<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1997
REGISTRATION NO. 333-27055
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
OPTEK TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C>
DELAWARE 75-1962405
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
1215 WEST CROSBY ROAD
CARROLLTON, TEXAS 75006
(972) 323-2200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
THOMAS R. FILESI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
1215 WEST CROSBY ROAD
CARROLLTON, TEXAS 75006
(972) 323-2200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
<TABLE>
<C> <C>
CHRISTOPHER M. HEWITT THOMAS J. MURPHY
HEWITT & HEWITT, P.C. MCDERMOTT, WILL & EMERY
2612 THOMAS AVENUE 227 WEST MONROE STREET
DALLAS, TEXAS 75204 CHICAGO, ILLINOIS 60606
(214) 969-0250 (312) 372-2000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 28, 1997
PROSPECTUS
950,000 SHARES
OPTEK TECHNOLOGY, INC.
COMMON STOCK
All of the shares of common stock (the "Common Stock") of Optek Technology,
Inc. ("Optek" or the "Company") offered by this Prospectus are being sold by
Allstate Insurance Company (the "Selling Stockholder"). See "Principal and
Selling Stockholders." The Company will not receive any proceeds from the sale
of shares of Common Stock by the Selling Stockholder.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"OPTT." On May 22, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $11.75 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNTS(1) STOCKHOLDER
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- -------------------------------------------------------------------------------------------------------------
Total(2)(3) $ $ $
=============================================================================================================
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriter against certain liabilities, including liabilities arising under
the Securities Act of 1933, as amended. See "Underwriting."
(2) The Company has agreed to pay expenses of the offering estimated at
$100,000.
(3) The Selling Stockholder has granted the Underwriter an option for 30 days to
purchase up to an additional 78,230 shares of Common Stock at the Price to
Public less the Underwriting Discount solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Selling Stockholder will be
$ , $ , and $ , respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the Underwriter specified herein,
subject to receipt and acceptance by it and subject to the right to reject any
order, in whole or in part. It is expected that delivery of the certificates
representing the shares will be made against payment therefor in Chicago,
Illinois on or about , 1997.
ABN AMRO CHICAGO CORPORATION
JUNE , 1997.
<PAGE> 3
OPTEK TECHNOLOGY, INC.
The following chart sets forth selected customer applications which utilize
the Company's sensor technology and the percentage of fiscal 1996 net sales by
product group.
Diagram is a pie chart showing various product groups and their
percentages, as follows:
<TABLE>
<S> <C> <C> <C> <C>
Office Equipment 37%
Industrial 26%
Automotive 19%
Aerospace/Defense 9%
Medical 6%
Communications 3%
</TABLE>
Examples of applications in each group are also described as follows:
Office Equipment: ATM Machines, Check Readers, Computer Tape Drives,
Credit Card Readers, Mail Sorters, Photocopiers,
Point of Sale Terminals, Postal Machines, Printers,
Ticket Machines
Industrial: Currency & Coin Changers, Electric Motors, Elevator
Door Position Sensors, Filling Station Pumps,
Optical Encoders, Security Systems, Staplers, Toll
Systems, Vending Equipment
Automotive: Cam Position Sensors, Crank Shaft Sensors, Ignition
Lock Theft Deterrent Systems, Power Van Door
Systems
Aerospace/Defense: Air to Air Missile Control Systems, Infantry
Missile Control Systems, Satellite Actuator/Control
Systems, Space Station Actuator/Control Systems,
Tank Ranging Systems
Medical: Defibrillators, Medical Fluid Analyzers, Medical
Fluid Dispensers, Pharmaceutical Dispensers
Communications: Custom Communication Components, LAN Transceivers
INCORPORATION BY REFERENCE
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated by reference herein (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference in such documents). See
"Information Incorporated by Reference." Requests for such copies should be
directed to the Secretary, Optek Technology, Inc., 1215 West Crosby Road,
Carrollton, Texas 75006, telephone number (972) 323-2200.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes thereto
appearing elsewhere in this Prospectus or incorporated by reference herein. All
references in this Prospectus to "Optek" or the "Company," unless the context
indicates otherwise, refer to Optek Technology, Inc. and its wholly-owned
subsidiaries. Unless otherwise indicated, this Prospectus assumes the
Underwriter's over-allotment option is not exercised. See "Underwriting."
THE COMPANY
Optek is a leading designer and manufacturer of electronic sensor
components and assemblies that detect motion and position for a broad range of
applications. The Company utilizes optoelectronic and magnetic field sensing
technologies to target non-standard applications that require specialized
engineering and manufacturing expertise. The Company sells its products for end
use by original equipment manufacturers (OEMs) in the office equipment,
automotive, industrial, aerospace/defense, medical and communications markets.
The Company believes that in many cases it is the sole source supplier for
specific components and assemblies necessary for its customers' applications. In
fiscal 1996, major customers included General Motors Corporation, Pitney Bowes,
Inc., Xerox Corporation and International Business Machines Corporation.
Prior to fiscal 1992, the Company's sales to the automotive market were not
significant (less than 2% of net sales in fiscal 1991). In fiscal 1992, the
Company began production and sale of magnetic field sensors for automotive
applications and continued efforts to identify additional applications. As a
result of this strategic pursuit of the automotive market, by fiscal 1996
automotive sales represented approximately 19% of net sales. Because of the
Company's engineering and manufacturing expertise and customer relationships,
the Company has been awarded several additional long-term automotive programs.
Sensor components and assemblies are being used increasingly by the automotive
industry to improve emission control, fuel economy, safety and performance,
while reducing warranty costs. As a result of this increasing demand and the
Company's strategy to capitalize on trends in the automotive industry, including
single sourcing, that favor high quality, reliable suppliers who provide custom
design and testing capabilities, the Company believes that the automotive market
represents its most significant opportunity for growth.
The Company's business objective is to continue to increase net sales and
earnings through the design, manufacture and sale of application specific
electronic sensors to a diverse worldwide customer base via multiple sales
channels. To achieve its objective, the Company has implemented a strategy to:
(i) take advantage of the increasing demand for sensors; (ii) continue to focus
on application and customer specific products; (iii) broaden and diversify its
customer base; (iv) utilize multiple sales channels for effective market
coverage; (v) further enhance its vertically integrated manufacturing
capabilities; (vi) expand its technology base and (vii) provide timely delivery
of high quality products.
The Company's manufacturing operations are vertically integrated with
facilities located in Carrollton, Texas and Juarez, Mexico. In order to realize
significantly reduced labor costs, substantially all of the Company's products
are assembled in facilities operated by the Company in Juarez, Mexico. The
Company markets its products through its own technical sales staff, independent
manufacturers' representatives and independent stocking distributors.
In the last three fiscal years, the Company has experienced growth in sales
and profitability. The Company's net sales have increased from $55.6 million in
fiscal 1994 to $67.4 million in fiscal 1996. In addition, operating income has
improved from $7.2 million in fiscal 1994 to $15.2 million in fiscal 1996. In
the first six months of fiscal 1997, net sales and operating income increased
5.6% and 6.4%, respectively, compared to the first six months of fiscal 1996.
Having overcome financial and operational difficulties in the early 1990s and
having successfully repositioned the Company to focus on its core competencies
in designing and manufacturing high quality custom sensor components and
assemblies, the Company believes it has the technological expertise,
manufacturing capabilities and financial resources to capture opportunities in
the expanding worldwide sensor market.
3
<PAGE> 5
THE OFFERING
<TABLE>
<S> <C> <C>
Common Stock offered by the Selling Stockholder............ 950,000 shares
Common Stock to be outstanding after the Offering.......... 4,072,187 shares(1)
Nasdaq National Market symbol.............................. OPTT
</TABLE>
---------------------
(1) Excludes, as of May 2, 1997, (i) 790,885 shares issuable upon exercise
of outstanding director and employee stock options, of which options
for 356,286 shares are immediately exercisable, and (ii) 3,360,468
shares issuable upon exercise of warrants to purchase Common Stock
which are immediately exercisable.
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED ENDED
------------------------------------------------------- ------------------
OCT. 30, OCT. 29, OCT. 28, OCT. 27, OCT. 25, APR. 26, MAY 2,
1992(1) 1993(1) 1994(1)(2) 1995(2) 1996(2) 1996(2) 1997
-------- -------- ----------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $58,403 $55,878 $55,625 $62,542 $67,395 $33,091 $34,940
Operating income (loss)........... (1,494) (5,272) 7,229 13,098 15,186 6,703 7,132
Earnings (loss) before income
taxes........................... (5,897) (10,059) 3,179 9,996 14,039 5,993 6,970
Net earnings (loss)............... (5,897) (10,059) 3,179 9,838 12,895 5,664 4,531
Net earnings(loss) per common and
common equivalent share......... $ (1.81) $ (3.12) $ 0.47 $ 1.40 $ 1.69 $ 0.75 $ 0.59
Weighted average number of common
and common equivalent
shares(3)....................... 3,250 3,224 7,108 7,027 7,627 7,495 7,589
</TABLE>
<TABLE>
<CAPTION>
OCT. 25, MAY 2,
1996 1997
BALANCE SHEET DATA: -------- -------
<S> <C> <C>
Working capital............................................. $ 6,658 $ 8,604
Total assets................................................ 25,886 27,013
Long-term debt.............................................. 3,428 1
Stockholders' equity........................................ 14,067 18,917
</TABLE>
- ---------------
(1) Results for fiscal 1992, 1993 and 1994 include non-recurring charges of $5.0
million, $8.3 million and $1.3 million, respectively, relating to (i)
restructuring charges; (ii) write-off of excess and obsolete inventory;
(iii) losses from the Company's local area network business which was sold
in fiscal 1994; and (iv) amortization of deferred development costs. See
"Selected Consolidated Financial Data."
(2) Results for fiscal 1994, 1995 and 1996 and the first six months of fiscal
1996 include tax benefits resulting from utilization of net operating loss
carryforwards during those periods of $305,000, $3.9 million, $3.2 million
and approximately $1.1 million, respectively. All such carryforwards were
fully utilized during fiscal 1996.
(3) Includes the dilutive effect of outstanding director and employee stock
options and warrants to purchase Common Stock.
4
<PAGE> 6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this Prospectus or incorporated herein by
reference, such as those concerning the Company's business strategy, the
expected future demand for sensor products, capital requirements and other
statements regarding matters that are not historical facts are forward-looking
statements (as such term is defined under the Securities Act of 1933, as amended
(the "Securities Act")). Because such forward-looking statements include risks
and uncertainties, actual results may differ materially from those expressed in
or implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
herein under "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and the documents incorporated
by reference herein. The Company undertakes no obligation to release publicly
the results of any revisions to these forward-looking statements that may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES
CERTAIN RISKS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS
SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS
OR INCORPORATED HEREIN BY REFERENCE, PRIOR TO MAKING ANY INVESTMENT IN THE
COMMON STOCK.
DEPENDENCE ON AUTOMOTIVE INDUSTRY
The automotive industry, which accounted for approximately 19% of the
Company's net sales during fiscal 1996, represents the fastest area of growth
for the Company. The automotive industry is cyclical due to general economic
conditions, the level of interest rates, consumer confidence, patterns of
consumer spending and the automobile replacement cycle, all of which are beyond
the control of the Company. In addition, the Company's customers in the
automotive industry are highly unionized and have in the past experienced labor
disruptions. Accordingly, automotive production may not increase or may decline
in the future. A significant reduction or prolonged interruption in automotive
production could have a material adverse effect on the Company.
Many products sold to the automotive industry are model, engine or system
specific and, therefore, have life cycles generally ranging from three to
fifteen years. Three to five year product development cycles requiring
substantial design and qualification requirements are customary in the sourcing
decisions of automotive OEMs. The inability of the Company to develop new
products to replace products whose life cycles come to an end or the lack of
success of any particular car model, engine or system, the success of which is
beyond the control of the Company, could have a material adverse effect on the
Company.
The Company's primary automotive customer has required certain of its
suppliers, including the Company, to meet QS9000 quality standards by the end of
calendar year 1997. Although the Company anticipates receiving certification
with respect to these standards by the required date, failure to do so could
have a material adverse effect on the Company.
There is continuing pressure from the major automotive OEMs to reduce
costs, including costs associated with outside suppliers such as the Company.
The Company believes that its ability to remain competitive and maintain its
profit margins at current levels will depend on its ability to develop new
products, to work with its customers to reduce costs on existing products and to
continue controlling its own operating expenses.
PRODUCT LIFE CYCLES
In addition to its automotive products, many products sold by the Company
are application specific and, therefore, have life cycles generally ranging from
three to fifteen years. Three to five year product development cycles requiring
substantial design and qualification requirements are customary in the sourcing
decisions of OEMs. The inability of the Company to develop new products to
replace products whose life cycles come to an end could have a material adverse
effect on the Company.
5
<PAGE> 7
FOREIGN MANUFACTURING OPERATIONS
In order to realize significantly reduced labor costs, substantially all of
the Company's components and assemblies, which accounted for approximately 81%
of the Company's net sales in fiscal 1996, are produced in facilities operated
by the Company in Juarez, Mexico. 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 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 the Company 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.
Although assembly operations in Mexico continue to be less expensive than
comparable operations in the United States, in recent years many companies have
established Maquiladora operations in the Juarez area to take advantage of lower
labor costs. Increasing demand for labor, particularly skilled labor and
professionals, from new and existing Maquiladora operations could result in
increased labor costs. The Company may be required to make additional
investments in automating equipment to partially offset increased labor costs.
The loss of Maquiladora status, the inability to recruit, hire and retain
qualified employees, a significant increase in labor costs, unfavorable exchange
rates or interruptions in the trade relations between the United States and
Mexico could have a material adverse effect on the Company.
CUSTOMER CONCENTRATION
During fiscal 1996, the Company's ten largest customers accounted for
approximately 62% of net sales. Two customers, General Motors Corporation and
Pitney Bowes, Inc., each accounted for approximately 11% of the Company's net
sales for fiscal 1996. Loss of, or the failure to replace, any significant
portion of sales to any significant customer could have a material adverse
effect on the Company.
There is continuing pressure from OEMs to reduce costs, including costs
associated with outside suppliers such as the Company. The Company believes that
its ability to remain competitive and maintain its profit margins at current
levels will depend on its ability to develop new products, to work with its
customers to reduce costs on existing products and to continue controlling its
own operating expenses.
RESTRICTIVE ARRANGEMENTS WITH FIRST SOURCE
Under the terms of the Company's credit facility with its lender, First
Source Financial, Inc. ("First Source"), the Company is required, if certain
events occur, to pay First Source additional interest of $2.4 million. The
triggering events are any consolidation or merger or sale, transfer or other
disposition of all or substantially all of the Company's property, assets or
business, other than a consolidation or merger of the Company with a
wholly-owned subsidiary of the Company, or any prepayment of the Company's debt
to First Source from the proceeds of a public offering or private placement of
its debt or equity securities or other financing. The requirement to pay this
amount upon the occurrence of any of these events could make more expensive, and
therefore delay or prevent, certain transactions involving the Company,
including an otherwise desirable acquisition of the Company by a third party.
Under the terms of the Company's credit facility and the warrant to
purchase Common Stock issued to First Source, the Company is restricted from
certain transactions without the consent of First Source. These transactions
include, but are not limited to, the declaration of dividends, the issuance or
redemption of equity securities, disposition of more than 10% of the Company's
assets, entering into certain leasing arrangements, certain transactions with
its officers, directors and employees, completion of a public offering of debt
or equity securities by the Company, and acquisitions and mergers, excluding
acquisitions for which disclosure of separate financial statements would not be
required under applicable federal securities regulations. To the extent the
6
<PAGE> 8
Company is prohibited from entering into these transactions, such restrictions
may have a material adverse effect on the Company.
REGISTRATION RIGHTS
After giving effect to the sale of Common Stock by the Selling Stockholder,
six beneficial owners hold rights to register up to 3,455,935 shares of Common
Stock under the Securities Act. The largest single block of these shares
entitled to registration rights is subject to a warrant to purchase Common Stock
held by First Source. The warrant grants to First Source the right to purchase
3,150,000 shares of Common Stock at a current price of $0.50 per share. The
exercise price is subject to adjustment in the event the Company fails to meet
certain performance criteria. The exercise price and number of shares are also
subject to adjustment upon the occurrence of certain events in order to address
dilution. The warrant expires on October 31, 1998. Pursuant to the terms of the
warrant, First Source may require the Company to file a registration statement
under the Securities Act on two occasions at the Company's expense and on two
occasions at First Source's expense with respect to shares of Common Stock which
may be acquired pursuant to the warrant. The Company is required to use its best
efforts to effect such registration, subject to certain conditions and
limitations. Further, whenever the Company proposes to register under the
Securities Act any of its securities (other than securities to be issued solely
to employees or pursuant to a reorganization of the Company) either for its own
account or for the account of other security holders exercising registration
rights, the Company is required to notify First Source of the proposed
registration and to include, at the Company's expense, all Common Stock which
First Source may request in such registration, subject to certain conditions and
limitations. The existence or exercise of these rights may have an adverse
effect on the market price of the Common Stock.
By virtue of contractual limitations placed upon these registration rights,
First Source and James D. Crownover, the holder of 282,602 shares of Common
Stock, have agreed not to sell or otherwise dispose of their shares for a period
of ninety (90) days after the effective date of this Registration Statement.
Should the Registration Statement not be declared effective by June 15, 1997,
the foregoing lock-up provisions will not apply.
COMPETITION
The Company competes with a range of companies for the custom
optoelectronic and magnetic sensor requirements of OEMs producing office
equipment, automotive products, industrial products, specialized
aerospace/defense and medical applications and communications equipment. Certain
of its competitors are companies which are larger, more diversified and have
greater financial resources than the Company. The Company believes that its
principal competitor for sales of custom sensor components and assemblies is
Honeywell, Inc. Competition in the sensor markets served by the Company is
primarily based upon custom design capabilities, quality, technology,
responsiveness and timely delivery. While the Company believes that its custom
design capabilities, quality, responsiveness, engineering and operating
efficiencies are competitive advantages, no assurance can be given that the
Company will be able to successfully compete with its competitors.
TECHNOLOGICAL CHANGE
There can be no assurance that the Company will be able, for financial or
other reasons, to anticipate and respond to technological changes which may be
necessary to satisfy customer needs. While the Company is currently unaware of
any technology that would have an adverse effect on its business, there can be
no assurance that products or technologies developed by others will not render
the Company's products obsolete or non-competitive.
RELIANCE ON KEY PERSONNEL
Thomas R. Filesi joined the Company in April 1991 and has been its
President and a Director since that time. Mr. Filesi has been primarily
responsible for directing the corporate strategy which has resulted in the
improving financial condition of the Company. Although the Company believes that
it has a highly qualified
7
<PAGE> 9
senior management team, the loss of Mr. Filesi's services could have a material
adverse effect on the Company. The Company has entered into an employment
agreement with Mr. Filesi having a term of three years with evergreen provisions
extending the term for an additional year unless either party gives notice of
intent not to renew at least six months prior to the end of each year of
service.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a publicly held Delaware
corporation from engaging in a business combination (which includes a merger,
asset sale or other transaction resulting in a financial benefit to the
interested stockholder) with an "interested stockholder" (defined generally as
any person who beneficially owns 15% or more of the outstanding voting stock of
the Company or any person affiliated with such person) for a period of three
years following the date of the transaction in which the person became an
interested stockholder, unless (i) prior to such date the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, or (ii)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which the employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer, or (iii) on or
subsequent to such date the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the Nasdaq National Market under the trading
symbol "OPTT." The following table sets forth the quarterly high and low sale
prices (to the nearest 1/8) of a share of Common Stock for each quarterly
period subsequent to relisting on the Nasdaq Stock Market on April 22, 1996, and
the high and low bid prices from October 31, 1994 through April 21, 1996 as
reported by various market makers. 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.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995 Fiscal Year
First Quarter............................................. $ 1 5/8 $ 1 1/4
Second Quarter............................................ 2 5/8 1 1/2
Third Quarter............................................. 5 2 1/2
Fourth Quarter............................................ 7 3/4 5
1996 Fiscal Year
First Quarter............................................. 8 1/4 7
Second Quarter............................................ 14 9
Third Quarter............................................. 15 3/4 9 5/8
Fourth Quarter............................................ 11 1/4 9
1997 Fiscal Year
First Quarter............................................. 13 7/8 9
Second Quarter............................................ 14 1/8 10 1/2
Third Quarter (through May 22, 1997)...................... 12 11
</TABLE>
8
<PAGE> 10
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below at October 30,
1992; October 29, 1993; October 28, 1994; October 27, 1995 and October 25, 1996
and for the fiscal years then ended are derived from the Company's consolidated
financial statements, which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, and which are incorporated by
reference herein. The selected consolidated financial data presented below for
the Company at April 26, 1996 and May 2, 1997 and for the six month fiscal
periods then ended are derived from the unaudited consolidated financial
statements of the Company which are incorporated by reference herein. The
unaudited consolidated financial data have been prepared on a consistent basis
with the audited financial statements and in the opinion of management include
all adjustments, consisting only of normal recurring adjustments, which are
necessary for a fair presentation of the financial position and results of
operations of the Company for the periods covered thereby. Results for interim
periods are not necessarily indicative of those to be expected for the year. The
selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements
and the related Notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
---------------------------------------------------- ------------------
OCT. 30, OCT. 29, OCT. 28, OCT. 27, OCT. 25, APR. 26, MAY 2,
1992 1993(1) 1994(2) 1995(2) 1996(2) 1996(2) 1997
-------- -------- -------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $ 58,403 $ 55,878 $55,625 $62,542 $67,395 $33,091 $34,940
Cost of sales(3).......................... 43,151 46,499 38,269 38,513 39,010 19,644 20,849
-------- -------- ------- ------- ------- ------- -------
Gross profit.............................. 15,252 9,379 17,356 24,029 28,385 13,447 14,091
Product development and engineering
expenses................................ 4,089 3,968 3,591 3,841 4,933 2,450 2,647
Selling, general and administrative
expenses................................ 9,057 7,498 6,536 7,090 8,266 4,294 4,312
Provision for restructuring costs......... 3,600 2,292 -- -- -- -- --
Reduction in value of deferred development
costs................................... -- 893 -- -- -- -- --
-------- -------- ------- ------- ------- ------- -------
Operating income (loss)................... (1,494) (5,272) 7,229 13,098 15,186 6,703 7,132
Other (income) expense:
Interest expense........................ 3,788 3,952 3,685 2,960 1,292 857 81
Other, net.............................. 615 835 365 142 (145) (147) 81
-------- -------- ------- ------- ------- ------- -------
Total other expenses............. 4,403 4,787 4,050 3,102 1,147 710 162
-------- -------- ------- ------- ------- ------- -------
Earnings (loss) before income taxes....... (5,897) (10,059) 3,179 9,996 14,039 5,993 6,970
Income tax expense........................ -- -- -- 158 1,144 329 2,439
-------- -------- ------- ------- ------- ------- -------
Net earnings (loss)..................... $ (5,897) $(10,059) $ 3,179 $ 9,838 $12,895 $ 5,664 $ 4,531
======== ======== ======= ======= ======= ======= =======
Net earnings (loss) per common share...... $ (1.81) $ (3.12) $ 0.47 $ 1.40 $ 1.69 $ 0.75 $ 0.59
======== ======== ======= ======= ======= ======= =======
Weighted average number of common and
common equivalent shares
outstanding(4).......................... 3,250 3,224 7,108 7,027 7,627 7,495 7,589
</TABLE>
<TABLE>
<CAPTION>
AS OF
-------------------------------------------------------------------------
OCT. 30, OCT. 29, OCT. 28, OCT. 27, OCT. 25, APR. 26, MAY 2,
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................ $(25,081) $ 6,865 $ 4,830 $ 4,028 $ 6,658 $ 4,882 $ 8,604
Total assets............................. 48,651 32,146 27,827 26,065 25,886 24,872 27,013
Total current liabilities................ 50,789 7,920 8,159 9,175 7,982 7,748 7,695
Long-term debt........................... 111 36,472 28,692 15,996 3,428 10,279 1
Stockholders' equity (deficit)(5)........ (2,302) (12,340) (9,148) 810 14,067 6,757 18,917
</TABLE>
- ---------------
(1) Results for fiscal 1993 include losses from the Company's local area network
business, which was sold in fiscal 1994, of approximately $1.5 million.
(2) Results for fiscal 1994, 1995 and 1996 and the first six months of fiscal
1996 include tax benefits resulting from utilization of net operating loss
carryforwards during those periods of $305,000, $3.9 million, $3.2 million
and approximately $1.1 million, respectively. All such carryforwards were
fully utilized during fiscal 1996
(3) For fiscal 1992, 1993 and 1994, cost of sales includes $1.4 million, $3.6
million and $1.3 million, respectively, for write-off of excess and obsolete
inventory.
(4) Includes the dilutive effect of outstanding director and employee stock
options and warrants to purchase Common Stock.
(5) The Company declared no cash dividends during the periods presented.
9
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Optek is a leading designer and manufacturer of electronic sensor
components and assemblies that detect motion and position for a broad range of
applications. The Company utilizes optoelectronic and magnetic field sensing
technologies to target non-standard applications that require specialized
engineering and manufacturing expertise. The Company sells its products for end
use by OEMs in the office equipment, automotive, industrial, aerospace/defense,
medical and communications markets. The Company believes that in many cases it
is the sole source supplier for specific components and assemblies necessary for
its customers' applications. In fiscal 1996, major customers included General
Motors Corporation, Pitney Bowes, Inc., Xerox Corporation and International
Business Machines Corporation.
The Company was incorporated in Texas in October 1979 as Crown
Semiconductor, Inc. and reincorporated in Delaware in August 1984, changing its
name to Optek Technology, Inc. In July 1988, the Company acquired all of the
assets of the Optoelectronics Division of TRW, Inc. ("TRW"). This included its
primary plants located in Carrollton and Mineral Wells, Texas and Juarez,
Mexico, as well as additional facilities. In order to finance this acquisition,
the Company entered into a $37.0 million credit facility with First Source.
Between fiscal 1989 and fiscal 1991, the Company experienced a decline in
revenues of approximately 10%, due primarily to a general downturn in the
economy and a reduction in sales of its power semiconductor product line due to
the expiration of its largest military contract. During the same period, the
Company suffered a significant decline in profitability resulting from (i)
losses incurred by a subsidiary developing and selling local area network
systems; (ii) failing to control selling, general and administrative expenses
and (iii) interest expense primarily related to the TRW acquisition. In
addition, the Company incurred costs associated with its efforts to develop
magnetic sensor technology for the automotive market. As a result of these
events, the Company incurred substantial losses and was not in compliance with
certain covenants under its credit facility.
In 1991, the Company hired Thomas R. Filesi, the Company's President and
Chief Executive Officer, to develop and implement a recovery plan for the
Company. The recovery plan was implemented over several years and included the
following: (i) significant work force reductions; (ii) consolidation of
facilities; (iii) discontinuance of the power semiconductor product line and
sale of the local area network business; (iv) changes in senior management and
(v) reorganization of manufacturing operations.
A major goal of the reorganization of the Company's manufacturing
operations was to better align production with customer demand through reduction
of manufacturing cycle time. This required a reengineering of manufacturing
processes and resulted in significant reductions in direct labor, manufacturing
overhead, scrap and inventory. The result was a substantial increase in gross
margins, from 20.2% in fiscal 1990 to 31.2% in fiscal 1994. In addition, the
Company realized increased cash flow, lower debt and interest expense and a
return to profitability.
Further supporting the Company's recovery was the successful entrance into
the automotive market. From fiscal 1994 through fiscal 1996, the Company
experienced an approximately 10% compounded annual growth rate in net sales.
During the same period, net sales of automotive products grew at an
approximately 29% compounded annual growth rate. Net sales of automotive
products grew from less than 2% of net sales in fiscal 1991 to approximately 19%
of net sales in fiscal 1996 and represented approximately 21% of net sales
during the first six months of fiscal 1997.
10
<PAGE> 12
The following table sets forth the Company's net sales by product group for
the last three fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
OCT. 28, OCT. 27, OCT. 25,
1994 1995 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Office equipment............................................ $21.4 $24.8 $24.7
Automotive.................................................. 8.2 9.5 12.9
Industrial.................................................. 15.1 16.0 17.7
Aerospace/defense........................................... 5.2 6.4 5.9
Medical..................................................... 4.4 4.1 4.0
Communications.............................................. 1.3 1.7 2.2
----- ----- -----
Total.............................................. $55.6 $62.5 $67.4
===== ===== =====
</TABLE>
The Company believes that the sale of automotive products represents its
major opportunity for growth over the next several years due to the
proliferation of sensors in automobiles resulting from the expanded use of
microprocessors. The Company expects sales to the office equipment, industrial
and medical markets to experience growth consistent with growth in the economy
in general. Sales to the communications market consist primarily of fiber optic
transmitters and receivers and offer opportunities for additional growth. Sales
to the aerospace/defense market are expected to remain relatively flat or
decline slightly, but opportunities for sales in certain applications may arise
as some manufacturers of aerospace/defense components exit this relatively low
volume market.
Gross margins have continued to increase from 31.2% in fiscal 1994 to 42.1%
in fiscal 1996. The Company is experiencing pressure from OEMs to reduce costs.
In addition to developing new products and increasing sales levels, the
Company's ability to maintain profit margins at current levels will depend on
its ability to work with its customers to reduce costs on existing products and
to continue to control its own operating expenses.
The combined effect of higher sales volumes and improved operating margins
enabled the Company to generate sufficient cash flows to pay down its long term
debt from a high of $39.0 million at the end of fiscal 1992 to $3.4 million at
the end of fiscal 1996. As a result, interest expense was reduced from $4.0
million during fiscal 1993 to $1.3 million during fiscal 1996. The remaining
debt was repaid during the second quarter of fiscal 1997.
Results for fiscal 1994, 1995 and 1996 include tax benefits resulting from
utilization of net operating loss carryforwards for book and tax purposes during
those years of $305,000, $3.9 million, and $3.2 million, respectively. All such
carryforwards were fully utilized during fiscal 1996.
11
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain items in the Company's statements of income
and the percentage changes of such items as compared to the indicated prior
period:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
PERCENTAGE OF NET SALES FROM PRIOR PERIOD
-------------------------------------------------- -------------------------
SIX MONTHS SIX
FISCAL YEAR ENDED ENDED FISCAL YEARS MONTHS
------------------------------ ----------------- ------------- ---------
1994 1995 1996
OCT. 28, OCT. 27, OCT. 25, APR. 26, MAY 2, V. V. V.
1994 1995 1996 1996 1997 1995 1996 1997
-------- -------- -------- -------- ------ ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0% 12.4% 7.8% 5.6%
Cost of sales............... 68.8 61.6 57.9 59.4 59.7 0.6 1.3 6.1
Product development and
engineering expenses...... 6.5 6.1 7.3 7.4 7.6 7.0 28.4 8.0
Selling expenses............ 7.1 6.8 7.5 8.0 7.4 7.5 19.8 (1.8)
General and administrative
expenses.................. 4.6 4.5 4.7 5.0 4.9 10.0 11.7 3.9
Operating income............ 13.0 20.9 22.5 20.3 20.4 81.2 15.9 6.4
Interest expense............ 6.6 4.7 1.9 2.6 0.2 (19.7) (56.4) (90.5)
Earnings before income
taxes..................... 5.7 16.0 20.8 18.1 19.9 214.4 40.4 16.3
Income taxes................ 0.0 0.3 1.7 1.0 7.0 100.0 624.1 641.3
Net earnings................ 5.7 15.7 19.1 17.1 13.0 209.5 31.1 (20.0)
</TABLE>
Six Months Ended May 2, 1997 Compared to Six Months Ended April 26, 1996
Net sales for the first six months of fiscal 1997 were $34.9 million, up
5.6% compared to net sales of $33.1 million for the first six months of fiscal
1996. This increase was the result of higher automotive net sales of $1.7
million and higher commercial (office equipment, industrial, medical and
communications) net sales of $460,000. Partially offsetting the increase were
lower sales of high reliability (aerospace/defense) products due to
approximately $600,000 of one-time sales in the second quarter of fiscal 1996.
Cost of sales was $20.8 million, or 59.7% of net sales, in the first six
months of fiscal 1997 compared to $19.6 million, or 59.4% of net sales, during
the comparable period of fiscal 1996. This increase in cost of sales as a
percentage of net sales was primarily the result of (i) the reduction in higher
margin aerospace/defense sales from the second quarter of fiscal 1996 as
discussed above, (ii) a change in product mix within the commercial product
group favoring lower margin component products and (iii) costs related to the
preparation for a ramp-up of automotive component production expected to occur
in the second half of fiscal 1997.
Product development and engineering expenses during the first six months of
fiscal 1997 were $2.6 million, or 7.6% of net sales, compared to $2.5 million,
or 7.4% of net sales during the comparable period of the previous fiscal year.
Selling, general and administrative expenses in the first six months of
fiscal 1997 totalled $4.3 million, or 12.3% of net sales, compared to $4.3
million, or 13.0% of net sales, during the comparable period of fiscal 1996. The
decrease in selling, general and administrative expenses as a percentage of net
sales was due to net sales increasing while expenses remained essentially the
same from period to period.
Operating income for the period was $7.1 million, or 20.4% of net sales,
compared to $6.7 million, or 20.3% of net sales, in the first six months of
fiscal 1996. The improvement from fiscal 1996 was the result of the factors
discussed above.
Other expenses, consisting primarily of interest expense, were $162,000 in
the first six months of fiscal 1997 compared to $710,000 in the first six months
of fiscal 1996. This decrease was the result of the continued reduction of long
term debt.
12
<PAGE> 14
Income tax expense during the first six months of fiscal 1997 was $2.4
million compared to $329,000 during the comparable period of fiscal 1996. Tax
expense increased as a result of the Company having fully utilized its remaining
net operating loss carryforwards during fiscal 1996. The Company expects to be
on a fully taxed basis during all of fiscal 1997.
As a result of the factors discussed above, net earnings for the first six
months of fiscal 1997 were $4.5 million versus $5.7 million in the first six
months of fiscal 1996.
Fiscal Year Ended October 25, 1996 Compared to Fiscal Years Ended October 27,
1995 and October 28, 1994
Net sales for fiscal 1996 were $67.4 million versus $62.5 million in fiscal
1995 and $55.6 million in fiscal 1994. The increase from fiscal 1995 to fiscal
1996 was attributable to increases in commercial net sales of $1.9 million and
automotive net sales of $3.4 million offset by a decrease in net sales of high
reliability optoelectronic products of $400,000. The increase from fiscal 1994
to fiscal 1995 was a result of increases in commercial net sales of $4.5
million, automotive net sales of $1.2 million and high reliability
optoelectronics product net sales of $1.2 million.
Cost of sales in fiscal 1996 was 57.9% of net sales versus 61.6% of net
sales in fiscal 1995 and 69.0% of net sales in fiscal 1994. The improvements in
fiscal 1996 and 1995 were the result of higher production volumes resulting in
lower unabsorbed fixed costs, continued efforts to reduce manufacturing cycle
times, favorable exchange rates as well as cost reduction and yield improvement
programs. In addition, fiscal 1995 showed an improvement of $1.2 million, or
approximately 2% of net sales, resulting from the absence of additional
provisions for excess and obsolete inventories versus fiscal 1994.
Product development and engineering expenses in fiscal 1996 were $4.9
million, or 7.3% of net sales, compared to $3.8 million, or 6.1% of net sales in
fiscal 1995 and $3.6 million, or 6.5% of net sales in fiscal 1994. These
expenses were primarily related to the development of new products and
processes. The increase in fiscal 1996 relates to additional development costs
for fiber optic connectors, used in telecommunications, and magnetoresistive
technologies, used primarily in automotive applications. In addition, certain
expenses were incurred to refurbish the engineering and product development
labs. The improvement in the percentage to net sales in fiscal 1995 as compared
to fiscal 1994 was due to net sales increasing at a greater rate than expenses.
Selling, general and administrative expenses in fiscal 1996 were $8.3
million, or 12.3% of net sales, versus 11.3% of net sales in fiscal 1995 and
11.8% of net sales in fiscal 1994. The increase in expenses in fiscal 1996 over
fiscal 1995 was primarily attributable to an increase in sales commissions and
expenses related to refurbishment of the sales and customer service areas.
Operating income was $15.2 million in fiscal 1996, $13.1 million in fiscal
1995 and $7.2 million in fiscal 1994. The improvements in fiscal 1996 and fiscal
1995 were the result of the aforementioned increase in sales volume and
improvements in cost of sales as discussed above.
Other expenses consist primarily of interest expense which decreased in
fiscal 1996 and fiscal 1995 due to the continued reduction of long-term debt.
Income tax expense was $1.1 million, or 1.7% of net sales, in fiscal 1996
versus $200,000, or 0.3% of net sales, in fiscal 1995. This was the result of
the Company fully utilizing its net operating loss carryforwards during fiscal
1996.
As a result of the factors discussed above, net earnings for fiscal 1996
were $12.9 million versus $9.8 million in fiscal 1995 and $3.2 million in fiscal
1994.
LIQUIDITY AND CAPITAL RESOURCES
As reflected in the Company's consolidated statements of cash flows, the
Company generated approximately $6.3 million in cash from operations during the
first six months of fiscal 1997. The largest single use of cash (approximately
$3.4 million) was to retire the Company's outstanding debt.
The Company generated approximately $13.5 million in cash from operations
in fiscal 1996. The largest single use of cash (approximately $12.6 million)
continued to be the reduction of the Company's outstanding
13
<PAGE> 15
debt. The remaining cash was used primarily for capital expenditures. Operating
cash flows were approximately $13.6 million in fiscal 1995 and approximately
$8.0 million in fiscal 1994. The improvement was a direct result of the factors
discussed above under the "Results of Operations."
In fiscal 1997, the Company estimates capital expenditures will be
approximately $3.0 million in the aggregate to support anticipated increases in
demand for the Company's automotive products during fiscal 1998 and 1999. The
Company also anticipates higher expenditures for federal income taxes in fiscal
1997 due to the Company's full utilization of its net operating loss
carryforwards during fiscal 1996.
In the second quarter of fiscal 1997, the Company completely repaid amounts
outstanding under its credit facility with First Source. The credit facility
continues to provide a $10.5 million working capital line. Amounts drawn on the
working capital line bear interest at one-half percentage point over the
reference rate announced from time to time by the First National Bank of
Chicago, Chicago, Illinois and mature on October 31, 1997. The credit facility
expires October 31, 1997, but can be renewed for an additional one year period
at the option of the Company. The credit facility contains certain 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 during fiscal 1996.
The Company presently anticipates that it will generate sufficient cash
from operations to meet its obligations, including its capital requirements, for
the foreseeable future. Any unanticipated expansion or contraction of its
business or future acquisitions may require the Company to draw upon its working
capital line or obtain other financing.
SEASONALITY
Because the Company's first fiscal quarter includes the holiday season,
which impacts customer order entry and also includes an annual facilities
shutdown, this quarter has traditionally been the Company's lowest in terms of
net sales and operating income. The following table presents unaudited quarterly
net sales and operating income for each of the Company's last ten fiscal
quarters:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------------- ------------------------------------- -----------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $13,250 $15,584 $16,497 $17,211 $15,040 $18,051 $16,834 $17,470 $16,689 $18,251
Operating income..... 1,781 3,102 4,247 3,968 2,499 4,204 4,275 4,208 3,102 4,030
</TABLE>
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings per Share,
which establishes new standards for computing and presenting earnings per share.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997 and requires restatement of all prior-period earnings per
share data. Early application of SFAS 128 is not permitted. The Company's
adoption of the provisions of SFAS 128 will result in the dual presentation of
basic and diluted earnings per share on the Company's income statement. Diluted
earnings per share as calculated under SFAS 128 is not expected to materially
differ from primary earnings per share amounts previously presented.
14
<PAGE> 16
BUSINESS
GENERAL
Optek is a leading designer and manufacturer of electronic sensor
components and assemblies that detect motion and position for a broad range of
applications. The Company utilizes optoelectronic and magnetic field sensing
technologies to target non-standard applications that require specialized
engineering and manufacturing expertise. The Company sells its products for end
use by OEMs in the office equipment, automotive, industrial, aerospace/defense,
medical and communications markets. The Company believes that in many cases it
is the sole source supplier for specific components and assemblies necessary for
its customers' applications. In fiscal 1996, major customers included General
Motors Corporation, Pitney Bowes, Inc., Xerox Corporation and International
Business Machines Corporation.
The worldwide sensor market is expected to grow from approximately $9.1
billion in 1995 to approximately $11.8 billion in 1998. The sensor market is
comprised of four major product types: position and proximity; pressure; flow;
and temperature. The Company competes primarily in the position and motion
portion of the position and proximity sensor market, which includes both
standard and custom products. The Company estimates that the global market for
its sensor components and assemblies is approximately $840 million. As the
number of electronic devices incorporated into automobiles and other industrial
and commercial equipment continues to increase, the market for sensors is
projected to continue to expand. Many advanced electronic systems require
electronic inputs from sensors which measure and feed back information on
performance to microprocessors. New sensor applications are driven by government
regulations and customer demand. The automotive, industrial and communications
markets are expected to continue to grow as manufacturers look for ways to
improve the performance, efficiency and accuracy of systems control and
monitoring functions.
BUSINESS STRATEGY
The Company's business objective is to continue to increase net sales and
earnings through the design, manufacture and sale of application specific
electronic sensors to a diverse worldwide customer base via multiple sales
channels. To achieve its objective, the Company has implemented a strategy with
the following key elements:
Take Advantage of Increasing Demand for Sensors. The increase in demand for
sensors is expected to continue as electronics are used to automate, enhance and
control more functions in a large and diverse group of products. Microprocessors
are increasingly being incorporated in a wide variety of products. Sensors,
which provide input to the microprocessor, can be added to increase a product's
functionality and/or performance. As a result of the Company's engineering and
manufacturing expertise, the Company believes it is well positioned to take
advantage of the anticipated increased demand for sensors.
Focus on Application and Customer Specific Products. Companies that compete
on the basis of the functionality and performance of their products often
require sensors that are unique and specific to their product. In addition, a
customer's application may necessitate electrical, optical, and mechanical
packaging characteristics which are specific to the application and to the
customer. The Company has structured its operations to effectively and
efficiently handle the design and manufacture of customer specific products in
relatively low to moderate annual unit volumes. A majority of the Company's net
sales are custom sensor components and assemblies. The Company strives to
enhance and leverage its application expertise to help maintain its position as
a leading and innovative manufacturer of custom electronic sensor components and
assemblies and, therefore, limit competition based solely on price.
Broaden and Diversify Customer Base. The Company has in the past and will
continue to focus on broadening and diversifying its customer base. The Company
currently produces sensor products for a wide number of applications over a
diverse range of products. The Company categorizes its markets as office
equipment, automotive, industrial, aerospace/defense, medical and
communications. Within each market the Company has multiple customers and often
provides a customer with multiple sensor products for various product lines.
15
<PAGE> 17
Utilize Multiple Sales Channels for Effective Market Coverage. The Company
sells its products via a combination of eight direct technical sales personnel,
21 independent manufacturers' representatives and 44 electronics parts
distributors, both domestically and internationally. The multiple sales channels
enable more efficient and wider coverage of available markets. The Company's
technical sales personnel, together with the Company's engineering staff, seek
to develop long-term relationships with customers by working closely with them
throughout all phases of new product development and subsequent production. In
addition, independent manufacturers' representatives provide additional market
coverage for the Company. The Company selects representatives on their ability
to effectively interface with its customers' engineers. Distributors are
typically utilized where customers are outsourcing their electronics parts
purchasing and inventory functions. The Company believes that the combination of
its own technical sales people together with independent sales representatives
and distributors allows the Company to market its products on a cost-effective
basis.
Enhance Manufacturing Capabilities as a Competitive Strength. The Company
utilizes its vertically integrated manufacturing structure as a strategic
strength to develop new products and to more effectively compete. The Company's
vertically integrated operations allow it to design, manufacture and test its
products. Integrated manufacturing capabilities enable the Company to rapidly
respond to customer requests for development of new products and design changes
to existing products without the vulnerability to lead times often experienced
when using outside sources. Rapid response in product development is a key
requirement among its customers. The Company's manufacturing capabilities allow
the Company to produce sensor and LED semiconductor chips, tools and plastic
molds, plastic assemblies, discrete, assembly, hybrid and high reliability
components, printed circuit boards and wire and cable assemblies.
Expand Technology Base. The Company endeavors to add to its technology base
as a means to increase the number and variety of customers and applications to
which its sensors can be applied. The Company has successfully added magnetic
field sensor technologies including Hall Effect and more recently magneto-
resistivity. The Company has also extended its optoelectronic technologies by
developing fiber optic communications products. The Company has utilized
internal and external development and may in the future acquire or license new
or enhanced technologies.
Provide Timely Delivery of High Quality Products. The Company utilizes
consistent high product quality as a means to retain customer business and limit
price competition. As customers have moved to "just in time" inventory
management, products are often shipped directly to the production line without
incoming inspection. The Company utilizes advanced machinery and production
techniques, incorporates raw materials conforming to stringent quality standards
and individually tests each of its products in an effort to manufacture products
of consistent high quality and reliability.
16
<PAGE> 18
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Grant A. Dove............................... 68 Director and Chairman of the Board
Thomas R. Filesi............................ 62 Director, President and Chief Executive Officer
Michael E. Cahr............................. 57 Director
William H. Daughtrey, Jr. .................. 57 Director
Rodes Ennis................................. 61 Director
Wayne Stevenson............................. 61 Director
William J. Collinsworth..................... 46 Vice President, Finance and Chief Financial Officer
Richard G. Dahlberg......................... 44 Vice President, Engineering
Thomas S. Garrett........................... 50 Vice President, Operations
Robert J. Kosobucki......................... 45 Vice President, Worldwide Sales and Marketing
</TABLE>
Mr. Dove was elected a Director of the Company in July 1989 and Chairman of
the Board in March 1993. He is currently a managing partner of Technology
Strategies & Alliance, a strategic planning and investment banking firm. He
spent 28 years with Texas Instruments, Inc. retiring in 1987 as Executive Vice
President. He then served as Chairman and Chief Executive Officer of
Microelectronics and Computer Technology Corporation, a research and development
consortium, retiring in 1992. He currently serves on the boards of the Cooper
Cameron Corporation, a public company engaged in oilfield services; U.S. WEST,
Inc., a public company engaged in telecommunications; Control Data Systems,
Inc., a public company engaged in computer systems integration; Intervoice,
Inc., a public company engaged in telecommunications equipment and software
sales; and Fore Front Group, Inc., a public company engaged in personal computer
and internet software.
Mr. Filesi became President and a Director of the Company in April 1991 and
Chief Executive Officer in March 1992. Before joining the Company, he was with
Motorola, Inc. Semiconductor Products Sector for 21 years, completing his tenure
there as Director of Manufacturing, RF Products.
Mr. Cahr was elected a Director of the Company in August 1988. He is
President and Chief Executive Officer of Allscrips Pharmaceuticals, Inc., a
private company engaged in the sale of prepackaged pharmaceuticals, having
served in that capacity since January 1995. Until late 1994 he was Manager of
Venture Capital at Allstate Insurance Company in Northbrook, Illinois, having
been with Allstate Insurance Company since 1987.
Mr. Daughtrey was elected a Director of the Company in March 1992. Mr.
Daughtrey is currently President of Princeton Associates, Inc., a management
consulting firm which he founded in January 1991. On September 1, 1995, JGB
Industries, Inc., a company for which Mr. Daughtrey had formerly served as
interim President and Chief Executive Officer from November 1993 to August 1995,
filed for protection under Chapter 11 of the Bankruptcy Code.
Mr. Ennis was elected a Director of the Company in February 1987. Mr. Ennis
acts as a general management consultant and formerly served as President of the
Journeys and Hardy Divisions of Genesco, Inc., a publicly-owned footwear
retailer, from March 1990 to December 1992.
Mr. Stevenson was elected a Director of the Company in September 1992.
Since 1986, Mr. Stevenson has been the Chairman and Chief Executive Officer of
CSI Control Systems International, Inc., a private firm engaged in the
manufacture and installation of environmental controls for the commercial
market.
Mr. Collinsworth joined the Company as Vice President, Finance, and Chief
Financial Officer in October 1996. From 1991 until joining the Company, he was
an independent financial consultant specializing in start-up and troubled
companies. In that role, he worked with several private companies and also
served as interim Chief Operating Officer and Chief Financial Officer for
Intellicall, Inc., a provider of telecommunications services and equipment, from
April 1992 to September 1993 and Chief Financial Officer for Value Added
Communications, Inc. ("VAC"), a provider of telecommunications services and
equipment, from June 1994 to October 1994. In November 1995, VAC filed for
protection under Chapter 11 of the Bankruptcy Code.
17
<PAGE> 19
Mr. Dahlberg was elected Vice President, Engineering in March 1994. Mr.
Dahlberg has been employed by the Company since 1983 and has served in various
engineering capacities. He is a Registered Professional Engineer in the State of
Texas.
Mr. Garrett joined the Company in October 1991 as Vice President,
Operations. In April 1988, he founded Garrett Consulting Group and was President
of that firm until December 1990, at which time it merged with Northwest
Technology Group, Inc. These companies provided comprehensive consulting
services to the micro-electronics and other high technology related industries.
Mr. Kosobucki joined the Company as Vice President, Worldwide Sales and
Marketing in July 1995. From 1991 until joining the Company, he served in
various strategic marketing and sales capacities for Summagraphics Corp., a
publicly-owned manufacturer of computer-based printers and plotters, most
recently as Director of Strategic Sales and Product Marketing. He is a
Registered Professional Engineer in the State of New York.
18
<PAGE> 20
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the Common Stock owned
at May 9, 1997 and as adjusted to reflect the sales of the shares offered by
this Prospectus by (i) each stockholder known to the Company to own beneficially
more than 5% of the Common Stock, (ii) each of the Company's executive officers
and Directors, (iii) all executive officers and Directors as a group, and (iv)
the Selling Stockholder. To the Company's knowledge, the persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community property laws,
where applicable, and the information contained in the footnotes to the table.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED BEFORE NUMBER OWNED AFTER
OFFERING(1) OF SHARES OFFERING(1)
-------------------- BEING --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
---- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
First Source Financial, Inc.(2)................. 3,150,000 43.6% -- 3,150,000 43.6%
2850 W. Golf Rd., 5th Floor
Rolling Meadows, IL 60008
Allstate Insurance Company...................... 1,028,230 25.3 950,000 78,230 1.9
3075 Sanders Road G5D
Northbrook, IL 60062
James D. Crownover.............................. 282,602 6.9 -- 282,602 6.9
P.O. Box 7812
Horseshoe Bay, TX 78657
Thomas R. Filesi(3)............................. 358,833 8.7 -- 358,833 8.7
1180 Emerald Sound Blvd.
Oak Point, TX 75068
Grant A. Dove(4)................................ 206,601 4.8 -- 206,601 4.8
15301 Dallas Parkway
Suite 840
Dallas, TX 75248
Michael E. Cahr(5).............................. 43,000 1.1 -- 43,000 1.1
William H. Daughtrey, Jr.(6).................... 4,500 * -- 4,500 *
Rodes Ennis(7).................................. 43,600 1.1 -- 43,600 1.1
Wayne Stevenson(8).............................. 15,750 * -- 15,750 *
William J. Collinsworth......................... 450 * -- 450 *
Richard G. Dahlberg(9).......................... 37,755 * -- 37,755 *
Thomas S. Garrett(10)........................... 92,332 2.3 -- 92,332 2.3
Robert J. Kosobucki(11)......................... 17,998 * -- 17,998 *
All executive officers and Directors as a group
(10 persons)(12).............................. 820,819 18.5 -- 820,819 18.5
</TABLE>
- ---------------
* Less than 1%.
(1) Includes shares of Common Stock not outstanding which are subject to
rights to acquire shares exercisable or to become exercisable within 60
days of May 9, 1997.
(2) Consists of 3,150,000 shares which may be acquired at any time prior to
October 31, 1998 upon exercise of a warrant at a current price of $0.50
per share. The exercise price is subject to adjustment in the event the
Company fails to meet certain performance criteria. The exercise price
and number of shares are also subject to adjustment upon the occurrence
of certain events in order to address dilution.
(3) Includes 36,000 shares which are presently exercisable pursuant to
incentive stock options at a price of $2.31 per share. Also includes
8,500 shares which are presently exercisable at a price of $2.125 per
share, 10,000 shares which are presently exercisable at a price of $6.05
per share and 3,333 shares which are presently exercisable at a price of
$11.97 per share pursuant to options issued under the Company's Long-Term
Stock Investment Plan.
19
<PAGE> 21
(4) Includes 10,000 shares which are presently exercisable at a price of $1.53
per share pursuant to warrants issued to the Company's non-employee
Directors and 3,500 shares which are presently exercisable at a price of
$2.11 per share and 3,500 shares which are presently exercisable at a
price of $1.04 per share pursuant to options awarded under the Company's
Directors' Formula Award Plan. Also includes 8,759 shares which are
presently exercisable at a price of $1.11 per share, 38,462 shares which
are presently exercisable at a price of $0.65 per share and 131,580 shares
which are presently exercisable at a price of $0.19 per share, all
issuable pursuant to warrants issued for services performed by Mr. Dove as
Chairman of the Board during the fiscal quarters ended April 30, 1993,
July 31, 1993 and October 29, 1993.
(5) Includes 10,000 shares which are presently exercisable at a price of $1.53
per share pursuant to warrants issued to the Company's non-employee
Directors and 3,500 shares which are presently exercisable at a price of
$2.11 per share, 3,500 shares which are presently exercisable at a price
of $1.04 per share, 3,500 shares which are presently exercisable at a
price of $0.44 per share, 3,500 shares which are presently exercisable at
a price of $1.83 per share, and 3,500 shares which are presently
exercisable at a price of $11.97 per share pursuant to options awarded
under the Company's Directors' Formula Award Plan. Also includes 5,500
shares owned of record by Mr. Cahr's wife of which Mr. Cahr may be deemed
the beneficial owner.
(6) Includes 3,500 shares which are presently exercisable at a price of $11.97
per share pursuant to options awarded under the Company's Directors'
Formula Award Plan.
(7) Includes 10,000 shares which are presently exercisable at a price of $1.53
per share pursuant to warrants issued to the Company's non-employee
Directors and 3,500 shares which are presently exercisable at a price of
$2.11 per share, 3,500 shares which are presently exercisable at a price
of $1.04 per share, 3,500 shares which are presently exercisable at a
price of $0.44 per share, 3,500 shares which are presently exercisable at
a price of $1.83 per share and 3,500 shares which are presently
exercisable at a price of $11.97 per share pursuant to options awarded
under the Company's Directors' Formula Award Plan.
(8) Includes 1,750 shares which are presently exercisable at a price of $2.18
per share pursuant to options awarded under the Company's Long-Term Stock
Investment Plan and 3,500 shares which are presently exercisable at a
price of $1.04 per share, 3,500 shares which are presently exercisable at
a price of $0.44 per share, 3,500 shares which are presently exercisable
at a price of $1.83 per share and 3,500 shares which are presently
exercisable at a price of $11.97 per share pursuant to options awarded
under the Company's Directors' Formula Award Plan.
(9) Includes 6,666 shares which are presently exercisable at a price of $6.05
per share, and 2,666 shares which are presently exercisable at a price of
$11.97 per share pursuant to options issued under the Company's Long-Term
Stock Investment Plan.
(10) Includes 6,666 shares which are presently exercisable at a price of $6.05
per share and 2,666 shares which are presently exercisable at a price of
$11.97 per share pursuant to options issued under the Company's Long-Term
Stock Investment Plan.
(11) Includes 3,333 shares which are presently exercisable at a price of $3.10
per share, 6,666 shares which are presently exercisable at a price of
$6.05 per share and 2,666 shares which are presently exercisable at a
price of $11.97 per share pursuant to options issued under the Company's
Long-Term Stock Investment Plan.
(12) Includes 89,162 shares which may be acquired upon exercise of employee
stock options presently exercisable, 91,250 shares which are presently
exercisable pursuant to warrants and options issued to the Company's
non-employee Directors, and 178,801 shares which are presently exercisable
pursuant to warrants issued for services rendered.
20
<PAGE> 22
UNDERWRITING
ABN AMRO Chicago Corporation (the "Underwriter") has agreed subject to the
terms and conditions specified in the Underwriting Agreement among the Company,
the Underwriter and the Selling Stockholder (the "Underwriting Agreement") to
purchase from the Selling Stockholder 950,000 shares of Common Stock.
The Underwriting Agreement provides that the obligations of the Underwriter
thereunder are subject to approval of certain legal matters by its counsel and
to various other conditions. The Underwriter is committed to purchase all of the
shares of Common Stock offered hereby, if any are purchased.
The Company and Selling Stockholder have been advised by the Underwriter
that the Underwriter proposes to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share and that the Underwriter and such dealers may reallow to
other dealers, including the Underwriter, a discount not in excess of
$ per share. After completion of the Offering, the public offering
price and other selling terms may be changed by the Underwriter.
The Selling Stockholder has granted to the Underwriter an option for 30
days to purchase up to an additional 78,230 shares of Common Stock at the public
offering price per share less the underwriting discount set forth on the cover
page of this Prospectus solely to cover over-allotments, if any.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriter and its controlling persons against certain liabilities under the
Securities Act or to contribute to payments the Underwriter or such persons may
be required to make in respect thereof.
The Underwriter has informed the Company that it does not intend to confirm
sales of Common Stock to any accounts over which it exercises discretionary
authority.
The Company, its directors and executive officers and the Selling
Stockholder have agreed for a period of 90 days after the date of this
Prospectus not to register for sale, sell, offer, contract to sell, grant an
option for sale or otherwise dispose of or transfer any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for Common
Stock without the prior written consent of the Underwriter (excluding certain
issuances of Common Stock by the Company in connection with employee benefit
plans). By virtue of contractual limitations placed upon their registration
rights, First Source, the holder of a warrant to purchase 3,150,000 shares of
Common Stock, and James D. Crownover, the holder of 282,602 shares of Common
Stock, have agreed not to sell or otherwise dispose of their shares for a period
of ninety (90) days after the effective date of the Registration Statement.
Should the Registration Statement not be declared effective by June 15, 1997,
the lock-up provisions affecting First Source and Mr. Crownover will not apply.
In connection with this Offering, the Underwriter may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Such transactions may include stabilization transactions
pursuant to which the Underwriter may bid for or purchase Common Stock for the
purpose of stabilizing its market price. The Underwriter also may create a short
position for the account of the Underwriter by selling more Common Stock in
connection with the Offering than it is committed to purchase from the Selling
Stockholder, and in such case the Underwriter may purchase Common Stock in the
open market following completion of the Offering to cover all or a portion of
such short position. The Underwriter may also cover all or a portion of such
short position by exercising the Underwriter's over-allotment option referred to
above. In addition, the Underwriter may impose "penalty bids" under contractual
arrangements whereby it may reclaim from a dealer participating in the Offering,
for the Underwriter's account, the selling concession with respect to Common
Stock that is distributed in the Offering but subsequently purchased for the
account of the Underwriter in the open market. Any of the transactions described
in this paragraph may result in the maintenance of the price of the Common Stock
at a level above that which might otherwise prevail in the open market. The
imposition of a penalty bid might also affect the price of the Common Stock to
the extent that it could discourage resales of the security. Neither the Company
nor the Underwriter makes any representation or prediction as to the direction
or magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor the Underwriter
makes any representation that the Underwriter will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
21
<PAGE> 23
The Underwriter and dealers may engage in passive market making
transactions in the Common Stock in accordance with Rule 103 of Regulation M
promulgated by the Securities and Exchange Commission (the "Commission"). In
general, a passive market maker may not bid for, or purchase, the Common Stock
at a price that exceeds the highest independent bid. In addition, the net daily
purchases made by any passive market maker generally may not exceed 30% of its
average daily trading volume in the Common Stock during a specified two month
prior period, or 200 shares, whichever is greater. A passive market maker must
identify passive market making bids as such on the Nasdaq electronic
inter-dealer reporting system. Passive market making may stabilize or maintain
the market price of the Common Stock above independent market levels. The
Underwriter and dealers are not required to engage in passive market making and
may end passive market making activities at any time.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Hewitt & Hewitt, P.C., Dallas, Texas. Mr. Hewitt,
a principal of Hewitt & Hewitt, P.C., beneficially owns 8,500 shares of Common
Stock and is the Secretary of the Company. Certain legal matters will be passed
upon for the Underwriter by McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The consolidated financial statements and schedule of Optek Technology,
Inc. as of October 25, 1996 and October 27, 1995, and for each of the years in
the three-year period ended October 25, 1996, have been incorporated by
reference herein and in the Registration Statement in reliance upon the reports
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed with the Commission (File No.
0-16304) pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and are incorporated herein by reference and made a part of this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended October
25, 1996, as amended by Form 10-K/A;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
January 31, 1997 and May 2, 1997; and
3. Description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Company's Common Stock shall be deemed to
be incorporated herein by reference and made a part of this Prospectus from the
respective filing dates of such documents. Any statement contained in this
Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
22
<PAGE> 24
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements, and other
information with the Commission. Such reports, proxy statements, the
Registration Statement related to this Offering and other information filed by
the Company can be inspected, without charge, and copies may be obtained at
prescribed rates, at the public reference facility maintained by the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Room 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300,
New York, New York 10048.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments, schedules and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement. Statements made in the Prospectus as to the contents
of any contract, agreement or other document are not necessarily complete; with
respect to each such contract, agreement or other document filed as an exhibit
to, or incorporated by reference in, the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by reference to
the copy of the applicable documents filed with the Commission. The Registration
Statement and the exhibits thereto may be inspected, without charge, at the
offices of the Commission or copies thereof may be obtained at prescribed rates
from the Public Reference Section of the Commission at the address set forth
above. The Registration Statement and other information filed by the Company
with the Commission are also available at the web site maintained by the
Commission on the World Wide Web at http://www.sec.gov.
23
<PAGE> 25
================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN CONNECTION WITH THIS OFFER AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR THE
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................. 3
Cautionary Statement Regarding
Forward-Looking Information...... 5
Risk Factors....................... 5
Price Range of Common Stock........ 8
Selected Consolidated Financial
Data............................. 9
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 10
Business........................... 15
Management......................... 17
Principal and Selling
Stockholders..................... 19
Underwriting....................... 21
Legal Matters...................... 22
Experts............................ 22
Information Incorporated by
Reference........................ 22
Available Information.............. 23
</TABLE>
================================================
================================================
950,000 SHARES
OPTEK TECHNOLOGY, INC.
COMMON STOCK
PROSPECTUS
ABN AMRO
CHICAGO CORPORATION
June , 1997
================================================
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are estimated expenses (other than the SEC registration fee
and the NASD filing fee) of the issuance and distribution of the securities
being registered, all of which will be paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 3,623
NASD Filing Fee............................................. 1,696
Accounting Fees and Expenses................................ 20,000
Legal Fees and Expenses..................................... 40,000
Transfer Agent and Registrar Fees and Expenses.............. 500
Printing and Engraving Expenses............................. 12,000
Miscellaneous............................................... 22,181
--------
TOTAL............................................. $100,000
========
</TABLE>
The Company intends to pay all expenses of registration, issuance and
distribution, excluding underwriting discounts and commissions, with respect to
the shares being sold by the Selling Stockholder.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers the Registrant
to indemnify its current and former directors, officers, and certain other
persons against certain expenses incurred by them in connection with any suit to
which they were or are a party or are threatened to be made a party by reason of
their serving in such positions, so long as they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. With respect to suits by or in the
right of the Registrant, however, the power to indemnify does not extend to
judgments or settlement amounts and, unless the court determines that
indemnification is appropriate, indemnification is not available for the benefit
of such persons who are adjudged to be liable to the Registrant. The Delaware
General Corporation Law also provides for mandatory indemnification of any
director, officer, employee or agent against expenses to the extent such person
has been successful in any proceeding covered by the statute. In addition, the
Delaware General Corporation Law provides the general authorization of
advancement of a director's or officer's litigation expenses in lieu of
requiring the authorization of such advancement by the board of directors in
specific cases. The statute also empowers the Registrant to purchase and
maintain insurance for such persons with respect to liability arising out of or
in connection with their capacity or status with the Registrant. The Registrant
maintains liability insurance for the benefit of its officers and directors.
The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors or otherwise. Article VI of the
Registrant's Bylaws provides for the indemnification of directors, officers, and
certain other persons within the limitations of Section 145. Section 7 of the
Underwriting Agreement, filed as Exhibit 1.1 hereto and incorporated herein by
reference, provides for indemnification of the directors, controlling persons
and officers of the Registrant against certain liabilities relating to claims
based upon the offering.
II-1
<PAGE> 27
ITEM 16. EXHIBITS
Exhibits
<TABLE>
<S> <S>
*1.1 -- Underwriting Agreement.
5.1 -- Opinion and Consent of Hewitt & Hewitt, P.C.
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Hewitt & Hewitt, P.C. Reference is made to
Item 5.1.
24.1 -- Power of Attorney. Reference is made to the Signature
Page.
</TABLE>
- ---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act") each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Carrollton, State of Texas, on the 28th day May,
1997.
OPTEK TECHNOLOGY, INC.
By: /s/ THOMAS R. FILESI
----------------------------------
Thomas R. Filesi
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ THOMAS R. FILESI President, Chief Executive May 28, 1997
- ----------------------------------------------------- Officer, and Director (Principal
Thomas R. Filesi Executive Officer)
/s/ WILLIAM J. COLLINSWORTH Vice President -- Finance May 28, 1997
- ----------------------------------------------------- (Principal Financial and
William J. Collinsworth Accounting Officer)
/s/ RODES ENNIS* Director May 28, 1997
- -----------------------------------------------------
Rodes Ennis
/s/ GRANT DOVE* Director May 28, 1997
- -----------------------------------------------------
Grant Dove
/s/ WILLIAM DAUGHTREY* Director May 28, 1997
- -----------------------------------------------------
William Daughtrey
/s/ MICHAEL CAHR* Director May 28, 1997
- -----------------------------------------------------
Michael Cahr
/s/ WAYNE STEVENSON* Director May 28, 1997
- -----------------------------------------------------
Wayne Stevenson
*By: /s/ WILLIAM J. COLLINSWORTH
------------------------------------------------
William J. Collinsworth
Attorney-In-Fact
</TABLE>
II-3
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*1.1 -- Underwriting Agreement.
5.1 -- Opinion and Consent of Hewitt & Hewitt, P.C.
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Hewitt & Hewitt, P.C. Reference is made to
Item 5.1.
24.1 -- Power of Attorney. Reference is made to the Signature
Page.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 1.1
950,000 SHARES*
Optek Technology, Inc.,
Common Stock
UNDERWRITING AGREEMENT
May __, 1997
ABN AMRO CHICAGO CORPORATION
208 South LaSalle Street
Chicago, Illinois 60604
Ladies and Gentlemen:
Pursuant to the terms of this Underwriting Agreement (this "Agreement"),
Allstate Insurance Company (the "Selling Stockholder"), proposes, subject to
the terms and conditions set forth herein, to sell an aggregate of 950,000
shares of Common Stock, par value $.01 per share (the "Common Stock"), of
Optek Technology, Inc., a Delaware corporation (the "Company"), to ABN AMRO
Chicago Corporation (the "Underwriter"). The Selling Stockholder has agreed to
sell to the Underwriter, upon the terms and conditions set forth in Section 2
hereof, up to an additional 78,230 shares of Common Stock. The aggregate of
950,000 shares to be sold by the Selling Stockholder are herein called the
"Firm Shares" and the aggregate of 78,230 additional shares to be sold by the
Selling Stockholder are herein called the "Additional Shares." The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares."
Prior to the purchase and public offering of the Shares by the
Underwriter, the Underwriter and the Selling Stockholder shall enter into an
agreement substantially in the form of Exhibit A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written telecommunication between the Underwriter and the
Selling Stockholder and shall specify such applicable information as is
indicated in Exhibit A hereto. The offering of the Shares will be governed by
this Agreement, as supplemented by the Pricing Agreement. From and after the
date of the execution and delivery of the Pricing Agreement, this Agreement
shall be deemed to incorporate the Pricing Agreement.
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* Plus an option to purchase up to 78,230 Additional Shares to cover over-
allotments.
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The Selling Stockholder is advised by the Underwriter that the
Underwriter has agreed to make a public offering of the Shares as soon
after the Registration Statement has become effective and the Pricing
Agreement has been executed as in the judgment of the Underwriter is
advisable and to first offer the Shares upon the terms set forth in the
Prospectus.
The Company, the Selling Stockholder and the Underwriter hereby agree to
the following matters with respect to the purchase and sale of the Shares:
SECTION 1. (a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Underwriter that:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions
of the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "Act"), a registration
statement on Form S-3 (File No. 333-27055), including a preliminary
prospectus, relating to the Shares and certain amendments thereto. The
Company will next file with the Commission one of the following: (A)
prior to effectiveness of such registration statement, a further
amendment thereto, including the form of final prospectus, (B) a final
prospectus in accordance with Rules 430A and 424(b) under the Act or (C)
a term sheet (the "Term Sheet") as described in and in accordance with
Rules 434 and 424(b) under the Act. As filed, the final prospectus, if
one is used, or the Term Sheet and the latest Preliminary Prospectus, if
a final prospectus is not used, shall include all Rule 430A Information
(as defined below). There have been or will promptly be delivered to
you three signed copies of such registration statement and amendments,
together with three copies of all documents incorporated by reference
therein, three copies of each exhibit filed therewith, and conformed
copies of such registration statement and amendments (but without
exhibits) and of the related preliminary prospectus or prospectuses and
final forms of prospectus or Term Sheet, if a Term Sheet is used, for
the Underwriter. The term "Registration Statement" as used in this
Agreement shall mean such registration statement at the time such
registration statement becomes effective and, in the event any amendment
thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended;
provided, however, that such term shall also include all Rule 430A
Information deemed to be included in such registration statement at the
time such registration statement becomes effective as provided by Rule
430A and, if a Term Sheet is used, shall also include all information
deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 434;
provided, further, that if the Company files a registration statement
under the Act to register a portion of the Shares and relies on Rule
462(b) for such registration statement to become effective upon filing
with the Commission (the "Rule 462 Registration Statement"), then any
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reference to "Registration Statement" herein shall be deemed to be to
both the registration statement referred to above (No. 333-27055) and
the Rule 462 Registration Statement, as each such registration statement
may be amended pursuant to the Act. The term "Preliminary Prospectus"
as used in this Agreement shall mean any preliminary prospectus relating
to the Shares filed with the Commission under the Act and the rules and
regulations thereunder, including any preliminary prospectus included in
the Registration Statement at the time it becomes effective that omits
Rule 430A Information. The term "Prospectus" as used in this Agreement
shall mean: (X) the prospectus relating to the Shares in the form in
which it is first filed with the Commission pursuant to Rule 424(b)
under the Act; (Y) if a Term Sheet is not used and no filing pursuant to
Rule 424(b) under the Act is required, the form of final prospectus
included in the Registration Statement at the time the Registration
Statement becomes effective; or (Z) if a Term Sheet is used in lieu of a
prospectus, the Term Sheet in the form in which it is first filed with
the Commission pursuant to Rule 424(b) under the Act, together with the
latest Preliminary Prospectus included in the Registration Statement at
the time it becomes effective (such Term Sheet and Preliminary
Prospectus are sometimes collectively referred to herein as the "Rule
434 Prospectus"). The term "Rule 430A Information" as used in this
Agreement shall mean information with respect to the Shares and the
offering thereof permitted to be omitted from the Registration Statement
when it becomes effective pursuant to Rule 430A under the Act. The
Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder are hereinafter collectively
referred to as the "Exchange Act." Any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Form
S-3 under the Act ("Incorporated Documents"), as of the date of such
Preliminary Prospectus or Prospectus, as the case may be. Any document
filed by the Company under the Exchange Act after the effective date of
the Registration Statement or the date of the Prospectus and
incorporated by reference in the Prospectus shall be deemed to be
included in the Registration Statement and the Prospectus as of the date
of such filing. The Incorporated Documents, when they were filed with
the Commission, conformed or will conform in all material respects to
the requirements of the Exchange Act and none of such documents
contained or will contain an untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus complied in all material respects when so filed with the
requirements of the Act (except to the extent that, in conformity with
the Act, such Preliminary Prospectus is subject to completion).
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(iii) The Registration Statement in the form in which it becomes
effective and also in such form as it may be when the Pricing Agreement
is executed or any post-effective amendment to the Registration
Statement shall become effective, and the Prospectus when and in the
form last filed with the Commission as part of the Registration
Statement prior to effectiveness or, if applicable, first filed pursuant
to Rule 424(b) under the Act, and when any supplement or amendment
thereto is filed with the Commission, each will comply in all material
respects with the requirements of the Act, will not at any such time
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. This representation and warranty does not apply
to statements in or omissions from the Registration Statement or the
Prospectus (or any supplement or amendment thereto) made in reliance
upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by or on behalf of the Underwriter
specifically for use in the Registration Statement.
(iv) There is no contract or other document of a character
required to be described in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement which is not
described or filed as required.
(v) The accountants who have expressed their opinions with
respect to certain of the financial statements of the Company included
or incorporated by reference in the Registration Statement and the
Prospectus, are independent public accountants as required by the Act.
(vi) The consolidated financial statements, together with the
notes thereto, of the Company included or incorporated by reference in
the Registration Statement and the Prospectus comply in all material
respects with the Act and present fairly the consolidated financial
position of the Company as of the dates indicated, and the consolidated
results of operations, cash flows and changes in financial position of
the Company for the periods specified. Such financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the entire period
involved except to the extent disclosed therein.
(vii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with full corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Registration Statement and Prospectus. The Company is duly qualified to
do business as a foreign corporation and in good standing in each
jurisdiction in which the ownership or leasing of its properties or the
conduct of its business requires such qualification, except in
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any such case in which the failure to so qualify or be in good standing
would not have a material adverse effect upon the business of the
Company and its subsidiaries, taken as a whole; and no proceeding of
which the Company has knowledge has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
(viii) Each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with full corporate
power and authority to own, lease and operate its properties and conduct
its business as described in the Registration Statement and Prospectus.
Each of the Company's subsidiaries is duly qualified to do business as a
foreign corporation in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except in any such case in which the
failure to so qualify or be in good standing would not have a material
adverse effect on the business of the Company and its subsidiaries,
taken as a whole. Each of the Company's subsidiaries has all
authorizations, approvals, orders, certificates and permits of and from
all state, federal and other regulatory officials and bodies necessary
to own its properties and to conduct its business as described in the
Registration Statement and Prospectus, except where the failure to have
any such authorization, approval, order, certificate or permit would not
have a material adverse effect on the business affairs, business
prospects, properties, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole. Except for the
capital stock of the subsidiaries and except as otherwise described in
the Prospectus, the Company does not own any capital stock of, or other
securities evidencing an equity interest in, any corporation,
partnership or other entity. All of the issued and outstanding shares
of capital stock of the Company's subsidiaries have been duly and
validly authorized and issued, are fully paid and non-assessable, and
except as described in the Prospectus, are owned by the Company, free
and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature. Except as described in the Prospectus, there
are no outstanding subscriptions, rights, warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares
of capital stock of any of the Company's subsidiaries.
(ix) The Company has an authorized and outstanding
capitalization as set forth in the Prospectus or incorporated by
reference therein and the Shares conform to the description thereof
contained in the Prospectus or incorporated by reference therein. All
of the issued and outstanding shares of Common Stock (including the
Shares to be sold by the Selling Stockholder to the Underwriter) have
been duly authorized, validly issued and are fully paid and non-
assessable and free of preemptive or other similar rights and there are
no
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options, agreements, contracts or other rights in existence to acquire
from the Company any shares of Common Stock, or other ownership in the
Company or any subsidiary, except as set forth in the Prospectus.
(x) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated or contemplated therein, there has not been (A) any material
adverse change in the condition (financial or otherwise), earnings,
affairs, business or prospects of the Company and its subsidiaries,
taken as a whole, whether or not arising in the ordinary course of
business, (B) any material transaction entered into, or any material
liability or obligation incurred, by the Company or its subsidiaries
other than in the ordinary course of business, (C) any change in the
capital stock, or material increase in the short-term debt or long-term
debt of the Company or its subsidiaries, or (D) any dividend or
distribution of any kind declared, paid or made by the Company or its
subsidiaries on its capital stock.
(xi) The Company and each of its subsidiaries have good and
marketable title to all properties and assets reflected as owned in the
financial statements hereinabove described or described in the
Prospectus as owned by them, free and clear of all liens, charges,
encumbrances or restrictions of any kind, except such as are referred to
in such financial statements or the Prospectus or which are not material
to the business of the Company and its subsidiaries, taken as a whole;
all of the leases and subleases material to the business of the Company
and its subsidiaries, taken as a whole or under which the Company or its
subsidiaries holds properties are in full force and effect; and neither
the Company nor any of its subsidiaries has received any notice of any
material claim of any sort which has been asserted by anyone adverse to
the rights of the Company or any subsidiary as owner or as lessee or
sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to
the continued possession of the leased or subleased premises under any
such lease or sublease.
(xii) Neither the Company nor any of its subsidiaries is in
default in the observance of any provision of its Certificate of
Incorporation or by-laws, or in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which it is a party or by which it or any of its properties may be
bound, the effect of which could be materially adverse to the condition
(financial or otherwise), earnings, affairs, business or prospects of
the Company and its subsidiaries, taken as a whole.
(xiii) The execution and delivery of this Agreement, the
consummation of the transactions contemplated herein and in the
Registration Statement and
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compliance with the terms of this Agreement and the Pricing Agreement
have been duly authorized by all necessary corporate action and will not
result in any violation of the Certificate of Incorporation or by-laws
of the Company or any of its subsidiaries, and will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge, encumbrance or restriction of any kind upon any property or
assets of the Company or any of its subsidiaries under any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries, or any of their
respective properties, is bound, or any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any of its subsidiaries or any of their respective
properties. No approval, authorization or consent of any court,
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its subsidiaries is required in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated herein, except such as may
be required under the Act, state securities or Blue Sky laws or from the
clearance of the offering with the National Association of Securities
Dealers, Inc. (the "NASD").
(xiv) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, or any
arbitrator or arbitration panel, now pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its
subsidiaries which could result in any material adverse change to the
condition (financial or otherwise), earnings, affairs, business or
prospects of the Company and its subsidiaries, taken as whole; and there
is no decree, judgment or order of any kind in existence against or
restraining the Company or any of its subsidiaries, or any of their
respective officers, employees or directors, from taking any actions of
any kind in connection with the business of the Company or any such
subsidiary.
(xv) The Company and each of its subsidiaries own or possess or
have obtained all material governmental licenses, permits, consents,
orders, approvals and other authorizations necessary to lease or own, as
the case may be, and to operate their properties and to carry on their
businesses as presently conducted, and neither the Company nor any such
subsidiary has received any notice of proceedings related to revocation
or modification of any such licenses, permits, consents, orders,
approvals or authorizations which singly or in the aggregate, if the
subject of an unfavorable ruling or finding, would be materially adverse
to the condition (financial or otherwise), earnings, affairs, business
or prospects of the Company and its subsidiaries, taken as a whole.
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(xvi) The conduct of the business of the Company and each of its
subsidiaries is in compliance with all applicable federal, state and
local laws and regulations that regulate or are concerned in any way
with the business of the Company or such subsidiaries, where the effect
of the failure to comply would be materially adverse to the condition
(financial or otherwise), earnings, affairs, business or prospects of
the Company and its subsidiaries, taken as a whole.
(xvii) The Company together with its subsidiaries owns or
possesses, or can acquire on reasonable terms, all right, title and
interest in or to, or has duly licensed from third parties, all patents,
trademarks, service marks, copyrights, trade names, trade secrets and
other proprietary rights ("Trade Rights") necessary to conduct the
business now or proposed to be conducted by it, and neither the Company
nor any of its subsidiaries has received any notice of, and has no
knowledge of, infringement of or conflict with asserted rights of others
with respect to any such Trade Rights which, singly or in the aggregate,
if the subject of any unfavorable decision, ruling or finding, would be
materially adverse to the condition (financial or otherwise), earnings,
affairs, business or prospects of the Company and its subsidiaries,
taken as a whole.
(xviii) The Company has filed all tax returns required to be
filed and has paid all taxes which were payable pursuant to said returns
or any assessments with respect thereto, other than any tax returns
which the Company is contesting in good faith or which are not material
to the Company and there is no tax deficiency that has been, or to the
knowledge of the Company might be, asserted against the Company or any
of its properties or assets that would or could be expected to have a
material adverse affect upon the condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a
whole.
(xix) This Agreement has been duly executed and delivered by the
Company.
(xx) A registration statement relating to the Common Stock has
been declared effective by the Commission pursuant to the Exchange Act
and the Common Stock is duly registered thereunder. The Shares have
been authorized for trading on the Nasdaq National Market.
(xxi) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company"
as defined in Section 3(a) of the Investment Company Act of 1940, as
amended (the "Investment Company Act").
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(xxii) All offers and sales of the Company's capital stock prior
to the date hereof were at all relevant times duly registered under the
Act or exempt from the registration requirements of the Act and were
duly registered with, or the subject of an available exemption from, the
registration requirements of the applicable state securities or Blue Sky
laws.
(xxiii) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company.
(xxiv) Except as disclosed or incorporated by reference in the
Registration Statement and the Prospectus, no transaction has occurred
between or among the Company, on the one hand, and any of its officers
or directors or any affiliate or affiliates of any such officer or
director, on the other hand, that is required to be so disclosed,
including, but not limited to, any outstanding loans, advances or
guaranties of indebtedness by the Company to or for the benefit of any
affiliates of the Company, or any of the officers or directors of the
Company, or any family member of any of them.
(xxv) The Company has not, directly or indirectly, at any time
(A) made any contributions to any candidate for foreign political
office, or if made, failed to disclose fully any such contribution made
in violation of law, or (B) made any payment to any state, federal or
foreign governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the
Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(xxvi) The Company and each of its subsidiaries (A) are in
compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
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(xxvii) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and its subsidiaries,
in the course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singly
or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(xxviii) The Company and each of its subsidiaries maintains
insurance of the type and in the amount, which its officers reasonably
believe is adequate and customary for a business of its nature.
(xxix) The Company has filed all documents and reports required
to be filed with the Commission under the Exchange Act. Such documents
or reports, when they were filed with the Commission, conformed in all
material respects to the requirements of the Exchange Act and none of
such documents or reports contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(xxx) There are no holders of securities of the Company having
rights to registration thereof or preemptive rights to purchase Common
Stock except as disclosed in the Prospectus. Holders of registration
rights who are not the Selling Stockholder have waived such rights with
respect to the offering being made by the Prospectus.
(a) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment.
(b) REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING
STOCKHOLDER. The Selling Stockholder represents and warrants and agrees with
the Company and the Underwriter that:
(i) The Selling Stockholder has good and marketable title to the
Shares proposed to be sold by the Selling Stockholder hereunder and full
right, power and authority to enter into this Agreement and the Pricing
Agreement and to sell, assign, transfer and deliver such Shares
hereunder, free and clear of all voting trust arrangements, security
interests, claims, liens, encumbrances,
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community property rights or adverse interests of any nature; and upon
delivery of and payment for such Shares hereunder, the Underwriter will
acquire valid and marketable title thereto, free and clear of all voting
trust arrangements, security interests, claims, liens, encumbrances,
property rights or adverse interests of any nature.
(ii) The execution and delivery of this Agreement and the
Pricing Agreement, the consummation of the transactions contemplated
herein and in the Registration Statement and compliance with the terms
of this Agreement and the Pricing Agreement have been duly authorized by
all necessary corporate action and will not result in any violation of
the Certificate of Incorporation or by-laws of the Selling Stockholder
or any of its subsidiaries, and will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge,
encumbrance or restriction of any kind upon any property or assets of
the Selling Stockholder or any of its subsidiaries under any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Selling Stockholder or any of its subsidiaries
is a party or by which the Selling Stockholder or any of its
subsidiaries, or any of their respective properties, is bound, or any
existing applicable law, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Selling Stockholder or any of its
subsidiaries or any of their respective properties. No approval,
authorization or consent of any court, regulatory body, administrative
agency or other governmental body having jurisdiction over the Selling
Stockholder or any of its subsidiaries is required in connection with
the sale of the Shares to the Underwriter, execution and delivery of
this Agreement or the Pricing Agreement or the consummation of the
transactions contemplated herein or therein, except such as may be
required under the Act, state securities or Blue Sky laws or from the
clearance of the offering with the National Association of Securities
Dealers, Inc. (the "NASD").
(iii) This Agreement and the Pricing Agreement have been duly
executed and delivered by the Selling Stockholder.
(iv) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Shares.
(v) Each Preliminary Prospectus, insofar as it has related to
the Selling Stockholder and, to the knowledge of the Selling Stockholder
in all other respects, as of its date, has conformed in all material
respects with the
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requirements of the Act and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and the
Registration Statement at the time of effectiveness, and at all times
subsequent thereto, (A) such parts of the Registration Statement and the
Prospectus and any amendments or supplements thereto as relate to the
Selling Stockholder, and the Registration Statement and the Prospectus
and any amendments or supplements thereto, to the knowledge of the
Selling Stockholder in all other respects, contained or will contain all
statements that are required to be stated therein in accordance with the
Act and in all material respects conformed or will in all material
respects conform to the requirements of the Act, and (B) neither the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as it relates to the Selling Stockholder, and, to
the knowledge of the Selling Stockholder in all other respects, included
or will include any untrue statement of a material fact or omitted or
will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that
neither clause (A) nor (B) shall have any affect if information has been
given by the Selling Stockholder to the Company and the Underwriter in
writing which would eliminate or remedy any such untrue statement or
omission.
(vi) The Selling Stockholder agrees with the Company and the
Underwriter not to sell, contract to sell or otherwise dispose of any
Common Stock or rights to purchase Common Stock for a period of 90 days
after the date of the Pricing Agreement without the prior written
consent from the Underwriter.
(vii) In order to document the Underwriter's compliance with the
reporting and withholding provisions of the Internal Revenue Code of
1986, as amended, with respect to the transactions herein contemplated,
the Selling Stockholder agrees to deliver to you prior to or on the
Closing Date, as hereinafter defined, a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form of
statement specified by Treasury Department regulations in lieu thereof).
SECTION 2. AGREEMENT TO SELL AND PURCHASE.
(a) The Selling Stockholder hereby agrees to sell to the Underwriter an
aggregate of 950,000 Firm Shares, and on the basis of the representations,
warranties and agreements of the Company and the Selling Stockholder herein
contained and subject to the terms and conditions set forth herein, the
Underwriter agrees to purchase from the Selling Stockholder, at the purchase
price per Share set forth in the Pricing Agreement (the "Purchase Price per
Share"), the Firm Shares.
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(b) The Selling Stockholder agrees to sell to the Underwriter and, on
the basis of the representations, warranties and agreements of the Company and
the Selling Stockholder set forth herein and subject to the terms and
conditions set forth herein, the Underwriter shall have the right to purchase
from the Selling Stockholder up to 78,230 Additional Shares, at the Purchase
Price per Share upon delivery to the Company and the Selling Stockholder of the
notice hereinafter referred to. Such Additional Shares may be purchased solely
for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares.
SECTION 3. DELIVERY OF THE SHARES AND PAYMENT THEREFOR.
(a) Delivery to the Underwriter of the Firm Shares shall be made
against payment therefor at 9:00 a.m., Chicago, Illinois time, on the third
full business day following the date of the Pricing Agreement (the "Closing
Date") at the offices of McDermott, Will & Emery, Chicago, Illinois. The place
of the closing and the Closing Date may be varied by agreement among the
Underwriter, the Company and the Selling Stockholder.
(b) Delivery to the Underwriter of any Additional Shares to be
purchased by the Underwriter shall be made in Chicago, Illinois against payment
therefor at the offices of McDermott, Will & Emery at such time on such date
(the "Option Closing Date"), which may be the same as the Closing Date, but
shall in no event be earlier than the Closing Date nor earlier than three nor
later than ten business days after the giving of the notice hereinafter
referred to, as shall be specified in written notice from the Underwriter to
the Company and the Selling Stockholder of the determination to purchase a
number, specified in said notice, of Additional Shares. Said notice may be
given at any time within 30 days after the date of the execution of the Pricing
Agreement. The place of the closing and the Option Closing Date may be varied
by agreement among the Underwriter, the Company and the Selling Stockholder.
(c) If the Underwriter and the Selling Stockholder have elected to
enter into the Pricing Agreement after the Registration Statement is effective,
the Purchase Price per Share to be paid by the Underwriter for the Shares shall
be an amount equal to the public offering price, less an amount to be
determined by agreement between the Underwriter and the Selling Stockholder.
The public offering price per Share of the Shares shall be a fixed price to be
determined by agreement between the Underwriter and the Selling Stockholder.
The public offering price and the Purchase Price per Share, when so determined,
shall be set forth in the Pricing Agreement. If such prices have not been
agreed upon and the Pricing Agreement has not been executed and delivered by
all parties thereto by the close of business on the fourth business day
following the date of this Agreement, this Agreement shall terminate forthwith,
without liability of any party to any other party, unless otherwise agreed to
by the Company, the Selling Stockholder and the Underwriter and except as
otherwise provided in Section 5 hereof. If the Underwriter and the Selling
Stockholder have elected to enter into the Pricing Agreement prior to the
Registration Statement becoming effective, the public offering price and the
Purchase Price per Share to be paid by the Underwriter for the Shares having
each been determined and set forth in the Pricing Agreement, the Company agrees
to file an
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amendment to the Registration Statement and the Prospectus before the
Registration Statement becomes effective.
(d) Certificates for the Firm Shares and for the Additional Shares
shall be registered in such names and in such denominations as the Underwriter
shall request upon at least 48 hours prior notice to the Company and the
Selling Stockholder preceding the Closing Date or the Option Closing Date, as
the case may be. Such certificates shall be made available to the Underwriter
at the office of The Depository Trust Company, New York, New York, for
inspection and packaging not later than at least 24 hours prior to the Closing
Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and the Additional Shares shall be delivered to the
Underwriter on the Closing Date or the Option Closing Date, as the case may be,
with any transfer taxes thereon duly paid by the Selling Stockholder for the
account of the Underwriter, against payment of the purchase price therefor by
wire or other immediately available funds.
SECTION 4. AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with the Underwriter that:
(a) The Company will endeavor to cause the Registration
Statement to become effective and will advise the Underwriter promptly
and, if requested by the Underwriter, will confirm such advice in
writing, (i) when the Registration Statement has become effective and
when any post-effective amendment to it becomes effective, and of the
filing of any final prospectus or supplement or amendment to the
Prospectus, (ii) of any request by the Commission for amendments or
supplements to the Registration Statement or Prospectus or any
Preliminary Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction, or
the initiation or contemplation of any proceeding for such purposes, and
(iv) within the period of time referred to in paragraph (f) below, of
the happening of any event which makes any statement made in the
Registration Statement or Prospectus (as then amended or supplemented)
untrue in any material respect or which requires the making of any
additions to or changes in the Registration Statement or Prospectus (as
then amended or supplemented) in order to make the statements therein
not misleading or the necessity to amend or supplement the Prospectus to
comply with the Act or any other law. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal of such order at the earliest possible moment. If
the Company elects to rely on Rule 434 of the Act, the Company will
prepare a Term Sheet that complies with the requirements of Rule 434 of
the Act and will provide the Underwriter with copies of the form of Rule
434 Prospectus in such numbers as you may reasonably request and file or
transmit for filing with the Commission the form of Prospectus complying
with Rule
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<PAGE> 15
434(c)(2) of the Act in accordance with Rule 424(b) of the Act by the
close of business in Chicago on the business day immediately succeeding
the date hereof. If the Company elects not to rely on Rule 434, the
Company will provide you with copies of the form of Prospectus in such
numbers as you may reasonably request and file or transmit for filing
with the Commission such Prospectus in accordance with Rule 424(b) of
the Act, by the close of business in Chicago on the business day
immediately succeeding the date hereof.
(b) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance
upon Rule 430A under the Act, then promptly following the execution of
the Pricing Agreement, the Company will prepare and file with the
Commission, in accordance with Rule 430A and Rule 424(b) under the Act,
copies of an amended Prospectus, or, if required by Rule 430A, a post-
effective amendment to the Registration Statement (including an amended
Prospectus) containing all information so omitted.
(c) Neither the Company nor any of its subsidiaries will, prior
to the earlier of the Option Closing Date or termination or expiration
of the related option, incur any liability or obligation, direct or
contingent, or enter into any material transaction, other than in the
ordinary course of business, except as contemplated in the Prospectus.
(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which
the Underwriter shall not previously have been advised or to which the
Underwriter shall promptly after being so advised reasonably object in
writing.
(e) Prior to the effective date of the Registration Statement,
the Company has delivered or will deliver to the Underwriter, without
charge, copies of each form of Preliminary Prospectus in such quantities
as you have reasonably requested or may hereafter reasonably request.
The Company consents to the use, in accordance with the provisions of
the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the Underwriter and by dealers, prior to
the effective date of the Registration Statement, of each Preliminary
Prospectus so furnished by the Company.
(f) On the effective date of the Registration Statement and
thereafter from time to time during such period as in the opinion of
counsel for the Underwriter a prospectus relating to the Shares is
required by law to be delivered in connection with offers or sales of
the Shares by the Underwriter or a dealer, the Company will deliver to
the Underwriter and each dealer, without charge, as many copies of the
Registration Statement, the Prospectus and each
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<PAGE> 16
Preliminary Prospectus and the Incorporated Documents (and of any
amendment or supplement to such documents) as they may reasonably
request. During such period, if any event occurs which in the judgment
of the Company, or in the opinion of counsel for the Underwriter, should
be set forth in the Prospectus in order to ensure that no part of the
Prospectus includes an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances at the time the Prospectus is
delivered to a purchaser, not misleading, the Company will forthwith
prepare, submit to the Underwriter, file with the Commission and
deliver, without charge to the Underwriter and dealers (whose names and
addresses will be furnished by the Underwriter to the Company) to whom
shares have been sold by the Underwriter or to other dealers any
amendments or supplements to the Prospectus so that the statements in
the Prospectus, as so amended or supplemented, will comply with the
standards set forth in this sentence. The Company consents to the use
of such Prospectus (and of any amendments or supplements thereto) in
accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Shares are lawfully
offered by the Underwriter and by all dealers to whom Shares may be
sold, both in connection with the offering or sale of the Shares and for
such period of time thereafter as the Prospectus is required by law to
be delivered in connection therewith. In case the Underwriter is
required to deliver a Prospectus (and any amendment or supplement
thereto) more than nine months after the first date upon which the
Shares are offered to the public, the Company will, upon request, but at
the expense of the Underwriter, promptly prepare and furnish the
Underwriter with reasonable quantities of a Prospectus complying with
Section 10(a)(3) of the Act.
(g) The Company will cooperate with the Underwriter and counsel
for the Underwriter in connection with the registration or qualification
of the Shares for offer and sale by the Underwriter and by dealers under
the securities or Blue Sky laws of such jurisdictions as the Underwriter
may designate, will continue such registrations or qualifications in
effect so long as reasonably required for the distribution of the Shares
and will file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification;
provided that in no event shall the Company be obligated (i) to qualify
to do business in any jurisdiction where it is not now so qualified,
(ii) to file any general consent to service of process, or (iii) take
any action that would subject it to income taxation in any jurisdiction
where it is not so qualified.
(h) For a period of five years after the date of the Pricing
Agreement:
(i) the Company will furnish to the Underwriter (A) as
soon as available, a copy of each report of the Company of
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<PAGE> 17
general interest mailed to any class of its security holders (B)
copies of all proxy statements and all annual reports and current
reports filed with the Commission on Forms 10-K, 10-Q and 8-K and
any amendment thereto or such other similar forms as may be
designated by the Commission and (C) from time to time, such
other information concerning the Company as the Underwriter may
reasonably request;
(ii) if at any time during such five year period, the
Company shall cease filing with the Commission the annual reports
and current reports on Forms 10-K, 10-Q and 8-K or other similar
forms referred to in clause (i) above, the Company will forward
to its stockholders generally and the Underwriter (A) as soon as
practicable after the end of each fiscal year, copies of a
balance sheet and statements of income and retained earnings of
the Company as of the end of and for such fiscal year, certified
by independent public accountants, and (B) as soon as practicable
after the end of each quarterly fiscal period, except for the
last quarterly fiscal period in each fiscal year, a summary
statement (which need not be certified) of income and retained
earnings of the Company for such period, which shall also be made
publicly available; and
(iii) the Company will furnish to the Underwriter and to
the NASD, and by issuance of a press release, on the date of
declaration, notice of all dividends, including the amount and
medium of payment, the record date (which shall be not less than
ten days subsequent to the declaration date) and the payment date
(which shall be not less than ten days subsequent to the record
date).
(i) The Company will make generally available to its security
holders an earnings statement of the Company, which need not be audited,
covering a twelve-month period commencing after the effective date of
the Registration Statement and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Act and the rules and regulations of the Commission thereunder
(including Rule 158).
(j) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than by notice given by the Underwriter's
termination of this Agreement pursuant to Section 9 hereof), or if this
Agreement shall be terminated by the Underwriter because of any failure
or refusal on the part of the Company to comply with the terms or
fulfill any of
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<PAGE> 18
the conditions of this Agreement, the Company agrees to reimburse the
Underwriter for all out-of-pocket expenses (including reasonable fees
and expenses of counsel for the Underwriter) reasonably incurred by them
in connection herewith but without any further obligation of the Company
for lost profits or otherwise. If this Agreement is terminated pursuant
to Section 10 hereof, the Underwriter shall bear any such out-of-pocket
expenses incurred by it.
(k) The Company will not sell, contract to sell or otherwise
dispose of any Common Stock or rights to purchase Common Stock for a
period of 90 days after the date of the Pricing Agreement without the
prior written consent of the Underwriter. The Company will also obtain
similar agreements from each of its officers and directors.
(l) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National
Market.
SECTION 5. PAYMENT OF EXPENSES. The Company will pay, or reimburse if
paid by the Underwriter, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and expenses
incident to the performance by it of its obligations under this Agreement and
the Pricing Agreement, including, without limiting the generality of the
foregoing, (a) preparation, printing, filing and distribution (including
postage, air freight charges and charges for counting and packaging) of the
original registration statement, the Registration Statement, each Preliminary
Prospectus, the Prospectus (including any all Incorporated Documents, exhibits
and financial statements and any Term Sheet delivered by the Company pursuant
to Rule 434 of the Act), each amendment and/or supplement to any of the
foregoing, and this Agreement, the Pricing Agreement, Selected Dealers
Agreement and the Underwriter's Powers of Attorney and Questionnaires, (b)
furnishing to the Underwriter and dealers copies of the foregoing materials
(provided, however, that any such copies furnished by the Company more than
nine months after the first date upon which the Shares are offered to the
public shall be at the expense of the Underwriter or dealers so requesting as
provided in Section 4(f) above), (c) the registrations or qualifications
referred to in Section 4(g) above (including filing fees and fees and
disbursements of counsel in connection therewith, if any), (d) the review of
the terms of the public offering of the Shares by the NASD (including the
filing fees paid to the NASD in connection therewith) and the reasonable fees
and disbursements of counsel for the Underwriter in connection therewith, (e)
the performance by the Company and the Selling Stockholder of their other
obligations under this Agreement, including the fees of the Company's and the
Selling Stockholder's counsel and accountants, (f) the issuance of the Shares
and the preparation and printing of the stock certificates representing the
Shares, including any transfer taxes, if any, with respect to the sale and
delivery of the Shares to the Underwriter, and (g) furnishing to the
Underwriter copies of all reports and information required by Section 4(h)
above, including reasonable costs of shipping and mailing.
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<PAGE> 19
SECTION 6. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation
of the Underwriter to purchase the Firm Shares hereunder is subject to the
following conditions:
(a) That the Registration Statement shall have become effective
not later than 1:00 p.m., Chicago time, on the first full business day
after the date of this Agreement, or at such later date and time as
shall be consented to in writing by the Underwriter, and, if the
Underwriter and the Company have elected to rely upon Rule 430A, the
price of the Shares and any price-related or other information
previously omitted from the effective Registration Statement pursuant to
such Rule 430A shall have been transmitted to the Commission for filing
pursuant to Rule 424(b) within the prescribed time period, and, if the
Underwriter and the Company have elected to rely upon a Term Sheet, such
Term Sheet shall have been transmitted to the Commission for filing
pursuant to Rule 434 and Rule 424(b) within the prescribed time period,
and on or prior to the Closing Date, the Company shall have provided
evidence satisfactory to the Underwriter of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the
requirements of Rule 430A. No stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings
for the purpose shall have been instituted or shall be pending or, to
the knowledge of the Company or the Selling Stockholder, shall be
contemplated by the Commission and there shall not have come to the
attention of the Underwriter any facts that would cause them to believe
that the Prospectus, at the time it was required to be delivered to
purchasers of the Shares, contained any untrue statement of material
fact or omitted to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which there
were made, not misleading.
(b) That subsequent to the effective date of the Registration
Statement, (i) there shall not have occurred any change, or any
development involving a prospective change, in or affecting particularly
the business or properties of the Company or its subsidiaries not
contemplated by the Prospectus, which, in the Underwriter's opinion,
would materially adversely affect the market for the Shares or make it
impracticable or inadvisable to proceed with the offering or the
delivery of the Shares, as contemplated herein and in the Prospectus, or
to attempt to enforce contracts for the purchase of Shares, and (ii) the
business and operations of the Company shall not have been adversely
affected by strike, fire, flood, accident or other calamity (whether or
not insured).
(c) The Underwriter shall have received from Hewitt & Hewitt,
P.C., counsel for the Company, a favorable opinion dated the Closing
Date and satisfactory to the Underwriter and the Underwriter's counsel
to the effect that:
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<PAGE> 20
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with full corporate power and authority to
own, lease and operate its properties and conduct its business as
described in the Registration Statement. The Company is duly
qualified to do business as a foreign corporation and in good
standing in each jurisdiction where the ownership or leasing of
its properties or the conduct of its business requires such
qualification, except in any such case where the failure to so
qualify or be in good standing would not have a material adverse
effect on the condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole.
(ii) An opinion to the same general effect as clause (i)
of this subparagraph (c) in respect of each direct and indirect
subsidiary of the Company.
(iii) All of the issued and outstanding capital stock of
the subsidiaries of the Company has been duly authorized and
validly issued and is fully paid and non-assessable, and except
as disclosed in the Registration Statement, the Company owns
directly or indirectly 100 percent of the outstanding capital
stock of each subsidiary and, to the best knowledge of such
counsel, such stock is owned free and clear of any security
interests, claims, liens, encumbrances or adverse interests of
any nature.
(iv) The issued and outstanding capital stock of the
Company has been duly authorized and validly issued and is fully
paid and non-assessable and free of preemptive rights.
(v) The authorized capitalization of the Company consists
entirely of 12,000,000 shares of Common Stock, of which
__________ were issued and outstanding on the date of the
Prospectus and 1,000,000 shares of Preferred Stock, of which
_________________ were issued and outstanding on the date of the
Prospectus and all of which conforms to the description thereof
in the Registration Statement and the Prospectus or incorporated
by reference therein.
(vi) The certificates for the Shares to be delivered
hereunder are in due and proper form, and when duly countersigned
by the Company's transfer agent and delivered to the Underwriter
against payment of the agreed consideration
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<PAGE> 21
therefor in accordance with the provisions of this Agreement and
the Pricing Agreement, the Shares represented thereby will be
duly authorized and validly issued, fully paid and nonassessable
and free of preemptive rights and, to the knowledge of such
counsel, will be free of any security interest, claim, lien,
encumbrance or adverse interest of any nature, or rights of first
refusal in favor of stockholders with respect to any of the
Shares or the issuance or sale thereof, pursuant to the
Certificate of Incorporation or by-laws of the Company and, to
such counsel's knowledge, there are no contractual preemptive
rights, rights of first refusal, rights of co-sale or other
similar rights which exist with respect to any of the Shares or
the issuance and sale thereof; and the Shares to be sold
hereunder have been duly and validly authorized and qualified for
inclusion on the Nasdaq National Market.
(vii) This Agreement has been duly and validly
authorized, executed and delivered by the Company and is the
legal, valid and binding obligations of the Company, enforceable
in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by
general principles of equity, and except that such counsel need
express no opinion as to those provisions relating to indemnities
for liabilities under the Act.
(viii) No authorization, approval, order or consent of
any governmental authority or agency is required for the valid
issuance and sale of the Shares, except such as may be required
under the Act or state securities laws as to which such counsel
need express no opinion.
(ix) The execution, delivery and performance of this
Agreement by the Company, the sale of the Shares, and the
consummation of the transactions contemplated hereby and thereby
will not conflict with or result in a breach of any of the
provisions of, or constitute a default under (A) the Company's
Certificate of Incorporation or by-laws or any agreement,
franchise, license, indenture, mortgage, deed of trust or other
instrument or agreement known to such counsel to which the
Company or any of its subsidiaries is a party or by which Company
or any of its subsidiaries is bound or to which any of its their
respective properties is subject or (B) so far as known to such
counsel, any statute, order, rule or regulation applicable to
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<PAGE> 22
the Company or any of its subsidiaries of any court or other
governmental authority or body having jurisdiction over the
Company or any of its subsidiaries or any of its properties.
(x) All documents incorporated by reference in the
Prospectus, when they were filed with the Commission, complied as
to form in all material respects with the requirements of the
Exchange Act; and such counsel have no reason to believe that any
of such documents, when they were so filed, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made when such
documents were so filed, not misleading; such counsel need
express no opinion as to the financial statements or other
financial or statistical data contained in any such document.
(xi) The Registration Statement has become effective
under the Act, and, to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act.
(xii) The Registration Statement (including the
information deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A(b), if
applicable) as amended or supplemented (except for the financial
statements and notes thereto, the financial statement schedules
and other statistical or financial data included therein as to
which such counsel need express no opinion) and the Prospectus
and any supplements or amendments thereto (except for the
financial statements and notes thereto, the financial statement
schedules and other statistical or financial data included
therein, as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the
Act and the rules of the Commission thereunder and nothing has
come to the attention of such counsel that would cause such
counsel to believe that the Registration Statement (including the
information deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A(b), if
applicable) as amended or supplemented (except for the financial
statements and notes thereto, the financial statement schedules
and other statistical or financial data included therein as to
which such counsel need express no opinion) at the time it became
effective, at the time the Pricing Agreement was executed and at
the Closing Date, contained any untrue statement of a material
fact or omitted or omits to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, or that, as of its date, the
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Prospectus or any amendment or supplement thereto (except for the
financial statements and notes thereto, the financial statement
schedules and other statistical or financial data included
therein as to which such counsel need express no opinion)
included or includes any untrue statement of a material fact or
omitted or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The Rule 434 Prospectus conforms
to the requirements of Rule 434 of the Act.
(xiii) The statements in the Registration Statement and
the Prospectus and the documents incorporated by reference
therein in the sections captioned "Risk Factors" and "Executive
Compensation" in each case insofar as such statements reflect a
summary of the material legal matters or the documents referred
to therein, fairly and accurately present the information called
for by the Act and the applicable rules and regulations
promulgated thereunder.
(xiv) To the knowledge of such counsel there are no
statutes or regulations, provisions of the Delaware General
Corporation Law or any pending or threatened litigation or
governmental proceedings against the Company required to be
described in the Prospectus which are not so described, nor of
any contracts or documents of a character required to be
described in or filed as a part of the Registration Statement
which are not described or filed as required.
(xv) To such counsel's knowledge, except as disclosed in
the Prospectus, no person has the right, contractual or
otherwise, to cause the Company to register pursuant to the Act
any shares of capital stock of the Company, upon the issuance and
sale of the Shares to be sold by the Company to the Underwriter
pursuant to this Agreement.
(xvi) Neither the Company nor any of its subsidiaries is
an "investment company" or a person "controlled by" an
"investment company" within the meaning of the Investment Company
Act.
(xvii) To such counsel's knowledge, all offers and sales
of the Company's and each of its subsidiaries' capital stock
prior to the date hereof were at all relevant times exempt from
the registration requirements of the Act and were duly registered
or
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<PAGE> 24
the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky laws.
(d) The Underwriter shall have received from __________, counsel
to the Selling Stockholder, a favorable opinion dated the Closing Date
and satisfactory to the Underwriter and the Underwriter's counsel to the
effect that:
(i) With respect to the Selling Stockholder, this
Agreement and the Pricing Agreement have been duly authorized,
executed and delivered by or on behalf of the Selling Stockholder
and the execution and performance of this Agreement and the
Pricing Agreement, the sale and transfer of the Shares by the
Selling Stockholder and the consummation of the transactions
contemplated herein by the Selling Stockholder will not
contravene, conflict with any of the provisions of, or result in
a breach or default under, any agreement, franchise, license,
indenture, mortgage, deed of trust or other agreement or
instrument known to such counsel to which the Selling Stockholder
is a party or by which it is bound or to which any of the
property of the Selling Stockholders is subject, nor will such
actions violate any order, rule or regulation known to such
counsel of any court or regulatory or governmental body having
jurisdiction over the Selling Stockholder or any of its
properties; and no consent, approval, authorization or order of
any court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
and the Pricing Agreement or the sale of Shares to be sold by the
Selling Stockholder hereunder, except such as may be required
under the Act or state securities laws as to which counsel need
express no opinion;
(ii) The Selling Stockholder has full right, power and
authority to enter into this Agreement and the Pricing Agreement
and to sell, transfer and deliver the Shares to be sold on the
Closing Date or the Option Closing Date, as the case may be, by
the Selling Stockholder hereunder; upon registration in the name
of the Underwriter of such Shares to be sold by the Selling
Stockholder hereunder, the Underwriter (who counsel may assume to
be a bona fide purchaser) will acquire valid title to such Shares
so sold, free and clear of all voting trust arrangements,
security interests, claims, liens, encumbrances, community
property rights or any adverse interests of any nature imposed on
such Shares by the Selling Stockholder or the Company.
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<PAGE> 25
(iii) This Agreement and the Pricing Agreement are legal,
valid and binding agreements of the Selling Stockholder except as
enforceability of the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles
of equity, and except that such counsel need express no opinion
to those provisions relating to indemnities for liabilities
arising under the Act.
In rendering such opinion, such counsel may state that they are
relying upon the certificate of officers of the Company and of the
Selling Stockholder and the transfer agent for the Common Stock, as to
the number of shares of Common Stock at any time or times outstanding,
and that insofar as their opinion under clause (xii) above relates to
the accuracy and completeness of the Prospectus and Registration
Statement, it is based upon a general review with the Company's
representatives and independent accountants of the information contained
therein, without independent verification by such counsel of the
accuracy or completeness of such information. Such counsel may also
rely upon the opinions of other competent counsel and, as to factual
matters, on certificates of officers of the Company and of state
officials, in which case their opinion is to state that they are so
doing and copies of such opinions or certificates are to be attached to
the opinion unless such opinions or certificates (or, in the case of
certificates, the information therein) have been furnished to the
Underwriter otherwise.
(e) That the Underwriter shall have received on the Closing Date
a favorable opinion dated the Closing Date from McDermott, Will & Emery,
counsel for the Underwriter, as to such matters as the Underwriter may
reasonably require.
(f) That the Underwriter shall have received letters addressed
to the Underwriter and dated the date hereof and the Closing Date from
KPMG Peat Marwick LLP, independent public accountants for the Company,
to the effect set forth in Schedule I. There shall not have been any
change or decrease specified in the letters referred to in this
subparagraph which makes it impractical or inadvisable in the judgment
of the Underwriter to proceed with the public offering or purchase of
the Shares as contemplated hereby.
(g) That (i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company,
shall be contemplated by the Commission at or prior to the Closing Date;
(ii) there shall not have been any change in the capital stock of the
Company nor any material increase in the short or long-term debt of the
Company from that set forth or
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<PAGE> 26
contemplated in the Registration Statement; (iii) there shall not have
been, since the respective dates as to which information is given in the
Registration Statement and the Prospectus, except as may otherwise be
set forth or contemplated in the Registration Statement and the
Prospectus, any material adverse change in the financial condition or
results of operations of the Company; (iv) the Company shall not have
incurred any material liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), other than those
reflected in the Registration Statement, and (v) all of the
representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the date hereof and the
Closing Date as if made on and as of each such date, and the Underwriter
shall have received a certificate, dated the Closing Date and signed by
the chief executive officer and the principal financial officer (or such
other officers as are acceptable to the Underwriter) to the effect set
forth in this Section 6(g) and in Section 6(h) hereof.
(h) That the Company shall not have failed at or prior to the
Closing Date to have performed or complied in all material respects with
any of the agreements herein contained and required to be performed or
complied with by it at or prior to the Closing Date.
(i) Within 24 hours after the Registration Statement becomes
effective, or within such longer period as to which the Underwriter
shall have consented, the Shares shall have been qualified for sale or
exempted from such qualification under the securities laws of such
jurisdictions as the Underwriter shall have designated prior to the time
of execution of the Pricing Agreement and such qualification or
exemption shall continue in effect to and including the Closing Date.
(j) That the representations and warranties of the Selling
Stockholder contained in this Agreement shall be true and correct on and
as of the date hereof and the Closing Date as if made on and as of each
such date, and the Underwriter shall have received a certificate, dated
the Closing Date, to the effect set forth in this Section 6(j).
The obligation of the Underwriter to purchase Additional Shares
hereunder is subject to the satisfaction on and as of the Option Closing
Date of the conditions set forth in paragraphs (a) through (j); except
that the opinions called for in paragraphs (c) and (d) shall be revised
to reflect the sale of Additional Shares and shall be dated the Option
Closing Date, if different from the Closing Date.
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<PAGE> 27
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Selling Stockholder, jointly and severally,
agree to indemnify and hold harmless the Underwriter and each person, if any,
who controls the Underwriter within the meaning of the Act or the Exchange Act
from and against any and all losses, claims, damages or liabilities, joint or
several, whatsoever (including any investigation, legal or other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted) to which the Underwriter, or such
controlling person may become subject, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Registration Statement or the Prospectus or in
any amendment or supplement thereto or arising out of or based upon 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, and
will reimburse the Underwriter for any legal or other expenses reasonably
incurred by the Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred, except insofar as such
losses, claims, damages or liabilities arise out of or are based upon any such
untrue statement or omission or allegation thereof which has been made therein
or omitted therefrom in reliance upon and in conformity with information
relating to the Underwriter furnished in writing to the Company by or on behalf
of the Underwriter expressly for use therein; provided, however, that the
indemnification contained in this paragraph with respect to any Preliminary
Prospectus shall not inure to the benefit of the Underwriter (or of any person
controlling the Underwriter) with respect to any action or claim arising from
the sale of the Shares by the Underwriter brought by any person who purchased
Shares from the Underwriter if (i) a copy of the Prospectus (as amended or
supplemented if any amendments or supplements thereto shall have been furnished
to the Underwriter prior to the written confirmation of the sale involved)
shall not have been given or sent to such person by or on behalf of the
Underwriter with or prior to the written confirmation of the sale involved and
(ii) the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (as amended or
supplemented if amended or supplemented as aforesaid).
(b) If any action or claim shall be brought against the Underwriter or
any person controlling the Underwriter, in respect of which indemnity may be
sought against the Company or the Selling Stockholder, the Underwriter shall
promptly notify the Company and the Selling Stockholder in writing, and the
Company or the Selling Stockholder shall assume the defense thereof, including
the employment of counsel and payment of all fees and expenses as they are
incurred. The Underwriter or any such person controlling the Underwriter 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 shall be at the
expense of the Underwriter or such controlling person and shall not be
reimbursed as they are incurred unless (i) the Company or the Selling
Stockholder has agreed in writing to pay such fees and expenses, (ii) the
Company or the Selling Stockholder has failed to assume the defense and employ
counsel, or (iii) the named parties to any such action (including any impleaded
party) included the Underwriter or such controlling person and the Company or
the Selling
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<PAGE> 28
Stockholder and the Underwriter or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the Company
or the Selling Stockholder and which may also result in a conflict of interest
(in which case if the Underwriter or such controlling person notifies the
Company and the Selling Stockholder, neither the Company nor the Selling
Stockholder shall have the right to assume the defense of such action on behalf
of the Underwriter or such controlling person, it being understood, however,
that the Company or the Selling Stockholder shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys for the Underwriter and such controlling person, which firm shall
be designated in writing by the Underwriter). Neither the Company nor the
Selling Stockholder shall be liable for any settlement or any such action
effected without the written consent of the Company and the Selling
Stockholder, but if settled with the written consent of the Company and the
Selling Stockholder, or if there shall be a final judgment for the plaintiff in
any such action and the time for filing all appeals has expired, each of the
Company and the Selling Stockholder agrees to indemnify and hold harmless the
Underwriter and any such controlling person from and against any loss or
liability by reason of such settlement or judgment.
(c) The Underwriter will indemnify and hold harmless the Company, its
directors, its officers who sign the Registration Statement and the Selling
Stockholder, and any person controlling the Company or the Selling Stockholder
within the meaning of the Act or the Exchange Act to the same extent as the
foregoing indemnity from the Company and the Selling Stockholder to the
Underwriter, but only with respect to information relating to the Underwriter
furnished in writing to the Company by or on behalf of the Underwriter
expressly for use in the Registration Statement, the Prospectus or any
Preliminary Prospectus. If any action or claim shall be brought or asserted
against the Company, any of its directors, any such officer, the Selling
Stockholder, or any such controlling person based on the Registration
Statement, the Prospectus or any Preliminary Prospectus and in respect of which
indemnity may be sought against the Underwriter, the Underwriter shall have the
rights and duties given to the Company and the Selling Stockholder pursuant to
Section 7(b) hereof (except that if the Company or the Selling Stockholder
shall have assumed the defense thereof, the Underwriter shall not be required
to do so, but may employ separate counsel therein and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of the Underwriter), and the Company, its directors, any such officer,
the Selling Stockholder, and any such controlling person shall have the rights
and duties given to the Underwriter by Section 7(b) hereof.
(d) (i) If the indemnification provided for in this Section 7 is
unavailable as a matter of law to any indemnified party under this Section 7 in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by damages,
liabilities or expenses (A) in such proportion as is appropriate to reflect
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<PAGE> 29
the relative benefits received by the Company, the Selling Stockholder and the
Underwriter from the offering of the Shares or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(A) above but also the relative fault of the Company, the Selling Stockholder
and the Underwriter 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 respective relative benefits
received by the Selling Stockholder and the Underwriter shall be deemed to be
in the same proportion in the case of the Selling Stockholder, as the total
price paid to the Selling Stockholder for the Shares by the Underwriter (net of
underwriting discount but before deducting expenses), and in the case of the
Underwriter as the underwriting discount received by them bears to the total of
such amounts paid to the Selling Stockholder and received by the Underwriter as
underwriting discount, in each case as contemplated by the Prospectus. The
relative fault of the Company, the Selling Stockholder and the Underwriter
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Selling Stockholder or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
this Section shall be deemed to include, subject to the limitations set forth
in this Section, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
(ii) The Company, the Selling Stockholder and the Underwriter
agree that the determination of contribution pursuant to this Section based on
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph would not be just and equitable. Notwithstanding the
provisions of this Section, the Underwriter shall not be required to contribute
any amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public exceeds the amount of any
damages which the Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The indemnity and contribution agreements contained in this Section
and the representations and warranties of the Company and the Selling
Stockholder set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Underwriter or any person controlling the Underwriter, the Company or its
directors or officers or the Selling Stockholder, (or any person controlling
the Company or the Selling Stockholder), (ii) acceptance of any Shares and
payment therefor hereunder and (iii) any termination of this Agreement. A
successor or assign of the Underwriter, the Company, the Selling Stockholder or
its directors or officers, and their legal and personal representatives (or of
any person controlling an Underwriter, the
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<PAGE> 30
Company or the Selling Stockholder) shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section.
(f) In no event shall the aggregate liability of the Selling
Stockholder under this Agreement for indemnification, contribution and
reimbursement of expense, exceed an amount equal to the proceeds received by
the Selling Stockholder with respect to the Shares sold to the Underwriter
hereunder.
SECTION 8. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective immediately as to Sections 5, 7, 9 and 10 and as to all other
provisions at 10:00 A.M., Chicago Time, on the day following the date upon
which the Pricing Agreement is executed and delivered, unless such a day is a
Saturday, Sunday or holiday (and in that event this Agreement shall become
effective at such hour on the business day next succeeding such Saturday,
Sunday or holiday); but this Agreement shall nevertheless become effective at
such earlier time after the Pricing Agreement is executed and delivered as you
may determine on and by notice to the Company and the Selling Stockholder or by
release of any Shares for sale to the public. For the purposes of this
Section, the Shares shall be deemed to have been so released upon the release
for publication of any newspaper advertisement relating to the Shares or upon
the release by you of telegrams (i) advising the Underwriter(s) that the Shares
are released for public offering, or (ii) offering the Shares for sale to
securities dealers, whichever may occur first.
SECTION 9. TERMINATION OF AGREEMENT. This Agreement and the Pricing
Agreement shall be subject to termination by notice given by you to the Company
and the Selling Stockholder, if (a) after the execution and delivery of this
Agreement and the Pricing Agreement and prior to the Closing Date (and with
respect to the Additional Shares, the Option Closing Date) (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York or in Chicago shall have been
declared by either Federal, New York or Illinois State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment,
is material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event, singly or together with any other such
event, makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus. Notice of such
cancellation shall be given to the Company and the Selling Stockholder by
telecopy or telephone but shall be subsequently confirmed by letter.
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<PAGE> 31
SECTION 10. REIMBURSEMENT OF UNDERWRITER'S EXPENSES. If the sale to
the Underwriter of the Shares on the Closing Date is not consummated because
any condition to the Underwriter's obligation hereunder is not satisfied or
because of any refusal, inability or failure on the part of the Company or the
Selling Stockholder to perform any agreement herein or to comply with any
provision hereof, unless such failure to satisfy such condition or to comply
with any provision hereof is due to the default or omission of the Underwriter,
the Company and the Selling Stockholder agree to reimburse you upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been reasonably incurred by you in connection with the
proposed purchase and the sale of the Shares. Any such termination shall be
without liability of any party to any other party except that the provisions of
this Section, Section 5 and Section 7 shall at all times be effective and shall
apply.
SECTION 11. NOTICES. Except as otherwise provided in Section 9
hereof, notice given pursuant to any of the provisions of this Agreement shall
be in writing and shall be delivered (a) if to the Company, at the office of
the Company at 1215 West Crosby Road, Carrollton, Texas 75006, Attention:
Thomas R. Filesi, with a copy to Hewitt & Hewitt, P.C., 2612 Thomas Avenue,
Dallas, Texas 75204, Attention: Christopher M. Hewitt or (b) if to the
Underwriter, at the offices of ABN AMRO Chicago Corporation, 208 South LaSalle
Street, 4th Floor, Chicago, Illinois 60604, Attention: Corporate Finance
Department, with a copy to McDermott, Will & Emery, 227 West Monroe, Chicago,
IL 60606, Attention: Thomas J. Murphy or (c) if to the Selling Stockholder,
Allstate Insurance Company, 3075 Sanders Road, Suite G5D, Northbrook, Illinois
60062, Attention: Private Equity Group, with a copy to Allstate Insurance
Company, Investment Law Division, 3075 Sanders Road, G5D Northbrook, Illinois
60062, Attention: Mary McGinn, or in any case to such other address as the
person to be notified may have requested in writing.
SECTION 12. SUCCESSORS. The Agreement and the Pricing Agreement are
made solely for the benefit of the Underwriter, the Selling Stockholder and the
Company, their directors and officers and other controlling persons referred to
in Section 7 hereof, and their respective successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement or
the Pricing Agreement. The term "successors and assigns" as used in this
Agreement shall not include a purchaser from the Underwriter of any of the
Shares in his status as such purchaser.
SECTION 13. PARTIAL UNENFORCEABILITY. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
SECTION 16. APPLICABLE LAW. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the state of
Illinois.
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<PAGE> 32
SECTION 14. COUNTERPARTS. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriter.
Very truly yours,
OPTEK TECHNOLOGY, INC.
By:
---------------------------------
Name:
Title:
ALLSTATE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
Accepted and delivered as of
the date first written above.
ABN AMRO CHICAGO CORPORATION
By:
---------------------------------------
Name:
Title:
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<PAGE> 33
OPTEK TECHNOLOGY, INC.
SCHEDULE I
Comfort Letter of KPMG Peat Marwick LLP
1. They are independent public accountants with respect to the Company
and its subsidiaries within the meaning of the Act.
2. In their opinion the consolidated financial statements of the
Company and its subsidiaries included or incorporated by reference in the
Registration Statement and the consolidated financial statements of the Company
from which the information presented under the caption "Selected Consolidated
Financial Data" has been derived which are stated therein to have been examined
by them comply as to form in all material respects with the applicable
accounting requirements of the Act.
3. On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to ______,
19__, a reading of minutes of meetings of the stockholders and directors of the
Company and its subsidiaries since ___________, 19__, a reading of the latest
available interim unaudited consolidated financial statements of the Company
and its subsidiaries (with an indication of the date thereof) and other
procedures as specified in such letter, nothing came to their attention which
caused them to believe that (i) the unaudited consolidated financial statements
of the Company and its subsidiaries included or incorporated by reference in
the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Exchange Act or
that such unaudited financial statements are not fairly presented in accordance
with generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, and (ii) at a specified date not more than five days
prior to the date thereof in the case of the first letter and not more than two
business days prior to the date thereof in the case of the second and third
letters, there was any change in the capital stock or long-term debt or short-
term debt (other than normal payments) of the Company and its subsidiaries on a
consolidated basis or any decrease in consolidated net current assets or
consolidated stockholders' equity as compared with amounts shown on the latest
unaudited balance sheet of the Company included in the Registration Statement
or for the period from the date of such balance sheet to a date not more than
five days prior to the day thereof in the case of the first letter and not more
than two business days prior to the date thereof in the case of the second and
third letters, there were any decreases, as compared with the corresponding
period of the prior year, in consolidated net sales, consolidated income before
income taxes or in the total or per share amounts of consolidated net income
except, in all instances, for changes or decreases which the Prospectus
discloses have occurred or may occur or which are set forth in such letter.
I-1
<PAGE> 34
4. They have carried out specified procedures, which have been agreed
to by the Underwriter, with respect to certain information in the Prospectus
specified by the Underwriter, and on the basis of such procedures, they have
found such information to be in agreement with the general accounting records
of the Company and its subsidiaries.
I-2
<PAGE> 35
Exhibit A
950,000 Shares*
Optek Technology, Inc.
Common Stock
PRICING AGREEMENT
May __, 1997
ABN AMRO CHICAGO CORPORATION
208 South LaSalle Street
4th Floor
Chicago, Illinois 60604
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated _______ __, 1997
(the "Underwriting Agreement"), relating to the sale by the Selling Stockholder
and purchase by ABN AMRO Chicago Corporation (the "Underwriter") of the above
referenced Common Stock (the "Shares") of Optek Technology, Inc. (the
"Company"). All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Underwriting Agreement.
Pursuant to Section 3 of the Underwriting Agreement, the Selling
Stockholder agrees with the Underwriter as follows:
1. The initial public offering price per share of the Shares determined
as provided in said Section 3 shall be $_______.
2. The purchase price per share of the Shares to be paid by the
Underwriter shall be $________, being an amount equal to the initial public
offering price set forth above, less $_______ per Share.
- ---------------
* Plus an option to purchase up to 78,230 Additional Shares to cover over-
allotments.
A-1
<PAGE> 36
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Selling Stockholder a counterpart
hereof, whereupon this instrument, along with all counterparts, will become a
binding agreement among the Underwriter and the Selling Stockholder in
accordance with its terms.
Very truly yours,
ALLSTATE INSURANCE COMPANY
By:
---------------------------------
Name:
Title:
Confirmed and Accepted, as of the date
first above written:
ABN AMRO CHICAGO CORPORATION
By:
---------------------------------------
Name:
Title:
A-2
