) Company............................................... Preamble Company Benefit Plans................................. Section 3.17(a) Company Common Stock.................................. Recitals Company Disclosure Schedule........................... Section 3 Company Filed SEC Documents........................... Section 3.6 Company Non-Voting Common Stock....................... Recitals Company Proxy Statement............................... Section 3.5(b) Company SEC Documents................................. Section 3.6 Company Stockholder Approval.......................... Section 3.23 Company Stockholders Meeting.......................... Section 6.3(b) Company Stock Options................................. Section 3.3(b) Company Stock Option Consideration.................... Section 6.5(a) Company Stock Plans................................... Section 3.3(a) Confidentiality Agreement............................. Section 9 Continuation Period................................... Section 6.6(a) DGCL.................................................. Recitals Dissenting Shares..................................... Section 2.7(a) Effective Time........................................ Section 2.1(b) Environmental Laws.................................... Section 12(e) ERISA................................................. Section 3.17(a) Exchange Act.......................................... Section 1.1(b) GAAP.................................................. Section 12(f) Governmental Entity................................... Section 3.5(b) -i- 58 Hazardous Substances.................................. Section 12(g) HSR Act............................................... Section 3.5(b) Immaterial Authorizations............................. Section 3.14(b) Indemnified Party..................................... Section 6.7(a) Information Statement................................. Section 3.7 Intellectual Property Rights.......................... Section 3.15(a) IRS................................................... Section 3.17(a) Laws.................................................. Section 3.14(a) Liens................................................. Section 12(h) Lucent................................................ Preamble Lucent Disclosure Schedule............................ Section 4 Lucent Plans.......................................... Section 6.6(b) Material Adverse Effect............................... Section 12(i) Merger................................................ Recitals Merger Consideration.................................. Section 2.5(c) Minimum Condition..................................... Exhibit A Nasdaq................................................ Section 3.5(b) Offer................................................. Recitals Offer Conditions...................................... Section 1.1(a) Offer Documents....................................... Section 1.1(b) Offer Price........................................... Recitals Parachute Gross-Up Payment............................ Section 3.18(e) Paying Agent.......................................... Section 2.8(a) Pension Plans......................................... Section 3.17(a) Permitted Liens....................................... Section 12(j) Person................................................ Section 12(k) reasonable best efforts............................... Section 12(l) Restraints............................................ Section 7.1(b) SARs.................................................. Section 3.3(b) Schedule 14D-1........................................ Section 1.1(b) Schedule 14D-9........................................ Section 1.2(b) SEC................................................... Section 1.1(a) Section 6.2 Notice.................................... Section 6.2(a) Shares................................................ Recitals Securities Act........................................ Section 3.6 Subsidiary............................................ Section 12(m) Superior Proposal..................................... Section 6.2(b) Surviving Corporation................................. Section 2.1(a) Takeover Proposal..................................... Section 6.2(a) Tax................................................... Section 12(n) Tax Return............................................ Section 12(o) Termination Fee....................................... Section 6.9(b) Warrant............................................... Section 6.5(c) -ii- 59 Warrant Consideration................................. Section 6.5(c) -iii- EX-99.C.3 7 CONTRACTUAL AGREEMENT 1 EXHIBIT (c)(3) CONTRACTUAL AGREEMENT BETWEEN LUCENT TECHNOLOGIES INC. AND SPECTRAN CORPORATION 2 pg 1 of 2
INDEX ARTICLE PAGE INTRODUCTION 1 1.0 MATERIAL 1 2.0 ORDERING COMPANIES 1 3.0 TERM 1 4.0 OPTION TO EXTEND 1 5.0 PRODUCT SPECIFICATION 2 6.0 PACKAGING SPECIFICATION 2 7.0 QUANTITIES 2 8.0 SCHEDULE 2 9.0 * 3 10.0 F.O.B. 3 11.0 TERMS OF PAYMENT 3 12.0 PRICE 3 13.0 * 3 14.0 BANKRUPTCY AND TERMINATION FOR FINANCIAL SECURITY 4 15.0 * 4 16.0 ASSIGNMENT AND SUBCONTRACTING 5 17.0 CFC PACKAGING 5 18.0 CHANGES 5 19.0 CHOICE OF LAW 5 20.0 COMPLIANCE WITH LAWS 5 21.0 FORCE MAJEURE 5 22.0 GOVERNMENT CONTRACT PROVISIONS 6 23.0 HEAVY METALS IN PACKAGING 6 24.0 INDEMNITY 6 25.0 IDENTIFICATION 6 26.0 IMPLEADER 7 27.0 INFRINGEMENT 7 28.0 GRANT OF "HAVE MADE" RIGHTS 7 29.0 INSPECTION 7 30.0 INSURANCE 8 31.0 INVOICING 8 32.0 MEDIATION 8 33.0 NOTICES 8 34.0 OZONE DEPLETING SUBSTANCES LABELING 9 35.0 PAYMENT TERMS 9 36.0 PRODUCT CONFORMANCE 9 37.0 RELEASES VOID 9 38.0 RIGHT OF ENTRY AND PLANT RULES 9
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39.0 SHIPPING 9 40.0 SURVIVAL OF OBLIGATIONS 9 41.0 TAXES 10 42.0 TITLE AND RISK OF LOSS 10 43.0 USE OF INFORMATION 10 44.0 WAIVER 10 45.0 WARRANTY 10 46.0 WORK DONE BY OTHERS 10 47.0 TOOLS AND EQUIPMENT 10 48.0 ENTIRE AGREEMENT 11
4 PAGE 1 OF 11 ACCEPTANCE SHALL BE INDICATED BY SIGNING AND RETURNING ORIGINAL TO: SPECTRAN CORP. LUCENT TECHNOLOGIES INC. Attn: Ray Jaeger Attn: Global Procurement 50 Hall Road 2000 Northeast Expressway Sturbridge, Ma. 01566 Norcross, Georgia 30071 Lucent Technologies Inc. ("Company") agrees to purchase and SpecTran Corp. or any affiliated corporation, partnership or venture of SpecTran Corp. ("Supplier") agrees to sell in accordance with the terms and conditions stated within this Agreement, and Attachments A and B and C, which are attached hereto and made part of this Agreement. Notwithstanding the foregoing, SpecTran Corp. shall be responsible for all MATERIAL provided under this Agreement. The term "MATERIAL" in this Agreement includes the * and any modifications to these specifications which may be made from time to time in accordance with the PRODUCT SPECIFICATION AND PACKAGING clauses below, or derivatives of these specifications which are minor modifications to the Specifications. The Attachments noted above are listed and described below: * Attachment C - Non-Disclosure Agreement Dated 10/21/92. 1.0 MATERIAL--MATERIAL shall be Multimode Optical Fiber manufactured to * 2.0 ORDERING COMPANIES--Lucent Technologies Inc. or any affiliated corporation, partnership, or venture, as may be designated in writing by Lucent Technologies Inc. may order under this Agreement. For the purpose of this Agreement, the term "Company" shall mean the corporation or other entity which enters into or issues an Order under this Agreement. An affiliated corporation, partnership, or venture is an entity, a majority of whose voting stock or ownership interest is owned directly or indirectly by Lucent Technologies Inc. Any Order issued under this Agreement shall be a contractual relationship between the ordering Company and Supplier, and Supplier shall look only to the ordering Company for performance of Company's obligations under such Order. 3.0 TERM--Agreement shall begin on 9/1/96 and end on 12/31/99. 4.0 OPTION TO EXTEND--Company shall have the right to extend the period specified in the clause TERM for up to one (1) year by giving Supplier written notice a minimum of six (6) months prior to the expiration of the contract. At the time of the request to extend this Agreement, pricing for the agreed upon quantities shall be negotiated and agreed upon by both parties. ______ * An asterisk, whenever appearing in this document, indicates redacted material filed separately with Commission, for which confidential treatment has been granted. 5 Page 2 of 11 5.0 PRODUCT SPECIFICATION-- Multimode Optical Fiber. Any changes to the current specifications set forth in this Agreement can only be made with the consent and agreement of both parties 6.0 PACKAGING SPECIFICATION-- Any changes to the current specification set forth in this Agreement can only be made with the consent and agreement of both parties. 7.0 QUANTITIES (a) * (b) * (c) * (d) * 8.0 SCHEDULE * 6 Page 3 of 11 9.0 * 10.0 F.O.B.--Destination--Supplier shall be responsible for all transportation cost for MATERIAL shipped to any U.S. destination. 11.0 TERMS OF PAYMENT--Net thirty (30) days for MATERIAL from date of receipt of invoice. 12.0 PRICE--Pricing for MATERIAL shall be as follows: * 13.0 * 7 Page 4 of 11 14.0 BANKRUPTCY AND TERMINATION FOR FINANCIAL SECURITY--Either party may terminate this Agreement by notice in writing: 1. If the other party makes an assignment for the benefit of creditors (other than solely an assignment of monies due); or 2. If the other party evidences an inability to pay debts as they become due, unless adequate assurances of such ability to pay is provided within thirty (30) days of such notice. If a proceeding is commenced under any provisions of the United States Bankruptcy Code, voluntary or involuntary, by or against either party, and this Agreement has not been terminated, the non-debtor party may file a request with the bankruptcy court to have the court set a date within sixty (60) days after the commencement of the case, by which the debtor party will assume or reject this Agreement, and the debtor party shall cooperate and take whatever steps necessary to assume or reject the Agreement by such date. 15.0 * 8 Page 5 of 11 16.0 ASSIGNMENT AND SUBCONTRACTING - Company or Supplier shall not assign any right or interest under this Agreement (excepting monies due or to become due) or delegate or subcontract the manufacture of MATERIAL or other obligation to be performed or owed under this Agreement without the prior written consent of the other. Any attempted assignment, delegation or subcontracting in contravention of the above provisions shall be void and ineffective except for (1) Supplier, a wholly-owned subsidiary whose primary business is the manufacture of fiber, or (2) for either party in a successor in ownership of all or substantially all of the assigning party's operations. In case of any such assignment, the assigning party fully guarantees the performance hereunder of its assignee. Any assignment of monies shall be void and ineffective to the extent that (1) Supplier shall not have given Company at least thirty (30) days prior written notice of such assignment or (2) such assignment attempts to impose upon Company obligations to the assignee additional to the payment of such monies, or to preclude Company from dealing solely and directly with Supplier in all matters pertaining to this Agreement including the negotiation of amendments or settlements of charges due. All Work performed by Supplier's subcontractor(s) at any tier shall be deemed Work performed by Supplier. 17.0 CFC PACKAGING - Supplier warrants that all packaging materials furnished under this Agreement and all packaging associated with material furnished under this Agreement were not manufactured using and do not contain chlorofluorocarbons. "Packaging" means all bags, wrapping, boxes, cartons and any other packing materials used for packaging. Supplier shall indemnify and hold Company harmless for any liability, fine or penalty incurred by Company to any third party or governmental agency arising out of Company's good faith reliance upon said warranty. 18.0 CHANGES - Company may at any time during the manufacture of MATERIAL require additions to or alterations of or deductions or deviations (all hereinafter referred to as a "Change") from the MATERIAL called for by the specifications as required by Industry Standards. No Change shall be considered as an addition or alteration to or deduction or deviation from the MATERIAL called for by the specifications nor shall Supplier be entitled to any compensation for MATERIAL manufactured pursuant to or in contemplation of a Change, unless made pursuant to a written Change Order issued by Company. Within ten (10) days after a request for a Change, Supplier shall submit a proposal to Company which includes any increases or decreases in Supplier's cost or changes in the MATERIAL schedule necessitated by the Change. Company shall, within ten (10) days of receipt of the proposal, either (i) accept the proposal, in which event Company shall issue a written Change Order directing Supplier to perform the Change or (ii) advise Supplier not to perform the Change in which event Supplier shall proceed with the original MATERIAL. 19.0 CHOICE OF LAW - The construction, interpretation and performance of this Agreement and all transactions under it shall be governed by the laws of the State of New Jersey excluding its choice of laws rules and excluding the Convention for the International Sale of Goods. The parties agree that the provisions of the New Jersey Uniform Commercial Code apply to this Agreement and all transactions under it, including agreements and transactions relating to the furnishing of services, the lease or rental of equipment or material, and the license of software. Supplier agrees to submit to the jurisdiction of 9 any court wherein an action is commenced against Company based on a claim for which Supplier has agreed to indemnify Company under this Agreement. 20.0 COMPLIANCE WITH LAWS - Supplier and all persons furnished by Supplier shall comply at their own expense with all applicable federal, state, local and foreign laws, ordinances, regulations and codes, including those relating to the use of chlorofluorocarbons, and including the identification and procurement of required permits, certificates, licenses, insurance, approvals and inspections in performance under this Agreement. Supplier agrees to indemnify, defend (at Company's request) and save harmless Company, its affiliates, its and their customers and each of their officers, directors and employees from and against any losses, damages, claims, demands, suits, liabilities, fines, penalties and expenses (including reasonable attorney's fees) that arise out of or result from any failure to do so. 21.0 FORCE MAJEURE - If the performance of this Agreement or of any obligation hereunder, other than the payment of any money, is prevented, restricted or interfered with by reason of any act of God, civil disorder, strike, 10 Page 6 of 11 governmental act, war or, without limiting the foregoing, by any other cause not within the control of a party hereto, then the party so affected, upon giving prompt notice to the other party, shall be excused from such performance to the extent of such prevention, restriction or interference; provided that the party so affected shall use its best reasonable efforts to avoid or remove such causes for nonperformance and shall continue performance hereunder with the utmost dispatch whenever such causes are removed. If a party's performance hereunder is continued to be delayed due to such force majeure so that contract objectives hereunder are not being carried out, then both parties shall use their best reasonable efforts to remove the ramifications of the force majeure so that the parties' performances hereunder may continue. 22.0 GOVERNMENT CONTRACT PROVISIONS - The following provisions regarding equal opportunity, and all applicable laws, rules, regulations and executive orders specifically related thereto, including applicable provisions and clauses from the Federal Acquisition Regulation and all supplements thereto are incorporated in this Agreement as they apply to work performed under specific U.S. Government contracts: 41 CFR 60-1.4, Equal Opportunity; 41 CFR 60-1.7, Reports and Other Required Information; 41 CFR 60-1.8, Segregated Facilities; 41 CFR 60-250.4, Affirmative Action For Disabled Veterans and Veterans of the Vietnam Era (if in excess of $10,000); and 41 CFR 60-741.4, Affirmative Action for Disabled Workers (if in excess of $2,500), wherein the terms "contractor" and "subcontractor" shall mean "Supplier". In addition, orders placed under this Agreement containing a notation that the material or services are intended for use under Government contracts shall be subject to such other Government provisions printed, typed or written thereon, or on the reverse side thereof, or in attachments thereto. 23.0 HEAVY METALS IN PACKAGING - Supplier warrants to Company that no lead, cadmium, mercury or hexavalent chromium have been intentionally added to any packaging or packaging component (as defined under applicable laws) to be provided to Company under this Agreement. Supplier further warrants to Company that the sum of the concentration levels of lead, cadmium, mercury and hexavalent chromium in the package or packaging component provided to Company under this Agreement does not exceed 100 parts per million. Upon request, Supplier shall provide to Company Certificates of Compliance certifying that the packaging and/or packaging components provided under this Agreement are in compliance with the requirements set forth above in this clause. Supplier shall indemnify and hold Company harmless for any liability, fine or penalty incurred by Company to any third party or governmental agency arising out of Company's good faith reliance upon said warranties or any Certificates of Compliance. 24.0 INDEMNITY - All persons furnished by Supplier shall be considered solely Supplier's employees or agents, and Supplier shall be responsible for payment of all unemployment, social security and other payroll taxes, including contributions when required by law. Supplier agrees to indemnify, defend and save harmless Company, its affiliates and its and their customers and each of their officers, directors, employees, successors and assigns (all hereinafter referred to in this clause as "Company") from and against any losses, damages, claims, demands, suits, liabilities, fines, penalties and expenses (including reasonable attorney's fees) that arise out of or result 11 from: (1) injuries or death to persons or damage to property, including theft, in any way arising out of or occasioned by, caused or alleged to have been caused by or on account of the performance of the Work or services performed by Supplier or persons furnished by Supplier; (2) assertions under Workers' Compensation or similar acts made by persons furnished by Supplier or by any subcontractor or by reason of any injuries to such persons for which Company would be responsible under Workers' Compensation or similar acts if the persons were employed by Company; (3) any failure on the part of Supplier to satisfy all claims for labor, equipment, materials and other obligations relating directly or indirectly to the performance of the Work; or (4) any failure by Supplier to perform Supplier's obligations under this clause or the INSURANCE clause. Supplier agrees to defend Company, at Company's request against any such claim, demand or suit. Company agrees to notify Supplier in a timely manner of any written claims or demands against Company for which Supplier is responsible under this clause. 25.0 IDENTIFICATION - Supplier shall not, without Company's prior written consent, engage in advertising, promotion or publicity related to this Agreement, or make public use of any identification in any circumstances related 12 Page 7 of 11 to this Agreement, "Identification" means any copy or semblance of any trade name, trademark, service mark, insignia, symbol, logo, or any other product, service or organization designation, or any specification or drawing of Lucent Technologies, or its affiliates, or evidence of inspection by or for any of them. Supplier shall remove or obliterate any Identification prior to any use or disposition of any material rejected or not purchased by Company, and, shall indemnify, defend (at Company's request) and save harmless Lucent Technologies and its affiliates and each of their officers, directors and employees from and against any losses, damages, claims, demands, suits, liabilities, fines, penalties and expenses (including reasonable attorneys' fees) arising out of Supplier's failure to so remove or obliterate. 26.0 IMPLEADER - Supplier shall not implead or bring an action against Company or its customers or the employees of either based on any claim by any person for personal injury or death to an employee of Company or its customers occurring in the course or scope of employment and that arises out of material or services furnished under this Agreement. 27.0 INFRINGEMENT - * 28.0 GRANT OF "HAVE MADE" RIGHTS - * 29.0 INSPECTION - Company's Representatives shall have with reasonable prior notice access to the Work for the purpose of inspection or a Quality Review and Supplier shall provide safe and proper facilities for such purpose. 13 Page 8 of 11 30.0 INSURANCE - Supplier shall maintain and cause Supplier's subcontractors to maintain during the term of this Agreement: (1) Worker's Compensation insurance as prescribed by the law of the state or nation in which the Work is performed; (2) employer's liability insurance with limits of at least $300,000 for each occurrence; (3) comprehensive automobile liability insurance if the use of motor vehicles is required, with limits of at least $1,000,000 combined single limit for bodily injury and property damage for each occurrence; (4) Commercial General Liability ("CGL") insurance, including Blanket Contractual Liability and Broad Form Property Damage, with limits of at least $1,000,000 combined single limit for bodily injury and property damage for each occurrence; and (5) if the furnishing to Company (by sale or otherwise) of products or material is involved, CGL insurance endorsed to include products liability and completed operations coverage in the amount of $5,000,000 for each occurrence. All CGL and automobile liability insurance shall designate Lucent Technologies, its affiliates, and each of their officers, directors and employees (all hereinafter referred to in this clause as "Company") as an additional insured. All such insurance must be primary and required to respond and pay prior to any other available coverage. Supplier agrees that Supplier, Supplier's insurer(s) and anyone claiming by, through, under or in Supplier's behalf shall have no claim, right of action or right of subrogation against Company and its customers based on any loss or liability insured against under the foregoing insurance. Supplier and Supplier's subcontractors shall furnish prior to the start of Work certificates or adequate proof of the foregoing insurance including, if specifically requested by Company, copies of the endorsements and insurance policies. Company shall be notified in writing at least thirty (30) days prior to cancellation of or any change in the policy. 31.0 INVOICING - Supplier shall: (1) render original invoice, or as otherwise specified in this Agreement, showing Agreement and order number, through routing and weight; (2) render separate invoices for each shipment within twenty-four (24) hours after shipment; and (3) mail invoices with copies of bills of lading and shipping notices to the address shown on this Agreement or order. If prepayment of transportation charges is authorized, Supplier shall include the transportation charges from the FOB point to the destination as a separate item on the invoice stating the name of of the carrier used. 32.0 MEDIATION - If a dispute arises out of or relates to this Agreement, or its breach, and the parties have not been successful in resolving such dispute through negotiation, the parties agree to attempt to resolve the dispute through mediation by submitting the dispute to a sole mediator selected by the parties or, at any time at the option of a party, to mediation by the American Arbitration Association ("AAA"). Each party shall bear its own expenses and an equal share of the expenses of the mediator and the fees of the AAA. The parties, their representatives, other participants and the mediator shall hold the existence, content and result of the mediation in confidence. If such dispute is not resolved by such mediation, the parties shall have the right to resort to any remedies permitted by law. All such defenses based on passage of time shall be tolled pending the termination of the mediation. Nothing in this clause shall be construed to preclude any party from seeking injunctive relief in order to protect its 14 rights pending mediation. A request by a party to a court for such injunctive relief shall not be deemed a waiver of the obligation to mediate. 33.0 NOTICES - Any notice or demand which under the terms of this Agreement or under any statute must or may be given or made by Supplier or Company shall be in writing and shall be given or made by telegram, tested telex, confirmed facsimile, or similar communication or by certified or registered mail addressed to the respective parties as follows: To Company: Lucent Technologies Inc. Attention: Purchasing Representative, Suite C110 2000 Northeast Expressway Norcross, Ga. 30071 To Supplier: SpecTran Corp. Attention: Ray Jaeger 50 Hall Road Sturbridge, Ma. 01566 15 Page 9 of 11 Such notice or demand shall be deemed to have been given or made when sent by telegram, telex, or facsimile, or other communication or when deposited postage prepaid in the U.S. mail. The previous addresses may be changed at any time by giving prior written notice as above provided. 34.0 OZONE DEPLETING SUBSTANCES LABELING - Supplier warrants and certifies that all products, including packaging and packaging components, provided to Company under this Agreement have been accurately labeled, in accordance with the requirements of 40 CFR, Part 82 entitled "Protection of Stratospheric Ozone, Subpart E - The Labeling of Products Using Ozone Depleting Substances." Supplier agrees to indemnify, defend and save harmless Company, its officers, directors and employees from and against any losses, damages, claims, demands, suits, liabilities, fines, penalties and expenses (including reasonable attorneys' fees) that may be sustained by reason of Supplier's noncompliance with such applicable law or the terms of this warranty and certification. 35.0 PAYMENT TERMS * 36.0 PRODUCT CONFORMANCE - Supplier shall be responsible for providing to Company all Certified Test Data and any other information requested by Company to verify that MATERIAL meets Company's specifications. Supplier shall be responsible for sending the Certified Test Data information to Company's Representative or others as may be delegated in writing prior to MATERIAL being received by Company. Company's Representative shall be R. J. (Ron) Smith, Member of Technical Staff. 37.0 - RELEASES VOID - Neither party shall require (i) waivers or releases of any personal rights or (ii) execution of documents which conflict with the terms of this Agreement, from employees, representatives or customers of the other in connection with visits to its premises and both parties agree that no such releases, waivers or documents shall be pleaded by them or third persons in any action or proceeding. 38.0 RIGHT OF ENTRY AND PLANT RULES - Each party shall have the right to enter the premises, with reasonable prior notice, of the other party during normal business hours with respect to the performance of this Agreement, subject to all plant rules and regulations, security regulations and procedures and U.S. Government clearance requirements if applicable. 39.0 SHIPPING - Supplier shall: (1) ship the material covered by this Agreement or Purchase Order complete unless instructed otherwise (partial shipments will be accepted, but not preferred); (2) ship to the destination designated in the Agreement or order; (3) ship according to routing instructions given by Company; (4) place the Agreement and order number on all subordinate documents; (5) enclose a packing memorandum with each shipment and, when more than one package is shipped, identify the package containing the memorandum; and (6) mark the Agreement number and order number on all packages and shipping papers. Adequate protective packing shall be furnished at no additional charge. Shipping and routing instructions may be furnished or altered by Company without a writing. 16 If Supplier does not comply with the terms of the FOB clause of the Agreement or order or with Company's shipping or routing instructions, Supplier authorizes Company to deduct from any invoice of Supplier (or to charge back to Supplier), any increased cost incurred by Company as a result of Supplier's noncompliance. 40.0 SURVIVAL OF OBLIGATIONS - The obligations of the parties under this Agreement which by their nature would continue beyond the termination, cancellation or expiration of this Agreement, including, by way of illustration only and not limitation, those in the clauses COMPLIANCE WITH LAWS, IDENTIFICATION, IMPLEADER, INFRINGEMENT, RELEASES VOID, USE OF INFORMATION and WARRANTY (and INSURANCE and INDEMNITY if included in this Agreement), shall survive termination, cancellation or expiration of this Agreement. 17 Page 10 of 11 41.0 TAXES - Company shall reimburse Supplier only for the following tax payments with respect to transactions under this Agreement unless Company advises Supplier that an exemption applies: state and local sales and use taxes, as applicable. Taxes payable by Company shall be billed as separate items on Supplier's invoices and shall not be included in Supplier's prices. Company shall have the right to have Supplier contest any such taxes that Company deems improperly levied at Company's expense and subject to Company's direction and control. 42.0 TITLE AND RISK OF LOSS - Title and risk of loss and damage to material purchased by Company under this Agreement shall vest in Company when the MATERIAL has been delivered at the FOB point. If this Agreement or order issued pursuant to this Agreement calls for additional services including, but not limited to, unloading, installation, or testing, to be performed after delivery, Supplier shall retain title and risk of loss and damage to the MATERIAL until the additional services have been performed. Notwithstanding the foregoing sentence, if Supplier is expressly authorized to invoice Company for MATERIAL upon shipment or prior to the performance of additional services, title to such MATERIAL shall vest in Company upon payment of the invoice, but risk of loss and damage shall pass to Company as provided in the foregoing sentence. 43.0 USE OF INFORMATION - In accordance with the Non-Disclosure Agreement dated 10/21/92, Supplier shall view as Company's property any idea, data, program, technical, business or other intangible information, however conveyed, and any document, print, tape, disk, tool, or other tangible information-conveying or performance-aiding article owned or controlled by Company, and provided to, or acquired by, Supplier under or in contemplation of this Agreement (Information). Supplier shall, at no charge to Company, and as Company directs, destroy or surrender to Company promptly at its request any such article or any copy of such Information. Supplier shall keep Information confidential and use it only in performing under this Agreement and obligate its employees, subcontractors and others working for it to do so, provided that the foregoing shall not apply to information previously known to Supplier free of obligation, or made public through no fault imputable to Supplier. 44.0 WAIVER - The failure of either party at any time to enforce any right or remedy available to it under this Agreement or otherwise with respect to any breach or failure by the other party shall not be construed to be a waiver of such right or remedy with respect to any other breach or failure by the other party. 45.0 WARRANTY * 18 46.0 WORK DONE BY OTHERS - If any of the manufacture of MATERIAL is dependent on work done by others, Supplier shall inspect and promptly report to Company's Representative any defect that renders such other work unsuitable for Supplier's proper performance. Supplier's silence shall constitute approval of such work as fit and suitable for Supplier's performance. 47.0 TOOLS AND EQUIPMENT - Unless otherwise specifically provided in this Agreement, Supplier shall provide all labor, tools and equipment (the "tools") for performance of this Agreement. Should Supplier actually use any tools owned or rented by Company or its customer, Supplier acknowledges that Supplier accepts the tools "as is, where is," that neither Company nor its customer have any responsibility for the condition or state of repair of the tools and that 19 Page 11 of 11 Supplier shall have risk of loss and damage to such tools. Supplier agrees not to remove the tools from Company's or its customer's premises and to return the tools to Company or its customer upon completion of use, or at such earlier time as Company or its customer may request, in the same condition as when received by Supplier, reasonable wear and tear expected. Any special tooling, special test equipment, designs or other facilities which are acquired, produced or used within proprietary processes by Supplier in connection with this Agreement shall remain the property of Supplier, notwithstanding anything to the contrary found elsewhere in this Agreement. 48.0 ENTIRE AGREEMENT - The typed or written provisions on Company's orders issued pursuant to this Agreement shall be subject to this Agreement and its Attachments and together shall constitute the entire agreement between the parties with respect to the subject matter of this Agreement and the order(s) and shall not be modified or rescinded except by a writing signed by Supplier and Company. All references of these terms and conditions to this Agreement or to work services material, equipment, products, software or information furnished under, in performance or pursuant or in contemplation of this Agreement shall also apply to any orders issued pursuant to this Agreement. Printed provisions on the reverse side of Company's orders (except as specified otherwise in this Agreement) and all provisions on Supplier's forms shall be deemed deleted. Additional or different terms inserted in the Agreement by Supplier, or deletions thereto whether by alterations, addenda or otherwise shall be of no force in effect, unless expressly consented to by Company in writing. Estimates or forecasts furnished by Company shall not constitute commitments. The provisions of this Agreement supersede all contemporaneous oral agreements and all prior oral and written quotations, communications, agreements and understandings of the parties with respect to the subject matter of this Agreement. SPECTRAN CORP. LUCENT TECHNOLOGIES INC. By /s/ R. E. Jaeger By /s/ E. J. Tracy ------------------------- --------------------------- Name R. Jaeger Name E. J. Tracy ------------------------- --------------------------- Title President Title Vice President Global Procurement Organization ----------------------- --------------------------------- Date 10-3-96 Date 9/27/96 ----------------------- --------------------------------- 20 Page 1 of 7 LUCENT TECHNOLOGIES NETWORK SYSTEMS MATERIAL SPECIFICATION * Lucent TECHNOLOGIES Proprietary Not for use or disclosure outside Lucent TECHNOLOGIES except under written agreement 21 Page 2 of 7 * Lucent TECHNOLOGIES Proprietary Not for use or disclosure outside Lucent TECHNOLOGIES except under written agreement 22 Page 3 of 7 * Lucent TECHNOLOGIES Proprietary Not for use or disclosure outside Lucent TECHNOLOGIES except under written agreement 23 Page 4 of 7 * Lucent TECHNOLOGIES Proprietary Not for use or disclosure outside Lucent TECHNOLOGIES except under written agreement 24 Page 5 of 7 * Lucent TECHNOLOGIES Proprietary Not for use or disclosure outside Lucent TECHNOLOGIES except under written agreement 25 Page 6 of 7 * Lucent TECHNOLOGIES Proprietary Not for use or disclosure outside Lucent TECHNOLOGIES except under written agreement 26 Page 7 of 7 * Lucent TECHNOLOGIES Proprietary Not for use or disclosure outside Lucent TECHNOLOGIES except under written agreement 27 LAK412D ATTACHMENT B * ----------------------------------------------------------------------------- CONTROLLED COPY if cover sheet is red or controlled number is listed Page 1 of 5 28 * ----------------------------------------------------------------------------- CONTROLLED COPY if cover sheet is red or controlled number is listed Page 2 of 5 29 * ----------------------------------------------------------------------------- CONTROLLED COPY if cover sheet is red or controlled number is listed Page 3 of 5 30 * ----------------------------------------------------------------------------- CONTROLLED COPY if cover sheet is red or controlled number is listed Page 4 of 5 31 * ----------------------------------------------------------------------------- CONTROLLED COPY if cover sheet is red or controlled number is listed Page 5 of 5 32 LAK412D Attachment C NON-DISCLOSURE AGREEMENT THIS AGREEMENT is made and entered into effective 10/21/1992, by and between SPECTRAN CORPORATION, a Delaware corporation, with offices located at 50 Hall Road Sturbridge, MA. 01566, and AMERICAN TELEPHONE AND TELEGRAPH COMPANY, a New York corporation, with offices located at 32 Avenue of the Americas, New York, New York 10013-2412 ("AT&T"), for itself and its affiliated companies. WHEREAS, both parties, for their mutual benefit, desire to disclose to the other certain specifications, designs, plans, drawings, software, data, prototypes, or other business and/or technical information related to the manufacturing and inspection of optical fiber and optical fiber preforms ("INFORMATION") which is proprietary to the disclosing party or its' affiliated companies. NOW, THEREFORE, the parties agree as follows: 1. The receiving party, for 5 years after the disclosure of such INFORMATION, shall hold such INFORMATION in confidence, shall use such INFORMATION only for the purpose of the Corporation's preparation and AT&T's evaluation of a proposal for potential business arrangements between the Corporation and AT&T regarding the manufacturing and inspection of optical fiber and optical fiber preforms, shall reproduce such INFORMATION only to the extent necessary for such purpose, shall restrict disclosure of such INFORMATION to its employees (and in the case of AT&T, employees of its affiliated companies) with a need to know (and advise such employees of the obligations assumed herein), and shall not disclose such INFORMATION to any third party without prior written approval of the other party. Each party agrees to protect such INFORMATION disclosed to it by the other party with at least the same degree of care as it normally exercises to protect its own proprietary information of a similar nature. These restrictions on the use or disclosure of INFORMATION shall not apply to any INFORMATION: i. which is independently developed by the receiving party or its affiliated company or lawfully received free of restriction from another source having the right to so furnish such INFORMATION; or 33 -2- II. after it has become generally available to the public without breach of this Agreement by the receiving party or its affiliated company; or III. which at the time of disclosure to the receiving party was known to such party or its affiliated company free of restriction as evidenced by documentation in such party's possession; or IV. which the disclosing party agrees in writing is free of such restrictions. 2. INFORMATION shall be subject to the restrictions of paragraph 1, if it is in writing or other tangible form, only if clearly marked as proprietary when disclosed to the receiving party or, if not in tangible form, only if summarized in a writing so marked and delivered to the receiving party within thirty (30) days of such summary disclosure, in which case the INFORMATION contained in such (not information contained solely in the non-tangible disclosure) shall be subject to the restrictions herein. Each party hereto shall endeavor to keep to a minimum the amount of INFORMATION that is furnished to the other upon which restrictions are imposed. Information, other than proprietary INFORMATION identified as provided above, shall not be subject to any restriction by the transmitting party as to the receiving party's disclosure or use thereof. 3. No license to a party, under any trademark, patent, copyright, mask work protection right or any other intellectual property right, is either granted or implied by the conveying of INFORMATION to such party. None of the INFORMATION which may be disclosed or exchanged by the parties shall constitute any representation, warranty, assurance, guarantee or inducement by either party to the other of any kind, and, in particular, with respect to the non-infringement of trademarks, patents, copyrights, mask work protection rights or any other intellectual property rights, or other rights of third persons or of either party. 4. Neither this Agreement nor the disclosure or receipt of INFORMATION shall constitute or imply any promise or intention to make any purchase of products or services by either party or its affiliated companies or any commitment by either party or its affiliated companies with respect to the present or future marketing of any product or service. 5. All INFORMATION shall remain the property of the transmitting party and shall be returned upon written request or upon the receiving party's determination that it no longer has a need for such INFORMATION. 34 -3- 6. Each party hereby assures the other that it does not intend to and will not knowingly, without the prior written consent, if required, of the Office of Export Administration of the U. S. Department of Commerce, P.O. Box 273, Washington, D.C. 20044, transmit directly or indirectly: I. any information received from the other hereunder; or II. any immediate product (including processes and services)produced directly by the use of such information; or III. any commodity produced by such immediate product if the immediate product of such information is a plant or a major component of a plant; to (1) Iraq, Afghanistan, the People's Republic of China or any Group Q, S, W, Y or Z country specified in Supplement No. 1 to Part 770 of the Export Administration Regulations issued by the U.S. Department of Commerce or (2) any citizen or resident of any of the aforementioned countries. Each party agrees that it will not, without the prior written consent of the other, transmit, directly or indirectly, the INFORMATION received from the other hereunder or any portion thereof to any country outside of the United States. 7. Each party agrees that all of its obligations undertaken herein as a receiving party shall survive and continue after any termination of this Agreement. 8. This Agreement constitutes the entire understanding between the parties hereto as to the INFORMATION and merges all prior discussions between them relating thereto. 9. No amendment or modification of this Agreement shall be valid or binding on the parties unless made in writing and signed on behalf of each of the parties by their respective duly authorized officers or representatives. 10. The parties are familiar with the principles of New York commercial law, and desire and agree that the law of New York shall apply in any dispute arising with respect to this agreement. 35 -4- IN WITNESS WHEREOF, the parties have executed this Agreement on the respective dates entered below. AMERICAN TELEPHONE AND SPECTRAN CORPORATION TELEGRAPH COMPANY By: J. F. Watson By: C. L. Cutts -------------------------- -------------------------- (Signature) (Signature) J. F. Watson Crawford. L. Cutts - - ------------------------------ ------------------------------ (Name) (Name) Manager, Optical Fiber & Cable Manufacturing and Maintenance V.P. - Business Development - - ------------------------------ ------------------------------ (Title) (Title) October 21, 1992 November 4, 1992 - - ------------------------------ ------------------------------ (Date Signed) (Date Signed) 36 EXHIBIT (c)(4) PATENT LICENSE AGREEMENT BETWEEN LUCENT TECHNOLOGIES INC. AND SPECTRAN CORPORATION EFFECTIVE UPON SIGNING RELATING TO OPTICAL FIBER 37 TABLE OF CONTENTS ARTICLE I - GRANTS OF LICENSES 1.01 Grant 1.02 Duration 1.03 Scope 1.04 Exclusions and Limitations 1.05 Ability to Provide Licenses 1.06 Joint Inventions 1.07 Publicity ARTICLE II - ROYALTY AND PAYMENTS 2.01 Royalty Calculation and Payments 2.02 Records and Adjustments 2.03 Reports and Payments ARTICLE III - TERMINATION 3.01 Breach or Acquisition 3.02 Voluntary Termination 3.03 Survival ARTICLE IV - MISCELLANEOUS PROVISIONS 4.01 Disclaimer 4.02 Nonassignability 4.03 Addresses 4.04 Taxes 4.05 Choice of Law 4.06 Integration 4.07 Outside the United States 4.08 Dispute Resolution 4.09 Releases 4.10 Counterparts DEFINITIONS APPENDIX APPENDIX A EX-99.C.4 8 PAGENT LICENSE AGREEMENT 1 PATENT LICENSE AGREEMENT Effective as of the date of execution by the last party to execute ("Effective Date"), Lucent Technologies Inc. ("LUCENT"), a Delaware corporation having an office at 600 Mountain Avenue, Murray Hill, New Jersey 07974, and SpecTran Corporation ("SpecTran"), a Delaware corporation having an office at 50 Hall Road, Sturbridge, MA 01566, agree as follows*: ARTICLE I GRANTS OF LICENSES 1.01 GRANT (a) LUCENT grants to SpecTran under LUCENT's PATENTS worldwide, personal, nonexclusive and, subject to Sections 1.03(c) and 4.02, non-transferable licenses, with limitations as provided herein, for: OPTICAL FIBER (b) SpecTran grants to LUCENT under SpecTran's PATENTS worldwide, personal, nonexclusive, royalty-free and, subject to Sections 1.03(c) and 4.02, non-transferable licenses, with limitations as provided herein, for: OPTICAL FIBER 1.02 DURATION All licenses granted herein under any patent shall continue for the entire unexpired term of such patent. 1.03 SCOPE (a) Subject to the exclusions and limitations referred to in this Agreement, the licenses granted herein to SpecTran are licenses to (i) make, use, lease, offer to sell, sell, import subject to Section 1.04(d) and export LICENSED PRODUCTS; (ii) make, have made, use and import machines, tools, materials and other instrumentalities, insofar as such machines, tools, materials and other instrumentalities are involved in or incidental to the development, manufacture, testing or repair of LICENSED PRODUCTS which are or have been made, used, leased, owned, sold or imported by the grantee of such license; and (iii) convey to any customer of the grantee, with respect to any LICENSED PRODUCT which is sold or leased by such grantee to such customer, rights to use and resell such LICENSED PRODUCT as sold or leased by such grantee (whether or not as part of a larger combination); provided, however, that no rights may be conveyed to customers with respect to any invention which is directed to (1) a combination of such LICENSED PRODUCT (as sold or leased) with any other product, (2) a method or process which is other than the inherent use of such LICENSED PRODUCT itself (as sold or leased), or (3) a method or - -------- *Any term in capital letters which is defined in the Definitions Appendix shall have the meaning specified therein. 2 process involving the use of a LICENSED PRODUCT to manufacture (including associated testing) any other product. (b) The licenses granted herein to LUCENT are licenses to (i) make, have made, use, lease, sell and import LICENSED PRODUCTS; (ii) make, have made, use and import machines, tools, materials and other instrumentalities, insofar as such machines, tools, materials and other instrumentalities are involved in or incidental to the development, manufacture, testing or repair of LICENSED PRODUCTS which are or have been made, used, leased, owned, sold or imported by the grantee of such license; and (iii) convey to any customer of the grantee, with respect to any LICENSED PRODUCT which is sold or leased by such grantee to such customer, rights to use and resell such LICENSED PRODUCT as sold or leased by such grantee (whether or not as part of a larger combination); provided, however, that no rights may be conveyed to customers with respect to any invention which is directed to (1) a combination of such LICENSED PRODUCT (as sold or leased) with any other product, (2) a method or process which is other than the inherent use of such LICENSED PRODUCT itself (as sold or leased), or (3) a method or process involving the use of a LICENSED PRODUCT to manufacture (including associated testing) any other product. (c) The grant of each license hereunder includes the right to grant sublicenses within the scope of such license to a Party's RELATED COMPANIES for so long as they remain its RELATED COMPANIES, subject to Section 4.02(b). Any such sublicense may be made effective retroactively, but not prior to the effective date hereof, nor prior to the sublicensee's becoming a RELATED COMPANY of such Party. 1.04 EXCLUSIONS AND LIMITATIONS (a) No rights whatsoever are granted to SpecTran under any LUCENT PATENT to make, have made, use, offer to sell, sell or import the following products and processes: [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] (b) No rights whatsoever are granted to SpecTran under Section 1.04(a)(ii) above for [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] (c) Subject to the exclusions and limitations in this Agreement (including Section 2.01(b) and 2.01(c), SpecTran's rights hereunder include the rights (i) within the United States only to make at its existing factories and (ii) abroad to make at factories of its foreign SUBSIDIARIES; provided, however that the combined domestic and foreign production of NZDF does not exceed the limitations of clause (iv) below unless the additional royalties are paid in accordance with Section 2.01(b) and (iii) subject to Section 2.01(c): (i) offer to sell, sell and export worldwide multimode OPTICAL FIBER; 3 (ii) offer to sell, sell and export worldwide NON-PREMIUM OPTICAL FIBER; (iii) offer to sell, sell and export worldwide rare earth-doped optical fiber and Raman fiber for medical, military and distributed sensor applications; provided, however, no rights are granted for [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]; and (iv) Subject to Section 2.01(b) and (c), offer to sell and sell within the United States the following quantity of NZDF in each year, and to export for sale an equal quantity each year outside the United States, as follows: YEAR QUANTITY( kilo-kilometers per year) [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] Prior to January 1, 2000, SpecTran's rights hereunder are limited to [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] (d) The Parties agree that no right is provided to SpecTran and/or its SUBSIDIARIES to import into the United States or for any SpecTran foreign SUBSIDIARY to directly or indirectly (e.g., through other countries) export to the United States under this Agreement. 1.05 ABILITY TO PROVIDE LICENSES (a) It is recognized that certain actions of the Parties to this Agreement may limit their ability to provide licenses hereunder without constituting a breach. In particular, (i) prior to the earliest filing of a patent application disclosing an invention of a Party or its RELATED COMPANY, such Party or RELATED COMPANY may assign to a third party the title to patents on such invention, or (ii) prior to the execution of this Agreement, a Party or its RELATED COMPANY may have limited by contract its ability to provide licenses hereunder with respect to certain patents or technologies. (b) Each Party agrees to disclose to the other Party, promptly upon receipt of a written request for such disclosure, any such assignment or other contractual limitation with respect to any patent licensed hereunder and which is specifically identified in such request. (c) A Party's failure to meet any obligation hereunder, due to the assignment of title to any invention or patent, or the granting of any licenses, to the United States Government or any agency or designee thereof pursuant to a statute or regulation of, or contract with, such Government or agency, shall not constitute a breach of this Agreement. 4 1.06 JOINT INVENTIONS (a) There are countries (not including the United States) which require the express consent of all inventors or their assignees to the grant of licenses or rights under patents issued in such countries for joint inventions. (b) Each Party shall give such consent, or shall obtain such consent from its RELATED COMPANIES, its employees or employees of any of its RELATED COMPANIES, as required to make full and effective any such licenses and rights respecting any joint invention granted to the grantee hereunder by such Party and by another licensor of such grantee. (c) Each Party shall take steps which are reasonable under the circumstances to obtain from third parties whatever other consents are necessary to make full and effective such licenses and rights respecting any joint invention purported to be granted by it hereunder. If, in spite of such reasonable efforts, such Party is unable to obtain the requisite consents from such third parties, the resulting inability of such Party to make full and effective its purported grant of such licenses and rights shall not be considered to be a breach of this Agreement. 1.07 PUBLICITY (a) Nothing in this Agreement shall be construed as conferring upon either Party or its RELATED COMPANIES any right to include in advertising, packaging or other commercial activities related to a LICENSED PRODUCT, any reference to the other Party (or any of its RELATED COMPANIES), its trade names, trademarks or service marks or to indicate that such LICENSED PRODUCT is in any way certified by the other Party hereto or its RELATED COMPANIES. (b) Except as required by law and regulation, the terms, but not the existence, of this Agreement shall be treated as confidential information, and neither Party shall disclose such terms to any third party without the prior written consent of the other Party; provided, however, that either Party may represent to suppliers and customers that such Party is licensed for the products and patents provided by this Agreement, to the extent required for a specific commercial transaction with that supplier or customer. Where required by law and regulation, the Party in need of making such disclosure of certain terms of the agreement will seek the written consent of the other Party which will not be unreasonably withheld. 5 ARTICLE II ROYALTY AND PAYMENTS 2.01 ROYALTY CALCULATION AND PAYMENTS SpecTran shall make payments to LUCENT at the address specified in Section 4.03(b), as follows: (a) In consideration for purchasing the rights to obtain the licenses granted herein, SpecTran shall pay to Lucent a total upfront fee totaling four million United States dollars (U.S. $ 4,000,000.00) to be paid as follows (A) the sum of seven hundred fifty thousand United States dollars (U.S. $ 750,000.00) within ninety (90) days after execution of this Agreement; (B) six semiannual payments each for the sum of five hundred thousand United States dollars (U.S. $500,000.00) within thirty (30) days of June 30 and December 31 beginning with the first installment date of June 30, 1999 and ending with the final $500,000.00 installment on December 31, 2001, and (C) the sum of two hundred fifty thousand United States dollars (U.S. $250,000.00) within thirty days of June 30, 2002. The parties agree that the payment obligation of Section 2.01(a) of four million United Stated dollars (U.S. $ 4,000,000.00) including the semiannual payments shall survive any termination of this Agreement by SpecTran and are not refundable or creditable to any other payments required hereunder. (b) For the rights granted to SpecTran in each semi-annual period beginning in 2000, SpecTran shall make the following additional semi-annual royalty payments to LUCENT in United States dollars based upon a royalty that shall accrue in such semi-annual period and shall be payable on a semiannual basis within thirty days of June 30 and December 31 for the preceding semiannual period. In each instance in this Agreement, reference to SpecTran's total gross revenues includes SpecTran's and its RELATED COMPANIES' total gross revenues excluding sales to LUCENT and excluding packing costs, costs of insurance and transportation, and import, export, excise, sales and value added taxes and customs duties associated with such sales. SpecTran shall pay LUCENT the lesser of: (i) a sum calculated at a royalty rate of [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]. In addition to any other fees payable by SpecTran hereunder, SpecTran shall pay to LUCENT a royalty of [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] in excess of the quantity limits specified in Section 1.04(c)(iv); or (ii) the combined royalty of [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] In addition to any other fees payable by SpecTran hereunder, SpecTran shall pay to LUCENT an additional royalty of [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] in excess of the quantity limits specified in Section 1.04(iv)(c). 6 (c) The parties agree that [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]. (d) Subject to the exclusions and limitations referred to in this Agreement, royalties payable hereunder are for all of LUCENT's PATENTS. (e) Overdue payments hereunder shall be subject to a late payment charge calculated at an annual rate of three percent (3%) over the prime rate or successive prime rates (as posted in New York City) during delinquency. If the amount of such late payment charge exceeds the maximum permitted by law, such charge shall be reduced to such maximum. (f) Notwithstanding any other provisions hereunder, royalty shall accrue and be payable only to the extent that enforcement of SpecTran's obligation to pay such royalty would not be prohibited by applicable law. 2.02 RECORDS AND ADJUSTMENTS (a) SpecTran shall keep full, clear and accurate records with respect to all LICENSED PRODUCTS and shall furnish any information which LUCENT may reasonably prescribe from time to time to enable LUCENT to ascertain the proper royalty due hereunder on account of products sold, leased and put into use by SpecTran or any of its RELATED COMPANIES. SpecTran shall retain such records with respect to each LICENSED PRODUCT for at least seven (7) years from the sale, lease or putting into use of such LICENSED PRODUCT. LUCENT shall have the right through its accredited auditors to make an examination, once annually, during normal business hours, of all records and accounts bearing upon the amount of royalty payable to it hereunder and will not use such information except to verify royalty payable. Prompt adjustment shall be made to compensate for any errors or omissions disclosed by such examination. (b) Independent of any such examination, LUCENT will credit to SpecTran the amount of any overpayment of royalties made in error which is identified and fully explained in a written notice to LUCENT delivered within twelve (12) months after the due date of the payment which included such alleged overpayment, provided that LUCENT is able to verify, to its own satisfaction, the existence and extent of the overpayment. (c) No refund, credit or other adjustment of royalty payments shall be made by LUCENT except as provided in this Section 2.02. Rights conferred by this Section 2.02 shall not be affected by any statement appearing on any check or other document, except to the extent that any such right is expressly waived or surrendered by a Party having such right and signing such statement. 2.03 REPORTS AND PAYMENTS (a) Within thirty (30) days after June 30 and December 31 of each year, SpecTran shall furnish to LUCENT at the address specified in Section 4.03 7 a statement certified by a responsible official of SpecTran showing, in a manner acceptable to LUCENT, the following disclosures with respect all licensed sales made by SpecTran and its RELATED COMPANIES in the preceding semiannual period for such calendar year and make all payments required hereunder if not specified as payable on other dates: (i) all LICENSED PRODUCTS which were sold, leased or put into use during the preceding semi-annual period for such calendar year; (ii) the FAIR MARKET VALUES of such LICENSED PRODUCTS; and (iii) the amount of royalty payable thereon. If no LICENSED PRODUCT has been so sold, leased or put into use, the statement shall show that fact. (b) Within thirty (30) days of June 30 and December 31 of each calendar year, SpecTran shall pay in United States dollars to LUCENT at the address specified in Section 4.03 the royalties payable in accordance with such statement. (c) Overdue payments hereunder shall be subject to a late payment charge calculated at an annual rate of three percentage points (3%) over the prime rate or successive prime rates (as posted in New York City) during delinquency. If the amount of such charge exceeds the maximum permitted by law, such charge shall be reduced to such maximum. (d) When a company ceases to be a RELATED COMPANY of SpecTran, royalties which have accrued with respect to any products of such company, but which have not been paid, shall become payable with SpecTran's next scheduled royalty payment. ARTICLE III TERMINATION 3.01 BREACH OR ACQUISITION (a) In the event of a material breach of this Agreement by either Party, the other Party may, in addition to any other remedies that it may have, at any time terminate all licenses and rights granted by it hereunder by not less than two (2) months' written notice specifying such breach, unless within the period of such notice all breaches specified therein shall have been remedied. (b) In the event of a material breach of this Agreement by LUCENT or its SUBSIDIARIES, or of any loss or injury to the CORPORATION arising out of this Agreement, for which LUCENT or its SUBSIDIARIES is liable to SpecTran, LUCENT's and its SUBSIDIARIES' total cumulative liability to SpecTran for all such breaches, losses and injuries shall be the lesser 8 of (i) the actual value of the injury or loss to the CORPORATION or (ii) the total royalties paid to LUCENT. (c) The Parties agree that if SpecTran is acquired by an OPTICAL FIBER manufacturer, this Agreement may be immediately terminated by LUCENT. (d) If SpecTran is acquired by other than an OPTICAL FIBER manufacturer and continues operation as a separately identifiable business, then the licenses granted hereunder to SpecTran under licensed patents which have been first filed prior to the date of such acquisition may continue, but only (i) for the duration and term of licenses as specified in this Agreement; (ii) to the extent and for the time that SpecTran functions as a separately identifiable business, and (iii) for products and services of the kind provided by SpecTran prior to its acquisition and not to any products or services of any entity which acquires SpecTran. 3.02 VOLUNTARY TERMINATION By written notice to the other Party, either Party may voluntarily terminate all or a specified portion of the licenses and rights granted to it hereunder. Such notice shall specify the effective date (not more than six (6) months prior to the giving of said notice) of such termination and shall clearly specify any affected patent, invention or product. 3.03 SURVIVAL (a) If a company ceases to be a RELATED COMPANY of a Party, licenses and rights granted hereunder with respect to patents of such company on inventions made prior to the date of such cessation, shall not be affected by such cessation. (b) Any termination of licenses and rights of a Party under the provisions of this Article III shall not affect such Party's licenses, rights and obligations with respect to any LICENSED PRODUCT made prior to such termination, and shall not affect the other Party's licenses and rights (and obligations related thereto) hereunder. ARTICLE IV MISCELLANEOUS PROVISIONS 4.01 DISCLAIMER NEITHER PARTY NOR ANY OF ITS SUBSIDIARIES MAKES ANY REPRESENTATIONS, EXTENDS ANY WARRANTIES OF ANY KIND, ASSUMES ANY RESPONSIBILITY OR OBLIGATIONS WHATEVER, OR CONFERS ANY RIGHT BY IMPLICATION, ESTOPPEL OR OTHERWISE, OTHER THAN THE LICENSES, RIGHTS AND WARRANTIES HEREIN EXPRESSLY GRANTED. 4.02 NONASSIGNABILITY (a) The Parties hereto have entered into this Agreement in contemplation of personal performance, each by the other, and intend that the licenses and 9 rights granted hereunder to a Party not be extended to entities other than such Party's RELATED COMPANIES without the other Party's express written consent. All of LUCENT's right, title and interest in this Agreement and any licenses and rights granted to it hereunder may be assigned to any direct or indirect successor to the business of LUCENT pertaining to this Agreement, which successor shall thereafter be deemed substituted for LUCENT as the Party hereto, effective upon such assignment; but neither this Agreement nor any licenses or rights hereunder shall be otherwise assignable or transferable (in insolvency proceedings, by reason of a corporate merger, or otherwise) by either Party without the express written consent of the other Party. (b) Notwithstanding the foregoing, if any of the Parties divests all or a portion of its business and such divested business continues operation as a separately identifiable business, then the licenses granted hereunder to the divesting Party under licensed patents which have been first filed prior to the date of such divestiture may be sublicensed to such divested separate business, but only (i) for the duration and term of licenses as specified in this Agreement; (ii) to the extent and for the time the divested business functions as a separately identifiable business, and (iii) for products and services of the kind provided by the divested business prior to its divestiture and not to any products or services of any entity which acquires the divested business. This subsection shall apply regardless of whether the business is divested by a sale of assets or as a sale of a legal entity (e.g., sale of a SUBSIDIARY). If the Party divesting such business is required to make royalty payments or provide other compensation under this Agreement, it shall continue to be obligated to do so for itself and, if and to the extent a sublicense is granted, for the divested business. The sublicensing rights specified herein shall not apply to any business other than a RELATED COMPANY the acquisition of which by a party is subsequent to the effective date of this Agreement. (c) Notwithstanding any other provision herein: (i) SpecTran may not [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] (ii) If LUCENT, in its sole discretion [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] 4.03 ADDRESSES (a) Any notice or other communication hereunder shall be sufficiently given to SpecTran when sent by certified mail (or an equivalent means that provides a return receipt) addressed to SpecTran at the above address or to LUCENT when sent by certified mail addressed to Contract Administrator, Intellectual Property Division, Lucent Technologies Inc., Suite 105, 14645 Northwest 77th Avenue, Miami Lakes, Florida 33014, United States of America. Changes in such addresses may be specified by written notice. 10 (b) Payments by SpecTran shall be made to Lucent at Sun Trust, P.O. Box 913021, Orlando, Florida, 32891-3021, United States of America. Alternatively, payments to Lucent may be made by bank wire transfers to LUCENT's account: Lucent Technologies Licensing, Account No.[REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED], at Chase Manhattan Bank, N.A., Four Chase Metrotech Center, Brooklyn, New York, 11245, United States of America. Changes in such address or account may be specified by written notice. 4.04 TAXES SpecTran shall pay any tax, duty, levy, customs fee, or similar charge ("taxes"), including interest and penalties thereon, however designated, imposed as a result of the operation or existence of this Agreement, including taxes which SpecTran is required to withhold or deduct from payments to LUCENT, except (i) net income taxes imposed upon LUCENT by any governmental entity within the United States (the fifty (50) states and the District of Columbia), and (ii) net income taxes imposed upon LUCENT by jurisdictions outside the United States which are allowable as a credit against the United States Federal income tax of LUCENT or any of its SUBSIDIARIES. In order for the exception in (ii) to be effective, SpecTran must furnish to LUCENT evidence sufficient to satisfy the United States taxing authorities that such taxes have been paid. 4.05 CHOICE OF LAW The Parties are familiar with the principles of New York commercial law, and agree that the patent laws of the United States or the patent laws of any other country as may be appropriate, and in so far as not pre-empted by U.S. patent law, the law of New York shall apply in any dispute arising with respect to this Agreement. 4.06 INTEGRATION This Agreement sets forth the entire Agreement and understanding between the Parties as to the subject matter hereof and merges all prior discussions between them. Neither of the Parties shall be bound by any warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or in a writing signed with or subsequent to execution hereof by an authorized representative of the Party to be bound thereby. 4.07 OUTSIDE THE UNITED STATES (a) There are countries in which the owner of an invention is entitled to compensation, damages or other monetary award for another's unlicensed manufacture, sale, lease, use or importation involving such invention prior to the date of issuance of a patent for such invention but on or after a certain earlier date, hereinafter referred to as the invention's "protection commencement date" (e.g., the date of publication of allowed claims or the date of publication or "laying open" of the filed patent application). In some instances, other conditions precedent must also be 11 fulfilled (e.g., knowledge or actual notification of the filed patent application). The Parties agree that (i) an invention which has a protection commencement date in any such country may be used in such country pursuant to the terms of this Agreement on and after any such date, and (ii) all such conditions precedent are deemed satisfied by this Agreement. (b) There may be countries in which a Party hereto may have, as a consequence of this Agreement, rights against infringers of the other Party's patents licensed hereunder. Each Party hereby waives any such right it may have by reason of any third Party's infringement or alleged infringement of any such patents. (c) SpecTran hereby agrees to register or cause to be registered, to the extent required by applicable law, and without expense to LUCENT or any of its RELATED COMPANIES, any agreements wherein sublicenses are granted by it under LUCENT's PATENTS. SpecTran hereby waives any and all claims or defenses, arising by virtue of the absence of such registration, that might otherwise limit or affect its obligations to LUCENT. 4.08 DISPUTE RESOLUTION (a) If a dispute arises out of or relates to this Agreement, or the breach, termination or validity thereof, the Parties agree to submit the dispute to a sole mediator selected by the Parties or, at any time at the option of a Party, to mediation by the American Arbitration Association ("AAA"). If not thus resolved, it shall be referred to a sole arbitrator selected by the Parties within thirty (30) days of the mediation, or in the absence of such selection, to AAA arbitration which shall be governed by the United States Arbitration Act. (b) Any award made (i) shall be a bare award limited to a holding for or against a Party and affording such remedy as is deemed equitable, just and within the scope of the Agreement; (ii) shall be without findings as to issues (including but not limited to patent validity and/or infringement) or a statement of the reasoning on which the award rests; (iii) may in appropriate circumstances (other than patent disputes) include injunctive relief; (iv) shall be made within four (4) months of the appointment of the arbitrator; and (v) may be entered in any court. (c) The requirement for mediation and arbitration shall not be deemed a waiver of any right of termination under this Agreement and the arbitrator is not empowered to act or make any award other than based solely on the rights and obligations of the Parties prior to any such termination. (d) The arbitrator shall be knowledgeable in the legal and technical aspects of this Agreement and shall determine issues of arbitrability but may not limit, expand or otherwise modify the terms of the Agreement. 12 (e) The Agreement shall be interpreted in accordance with the patent laws of the United States or the patent laws of any other country as may be appropriate, and in so far as not pre-empted by U.S. patent law, the laws of the State of New York exclusive of its conflict of laws provisions and the place of mediation and arbitration shall be New York City. (f) Each Party shall bear its own expenses but those related to the compensation and expenses of the mediator and arbitrator shall be borne equally. (g) A request by a Party to a court for interim measures shall not be deemed a waiver of the obligation to mediate and arbitrate. (h) The arbitrator shall not have authority to award punitive or other damages in excess of compensatory damages and each Party irrevocably waives any claim thereto. (i) Except as required by law, the Parties, their representatives, other participants and the mediator and arbitrator shall hold the existence, content and result of mediation and arbitration in confidence. 4.09 RELEASES (a) Subject to Section 4.09(c) and for good and valuable consideration, LUCENT, for itself and for its present RELATED COMPANIES, hereby irrevocably releases SpecTran, its present RELATED COMPANIES and all customers (purchasers and users) of LICENSED PRODUCTS as of the effective date hereof to SpecTran, from all claims, demands and rights of action which LUCENT or any of its present RELATED COMPANIES may have on account of any infringement or alleged infringement of any patent issued in any country of the world by reason of the manufacture or any past or future use, lease, sale, offer for sale or importation of any of such products which, prior to the effective date hereof, were manufactured by or for, or sold or used or furnished or imported by SpecTran or any of its present RELATED COMPANIES. (b) Subject to Section 4.09(c), and for good and valuable consideration, SpecTran, for itself and for its present RELATED COMPANIES, hereby irrevocably releases LUCENT (for the purposes of this Section 4.09(b) "LUCENT" means Lucent Technologies Inc. as it presently exists and as it formerly existed as a part of AT&T Corp.), its present RELATED COMPANIES, and all customers (purchasers and users) of LICENSED PRODUCTS as of the effective date hereof to LUCENT, from all claims, demands and rights of action which SpecTran or any of its present RELATED COMPANIES may have on account of any infringement or alleged infringement of any patent issued in any country of the world by reason of the manufacture or any past or future use, lease, sale, offer for sale or importation of any of such products which, prior to the effective date hereof, were manufactured by or for, or used, furnished or imported by, LUCENT or any of its present RELATED COMPANIES. 13 (c) With respect to customers (purchasers and users) of a grantee, such releases shall not extend to any patent which is directed to (i) a combination of a product of the kind herein licensed as of the effective date hereof with any other product; (ii) a method or process which is other than the inherent use of a product of the kind herein licensed (as furnished to such customers); or (iii) a method or process involving the use of a product of the kind herein licensed as of the effective date hereof to manufacture (including associated testing) any other product. 4.10 COUNTERPARTS This Patent License Agreement may be executed by the Parties in any number of identical counterparts, all of which together shall constitute the final agreement. The Parties further agree that this Patent License Agreement shall be of no force or effect until the date of the last execution by any Party, and that the executed counterparts may be exchanged by facsimile transmission. 14 IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed in duplicate originals by its duly authorized representatives on the respective dates entered below. LUCENT TECHNOLOGIES INC. By: s/s M.R. Greene ------------------------------------ M. R. Greene Vice President - Intellectual Property Date: 10-30-98 ------------------------------------ SpecTran CORPORATION By: s/s Charles B. Harrison ------------------------------------ Date: October 30, 1998 ------------------------------------ THIS AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY IN ANY MANNER UNLESS DULY EXECUTED BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES. 15 DEFINITIONS APPENDIX CLASSIC TRUE WAVE FIBER means OPTICAL FIBER which is NON ZERO DISPERSION FIBER having an [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT REQUESTED PORTION FILED SEPARATELY - CONFIDENTIAL TREATMENT GRANTED]. FAIR MARKET VALUE means, with respect to any OPTICAL FIBER sold, leased or put into use, the greater of (i) the selling price which a seller would realize from an unaffiliated buyer in an arm's length sale of an identical product in the same quantity and at the same time and place as such sale, lease or putting into use; or (ii) the selling price actually obtained for such OPTICAL FIBER in the form in which it is sold. In determining "selling price" the following shall be excluded: (a) packing costs; (b) costs of insurance and transportation; and (c) import, export, excise, sales and value added taxes and customs duties. LICENSED PRODUCT means, as to any grantee, any product (including any specified combination of other products) listed for such grantee in Section 1.01 excluding those products listed in Section 1.04. LUCENT'S PATENTS means all patents (including utility models but excluding design patents and design registrations) owned and controlled by LUCENT or its wholly-owned SUBSIDIARIES (including patents which LUCENT and its RELATED COMPANIES do not own but have a right to license), (1) claiming: (i) an OPTICAL FIBER (ii) a method of or an apparatus for making (including quality control and testing) an OPTICAL FIBER, or (iii) a material used in the manufacture of or forming a part of an OPTICAL FIBER; and (2) issued prior to January 1, 1998 in any country of the world, and any patent issuing from an application claiming priority from any such issued patents (except as below) with respect to which and to the extent that LUCENT or its wholly-owned SUBSIDIARIES has a right, as of the date of execution of this Agreement, to grant the licenses granted herein; provided, however, the term means and includes applications resulting in patents claiming multimode OPTICAL FIBER filed prior to the Effective Date of this Agreement. The term LUCENT's PATENTS shall exclude any and all patents and patent rights excluded in Section 1.04, including but not limited to: (1) [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]; (2) related to a method or means to introduce dispersion compensation into a 16 transmission system using one or more OPTICAL FIBERS, [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]; (3) related to a method or means for [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]; and (4) claiming [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]. Subject to all of the restrictions, exclusions and limitations herein, the term LUCENT's PATENTS includes but is not limited to OPTICAL FIBER patents listed in Appendix A, their foreign counterparts and any reissues, reexaminations or extensions thereof. NON-PREMIUM OPTICAL FIBER means an OPTICAL FIBER other than PREMIUM OPTICAL FIBER including but not limited to what is commonly known in the industry as: conventional standard matched clad single mode fibers, multimode optical fibers, conventional dispersion shifted fibers (but not including any form of non-zero dispersion fiber), dispersion flattened fibers and polarization maintaining fiber. NON ZERO DISPERSION FIBER (NZDF) means an OPTICAL FIBER designed to [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]. OPTICAL FIBER means optical transmission fiber drawn from an optical fiber preform made by vapor phase methods, including but not limited to MCVD, OVD, and VAD methods or combinations thereof, and/or in combination with rod-in-tube overcladding methods. OPTICAL FIBER includes, but is not limited to, single mode optical fiber, multimode optical fiber, dispersion shifted fiber (including but not limited to NON-ZERO DISPERSION FIBER), and polarization maintaining fiber. PREMIUM OPTICAL FIBER means those OPTICAL FIBERS commonly referred to in the industry as [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED]. RELATED COMPANIES of a company are SUBSIDIARIES of the company and any other company so designated as agreed to in writing by LUCENT and SpecTran. SPECTRAN'S PATENTS means all patents (including utility models but excluding design patents and design registrations) owned and controlled by SpecTran or its wholly-owned SUBSIDIARIES (including patents which SpecTran and its RELATED COMPANIES do not own but have a right to license), (1) claiming: (i) an OPTICAL FIBER (ii) a method of or an apparatus for making (including quality control and testing) an OPTICAL FIBER, or (iii) a material used in the manufacture of or forming a part of an OPTICAL FIBER; and 17 (2) issued prior to January 1, 1998 in any country of the world, and any patent issuing from an application claiming priority from any such issued patents with respect to which and to the extent that SpecTran or its wholly-owned SUBSIDIARIES has a right, as of the date of execution of this Agreement, to grant the licenses granted herein; provided, however, the term means and includes applications resulting in patents claiming multimode OPTICAL FIBER filed prior to October 1, 1998. SUBSIDIARY of a company means a corporation or other legal entity (i) the majority of whose shares or other securities entitled to vote for election of directors (or other managing authority) is now or hereafter controlled by such company either directly or indirectly; or (ii) which does not have outstanding shares or securities but the majority of whose ownership interest representing the right to manage such corporation or other legal entity is now or hereafter owned and controlled by such company either directly or indirectly; but any such corporation or other legal entity shall be deemed to be a SUBSIDIARY of such company only as long as such control or ownership and control exists. The term does not mean or include, without limitation, General Photonics, LLC. 18 APPENDIX A SELECT LUCENT OPTICAL FIBER PATENTS - ------------------------------------------------------------------------------- U.S. PATENT AUTHOR FILING DATE ISSUE DATE # TITLE - ------------------------------------------------------------------------------- [REDACTED MATERIAL FILED SEPARATELY WITH COMMISSION; CONFIDENTIAL TREATMENT GRANTED] -----END PRIVACY-ENHANCED MESSAGE-----