-----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, Ww5TfWF4SZm3rGLkt2bL/+dvRxAgeALWoaXJFFjGuGAQICEthzB2WWqX0cvp9VLf l5NALMBTuiEBXcynpYTlpw== 0000804312-96-000001.txt : 19960117 0000804312-96-000001.hdr.sgml : 19960117 ACCESSION NUMBER: 0000804312-96-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951027 FILED AS OF DATE: 19960116 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTEK TECHNOLOGY INC CENTRAL INDEX KEY: 0000804312 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 751962405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16304 FILM NUMBER: 96503647 BUSINESS ADDRESS: STREET 1: 1215 W CROSBY RD CITY: CARROLLTON STATE: TX ZIP: 75006 BUSINESS PHONE: 2143232200 MAIL ADDRESS: STREET 1: 1215 W CROSBY RD CITY: CARROLLTON STATE: TX ZIP: 75006 10-K 1 CONFORMED COPY SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended October 27, 1995 Commission File Number 0-16304 Optek Technology, Inc. (Exact name of registrant as specified in its charter) Delaware 75-1962405 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1215 West Crosby Road, Carrollton, Texas 75006 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 323-2200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. ( ) The aggregate market value of the registrant's voting stock held by non-affiliates as of October 27, 1995 was: $16,095,758 (* see note on index page). The number of shares outstanding of each class of registrant's common stock as of October 27, 1995 was: Common Stock, par value $0.01 per share, 3,444,624 shares. ___________________ Documents Incorporated by Reference Portions of the registrant's definitive proxy statement to be furnished to stockholders in connection with its Annual Meeting of Stockholders to be held on March 19, 1996 are incorporated by reference in Part III of this Form 10-K. OPTEK TECHNOLOGY, INC.ANNUAL REPORT ON FORM 10-K INDEX Securities and Exchange Commission Item Number and Description Page PART I ITEM 1. Business 1 ITEM 2. Properties 6 ITEM 3. Legal Proceedings 7 ITEM 4. Submission of Matters to a Vote of Security Holders 7 PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters 7 ITEM 6. Selected Financial Data 8 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 ITEM 8. Financial Statements and Supplementary Data 10 ITEM 9. Changes in and Disagreements on Accounting and Financial Disclosure 10 PART II ITEM 10. Directors and Executive Officers of the Registrant 11 ITEM 11. Executive Compensation 11 ITEM 12. Security Ownership of Certain Beneficial Owners and Management 11 ITEM 13. Certain Relationships and Related Transactions 11 PART IV AND SIGNATURES ITEM 14. Exhibits, Financial Statements & Financial Statement Schedules and Reports on Form 8-K 11 INDEPENDENT AUDITORS' REPORT F-1 SIGNATURES The figure indicated on the cover page as to the aggregate market value of shares of registrant's voting stock held by nonaffiliates, as such figure relates to shares held by affiliates, represents the registrant's best good faith estimate for purposes of this annual report on Form 10-K. The aggregate market value indicated is based upon the average of the bid and asked prices of the registrant's common stock, as reported by a market maker for the Company's common stock, as of October 27, 1995. All outstanding shares beneficially owned by executive officers and Directors of the registrant or by any stockholder beneficially owning more than 10% of registrant's common stock, as incorporated herein under the heading "Security Ownership of Certain Beneficial Owners and Management," were considered for purposes of this disclosure to be held by affiliates. PART I ITEM 1. Business. Introduction Optek Technology, Inc. ("Optek" or "the Company") markets, designs and manufactures sensor products based on either of two technologies: optoelectronics or magnetic field sensing (Hall Effect). These products react to changes in infrared light or magnetic fields which indicate physical events such as position, speed or rotation and convert this information into an electrical signal which can then be communicated to control devices such as microprocessors capable of processing and responding to that signal. Because optoelectronic and magnetic sensors operate without physical contact, they are capable of more accurate and reliable measurement and can be used with more sensitive and delicate equipment than standard mechanical or electromechanical devices. These characteristics, combined with increased speed, durability and compactness, have prompted the substitution of optoelectronic and magnetic sensors for mechanical and electromechanical processors. Optek's optoelectronic components and assemblies are used in business machines, such as mailing machines, in which they determine envelope position; in computer peripherals, such as disk and tape drives, in which they sense the beginning position of the data storage area; in industrial products, such as security systems, in which they sense the interruption of a beam of light; and in military applications, such as missile guidance systems, in which they assist the projectile in tracking its target. Optek's magnetic sensors are used in automotive applications and in various industrial applicationswhere harsh environments prevent the use of optoelectronics. For example, Hall Effect devices sense rotation of shafts and gears in automobiles where the presence of dirt and oil would make the application of optoelectronic technology impractical. Optoelectronic Products The largest portion of the Company's current business is the design, manufacture and sale of custom devices which use optoelectronics technology to satisfy customers'sensing application requirements. Optoelectronics technology uses light to measure or sense position or motion. A familiar example of the use of this technology is its application in certain burglar alarm systems which emit a beam of light which is received by a sensor. The interruption of this beam causes an electrical response in the sensor which signals the alarm. These principles may be applied using either visible or nonvisible (i.e., infrared) light as a means of sensing motion, speed or position. The optoelectronic products made by Optek primarily use infrared light. Optek specializes in customized optoelectronic solutions for its customers' applications. The Company applies its specific engineering and manufacturing expertise to the design and manufacture of components and assemblies which meet the physical and technical requirements demanded for the intended use by the customer. This application-based design requires the integration of mechanical, electrical and optical technologies. Based upon the Company's expertise and knowledge of the optoelectronics industry, the Company does not believe any patents currently govern the basic optoelectronics technology used by the Company. As a result, development of new applications for this technology has proceeded without the impediment of obtaining licenses for the underlying technology. Further, the Company believes that companies desiring to enter the optoelectronics industry may do so without obtaining licenses or permits relating to the use of such technology and that competition is not impeded by such constraints. However, Optek has sought to protect confidential information which is used in the Company's operations by restricting its employees from using, disseminating or disclosing confidential information not generally known in the industry. Optek is vertically integrated and manufactures: (1) infrared emitting and light sensing semiconductor chips; (2) discrete components, which are plastic or metal packages housing the light emitting or light sensing chips described above; and (3) assemblies, which combine the light emitting and light sensing components in a single plastic package to meet various electrical and/or mechanical specifications. Generally, it is assemblies which are sold by Optek to its customers for use in their products. This integrated manufacturing structure offers Optek the necessary flexibility to satisfy customers' specialized requirements. The following paragraphs describe these optoelectronic devices and their basic principles of operation. Semiconductor Chips Light emitting and light sensing semiconductor chips are the basic elements in Optek's optoelectronic product range. Both types of chips are manufactured by Optek which has a complete semiconductor processing operation from engineering, through all processing steps, to final testing. A light emitting diode ("LED") chip emits light as the result of the application of direct current at a low voltage. Such chips can be made to produce light in a wide range of wavelengths extending from the near ultraviolet region of the electromagnetic spectrum to the far infrared. Optek's light emitting chips are manufactured from gallium arsenide wafers using standard semiconductor manufacturing techniques. Light sensors are semiconductor chips which are capable of converting light into electrical signals; thus, they can be used to sense and relay the signal produced from a light emitting chip. Optek produces light sensitive chips from polished silicon slices using standard silicon semiconductor manufacturing processes. Optek's light sensing chips include photodiodes, phototransistors and photodarlingtons, which have varying speed and sensitivity. Phototransistors and photodarlingtons incorporate transistors as an integral part of the chip thus providing in a single unit the ability to detect the light and amplify the signal received. The Company uses a substantial portion of the semiconductor chips it manufactures in its discrete components. On occasion, however, the Company has designed and manufactured custom semiconductor chips for specific customer applications. Most of the light sensing chips manufactured by Optek produce an analog output which must then be interpreted by a microprocessor. However, the Company has developed a family of more sophisticated light sensing integrated circuits for these applications. These Photologic chips developed by Optek incorporate into the chip all the functions necessary to produce a digital output. The versatility of the chip's output geometry allows it to drive multiple outputs, resulting in savings to the customer in system processing circuitry. A Photologic( chip has also been developed with increased sensitivity, low level input detection and on-chip voltage regulation which enables the chip to function under fluctuating power conditions. The former characteristic is particularly useful in fiber optics where the signal transmitted may be a very low level signal. The latter characteristic finds a wide range of applications, for example with battery powered devices or under conditions of heavy electrical interference. Discrete Components Discrete components incorporate LED or sensor chips in either plastic or metal packages which protect the chip and allow light to pass to or from the chip. These components form an integral part of the assemblies manufactured by Optek. In manufacturing discrete components, LED or sensor chips are mounted on lead frames or headers, a wire is bonded from the chip to the lead, and the device is housed in a plastic or metal package. While most of Optek's discrete components are used in its own assembly manufacturing operations, the Company also manufactures and sells discrete components to original equipment manufacturers ("OEMs") which integrate them into their own products. Assemblies Most of Optek's business is directed to the production of complete assemblies which are ready to plug into the customer's equipment. These assemblies generally fall into three product groups: (1) interrupter/reflective assemblies, which use LED and sensor discrete components in combination and detect objects interrupting the light path; (2) detector assemblies and displays, which incorporate specifically designed semiconductor chips capable of sensing position in physical packaging suitable for Aerospace/Defense applications; and (3) isolators or couplers which transmit signals while "isolating" high voltage circuits. Discrete LED and sensor components are generally used in combination with one another in interruptive or reflective assemblies. Each of these assemblies includes a discrete emitter, a light transmission path and a discrete sensor. The sensing occurs when an object interrupts the light transmission path from emitter to sensor or by reflecting the emitted light back to the sensor. Optek manufactures various types of detector assemblies and displays which are used in modern weapons systems. These assemblies and displays are designed to sense the location of an object in relation to its target and often requires custom sensor or LED chips which are incorporated in physical packaging capable of withstanding rigorous environmental conditions. Optoelectronic LED's and sensors can be used to isolate electrical noise or high voltage from an electrical circuit. In an isolator or coupler, the light path from emitter to sensor is totally enclosed and cannot be modified externally. Placing an isolator between an input and output circuit can eliminate the possibility of high voltage or electrical noise reaching the output circuit. These devices are used to protect computers and other sensitive circuits from potentially damaging electrical surges or electrical noise. Fiber Optic Products As a complement to its other optoelectronic devices, Optek manufactures fiber optic LED's and sensors. Optek uses its LED and sensor technology to provide the light signal and receiver products for data transmission through fiber. Fiber optics are currently widely used in modems, multiplexers and local area networks. These products allow electronic equipment, such as energy management systems, computers and even telephones, to communicate over thin lightweight cables of glass or plastic fiber. Hall Effect Devices During fiscal 1992, Optek began production of Hall Effect (magnetic field sensing) devices which sense physical events by reacting to changes in magnetic fields. Since magnetic fields are relatively unaffected by the cleanliness of the environment, Hall Effect devices can be used in environments in which a clear optical path is inhibited. For example, Hall Effect devices sense rotation of gears in automobiles for various applications where the presence of dirt and oil would make the application of optoelectronic technology impractical. The first practical application of this technology by Optek has been the production of crankshaft and camshaft sensors used for the ignition system of an automobile. This application is the subject of a patent and the Company has been licensed to manufacture such devices only for General Motors Corporation. The Company continues to explore additional opportunities in which Hall Effect devices can efficiently address customers' requirements. For example, the Company recently began production of a Hall Effect sensor used in an automotive security system. Because of the presence of oil and dirt characteristic of automotive applications, magnetic sensing devices are particularly useful and the Company has sought to expand upon the expertise and familiarity gained through its initial automotive programs to identify and participate in additional sensor programs. The Company's engineering expertise in sensor technologies has facilitated its identification of additional potential applications for Hall Effect devices. Because of the relative newness of some of these applications, the Company has sought and, in some cases, obtained patent protection for these applications. However, Optek cannot currently predict whether additional new applications will qualify for patent registration. As with optoelectronic products, the Company is vertically integrated and capable of producing each of the elements incorporated into its Hall Effect devices. The basic building block of each device is a semiconductor chip which reacts to fluctuations in a magnetic field. Optek produces its own magnetic field sensing chips through processes and techniques similar to those used for manufacturing light sensing chips. As the position of a magnet is changed, the sensor produces a signal which is relayed to a control device. Each of these elements is combined into an assembly integrating mechanical, electronic and magnetic technologies. Product Development In the past, the optoelectronics industry has not been as subject to rapid technological change as other semiconductor-based industries. Consequently, the Company's efforts have been primarily directed toward enhancing the functions of its existing product base to permit a wider range of applications and to identification of new applications for optoelectronic devices rather than to research and development related to technological advances. Similarly, most of the research related to Hall Effect devices has been directed to the solution of application-specific problems rather than to improvements in the underlying technology. However, in order to expand the range of applications which can be addressed with its Hall Effect devices, the Company anticipates applying a portion of its research activities to development of new magnetic sensor technology having different sensitivities and capacities. If successful, this effort would permit the Company to introduce new lines of products for applications which are difficult or impossible to address with available sensors. No assurance can be given that the Company will succeed in expanding these technologies. During the past three fiscal years, the Company's product development and engineering expenses have ranged between 6% and 7% of net sales, a portion of which has been funded by customers. Future developments may require the Company to allocate increased resources to advances in optoelectronic and Hall Effect technologies. However, no assurance can be given that the Company will be successful in further expanding these technologies. Raw Materials The principal raw materials used by the Company in the manufacture of its semiconductor chips components and assemblies are silicon wafers, gallium wafers, chemicals and gases used in processing wafers, gold wire, lead frames, metal and plastic for packages that house the chip and the various custom assemblies, and magnets used in certain Hall Effect applications. All of these raw materials can be obtained from several suppliers. From time to time, particularly during periods of increased industry-wide demand, silicon wafers and other materials have been in short supply. However, the Company has not been materially affected by such shortages. As is typical in the industry, the Company allows for a significant lead time between order and delivery of raw materials. Customers In fiscal 1995, Optek's ten largest customers accounted for approximately 57% of net sales. Two customers, General Motors Corporation and Pitney Bowes, made purchases which accounted for 13% and 13%, respectively, of the Company's net sales. Optek's customers normally purchase the Company's products and incorporate them in products that they in turn sell into their own markets on an ongoing basis. As a result, Optek's sales are dependent upon the success of its customers' products, and its future performance is dependent upon its success in finding new customers and receiving new orders from existing customers. Sales orders are frequently made on the Company's standard form, which permits the customer to cancel the order in whole or in part. In such event, the standard form obligates the customer to pay the Company the purchase price of finished goods, a price adjustment based on the quantity of goods actually shipped and all costs, direct or indirect, incurred by the Company with respect to the order, including a reasonable allowance for prorated expenses and anticipated profits. However, no assurance can be given that such amounts will be received by the Company after cancellation. Marketing Optek markets its products through its own technical sales staff and through independent sales representatives. At October 27, 1995, Optek employed seven technical sales people who operate out of the Company's offices in Carrollton, Texas and two technical sales people operating out of offices in western Europe. Optek also uses approximately 130 independent sales representatives in geographic territories throughout the United States. Independent sales representatives are typically paid a 3% to 5% commission on sales within their geographical territory. The initial customer contact is usually made by either a member of Optek's technical sales staff or a sales representative for the geographic area. During this contact, the representative determines if custom optoelectronic or Hall Effect components or assemblies could perform the specific functions desired by the customer. Typically, the customer either provides a detailed specification of its requirements or is assisted by Optek's engineering and technical sales staff in the development of specifications. Optek then develops a technical proposal, incorporating preliminary design concepts, and submits the technical proposal to the customer. The technical proposal includes pricing terms, which usually include a one-time tooling charge and a unit price for the product over a specified period based on an estimated production volume. The marketing process takes approximately four to eighteen months from initial customer contact to purchase order, depending on the complexity of the customer's requirements. Once a purchase order is placed by the manufacturer with Optek, the typical lead time to delivery of a prototype is approximately twelve weeks, with production quantities available approximately six to eight weeks later. Subsequent production releases typically require lead times of six to eight weeks. During fiscal 1995, foreign sales accounted for approximately $16.9 million or approximately 27% of net sales, as compared to $14.4 million, or approximately 26% of net sales for fiscal 1994, and $13.3 million, or approximately 24% of net sales during 1993. Backlog Optek's order backlog at October 27, 1995 was approximately $23.2 million compared with a backlog of approximately $15.6 million at October 28, 1994. Most of the backlog existing at October 27, 1995 is scheduled to be shipped within fiscal 1996. The Company's backlog is comprised of orders which customers have released and scheduled for delivery within one year. However, by industry practice, orders may be canceled or modified at any time, with the customer being responsible for all finished goods, all costs, direct and indirect, incurred by the Company and a reasonable allowance for anticipated profits. No assurance can be given that such amounts will be received by the Company after cancellation. Competition The Company is a leading supplier of custom optoelectronic and magnetic sensing devices for sale to original equipment manufacturers and automotive parts suppliers. Optek competes with a range of companies for the custom optoelectronic and magnetic sensor requirements of vendors of general business machines, computer peripherals, a variety of industrial products and specialized military applications. The Company believes that its principal competitor for sales of custom devices is Honeywell Optoelectronics (formerly Spectronics, Inc.), a division of Honeywell, Inc. Because the Company specializes in custom devices requiring a high degree of engineering expertise to meet the requirements of specific applications, it generally does not compete to any significant degree with other large United States, European or Far Eastern manufacturers of standard "off-the-shelf" optoelectronic components. Optek believes that the production of quality products, expertise in the design and development of custom products, timely delivery of such products and price are the most significant factors in the segment of the market in which it competes. Optek believes that generally it competes favorably with respect to these factors. Foreign Manufacturing Operations Virtually all of Optek's discrete components and assemblies for commercial use, sales of which accounted for approximately 81% of Optek's net sales in its last fiscal year, are produced in facilities operated by the Company in Juarez, Mexico in order to realize significantly reduced labor costs. Mexico has enacted legislation to promote the use of such manufacturing operations by foreign companies and continuation of these operations depends upon compliance with applicable laws and regulations of the United States of America and Mexico, the availability of less expensive labor and the continuation of favorable exchange rates. These operations are authorized to operate as Maquiladoras by the Ministry of Commerce and Industrial Development of Mexico. Maquiladora status allows Optek to wholly own its Mexican subsidiaries and to import items into Mexico duty free, provided that such items, after processing, are re-exported from Mexico within six months. Maquiladora status, which must be renewed every two years, is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program, proper utilization of imported materials, hiring and training of Mexican personnel, compliance with tax, labor, exchange control and notice provisions and regulations and compliance with locational constraints. The Company anticipates that the North American Free Trade Agreement ("NAFTA"), when fully implemented, will further facilitate its operations in Mexico and reduce the restrictions applicable to those operations. Recently, as trade relations between the two countries have matured, labor costs have begun to rise and following a devaluation of the peso at the beginning of the year, exchange rates have stabilized in the latter half of the year. Although assembly operations in Mexico continue to be less expensive than comparable operations in the United States of America, additional investment in automated equipment may become necessary to offset rising labor costs. The Company's foreign manufacturing operations could be adversely affected by interruptions in the trade relations between these two countries. Employees As of October 27, 1995, the Company employed 1,686 persons, including 1,544 in manufacturing and assembly (1,348 in Mexico and 196 in Carrollton), 90 in sales and engineering and 52 in management and administration. Some of the Company's employees are highly skilled and the Company's continued success will depend in part on its ability to attract and retain such employees, who are generally in demand. At times, the Company has had difficulty hiring engineering personnel with previous experience in its industry due to the limited number of engineers available with such experience. To date, this difficulty has not materially affected the Company's operations. The Company has never had a work stoppage, no employees are represented by any labor organi- zation and the Company considers its employee relations to be good. ITEM 2. Properties. The Company's administrative offices, engineering facilities, silicon and gallium arsenide chip manufacturing operations and tooling and plastic molding operations are located in a Company-owned building containing 205,000 square feet on a 15.5 acre site in Carrollton, Texas. The Company also leases approximately 6,250 square feet of warehouse space in El Paso, Texas under a lease terminating in January 1997, half of which has been subleased. Virtually all of the Company's non-military discrete components, interrupter and reflective assemblies and isolators/couplers are assembled at the facilities of the Company's subsidiaries located in Juarez, Mexico. The Mexican subsidiaries beneficially own a 24,000 square foot building and a 45,000 square foot building in Jaurez, Mexico through trust agreements with Banca Serfin, Sociedad Nacional de Credito, as required by Mexican law. The operations formerly conducted at the smaller of those buildings have been consolidated into the larger plant and adjacent leased premises, and the Company is currently seeking to sell such plant. Therefore, the smaller building is now classified as an asset held for disposal. This property is currently under lease to a third party terminating in March 1998 with annual lease payments of approximately $114,000. The Company's Mexican subsidiaries also lease a 58,000 square foot building in Juarez, Mexico under a lease expiring in December 1996 with aggregate annual lease payments of $269,000. The lease provides for five one-year renewals exercisable on at least 180 days notice. This plant is adjacent to the 45,000 square foot building owned by the Company's subsidiaries. Additional buildings aggregating 56,000 square feet are owned by Optek in Mineral Wells, Texas which formerly housed the manufacturing and assembly operations of Optek's Aerospace division. This plant has been classified as an asset held for disposal in the Company's financial statements and the Company is currently seeking to sell such plant and other land held in Mineral Wells. The Company believes that its existing facilities and equipment are well-maintained and are in good operating condition. The Company anticipates that its current facilities will be suitable and adequate for its operations through 1996. ITEM 3. Legal Proceedings. The Company is not involved in any material current or pending legal proceedings, other than ordinary routine litigation incidental to its business. ITEM 4. Submission of Matters to a Vote of Security Holders. No matters were submitted by the Company during the fourth quarter of the fiscal year ended October 27, 1995 to a vote of the Company's security holders through the solicitation of proxies or otherwise. PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters. Through July 1, 1993, the Company's Common Stock was traded in the over-the-counter market and was quoted on the National Association of Securities Dealers' Automated Quotations System ("NASDAQ") National Market System. Due to the losses reported for the fiscal year ended October 30, 1992, the Company did not satisfy the quantitative criteria for continued listing on the NASDAQ system and, therefore, the Company's common stock ceased to be quoted by the NASDAQ system effective July 2, 1993. The Company's common stock continues to be traded in the over-the-counter market. The following table sets forth the quarterly high and low closing sales prices (to the nearest 1/8) of the Common Stock, as quoted by NASDAQ, for each quarterly period through July 1, 1993 and the high and low bid prices as reported since the fourth quarter of 1994. Bid prices represent quotations between dealers in securities, without adjustment for retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. Quarterly prices for periods from the cessation of quotation by NASDAQ until the fourth quarter of fiscal 1994 are not available as the Company did not have access to a regular record of quotations.
1995 Quarter Ended High Low October 27, 1995 7 3/4 5 1/2 July 28, 1995 5 3/4 2 1/2 April 28, 1995 2 5/8 1 1/2 January 27, 1995 1 5/8 1 1/4 1994 Quarter Ended October 28, 1994 1 5/8 1 1/4 July 30, 1993 1 1/2 1/4 April 30, 1993 1 1/2 3/4 January 29, 1993 1 3/4 1 1/4
At October 27, 1995, the Company had approximately 243 stockholders of record. The Company believes that a significant number of shares of the Company's Common Stock are held in street name and, consequently, the Company is unable to determine the actual number of beneficial owners thereof. The Company has never paid a cash dividend on its Common Stock, currently intends to retain any earnings for use in its business and does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The Company's loan agreements contain covenants which prohibit the Company from declaring dividends on its Common Stock unless such covenants are waived in writing. ITEM 6. Selected Financial Data. The following table summarizes certain selected consolidated financial data for the periods indicated. This information is derived from the Company's consolidated financial statements and is qualified in its entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K.
(In thousands, except per share amounts) Oct. 27, Oct. 28, Oct. 29, Oct. 30, Oct. 25, Operating Statement Data: 1995 1994 1993 1992 1991 ________ ________ ________ ________ ________ Net sales $62,542 $55,625 $55,878 $58,403 $51,703 Cost and expenses: Cost of sales 38,450 36,971 42,898 41,780 39,206 Provision for excess and obsolete inventories 63 1,298 3,601 1,371 982 ______ ______ ______ ______ ______ Gross profit 24,029 17,356 9,379 15,252 11,515 Product development and engineering expenses 3,841 3,591 3,968 4,089 4,520 Selling, general and administrative expenses 7,090 6,536 7,498 9,057 7,989 Provision for restructuring costs - - 2,292 3,600 - Reduction in value of deferred costs - - 893 - - ______ ______ ______ ______ ______ Operating income (loss) 13,098 7,229 (5,272) (1,494) (994) Other expense: Interest expense 2,960 3,685 3,952 3,788 3,521 Reduction in value of assets held for disposal 74 230 518 - - Other, net 68 135 317 615 658 ______ ______ ______ ______ ______ Total other expenses 3,102 4,050 4,787 4,403 4,179 Earnings (loss) before income taxes 9,996 3,179 (10,059) (5,897) (5,173) Income tax expense 158 - - - 44 ______ ______ ______ ______ ______ Net earnings (loss) $9,838 $3,179 $(10,059) $(5,897) $(5,217) ______ ______ _______ ______ ______ Earnings (loss) per common share $ 1.40 $ .47 $ (3.12) $ (1.81) $ (1.64) Weighted average number of common and common equivalent shares outstanding 7,027 7,108 3,224 3,250 3,187 Balance sheet data: Working capital (deficit) $4,028 $4,830 $ 6,865 $(25,081) $14,075 Total assets 26,065 27,827 32,146 48,651 45,212 Total current liabilities, including current maturities of long-term debt 9,175 8,159 7,920 50,789 9,106 Long-term debt, less current maturities 15,996 28,692 36,472 111 32,567 Stockholders' equity (deficit) 810 (9,148) (12,340) (2,302) 3,489 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Net sales for 1995 were $62.5 million versus $55.6 million in 1994 and $55.9 million in 1993. The increase from 1994 is attributed to higher commercial sales volume of $4.5 million, higher automotive sales volume of $1.2 million and increased volume of high-reliability optoelectronic products of $1.2 million. The net decline from 1993 to 1994 was a result of the divestiture of the local area network product line, $1.6 million, and discontinuation of the power semiconductor product line, $2.8 million. These reductions were substantially offset by increases in the commercial and hi-reliability optoelectronics businesses totaling $4.1 million. Cost of sales in 1995 was 61% of sales versus 66% in 1994 and 77% in 1993. The improvements in 1995 and 1994 are the result of higher production volumes resulting in lower unabsorbed fixed costs, favorable Mexico exchange rates, cost reduction programs that were implemented in 1993, and divestiture or discontinuation in 1993 of unprofitable product lines. Operating income was $13.1 million in 1995, $7.2 million in 1994 and a loss of $5.3 million in 1993. The improvement in 1995 was the result of the aforementioned increase in sales volume; improvements in cost of sales as discussed above; and the absence of additional provisions for excess and obsolete inventories versus 1994 provisions of $1.3 million. The improvement from 1993 to 1994 was the result of lower cost of sales as previously mentioned; the absence of charges incurred in 1993 for restructuring, $2.3 million and write-off of deferred product development, $.9 million; lower provisions for excess and obsolete inventories, $2.3 million; and reduced engineering, selling, general and administrative expenses. Restructuring charges in 1993 of $2.3 million included a $1.9 million inventory provision related to the discontinuation of the power semiconductor product line and a $.4 million provision for a reduction in force in the commercial and automotive groups. Product development and engineering expenses in 1995 were $3.8 million or 6.1% of sales compared to $3.6 million or 6.5% of sales in 1994 and $4.0 million or 7.1% in 1993. These expenses are related to the development of new products and processes as well as sustaining engineering. The improvement in the percent to sales in 1995 was due to sales increasing at a greater rate than expenses. The 1994 improvement was primarily the result of the divestiture of the local area network product line and discontin- uation of the power semiconductor product lines as well as other downsizing activities. In 1996, the Company will continue to emphasize development of new products in support of its strategic growth plan. Selling, general and administrative expenses in 1995 were $7.1 million or 11.3% of sales, versus 11.8% in 1994 and 13.4% in 1993. The improvement in 1995 was the result of sales increasing at a rate greater than expenses. The 1994 improvement was the result of divesting or discontinuing unprofitable product lines as discussed above and other downsizing actions. Other expenses consist primarily of interest expense which decreased in 1995 and 1994 due to the continued reduction of long-term debt. As a result of the factors discussed above, net earnings for 1995 were $9.8 million versus $3.2 million in 1994 and a loss of $10.1 million in 1993. Liquidity and Capital Resources As reflected in the Company's consolidated statements of cash flows, Optek generated approximately $14 million in cash from operations in fiscal year 1995. The largest single use of cash flow continues to be the reduction of the Company's outstanding debt, approximately $13 million in fiscal year 1995. The remainder of approximately $1 million was used for the purchase of manufacturing equipment. Operating cash flows were $8 million in 1994 and $3 million in 1993. The year-to-year improvements were a direct result of the factors discussed above. A credit agreement with a financial institution at January 20, 1994, provided a $38.8 million line of credit consisting of a $10.5 million working capital line and a $28.3 million revolving term loan. Amounts drawn on the working capital line bear interest at 1 1/2% over the reference rate announced from time to time by the First National Bank of Chicago, Chicago, Illinois and mature on October 31, 1996, with two one year extensions if no default exists under the loan documents at maturity. Interest accrues on the revolving line of credit at various rates by tranche, a summary of which is set forth in Note 5 to the consolidated financial statements included herein. The revolving line was scheduled to reduce to $20,650,000 as of November 1, 1995, with additional reductions in the revolving line to occur in the event that the Company used less than the available line for the sixty days preceding a scheduled reduction date. On November 1, 1995, the commitment on the revolving line was reduced to approximately $8,000,000 through operation of these provisions. The final scheduled reduction in the revolving line of $8,000,000 is to occur October 31, 1998. The Company is currently in compliance with the financial and other covenants contained in its loan documents. Although Optek's ability to fund research and development and capital expenditures is constrained by the terms of the loan documents, management believes that its working relationship with its lender is good and that these facilities will be adequate to finance the Company's needs for the foreseeable future. Recently Issued Accounting Pronouncements The Company is required to adopt, in fiscal 1997, the Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company has not determined what the impact of this adoption will be. ITEM 8. Financial Statements and Supplemental Data. Included on pages F-1 through F-11 hereof. ITEM 9. Changes in and Disagreements on Accounting and Financial Disclosure. None. PART III ITEM 10. Directors and Executive Officers of the Registrant. Information relating to the Company's Directors and executive officers is set forth under the heading "Election of Directors and Information as to Directors, Nominees and Executive Officers" in the Company's definitive proxy statement relating to the Company's Annual Meeting of Stockholders to be held March 19, 1996, which will be filed with the Securities and Exchange Commission on or about January 19, 1996, and such information is incorporated herein by reference. ITEM 11. Executive Compensation. Information relating to executive compensation is set forth under the heading "Executive Compensation" in the Company's definitive proxy statement relating to the Company's Annual Meeting of Stockholders to be held March 19, 1996, which will be filed with the Securities and Exchange Commission on or about January 19, 1996, and such information is incorporated herein by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. Information relating to the ownership of certain beneficial owners and management of the Company's Common Stock is set forth under the heading "Securities Ownership of Certain Beneficial Owners and Management" in the Company's definitive proxy statement relating to the Company's Annual Meeting of Stockholders to be held March 19, 1996, which will be filed with the Securities and Exchange Commission on or about January 19, 1996, and such information is incorporated herein by reference. ITEM 13. Certain Relationships and Related Transactions. Information relating to the business relationships and related transactions with respect to the Company and certain Directors and nominees for election as Directors is set forth under the heading "Certain Transactions" in the Company's definitive proxy statement relating to the Company's Annual Meeting of Stockholders to be held March 19, 1996, which will be filed with the Securities and Exchange Commission on or about January 19, 1996, and such information is incorporated herein by reference. PART IV ITEM 14. Exhibits, Financial Statements & Financial Statement Schedules and Reports on Form 8-K. 1. Financial Statements included in Part II (Item 8) of this report: Independent Auditors' Report; Consolidated Balance Sheets as of October 27, 1995 and October 28, 1994; Consolidated Statements of Operations for the three years ended October 27, 1995; Consolidated Statements of Stockholders' Equity (Deficit) for the three years ended October 27, 1995; Consolidated Statements of Cash Flows for the three years ended October 27, 1995; Notes to Consolidated Financial Statements. 2. Financial Statement Schedules included in Part IV (Item 14) of this report for the three fiscal years ended October 27, 1995: Independent Auditors' Report; Schedule II - Valuation and Qualifying Accounts; All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. No. Exhibit 3.7 Bylaws of Optek Technology, Inc. (1). 3.8 Restated Certificate of Incorporation of Optek Technology, Inc. dated August 27, 1987 (2). 10.1 Restated and Amended 1983 Incentive Stock Option Plan (1). 10.2 Form of Incentive Stock Option Agreement (1). 10.25 Optek Technology, Inc. Profit-Sharing Plan and Trust (1). 10.30 1983 Incentive Stock Option Plan (3). 10.33 First Amended and Restated Registration Rights Agreement dated as of July 1, 1988 among Optek Technology, Inc., Allstate Insurance Company, Metropolitan Life Insurance Company, Massey Burch Venture Investors, The Confederate Venture Fund, James D. Crownover, Jack C. Massey, Rauscher Pierce Refsnes, Inc., Equitable Enskilda Securities Limited and Household Commercial Financial Services, Inc. (4). 10.36 First Amendment to Optek Technology, Inc., Profit Sharing Plan and Trust (5). 10.38 Form of Director Warrant to Purchase Common Stock (5). 10.47 Long-Term Stock Investment Plan (6). 10.48 Directors' Formula Award Plan (6). 10.49 Amended and Restated Secured Credit Agreement dated January 20, 1994 between Optek Technology, Inc. and Household Commercial Financial Services, Inc. (7). 10.52 Warrant to Purchase Common Stock of Optek Technology, Inc. dated May 20, 1993 (8). 10.53 Warrant to Purchase Common Stock of Optek Technology, Inc. dated November 22, 1993 (8). 10.54 Warrant to Purchase Common Stock of Optek Technology, Inc. dated November 22, 1993 (8). 10.55 Consulting Agreement between Optek Technology, Inc. and Grant Dove (8). 10.56 Employment Agreement between Optek Technology, Inc. and Thomas R. Filesi (8). 10.57 Employment Agreement between Optek Technology, Inc. and Thomas S. Garrett (8). 10.58 Employment Agreement between Optek Technology, Inc. and D. Vinson Marley (8). 10.59 Form of Stock Option Agreement (8). 10.60 Amended and restated warrant to purchase Common Stock of Optek Technology, Inc. dated December 13, 1995. 11.1 Statement Regarding Computation of Per Share Earnings. 22 Subsidiaries of the Registrant. 23 Independent Auditors' Consent. (1) Previously filed as Exhibits 3.7, 10.1, 10.2, and 10.25, to registrant's Registration Statement on Form S-1, No. 33-14885, and incorporated herein by reference. (2) Previously filed as Exhibit 3.8 to registrant's Registration Statement on Form 8-A filed on October 15, 1987, and incorporated herein by reference. (3) Previously filed as Exhibit 10.30 to registrant's Registration Statement on Form S-8, No. 33-18555, and incorporated herein by reference. (4) Previously filed as Exhibit 4 to Schedule 13D dated July 21, 1988 filed on behalf of Household Commercial Financial Services, Inc., and incorporated herein by reference. (5) Previously filed as Exhibits 10.36 and 10.38 to registrant's Annual Report on Form 10-K for the fiscal year ended October 28, 1988 and incorporated herein by reference. (6) Previously filed as Exhibits 10.47 and 10.48 to registrant's Annual Report on Form 10-K for the fiscal year ended October 25, 1991 and incorporated herein by reference. (7) Previously filed as Exhibits 10.49 and 10.50 to registrant's Annual Report on Form 10-K for the fiscal year ended October 29, 1993 and incorporated herein by reference. (8) Previously filed as Exhibits 10.52, 10.53, 10.54, 10.55, 10.56, 10.57, 10.58 and 10.59 to registrant's Annual Report on Form 10-K for the fiscal year ended October 28, 1994 and incorporated by reference. (b) Reports on Form 8-K. The Company filed no reports on Form 8-K during the quarter ended October 27, 1995. KPMG Peat Marwick LLP Certified Public Accountants INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Optek Technology, Inc.: We have audited the accompanying consolidated balance sheets of Optek Technology, Inc. and subsidiaries as of October 27, 1995 and October 28, 1994, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended October 27, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Optek Technology, Inc. and subsidiaries as of October 27, 1995 and October 28, 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended October 27, 1995, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Dallas, Texas December 6, 1995
OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) ASSETS
October 27, October 28, 1995 1994 __________ __________ Current assets: Cash $ 928 $ 722 Accounts receivable, net of allowance for doubtful accounts and customer returns of $975 in 1995 and $738 in 1994 6,931 6,689 Inventories (note 2) 5,284 5,517 Prepaid expenses 60 61 _____ _____ Total current assets 13,203 12,989 Property, plant and equipment, at cost (note 3) 33,282 32,761 Less accumulated depreciation 20,618 18,576 ______ ______ 12,664 14,185 Assets held for disposal at the lower of cost or estimated net realizable value 141 297 Other assets 57 356 ______ _____ $26,065 $27,827 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Checks not presented for payment $ 979 $ 749 Accounts payable 2,339 1,938 Accrued expenses (note 4) 5,857 5,472 ______ _____ Total current liabilities 9,175 8,159 Long-term debt (note 5) 15,996 28,692 Other liabilities 84 124 Stockholders' equity (deficit) (notes 5 and 6): Preferred stock, $.01 par value. Authorized 1,000,000 shares; none issued - - Common stock, $.01 par value. Authorized 12,000,000 shares; issued 3,444,624 shares in 1995 and 3,232,861 shares in 1994 34 32 Additional paid-in capital 13,016 12,898 Accumulated deficit (12,240) (22,078) ______ ______ Total stockholders' equity (deficit) 810 (9,148) _____ ______ $26,065 $27,827 See accompanying notes to consolidated financial statements
OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Year ended October 27, October 28, October 29, 1995 1994 1993 _________ _________ __________ Net sales $62,542 $55,625 $ 55,878 Cost and expenses: Cost of sales 38,450 36,971 42,898 Provision for excess and obsolete inventories 63 1,298 3,601 Product development expenses 650 582 407 Engineering expenses 3,191 3,009 3,561 Selling expenses 4,245 3,950 4,776 General and administrative expenses 2,845 2,586 2,722 Provision for restructuring costs (note 4) - - 2,292 Reduction in value of deferred costs (note 1) - - 893 Total cost and expenses 49,444 48,396 61,150 ______ ______ ______ Operating income (loss) 13,098 7,229 (5,272) Other expense: Interest expense 2,960 3,685 3,952 Reduction in value of assets held for disposal 74 230 518 Other, net 68 135 317 _____ _____ _____ Total other expenses 3,102 4,050 4,787 Earnings (loss) before income taxes 9,996 3,179 (10,059) Income tax expense (note 7): 158 - - ______ _____ ______ Net earnings (loss) $ 9,838 $ 3,179 $(10,059) Earnings (loss) per common share $ 1.40 $ .47 $ (3.12) See accompanying notes to consolidated financial statements
OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (in thousands, except share data)
Total Stock- Additional holders' Common Stock paid-in Accum. Treas. Stk equity Shares Amount capital Deficit Shares Amount (deficit) ______ ______ __________ _______ ______ ______ _______ Balance at October 30, 1992 3,273,725 $ 33 $13,078 $(15,198) (49,020) $(215) $(2,302) Forfeiture of common stock under a restricted stock bonus plan - - - - (2,400) - - Amortization ofrestricted stock com- pensation expense - - 21 - - - 21 Retirement of treasury shares (51,420) (1) (214) - 51,420 15 - Net loss - - - (10,059) - - (10,059) ______ ___ ______ _______ ______ __ _______ Balance at October 29, 1993 3,222,305 32 12,885 (25,257) - - (12,340) Exercise of incentive stock options 10,556 - 13 - - - 13 Net earnings - - - 3,179 - - 3,179 ________ __ ______ ______ _____ ___ ______ Balance at October 28, 1994 3,232,861 32 12,898 (22,078) - - (9,148) Exercise of incentive stock options and warrants 211,763 2 118 - - - 120 Net earnings - - - 9,838 - - 9,838 _________ ___ ______ _______ _____ ___ ______ Balance at October 27, 1995 3,444,624 $ 34 $13,016 $(12,240) - $ - $ 810 _________ ____ _______ ________ _____ ____ _______ See accompanying notes to consolidated financial statements OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended October 27, October 28, October 29, 1995 1994 1993 Cash flows from operating activities: Net earnings (loss) $ 9,838 $ 3,179 $(10,059) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 2,722 2,705 3,664 Gain on sale of property, plant & equipment (25) (220) (133) Reduction in value of deferred costs - - 893 Reduction in value of assets held for disposal 74 230 518 Changes in assets and liabilities: Accounts receivable (242) 259 1,905 Inventories, prepaid expenses and other assets 533 1,651 8,880 Accounts payable, accrued expenses and other liabilities 746 169 (2,774) Net cash provided by operating activities 13,646 7,973 2,894 Cash flows from investing activities: Purchase of property, plant and equipment (1,121) (898) (163) Proceeds from sale of property, plant and equipment 25 681 117 Increase in other assets - - (144) Net cash used in investing activities (1,096) (217) (190) Cash flows from financing activities: Net repayment under long-term bank debt (12,696) (7,780) (2,557) Net proceeds from exercise of stock options 120 13 - Other financing activities 230 100 (266) Net cash used in financing activities (12,346) (7,667) (2,823) Effect of exchange rate changes on cash 2 (25) (19) ______ _____ ______ Net increase (decrease) in cash 206 64 (138) Cash at beginning of year 722 658 796 Cash at end of year $ 928 $ 722 $ 658 Interest payments $ 3,075 $ 3,719 $ 3,947 Income tax payments $ 123 $ - $ - See accompanying notes to consolidated financial statements OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended October 27, 1995, October 28, 1994 and October 29, 1993 (dollars in thousands) (1) Summary of Significant Accounting Policies (a) General Information Optek Technology, Inc. and subsidiaries (Company) design, manufacture and market custom infrared optoelectronic devices and magnetic field sensing (Hall Effect) devices. A substantial portion of the Company's products are manufactured by a wholly-owned subsidiary located in Mexico. Net assets located at that subsidiary were $6,852 in 1995, $6,901 in 1994 and $7,426 in 1993. The Company uses a fiscal year ending on the last Friday in October. (b) Principles of Consolidation The accompanying consolidated financial statements include the accounts of Optek Technology, Inc. and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. (c) Inventories Inventories are valued at standard cost which approximates the lower of first-in, first-out cost or market. (d) Depreciation Depreciation of property, plant and equipment is provided using the straight-line method. (e) Other Assets The cost of other assets, principally deferred costs associated with new products, are amortized on a straight-line basis over a period of three to five years. In fiscal 1993, the unamortized deferred cost associated with the development of a production line was fully amortized because of reduced expectancy of cost recovery in the future. (f) Earnings (loss) per Common Share Earnings (loss) per common share is based on the weighted average number of shares and, when dilutive, equivalent shares outstanding during each of the periods presented. Primary earnings (loss) per share and fully diluted earnings (loss) per share were substantially the same in fiscal 1995, 1994 and 1993. Weighted average common shares and common share equivalents when dilutive were 7,027,181, 7,108,016, and 3,223,971 during fiscal 1995, 1994 and 1993, respectively. The calculation of net earnings per share in 1995 and 1994 uses the modified treasury stock method. (g) Foreign Currency Translation The United States dollar has been determined to be the functional currency for all foreign operations. Exchange gains and losses related to such operations are immaterial for all years presented. OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands) (2) Inventories A summary of inventories at October 27, 1995 and October 28, 1994 follows: 1995 1994 Finished goods $1,186 $1,267 Work in process 3,393 4,504 Raw materials 3,158 2,776 Reserve for excess and obsolete inventory (2,453) (3,030) _____ _____ $5,284 $5,517 (3) Property, Plant and Equipment A summary of property, plant and equipment at October 27, 1995 and October 28, 1994 follows: 1995 1994 Land $ 3,137 $ 3,137 Buildings and improvements 8,886 8,744 Equipment 21,259 20,880 ______ ______ $33,282 $32,761 (4) Accrued Expenses A summary of accrued expenses at October 27, 1995 and October 28, 1994 follows: 1995 1994 Employee related accruals $2,729 $2,055 Customer tooling 278 626 Restructuring costs 203 476 Other 2,647 2,315 _____ _____ $5,857 $5,472 In fiscal 1992, the Company accrued $3,600 for the estimated loss upon sale or closure of a subsidiary and the consolidation of the Company's high reliability optoelectronic and power semiconductor manufacturing capacity. During fiscal 1993, the subsidiary's operations were substantially discontinued and the high reliability optoelectronic and power semiconductor manufacturing capacity was consolidated into other existing manufacturing facilities. Subsequently during fiscal 1993, the Company discontinued the power semiconductor product line and provided $1,942 for related excess inventory which was included in the provision for restructuring costs. Restructuring costs in 1993 also included $350 for a reduction in force in the commercial and automotive groups. OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands) (5) Long-term debt The following is a summary of long-term debt at October 27, 1995 and October 28, 1994: 1995 1994 $10,500 working capital line of credit from a financial institution; interest at the corporate base rate at the First National Bank of Chicago (8.75% at October 27, 1995) plus 1.5%; interest payable monthly (a) $ 1 $ 392 $21,900 revolving term loan ($28,300 in 1994) from a financial institution with annual scheduled principal reductions through October 31, 1998; interest rates and associated outstanding amounts are as follows: Corporate base rate at the First National Bank of Chicago plus 2.0%, interest payable monthly (b) 1,080 - Corporate base rate at the First National Bank of Chicago plus 4.0%; interest payable monthly (b) 6,000 6,000 Corporate base rate at the First National Bank of Chicago plus 1.50%; interest payable monthly - 4,300 13.40%; interest payable monthly - 6,000 12.20%; interest payable monthly (b) 6,915 10,000 12.34%; interest payable monthly (b) 2,000 2,000 Total long term debt $15,996 $28,692 (a) The working capital commitment is scheduled to expire October 31, 1996 and is renewable at the option of the Company for two one-year terms thereafter, provided no event of default has occurred, and will be renewable after October 31, 1998 at the option of the lender. (b) The financial institution is entitled to additional contingent interest in the event of a future sale of the Company or third party refinancing of the Company's loans. The additional interest would be equal to the difference between 18% and the applicable interest rate on certain portions of the debt for the period January 20, 1994 through the date of the event. The Company must comply with specific affirmative and negative covenants which require the Company, among other things, to maintain minimum net worth, as defined, and to satisfy certain financial ratios. The covenants also restrict investments, capital expenditures and additional debt and prohibit payment of dividends. The Company was in compliance with all debt covenants at the end of fiscal 1995. All loans from the financial institution are secured by all of the real and personal property of the Company. For loans from the financial institution, a commitment fee accrues at 1/2% per annum on the daily average balance of the unused commitment. The Company has granted the financial institution a warrant, as amended on December 13, 1995, to purchase 3,150,000 shares of the Company's common stock at an exercise price of $.50 per share which expires on October 31, 1998. The exercise price may decrease to $.01 if the Company's cumulative adjusted operating profit is less than stipulated minimums through the earlier of the date the warrants are exercised, the Company is sold or October 31, 1998. The warrant contains certain antidilutive provisions, certain registration rights upon the occurrence of a public offering and certain demand rights for such a registration. OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands) The Company has entered into bank agency agreements with the financial institution which specify that throughout the term of the credit agreement, the agent bank shall be pledgee-in-possession (for the benefit of the lender) of lock boxes, master accounts and all cash instruments of the Company. Available cash balances in excess of $300 are applied against long-term debt and are available for re-borrowing according to the terms of the agreement. The revolving line was scheduled to reduce to $20,650,000 as of November 1, 1995, with additional reductions in the revolving line to occur in the event that the Company used less than the available line for the sixty days preceding a scheduled reduction date. On November 1, 1995, the commitment on the revolving line was reduced to approximately $8,000,000 through operation of these provisions. The final scheduled reduction in the revolving line of $8,000,000 is to occur October 31, 1998. (6) Stockholders' Equity During fiscal 1992, the Company implemented a long-term stock investment plan (Investment Plan) which allows the granting of options to key employees and non-employee advisors to the Company to purchase up to 1,000,000 shares of the Company's authorized but unissued common stock at an exercise price equal to the fair market value on the date of grant. During fiscal 1995, the Company increased the authorized but unissued common stock available for this plan to 1,500,000 shares. The Investment Plan allows the granting of rights to receive cash or to acquire shares of common stock equal to the difference between the exercise price and the current market price of stock issuable pursuant to exercisable options. No rights to receive cash in lieu of common stock have been granted as of October 27, 1995. During fiscal 1995, 200,650 options were granted, 177,280 were exercised and 72,365 were terminated. A summary of options under the Long Term Investment Plan follows: Outstanding Exercisable Exercise Price Granted 1,136,050 - $0.19 - $2.13 Vested - 431,679 Exercised (177,280) (177,280) Terminated (139,945) (667) _________ ________ Options at October 27, 1995 818,825 253,732 $0.19 - $6.05 During fiscal 1983, the Company implemented an incentive stock option plan (Incentive Plan) which allowed the granting of options, exercisable for up to ten years after the date of grant, to key employees to purchase the Company's authorized but unissued common stock at an exercise price equal to the fair market value on the date of grant. The Incentive Plan expired during fiscal 1993. During fiscal 1995, options to purchase 18,483 shares of common stock were exercised. Under the Incentive Plan, options outstanding and exercisable total 143,399 at an exercise price of $1.13 to $3.45 per share at October 27, 1995. During fiscal 1993 and 1994, the Company granted warrants to purchase up to 8,759 and 170,042 shares of common stock to a director in partial consideration for consulting services. Previous grants were made to certain non-employee directors and advisors. During fiscal 1995, warrants to purchase 16,000 shares of common stock were exercised. Excluding warrants granted to financial institutions, the Company at October 27, 1995 had 245,301 warrants outstanding and exercisable at $.19 to $6.13 per share expiring December, 1996 through November, 1998. OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands) During fiscal 1992, the Company adopted a directors' formula award plan (Directors' Plan) which provides for the granting of options to directors of the Company to purchase up to 200,000 shares of the Company's authorized but unissued common stock at an exercise price equal to the fair market value on the date of grant. Each individual elected or reelected to serve as a director of the Company who is not a full-time employee of the Company will automatically be awarded options to purchase up to 3,500 shares of common stock. Options granted under the Directors' Plan vest if such individual continues to serve as a Director of the Company until the next annual meeting of the Company's stockholders and are exercisable for a period of ten years from the date of grant. At October 27, 1995 there are 59,500 director options outstanding (of which 45,500 are exercisable) from $.44 to $2.13 per share. (7) Income Taxes The Company adopted Financial Accounting Standards Board Statement No. 109 as of October 30, 1993. The adoption of Statement No. 109 was made on a prospective basis and did not impact the Company in the fiscal year 1994. Prior to adoption of Statement No. 109, the Company accounted for income tax in accordance with Accounting Principles Board Opinion No. 11. Income tax expense (benefit) for fiscal years 1995, 1994 and 1993 differs from the "expected" tax expense (benefit) computed by applying the U.S. corporate income tax rate of 34% to net earnings (loss) before income taxes as follows: 1995 1994 1993 Expected tax expense (benefit) $3,399 $1,081 $(3,420) Loss in excess of available tax carryback - - 3,371 Realization of benefits of tax loss carryforwards (3,853) (305) - Change in valuation reserve net of loss carryforward realized 410 (804) - Other, net 202 28 49 ______ ______ ______ $ 158 $ - $ - The tax effects of temporary differences that give rise to significant portion of the deferred tax assets and deferred tax liabilities at October 27, 1995 and October 28, 1994 are presented below: 1995 1994 Deferred tax assets: Net operating loss carryforwards $3,238 $7,055 Allowance for doubtful accounts, inventories and accrued expenses 1,894 1,451 Less valuation allowance (3,805) (7,248) _____ _____ Net deferred tax assets 1,327 1,258 Deferred tax liabilities: Difference between book and tax depreciation allowances (1,327) (1,258) _____ _____ Net deferred taxes $ - $ - The valuation allowance for deferred tax assets at October 27, 1995 was $3,805. The net change in the valuation allowance for the year ended October 27, 1995 and October 28, 1994 was a decrease of $3,443 and $1,109, respectively. OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (dollars in thousands) At October 27, 1995, the Company had net operating loss carryforwards for federal income tax purposes of $9,522 which are available to offset future regular federal income taxes and alternate minimum tax operating loss carryforwards of $7,870. These carryforwards expire during the years 2005 through 2008. (8) Operating Leases The Company and its subsidiaries lease certain manufacturing facilities and equipment under noncancellable operating leases. Future minimum lease payments as of October 27, 1995, under all such operating leases are as follows: 1996, $362; 1997, $86; 1998, $35; and 1999, $33. Rental expense was $412 in 1995, $382 in 1994, and $445 in 1993. (9) Credit Risk and Major Customer Information Substantially all of the Company's sales are made on credit on an unsecured basis. The Company evaluates credit risks on an individual basis before extending credit to its customers and it believes the allowance for doubtful accounts adequately provides for losses on uncollectible accounts. During fiscal 1995, the Company's ten largest customers accounted for approximately 57% of net sales. Such customers are involved primarily in the automotive and office equipment industries. During fiscal 1995, sales to one customer in the automotive industry were 13% of sales, versus 14% in 1994 and 1993, and sales to one customer in the office equipment industry were 13% of sales versus 15% in 1994 and 10% in 1993. Aggregate export sales to unaffiliated customers were $16,856 in 1995, $14,406 in 1994 and $13,321 in 1993. Export sales were primarily to customers in Western Europe. (10) Employee Benefit Plan All U.S. paid employees of the Company are entitled to participate in the Optek Technology, Inc. Profit-Sharing Plan and Trust (Profit-Sharing Plan). Pursuant to the Profit-Sharing Plan, employees may request the Company to deduct and contribute up to 15% of their salary. For each dollar con- tributed, the Company has the option to contribute an additional $0.50 up to 2% of the employee's salary. Employer contributions vest ratably over a period of five years. Vesting occurs in each year in which employees accumulate at least 1,000 hours of service. An employee's vested account balance is distributable either upon termination of employment or after attaining a certain age. During fiscal 1995, the Company provided for contributions to the Profit-Sharing Plan totaling $140,000 to be paid the first quarter of fiscal 1996. During fiscal 1994, the Company contributed $118,000. During fiscal 1993, the Company did not make a contribution to the Profit-Sharing Plan. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunder duly authorized. OPTEK TECHNOLOGY, INC. By /s/ Thomas R. Filesi . ___________________________ Thomas R. Filesi, President and Chief Executive Officer Dated: December 12, 1995 Pursuant to the requirements of The Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Thomas R. Filesi President, Chief Executive ________________________ Officer and Director Thomas R. Filesi (Principal Executive Officer) /s/ D. Vinson Marley Vice President - Finance ________________________ Treasurer and Assistant D. Vinson Marley Secretary (Principal Financial and Accounting Officer) /s/ Grant A. Dove Chairman of the Board ________________________ and Director Grant A. Dove December 12, 1995 /s/ Rodes Ennis Director ________________________ Rodes Ennis /s/ Michael E. Cahr Director ________________________ Michael E. Cahr /s/ William H. Daughtrey Director __________________________ William H. Daughtrey /s/ Wayne Stevenson Director __________________________ Wayne Stevenson
EX-10 2 NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH REGISTRATION REQUIREMENTS OR AN AVAILABLE EXEMPTION THEREFROM AND EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS WARRANT. AMENDED AND RESTATED WARRANT To Purchase Common Stock of OPTEK TECHNOLOGY, INC. This AMENDED AND RESTATED WARRANT (the "Warrant"), entered into this 12th day of December, 1995, between Optek Technology, Inc., a Delaware corporation (the "Company") and First Source Financial, Inc., a Delaware corporation ("First Source"). WITNESSETH THAT: WHEREAS, the Company previously has issued a warrant, dated as of January 20, 1994, (the "Original Warrant") to purchase shares of its Common Stock to First Source, as successor-in-interest to Household Commercial Financial Services, Inc. pursuant to an amended and restated Secured Credit Agreement dated as of January 20, 1994 (as hereinafter defined) in consideration of the loans by Household Commercial Financial Services, Inc.; WHEREAS, the Original Warrant was an amendment and restatement of, and was issued in replacement of, a warrant dated as of November 27, 1991, which, in turn, was an amendment and restatement of, and was issued in replacement of, the warrant dated as of January 31, 1991, which in turn replaced rights granted under a Conversion Agreement dated July 1, 1988, all of which were issued to Household Commercial Financial Services, Inc.; WHEREAS, in consideration of a single lump-sum cash payment of Two Hundred Thousand Dollars ($200,000.00) to be made by the Company to First Source upon execution and delivery of this Warrant, the Company and First Source have agreed to amend various provisions of the Original Warrant as set forth herein, including elimination of provisions for repurchase of the Warrant or shares of Common Stock by the Company, addition of covenants and decoupling of the obligations under the Warrant from those under the Secured Credit Agreement. NOW, THEREFORE, in consideration of the foregoing payment, the mutual covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and First Source hereby covenant to amend and restate the Original Warrant in its entirety as follows: THIS IS TO CERTIFY that First Source Financial, Inc., a Delaware corporation ("First Source"), as successor-in-interest to Household Commercial Financial Services, Inc., or registered assigns, is entitled upon the due exercise hereof at any time during the Exercise Period (as hereinafter defined) to purchase, in whole or in part, from Optek Technology, Inc., a Delaware corporation (the "Company'), the number of shares of Common Stock, $0.01 par value, of the Company as provided in Section 2.1 (subject to adjustment) at the price for each share of such Common Stock so purchased as provided in Section 2.1 (subject to adjustment) and to exercise the other rights, powers and privileges hereinafter provided, all on the terms and conditions and pursuant to the provisions hereinafter set forth. This Warrant has been issued to First Source pursuant to the Secured Credit Agreement (as hereinafter defined) in consideration of the loans by Household Commercial Financial Services, Inc. as provided therein. Dated as of December 12, 1995. TABLE OF CONTENTS Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . 5 2.1 Right to Exercise, Number of Shares and Exercise Price. . . . 5 2.2 Notice of Exercise; Issuance of Common Stock. . . . . . . . . 6 2.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 7 2.4 Continued Validity. . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE III REGISTRATION, TRANSFER AND EXCHANGE . . . . . . . . . . . 8 ARTICLE IV ANTIDILUTION PROVISIONS AND RIGHTS UPON EXTRAORDINARY TRANSACTIONS 9 4.1 Adjustment of Number of Shares Purchasable and Exercise Price 9 (a) Adjustment to Exercise Price. . . . . . . . . . . . . . . 9 (b) Adjustment to Number of Shares Issuable Pursuant to this Warrant 10 (c) Minimum Adjustment. . . . . . . . . . . . . . . . . . . . 10 (d) Maximum and Minimum Exercise Price. . . . . . . . . . . . 11 4.2 Diluting Events and Related Matters . . . . . . . . . . . . . 11 (a) Issuance of Stock . . . . . . . . . . . . . . . . . . . . 11 (b) Issuance of Warrants, Options or Other Rights . . . . . . 11 (c) Issuance of Convertible Securities. . . . . . . . . . . . 12 (d) Dividends . . . . . . . . . . . . . . . . . . . . . . . . 13 (e) Dividends in Securities . . . . . . . . . . . . . . . . . 13 (f) Other Distribution. . . . . . . . . . . . . . . . . . . . 13 (g) Reorganization, Reclassification, Recapitalization, Merger or Sale of Company 14 (h) Splits and Combinations . . . . . . . . . . . . . . . . . 14 (i) Readjustments . . . . . . . . . . . . . . . . . . . . . . 14 (j) Determination of Consideration for Rights or Options. . . 15 (k) Determination of Consideration upon Payment of Cash, Property or Merger 15 (l) Record Date . . . . . . . . . . . . . . . . . . . . . . . 15 (m) Shares Outstanding. . . . . . . . . . . . . . . . . . . . 16 (n) Date of Determination . . . . . . . . . . . . . . . . . . 16 (o) No Adjustment After Exercise. . . . . . . . . . . . . . . 16 4.3 Rights of the Holder upon Rights Offering, Mergers, Reorganizations and Other Transfers 16 (a) Participation in Rights Offerings . . . . . . . . . . . . 16 (b) Participation in Stock Dispositions . . . . . . . . . . . 16 4.4 Certificates, Notices and Consents. . . . . . . . . . . . . . 17 4.5 No Implied Consent or Extension . . . . . . . . . . . . . . . 18 ARTICLE V COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . 18 5.1 No Impairment . . . . . . . . . . . . . . . . . . . . . . . . 18 5.2 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . 19 5.2.2 Disputed Financial Statements . . . . . . . . . . . . . . 20 5.2.3 Budget. . . . . . . . . . . . . . . . . . . . . . . . . . 21 5.2.4 Auditors' Reports . . . . . . . . . . . . . . . . . . . . 21 5.2.5 Lender Information. . . . . . . . . . . . . . . . . . . . 21 5.2.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . 21 5.2.7 Default . . . . . . . . . . . . . . . . . . . . . . . . . 21 5.2.8 Material Adverse Developments . . . . . . . . . . . . . . 21 5.2.9 Other Information . . . . . . . . . . . . . . . . . . . . 21 5.2.10 Auditors. . . . . . . . . . . . . . . . . . . . . . . . . 21 5.2.11 Inspection and Meeting Rights; Budget Review. . . . . . . 21 5.2.12 Accounting. . . . . . . . . . . . . . . . . . . . . . . . 22 5.2.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 22 5.2.14 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . 22 5.2.15 Compliance With Laws. . . . . . . . . . . . . . . . . . . 22 5.2.16 Preservation of Corporate Existence and Property; Operations 22 5.2.17Holder as Observer . . . . . . . . . . . . . . . . . . . . . . . . 23 5.2.18 Confidential Information. . . . . . . . . . . . . . . . . 23 5.3 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . 23 (a) Distributions . . . . . . . . . . . . . . . . . . . . . . 23 (b) Redemptions . . . . . . . . . . . . . . . . . . . . . . . 23 (c) Security Issuances. . . . . . . . . . . . . . . . . . . . 23 (d) Loans or Guarantees . . . . . . . . . . . . . . . . . . . 24 (e) Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 24 (f) Asset Dispositions. . . . . . . . . . . . . . . . . . . . 24 (g) Liquidation . . . . . . . . . . . . . . . . . . . . . . . 24 (h) Acquisitions. . . . . . . . . . . . . . . . . . . . . . . 24 (i) Related Party Arrangements. . . . . . . . . . . . . . . . 24 (j) Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 24 (k) Leases. . . . . . . . . . . . . . . . . . . . . . . . . . 24 (l) Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 24 (m) Securities of Subsidiary. . . . . . . . . . . . . . . . . 25 (n) Compensation. . . . . . . . . . . . . . . . . . . . . . . 25 (o) Public Offering . . . . . . . . . . . . . . . . . . . . . 25 (p) Change in the Business. . . . . . . . . . . . . . . . . . 25 (q) Bankruptcy, Etc.. . . . . . . . . . . . . . . . . . . . . 25 (r) Capital Expenditures. . . . . . . . . . . . . . . . . . . 25 ARTICLE VI RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT; PREEMPTIVE RIGHTS 26 ARTICLE VII LISTING ON SECURITIES EXCHANGE. . . . . . . . . . . . . . 26 ARTICLE VIII RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . 26 8.1 Notice of Proposed Transfer; Transfers Without Registration . 26 8.2 Registration and Qualification. . . . . . . . . . . . . . . . 27 (a) Piggyback Registration. . . . . . . . . . . . . . . . . . 27 (b) Demand Registration . . . . . . . . . . . . . . . . . . . 29 8.3 Registration and Qualification Procedures . . . . . . . . . . 30 8.4 Allocation of Expenses. . . . . . . . . . . . . . . . . . . . 31 8.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 32 8.6 Legend on Certificates. . . . . . . . . . . . . . . . . . . . 33 8.7 Supplying Information . . . . . . . . . . . . . . . . . . . . 34 8.8 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.9 Holdback Agreements . . . . . . . . . . . . . . . . . . . . . 35 8.10 Rule 144 Reporting. . . . . . . . . . . . . . . . . . . . . . 35 8.11 Consent for Additional Registration Rights. . . . . . . . . . 36 ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 36 9.1 Nonwaiver and Expenses. . . . . . . . . . . . . . . . . . . . 36 9.2 Holder Not a Stockholder. . . . . . . . . . . . . . . . . . . 36 9.3 Notice Generally. . . . . . . . . . . . . . . . . . . . . . . 36 9.4 Payment of Certain Expenses . . . . . . . . . . . . . . . . . 36 9.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 36 9.6 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 36 9.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 37 9.8 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 37 9.9 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 37 9.10 No Section 338 Election or Step-Up in Asset Value on Books of the Company 38 9.11 Replacement . . . . . . . . . . . . . . . . . . . . . . . . . 38 NOTICE OF EXERCISE FORM ASSIGNMENT FORM ARTICLE I DEFINITIONS The terms defined in this ARTICLE I, whenever used in this Warrant, shall have the respective meanings hereinafter specified. Whenever used in this Warrant, any noun or pronoun shall be deemed to include both the singular and plural and to cover all genders. "Adjusted Operating Profits" means an amount equal to the Net Income of the Company and its Subsidiaries for the period specified before deduction of any amount which, in conformity with generally accepted accounting principles, would be set forth opposite the caption "income tax expense" (including deferred income taxes) (or any like caption) on a consolidated income statement of the Company, and excluding any amounts which, in conformity with generally accepted accounting principles, would be set forth opposite the captions, "extraordinary pre-tax gain" and "extraordinary pre-tax loss" (or any like captions) on such consolidated income statement, plus the amount which, in accordance with generally accepted accounting principles, would be set forth opposite the caption "interest expense" (or any like caption) on such consolidated income statement, plus an amount which, in conformity with generally accepted accounting principles, is equal to any amortization or depreciation for such fiscal period, to the extent the same are deducted from net revenues, in conformity with generally accepted accounting principles, in determining Net Income for such fiscal period. "Affiliate" of any person means any other person which, directly or indirectly, controls or is controlled by or is under common control with, such person. A person shall be deemed to be "controlled by" any other person if such other person possesses, directly or-indirectly, power (a) to vote 10% or more of the securities having ordinary voting power, or if not having ordinary voting power, having at the time voting power, for the election of directors of such person; or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. "Assignment" means the form of Assignment appearing at the end of this Warrant. "Basic Exercise Price" shall have the meaning provided in Section 2.2 (b) (i). "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's authorized Common Stock, $0.01 par value, and any class of capital stock of the Company now or hereafter authorized having the right to share in distributions either of earnings or assets of the Company without limit as to amount or percentage. "Common Stock on a Fully Diluted Basis" means, at any date as at which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock (which issued and outstanding shares shall be approximately 3,432,278 shares on the date this Warrant is issued), and all shares issuable pursuant to the Company's incentive stock option plan, restricted stock bonus plan, long-term stock investment plan or director's formula award plan, to the extent each of these plans has been previously approved by First Source, or pursuant to an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company may implement after receiving written approval of a majority of the Holders in their sole discretion (which approval must include First Source if First Source is a Holder) (whether or not options or awards with respect to such shares have been granted) or issuable upon exercise of any warrant (including this Warrant), rights to subscribe for or options (whether or not vested) to purchase Common Stock or Convertible Securities or upon the conversion of any Convertible Securities. On the date hereof, the number of shares of Common Stock on a Fully Diluted Basis shall be 8,486,382 shares, including 3,150,000 shares of Common Stock initially issuable pursuant to this Warrant. "Common Stock Valuation Price" in effect as of any date shall mean a per share value equal to the result obtained by dividing (a) an amount equal to (i) the product of the Company's Adjusted Operating Profits for the four most recent Quarterly Fiscal Periods of the Company (at the end of the Quarterly Fiscal Period of the Company immediately preceding such date) and seven (7) less (ii) the amount of Funded Indebtedness (at the end of the Quarterly Fiscal Period of the Company immediately preceding such date), plus (iii) the proceeds that would be received by the Company upon exercise of all warrants, rights to subscribe for or options to purchase Common Stock or Convertible Securities or upon conversion of any Convertible Securities, plus (iv) the fair market value of proceeds received by the Company (other than proceeds in the form of services of employees of the Company and cash proceeds, which are reflected in the amount of Funded Indebtedness in clause (ii) above) upon any issuances or sales by it of Common Stock, Convertible Securities or warrants, rights to subscribe for or options to purchase Common Stock or Convertible Securities, multiplied by a fraction the numerator of which (which shall never be less than zero) is four minus the number of full Quarterly Fiscal Periods since such issuance or sale and the denominator of which is four, by (b) the number of shares of Common Stock on a Fully Diluted Basis on such date, all as determined by a firm of independent public accountants of recognized standing selected by the Company and reasonably acceptable to the Holder. "Company" means Optek Technology, Inc., a Delaware corporation. "Convertible Securities" means evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event. "Default Rate" means at any time 4.50% plus the rate per annum then most recently announced by The First National Bank of Chicago, a national banking association ("FNBC"), as its corporate base rate at Chicago, Illinois (or if such rate is not being quoted by FNBC, the rate which is the successor to such rate, and if FNBC is not quoting any such rate, the rate conceptually equivalent to such rate which the domestic commercial bank having the highest combined capital and surplus of any bank having its principal office in Chicago, Illinois is quoting). "Diluting Event" means any transaction or event which is identified as a Diluting Event in Section 4.2(a) - (h). "Exercise Period" means the period commencing on the Closing Date and terminating at 5:00 p.m., Chicago time, on October 31, 1998. "Exercise Price" means the price per share of Common Stock as set forth in Section 2.1 as such price may be adjusted from time to time pursuant to Article IV. "Exercise Price" shall have the meaning provided in Section 4.1. "First Alternative Exercise Price" shall have the meaning provided in Section 2.1 (b)(ii). "First Source" means First Source Financial, Inc., a Delaware corporation. "Funded Indebtedness" means all indebtedness of the Company and its Subsidiaries, on a consolidated basis, if appropriate, solely for money borrowed and owing, less the aggregate amount of all cash and cash equivalents of the Company and its Subsidiaries but not including the amount of any indebtedness of the Company represented by Convertible Securities and not including additional interest pursuant to Section 4.7 of the Secured Credit Agreement. "Holder" means the person in whose name this Warrant is registered on the books of the Company maintained for such purpose. "Independent Counsel" means counsel to the Company, unless counsel to the Holder disagrees in writing with the opinion or advice of such counsel with respect to the issue in question within 15 days after receipt of such opinion or advice, in which case the Company and Holder shall select another counsel, not the regular counsel of the Company or the Holder and experienced in Securities Act matters, who shall render an opinion with respect to the issue in question. The opinion or advice of such other counsel so given shall be conclusive and binding on the Company and the Holder. The legal fees and expenses of such other counsel incurred in connection with the rendering of such opinion shall be borne equally by the Holder and the Company. "Market Value" per share of Common Stock on any date shall mean the average of the daily market prices for the 30 consecutive trading days preceding such date. The market price for each such day shall be the last sale price on such day on such stock exchange on which such stock is listed or admitted to trading, or, if no sale takes place on such day on any such exchange, the average of the closing bid and asked prices on such day and officially quoted on any such exchange, or, if the Common Stock is not then listed or admitted to trading on any stock exchange, the market price for each such business day shall be the last sale price on such day if reported by the National Association of Securities Dealers Automated Quotation System or, if not so reported, the average of the reported closing bid and asked price quotations for such day, as reported by the National Association of Securities Dealers Automated Quotation System or, if not so reported, as furnished by the National Quotation Bureau, Inc., or, if such firm at the time is not engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business as selected by the Holder, or if there is no such firm, as determined by any member of the National Association of Securities Dealers, Inc. selected by the Holder. "Net Income" for any fiscal period of the Company shall mean consolidated net income or loss of the Company and its Subsidiaries (including, without limitation, Opcom), if any, as it would appear on the consolidated statement of income of the Company for such fiscal period prepared in accordance with generally accepted accounting principles and as it may be adjusted pursuant to Section 5.2. "Notice of Cashless Exercise" shall have the meaning provided in Section 2.2(b)(ii). "Notice of Exercise" means the form of Notice of Exercise appearing at the end of this Warrant. "Organic Change" shall have the meaning provided in Section 4.3(b). "Plan Adjusted Operating Profits" for any fiscal year shall be the amount so identified in Schedule I hereto. "Quarterly Fiscal Period" means a period comprised of thirteen or fourteen weeks, as applicable, representing a fiscal quarter of the Company, the first of which in any fiscal year shall begin on the first day of the Company's fiscal year and the remainder of which in such year shall begin on the day following the termination of the preceding Quarterly Fiscal Period. "Registration Agreement" shall have the meaning provided in Section 8.2. "Second Alternative Exercise Price" shall have the meaning provided in Section 2.1 (b) (iii). "Secured Credit Agreement" means the Amended and Restated Secured Credit Agreement among the Company and First Source, as successor-in-interest to Household Commercial Financial Services, Inc., as the same may be amended, modified or supplemented from time to time. "Securities Act" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Shares" shall have the meaning provided in Section 2.1. "Subsidiary" means a corporation, partnership or other entity of which a person and/or such person's other Subsidiaries, individually or in the aggregate, own, directly or indirectly, such number of outstanding shares or other interests as have more than 50% of the ordinary voting power (or, at the time extraordinary powers are available to holders of shares or other interests, such number of outstanding shares or other interests as have more than 50% of voting power) for the election of directors or the members of any similar governing body. "Warrant" and "Warrants," including "this Warrant," mean (a) the warrant dated as of the Closing Date issued to First Source and (b) all warrants issued upon the partial exercise, transfer or division of or in substitution for such warrant. "Warrant Valuation Price" in effect as of any date shall mean a per share value equal to the difference between the Common Stock Valuation Price and the Exercise Price then in effect. ARTICLE II EXERCISE OF WARRANT 2.1 Right to Exercise, Number of Shares and Exercise Price. Subject to and upon compliance with the conditions of this ARTICLE II, the Holder shall have the right, at its option, at any time and from time to time during the Exercise Period, to exercise this Warrant in whole or in part. The aggregate number of shares of Common Stock which may be purchased from time to time during the Exercise Period by the Holder upon exercise of this Warrant shall be as set forth below, subject to adjustment as provided in ARTICLE IV hereof (the "Shares"): (a) The number of shares of Common Stock issuable upon the exercise of the Warrant shall be 3,150,000 (subject to adjustment as provided herein). The initial Exercise Price shall be fifty cents ($0.50) (subject to adjustment as provided herein). (b) On January 31 of each year (and applicable for the period through and including January 30 of the next succeeding year), the Exercise Price shall be adjusted to the extent provided as follows: (i) If the Company's cumulative Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year are equal to or greater than Plan Adjusted Operating Profits through the end of the most recently ended fiscal year as set forth in Schedule I hereto, then the Exercise Price through January 30 of the next succeeding year shall be fifty cents ($0.50) (subject to adjustment as provided herein) (the "Basic Exercise Price"). (ii) If the Company's cumulative Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year are less than 100% of Plan Adjusted Operating Profits but at least 90% of Plan Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year as set forth on Schedule I hereto, then the Exercise Price through January 30 of the next succeeding year shall be twenty-five cents ($0.25) (subject to adjustment as provided herein) (the "First Alternative Exercise Price"). (iii) If the Company's cumulative Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year are less than 90% of Plan Adjusted Operating Profits through the end of the most recently ended fiscal year as set forth on Schedule I hereto, then the Exercise Price through January 30 of the next succeeding year shall be one cent ($0.01) (the "Second Alternative Exercise Price"). 2.2 Notice of Exercise; Issuance of Common Stock. (a) To exercise this Warrant, the Holder shall deliver to the Company at its principal office at 1215 West Crosby Road, Carrollton, Texas 75006 Attention: President (i) a Notice of Exercise duly executed by the Holder and specifying the number of shares of Common Stock to be purchased and (ii) this Warrant. (b) Payment of the Exercise Price shall be made in the manner selected by the Holder as set forth below: (i) At the option of the Holder, (A) by wire transfer to an account in a bank located in the United States designated for such purpose by the Company or (B) by certified or official bank check payable to the order of the Company and drawn on a member of the Chicago or New York Clearing House; or (ii) In lieu of delivering the cash Exercise Price as set forth in Section 2.2(b)(i), the Holder may instruct the Company in writing ("Notice of Cashless Exercise") to deduct from the number of shares of Common Stock that would otherwise be issued upon such exercise a number of shares of Common Stock equal to the quotient obtained from dividing (x) the product obtained by multiplying (1) the number of shares of Common Stock for which the Warrant is being exercised and (2) the Exercise Price then in effect, by (y) the Market Value of a share of Common Stock. The Notice of Cashless Exercise may be given by completing the appropriate box in the Notice of Exercise at the end of this Warrant. Upon receipt of the cash payment described in Section 2.2(b)(i) or the Notice of Cashless Exercise described in Section 2.2(b)(ii), the Company shall, as promptly as practicable, and in any event within five days thereafter, cause to be issued and delivered to the Holder, or, subject to ARTICLE VIII, the transferee designated in the Notice of Exercise, a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise registered in the name of the Holder or the name of the transferee so designated. (c) Unless otherwise requested by the Holder, this Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or transferee so designated in the Notice of Exercise shall be deemed to have become the holder of record of such shares for all purposes, as of the close of business on the date the Notice of Exercise, together with payment or Notice of Cashless Exercise as herein provided, and this Warrant, are received by the Company. (d) If this Warrant is exercised in part, the Company shall, at the time of delivery of the certificate or certificates for Common Stock, unless this Warrant has then expired, issue and deliver to the Holder or the transferee so designated in the Notice of Exercise a new Warrant evidencing the rights of the Holder or such transferee to purchase the aggregate number of shares of Common Stock for which this Warrant shall not have been exercised, and this Warrant shall be cancelled. 2.3 Fractional Shares. The Company shall not issue fractional shares of Common Stock or scrip representing fractional shares of Common Stock upon exercise of this Warrant. As to any fractional share of Common Stock which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall purchase from the Holder such unissued fractional share at a price equal to an amount calculated by multiplying such fractional share (calculated to the nearest 1/100th of a share) by the Common Stock Valuation Price, unless such Common Stock Valuation Price is a negative amount, in which case such fractional share shall be multiplied by its Exercise Price determined in accordance with this Warrant. Payment of such amount shall be made in cash or by check payable to the order of the Holder at the time of delivery of any certificate or certificates arising upon such exercise. 2.4 Continued Validity. A holder of shares of Common Stock issued upon the exercise of this Warrant, in whole or in part, shall continue to be entitled to all rights provided to holders of Common Stock issuable on the exercise of this Warrant, whether or not this Warrant has been fully exercised. The Company will, at the time of the exercise of this Warrant, in whole or in part, upon the request of the holder of the shares of Common Stock issued upon the exercise thereof, acknowledge in writing, in form reasonably satisfactory to such holder, its continuing obligation to afford to such holder all rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant; provided, however, that if such holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder all such rights. ARTICLE III REGISTRATION, TRANSFER AND EXCHANGE The Company shall keep at the Company's principal office referred to in Section 2.2 or at the offices of Hewitt & Hewitt, P.C. in Dallas, Texas or at such other address as shall be specified in a written notice to the Holder a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration, transfer and exchange of this Warrant. The Company will not at any time, except upon the dissolution, liquidation or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. Upon surrender for registration of transfer of this Warrant at such office, the Company shall execute and deliver, in the name of the designated transferee or transferees, one or more new Warrants representing the right to purchase a like aggregate number of shares of Common Stock. At the option of the Holder, this Warrant may be exchanged for other Warrants representing the right to purchase a like aggregate number of shares of Common Stock upon surrender of this Warrant at such office. Whenever this Warrant is so surrendered for exchange, the Company shall execute and deliver the Warrants which the Holder making the exchange is entitled to receive. Every Warrant presented or surrendered for registration of transfer or exchange shall be accompanied by an Assignment duly executed by the holder thereof or its attorney duly authorized in writing. All warrants issued upon any registration of transfer or exchange of warrants shall be the valid obligations of the Company, evidencing the same rights, and entitled to the same benefits as the warrants surrendered upon such registration of transfer or exchange. Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the loss, theft, destruction or mutilation of this Warrant and (in case of loss, theft or destruction) the written agreement of the Holder to indemnify the Company (or, if the Holder is not First Source Financial and if the Company reasonably requests, a bond) against any resulting loss or expense and in case of mutilation upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant. No service charge shall be made for any registration of transfer or exchange of Warrants, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer as provided in Section 9.4. The Company and any agent of the Company may treat the person in whose name this Warrant is registered as the owner of this Warrant for all purposes whatsoever, and neither the Company nor any agent of the Company shall be affected by notice to the contrary. This Warrant, if properly assigned, may be exercised by a new holder without first having a new Warrant issued. ARTICLE IV ANTIDILUTION PROVISIONS AND RIGHTS UPON EXTRAORDINARY TRANSACTIONS 4.1 Adjustment of Number of Shares Purchasable and Exercise Price. Subject to the provisions of this ARTICLE IV, the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price at the time of any calculation pursuant to this Article IV, and the number of shares of Common Stock issuable upon exercise of this Warrant at the time of any calculation pursuant to this Article IV (the "Exercise Price") shall be subject to adjustment from time to time as set forth below in the order set forth below. After making any antidilution adjustment, pursuant to this Article IV, the adjustments described in Section 4.1(d) must be made. (a) Adjustment to Exercise Price. If a Diluting Event, as identified in Section 4.2, occurs (unless otherwise specified in Section 4.2), the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price shall each be reduced to the lower of the prices calculated by: (i) Dividing (A) an amount equal to the sum of (x) the number of shares of Common Stock on a Fully Diluted Basis (but not including Shares issuable upon exercise of this Warrant) immediately prior to such Diluting Event multiplied by the then existing Basic Exercise Price, First Alternative Exercise Price or Second Alternative Exercise Price, as applicable, plus (y) the aggregate consideration, if any, received or deemed to be received by the Company upon such Diluting Event, by (B) the total number of shares of Common Stock on a Fully Diluted Basis (but not including Shares issuable upon exercise of this Warrant) immediately after such Diluting Event; and (ii) Multiplying the then existing Basic Exercise Price, First Alternative Exercise Price or Second Alternative Exercise Price, as applicable, by a fraction (a) the numerator of which is (x) the sum of (i) the number of shares of Common Stock on a Fully Diluted Basis immediately prior to such Diluting Event (but not including shares of Common Stock issuable upon exercise of this Warrant) multiplied by the Common Stock Valuation Price immediately prior to such Diluting Event plus (ii) the aggregate consideration, if any, deemed to be received by the Company upon such Diluting Event, divided by (y) the total number of shares of Common Stock on a Fully Diluted Basis immediately after such Diluting Event (but not including shares of Common Stock issuable upon exercise of this Warrant), and (b) the denominator of which shall be the Common Stock Valuation Price immediately prior to such Diluting Event. Notwithstanding the foregoing, if the Common Stock Valuation Price is less than or equal to zero, the Basic Exercise Price and the First Alternative Exercise Price and the Second Alternative Exercise Price shall be reduced in accordance with clause (i) above. (b) Adjustment to Number of Shares Issuable Pursuant to this Warrant. Upon any adjustment of the Basic Exercise Price, First Alternative Exercise Price and the Second Alternative Exercise Price as provided in this Section 4.1 or Section 4.2, the Holder shall thereafter be entitled upon exercise of this Warrant under Section 2.1 to receive, at the Exercise Price in effect after such adjustment (which may be the Basic Exercise Price, the First Alternative Exercise Price or Second Alternative Exercise Price): (i) If the Warrant Valuation Price in effect immediately prior to and after a Diluting Event are each positive numbers, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) which, when multiplied by the Warrant Valuation Price in effect immediately after the Diluting Event (and after giving effect to the number of shares of Common Stock issuable upon the exercise of this Warrant as determined under this clause (i) immediately after the Diluting Event), shall equal the product of (A) the Warrant Valuation Price in effect immediately prior to such Diluting Event and (B) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such Diluting Event. (ii) If the Warrant Valuation Price in effect immediately prior to or after a Diluting Event is not a positive number, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) which, when multiplied by the Exercise Price per share of Common Stock in effect immediately after the Diluting Event, shall equal the product of (A) the Exercise Price per share of Common Stock immediately prior to such Diluting Event and (B) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such Diluting Event. The Company shall not engage in any Diluting Event if as a result of such event and the adjustment pursuant to this Section 4.1 (b), an ownership change would occur within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, or any successor provision. If notwithstanding the foregoing, a Diluting Event inadvertently occurs which would result in such an ownership change if the full adjustments provided herein were made, then the number of shares subject to this Warrant shall only be adjusted to the extent possible without causing such an ownership change, and notwithstanding such partial adjustment, the Holder shall retain all applicable rights with respect to breach of the foregoing sentence. (c) Minimum Adjustment. In the event any adjustment of the Exercise Price pursuant to this Section 4.l shall result in an adjustment of the Basic Exercise Price, the First Alternative Exercise Price or the Second Alternative Exercise Price of less than $0.01 per share of Common Stock, no such adjustment shall be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to $0.01 or more per share of Common Stock; provided, however, that upon any adjustment of the Exercise Price resulting from (i) the declaration of a dividend upon, or the making of any distribution in respect of, any stock of the Company payable in Common Stock or Convertible Securities or (ii) the reclassification, by subdivision, combination or otherwise, of the Common Stock into a greater or smaller number of shares, the foregoing figure of $0.01 per share (or such figure as last adjusted) shall be proportionately adjusted; and provided further, that upon exercise of this Warrant: the Company shall make all necessary adjustments not theretofore made to the Exercise Price up to and including the date upon which this Warrant is exercised. (d) Maximum and Minimum Exercise Price. At no time shall the Exercise Price per share of Common Stock exceed $0.50 except as provided in subsection (g) or (h) of Section 4.2. Subject to Article V, at no time shall the Exercise Price per share of Common Stock be less than the par value per share of Common Stock. 4.2 Diluting Events and Related Matters. Except as otherwise expressly provided, upon the occurrence of a Diluting Event, as identified in subsections (a)-(h) below, the Exercise Price shall be adjusted as set forth in Section 4.1: (a) Issuance of Stock. If the Company shall issue or sell any shares of Common Stock, including any treasury shares but excluding (i) any shares issued pursuant to warrants or options outstanding on the date hereof (at prices not less than the prices at which such warrants and options are exercisable on the date hereof), (ii) any shares issued pursuant to the Company's existing incentive stock option plan or restricted stock bonus plan, directors formula award plan or long term stock incentive plan, in each case as in effect and in an amount permitted on the date hereof, whether or not options or awards with respect to such shares have been granted and (iii) any shares issuable pursuant to an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company may implement after receiving the written approval of a majority of the Holders in their sole discretion (which approval must include First Source if First Source is a Holder) whether or not options or awards with respect to such shares have been granted for the consideration per share less than (x) the Exercise Price in effect immediately prior to the time of such issue or sale or (y) the Common Stock Valuation Price in effect immediately prior to the time of such issue or sale, then a Diluting Event shall have occurred and the Exercise Price shall be adjusted as set forth in Section 4.1. (b) Issuance of Warrants, Options or Other Rights. (i) Characterization of Transaction for Antidilution Adjustment. In case the Company shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of Common Stock or for the purchase of Convertible Securities (but excluding options or awards granted pursuant to the Company's existing incentive stock option plan, restricted stock bonus plan, directors' formula award plan or long term stock incentive plan, in each case as in effect and in an amount permitted on the date hereof or granted pursuant to an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company may implement after receiving the written approval of a majority of the Holders in their sole discretion (which approval must include First Source if First Source is a Holder) in amounts permitted pursuant to the approval described above), whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which shares of Common Stock are issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities shall be less than (1) the Exercise Price in effect immediately prior to the time of the granting of such rights or options, or (2) the Common Stock Valuation Price existing immediately prior to the time of such granting of such rights or options, then a Diluting Event shall have occurred and the maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of the maximum amount of such Convertible Securities issuable upon the exercise of such rights or options shall (as of the date for adjustment required by subsection (n) below) be deemed to be outstanding and to have been issued for such price per share. Except as otherwise specified in Section 4.2 (i), no further adjustments described in Section 4.1 of the Exercise Price shall be made upon the actual issuance of such Common Stock or of such rights or options or upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities. (ii) Adjustment to Price. The price per share for which shares of Common Stock are issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities shall be determined by dividing (1) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights or options, plus, in the case of such Convertible Securities, the minimum aggregate amount of additional consideration if any, payable upon the conversion or exchange thereof plus the net amount received or receivable upon the issuance of such Convertible Securities (in each case without double counting), by (2) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options. (c) Issuance of Convertible Securities. (i) Characterization of Transaction for Antidilution Adjustment. in case the Company shall in any manner issue or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the rights to convert or exchange thereunder are immediately exercisable, and the price per share for which shares of Common Stock are issuable upon such conversion or exchange shall be less than (1) the Exercise Price in effect immediately prior to the time of such issue or sale or (2) the Common Stock Valuation Price existing immediately prior to the time of such issuance or sale, then a Diluting Event shall have occurred and the Exercise Price shall be adjusted as provided in Section 4.1 and the maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date for adjustment required by subsection (n) below) be deemed to be outstanding and to have been issued for such price per share. Except as otherwise specified in Section 4.2(i), (x) no further adjustments of the Exercise Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities and (y) if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Exercise Price have been or are to be made pursuant to other provisions of Sections 4.1 and 4.2, no further adjustment of the Exercise Price shall be made by reason of such issue or sale. (ii) Adjustment to Price. The price per share for which shares of Common Stock are issuable upon such conversion or exchange shall be determined by dividing (1) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (2) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. (d) Dividends. In case the Company shall declare, in any 12-month period, dividends upon the Common Stock (excluding a dividend payable in Common Stock referred to in subsection (e) below or in warrants, rights or Convertible Securities referred to in subsection (b) or (c) above) which in the aggregate is in excess of either 50% of Net Income for such 12- month period or 15% of the net worth of the Company (as shown on the most recent year end consolidated balance sheet to be delivered pursuant to ARTICLE V hereof), then a Diluting Event shall have occurred and the Basic Exercise Price and the First Alternative Exercise Price in effect immediately prior to the declaration of such dividend shall each be reduced by an amount equal to the aggregate amount of such dividends in excess of (x) the lesser of (a) 50% of Net Income for such 12-month period and (b) 15% of Net Worth divided by (y) all outstanding shares of Common Stock with respect to which such dividend is payable. Such reductions shall take effect as of the date on which a record date is established for the purpose of such dividend, or, if a record date is not established, the date as of which the holders of Common Stock of record entitled to such dividend are to be determined. Appropriate readjustment of the Basic Exercise Price and the First Alternative Exercise Price shall be made in the event that any dividend referred to in this subsection (d) shall be lawfully abandoned. (e) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, then a Diluting Event shall have occurred, and such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution, shall be deemed to have been issued or sold without consideration. (f) Other Distribution. In case the Company shall distribute or grant to the holders of shares of Common Stock (whether or not on a pro rata basis) any evidence of its indebtedness or any assets (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) or rights or options to subscribe or purchase any such evidence of its indebtedness or assets (excluding rights or options to subscribe or purchase Common Stock or Convertible Securities), then a Diluting Event shall have occurred and the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price in effect immediately prior to such distribution or grant shall each be reduced by an amount equal to the aggregate amount of such distribution divided by the number of outstanding shares of Common Stock with respect to which such distribution was made immediately prior to such distribution, and other adjustments shall be made as set forth in Section 4.1 hereof. Such reductions shall take effect as of the date on which a record date is established for the purpose of such distribution or grant, or, if a record date is not established, the date as of which the holders of Common Stock of record entitled to such distribution or grant are to be determined. (g) Reorganization, Reclassification, Recapitalization, Merger or Sale of Company. In case the Company or a successor thereto issues Common Stock, options, other rights or Convertible Securities in connection with any consolidation or merger of the Company or any of its Subsidiaries with or into another corporation or in connection with the sale or other disposition of all or substantially all of the business or assets of the Company or any of its Subsidiaries and the consideration per share realized by the Company by reason of any such transaction, determined as applicable in accordance with subsection (k) of this Section 4.2, is less than (i) the Exercise Price in effect immediately prior to such event, or (ii) the Common Stock Valuation Price in effect immediately prior to such event, then a Diluting Event shall have occurred and the Exercise Price shall be adjusted as set forth in Section 4.1. (h) Splits and Combinations. In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then a Diluting Event shall have occurred and the Exercise Price in effect immediately prior to such combinations, notwithstanding Section 4.1, shall be adjusted as follows: Each of the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price in effect immediately after such event shall equal the product of (a) the Basic Exercise Price, the First Alternative Exercise Price or the Second Alternative Exercise Price, as applicable, in effect immediately prior to such event and (b)(i) the number of outstanding shares of Common Stock immediately prior to such event, divided by (ii) the number of outstanding shares of Common Stock immediately after such event. The number of shares of Common Stock issuable upon the exercise of the Warrant immediately after such event shall equal the product of (c) the number of shares of Common Stock issuable upon the exercise of the Warrant immediately prior to such event and (d) (i) the number of outstanding shares of Common Stock immediately after such event, divided by (ii) the number of shares of outstanding Common Stock immediately prior to such event. (i) Readjustments. In the event (i) the purchase price provided for in any rights or options referred to in subsection (b) above, or (ii) the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities referred to in subsection (b) or (c) above or (iii) the rate at which any Convertible Securities referred to in subsection (b) or (c) above are convertible into or exchangeable for Common Stock shall change (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such event shall forthwith be readjusted to the Exercise Price which would have been in effect at such time had such rights, options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or exercise rate, as the case ray be, at the time initially granted, issued or sold. On the expiration of any such option or right or the termination of any such right to convert or exchange such Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such right, option or Convertible Security never been issued, and the Common Stock issuable thereunder shall no longer be deemed to be outstanding. (j) Determination of Consideration for Rights or Options. In case any rights or options to purchase any shares of Common Stock or Convertible Securities shall be issued in connection with the issue or sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to the rights or options, such rights or options shall be deemed to have been issued without consideration. (k) Determination of Consideration upon Payment of Cash, Property or Merger. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor, after deduction of any accrued interest, dividends or any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair market value of such other consideration on the date of issue of such securities, as determined in good faith by the Board of Directors of the Company, less any expenses incurred by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase such Common Stock or Convertible Securities shall be issued in Connection with any merger or consolidation in which the Company and its Subsidiary, if applicable, survive, the amount of consideration therefor shall be deemed to be the fair market value thereof on the date of issue, as determined in good faith by the Board of Directors of the Company, or such portion of the assets and business of the non-surviving corporation as the Board of Directors shall attribute to such Common Stock, Convertible Securities, rights or options, as the case may be. In the event of any consolidation or merger of the Company or any of its Subsidiaries in which the Company or its Subsidiary, if applicable, does not survive or in the event of any sale or other disposition of all or substantially all of the business or assets of the Company or any of its Subsidiaries for stock or other securities of any corporation, the Company shall be deemed to have issued a number of shares of its Common Stock for stock or securities of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated and for a consideration equal to the fair market value on the date of such transaction of such stock or securities of the other corporation. (l) Record Date. In case the Company shall establish a record date of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock or in Convertible Securities or (ii) to subscribe for or purchase Common Stock or Convertible Securities, then effective as of such record date such Common Stock or Convertible Securities shall be deemed to have been issued or sold. Appropriate readjustment of the Basic Exercise Price and the First Alternative Exercise Price shall be made in the event that any dividend, distribution or subscription referred to in this subsection (l) shall be lawfully abandoned. (m) Shares Outstanding. Except as provided to the contrary herein, the number of shares of Common Stock deemed to be outstanding for purposes of Section 4.2(d), (f) and (h) at any given time shall be the number of shares of Common Stock actually issued and outstanding at such time, plus any shares of Common Stock issuable in respect of scrip certificates which have been issued in lieu of fractional shares of Common Stock. (n) Date of Determination. For purposes of Section 4.1 and 4.2, the date as of which the Exercise Price shall be adjusted shall be the earlier of the date upon which the Company shall (1) enter into a firm contract for the issuance of shares of Common Stock, rights or other options or Convertible Securities, as the case may be, or (2) issue such shares of Common Stock, rights or other options or Convertible Securities, as the case may be. (o) No Adjustment After Exercise. After this Warrant is exercised in whole or in part, the holder of any Common Stock so acquired shall not be entitled to any adjustment in the price or number of shares so acquired by reason of any subsequent occurrence which would result in an adjustment of the Exercise Price, number of shares or other adjustments by operation of this Article IV. 4.3 Rights of the Holder upon Rights Offering, Mergers, Reorganizations and Other Transfers. (a) Participation in Rights Offerings. In the event the Company shall effect an offering of Common Stock or other stock pro rata among its stockholders, the Holder shall be entitled, at the Holder's option, regardless of whether the Warrant is otherwise then exercisable, in lieu of the adjustments set forth in Sections 4.1 and 4.2 to the extent that such option is exercised by the Holder, to elect to participate in each and every such offering as though this Warrant had been exercised and the holder were, at the time of any such rights offering, then a holder of that number of shares of Common Stock to which the Holder is then entitled on the exercise hereof. (b) Participation in Stock Dispositions. In the event that the Company shall offer, approve, accept or recommend an offering, sale, transfer, redemption, cancellation or other disposition of Common Stock (including without limitation, by way of any merger, capital reorganization, or reclassification or recapitalization of the capital stock of the Company) to any person (other than in any offering described in subsection (a) above) or in the event that the Company liquidates or dissolves following a sale or transfer of all or substantially all of its assets to any entity, the Company shall arrange as part of such offering, sale or other disposition for the participation of the Holder, with respect to including this Warrant or the Shares issuable upon exercise hereof in such offering, sale or other disposition upon identical terms, without such Holder incurring any liability under Section 16(b) of the Securities Exchange Act of 1934, as amended, and after taking into account the Exercise Price. Such participation shall be at the Holder's option, regardless of whether the Warrant is otherwise then exercisable, in lieu of the adjustments set forth in Sections 4.1 and 4.2, to the extent such option is exercised by the Holder. In case of the consolidation or merger of the Company or any of its Subsidiaries with or into another corporation (each such event is herein called an "Organic Change") and in which the Holder does not participate as contemplated by the preceding paragraph, then after any required adjustment in the Exercise Price on account of such Organic Change, there shall thereafter be deliverable upon the exercise of this Warrant or any portion hereof (in lieu of or in addition to the number of shares of Common Stock theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock represented by that portion of this Warrant so exercised would have been entitled upon such Organic Change, and at the same aggregate Exercise Price, as adjusted. Prior to and as a condition of the consolidation of any Organic Change described, the Company shall make appropriate, written adjustments in the application of the provisions herein set forth satisfactory to the holders of the Warrants entitled to not less than a majority of the shares of Common Stock issuable upon the exercise thereof with respect to the rights and interests of the holders of the Warrants so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares of stock or other securities or other property thereafter deliverable upon exercise of the Warrants. Any such adjustment shall be made by and set forth in a supplemental agreement between the Company and the successor entity and be approved by the holders of the Warrants entitled to not less than a majority of the shares of Common Stock issuable upon the exercise thereof. 4.4 Certificates, Notices and Consents. (a) Upon the occurrence of any Diluting Event requiring adjustments of the Exercise Price pursuant to Sections 4.1 and/or 4.2, a certificate signed (i) by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company or (ii) by any independent firm of certified public accountants of recognized standing selected by, and at the expense of, the Company setting forth in reasonable detail the events requiring' the adjustment and the method by which such adjustment was calculated, shall be mailed (by first class mail, postage prepaid) to the Holder specifying the adjusted Exercise Price after giving effect to the adjustment(s). The certificate of any independent firm of certified public accountants of recognized standing selected by the Board of Directors of the Company and reasonably acceptable to the Holder shall be conclusive evidence, absent manifest error, of the correctness of any computation made under Sections 4.1 and/or 4.2. (b) In case the Company after the date hereof shall propose to (i) pay any dividend payable in stock to the holders of shares of Common Stock or to make any other distribution to the holders of shares of Common Stock, (ii) offer to the holders of shares of Common Stock rights to subscribe for or purchase any additional shares of any class of stock or any other rights or options or (iii) effect any reclassification involving merely the subdivision or combination of outstanding shares of Common Stock, or (iv) any capital reorganization or any consolidation or merger, or any sale or other disposition of all or substantially all of the business or assets of the Company, or the liquidation, dissolution or winding up of the Company or (v) engage in any Diluting Event not otherwise mentioned in this subsection (b), then, in each such case, the Company shall mail (by first class mail, postage prepaid) to the Holder notice of such proposed action, which shall specify the date on which the books of the Company shall close, or a record date shall be established, for determining holders of Common Stock entitled to receive such stock dividends or other distribution of such rights or options, or the date on which such reclassification, reorganization, consolidation, merger, sale, transfer, other disposition, liquidation, dissolution or winding up shall take place or commence, as the case may be, and the date as of which it is expected that holders of Common Stock of record shall be entitled to receive securities or other property deliverable upon such action, if any such date is to be fixed. Such notice shall be mailed, in the case of any action covered by clause (i) or (ii) above, at least 30 days prior to the date upon which such action takes place, and, in the case of any action covered by clause (iv) above, at lease 30 days prior to the date upon which such action takes place and 30 days prior to any record date to determine holders of Common Stock entitled to receive such securities or other property. (c) Failure to file any certificate or notice or to mail any notice, or any defect in any certificate or notice, pursuant to this Section 4.4, shall not affect the legality or validity of the adjustment of the Exercise Price, the number of shares purchasable upon exercise of this Warrant, or any transaction giving rise thereto. 4.5 No Implied Consent or Extension. Nothing in this Warrant is intended to permit any action or event which is prohibited by the Secured Credit Agreement as long as such Secured Credit Agreement remains in effect; nor shall the Secured Credit Agreement or any provision or term thereof extend or apply to any right or liability under this Warrant or any observance or breach thereof. After all obligations under the Secured Credit Agreement other than those that are distinct and exclusive to this Warrant have been paid in full or otherwise satisfied by the Company, no provision or term thereof shall extend or apply to any right or liability under this Warrant or any observance or breach thereof. ARTICLE V COVENANTS OF THE COMPANY 5.1 No Impairment. The Company shall not, and shall not permit its Subsidiaries to, directly or indirectly, by any action, including, without limitation, amending its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and any required issuance of additional shares of Common Stock pursuant to Sections 4.1 and 4.2, (c) obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant (except that compliance with applicable securities and blue sky laws shall be governed by the provisions of Article VII of this Warrant), (d) not issue any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding up of the Company or which has disproportionately greater voting rights under any circumstance, (e) not permit any Subsidiary of the Company to issue, sell or transfer any capital stock or other equity interest in such Subsidiary, or to sell all or substantially all of the assets of such Subsidiary, to any person or entity other than the Company, except in connection with an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company or Opcom may implement after receiving the written approval of a majority of the Holders (which approval must include First Source if First Source is a Holder), (f) not undertake any reverse stock split, combination, reorganization or other reclassification of its capital stock which would have the effect of making this Warrant exercisable for less than one share of Common Stock, (g) not take or permit the taking of any action which could subject the holder of this Warrant or shares of Common Stock issuable upon exercise thereof to liability under Section 16(b) of the Securities Exchange Act of 1934, as amended and (h) not change the Company's fiscal year from a fiscal year ending at the end of October as identified on Schedule I hereto. 5.2 Affirmative Covenants. So long as the Holder is the owner of or is entitled upon the due exercise hereof during the Exercise Period to purchase 1,039,500 shares of the Company's Common Stock, the Company shall comply with the requirements of this Section 5.2: 5.2.1 Delivery of Financial and Business Information. The Company will deliver to the Holder: (a) As soon as practicable after the end of each of the first three Quarterly Fiscal Periods in each fiscal year of the Company, and in any event within 45 days thereafter, two copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter (reflecting, among other things, Funded Indebtedness), and (ii) consolidated statements of income, retained earnings and cash flow of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter; setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year. Such statements shall be (1) prepared in accordance with generally accepted accounting principles consistently applied, (2) in reasonable detail and (3) certified as complete and correct by the principal financial or accounting officer of the Company; (b) As soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, two copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and (ii) consolidated statements of income, retained earnings and cash flow of the Company and its Subsidiaries for such year; setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by a report thereon by a firm of independent certified public accountants of recognized standing selected by the Company, which report shall state that such financial statements fairly present the financial position of the company being reported upon at the end of such year and the results of their operations and changes in their financial position for such year in conformity with generally accepted accounting principles applied consistently (except for changes in accounting principles with which such accountants concur) and that their examination of such financial statements has been made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and other auditing procedures as they considered necessary in the circumstances; (c) Promptly upon their becoming available one copy of each report, notice or proxy statement sent by the Company to its stockholders generally, and of each regular or periodic report (pursuant to the Securities Exchange Act of 1934, as amended) and any registration statement, prospectus or written communication (other than transmittal letters) (pursuant to the Securities Act), filed by the Company with (i) the Commission or (ii) any securities exchange on which shares of the Common Stock are listed; (d) With reasonable promptness, such other data and information as from time to time may be reasonably requested by the Holder; and (e) Promptly upon, and in any event within 10 days after, the adoption, initiation or undertaking of any plan, arrangement, negotiations, intention or commitment to enter into any of the transactions described in Sections 4.1, 4.2, or 4.3, notice of any such transactions, including information in reasonable detail pertaining to the terms, conditions and consummation of any such transactions. 5.2.2 Disputed Financial Statements. The Holder shall have the right at any time after receipt thereof to object to any financial statements delivered to the Holder pursuant to subsections (a) or (b) of Section 5.2.1 by specifying in writing to the Company the nature of its objection, and, unless such objection is resolved by agreement of the Company and the Holder, the Company and the Holder shall each have the right to submit the disputed financial statements to separate firms of independent accountants of recognized standing for a joint resolution (based upon written submissions) of the objection of the Holder (which firms of independent accountants may, in either case, be the firm of accountants regularly retained by the Company or the Holder). If such firms cannot jointly resolve the objection of the Holder, then, unless otherwise directed by agreement of the Company and the Holder, such firms shall in their sole discretion choose another firm of independent certified public accountants of recognized standing not the regular auditor of the Holder or of the Company, which firm shall resolve such objection. In either case, the determination so made shall be conclusive and binding on the Company solely for purposes of this Warrant, the Holder and all persons claiming under or through either of them, and any adjustment in the disputed financial statements, the Common Stock Valuation Price resulting from such determination shall be made. The cost of any such determination shall be borne by the Company if it results in an increase in the applicable Common Stock Valuation Price or by the Holder if it results in no adjustment or a decrease in the Common Stock Valuation Price; 5.2.3 Budget. The Company will deliver to the Holder not less than thirty (30) days prior to the commencement of each fiscal year, an annual business plan, including a budget and detailed financial projections for the Company and its Subsidiaries, for each month during such period (the "Budget"), all in reasonable detail, together with underlying assumptions and approved by a majority of the entire Board; 5.2.4 Auditors' Reports. The Company will deliver to the Holder promptly upon receipt thereof, copies of all other material reports, if any, submitted to the Company by independent public accountants in connection with any annual or interim audit of the books of the Company and its Subsidiaries made by such accountants; 5.2.5 Lender Information. The Company will deliver to the Holder a copy of each material financial statement, report, notice or communication that the Company or any Subsidiary delivers to any of their lenders or creditors; 5.2.6 Litigation. The Company will deliver to the Holder promptly upon the Company's learning thereof, notice of any litigation, suit or administrative proceeding that could reasonably be expected to have a material adverse affect on the Company's or any Subsidiary's business, affairs, assets, prospects, operations, employee relations or condition, financial or otherwise, whether or not the claim is considered by the Company to be covered by insurance; 5.2.7 Default. The Company will deliver to the Holder notice of any default under any senior or subordinated loan agreements promptly upon the occurrence thereof; 5.2.8 Material Adverse Developments. The Company will deliver to the Holder promptly upon the occurrence thereof, notice of any event which has had, or could reasonably be expected to have, a material adverse impact on the business, affairs, assets, prospects, operations, employee relations or condition, financial or otherwise, of the Company or any Subsidiary, including, without limitation, the institution or threat of any material litigation or investigation with respect to the Company or any Subsidiary; 5.2.9 Other Information. The Company will deliver to the Holder with reasonable promptness, all press releases issued by the Company or any Subsidiary, any filings made with the Commission by the Company or any Subsidiary and such other data and information as from time to time may be reasonably requested by First Source or such other data as the Company may from time to time furnish to any of the holders of its securities; 5.2.10 Auditors. The Company will deliver to the Holder promptly after the occurrence thereof, the engagement or termination of any individual or firm that provides accounting advice to the Company; 5.2.11 Inspection and Meeting Rights; Budget Review. The Company will permit First Source to visit and inspect the properties of the Company and its Subsidiaries, including, without limitation, its and their books and records (and to make extracts therefrom) and to discuss its and their affairs, finances and accounts with its and their officers and personnel, all at such reasonable times and as often as such party may reasonably request. First Source also shall have the right to meet with the Company's key management, including, without limitation, Messrs. Filesi and Marley, on a quarterly basis, to discuss the state of the Company's finances, business operations and prospects, and any other matters relating to the affairs of the Company and its Subsidiaries; 5.2.12 Accounting. The Company will maintain and will cause each of its Subsidiaries to maintain a system of accounting established and administered in accordance with GAAP and all financial statements or information delivered under Section 5.2.1(a) and (b) (in the case of 5.2.1(b) exclusive of footnote disclosures) will be prepared in accordance with GAAP; 5.2.13 Insurance. The Company agrees to maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its assets and business and the assets and business of its Subsidiaries against loss or damage of the kinds customarily insured against by similarly situated corporations of established reputation engaged in the same or similar businesses, in adequate amounts, and at the request of First Source shall furnish First Source with evidence of the same; 5.2.14 Payment of Taxes. The Company agrees to pay or cause to be paid all taxes, assessments and other governmental charges levied upon any of its assets or those of its Subsidiaries or in respect of its or their respective franchises, businesses, income or profits, which if unpaid might become a Lien upon any asset of the Company or any Subsidiary, before the same become delinquent, except that (unless and until foreclosure, distraint, sale or other similar proceedings shall have been commenced) no such charge need be paid if being contested in good faith and by appropriate measures promptly initiated and diligently conducted if (a) a reserve or other appropriate provision, if any, as shall be required by sound accounting practice shall have been made therefor, and (b) such contest does not have a material adverse effect on the financial condition of the Company and no material assets are in imminent danger of forfeiture; 5.2.15 Compliance With Laws. The Company agrees to use its best efforts to comply, and shall use its best efforts to cause each Subsidiary to comply, with all laws, rules, regulations, judgments, orders and decrees of any governmental or regulatory authority applicable to it and its respective assets, and with all contracts, and agreements to which it is a party or shall become a party, and to perform all obligations which it has or shall incur, the violation of which would reasonably be anticipated to have a material adverse effect on the business, affairs, assets, prospects, operations or condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole; 5.2.16 Preservation of Corporate Existence and Property; Operations. The Company agrees to preserve, protect, and maintain, and cause each Subsidiary to preserve, protect, and maintain, (a) its corporate existence, and (b) all rights, franchises, accreditations, privileges, and properties the failure of which to preserve, protect, and maintain would reasonably be anticipated to have a material adverse effect on the business, affairs, assets, prospects, operations, or condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole; 5.2.17 Holder as Observer. The Company agrees at all times to permit a representative of Holder to attend and observe all meetings of Company's Board of Directors and each committee thereof, and cause Holder to receive reasonably adequate notice of all such meetings; provided, however, that Holder shall not be entitled to attend or observe any portion of a meeting relating solely and exclusively to action proposed to be taken by Company with respect to Company's relationship with Holder. The Company acknowledges and agrees that attendance by a designee of Holder at any meeting of Company's Board of Directors or any committee thereof shall not constitute approval by Holder of or consent by Holder to any action authorized at such meeting, or constitute a waiver or modification of any provision of this Warrant or any right hereunder. The Company agrees to reimburse Holder for all reasonable travel, lodging, and meal expenses incurred in connection with the foregoing; and 5.2.18 Confidential Information. Holder acknowledges that pursuant to the provisions of this Section 5.2, Holder may receive insider information concerning the Company which Holder may be precluded from acting upon by applicable securities and other laws. Except as otherwise required by law or judicial order or decree or by any governmental agency or authority, each Person entitled to receive information regarding the Company and its Subsidiaries under this Section 5.2 shall use its best efforts to maintain the confidentiality of all nonpublic information obtained by it hereunder; provided that each such Person may disclose such information in connection with the sale or transfer or proposed sale or transfer of this Warrant or of any Common Stock, provided such Person's transferee or proposed transferee agrees in writing to be bound by the provisions of this Warrant and such disclosure would not materially and adversely affect the Company. 5.3 Negative Covenants. So long as the Holder is the owner of or is entitled upon the due exercise hereof during the Exercise Period to purchase 1,039,500 shares of the Company's Common Stock, the Company agrees that it will not effect any of the following matters, unless, at any time, First Source shall otherwise expressly consent in writing: (a) Distributions. The direct or indirect declaration or payment of any dividends or distributions upon any of the Company's equity securities; (b) Redemptions. The direct or indirect redemption, purchase or other acquisition of any of the Company's or any Subsidiary's equity securities (including, without limitation, warrants, options and other rights to acquire equity securities) if the total amount of such redemptions, purchases or other acquisitions exceeds 3% of the Common Stock on a Fully Diluted Basis during any 12 month period; provided that no Common Stock held Messrs. Grant A. Dove, Thomas R. Filesi, D. Vinson Marley, Richard G. Dahlberg and Thomas S. Garrett shall be redeemed without the express written consent of First Source; (c) Security Issuances. The authorization, issuance or entering into any agreement providing for the issuance (contingent or otherwise) of (X) any notes or debt securities containing equity features (including, without limitation, any notes or debt securities convertible into or exchangeable for equity securities, issued in connection with the issuance of equity securities or containing profit participation features) , or (Y) any equity securities (or any securities convertible into or exchangeable for any equity securities) except (i) pursuant to warrants and options outstanding on the date of this Warrant or the Company's incentive stock option plan, restricted stock bonus plan, long- term stock investment plan, or directors formula award plan, to the extent each of these plans has been previously approved by First Source, (ii) in connection with any transaction permitted pursuant to Section 5.3(e) or 5.3(h) hereof, and (iii) that up to 5% of the Common Stock on a Fully Diluted Basis may be granted in connection with obtaining financing from any subsequent lender; (d) Loans or Guarantees. The making of any loans or advances to, guarantees for the benefit of, or investments in, any person or entity (other than a wholly-owned Subsidiary); (e) Mergers. A merger, consolidation or reorganization with any person or entity unless the Company shall be the surviving entity and the transaction is permitted by Section 5.3(h); (f) Asset Dispositions. The sale, assignment, transfer, lease or other disposition of more than 10% of the consolidated assets of the Company and its wholly- owned subsidiaries (computed on the basis of book value, determined in accordance with generally accepted accounting principles, or fair market value, determined by the Board of Directors in its reasonable good faith judgment) in any transaction or series of related transactions; (g) Liquidation. The liquidation or dissolution of the Company; (h) Acquisitions. The acquisition of any interest in any business (whether by a purchase of assets, purchase of stock, merger or otherwise), if financial statements, for the business acquired would be required under the provisions of Rule 3-05 of Regulation S-X promulgated by the Securities and Exchange Commission; (i) Related Party Arrangements. The entering into, or permitting any Subsidiary to enter into, any material transaction with any of the Company's or any Subsidiary's officers, directors, employees or affiliates where such transaction would be required to be reported under Item 404 of Regulation S-K (excluding employment arrangements and agreements entered into during the ordinary course of business); (j) Subsidiaries. The establishment or acquisition of any Subsidiary which is not wholly-owned by the Company; (k) Leases. The entering into or becoming or remaining liable in any way, whether directly or by assignment or as a guarantor or other surety, for the obligations of a lessee under any leases or other rental agreements under which the amount of the aggregate lease payments for all such agreements exceeds $750,000 on a consolidated basis in any fiscal year of the Company; (l) Fiscal Year. The changing of the Company's fiscal year end from the last Friday of October. (m) Securities of Subsidiary. The issuance or sale of any shares of the capital stock, or rights to acquire shares of the capital stock, of any Subsidiary to any person or entity other than the Company or another wholly-owned Subsidiary; (n) Compensation. The Company will not permit (x) the salary and (y) other remuneration (which shall mean an amount equal to (i) gross salary shown on the relevant Form W-2 or gross income on the relevant Form 1099, plus accrued bonuses and director's fees for such year, less (ii) base salary for such year less (iii) accrued bonuses and director's fees for the previous year and paid in the current year) excluding (z) any amounts so recognized but attributable to exercise of options or warrants or resale of Common Stock so acquired to be paid during any Fiscal Year to the persons holding the positions listed in Schedule I (or any successor of any thereof in the capacity shown in Schedule I), to exceed, in the aggregate for each such person, the amount for such person shown in Schedule I, to be adjusted as of the first day of each Fiscal Year to an amount not to exceed 110% of the maximum allowable amount (as set forth in Schedule I and subsequently adjusted) for the preceding Fiscal Year; (o) Public Offering. The consummation of any public offering of the Company's equity or debt securities; (p) Change in the Business. The Company making a fundamental change in business so that less than 75% of its revenues are received from the manufacture and sale of optoelectronic, magnetic, fiber optic and other sensor products; (q) Bankruptcy, Etc. The making of an assignment for the benefit of creditors; or petitioning or applying to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company or any subsidiary, or of any substantial part of the assets of the Company or any subsidiary, or commencing of any proceeding (other than a proceeding for the voluntary liquidation and dissolution of any subsidiary) relating to the Company or any subsidiary under any bankruptcy, reorganization, arrangement, insolvency,readjustment of debt, dissolution or liquidation law of any jurisdiction; and (r) Capital Expenditures. The making of capital expenditures in excess of an aggregate of $5,000,000 in any fiscal year of the Company, unless such capital expenditures shall have been provided for in an annual budget approved by the Board of Directors for such fiscal year. Upon the request of First Source, the Company will at any time and from time to time during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to First Source, the continued validity of this Warrant and the Company's obligations hereunder. ARTICLE VI RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT; PREEMPTIVE RIGHTS The Company will at all times reserve and keep available, solely for issuance, sale and delivery upon the exercise of this Warrant, a number of shares of Common Stock equal to the number of full shares of Common Stock issuable upon the exercise of this Warrant. All shares of Common Stock issuable upon the exercise of this Warrant shall, when issued upon such exercise, (a) be duly and validly authorized and issued, fully paid and nonassessable, and (b) be free from all taxes, liens and charges with respect to the issue thereof other than any stock transfer taxes in respect of any transfer occurring contemporaneously with such issue. No stockholder of the Company has or shall have any preemptive rights to subscribe for such shares of Common Stock. ARTICLE VII LISTING ON SECURITIES EXCHANGE If the Company shall list any shares of Common Stock on any securities exchange, it will during the Exercise Period, at its expense, list thereon, maintain and, when necessary, increase such listing of, all shares of Common Stock issued or, to the extent permissible under the rules of the applicable securities exchange or automated quotation system, issuable upon the exercise of this Warrant so long as any shares of Common Stock shall be so listed. ARTICLE VIII RESTRICTIONS ON TRANSFER The conditions contained in the following sections of this ARTICLE VIII are intended to insure compliance with the Securities Act in respect of the transfer of Warrants or Common Stock issuable upon the exercise of Warrants. Reference in this ARTICLE VIII to shares of Common Stock issuable upon the exercise of Warrants includes shares of Common Stock theretofore issued upon the exercise of any Warrants which are then evidenced by certificates required to bear the legend set forth in Section 8.6. 8.1 Notice of Proposed Transfer; Transfers Without Registration. The Holder or the holder of any shares of Common Stock issuable upon the exercise of this Warrant, by acceptance hereof or thereof, agrees to give written notice to the Company, prior to any transfer of this Warrant, such shares of Common Stock or any portion thereof which bear the legend described in Section 8.6, of its intention to make such transfer, which notice shall include a brief description of such proposed transfer. A copy of such notice shall be sent to Independent Counsel. If in the opinion of Independent Counsel the proposed transfer may be effected without registration or qualification under any Federal or State law, such counsel shall, as promptly as practicable, notify the Company and the Holder of such opinion and of the terms and conditions, if any, to be observed in such transfer, whereupon the Holder shall be entitled to transfer such shares of Common Stock in accordance with the terms of the notice delivered to the Company and the opinion of Independent Counsel. In the event this Warrant shall be exercised as an incident to such transfer, such exercise shall relate back and for all purposes of this Warrant be deemed to have occurred as of the date of such notice regardless of delays incurred by reason of the provisions of this ARTICLE VIII which may result in the actual exercise on any later date. 8.2 Registration and Qualification. The provisions of Section 8.2 (a), 8.2 (b), and 8.9 below are subject to the terms of the First Amended and Restated Registration Rights Agreement, dated as of July 1, 1988 (the "Original Registration Agreement"), among the Company, First Source and the stockholders listed therein, as the same may be amended, modified or supplemented from time to time with the consent required by Section 8.11 (the "Registration Agreement"), and if, prior to an amendment of the Original Registration Agreement as amended by any effective amendment thereof, any conflict exists between the provisions of the Original Registration Agreement as amended by any effective amendment thereof, and Section 8.2 (a), 8.2 (b) and 8.9, the applicable conflicting provisions of the Original Registration Agreement as amended by any effective amendment thereof shall control, but only to the extent of the conflict, and the holder of any Warrant and the shares of Common Stock issuable upon exercise thereof shall have the applicable conflicting rights contained in the Original Registration Agreement as amended by any effective amendment thereof but only to the extent of the conflict, until such time as the Original Registration Agreement as amended by any effective amendment thereof is so amended. (a) Piggyback Registration. If the Company proposes (whether on its own behalf or at the request of any other person or entity) to register any security under the Securities Act on any registration form (otherwise than for the registration of securities to be offered and sold pursuant to (a) an employee benefit plan, (b) a dividend or interest reinvestment plan, (c) other similar plans or (d) reclassifications of securities, mergers, consolidations and acquisitions of assets on Form S-4 or any successor thereto) prescribed by the Commission permitting a secondary offering or distribution, not less than 60 days prior to each such registration, the Company shall give to the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof written notice of such proposal which shall describe in detail the proposed registration and distribution (including those jurisdictions where registration or qualification under the securities or blue sky laws is intended) and, upon the written request of any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof given within 30 days after the date of any such notice, proceed to include in such registration such shares of Common Stock as have been requested by any such holder to be included in such registration; provided, however, that the Company shall not be required to include fewer than 50,000 shares (subject to adjustment upon any combination or split of shares or similar event) of Common Stock in any such registration pursuant to this Section 8.2(a). Any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof shall in its request describe briefly the proposed disposition of such shares of Common Stock. The Company will in each instance use its best efforts to cause any shares of Common Stock issuable upon the exercise of the Warrants (the holders of which shall have so requested registration thereof) to be registered under the Securities Act and qualified under the securities or blue sky laws of any jurisdiction requested by a prospective seller, all to the extent necessary to permit the sale or other disposition thereof (in the manner stated in such request) by a prospective seller of the securities so registered. If the managing underwriter, who shall be selected by the Company (subject to the approval, not unreasonably withheld, of a majority of the holders that have requested registration (which must include First Source if First Source is then a holder and requesting registration)) to manage the distribution of the shares of Common Stock being registered, advises the Company in writing that, in its opinion, the inclusion of the shares of Common Stock requested to be included in such registration by a holder of a Warrant or shares of Common Stock issuable upon the exercise thereof with the securities being registered by the Company and other prospective sellers would materially adversely affect the distribution of all such securities, then: (a) (i) if such registration has been initially proposed by the Company, the Company shall include in such registration the number of shares proposed to be registered by the Company and by the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof before including any other securities in the registration, and, if an additional reduction in the number of securities being registered is necessary, the Company shall include in such registration such shares of the Company and the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof pro rata based on the number of shares originally proposed to be registered by the Company and by the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof or (ii) if such registration has been initially proposed by a holder of securities other than the Company or the holders of Warrants or shares of Common Stock issuable upon exercise thereof, the Company shall include in such registration the number of shares proposed to be registered by such other holder and the holders of Warrants or shares of Common Stock issuable upon exercise thereof before including any other securities in the registration and, if an additional reduction in the number of securities being registered is necessary, the Company shall include in such registration such shares of such other holder and the holders of Warrants or shares of Common Stock issuable upon exercise thereof pro rata based on the number of shares originally proposed to be registered by such other holder and by each holder of Warrants or shares of Common Stock issuable upon exercise thereof; or (b) any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof may, at its sole option, delay its offering and sale for a period not to exceed 120 days after the effective date of such registration as such managing underwriter shall reasonably request. In the event of such delay, the Company: (i) shall use its best efforts to effect any registration or qualification under the Securities Act and the securities or blue sky laws of any jurisdiction as may be necessary to permit such prospective seller to make its proposed offering and sale following the end of such period of delay; and (ii) during such period of delay and for at least 90 days thereafter, shall not file or cause to be effected any other registration of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock, whether on its own behalf or at the request of any other person or entity, and shall not sell any shares of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock. The holder of a Warrant or shares of Common Stock issuable upon the exercise thereof who has requested shares of Common Stock to be included in a registration pursuant to this Section 8.2(a) by acceptance hereof or thereof, agrees to execute an underwriting agreement with such underwriter that is (i) reasonably satisfactory to such holder and (ii) in customary form. Nothing in this Section 8.2(a) shall be deemed to require the Company to proceed with any registration of its securities after giving the notice herein provided. (b) Demand Registration. The holders of the Warrants and of any shares of Common Stock issuable upon the exercise thereof may, on up to four separate occasions (unless such request is withdrawn in accordance with the terms hereof) (the "Demands"), require the Company to effect the registration of the Shares pursuant to the provisions of this Section 8.2(b). Such Demands "shall consist of two demands for which the Company shall pay all the fees and expenses as set forth in Section 8.4 (the "Free Demands") and two demands for which the holders shall pay their proportionate share of the fees and expenses set forth in Section 8.4 (the "Charged Demands"). If the holders of the Warrants and of any shares of Common Stock issuable upon the exercise thereof representing a total of more than 50% of the shares of Common Stock then issued and issuable upon the exercise of the Warrants (which must include First Source if First Source is then a holder) shall give notice to the Company to the effect that such holders intend to (i) transfer all or any part of the Shares or (ii) exercise all or any part of the Warrants and transfer all or any part of the Shares under such circumstances that a public distribution (within the meaning of the Securities Act) of the Shares will be involved, then the Company shall (A) within 10 days after receipt of such notice, give written notice of the proposed registration to the other holders of Warrants and shares of Common Stock issuable upon exercise thereof, and (B) within 30 days after receipt of such notice, file a registration statement pursuant to the Securities Act to the effect that such shares may be sold under the Securities Act as promptly as is practicable thereafter and the Company will use its best efforts to cause any such registration to become effective and to keep the prospectus included therein current for at least six months after the effective date thereof or until the distribution shall have been completed, whichever first occurs; provided, however, that such holders shall furnish the Company with such appropriate information (relating to the intention of such holders) in connection therewith as the Company may reasonably request in writing; and provided, further, that the Company shall not be required to register fewer than 200,000 (subject to adjustment upon any combination or split of shares or similar event) shares of Common Stock in any registration pursuant to this Section 8.2(b). As long as the Company is not in default on its obligations under Section 5.1.2(a) and (b), the Company's obligation to file a registration statement, at any time when it is impossible or impracticable to include the Company's fiscal year-end financial statements as the most recent certified financial statements required to be included therein, shall be suspended until the Company's next fiscal year-end financial statements are due in accordance with Section 5.1.2(b), unless the request for registration pursuant to this Section 8.2(b) has been withdrawn. The managing underwriter for offerings made pursuant to this Section 8.2(b) shall be selected by the parties requiring registration hereunder (which must include First Source if First Source is then a holder and requesting registration), subject to the consent, not unreasonably withheld, of the Company. If the managing underwriter for any offering made pursuant to this Section 8.2(b) advises the Company in writing that, in its opinion, the inclusion of all of the shares of Common Stock requested to be included in such registration by the holders of Warrants and shares of Common Stock issuable upon the exercise thereof would materially adversely affect the distribution of all such securities, then (a) there shall be included in such registration shares of the holders of Warrants or shares of Common Stock issuable upon the exercise thereof pro rata based on the number of shares originally proposed to be registered by each holder of Warrants or shares of Common Stock issuable upon the exercise thereof or (b) any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof may, at its sole option, delay its offering and sale for a period not to exceed 120 days after the effective date of such registration as such managing underwriter shall reasonably request. In the event of such delay, the Company (i) shall use its best efforts to effect any registration or qualification under the Securities Act and the securities or blue sky laws of any jurisdiction as may be necessary to permit such prospective seller to make its proposed offering and sale following the end of such period of delay; and (ii) during such period of delay and for at least 90 days thereafter, shall not file or cause to be effected any other registration of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock, whether on its own behalf or at the request of any other person or entity, and shall not otherwise sell any of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock. A registration shall not reduce the number of Demands available to the holders under this Section 8.2(b) until such registration has become effective and the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof participating in the demand registration are able to register and sell at least 80% of the shares of Common Stock originally requested to be included in such registration; provided, however, that if in connection with a proposed Demand made pursuant to Section 8.2(b) the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof participating in the demand registration are able to register and sell more than 50% but less than 80% of the shares of Common Stock originally requested to be included in such registration, the number of Free Demands shall be reduced by one, and the number of Charged Demands shall be increased by one. 8.3 Registration and Qualification Procedures. Whenever the Company is required by the provisions of Section 8.2 to use its best efforts to effect the registration of any of its securities under the Securities Act, the Company will, as expeditiously as is possible: (a) prepare and file with the Commission a registration statement with respect to such securities; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and the prospectus current and to comply with the provisions of the Securities Act with respect to the sale of all securities covered by such registration statement whenever the seller of such securities shall desire to sell the same, including the offering or sale of such securities on a continuous or delayed basis pursuant to Rule 415 under the Securities Act as the same shall be in effect from time to time; (c) furnish to each seller such number of copies of preliminary prospectuses and prospectuses and each supplement or amendment thereto and such other documents as each seller may reasonably request in order to facilitate the sale or other disposition of the securities owned by such seller in conformity with (i) the requirements of the Securities Act and (ii) the seller's proposed method of distribution; (d) register or qualify the securities covered by such registration statement under the securities or blue sky laws of such jurisdictions within the United States as each seller shall reasonably request, and do such other reasonable acts and things as may be required of it to enable each seller to consummate the sale or other disposition in such jurisdictions of the securities owned by such seller; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or consent to a general and unlimited service of process in any such jurisdictions, (ii) qualify as a dealer in securities or (iii) register or qualify at its own expense securities of such seller in any jurisdiction not described in the notice of the Company referred to in the first paragraph of Section 8.2(a), in any case in order to accomplish any of the foregoing; (e) furnish, at the request of any seller on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the seller making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as the seller of such securities may reasonably request and are customarily included in such opinion and (ii) letters, dated, respectively, (1) the effective date of the registration statement and (2) the date such securities are delivered to the underwriters, if any, for sale pursuant to such registration, from a firm of independent certified public accountants of recognized standing selected by the Company, addressed to the underwriters, if any, and to the seller making such request, covering such financial, statistical and accounting matters with respect to the registration in respect of which such letters are being given as the seller of such securities may reasonably request and are customarily included in such letters; (f) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders as soon as reasonably practicable, but not later than 16 months after the effective date of the registration statement, an earnings statement covering a period of at least 12 months beginning after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; (g) enter into and perform an underwriting agreement with the managing underwriter, if any, selected as provided in Section 8.2, as the case may be, containing customary terms of offer and sale of the securities, payment provisions, underwriting discounts and commissions, representations, warranties, covenants, indemnities, terms and conditions; and (h) keep each seller advised in writing as to the initiation and progress of any registration under Section 8.2, as the case may be. 8.4 Allocation of Expenses. If the Company is required by the provisions of Section 8.2 to use its best efforts to effect the registration or qualification under the Securities Act or any state securities or blue sky laws of any of the shares of Common Stock issuable upon the exercise of the Warrants, the Company will pay all expenses in connection therewith, including, without limitation, (a) all expenses incident to filing with the National Association of Securities Dealers, Inc., (b) registration fees, (c) printing expenses, (d) the Company's accounting and legal fees and expenses, (e) expenses of any special audits incident to or required by any such registration or qualification, (f) premiums for insurance in such amount, if any, deemed appropriate by the managing underwriter and (g) expenses of complying with the securities or blue sky laws of any jurisdictions in connection with such registration or qualification; provided, however, that the holders of any Warrant or shares of Common Stock issuable upon exercise thereof participating in a Charged Demand shall be liable for the amount of such expenses in connection with such Charged Demand made pursuant to Section 8.2(b) equal to the product of (a) all such expenses and (b) the proportion which the number of shares of Common Stock issuable upon exercise of the Warrants for which registration has become effective and which are sold pursuant to Section 8.2(b) bears to the total number of all shares included in such registration; and provided, further, that the Company shall not be liable for (1) any discounts or commissions to any underwriter or (2) any stock transfer taxes incurred in respect of the shares of Common Stock issuable upon the exercise of the Warrants sold by the sellers. 8.5 Indemnification. In connection with any registration or qualification of securities under Section 8.2 or 8.3, the Company hereby indemnifies the Holder and the holders of any shares of Common Stock issuable upon the exercise of the Warrants and each underwriter thereof, including each person, if any, who controls the Holder or such stockholder or underwriter within the meaning of Section 15 of the Securities Act, against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) caused by any untrue, or alleged untrue, statement of a material fact contained in any registration statement, preliminary prospectus, prospectus or notification or offering circular (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or caused by any omission, or alleged omission, to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information furnished in writing to the Company by the Holder or any such stockholder or underwriter expressly for use therein. The Holder and the holders of any shares of Common Stock issuable upon the exercise of the Warrants hereby indemnify the Company and each officer, director and controlling person of the Company or underwriter within the meaning of Section 15 of the Securities Act against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) caused by any untrue, or alleged untrue, statement of a material fact contained in any registration statement, preliminary prospectus or notification or offering circular (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or caused by any omission, or alleged omission, to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Holder or any such stockholder expressly for use therein. Promptly upon receipt by a party indemnified under this Section 8.5 of notice of the commencement of any action against such indemnified party in respect of which indemnity or reimbursement may be sought against any indemnifying party under this Section 8.5, such indemnified party shall notify the indemnifying party in writing of the commencement of such action, but the failure so to notify the indemnifying party shall not relieve it of any liability which it may have to any indemnified party, unless such failure shall materially adversely affect the defense of such action. In case notice of commencement of any such action shall be given to the indemnifying party as above provided, the indemnifying party shall be entitled to participate in and, to the extent it may wish, jointly with any other indemnifying party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and satisfactory to such indemnified party. The indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the indemnified party unless (a) the indemnifying party agrees to pay the same, (b) the indemnifying party fails to assume the defense of such action with counsel reasonably satisfactory to the indemnified party or (c) the named parties to any such action (including any impleaded parties) have been advised by such counsel that representation of such indemnified party and the indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party); provided that the indemnifying party shall not be required to pay the fees and expenses of more than one counsel to indemnified parties claiming indemnification pursuant to this Section 8.5. No indemnifying party shall be liable for any settlement entered into without its consent. If the indemnification provided for in this Section 8.5 shall for any reason be unenforceable by an indemnified party, although otherwise available in accordance with its terms, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, liabilities or expenses with respect to which such indemnified party has claimed indemnification, in such proportion as is appropriate to reflect the relative fault of the indemnified party on the one hand and the indemnifying party on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The Company, each holder of the Warrants and each holder of Shares of Common Stock issued upon the exercise thereof agree that it would not be just and equitable if contribution pursuant hereto were to be determined by pro rata allocation or by any other method of allocation which does not take into account such equitable considerations. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to herein shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim which is the subject hereof. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. Each Holder of the Warrants and each holder of shares of Common Stock issued upon the exercise thereof and bearing the legend required by Section 8.6, by acceptance thereof, agrees to the indemnification provisions of this Section 8.5. 8.6 Legend on Certificates. In case any shares of Common Stock are issued upon the exercise in whole or in part of the Warrants or are thereafter transferred, in either case under such circumstances that no registration under the Securities Act is required, each certificate representing such shares shall bear on the face thereof the following legend: The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and any transfer thereof is subject to the conditions specified in the Warrant, dated as of December 12, 1995, which is an amendment and restatement of the Warrant originally issued by Optek Technology, Inc. (the "Company") to First Source Financial, Inc., dated as of January 31, 1991. A copy of the form of such Warrant is on file with the Secretary of the Company at 1215 West Crosby Road, Carrollton, Texas 75006 and will be furnished without charge by the Company to the holder of this certificate upon written request to the Secretary of the Company at such address. In case (a) a registration statement covering shares of Common Stock represented by a certificate bearing the legend specified above becomes effective under the Securities Act or (b) the Company receives an opinion of Independent Counsel that such legend is no longer necessary on such certificate to protect the Company from a violation of the Securities Act, the Company shall, or shall instruct its transfer agent and registrar to, issue in lieu thereof a new certificate or certificates for such shares in the name of the holder of such shares without such legend on the face thereof. 8.7 Supplying Information. The Company, the Holder and each holder of shares of Common Stock issuable upon the exercise of the Warrant shall cooperate with each other in supplying such information as may be necessary for any of such parties to complete and file any information reporting forms presently or hereafter required by the Commission or any commissioner or other authority administering the blue sky or securities laws of any jurisdiction where shares of Common Stock are proposed to be sold pursuant to Section 8.2 or 8.3. 8.8 Damages. In the event the Company fails to comply with any provision of Section 8.2 or 8.3, upon written request of the Holder of the Warrant or any holder of shares of Common Stock issuable upon the exercise thereof, the Company shall promptly obtain from an independent investment banking firm acceptable to such person an opinion estimating the net proceeds which such person would have received (after deducting underwriting commissions and discounts and any other expenses that would have been for the account of such Holder or holder of shares of Common Stock in connection with the registration or qualification of such shares of Common Stock) upon the sale of shares of Common Stock proposed to be sold pursuant to such registration or qualification. Such opinion of the independent investment banking firm shall be (a) delivered in writing to the Company, with a copy to such person, within 15 days after the date of the request of such person to the Company and (b) conclusive and binding on the Company and such person. Within 21 days of receipt by the Company of such estimate, if such person so elects, the Company shall pay to such person an amount, equal to such estimated net proceeds related to the Warrants or shares of Common Stock, as the case may be. Payment of such amount shall be made at the option of such person, by (i) wire transfer to an account in a bank located in the United States designated by such person for such purpose or (ii) a certified or official bank check drawn on a member of the Chicago or New York Clearing House payable to the order of such person. Upon payment to such person of such amount, such person shall assign to the Company, this Warrant and, if issued, the shares of Common Stock issued upon the exercise of this Warrant proposed to be sold pursuant to the registration or qualification in question, without any representation or warranty (other than that such Holder has good and valid title thereto free and clear of liens, claims, encumbrances and restrictions of any kind arising by or through such Holder). If less than all of the shares of Common Stock issuable upon exercise of this Warrant were proposed to be sold pursuant to the registration or qualification in question, the Company shall cancel the Warrant and issue in the name of, and deliver to, the Holder, pursuant to Section 2, a new Warrant for the shares of Common Stock issuable upon the exercise thereof not required to be assigned to the Company pursuant to the provisions of the preceding sentence. The Company agrees that the amount of actual damages that would be sustained by the Holder as a result of the failure of the Company to comply with any provisions of Section 8.2 or 8.3 is not capable of ascertainment on any other basis. 8.9 Holdback Agreements. The Company agrees: (i) not to effect any public sale or distribution of or otherwise dispose of any of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock during the seven days prior to or 135 days after the date any registration pursuant to Section 8.2(a) or 8.2(b) has become effective, except as part of such registration and except pursuant to any registration of securities to be offered and sold pursuant to (A) an employee benefit plan, (B) a dividend or interest reinvestment plan, (C) other similar plans or (D) reclassifications of securities, mergers, consolidations and acquisitions of assets on Form S-4 or any successor thereto; and (ii) to cause each person or entity which owns any capital stock of the Company as of the date of this Warrant (other than persons or entities holding nonrestricted stock that can be freely traded pursuant to Section 4(1) of the Securities Act and persons or entities who obtained stock pursuant to a registration described in Section 8.9(i)(A), (B), (C) or (D)) and each person or entity which purchases the Company's capital stock or securities convertible into or exchangeable or exercisable for any such capital stock at any time after the date of this Warrant (other than in a public offering and other than persons or entities holding nonrestricted stock that can be freely traded pursuant to Section 4(1) of the Securities Act and persons or entities who obtained stock pursuant to a registration described in Section 8.9(i)(A), (B), (C) or (D)) to agree not to effect any such public sale or distribution during such period. 8.10 Rule 144 Reporting. With a view to making available to the holders of Warrants and of shares of Common Stock issuable upon exercise thereof the benefits of certain rules and regulations of the Commission which may permit the sale of Warrants or shares of Common Stock issuable upon exercise thereof to the public without registration, the Company agrees to: (a) make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act or any successor rule or regulation from time to time in effect; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to the Holder or a holder of Common Stock issuable upon exercise of Warrants forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and the Exchange Act, a copy of the most recent annual or quarterly report of the Company filed with the Commission and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Holder or such holders my reasonably request in availing themselves of any rule or regulation of the Commission allowing them to sell securities without registration under the Securities Act. 8.11 Consent for Additional Registration Rights. The Company shall not grant rights to register any of its securities under the Securities Act to any person or entity, and shall not permit the amendment, supplement or modification of any such rights existing as of the Closing Date, without the consent of the holders of Warrants and shares of Common Stock issuable upon exercise thereof representing more than 50% of the shares of Common Stock issued or issuable upon exercise of the Warrants (which must include First Source if First Source is then a Holder), except for the rights described by the Registration Agreement. ARTICLE IX MISCELLANEOUS 9.1 Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder's rights, power or remedies. If the Company fails to make, when due, any payments provided for herein or fails to comply with any other provision of this Warrant, the Company shall pay to the Holder (a) interest at the Default Rate on any amounts due and owing to the Holder and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys, fees, incurred by the Holder in collecting any amounts due pursuant to this Warrant or in otherwise enforcing any of its rights, powers or remedies hereunder. 9.2 Holder Not a Stockholder. Except as otherwise provided herein, prior to the exercise of this Warrant as hereinbefore provided, the Holder shall not be entitled to any of the rights of a stockholder of the Company, including, without limitation, the right as a stockholder to (a) vote or consent, or (b) receive dividends or any other distributions made to stockholders. 9.3 Notice Generally. Any notice, demand or delivery to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if sent by first class mail, postage prepaid, addressed to (a) the Holder at its last known address appearing on the books of the Company maintained for such purpose or (b) the Company at its principal office referred to in Section 2.2. The Holder and the Company nay each designate a different address by notice to the other pursuant to this Section 9.3. 9.4 Payment of Certain Expenses. The Company shall pay all expenses in connection with, and all taxes (other than stock transfer taxes and income taxes) and other governmental charges that may be imposed in respect of, the issue, sale and delivery of (a) the shares of Common Stock issuable upon the exercise of this Warrant or (b) this Warrant. The Company shall reimburse First Source for all reasonable expenses incurred by First Source in monitoring the Company's compliance with the affirmative and negative covenants of this Warrant. 9.5 Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder. 9.6 Amendment. This Warrant may not be modified or amended except by an instrument in writing signed by the party against which enforcement is sought. 9.7 Headings. The headings of the Articles and Sections of this Warrant are for convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 9.8 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS FOR CONTRACTS ENTERED INTO AND TO BE PERFORMED IN SUCH STATE. 9.9 Subsidiaries. The provisions of this Warrant referring to "Subsidiaries" of the Company or to "consolidated" financial statements shall only apply during such times as the Company has one or more Subsidiaries. 9.10 No Section 338 Election or Step-Up in Asset Value on Books of the Company. The Company acknowledges that the definition of Adjusted Operating Profits is based upon the assumption that neither the Company nor any of its Subsidiaries will (or will be deemed to) make a Section 336 election under the Internal Revenue Code of 1986, as amended, or otherwise write-up the value of any of its assets on its books used for computing Adjusted Operating Profits. The Company hereby agrees and covenants that neither it nor any of its Subsidiaries will (or will be deemed to) make any such election or write-up. 9.11 Replacement. This Warrant is an amendment and restatement of, and is issued in replacement of, the warrant dated as of January 20, 1994 which was issued to Household Commercial Financial Services, Inc., and that warrant and its predecessors and all rights thereunder are hereby cancelled and terminated. Dated as of December 12, 1995. OPTEK TECHNOLOGY, INC. By: Its: Attest: Secretary (AFFIX CORPORATE SEAL) AGREED AND ACCEPTED TO: FIRST SOURCE FINANCIAL, INC. By: Its: NOTICE OF EXERCISE FORM, (To be executed only upon partial or full exercise of the within Warrant) The undersigned registered Holder of the within Warrant irrevocably exercises the within Warrant for and purchases _____________ shares of Common Stock of Optek Technology, Inc. and [Make appropriate selection by placing an "X" in the box and completing the blank associated with that box] (a) agrees to make payment therefor in the amount of $__________, (b) pursuant to Section 2.2(b)(ii) of the within Warrant instructs and agrees that shares of Common Stock of Optek Technology, Inc. be withheld in payment therefor, all at the price and on the terms and conditions specified in the within Warrant and requests that a certificate (or ______________ certificates in denominations of __________ shares) for the shares of Common Stock of Optek Technology, Inc. hereby purchased be issued in the name of and delivered to (choose one) (a) the undersigned or (b) ___________________, whose address is ____________________, and if such shares of Common Stock shall not include all the shares of Common Stock issuable as provided in the within Warrant, that a new Warrant of like tenor for the number of shares of Common Stock of Optek Technology, Inc. not being purchased hereunder be issued in the name of and delivered to [choose one] (a) the undersigned or (b) _________________ whose address is _____________________. Dated:_______________________, 19___ By (Signature of Registered Holder) Signature Guaranteed: By [Title) NOTICE: The signature of this Notice of Exercise must correspond exactly with the name of the Holder as specified on the face of the within Warrant. The signature to this Notice of Exercise must be guaranteed by a commercial bank or trust company in the United States or a member firm of the New York Stock Exchange. SCHEDULE I Compensation (Section 5.3(n)) Title Maximum, Not to Exceed President, CEO $250,000/yr* Vice President $175,000/yr* Dir. Corp. Services $175,000/yr* Dir. Operations $175,000/yr* Dir. Marketing/R&D $175,000/yr* _______________________ * Maximum amount shown is for Fiscal Year Ending 1988, and increases 10% per year. EX-11 3 Computation of Per Share Earnings Exhibit 11.1 For the Fiscal Years Ended
October 27, October 28, October 29, 1995 1994 1993 ___________ ___________ __________ Adjusted shares outstanding Weighted average common shares outstanding 3,318,649 3,223,741 3,223,971 Warrants 3,404,801 3,408,801 - Stock Options 967,461 1,120,222 - _________ _________ _________ Total common shares and common share equivalents 7,690,911 7,752,764 3,223,971 20% common stock limitation (663,730) (644,748) - _________ _________ _________ Adjusted weighted average shares outstanding 7,027,181 7,108,016 3,223,971 _________ _________ _________ Adjusted net earnings (loss) Net earnings (loss) $ 9,838,000 $ 3,179,000 $(10,059,000) Adjustment for 20% common stock limitation 27,000 184,000 - __________ _________ ____________ Adjusted earnings for computation of earnings per share $ 9,865,000 $ 3,363,000 $(10,059,000) Earnings (loss) per share Adjusted earnings for computation of earnings per share $ 9,865,000 $ 3,363,000 $(10,059,000) Adjusted weighted average shares outstanding 7,027,181 7,108,016 3,223,971 __________ __________ ___________ Earnings (loss) per common share $1.40 $0.47 ($3.12)
Notes: Primary earnings (loss) per share and fully diluted earnings (loss) per share were substantially the same in all periods presented. The modified treasury stock method is used to calculate net earnings per common share. The calculation uses the weighted average number of common shares outstanding and, when fully dilutive, common equivalent shares outstanding (warrants and stock options). Under this method, all warrants and options are assumed to be exercised and up to 20% of common shares outstanding are assumed to be repurchased. The net proceeds are then assumed to be used to reduce debt and the resulting reduction in interest expense is added back to net earnings for calculation of earnings per share. EX-21 4 SUBSIDIARIES OF THE REGISTRANT Optek Holdings, Inc. (Texas) OTX Corporation (Texas) Semiconductores Opticos, S.A. de C.V. (Mexico) Optron de Mexico, S.A. de C.V. (Mexico) EX-23 5 INDEPENDENT AUDITORS' CONSENT The Board of Directors Optek Technology, Inc.: We consent to incorporation by reference in the registration statements on Form S-8 (no. 33-18555 and No. 33-60656) of Optek Technology, Inc. of our reports dated December 6, 1995, relating to the consolidated balance sheets of Optek Technology, Inc. and subsidiaries as of October 27, 1995 and October 28, 1994, the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended October 27, 1995, and the related schedule, which reports appear in the October 27, 1995 annual report on Form 10-K of Optek Technology, Inc. KPMG Peat Marwick LLP Dallas, Texas January 5, 1996 EX-13 6 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Optek Technology, Inc.: Under date of December 6, 1995, we reported on the consolidated balance sheets of Optek Technology, Inc. and subsidiaries as of October 27, 1995 and October 28, 1994, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended October 27, 1995, which are included in this annual report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Dallas, Texas December 6, 1995 Schedule II OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts (in thousands)
Additions Balance at charged to Deductions beginning of costs and and Balance at Description year expenses write-offs end of year Year ended October 27, 1995 Allowance for doubtful accounts and customer returns 738 785 (548) 975 Reserve for excess and obsolete inventory 3,030 63 (640) 2,453 Year ended October 28, 1994 Allowance for doubtful accounts and customer returns 825 697 (784) 738 Reserve for excess and obsolete inventory 3,483 1,298 (1,751) 3,030 Year ended October 29, 1993 Allowance for doubtful accounts and customer returns 561 1,099 (835) 825 Reserve for excess and obsolete inventory 2,320 5,543 (4,380) 3,483
Schedule X OPTEK TECHNOLOGY, INC. AND SUBSIDIARIES Supplementary Statement of Operations Information (in thousands)
Year ended Oct. 27 Oct. 28, Oct. 29, 1995 1994 1993 Maintenance and repairs $1,718 $ 851 $ 702 Depreciation and amortization 2,722 2,705 3,664
S-1 EX-27 7
5 This schedule contains summary financial information extracted from registrant's Form 10-K for the fiscal year ended October 27, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR OCT-27-1995 OCT-27-1995 928 0 7906 975 5284 13203 33282 20618 26065 9175 15996 34 0 0 810 26065 62542 62542 38450 49444 142 0 2960 9996 158 9838 0 0 0 9838 1.40 1.40
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