-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, eNAks2nEFIWOocUP7NwOwpCuA8/9dx2CaDR1IMtpXkVtZix16AAEtrX90wesf7QC XDLN0Slmii+6DWpNSxmzdA== 0000906387-95-000017.txt : 19950414 0000906387-95-000017.hdr.sgml : 19950414 ACCESSION NUMBER: 0000906387-95-000017 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19950410 SROS: NASD GROUP MEMBERS: DOMINION CAPITAL, INC. GROUP MEMBERS: DOMINION RESOURCES, INC. GROUP MEMBERS: FIRST SOURCE FINANCIAL LLP GROUP MEMBERS: HCFS CORPORATE FINANCE VENTURE, INC. GROUP MEMBERS: HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. GROUP MEMBERS: HOUSEHOLD INTERNATIONAL INC GROUP MEMBERS: VIRGINIA FINANCIAL VENTURES, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: OPTEK TECHNOLOGY INC CENTRAL INDEX KEY: 0000804312 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 751962405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-38829 FILM NUMBER: 95527742 BUSINESS ADDRESS: STREET 1: 1215 W CROSBY RD CITY: CARROLLTON STATE: TX ZIP: 75006 BUSINESS PHONE: 2143232200 MAIL ADDRESS: STREET 1: 1215 W CROSBY RD CITY: CARROLLTON STATE: TX ZIP: 75006 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HOUSEHOLD INTERNATIONAL INC CENTRAL INDEX KEY: 0000354964 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 363121988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 2700 SANDERS RD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 BUSINESS PHONE: 7085645000 MAIL ADDRESS: STREET 1: 2700 SANDERS ROAD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 SC 13D/A 1 OMB APPROVAL OMB Number: 3235-0145 Expires: October 31, 1997 Estimated average burden hours per response . . .14.90 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 29549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 2) OPTEK TECHNOLOGY, INC. (Name of Issuer) Common Stock, $.01 par value (Title of Class of Securities) 683815 (CUSIP Number) David P. Dekker Household Commercial Financial Services, Inc. 2700 Sanders Road, Prospect Heights, Illinois 60070 (708) 564-5000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 27, 1995 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Check the following box if a fee is being paid with the statement [ ]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 683815 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Household International, Inc. 36-3121988 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER - -0- 8 SHARED VOTING POWER 3,150,000 9 SOLE DISPOSITIVE POWER - -0- 10 SHARED DISPOSITIVE POWER 3,150,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,150,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.1% 14 TYPE OF REPORTING PERSON* HC SCHEDULE 13D CUSIP No. 683815 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Household Commercial Financial Services, Inc. 36-3427357 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER - -0- 8 SHARED VOTING POWER 3,150,000 9 SOLE DISPOSITIVE POWER - -0- 10 SHARED DISPOSITIVE POWER 3,150,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,150,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.1% 14 TYPE OF REPORTING PERSON* CO SCHEDULE 13D CUSIP No. 683815 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON HCFS Corporate Finance Venture, Inc. 36-3990749 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER 3,150,000 8 SHARED VOTING POWER - -0- 9 SOLE DISPOSITIVE POWER 3,150,000 10 SHARED DISPOSITIVE POWER - -0- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,150,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.1% 14 TYPE OF REPORTING PERSON* CO SCHEDULE 13D CUSIP No. 683815 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Virginia Financial Ventures, Inc. 54-1740145 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Virginia NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER - -0- 8 SHARED VOTING POWER 3,150,000 9 SOLE DISPOSITIVE POWER - -0- 10 SHARED DISPOSITIVE POWER 3,150,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,150,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.1% 14 TYPE OF REPORTING PERSON* CO SCHEDULE 13D CUSIP No. 683815 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Dominion Capital, Inc. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Virginia NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER - -0- 8 SHARED VOTING POWER 3,150,000 9 SOLE DISPOSITIVE POWER - -0- 10 SHARED DISPOSITIVE POWER 3,150,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,150,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.1% 14 TYPE OF REPORTING PERSON* CO SCHEDULE 13D CUSIP No. 683815 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Dominion Resources, Inc. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Virginia NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER - -0- 8 SHARED VOTING POWER 3,150,000 9 SOLE DISPOSITIVE POWER - -0- 10 SHARED DISPOSITIVE POWER 3,150,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,150,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.1% 14 TYPE OF REPORTING PERSON* HC SCHEDULE 13D CUSIP No. 683815 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON First Source Financial LLP 36-3991240 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Illinois NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH 7 SOLE VOTING POWER 3,150,000 8 SHARED VOTING POWER - -0- 9 SOLE DISPOSITIVE POWER 3,150,000 10 SHARED DISPOSITIVE POWER - -0- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,150,000 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 49.1% 14 TYPE OF REPORTING PERSON* PN Household International, Inc., a Delaware corporation ("Household International"), and Household Commercial Financial Services, Inc. ("Household"), a Delaware corporation and an indirect, wholly-owned subsidiary of Household International, hereby amend the Statement on Schedule 13D, dated July 14, 1988 as amended January 31, 1991 (the "Statement"), with respect to the shares of common stock, par value $0.01 (the "Shares"), of Optek Technology, Inc., a Delaware corporation (the "Issuer"). HCFS Corporate Finance Venture, Inc. ("HCFS"), a wholly-owned subsidiary of Household, which holds a fifty percent general partnership interest in First Source Financial LLP, an Illinois registered limited liability partnership ("FSFLLP"), FSFLLP, Virginia Financial Ventures, Inc. ("Virginia"), a Virginia corporation and a wholly-owned subsidiary of Dominion Capital, Inc. ("Dominion"), which holds a fifty percent general partnership interest in FSFLLP, Dominion, a wholly owned subsidiary of Dominion Resources, Inc. ("Dominion Resources"), and Dominion Resources hereby join in this Statement. A copy of the agreement between Household International, Household, HCFS, FSFLLP, Virginia, Dominion and Dominion Resources required by Rule 13d-1(f)(1)(iii) is attached hereto as Exhibit 8. Unless otherwise indicated, capitalized terms used below but not defined herein shall have the meanings assigned to such terms in the Statement. Item 1. Security and Issuer. Item 1 of the Statement is not amended. Item 2. Identity and Background. Item 2 of the Statement is hereby amended as follows: (a) Household International. The present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of Household International are set forth in Appendix A. During the last five years, neither Household International nor, to the best of its knowledge, any of the persons listed in Appendix A has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. To the best knowledge of Household International, except as otherwise indicated in Appendix A, each of the persons listed in Appendix A is a citizen of the United States of America. (b) Household. The present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of Household are set forth in Appendix B. During the last five years, neither Household nor, to the best of its knowledge, any of the persons listed in Appendix B has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. To the best knowledge of Household, except as otherwise indicated in Appendix B, each of the persons listed in Appendix B is a citizen of the United States of America. (c) HCFS HCFS's principal business is acting as the general partner of FSFLLP. The address of HCFS's principal business and the address of its principal office are 2700 Sanders Road, Prospect Heights, Illinois 60070. The present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of HCFS are set forth in Appendix C. During the last five years, neither HCFS nor, to the best of its knowledge, any of the persons listed in Appendix C has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. To the best knowledge of HCFS, except as otherwise indicated in Appendix C, each of the persons listed in Appendix C is a citizen of the United States of America. (d) FSFLLP. FSFLLP's principal business is providing commercial financial services. The address of FSFLLP's principal business and the address of its principal office are 2700 Sanders Road, Prospect Heights, Illinois 60070. The present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of FSFLLP are set forth in Appendix D. During the last five years, neither FSFLLP nor, to the best of its knowledge, any of the persons listed in Appendix D has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. To the best knowledge of FSFLLP, except as otherwise indicated in Appendix D, each of the persons listed in Appendix D is a citizen of the United States of America. (e) Virginia Virginia's principal business is acting as the general partner of FSFLLP. The address of Virginia's principal business and the address of its principal office are 901 East Byrd Street, Richmond, Virginia 23219. The present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of Virginia are set forth in Appendix E. During the last five years, neither Virginia nor, to the best of its knowledge, any of the persons listed in Appendix E has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. To the best knowledge of Virginia, except as otherwise indicated in Appendix E, each of the persons listed in Appendix E is a citizen of the United States of America. (f) Dominion Dominion is primarily engaged in financial and real estate investment activities. The address of Dominion's principal business and the address of its principal office are 901 East Byrd Street, Richmond, Virginia 23219. The present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of Dominion are set forth in Appendix F. During the last five years, neither Dominion nor, to the best of its knowledge, any of the persons listed in Appendix F has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. To the best knowledge of Dominion, except as otherwise indicated in Appendix F, each of the persons listed in Appendix F is a citizen of the United States of America. (g) Dominion Resources Dominion Resources is a holding company with utility and non-utility subsidiaries. The address of Dominion Resources's principal business and the address of its principal office are 901 East Byrd Street, Richmond, Virginia 23219. The present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted of each executive officer and director of Dominion Resources are set forth in Appendix G. During the last five years, neither Dominion Resources nor, to the best of its knowledge, any of the persons listed in Appendix G has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. To the best knowledge of Dominion Resources, except as otherwise indicated in Appendix G, each of the persons listed in Appendix G is a citizen of the United States of America. Item 3. Source and Amount of Funds or Other Consideration. Item 3 of the Statement is hereby amended as follows: Pursuant to the Amended and Restated Secured Credit Agreement, dated as of January 20, 1994 (the "Amended Secured Credit Agreement"), between the Issuer and Household, Household agreed to loan certain funds to the Issuer. Household agreed to make loans to the Issuer on a revolving basis in amounts up to $28,300,000. This indebtedness is evidenced by a Revolving Note in the form attached as Exhibit A to the Amended Secured Credit Agreement. Household agreed to make loans to the Issuer for working capital as from time to time requested by Issuer in an amounts up to $10,500,000. This indebtedness is evidenced by a Working Capital Note in the form attached as Exhibit B to the Amended Secured Credit Agreement. A copy of the Amended Secured Credit Agreement is attached to this Statement as Exhibit 9. See item 6. Pursuant to the Amended Secured Credit Agreement, the Issuer issued to Household a Warrant (the "Warrant") to purchase at any time on or before October 31, 1998 3,150,000 Shares at an exercise price of $0.50 (as it may be adjusted from time to time pursuant to the Warrant ("Exercise Price")). For a more detailed discussion of the Warrant, see item 6. A copy of the Warrant is attached to this Statement as Exhibit 12 and is incorporated by reference herein. Household, HCFS, Dominion and Virginia entered into an Asset Purchase Agreement, dated as of December 30, 1994, as amended by the First Amendment to the Asset Purchase Agreement, dated as of March 24, 1995 (as so amended the "Asset Purchase Agreement"). A copy of the Asset Purchase Agreement is attached hereto as Exhibit 10. See item 6. A copy of the First Amendment to the Asset Purchase Agreement is attached hereto as Exhibit 11. Pursuant to the Asset Purchase Agreement, Household sold certain warrants, including the Warrant, to FSFLLP. Household executed an Assignment of the Warrant to FSFLLP on March 24, 1995 (the "Assignment"). A copy of the Assignment is attached hereto as Exhibit 13. Pursuant to an Escrow Agreement between HCFS, Virginia, FSFLLP, Citicorp North America, Inc., as Agent, Financial Security Assurance, Inc., Citibank, N.A., CXC Incorporated, Household, Household Finance Corporation, Dominion Resources and Dominion, dated March 24, 1995 (the "Escrow Agreement"), the Assignment became effective when each party to the Escrow Agreement released certain agreements, including the Assignment. The agreements were released from escrow on March 27, 1995. A copy of the Escrow Agreement is attached hereto as Exhibit 14. The source of funds for the acquisition of Shares upon any exercise of the Warrant will be working capital of FSFLLP. Item 4. Purpose of Transaction. Item 4 of the Statement is hereby amended as follows: FSFLLP acquired the Warrant from Household for investment purposes, and presently intends that any Shares acquired upon conversion of the Warrant will be held for investment purposes. Except for adjustments to the number of Shares issuable under the Warrant, FSFLLP does not presently intend to acquire additional Shares. Other than as indicated above, neither FSFLLP, Household International, HCFS, Household, Dominion, Virginia nor Dominion Resources has any plans and none has made or received any proposals which relate to or which would result in any of the following: (a) the acquisition of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (d) any change in the present Board of Directors or management of the Issuer, including any plans or proposals to change the number or term of Directors or to fill any existing vacancies on the Board of Directors; (e) any material change in the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer's business or corporate structure; (g) changes in the Issuer's charter or bylaws or other actions which may impede the acquisition of control of the Issuer by any person; (h) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any actions similar to any of those enumerated above. Item 5. Interests in Securities of Issuer. Item 5 of the Statement is hereby amended as follows: (a) As of the date hereof, FSFLLP, Household International, Household, HCFS, Dominion Resources, Dominion and Virginia may be deemed to beneficially own 3,150,000 Shares, which represent approximately 49.1% of the sum of (i) the 3,266,195 Shares reported by the Company to be outstanding as of January 27, 1995 according to its Report on Form 10-Q for the fiscal quarter ended January 27, 1995 and (ii) the Shares issuable upon exercise of the Warrant. FSFLLP does not currently own any Shares. FSFLLP has the right to acquire all 3,150,000 Shares upon exercise of the Warrant. (b) FSFLLP has the power to vote and dispose of all Shares acquired upon exercise of the Warrant. Household International, Household, HCFS, Dominion Resources, Dominion and Virginia have shared power to vote and dispose of all Shares acquired upon exercise of the Warrant. (c) FSFLLP, Household International, Household, HCFS, Dominion Resources, Dominion and Virginia have not, and to the best knowledge of FSFLLP, Household International, Household, HCFS, Dominion Resources, Dominion and Virginia none of the persons listed in Appendices A through G hereto has effected any transactions in Shares during the past 60 days. (d) None. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Item 6 of the Statement is hereby amended as follows: (a) Amended Secured Credit Agreement. Pursuant to the Amended Secured Credit Agreement, Household agreed to loan certain funds to the Issuer. Household agreed to make loans to the Issuer on a revolving basis in amounts up to $28,300,000, as evidenced by a Revolving Note (the "Revolving Loan") in the form attached as Exhibit A to the Amended Secured Credit Agreement. Household agreed to make loans to the Issuer for working capital as from time to time requested by Issuer in an amounts up to $10,500,000, as evidenced by a Working Capital Note (the "Working Capital Loan") in the form attached as Exhibit B to the Amended Secured Credit Agreement. The Secured Credit Agreement contains standard covenants, including, without limitation, covenants which require the Issuer to deliver certain information to Household on a periodic basis and comply with certain financial ratios, and which prohibit certain significant corporate transactions, including payment of dividends, mergers, consolidations, and acquisitions or sales of all or substantially all of the Issuer's (or its subsidiaries') assets. Substantially all of the assets of the Issuer and its subsidiaries are pledged to Household to secure the Borrower's indebtedness to Household. The Secured Credit Agreement contains standard events of default, including, without limitation, default in certain payments to Household when due, certain events of bankruptcy and certain changes in control of the Issuer of the Borrower. (b) Warrant. Pursuant to the Warrant, Household has the right to purchase at any time on or before October 31, 1998, 3,150,000 Shares at the Exercise Price. The number of Shares subject to the Warrant and the Exercise Price are subject to adjustment to reflect certain events of dilution specified in the Warrant. Pursuant to the Warrant, the holder of the Warrant may, on up to four separate occasions, require the Issuer to register Shares issuable under the Warrant under the Securities Act of 1933; provided, however, that the Issuer shall not be required to register fewer than 200,000 Shares in any such registration. From time to time prior to the later to occur of (1) October 31, 1998 and (2) payment in full of all Liabilities (as defined in the Restated Secured Credit Agreement), the Issuer, upon written notice to the Issuer by the holder of the Warrant, is required to repurchase from the holder of the Warrant all or any portion of the Warrant or all or any number of Shares received pursuant to exercise of the Warrant for an amount determined by applying a formula specified in the Warrant, which shall not exceed the fair market value of the Shares to be repurchased and any Shares issuable upon exercise of the Warrant to be repaid. The Issuer has a similar right to repurchase issued Shares or Shares issuable upon exercise of the Warrant. (c) Asset Purchase Agreement Pursuant to the Asset Purchase Agreement, Household agreed to sell certain loans and warrants, including the Revolving Loan, the Working Capital Loan and the Warrant, to FSFLLP. Household also assigned its rights under related documents, including the Amended Secured Credit Agreement and the Registration Rights Agreement to FSFLLP. (d) Escrow Agreement Pursuant to the Escrow Agreement, the Assignment of the Warrant from Household to FSFLLP became effective as of March 27, 1995. Item 7. Materials to be filed as Exhibits. Item 7 of the Statement is hereby amended as follows: Exhibit 8 - Agreement among the Reporting Persons as to joint filing of Schedule 13D, dated April 6, 1995. Exhibit 9 - Amended and Restated Secured Credit Agreement, dated as of January 20, 1994 between Optek Technology, Inc. and Household Commercial Financial Services, Inc. Exhibit 10 - Asset Purchase Agreement, dated as of December 30, 1994, by and among Household, HCFS Corporate Finance Venture, Inc., Dominion Capital, Inc. and Virginia Financial Ventures, Inc. Exhibit 11 - First Amendment to the Asset Purchase Agreement, dated as of March 24, 1995. Exhibit 12 - Warrant to Purchase Common Stock of Optek Technology, Inc., dated as of January 20, 1994. Exhibit 13 - Assignment of Warrant, dated as of March 24, 1995, but effective as of March 27, 1995. Exhibit 14 - Escrow Agreement between HCFS Corporate Finance Venture, Inc., Virginia Financial Venture, Inc., First Source Financial LLP, Citicorp North America, Inc., as Agent, Financial Security Assurance, Inc., Citibank, N.A., CXC Incorporated, Household Commercial Financial Services, Inc., Household Finance Corporation, Dominion Resources, Inc. and Dominion Capital, Inc. Signature After reasonable inquiry to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 6, 1995 HOUSEHOLD INTERNATIONAL, INC. By: /s/ JOHN W. BLENKE _______________________ Name: John W. Blenke Title: Secretary Signature After reasonable inquiry to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 6, 1995 HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. By: /s/ D.P. DEKKER _______________________ Name: D.P. Dekker Title: Senior Vice President Signature After reasonable inquiry to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 6, 1995 HCFS CORPORATE FINANCE VENTURE, INC. By: /s/ D.P. DEKKER _______________________ Name: D.P. Dekker Title: Senior Vice President Signature After reasonable inquiry to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 6, 1995 FIRST SOURCE FINANCIAL LLP By: /s/ D.P. DEKKER _______________________ Name: D.P. Dekker Title: Vice President Signature After reasonable inquiry to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 6, 1995 VIRGINIA FINANCIAL VENTURES, INC. By: /s/ HAYDEN D. McMILLIAN _______________________ Name: Hayden D. McMillian Title: Vice President Signature After reasonable inquiry to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 6, 1995 DOMINION CAPITAL, INC. By: /s/ HAYDEN D. McMILLIAN _______________________ Name: Hayden D. McMillian Title: Vice President and Treasurer Signature After reasonable inquiry to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 6, 1995 DOMINION RESOURCES, INC. By: /s/ DAVID L. HEAVENRIDGE _______________________ Name: David L. Heavenridge Title: Senior Vice President APPENDIX A DIRECTORS AND EXECUTIVE OFFICERS OF HOUSEHOLD INTERNATIONAL, INC. Name and Title; Principal Occupation or Employment: William F. Aldinger, Director; President & Chief Executive Officer, Household International, Inc. Donald C. Clark, Director; Chairman of the Board, Household International, Inc. Robert J. Darnall, Director; President and Chief Executive Officer, Inland Steel Industries, Inc. 30 West Monroe Street, Chicago, Illinois 60603 Gary G. Dillon, Director; President and Chief Executive Officer, Schwitzer, Inc., P.O. Box 15075, Asheville, North Carolina 28813 John A. Edwardson, Director; President, United Airlines, Inc., United Airlines World Headquarters, P.O. Box 66100, Chicago, Illinois 60666 Mary J. Evans, Director; 920 Fifth Avenue, #14B, New York, New York 10021 Cyrus F. Freidham, Jr., Director; Vice Chairman, Booz, Allen & Hamilton, Inc., 225 West Wacker Drive, Suite 1700, Chicago, Illinois 60606 Louis E. Levy, Director; 26 Farmstead Road, Short Hills, New Jersey 07078 George A. Lorch, Director; Chairman & Chief Executive Officer, Armstrong, World Industries, Inc., P.O. Box 3001, Lancaster, Pennsylvania 17604 John D. Nichols, Director; Chairman and Chief Executive Officer, Illinois Tool Works Inc., 3600 West Lake Avenue, Glenview, Illinois 60025 Gordon P. Osler, Director; TransCanada Pipelines, 55 Yonge Street, 8th Floor, Toronto, Ontario Canada M5E 1J4 James B. Pitblado, Director; BCE Place, 181 Bay Street, Suite 2370, P.O. Box 875, Toronto, Ontario, M5J 2T3 Canada Arthur E. Rasmussen, Director; P.O. Box 1, Walton, New York 13856 S. Jay Stewart, Director; Chairman & Chief Executive Officer, Morton International, Inc., 100 North Riverside Plaza, Chicago, Illinois 60606 Louis W. Sullivan, M.D., Director; President, Morehouse School of Medicine, 720 Westview Drive, S.W., Atlanta, Georgia 30310 Raymond C. Tower, Director; 81 Indian Hill Road, Winnetka, Illinois 60093 Robert F. Elliott, Group Executive - U.S. Consumer Finance and Canada, Household International, Inc. Joseph W. Saunders, Group Executive - U.S. BankCard and Household Retail Services, Inc., Household Credit services, Inc., 1441 Schilling Place, Salinas, California 93901 Richard H. Headlee, Chairman, Alexander Hamilton Life Insurance Company of America, 33045 Hamilton Boulevard, Farmington Hills, Michigan 48334 Glen O. Fick, Group Executive - Commercial Finance, Household International, Inc. Gary D. Gilmer, President & Chief Executive Officer, Alexander Hamilton Life Insurance Company, 33045 Hamilton Boulevard, Farmington Hills, Michigan 48334 David A. Schoenholz, Senior Vice President - Chief Financial Officer, Household International, Inc. Edgar D. Ancona, Vice President - Treasurer, Household International, Inc. David B. Barany, Vice President - Chief Information Officer, Household International, Inc. John W. Blenke, Assistant General Counsel and Secretary, Household International, Inc. Michael A. DeLuca, Vice President - Taxes, Household International, Inc. Colin P. Kelly, Vice President - Human Resources, Household International, Inc. Theresa F. Kendziorski, Vice President - Analysis and Projects, Household International, Inc. Richard J. Kolb, Vice President - Controller, Household International, Inc. Michael H. Morgan, Vice President - Corporate Communications, Household International, Inc. Randall L. Raup, Vice President - Strategy and Development, Household International, Inc. Kenneth H. Robin, Vice President - General Counsel, Household International, Inc. Except as otherwise noted, the business address of each of the directors and executive officers listed above is 2700 Sanders Road, Prospect Heights, Illinois 60070. With the exception of Messrs. Osler and Pitblado, who are citizens of Canada, each of the directors and executive officers listed above is a citizen of the United States. APPENDIX B DIRECTORS AND EXECUTIVE OFFICERS OF HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. Name and Title; Principal Occupation or Employment: G.O. Fick, Director; President R.F. Elliott, Director; Group Executive-U.S. Consumer Finance and Canada, Household International, Inc. W.F. Aldinger, Director; President & Chief Executive Officer, Household International, Inc. D.P. Killion, Executive Vice President and President CFD R.E. Walsh, Executive Vice President and President EFD D.P. Dekker, Senior Vice President - Finance & Administration J.E. Jones, Senior Vice President - Real Estate Asset Management J.W. Wilson, Senior Vice President - Risk Asset Management R.C. Mancini, Secretary & General Counsel R.M. Coseo, Vice President M.A. DeLuca, Vice President A.F. DeMonte, Vice President M.G. DiRe, Vice President W.D. Evans, Vice President G.L. Francis, Vice President D.A. Friedrich, Vice President L.C. Klug, Vice President S.E. Malinowski, Vice President P.J. Moss, Vice President J.L. Muller, Vice President V.S. Powell, Vice President R.A. Reese, Vice President T.P. Shanley, Vice President W.J. Tame, Vice President C.M. Korte, Controller N.L. Mychko, Assistant Vice President (Treasury) N.J. Bromley, Assistant Vice President & Assistant Secretary L.J. Morris, Assistant Vice President & Assistant Secretary E.A. Szarkowicz, Assistant Vice President & Assistant Secretary T.A. Claeys, Assistant Vice President S.P. Errandi, Assistant Vice President J.D. Freko, Assistant Vice President C.L. Gill, Assistant Vice President J.M. Kohlway, Assistant Vice President J.J. Russell, Assistant Vice President F.R. Schimel, Assistant Vice President J.B. Weatherstein, Assistant Vice President C.J. Oeler, Assistant Secretary R.S. Winder, Assistant Secretary The business address of each of the directors and executive officers listed above is 2700 Sanders Road, Prospect Heights, Illinois 60070. APPENDIX C DIRECTORS AND EXECUTIVE OFFICERS OF HCFS CORPORATE FINANCE VENTURE, INC. Name and Title; Principal Occupation or Employment: E.A. Szarkowicz, Director; Vice-President and Secretary G.O. Fick, Director; President D.P. Dekker, Director; Senior Vice President D.P. Killion, Executive Vice President C.M. Korte, Controller The business address of each of the directors and executive officers listed above is 2700 Sanders Road, Prospect Heights, Illinois 60070. APPENDIX D EXECUTIVE OFFICERS OF FIRST SOURCE FINANCIAL LLP Name and Title; Principal Occupation or Employment: D.P. Killion, President R.M. Coseo, Vice President D.P. Dekker, Vice President A.F. DeMonte, Vice President G.L. Francis, Vice President E.A. Szarkowicz, Secretary L.J. Morris, Assistant Secretary C.M. Korte, Treasurer The business address of each of the executive officers listed above is 2700 Sanders Road, Prospect Heights, Illinois 60070. APPENDIX E DIRECTORS AND EXECUTIVE OFFICERS OF VIRGINIA FINANCIAL VENTURES, INC. Name and Title; Principal Occupation or Employment: Thos. E. Capps, Director; Chairman and Chief Executive Officer, Dominion Resources, Inc. David L. Heavenridge, Director; President, Virginia Financial Ventures, Inc. Paul J. Bonavia, Director; Senior Vice President and General Counsel, Dominion Resources, Inc. Hayden D. McMillian, Vice President, Virginia Financial Ventures, Inc. Daniel A. Hillsman, Jr., Secretary, Virginia Financial Ventures, Inc. The business address of each of the directors and executive officers listed above is 901 East Byrd Street, Richmond, Virginia 23219. APPENDIX F DIRECTORS AND EXECUTIVE OFFICERS OF DOMINION CAPITAL, INC. Name and Title; Principal Occupation or Employment: Thos. E. Capps, Director; Chairman and Chief Executive Officer, Dominion Resources, Inc. Tyndall L. Baucom, Director; President and Chief Operating Officer, Dominion Resources, Inc. John W. Harris, Director; President and Managing Partner, Harris Group, Rolanda Suite 175, 4201 Congress Street, Charlotte, North Carolina David L. Heavenridge, Director; President and Chief Executive Officer, Dominion Capital, Inc. William J. Hopke, Director; Senior Vice President, Dominion Capital, Inc. David A. Wollard, Director; President, Bank One Colorado Corporation, Denver, Colorado, P.O. Box 17669, Denver, Colorado 80217-0069 David S. Brollier, Vice President, Dominion Capital, Inc. Daniel A. Hillsman, Jr., Vice President - Administration, Dominion Capital, Inc. Hayden D. McMillian, Vice President and Treasurer, Dominion Capital, Inc. Mark P. Mikuta, Controller, Dominion Capital, Inc. James L. Truehart, Vice President and Controller, Dominion Resources, Inc. Henry C. Riely, Corporate Secretary, Dominion Capital, Inc. With the exception of Messrs. Harris and Wollard, the business address of each of the directors and executive officers listed above is 901 East Byrd Street, Richmond, Virginia 23219. APPENDIX G DIRECTORS AND EXECUTIVE OFFICERS OF DOMINION RESOURCES, INC. Name and Title; Principal Occupation or Employment: John B. Adams, Jr., President and Chief Executive Officer, A. Smith Bowman Distillery, Inc., One Bowman Drive, Fredericksburg, VA 22408 Thos. E. Capps, Director; Chairman and Chief Executive Officer, Dominion Resources, Inc. Tyndall L. Baucom, Director; President and Chief Operating Officer, Dominion Resources, Inc. John B. Bernhardt, Director; Managing Director, Bernhardt/Gibson Financial Opportunities, 11817 Canon Boulevard, Suite 502, Newport News, VA 23606 Dr. Benjamin J. Lambert, III, Director; Virginia State Senator and Optometrist, 904 North First Street, Richmond, VA 23219 Richard L. Leatherwood, Director; 3805 Greenway, Baltimore, MD 21218 Harvey L. Lindsay, Jr., Director; Chairman and Chief Executive Officer, Harvey Lindsay Commercial Real Estate, Dominion Tower, Suite 1400, 999 Waterside Drive, Norfolk, VA , 23510 Kenneth A. Randall, Director; 6 Whittaker's Mill, Williamsburg, VA 23185 William T. Roos, Director; 2820 Build America Drive, Hampton, VA 23666 Frank S. Royal, M.D., Director; East End Medical Building, 1122 North 25th Street, Suite A, Richmond, VA 23223 Judith B. Sack, Director; Advisor, Morgan Stanley, 1251 Avenue of the Americas, New York, NY 10020 Richard L. Sharp, Director; Chairman, President and Chief Executive Officer, Circuit City Stores, Inc., 9950 Mayland Drive, Richmond, VA 23233-1464 Dr. S. Dallas Simmons, Director; President, Virginia Union University, 1500 North Lombardy Street, Richmond, VA 23220 Robert H. Spilman, Director; Chairman of the Board, Bassett Furniture Industries, Inc., P.O. Box 626, Bassett, VA 24055 David L. Heavenridge, Senior Vice President, Dominion Resources, Inc. James L. Truehart, Vice President and Controller, Dominion Resources, Inc. Paul J. Bonavia, Senior Vice President and General Counsel, Dominion Resources, Inc. Lynwood R. Robertson, Senior Vice President, Chief Financial Officer, Treasurer, Corporate Secretary, Dominion Resources, Inc. Donald T. Hernick, Jr., Vice President, Dominion Resources, Inc. Everard Munsey, Vice President - Public Policy, Dominion Resources, Inc. Except as otherwise noted, the business address of each of the directors and executive officers listed above is 901 East Byrd Street, Richmond, Virginia 23219. EX-8 2 EXHIBIT 8 AGREEMENT PURSUANT TO RULE 13d-1(f)(1)(iii) CONCERNING JOINT SCHEDULE 13D FILING The undersigned each agree, in connection with the acquisition, effective March 27, 1995, by First Source Financial LLP of a warrant to purchase 3,150,000 shares of Common Stock, with a par value of $0.01 per share, of Optek Technology, Inc., a Delaware corporation: (i) that an Amended Statement on Schedule 13D (the "Statement") shall be filed jointly by all of them pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), together with any amendments to the Amended Statement as may from time to time be required; and (ii) that the Amended Statement and any such amendments are filed on behalf of each of them. The undersigned acknowledge their respective responsibilities with respect to the Amended Statement and any such amendments as set forth in Rule 13d-1(f) promulgated under the Exchange Act. This Agreement may be executed in counterparts. HOUSEHOLD INTERNATIONAL, INC. By: /s/ JOHN BLENKE ______________________________ Title: Secretary and Assistant General Counsel Date: 4/6/95 HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. By: /s/ DAVID P. DEKKER ______________________________ Title: Senior Vice President Date: 4/6/95 HCFS CORPORATE FINANCE VENTURE, INC. By: /s/ DAVID P. DEKKER ______________________________ Title: Senior Vice President Date: 4/6/95 FIRST SOURCE FINANCIAL LLP By: /s/ DAVID P. DEKKER ______________________________ Title: Senior Vice President Date: 4/6/95 VIRGINIA FINANCIAL VENTURES, INC. By: /s/ HAYDEN D. McMILLIAN _________________________ Title: Vice President Date: 4/6/95 DOMINION CAPITAL, INC. By: /s/ HAYDEN D. McMILLIAN ____________________________ Title: Vice President and Treasurer Date: 4/6/95 DOMINION RESOURCES, INC. By: /s/ DAVID HEAVENRIDGE ____________________________ Title: Senior Vice President Date: 4/6/95 EX-9 3 EXHIBIT 9 AMENDED AND RESTATED SECURED CREDIT AGREEMENT dated as of January 20, 1994 between OPTEK TECHNOLOGY, INC. and HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. TABLE OF CONTENTS PAGE PREAMBLE ...................1 BACKGROUND..................1 SECTION 1 CERTAIN DEFINITIONS..................2 1.1 Certain Definitions..................2 Account..................2 Account Debtor..................2 Acquired Assets..................2 Adjusted Net Worth..................2 Adjusted Operating Profit..................2 Affiliate..................3 Agent Bank..................3 Amended and Restated Closing Date..................3 Applicable Margin..................3 Applicable Rate..................3 Assumed Liabilities..................3 Bank Agency Agreement..................3 Borrower..................3 Borrower Bank Agency Agreement..................3 Borrower Mortgages..................3 Borrower Pledge Agreement..................4 Borrower Security Agreement..................4 Borrowing Certificate..................4 Business Day..................4 Cash Equivalents..................4 Cash Instruments..................4 Collateral..................4 Collateral Documents..................4 Collected Balances..................5 Commitment and Commitments..................5 Compliance Certificate..................5 Contingent Obligation..................5 Contractual Obligation..................5 Controlled Group..................5 Current Assets..................6 Current Liabilities..................6 Current Ratio..................6 Delco-Remy Loan Commitment..................6 Delco-Remy Revolving Loan..................6 Division..................6 Dollar(s)..................6 Employment Agreements..................6 ERISA..................6 Event of Default..................6 Fiscal Quarter..................6 Fiscal Year..................6 Fixed Rate Loan..................7 Floating Rate Loan..................7 Force Majeure..................7 Fourth Amendment..................7 GAAP..................7 General Intangible..................7 Gross Capital Expenditures..................7 Hazardous Material..................7 Household Loan Receipt Account..................8 Household Loan Receipt Account Agreement..................8 Indebtedness..................8 Insurance Assignment..................8 Intangible Assets..................8 Interest Coverage Ratio Number 1..................8 Interest Coverage Ratio Number 2..................9 Interest Expense..................9 Lease Obligations..................9 Lender..................9 Lender Party..................9 Liabilities..................9 Lien..................9 Loans and Loan..................10 Lockbox(es)..................10 Master Account(s)..................10 Material Licensing Agreement..................10 Maximum Rate..................10 Mexican Subsidiaries..................10 Net Cash Generated..................10 Net Income..................10 Note and Notes..................10 Opcom..................10 Opcom Bank Agency Agreement..................10 Opcom Revolving Loan..................10 Opcom Revolving Loan Commitment..................10 Opcom Working Capital Commitment..................11 Operating Account(s)..................11 Optek International..................11 Optron de Mexico..................11 Original Closing Date..................11 Original Credit Agreement..................11 PBGC..................11 Permitted Exceptions..................11 Permitted Liens..................11 Person..................11 Plan..................11 Purchase..................12 Purchase Agreement..................12 Purchase Documents..................12 Redeployment Rate..................12 Reference Rate..................12 Related Documents..................12 Related Transactions..................13 Remaining Term..................13 Reportable Event..................13 Reporting Period..................13 Requirement of Law..................13 Revolving Loan..................13 Revolving Loan Commitment..................13 Revolving Loan Commitment Reduction Amount...............13 Revolving Loan Commitment Reduction Date.................13 Revolving Loan Termination Date..................13 Revolving Note..................13 Scheduled Reduction in the Revolving Loan Commitment.....13 Seller..................14 Senior Management Agreements..................14 Subsidiary..................14 Subsidiary Mortgages..................14 Subsidiary Security Agreement..................14 Third Amendment..................14 Total Fixed Charges..................14 Total Liabilities..................14 Tranche, Tranche One, Tranche Two, Tranche Three, Tranche Four, Tranche Five, and Tranche Six....15 Triggering Event..................15 Type of Loan..................15 Unmatured Event of Default..................15 Warrant..................15 Welfare Plan..................15 Working Capital..................15 Working Capital Commitment..................15 Working Capital Commitment Extension Request......15 Working Capital Loan..................15 Working Capital Loan Termination Date.............15 Working Capital Note..................15 1.2 Accounting and Financial Determinations...........15 1.3 Cross References; Headings..................16 SECTION 2 COMMITMENTS OF LENDER; PROCEDURES FOR BORROWING...16 2.1 Commitments..................16 2.1.1 Revolving Loan Commitment..................16 2.1.2 Working Capital Commitment..................17 2.2 Extension of Working Capital Loan Termination Date......17 2.3 Various Types of Loans..................18 2.4 Loan Requests; Deemed Loans..................18 2.5 Certain Waivers..................19 2.6 Conditions..................19 SECTION 3 NOTES; RECORDKEEPING..................19 3.1 Revolving Notes..................19 3.2 Working Capital Note..................20 3.3 Recordkeeping..................20 3.4 Replacement Notes..................20 SECTION 4 INTEREST..................21 4.1 Tranches; Interest Rates on Revolving Loan..............21 4.2 Interest Rate on Working Capital Loans..................22 4.3 Interest Payment Dates..................22 4.4 Setting and Notice of Rates..................23 4.5 Computation of Interest..................23 4.6 Limitation on Interest..................23 4.7 Additional Interest..................24 SECTION 5 FEES..................24 5.1 Revolving Loan Non-Use Fee..................24 5.2 Working Capital Loan Non-Use Fee..................24 5.3 Closing Fee..................25 5.4 Computation of Fees..................25 SECTION 6 ACCOUNTS; REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENT..................25 6.1 Accounts..................25 6.2 Reduction or Termination of the Revolving Loan Commitment..................29 6.3 Reduction or Termination of the Working Capital Commitment..................31 6.4 Mandatory Prepayments..................31 6.5 Voluntary Prepayments..................32 6.6 Prepayment of Loans..................32 SECTION 7 MAKING OF PAYMENTS; SETOFF..................33 7.1 Making of Payments..................33 7.2 Due Date Extension..................33 7.3 Setoff..................33 7.4 Other Accounts..................33 SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS..................34 8.1 Increased Costs..................34 8.2 Funding Losses..................35 8.3 Discretion of Lender as to Manner of Funding......35 8.4 Conclusiveness of Statements; Survival of Provisions..................35 SECTION 9 COLLATERAL SECURITY; WARRANT................35 9.1 Borrower..................35 9.1.1 Borrower's Personal Property..................35 9.1.2 Borrower's Real Estate..................36 9.1.3 Life Insurance..................36 9.2 Subsidiaries..................36 9.2.1 Personal Property..................36 9.2.2 Real Estate..................36 9.3 Warrant..................36 9.4 Change of Location or Name..................37 9.5 Deliveries; Further Assurances..................37 9.6 Subsequently Acquired Property..................38 SECTION 10 REPRESENTATIONS AND WARRANTIES..................38 10.1 Due Organization, Authorization, etc.................39 10.2 Certain Agreements..................39 10.3 Financial Information; Financial Condition.......39 10.4 Litigation and Contingent Obligations................41 10.5 Liens..................42 10.6 Absence of Default..................42 10.7 Plans and Welfare Plans..................43 10.8 Investment Company Act..................43 10.9 Regulations G, U and X..................43 10.10 Proceeds..................43 10.11 Confirmation of Warranties in Purchase Agreement...43 10.12 Insurance..................44 10.13 Material Disruptions..................44 10.14 Patents, Trademarks, etc..................44 10.15 Ownership of Properties; Property Schedule.......44 10.16 Business Locations; Trade Names..................45 10.17 Accuracy of Information..................45 10.18 Subsidiaries..................45 10.19 Hazardous Materials..................45 10.20 Agent's Fees..................45 10.21 Taxes..................46 10.22 Securities Laws..................46 10.23 Governmental Authorizations..................46 10.24 Compliance with Laws..................47 10.25 Employees and Labor..................47 10.26 Purchase..................47 10.27 Assignment of Claims Act..................48 10.28 Bulk Sales Notices..................48 SECTION 11 COVENANTS..................48 SECTION 11A AFFIRMATIVE COVENANTS..................48 11A.1 Reports, Certificates and Other Information..48 11A.1.1 Audit Report..................48 11A.1.2 Quarterly Reports..................49 11A.1.3 Monthly Reports...................49 11A.1.4 Business Plan..................49 11A.1.5 Compliance Certificates..................50 11A.1.6 Auditors' Materials..................50 11A.1.7 Reports to SEC and to Shareholders..................50 11A.1.8 Notice of Default, Litigation, License and ERISA Matters..................50 11A.1.9 Insurance Reports..................51 11A.1.10 Information Concerning Subsidiaries..................51 11A.1.11 List of Officers and Directors..................51 11A.1.12 Weekly Reports..................51 11A.1.13 Borrowing Certificate..................51 11A.1.14 Notice of Triggering Event..................52 11A.1.15 Other Information..................52 11A.2 Corporate Existence; Foreign Qualification......52 11A.3 Books, Records and Inspections..................52 11A.4 Insurance..................52 11A.5 Taxes and Liabilities..................53 11A.6 Current Ratio..................53 11A.7 Adjusted Net Worth..................53 11A.8 Plans and Welfare Plans..................54 11A.9 Collateral Documents..................54 11A.10 Compliance with Laws..................54 11A.11 Maintenance of Permits..................54 11A.12 Lender as Observer..................55 11A.13 Opcom Warrant..................55 11A.14 Title Policy..................55 11A.15 Subsidiary Mortgages..................55 SECTION 11B NEGATIVE COVENANTS..................56 11B.1 Working Capital..................56 11B.2 Net Cash Ratio..................56 11B.3 Total Liabilities Ratio..................56 11B.4 Annual Interest Coverage Ratio..................57 11B.5 Quarterly Interest Coverage Ratio..................57 11B.6 Purchase, Redemption, Dividend, Interest and Payment Restrictions..................58 11B.7 Gross Capital Expenditures..................59 11B.8 Guaranties, Loans, Advances or Investments..................59 11B.9 Mergers, Consolidations, Sales..................60 11B.10 Leases..................60 11B.11 Unconditional Purchase Obligations.............61 11B.12 Regulations G, U and X..................61 11B.13 Subsidiaries..................61 11B.14 No Amendment of Certain Documents..............61 11B.15 Other Agreements..................61 11B.16 Business Activities..................61 11B.17 Transactions with Affiliates..................61 11B.18 Environmental Liabilities..................62 11B.19 Indebtedness..................62 11B.20 Liens..................62 11B.21 Compensation..................63 SECTION 12 CONDITIONS..................63 12.1 Effectiveness of this Agreement..................63 12.1.1 No Default..................63 12.1.2 Warranties and Representations..................63 12.1.3 Litigation..................64 12.1.4 Fees..................64 12.1.5 Documents..................64 12.1.6 Legality..................66 12.2 All Loans..................66 12.2.1 No Default; Reaffirmation of Warranties and Representations..................66 12.2.2 Litigation; Adverse Changes..................66 12.2.3 Minimum Loan Balance..................67 12.3 Extensions of Working Capital Commitment.........67 SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT.........67 13.1 Events of Default..................67 13.1.1 Non-Payment of Loans..................67 13.1.2 Non-Payment of Fees, etc..................68 13.1.3 Non-Payment of Other Indebtedness............68 13.1.4 Other Material Obligations..................68 13.1.5 Bankruptcy, Insolvency, etc..................68 13.1.6 Non-compliance with Certain Provisions.......69 13.1.7 Non-compliance with Other Provisions.........69 13.1.8 Warranties and Representations..................69 13.1.9 Plans..................70 13.1.10 Related Documents..................70 13.1.11 Collateral..................70 13.1.12 Change in Ownership..................70 13.1.13 Litigation..................70 13.2 Effect of Event of Default..................71 SECTION 14 GENERAL..................71 14.1 Waiver; Amendments..................71 14.2 Confirmations..................71 14.3 Notices..................72 14.4 Costs, Expenses and Taxes..................72 14.5 Indemnification..................73 14.6 Confirmation of Collateral Documents..................74 14.7 SUBMISSION TO JURISDICTION..................75 14.8 GOVERNING LAW..................75 14.9 Sales of Notes; Participation..................75 14.10 JURY TRIAL..................76 14.11 Successors and Assigns..................76 SCHEDULES SCHEDULE IRevolving Loan Commitment Reduction Amounts (Section 2.1.1) SCHEDULE IITranche Amounts SCHEDULE IIILocations of Bank Accounts (Section 7.4) SCHEDULE IVLitigation (Section 10.4) SCHEDULE VInsurance (Section 10.12) SCHEDULE VILicense Agreements (Section 10.14) SCHEDULE VIICertain Property of Parent or Borrower (Section 10.15) SCHEDULE VIIIBusiness Locations; Trade Names (Section 10.16) SCHEDULE IXHazardous Materials (Section 10.19) SCHEDULE XBusiness Activities (Section 11B.16) SCHEDULE XIIndebtedness; Liens (Sections 11B.19 and 11B.20) SCHEDULE XIIWelfare Plan Liabilities (Section 10.7) SCHEDULE XIII Employees Subject to Employment Agreements SCHEDULE XIV Employees To Be Insured (Section 11.A.4) SCHEDULE XV Subsidiaries (Section 10.18 and Section 11B.13) SCHEDULE XVI Compensation (Section 11B.21) EXHIBITS EXHIBIT A Revolving Note (Section 3.1) EXHIBIT B Working Capital Note (Section 3.2) EXHIBIT C Working Capital Commitment Extension Request (Section 2.2) EXHIBIT D Bank Agency Agreement (Section 6.1(a)) EXHIBIT D-2 Opcom Bank Agency Agreement (Section 6.1(a)) EXHIBIT E Insurance Assignment (Section 9.1.3) EXHIBIT F Borrower Security Agreement (Section 9.1.1) EXHIBIT G-1 Borrower Pledge Agreement (U.S. Stock) (Section 9.1.1) EXHIBIT G-2 Borrower Pledge Agreement (Mexican Stock) (Section 9.1.1) EXHIBIT H Form of Borrower Mortgage (Section 9.1.2) EXHIBIT I Subsidiary Security Agreement (Section 9.2.1) EXHIBITS J-1 and J-2 Subsidiary Mortgages (Section 9.2.2) EXHIBIT K Warrant Agreement (Section 9.3) EXHIBIT L Compliance Certificate (Section 11A.1.5) EXHIBIT M Opinion of Hewitt & Hewitt, Inc., counsel for Borrower (Section 12.1.6(l)) EXHIBIT N Borrowing Certificate (Section 11A.1.13) AMENDED AND RESTATED SECURED CREDIT AGREEMENT THIS AMENDED AND RESTATED SECURED CREDIT AGREEMENT (this "Agreement"), dated as of January 20, 1994, is entered into between OPTEK TECHNOLOGY, INC., a Delaware corporation (the "Borrower") and HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC., a Delaware corporation (the "Lender"). BACKGROUND 1. On July 1, 1988, Optron, Inc., a Texas corporation ("Optron"), Borrower, and Lender entered into a Secured Credit Agreement (such Secured Credit Agreement as amended by the First Amendment, dated as of January 16, 1989, the Second Amendment, dated as of January 24, 1989, the Third Amendment, dated as of January 31, 1991, and the Fourth Amendment, dated as of November 27, 1991, being herein referred to as the "Original Credit Agreement"; the other capitalized terms used herein shall have the meanings set forth in Section 1 unless otherwise defined herein) pursuant to which Lender made working capital loans and reducing revolving loans. 2. Pursuant to the Third Amendment, the Lender made available to Borrower the Delco-Remy Revolving Loan Commitment pursuant to which it made the Delco-Remy Revolving Loans. 3. Pursuant to the Fourth Amendment, the Lender made available to Opcom the Opcom Revolving Loan Commitment and the Opcom Working Capital Commitment for which Borrower was jointly and severally liable. 4. Borrower desires that the Original Credit Agreement be amended and restated to, among other things: (i) combine the Delco-Remy Revolving Loan Commitment, the Opcom Revolving Loan Commitment, the Opcom Working Capital Commitment and the Revolving Loan Commitment established by the Original Credit Agreement into one reducing revolving loan facility, (ii) extend the Working Capital Commitment, and (iii) revise the financial covenants applicable to Borrower. 5. As security for the loans made or to be made by Lender to, or for the account of, Borrower, Borrower and each of its Subsidiaries has granted to Lender a lien on, and a security interest in, all of its assets. Accordingly, in consideration of the mutual agreements contained herein, and subject to the terms and conditions hereof, the Original Credit Agreement is amended and restated in its entirety, and the parties hereto agree, as follows: SECTION 1 CERTAIN DEFINITIONS. SECTION 1.1 Certain Definitions. When used herein the following terms shall have the following meanings: Account shall have the meaning provided in the Uniform Commercial Code as from time to time in effect in any applicable jurisdiction. Account Debtor shall mean any Person obligated on or under any Account or General Intangible. Acquired Assets shall have the meaning provided therefor in the Purchase Agreement. Adjusted Net Worth shall mean, at any date, (a) $1,000,000, plus (b) Net Income plus depreciation and amortization expenses, to the extent that the same are deducted from net revenues in determining Net Income, for the period beginning on the Amended and Restated Closing Date to and including the date of calculation (treating such period as one accounting period), less (c) all payments pursuant to Section 11B.6(ii) made by Borrower during the period beginning on the Amended and Restated Closing Date and ending on the date of calculation and less (d) unless subtracted in determining Net Income and without double counting, all amounts paid by Borrower and its Subsidiaries to purchase, redeem or otherwise acquire any shares of Borrower's capital stock. Nothing contained herein shall be deemed to permit Borrower or any of its Subsidiaries to take any action otherwise prohibited by this Agreement. Adjusted Operating Profit shall mean, for any period, Net Income for such period before deduction of any amount which, in conformity with GAAP, would be set forth opposite the caption "income tax expense" (including deferred income taxes) (or any like caption) on a consolidated income statement of Borrower and its Subsidiaries for such period, less any amount which, in conformity with GAAP, would be set forth opposite the caption "extraordinary pre-tax gain" (or any like caption) on such an income statement, plus Interest Expense for such period, plus an amount which, in conformity with GAAP, would be set forth opposite the caption "depreciation and amortization expenses" (or any like caption) (including, without limitation, amortization of Intangible Assets) on such an income statement for such period, to the extent the same are deducted from consolidated net revenues, in conformity with GAAP, in determining Net Income for such period. Affiliate of any Person shall mean (i) any director (or Person holding the equivalent position) or officer (or Person holding the equivalent position) of such Person or of any Affiliate of such Person, and (ii) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be (a) "controlled by" any other Person if such other Person possesses, directly or indirectly, power (i) to vote 10% or more of the securities having at the time of any determination hereunder voting power for the election of directors of such Person; or (ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; or (b) "controlled by" or "under common control with" such other Person if such other Person is a member of the immediate family of such Person or is the executor, administrator, or other personal representative of such Person. Agent Bank shall mean any bank serving in the capacity of agent for Lender under the Bank Agency Agreements. Amended and Restated Closing Date shall mean January 20, 1994. Applicable Margin shall mean, with respect to Revolving Loans in Tranche Three, 3.5%; Tranche Five, 4.5%; and Tranche One, 3.5%. Applicable Rate - see Section 4.6(a). Assumed Liabilities shall have the meaning provided therefor in the Purchase Agreement. Bank Agency Agreement - see Section 6.1(a). Borrower - see Preamble. Borrower Bank Agency Agreement - see Section 6.1(a). Borrower Mortgages - see Section 9.1.2. Borrower Pledge Agreement - see Section 9.1.1. Borrower Security Agreement - see Section 9.1.1. Borrowing Certificate - see Section 11A.1.13. Business Day shall mean any day of the year (other than any Saturday or Sunday) on which the Federal Reserve Bank is open for business in Chicago, Illinois. Cash Equivalents shall mean any or all of the following: obligations of, or guaranteed as to interest and principal by, the United States Government maturing within 90 days after the date on which such obligations are purchased; open market commercial paper of any corporation (other than Borrower or any of its Affiliates) incorporated under the laws of the United States of America or any State thereof or the District of Columbia rated "Prime-1" or its equivalent by Moody's Investors Service Inc. or "A-1" or its equivalent by Standard & Poor's Corporation; or certificates of deposit maturing within 180 days after the issuance thereof issued by commercial banks organized under the laws of the United States of America or of any political subdivision thereof and which are either (a) fully insured by the Federal Deposit Insurance Corporation or (b) issued by banks (i) having a combined capital and surplus in excess of $500,000,000 or (ii) being one of the four domestic banks having the largest combined capital and surplus among banks having their principal offices in Chicago, Illinois. Cash Instruments shall mean all cash, checks, drafts and other similar writings for the payment of money. Collateral shall mean all property and/or rights on or in which a Lien or security interest is granted to Lender (or to any agent, trustee or other party acting on behalf of Lender) pursuant to this Agreement or any of the Collateral Documents or any other instruments or documents provided for herein or therein or delivered or to be delivered hereunder or thereunder or in connection herewith or therewith. Collateral Documents shall mean the Borrower Security Agreement, the Operating Account Agreement, the Subsidiary Security Agreement, the Borrower Mortgages, the Subsidiary Mortgages, the Insurance Assignment, the Bank Agency Agreement, the Borrower Pledge Agreement and any and all other documents provided for in Section 9 or pursuant to which a Lien is granted to Lender (or to any agent, trustee, or other party acting on behalf of Lender) as security for any of the Liabilities, as the same may be amended, modified or supplemented from time to time. Collected Balances - see Section 6.1(d). Commitment and Commitments - see the last paragraph of Section 2.1. Compliance Certificate - see Section 11A.1.5. Contingent Obligation as to any Person shall mean the undrawn face amount of any letters of credit issued for the account of such Person and shall also mean any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends, letters of credit or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the obligee under any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the obligee under such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation or, where such Contingent Obligation is specifically limited to a portion of any such primary obligation, that portion to which it is limited or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. Contractual Obligation of any Person shall mean any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. Controlled Group shall mean Borrower and any corporation, trade or business that is, along with Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses as described in sections 414(b) and 414(c), respectively, of the Internal Revenue Code of 1986, as amended. Current Assets shall mean, at any date, the amount which, in conformity with GAAP, would be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of Borrower and its Subsidiaries at such date, less cash, Cash Instruments, and Cash Equivalents. Current Liabilities shall mean, at any date, the amount which, in conformity with GAAP, would be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of Borrower and its Subsidiaries at such date, less any portion thereof attributable to the Notes, leases which have been, or, in accordance with GAAP, should be, recorded as capitalized leases and any other Indebtedness permitted hereunder. Current Ratio shall mean, at any date, the ratio on such date of (x) Current Assets (excluding Intangible Assets) to (y) Current Liabilities. Delco-Remy Loan Commitment shall have the meaning given to such term in the Original Credit Agreement. Delco-Remy Revolving Loan shall have the meaning given to such term in the Original Credit Agreement. Division has the meaning assigned to such term in the Original Credit Agreement. Dollar(s) and the sign "$" shall mean lawful money of the United States of America. Employment Agreements shall mean those certain Employment Agreements in existence as of the Amended and Restated Closing Date by and between Borrower and those persons listed in Schedule XIII, together with any amendments, modifications and supplements to any thereof as may be permitted by this Agreement. ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute or similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. Event of Default shall mean any of the events described in Section 13.1. Fiscal Quarter of Borrower shall mean a period of three consecutive Reporting Periods, commencing, in the case of the first Fiscal Quarter, on the first day of such Person's Fiscal Year, and in the case of each succeeding Fiscal Quarter, on the day following the end of the preceding Fiscal Quarter. Fiscal Year of Borrower shall mean a period of 52 or 53 weeks, as applicable, commencing on the first day following the last Friday in October of each calendar year and ending on the last Friday in October of the subsequent calendar year. Fixed Rate Loan - see Section 2.3. Floating Rate Loan - see Section 2.3. Force Majeure shall mean acts of God, acts of public enemies, insurrections, riots, civil disturbances, strikes, boycotts, other direct consequences of a labor dispute, other industrial disturbances, fires, explosions, floods, epidemics, quarantine restrictions, shortages of materials, equipment or transportation, freight embargoes, power or utility failures, orders or acts, or failures to act, of civil or military authority or other similar causes beyond the control of Borrower. Fourth Amendment shall mean the Fourth Amendment to Secured Credit Agreement dated as of November 27, 1991 among Borrower, Opcom and Lender. GAAP shall mean generally accepted accounting principles in the United States of America as in effect from time to time. General Intangible shall mean any of a Person's "general intangibles", as defined in the Uniform Commercial Code as from time to time in effect in any applicable jurisdiction. Gross Capital Expenditures shall mean, for any period, the total of all expenditures incurred by Borrower and its Subsidiaries in respect of the purchase or other acquisition of fixed or capital assets during such period, without any deduction for trade-ins, salvage values, resales or similar recoveries, including the amount which in accordance with GAAP is or should be initially posted to Borrower's consolidated balance sheet with respect to leases entered into during such period which have been, or, in accordance with GAAP, should be, recorded as capitalized leases. Hazardous Material shall mean and include (i) any asbestos, PCBs or dioxins, or insulation or other material composed of or containing asbestos, PCBs or dioxins or (ii) any hazardous, toxic or dangerous waste, substance or material defined as such in (or for purposes of) the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), any so-called "Superfund" or "Superlien" law, or any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. Household Loan Receipt Account - See Section 6.1(b) Household Loan Receipt Account Agreement - See Section 6.1(a). Indebtedness of a Person shall mean (a) indebtedness of such Person for borrowed money, (b) indebtedness of such Person for the deferred purchase price of services or property, excluding trade payables incurred in the ordinary course of business, (c) obligations of such Person under leases which have been, or, in accordance with GAAP, should be, recorded as capitalized leases, (d) indebtedness of such Person arising under acceptance facilities, (e) obligations of such Person with respect to judgments, awards or decrees and (f) indebtedness of such Person consisting of unpaid reimbursement obligations in respect of all drawings under letters of credit issued for the account of such Person (including, without limitation, with respect to each of the foregoing clauses (a) through (f), any such indebtedness or obligation which is non-recourse to the credit of such Person but is secured by assets of such Person). Indebtedness shall not include the liability of any Person for judgments, awards or decrees (i) to the extent that such Person is fully insured and with respect to which the insurer has assumed responsibility in writing, (ii) to the extent that such Person is fully indemnified (upon terms and by creditworthy indemnitors which are satisfactory to Lender) or (iii) which have been in force for less than the applicable period for filing an appeal so long as execution is not levied thereunder (or in respect of which such Person shall at the time in good faith be prosecuting an appeal or proceeding for review and in respect of which a stay of execution or appropriate appeal bond shall have been obtained pending such appeal or review). Insurance Assignment - see Section 9.1.3. Intangible Assets of any Person shall mean licenses, franchises, patents, patent applications, trademarks, computer software rights, goodwill and research and development expense or other like intangibles shown on the consolidated balance sheet of such Person. Interest Coverage Ratio Number 1 shall mean, for any period, the ratio of (a) the excess of (i) Adjusted Operating Profit for such period over (ii) the aggregate amount incurred by Borrower and its Subsidiaries during such period on account of Gross Capital Expenditures to (b) Interest Expense for such period. Interest Coverage Ratio Number 2 shall mean, for any period, the ratio of (a) Adjusted Operating Profit for such period to (b) Interest Expense for such period. Interest Expense shall mean, for any period, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" (or any like caption) on an income statement of Borrower and its Subsidiaries for such period. Lease Obligations of any Person shall mean, at any date, the rental commitments of such Person under leases for real and/or personal property (including taxes, insurance, maintenance and similar expenses which such Person is obligated to pay under the terms of said leases) on such date, whether or not such obligations are reflected as liabilities or commitments on a balance sheet of such Person or in the notes thereto, excluding, however, obligations under leases which have been, or, in accordance with GAAP, should be, recorded as capitalized leases. Lender - see Preamble. Lender Party - see Section 14.5. Liabilities shall mean (i) all obligations to Lender and its successors and assigns of Borrower or any of its Subsidiaries under or in connection with this Agreement, any Note, or the other Related Documents, (ii) all other obligations of Borrower or any of its Subsidiaries to Lender, in each case howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, and whether or not arising out of or in connection with this Agreement, any Note, or any of the other Related Documents, and (iii) all other obligations of Borrower or any of its Subsidiaries to Lender and its successors and assigns in connection with the Related Transactions. Lien shall, when used with respect to any Person, mean any interest in any real or personal property, asset or other right held, owned or being purchased or acquired by such Person for its own use, consumption or enjoyment in its business which secures payment or performance of any obligation and shall include any mortgage, lien, pledge, encumbrance, charge, retained security title of a conditional vendor or lessor, or other security interest of any kind, whether arising under a security agreement, mortgage, deed of trust, chattel mortgage, assignment, pledge, retention of security title, financing or similar statement or notice or arising as a matter of law, judicial process or otherwise. Loans and Loan - see the last paragraph of Section 2.1. Lockbox(es) - see Section 6.1(b). Master Account(s) - see Section 6.1(b). Material Licensing Agreement - see Section 10.14. Maximum Rate - shall mean the maximum lawful rate of interest (if any) permitted by applicable usury laws, which rate shall change when and as such laws change, to the extent permitted by such laws, effective on the day such change in law becomes effective. Mexican Subsidiaries - shall mean Optron de Mexico and Semiconductores Opticos, S.A. de C.V. Net Cash Generated shall mean, for any period, an amount equal to (a) Adjusted Operating Profit for such period, less (b) Gross Capital Expenditures incurred during such period, plus (c) the amount of any reduction (or minus the amount of any increase) in Working Capital in such period. Net Income shall mean, for any period, consolidated net income or loss of Borrower and its Subsidiaries as it would appear on an income statement of Borrower and its Subsidiaries for such period prepared in accordance with GAAP, less, to the extent not subtracted from gross income in computing net income, the amounts paid or payable under Sections 11B.6(i) and, if paid or payable by Borrower or any of its Subsidiaries to any Affiliate of Borrower (other than Borrower and its Subsidiaries), 11B.6(iii). Note and Notes shall mean the Revolving Note and the Working Capital Note, or any of them. Opcom shall mean OTX Corporation (formerly Opcom, Inc.), a Texas corporation and a partially-owned Subsidiary of Borrower. Opcom Bank Agency Agreement - see Section 6.1(a). Opcom Revolving Loan shall have the meaning given to such term in the Original Credit Agreement. Opcom Revolving Loan Commitment shall have the meaning given to such term in the Original Credit Agreement. Opcom Working Capital Commitment shall have the meaning given to such term in the Original Credit Agreement. Operating Account(s) - see Section 6.1(b). Optek International shall mean Optek International Inc., a Texas corporation and a wholly-owned Subsidiary of Borrower. Optron de Mexico - shall mean Optron de Mexico, S.A. de C.V. Original Closing Date shall mean July 14, 1988. Original Credit Agreement - see Background. PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. Permitted Exceptions shall mean (i) Liens for taxes not yet due and payable or for installments of special assessments not yet due and payable, (ii) easements, covenants, conditions and restrictions of record which are not violated by existing uses or improvements, do not interfere with the use of the related property and do not adversely affect the merchantability of the title to the related property, and (iii) such other matters as Lender may approve in writing. Permitted Liens - see Section 11B.20. Person shall mean any natural person, corporation, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity. Plan shall mean a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which Borrower or any corporation, trade or business that is, along with Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in sections 414(b) and 414(c), respectively, of the Internal Revenue Code of 1986, as amended, or section 4001 of ERISA may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. Purchase shall mean the transactions contemplated by the Purchase Agreement. Purchase Agreement shall mean that certain Agreement of Purchase and Sale dated as of May 25, 1988 between Optron, Inc. and TRW Inc., together with all schedules thereto and the Disclosure Packages (as defined therein) delivered thereunder and as hereafter amended, modified or supplemented as permitted by this Agreement. Purchase Documents shall mean the Purchase Agreement and any other instrument, document or agreement executed in connection therewith, together with all amendments, modifications and supplements thereto permitted by this Agreement. Redeployment Rate shall mean, when used to calculate any amount payable under Section 6.6 in connection with the repayment of a Fixed Rate Loan, the rate of interest (expressed as an annual rate) equal to the Applicable Margin plus the simple average of the yields to maturity, rounded to three decimal places, published for the direct obligations of the United States in an amount closest to the amount being repaid and with a remaining term closest to the applicable Remaining Term in The Wall Street Journal on each of the five Business Days prior to the date of repayment; provided, however, that if The Wall Street Journal shall not have published such a yield to maturity on any day, such yield to maturity shall be the arithmetic mean of the secondary market yield to maturity implicit in bids of three primary United States government securities dealers in New York City or Chicago selected by Lender as of approximately 3:30 p.m., New York City time, on that day for the issue of United States Treasury instruments with the remaining term closest to the applicable Remaining Term. Reference Rate shall mean at any time the rate per annum then most recently announced by The First National Bank of Chicago, a national banking association, as its corporate base rate at Chicago, Illinois (or if such rate is not being quoted, the rate which is the successor to such rate, and if no successor is being quoted, the rate conceptually equivalent to such rate which the domestic commercial bank having the highest combined capital and surplus of any bank having its principal office in Chicago, Illinois is quoting). Related Documents shall mean the Notes, the Employment Agreements, the Collateral Documents, the Warrant, the Senior Management Agreements and the Purchase Documents. Related Transactions shall mean all transactions contemplated by the Original Credit Agreement, this Agreement and the Related Documents, including, without limitation, the Purchase, the Loans, and the granting by Borrower and its Subsidiaries of Liens on the Collateral to secure the Liabilities. Remaining Term shall mean, with respect to any Fixed Rate Loan, the period from and including the date of repayment to but excluding the scheduled maturity date for such Loan or any portion thereof. Reportable Event shall have the meaning given to such term by ERISA. Reporting Period shall mean a period of four or five weeks, as applicable, with two such consecutive four week periods commencing on the first day of a Fiscal Quarter and one five week period commencing on the day after the last day of the second such fiscal period, except that in Fiscal Years containing 53 weeks, the last Reporting Period in the Fiscal Year shall contain six weeks. Requirement of Law for any Person shall mean the corporate charter and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule, ordinance or regulation or determination of an arbitrator or a court of other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. Revolving Loan - see Section 2.1.1. Revolving Loan Commitment - see Section 2.1.1. Revolving Loan Commitment Reduction Amount - see Section 6.2(a). Revolving Loan Commitment Reduction Date shall mean each date indicated as such in Schedule I or, if such date is not a Business Day, the next succeeding Business Day. Revolving Loan Termination Date - see Section 2.1.1. Revolving Note - see Section 3.1. Scheduled Reduction in the Revolving Loan Commitment for any period shall mean the amount set forth in the lower portion of Schedule I opposite any date which falls within such period. Seller shall mean TRW Inc. Senior Management Agreements - see Section 11B.6(i). Subsidiary shall mean a corporation of which the indicated Person and/or its other subsidiaries, individually or in the aggregate, own, directly or indirectly, such number of outstanding shares as have at the time of any determination hereunder more than 50% of voting power for the election of directors (or their equivalent under the laws of the jurisdiction of organization of such corporation). Subsidiary Mortgages - see Section 9.2.2. Subsidiary Security Agreement - see Section 9.2.1. Third Amendment shall mean the Third Amendment to Secured Credit Agreement dated as of January 31, 1991 between Borrower and Lender. Total Fixed Charges shall mean, for any period, the sum of (i) all scheduled or accelerated payments of interest or principal on account of Indebtedness of Borrower and its Subsidiaries, including any and all penalties, premiums, prepayment fees or the like thereon (including without limitation any Scheduled Reduction in the Revolving Loan Commitment, whether or not such reduction gives rise to a payment of any Loans) with respect to such period, plus (ii) taxes paid or payable with respect to such period and which are of a type included in Net Income in determining Adjusted Operating Profit, plus (iii) amounts paid or payable by Borrower and its Subsidiaries under Section 11B.6(ii) with respect to such period, plus (iv) to the extent not subtracted in determining Net Income and without double counting, all amounts paid by Borrower and its Subsidiaries with respect to such period (A) to purchase, redeem or otherwise acquire any of Borrower's capital stock or (B) in respect of the purchase of or satisfaction of any principal installment on any Indebtedness of Borrower or any Affiliate of Borrower. Nothing contained herein shall be deemed to permit Borrower or any Subsidiary thereof to take any action otherwise prohibited by this Agreement. For purposes of the foregoing, "scheduled or accelerated payments" shall not include (A) repayments of Loans pursuant to clauses sixth or seventh of the last paragraph of Section 6.1(d), or (B) repayments of Loans following any reductions or termination of the Commitments pursuant to Section 6.2(b) or 6.3. Total Liabilities at any date shall mean the sum of (i) the amount which, in conformity with GAAP, would be set forth opposite the caption "liabilities" (or any like caption) on a consolidated balance sheet of Borrower and its Subsidiaries at such date, plus (ii) the aggregate amount of Contingent Obligations of Borrower and its Subsidiaries outstanding on such date (other than those which would constitute liabilities under the foregoing clause (i)). Tranche, Tranche One, Tranche Two, Tranche Three, Tranche Four, Tranche Five, and Tranche Six - see Section 4.1. Triggering Event shall mean (i) any consolidation, merger or sale, transfer or other disposition of all or substantially all of Borrower's property, assets or business other than a consolidation or merger of Borrower with a wholly-owned Subsidiary of Borrower, or (ii) any prepayment of the Loans from the proceeds of a public offering or private placement of its equity or debt securities or from any loans or any other refinancing. Type of Loan - see Section 2.3. The two types of Loans under this Agreement are Floating Rate Loans and Fixed Rate Loans. Unmatured Event of Default shall mean any event which, if it continues uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. Warrant - see Section 9.3. Welfare Plan means a "welfare plan", as such term is defined in section 3(i) of ERISA. Working Capital shall mean, at any date, the excess of Current Assets over Current Liabilities as at said date. Working Capital Commitment - see Section 2.1.2. Working Capital Commitment Extension Request - see Section 2.2. Working Capital Loan - see Section 2.1.2. Working Capital Loan Termination Date - see Section 2.1.2. Working Capital Note - see Section 3.2. SECTION 1.2 Accounting and Financial Determinations. Where the character or amount of any asset or liability or item of income or expense is required to be determined, or any accounting computation is required to be made, for the purpose of this Agreement or the Related Documents, such determination or calculation shall be made, to the extent applicable and except as otherwise specified in this Agreement or such Related Document, on a consolidated basis so as to include Subsidiaries of Borrower in each such calculation, and in accordance with GAAP; provided, however, that if any promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions), the initial announcement of which is made after the Closing Date, results in a change in the method of calculation of financial covenants, standards or terms found in Sections 1, 11A or 11B hereof from the method used at the time of preparation of the financial statements referred to in Section 10.3 hereof, the parties hereto agree to enter into good faith negotiations in order to amend such provisions so as to reflect such changes with the desired result that the criteria for evaluating Borrower's financial condition shall be the same after such changes as if such changes had not been made; and provided, further, that until such time as the parties hereto agree upon such amendments, such financial covenants, standards and terms shall be construed and calculated as though such change had not taken place. When used herein, the term "financial statement" shall include the notes and schedules thereto. SECTION 1.3 Cross References; Headings. The words "hereof", "herein" and "hereunder" and words of a similar import when used in this Agreement or in any of the Related Documents shall refer to this Agreement or such Related Document as a whole and not to any particular provision of this Agreement or such Related Document. Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified. Any reference in any Section or definition to any clause is, unless otherwise specified, to such clause of such Section or definition. The various headings in this Agreement and the Related Documents are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such Related Document or any provision hereof or thereof. SECTION 2 COMMITMENTS OF LENDER; PROCEDURES FOR BORROWING. SECTION 2.1 Commitments. Subject to the terms and conditions of this Agreement, Lender agrees: 2.1.1 Revolving Loan Commitment. To make loans to Borrower (herein collectively called the "Revolving Loans" and individually called a "Revolving Loan") on a revolving basis from time to time before October 31, 1998 (herein called the "Revolving Loan Termination Date") in such amounts as Borrower may from time to time request; provided that the aggregate principal amount of all Revolving Loans from time to time outstanding shall not exceed, during any period, the amount set forth in Schedule I (as adjusted pursuant to this Agreement, including pursuant to Section 6.2) applicable to such period and the aggregate principal amount of Revolving Loans in each Tranche shall not exceed, during any period, the amount set forth in Schedule II for such Tranche (as adjusted pursuant to this Agreement, including pursuant to Section 6.2) applicable to such period. Revolving Loans made after the Amended and Restated Closing Date shall be deemed to be in Tranche Six to the extent of availability in Tranche Six, then in Tranche Four to the extent of availability in Tranche Four and then in Tranche Two to the extent of availability in Tranche Two. The foregoing commitment of Lender is herein called the "Revolving Loan Commitment". 2.1.2 Working Capital Commitment. To make loans to Borrower (herein collectively called the "Working Capital Loans" and individually called a "Working Capital Loan"), from time to time before October 31, 1995, or such later date as may be established pursuant to Section 2.2 (herein called the "Working Capital Loan Termination Date") in such amounts as may from time to time be requested by the Borrower; provided that the aggregate principal amount of all Working Capital Loans from time to time outstanding shall not exceed $10,500,000 (or such lesser amount as Borrower shall specify in any notice delivered pursuant to Section 2.2 or Section 6.3) and, provided, further Working Capital Loans shall only be made when there is no availability under the Revolving Loan Commitment. The foregoing commitment of Lender is herein called the "Working Capital Commitment". The Revolving Loan Commitment and the Working Capital Commitment are herein collectively called the "Commitments" and individually called a "Commitment"; and the Revolving Loans and the Working Capital Loans are herein collectively called "Loans" and individually called a "Loan". SECTION 2.2 Extension of Working Capital Loan Termination Date. Borrower may, pursuant to a Working Capital Commitment Extension Request substantially in the form set forth in Exhibit C, delivered to Lender not more than 120, nor less than 45, Business Days prior to the then scheduled Working Capital Loan Termination Date, request Lender to extend all or part (as specified in such Working Capital Commitment Extension Request) of its Working Capital Commitment for an additional period consisting of one Fiscal Year beginning on the day following the then scheduled Working Capital Loan Termination Date. If no Event of Default or Unmatured Event of Default has occurred and is continuing on the date the Working Capital Commitment Extension Request is received by Lender and on the then scheduled Working Capital Loan Termination Date and if Borrower has complied with Section 12.3 hereof, the Working Capital Loan Termination Date shall be so extended, subject to Lender's consent in writing to such extension of its Working Capital Commitment for requests made to extend the Working Capital Loan Termination Date to a date on or after October 31, 1998 which consent may be withheld in Lender's sole and absolute discretion. Lender shall use reasonable efforts to respond within 25 Business Days to any Working Capital Commitment Extension Request made to extend the Working Capital Loan Termination Date to a date on or after October 31, 1998; provided, however, that any failure of Lender to respond to any such Working Capital Commitment Extension Request shall not create any claim against Lender; and provided, further, that failure to respond to any Working Capital Commitment Extension Request made to extend the Working Capital Loan Termination Date to a date on or after October 31, 1998 shall have the effect of denying such Working Capital Commitment Extension Request. SECTION 2.3 Various Types of Loans. As specified in Section 4, a certain portion of the outstanding principal amount of the Loans may bear interest at a rate which is fixed as of a date prior to the making thereof. Such portion of the principal amount of the Loans is herein called a "Fixed Rate Loan". The Loans, to the extent that the interest rate payable thereon is not so fixed and during any period when such interest rate is not so fixed, are herein collectively called "Floating Rate Loans" and individually called a "Floating Rate Loan". SECTION 2.4 Loan Requests; Deemed Loans. (a) Borrower shall give notice (which may be oral and shall be confirmed in writing on the fifteenth day of the next month by delivery of a Borrowing Certificate to Lender) of each proposed borrowing by 10:00 a.m., Chicago time on the day of, or within 5 Business Days prior to, the proposed date of such borrowing. Each notice given pursuant to this Section shall be irrevocable. Each such notice shall specify the date, amount and type of borrowing. Subject to receipt by Lender of the documents required under Section 11 with respect to such borrowing and the satisfaction of all other conditions precedent to such borrowing, on the requested borrowing date Lender shall pay over such funds by wire transfer to the Household Loan Receipt Account maintained by Borrower at Household Bank. Each borrowing shall be on a Business Day and shall be in an aggregate amount of at least $100,000 and in an integral multiple of $5,000. (b) Notwithstanding any provision herein to the contrary, if at any time or from time to time any interest or fee is due and payable hereunder and the Collected Balances, applied in the order set forth in Section 6.1(d), are not sufficient to pay such interest or fee in full, Borrower shall be deemed to have given the notice required by clause (a) of this Section 2.4 (and to have made all of the representations set forth in a Borrowing Certificate) of a proposed borrowing in the amount necessary to pay the remainder of such interest or fee, and Lender shall be deemed to have made a Loan to Borrower in such amount, which Loan will be deemed to have been used by Borrower to pay the remainder of such interest or fee. Such Loan shall be deemed to have been a Revolving Loan to the extent of availability of the Revolving Loan Commitment and otherwise shall be deemed to have been a Working Capital Loan. SECTION 2.5 Certain Waivers. Borrower waives presentment, demand for payment, notice of dishonor and protest, notice of the creation of any of the Liabilities and all other notices whatsoever to Borrower with respect to the Liabilities except notices required under Section 13.1. The obligations of Borrower under this Agreement and the Related Documents shall not be affected by (i) the failure of Lender, its successors or assigns, any Lender Party or any holder of any Note or any of the Liabilities to assert any claim or demand or to exercise or enforce any right, power or remedy against Borrower, the Collateral or otherwise, (ii) any extension or renewal for any period (whether or not longer than the original period) or exchange of any of the Liabilities or the release or compromise of any obligation of any nature of any Person with respect thereto, (iii) the surrender, release or exchange of all or any part of any property (including without limitation the Collateral) securing payment and performance of any of the Liabilities or the compromise or extension or renewal for any period (whether or not longer than the original period) of any obligations of any nature of any Person (other than, prior to any Event of Default, any Account Debtor) with respect to any such property, and (iv) any other act, matter or thing which would or might, in the absence of this provision, operate to release, discharge or otherwise prejudicially affect the obligations of Borrower. SECTION 2.6 Conditions. The making of each Loan shall be subject to the satisfaction of the applicable conditions set forth in Section 12. SECTION 3 NOTES; RECORDKEEPING. SECTION 3.1 Revolving Notes. The Revolving Loans shall be evidenced by a promissory note (herein, as from time to time supplemented, extended or replaced, called the "Revolving Note"), substantially in the form set forth in Exhibit A, with appropriate insertions, dated the Amended and Restated Closing Date, payable to the order of Lender in the initial principal amount of $28,300,000 (or, if less, in the aggregate unpaid principal amount of all of the Revolving Loans) on the Revolving Loan Termination Date. SECTION 3.2 Working Capital Note. The Working Capital Loans shall be evidenced by a promissory note (herein, as such note may be from time to time supplemented, extended or replaced, called the "Working Capital Note") substantially in the form set forth in Exhibit B, with appropriate insertions, dated the date hereof, payable to the order of Lender in the initial principal amount of $10,500,000 (or, if less, in the aggregate unpaid principal amount of all Working Capital Loans hereunder) on the Working Capital Loan Termination Date. SECTION 3.3 Recordkeeping. Lender shall record in its records, or at its option on the schedule attached to each Note, the date and amount of each Loan made thereunder, each repayment thereof, and the other information provided for thereon. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on the applicable Note. The failure so to record any such information or any error in so recording any such information shall not, however, limit or otherwise affect the actual obligations of Borrower hereunder or under the Notes to repay the principal amount of all Loans together with all interest and premium, if any, accruing thereon. SECTION 3.4 Replacement Notes. The Indebtedness evidenced by the Revolving Note shall be, (a) to the extent of $20,300,000 aggregate principal amount of Indebtedness, an extension and restatement of all of the Indebtedness evidenced by the "Second Revolving Note", as executed on November 27, 1991, (b) to the extent of $4,000,000 aggregate principal amount of Indebtedness, an extension and restatement of such amount of Indebtedness evidenced by the Second Delco-Remy Revolving Note, as executed on November 27, 1991, (c) to the extent of $2,000,000 aggregate principal amount of Indebtedness, an extension and restatement of such amount of Indebtedness evidenced by the Opcom Revolving Note, as executed on November 27, 1991, and (d) to the extent of $2,000,000 aggregate principal amount of Indebtedness, an extension and restatement of such amount of Indebtedness evidenced by the Opcom Working Capital Note, as executed on November 27, 1991. The Indebtedness evidenced by the Working Capital Note shall be, to the extent of $6,662,273.00 aggregate principal amount of Indebtedness, an extension and restatement of such amount of Indebtedness evidenced by the Working Capital Note as executed on January 31, 1991, and to that extent the Working Capital Note shall be a replacement and substitute for such Working Capital Note. The execution and delivery of this Agreement, the Revolving Note, the Working Capital Note, and any other document or instrument executed in connection therewith on the Amended and Restated Closing Date shall not be construed (i) to have constituted repayment of any amount of principal or of interest owing on the Loans or (ii) to release, cancel, terminate, or otherwise impair all or any part of any security interest granted to the Lender as collateral for the Liabilities. The "Opcom Note", the "Delco-Remy Note" and the "Second Revolving Note" executed pursuant to the Original Credit Agreement shall be marked with the legend "cancelled by restatement" and attached to the Revolving Note executed on the Amended and Restated Closing Date. The Working Capital Note executed pursuant to the Original Credit Agreement shall be marked with the legend "cancelled by restatement" and attached to the Working Capital Note executed on the Amended and Restated Closing Date. SECTION 4 INTEREST. SECTION 4.1 Tranches; Interest Rates on Revolving Loan. For purposes of calculating interest and other amounts with respect to the Revolving Loans, the Revolving Loans shall at all times be divided into six Tranches as follows: "Tranche One" shall consist of an aggregate principal amount of $2,000,000 of the Revolving Loans outstanding on the Amended and Restated Closing Date; "Tranche Two" shall consist of an aggregate principal amount of $6,000,000 of the Revolving Loans outstanding on the Amended and Restated Closing Date; "Tranche Three" shall consist of an aggregate principal amount of $10,000,000 of the Revolving Loans outstanding on the Closing Date; "Tranche Four" shall consist of an aggregate principal amount of $0 of the Revolving Loans outstanding on the Amended and Restated Closing Date; "Tranche Five" shall consist of an aggregate principal amount of $6,000,000 of the Revolving Loans outstanding on the Amended and Restated Closing Date; and "Tranche Six" shall consist of an aggregate principal amount of $4,300,000 of the Revolving Loans outstanding on the Amended and Restated Closing Date. Except as provided in Section 6.4, repayments of the Revolving Loans shall be applied first to Loans in the Tranche Six, then to Loans in Tranche Five, then to Loans in Tranche Four, then to Loans in Tranche Three, then to Loans in Tranche Two and then to Loans in Tranche One. Any repayment of Revolving Loans in Tranche Five, Tranche Three and Tranche One shall permanently reduce the availability for such Tranche. Subject to Section 4.6, the unpaid principal amount of each Revolving Loan shall bear interest for the period commencing on the date of such Revolving Loan until such Revolving Loan is paid in full, at the rates per annum specified below: (a) the Revolving Loans in Tranche Six shall bear interest at a rate per annum equal to the sum of (i) the Reference Rate from time to time in effect, plus (ii) one and one-half percent (1-1/2%) per annum; (b) each Revolving Loan in Tranche Five shall bear interest at a rate of thirteen and 40/100 percent (13.40%) per annum; (c) the Revolving Loans in Tranche Four shall bear interest at a rate per annum equal to the sum of (i) the Reference Rate from time to time in effect, plus (ii) two percent (2%) per annum; (d) each Revolving Loan in Tranche Three shall bear interest at a rate equal to twelve and 20/100 percent (12.20%) per annum; (e) the Revolving Loans in Tranche Two shall bear interest at a rate per annum equal to the sum of (i) the Reference Rate from time to time in effect, plus (ii) four percent (4%) per annum; and (f) each Revolving Loan in Tranche One shall bear interest at a rate equal to twelve and 34/100 percent (12.34%) per annum; provided, however, that in the event that any principal or interest of any Revolving Loan is not paid when due (whether by acceleration or otherwise), the unpaid principal amount of such Revolving Loan shall bear interest, after the due date of such principal or interest until such principal or interest is paid, at a rate per annum equal to the interest rate applicable to such Revolving Loan under Section 4.1, plus three percent (3%); and provided, further, that in no event shall any Revolving Loan at any time bear interest at a rate in excess of the Maximum Rate. SECTION 4.2 Interest Rate on Working Capital Loans. Subject to Section 4.6, interest on the unpaid principal amount of each Working Capital Loan for the period commencing on the date of such Working Capital Loan until such Working Capital Loan is paid in full shall be paid at a rate per annum equal to the Reference Rate from time to time in effect plus one and one-half percent (1-1/2%) per annum; provided, however, that in the event any principal of or interest on any Working Capital Loan is not paid when due (whether by acceleration or otherwise), the unpaid principal amount of such Working Capital Loan shall bear interest, after the due date of such principal or interest until such principal or interest is paid, at a rate per annum equal to the Reference Rate from time to time in effect (but not less than the Reference Rate in effect at such due date), plus four and three-quarters percent (4-3/4%) per annum; and provided, further, that in no event shall any Working Capital Loan at any time bear interest at a rate in excess of the Maximum Rate. SECTION 4.3 Interest Payment Dates. Accrued interest on each Loan shall be payable on the last day of each month and at maturity, commencing with the first of such dates to occur after the date of the initial Working Capital Loan. After maturity (whether by acceleration or otherwise), accrued interest on all Loans shall be payable on demand. SECTION 4.4 Setting and Notice of Rates. Interest rates hereunder shall be calculated from time to time by Lender and each such calculation of an interest rate shall be conclusive and binding on Borrower in the absence of demonstrable error. SECTION 4.5 Computation of Interest. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days (unless such calculation would cause the rate of interest applicable to such Floating Rate Loan to exceed the Maximum Rate, in which case such rate shall be calculated on the basis of a year consisting of 365 or 366 days). The interest rate applicable to each Floating Rate Loan shall change simultaneously with each change in the Reference Rate. SECTION 4.6 Limitation on Interest. (a) Notwithstanding anything to the contrary contained in this Section 4, if for any period of time interest on any Loan shall be calculated at the Maximum Rate rather than at any other rate which would otherwise be applicable hereunder during such period (hereafter, any "Applicable Rate") and thereafter such Applicable Rate shall become less than the Maximum Rate, the rate of interest payable on such Loan shall be the Maximum Rate until Lender shall have received the amount of interest which Lender would have received on such Loan had the rate of interest payable hereunder on such Loan not been limited to the Maximum Rate during the period the Applicable Rate exceeded the Maximum Rate. (b) It is the intention of the parties hereto to comply with applicable usury laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Agreement, the Notes, or any of the Related Documents, in no event shall this Agreement, the Notes or such Related Documents require the payment or permit the collection of interest, as defined under applicable usury laws, in excess of the Maximum Rate. If any such excess of interest is contracted for, charged or received under this Agreement or any Note, or under the terms of any of the Related Documents, or if the maturity of the indebtedness evidenced by any Note is accelerated in whole or in part, or in the event that all or part of the principal of or interest on any Note shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Agreement, such Note, or under any of the Related Documents, on the amount of principal actually outstanding from time to time under such Note shall exceed the Maximum Rate, then in any such event (i) the provisions of this Section shall govern and control, (ii) Borrower shall not be obligated to pay the Maximum Rate, (iii) any such excess which may have been collected either shall be applied as a credit against the then unpaid principal amount of the Liabilities or refunded to Borrower, at the Lender's option, and (iv) the effective rate of interest shall be automatically reduced to the Maximum Rate. It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under this Agreement, the Notes, or under the Related Documents which are made for the purpose of determining whether such rate exceeds the Maximum Rate shall be made, to the extent permitted by applicable usury laws, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the Notes, all interest at any time contracted for, charged or received from Borrower or otherwise by the holder or holders thereof in connection with the Notes, the Related Documents or this Agreement. SECTION 4.7 Additional Interest. Borrower agrees to pay to Lender additional interest in an amount equal to the difference of (a) the amount of interest which would have accrued on the Loans outstanding under Tranche Two, Tranche Four, Tranche Three and Tranche One during the period from the Amended and Restated Closing Date through the date of the Triggering Event assuming an interest rate of 18% per annum and (b) the actual interest which was payable in respect to such Loans during such period pursuant to Section 4.1. The interest shall be payable concurrently with the occurrence of any Triggering Event (and only if a Triggering Event occurs). SECTION 5 FEES. SECTION 5.1 Revolving Loan Non-Use Fee. Borrower shall pay to Lender a non-use fee for the period from and including January 1, 1994 to but excluding the Revolving Loan Termination Date (or such earlier date on which the Revolving Loan Commitment shall be terminated pursuant to Section 6.2(b) or 13.2 hereof) of one-half of one percent (1/2%) per annum on the daily average of the unused amount of the Revolving Loan Commitment. Such non-use fee shall be payable in arrears on the last day of each March, June, September and December, and on the Revolving Loan Termination Date (or such earlier date on which the Revolving Loan Commitment shall terminate), commencing with the first of such dates to occur after the Amended and Restated Closing Date, for any period then ending for which such fee shall not have been theretofore paid. SECTION 5.2 Working Capital Loan Non-Use Fee. Borrower shall pay to Lender a non-use fee for the period from and including January 1, 1994 to but excluding the Working Capital Loan Termination Date (or such earlier date on which the Working Capital Loan Commitment shall terminate) of one-half of one percent (1/2%) per annum on the excess of (i) the daily average of the Working Capital Loan Commitment, over (ii) the daily average of the aggregate principal amount of outstanding Working Capital Loans. Such non-use fee shall be payable in arrears on the last day of each March, June, September and December and on the Working Capital Loan Termination Date (or such earlier date on which the Working Capital Loan Commitment shall terminate), commencing with the first of such dates to occur after the Amended and Restated Closing Date, for any period then ending for which such fee shall not have been theretofore paid. SECTION 5.3 Closing Fee. On the Amended and Restated Closing Date, Borrower agrees to pay to Lender a closing fee in the amount of $145,500, which fee is not refundable under any circumstances. SECTION 5.4 Computation of Fees. All fees shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days. SECTION 6 ACCOUNTS; REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENT. SECTION 6.1 Accounts. (a) Bank Agency Agreement. Prior to the date of the initial Loan under the Original Credit Agreement, Lender, Borrower and Agent Bank entered into a Bank Agency Agreement substantially in the form of Exhibit D (as heretofore or from time to time hereafter amended, supplemented or modified, the "Borrower Bank Agency Agreement"). Prior to November 27, 1991, Lender, Opcom and Agent Bank entered into an agreement substantially in the form of Exhibit D-2 (as from time to time hereafter amended, supplemented or modified, the "Opcom Bank Agency Agreement" and, together with the Borrower Bank Agency Agreement, each a "Bank Agency Agreement"). Pursuant to the Collateral Documents, including their respective Bank Agency Agreements, each of Borrower and Opcom has granted to Lender a continuing lien upon, and security interest in, its Lockbox, its Master Account, its Operating Account and, in the case of Borrower, the Household Loan Receipt Account, all funds, items, instruments, investments, securities and other things of value at any time paid, deposited, credited or held in any Lockbox, Master Account, Operating Account or the Household Loan Receipt Account (whether for collection, provisionally or otherwise), and all other property of Borrower and Opcom from time to time in the possession or under the control of, or in transit to, Lender, Agent Bank or Household Bank or any agent, bailee or custodian therefor, and all proceeds of all of the foregoing. The Borrower Bank Agency Agreement specifies with respect to Borrower and the Opcom Bank Agency Agreement specifies with respect to Opcom that (i) throughout the term of this Agreement, the Agent Bank shall be pledgee-in-possession (for the benefit of Lender) of the Lockboxes, and the Master Accounts and the Operating Accounts, all Cash Instruments of Borrower and of Opcom, all such funds, items, instruments, investments, securities, things of value, property and proceeds and all lockboxes to which any of the foregoing may be paid, (ii) the Agent Bank or Household Bank shall take such action as shall be specified by written notice from Lender to enable Lender to exercise its rights with respect to such lien and security interest, (iii) the Agent Bank, on behalf of Lender, shall be entitled to exercise all and any rights which Lender may have under this Agreement and the Related Documents or applicable law with respect to the Lockboxes, the Master Accounts, Operating Accounts and the other property and lockboxes and (iv) the Agent Bank shall provide Lender with copies of all statements relating to the Lockboxes, the Master Accounts and the Operating Accounts provided by Agent Bank to Borrower or to Opcom. The depository account agreement with respect to the Household Loan Receipt Account (the "Household Loan Receipt Account Agreement") shall specify such terms and conditions as shall be satisfactory to Lender. (b) (i) Lockboxes, Master Accounts, Operating Accounts and Household Bank Loan Receipt Account. (1) Lockboxes. Each of Borrower and Opcom shall maintain at the applicable Agent Bank the lockbox (individually a "Lockbox" and collectively the "Lockboxes"). (2) Master Accounts. Each of Borrower and Opcom shall maintain the account identified as the "Master Account" of such party in its respective Bank Agency Agreement (herein individually called a "Master Account" and collectively the "Master Accounts"). (3) Operating Accounts. Each of Borrower and Opcom shall maintain the respective controlled disbursement operating account of such party at the Agent Bank described in their respective Bank Agency Agreements (such accounts being herein called individually an "Operating Account" and collectively the "Operating Accounts"). (4) Household Bank Loan Receipt Account. Borrower shall maintain, at all times upon terms and conditions acceptable to Lender, at Household Bank that certain depository account no. 0190045765 in the name of Borrower (the "Household Bank Loan Receipt Account"). The Lockboxes and the Master Accounts shall be under the sole dominion and control of Lender, and neither Opcom nor Borrower shall have any right of withdrawal therefrom. From and after Lender's request, each of Borrower and Opcom shall provide Lender with copies of all statements received from Agent Bank relating to the Lockboxes and the Master Accounts and the Operating Accounts promptly upon (and, in any event, within five days after) their receipt. (c) Proceeds of Collateral; Notices to Account Debtors. Promptly after the date of the initial Loan under the Original Credit Agreement (or, in the case of Opcom, on or prior to November 27, 1991) and from time to time thereafter as any additional Account Debtors shall have become obligated to Borrower or Opcom, Borrower or Opcom, as the case may be, at its sole expense, has in the past and shall in the future send a notice to each Account Debtor indebted to such party stating that all payments are to be made directly to the Lockbox maintained by such party at Agent Bank; provided that (i) such notice may be included in an invoice sent by Borrower or Opcom to such Account Debtor and (ii) no such notice need be sent to an Account Debtor of a type to which Borrower or Opcom does not customarily send an invoice and which owes, or is reasonably expected to owe, an aggregate amount which does not, and is not reasonably expected to, exceed $10,000 during any fiscal year of Borrower or Opcom, as the case may be. If Lender so requests, each of Borrower and Opcom shall, and Lender may, if it so chooses, give each Account Debtor of Borrower and Opcom a notice which shall constitute notification of an assignment of payments effective under Uniform Commercial Code Section 9- 318(1)(b) and (3). In addition, except as otherwise expressly provided to the contrary with respect to insurance proceeds in the Collateral Documents, Borrower and Opcom each shall take all such actions as Lender in good faith deems necessary or appropriate to insure that at all times on and after the date hereof all proceeds of Collateral (including, without limitation, amounts owed by Account Debtors to whom neither Borrower nor Opcom is required to give a notice described in clause (c)) are deposited in the Master Account of the party to which such Collateral pertains. If, notwithstanding the notices and actions provided for in the preceding sentences of this clause (c), either Borrower or Opcom shall receive, or any financial institution shall receive for the account of Borrower or Opcom, any Cash Instruments, Borrower or Opcom (as the case may be) shall, or shall cause such financial institution to, transmit in the form received, before the close of business on the next succeeding Business Day, all such Cash Instruments other than refunds of Mexican taxes payable in pesos (properly endorsed, where required, so that all items delivered may be collected by Agent Bank) to Agent Bank for deposit in the Master Account maintained by such respective party. Neither Borrower nor Opcom shall, or shall permit any such financial institution to, commingle any Cash Instrument so received with the other property of Borrower or Opcom, and shall hold separate and apart from all other property, all such Cash Instruments in express trust for the benefit of Lender until delivery thereof is made to Agent Bank. Pursuant to, and subject to the terms and conditions of, the Bank Agency Agreement, items deposited in the Lockbox maintained by either Borrower or Opcom shall be credited to the Master Account of such party. (d) Application of Funds. At the opening of business on each Business Day, the Agent Bank shall calculate the amount of collected funds on deposit in the Borrower's and Opcom's Master Account (herein, with respect to any day, called the "Collected Balances" for such account for such day). Promptly upon such calculation (and in any event prior to 10:00 a.m., Chicago time on such date), the Agent Bank shall, if no Event of Default shall have occurred and be continuing, (i) to the extent of Collected Balances available to do so, transfer from such Master Account to the Operating Account maintained by the same party such amounts as shall permit all checks drawn on such Operating Account presented for payment at the Agent Bank as of such Business Day and all permitted interbank transfers authorized by such party on such date to accounts of such party at the Banks listed on Schedule III to be honored and leaving a zero balance in such Operating Account after payment and transfer of such items from such Operating Account, and (ii) after acting pursuant to clause (i) above, transfer, in increments of $5,000 or greater the remaining Collected Balances in excess of $300,000 (in the case of Borrower's Master Account) or $50,000 (in the case of Opcom's Master Account), if any, from such Master Account to Lender for application in the order specified below; provided, however, that no such transfer by Agent Bank to Lender need be made if the amount of Collected Balances transferred from such Master Account would be less than $100,000 (in the case of Borrower's Master Account) or $25,000 (in the case of Opcom's Master Account), in which event such Collected Balances shall remain in such Master Account. Any amounts received by Lender pursuant to this clause (d) from the Borrower's or Opcom's Master Account shall be applied to the outstanding Liabilities in the following order of priority: first, to interest then due and payable on the Working Capital Loans; second, to interest then due and payable on the Revolving Loans (in the order of (a) Tranche Six, (b) Tranche Five, (c) Tranche Four, (d) Tranche Three, (e) Tranche Two, and (f) Tranche One); third, to principal of the Working Capital Loans then due and payable; fourth, to principal of the Revolving Loans then due and payable (in the order of (a) Tranche Six, (b) Tranche Five, (c) Tranche Four, (d) Tranche Three, (e) Tranche Two and (f) Tranche One); fifth, to any fees hereunder then due and payable, in such order as Lender may elect; sixth, to the unpaid principal amount of the Working Capital Loans not otherwise due and payable at such time (provided, however, that prior to the termination of the Working Capital Commitment, the unpaid principal amount of the Working Capital Loans shall never be less than $1,000); and seventh, to the unpaid principal amount of the Revolving Loans not otherwise due and payable at such time in the order provided in Section 4.1 (provided, however, that prior to the termination of the Revolving Loan Commitment, the unpaid principal amount of the Revolving Loans shall never be less than $1,000). Any additional amount remaining following the foregoing applications shall be transferred to the Master Account maintained by Borrower. Lender may, in its sole discretion, elect not to apply any such amounts (whether received from Borrower's or Opcom's Master Account) to repayment of Fixed Rate Loans, and any amounts which would, but for such election, have been applied to Fixed Rate Loans may be invested by Lender in such Cash Equivalents as Borrower may direct, with such Cash Equivalents and any proceeds thereof being held by Lender as additional Collateral for the Liabilities. If, at any time, the total Collected Balances in Borrower's Master Account shall be less than $200,000, then, at Lender's election, Borrower shall be deemed to have given the notice required by clause (a) of Section 2.4 (and to have made all of the representations set forth in a Borrowing Certificate) of a proposed borrowing in the amount necessary to increase the total Collected Balances in such account to at least $300,000 but not more than $305,000, and Lender may make a Loan to Borrower in such amount, the proceeds of which shall be deposited in the Borrower's Household Loan Receipt Account for transfer to Borrower's Master Account. Such Loan shall constitute first, a Revolving Loan to the extent of availability of the Revolving Loan Commitment and second, a Working Capital Loan to the extent of availability of the Working Capital Commitment. (e) Application Upon an Event of Default. If an Event of Default shall have occurred and be continuing, and notwithstanding the foregoing clause (d), at the request of Lender, Agent Bank shall from time to time transfer all collected funds in the Master Accounts to Lender for application to the outstanding Liabilities in such order as Lender, in its sole discretion, shall elect. Agent Bank shall be entitled to rely on a statement of Lender to the effect that an Event of Default has occurred and is continuing. SECTION 6.2 Reduction or Termination of the Revolving Loan Commitment. (a) On each Revolving Loan Commitment Reduction Date, the Revolving Loan Commitment in effect on such date shall be reduced by an amount equal to the sum of (i) the Revolving Loan Commitment Reduction Amount, plus (ii) an amount equal to the difference, if any, by which (x) $7,500,000 exceeds (y) (a) the average aggregate principal amount of all Working Capital Loans outstanding for the sixty days prior to such Revolving Loan Commitment Reduction Date plus (b) the Revolving Loan Commitment Reduction Amount provided, however, that prior to the termination of the Revolving Loan Commitment, the Revolving Loan Commitment shall at no time be less than $1,000. For purposes of the foregoing, "Revolving Loan Commitment Reduction Amount" shall mean the amount indicated with respect to the relevant Revolving Loan Commitment Reduction Date in Schedule I under the caption "Scheduled Reduction in Revolving Loan Commitment". Borrower agrees that it will not, in anticipation of any Revolving Loan Commitment Reduction Date, take any actions primarily intended to increase the amount specified in clause (y) above for such date. These actions could include, for example and not by way of limitation, prepaying or accelerating Borrower's trade payables, other obligations or discretionary expenditures or making short term investments (whether with Revolving Loan proceeds, Working Capital Loan proceeds or other available cash). (b) In addition to the mandatory reduction of the Revolving Loan Commitment under clause (a) above, Borrower may voluntarily from time to time on at least two Business Days' prior written irrevocable notice to Lender permanently reduce the amount of the Revolving Loan Commitment or terminate the Revolving Loan Commitment prior to the Revolving Loan Termination Date; provided, however, that no such notice may be given unless, prior to or contemporaneously with the effective date of such reduction or termination, the Working Capital Commitment shall have been terminated pursuant to Section 6.3 or otherwise; and provided, further, that prior to the termination of the Revolving Loan Commitment, the Revolving Loan Commitment shall at no time be less than $1,000. Each such voluntary reduction of the Revolving Loan Commitment shall be in an aggregate amount of at least $1,000,000 and an integral multiple of $1,000,000. The Borrower may terminate the Revolving Loan Commitment only upon payment in full of the Revolving Notes. (c) The Revolving Loan Commitment shall also be automatically reduced by the amount of the excess, if any, of the amount of any proceeds of insurance which Lender shall (at the direction of Borrower pursuant to Section 14(a) of the Security Agreement, or the Subsidiary Security Agreement, or Section 1.7 of any of the Borrower Mortgages) apply to repayment of the Loans over the amount of the associated reduction of the Working Capital Commitment made pursuant to Section 6.3(b); provided, however, that prior to the termination of the Revolving Loan Commitment, the Revolving Loan Commitment shall at no time be less than $1,000. (d) The amount of each reduction of the Revolving Loan Commitment pursuant to either of the foregoing clauses (a)(ii), (b) or (c) shall be subtracted (as an additional reduction of the Revolving Loan Commitment) from the "Amount of Revolving Loan Commitment" set forth in Schedule I opposite each remaining period beginning with the period which includes the date of such reduction; and shall be subtracted from the availability of the Tranches set forth in Schedule II in the following order: Tranche Six, then to Tranche Five, then to Tranche Four, then to Tranche Three, then to Tranche Two, and then to Tranche One. Lender shall deliver to Borrower a copy of Schedules I and II setting forth such revisions, which revised Schedules I and II shall become a part of this Agreement amending any and all previous versions of Schedules I and II. SECTION 6.3 Reduction or Termination of the Working Capital Commitment. (a) Borrower may from time to time on at least two Business Days' prior written irrevocable notice to Lender permanently reduce the amount of the Working Capital Commitment, and such reduction to be in an aggregate amount of at least $1,000,000 and an integral multiple of $1,000,000; provided, however, that prior to the termination of the Working Capital Commitment, the Working Capital Commitment shall at no time be less than $1,000. Borrower may at any time on like notice prior to the Working Capital Loan Termination Date terminate the Working Capital Commitment upon payment in full of the Working Capital Note. (b) The Working Capital Commitment shall also be automatically reduced by the amount of any proceeds of insurance which Lender shall (at the direction of Borrower or Opcom pursuant to Section 14(a) of the Borrower Security Agreement, or the Subsidiary Security Agreement, respectively, or Section 1.7 of any of the Borrower Mortgages) apply to repayment of the Loans; provided, however, that prior to the termination of the Working Capital Commitment, the Working Capital Commitment shall at no time be less than $1,000. SECTION 6.4 Mandatory Prepayments. (a) Borrower agrees that (i) concurrently with each reduction (including any termination) of the Revolving Loan Commitment (whether pursuant to Section 6.2 or otherwise), it shall make a mandatory prepayment of the amount, if any, by which the unpaid principal amount of the Revolving Loans (after giving effect to any repayments thereof pursuant to Section 6.1) exceeds the then reduced amount of the Revolving Loan Commitment (and any such payment shall be accompanied by accrued interest on such principal amount and any payment required under Section 6.6), and (ii) concurrently with each reduction (including any termination) of the Working Capital Commitment (whether pursuant to Section 6.3 or otherwise), it shall make a mandatory prepayment of the amount, if any, by which the unpaid principal amount of the Working Capital Loans (after giving effect to any repayments thereof pursuant to Section 6.1) exceeds the then reduced amount of the Working Capital Commitment (and any such payment shall be accompanied by accrued interest on such principal amount). Repayments made because of a reduction of the Revolving Loan Commitment pursuant to (i) Section 6.2(a)(i) shall be applied to the Tranches which are scheduled to be reduced on such Revolving Loan Commitment Reduction Date as set forth on Schedule II, and (ii) Section 6.2(a)(ii)(c), or (d) shall be applied to Tranche Six, then to Tranche Five, then to Tranche Four, then to Tranche Three, then to Tranche Two, and then to Tranche One. SECTION 6.5 Voluntary Prepayments. Borrower may from time to time prepay the Loans in whole or in part; provided that: (i) any prepayment of Revolving Loans may be made only if at the time of such prepayment the aggregate outstanding principal amount of all Working Capital Loans is $1,000 or zero; and (ii) except for prepayments pursuant to Section 6.1(d), Borrower shall give Lender not less than ten (10) Business Days' prior notice of any prepayment, specifying the Loans to be prepaid, and the date and amount of such prepayment; and (iii) except for prepayments pursuant to Section 6.1(d), each partial prepayment of a Loan shall be in a principal amount of at least $50,000 and an integral multiple of $50,000; and (iv) prior to the termination of the Working Capital Loan Commitment, Borrower shall be entitled to prepay only so much of the Working Capital Loans as shall leave at all times outstanding a minimum principal amount of $1,000 in Working Capital Loans; and (v) prior to the termination of the Revolving Loan Commitment, the Borrower shall be entitled to prepay only so much of the Revolving Loans as shall leave at all times outstanding a minimum principal amount of $1,000 in Revolving Loans; and (vi) all prepayments of Revolving Loans shall be applied first to Tranche Six, then to Tranche Five, then to Tranche Four, then to Tranche Three, then to Tranche Two, and last to Tranche One; and (vii) any such prepayment shall be accompanied by accrued interest on the principal amount prepaid and any amount payable pursuant to Section 6.6 with respect to such principal amount being prepaid. SECTION 6.6 Prepayment of Loans. In the event that any Floating Rate Loan is to be repaid prior to the Revolving Loan Termination Date or the Working Capital Loan Termination Date, as applicable, such repayment shall be without any penalty or premium. In the event that any Fixed Rate Loan is to be repaid on a date prior to the scheduled maturity date of such Loan, Lender shall calculate, as of the date of repayment, the result obtained by discounting to present value at the Redeployment Rate applicable to the principal amount to be so repaid the excess, if any, of (A) the interest which would be required to be paid on that amount pursuant to Section 4.1 for the Remaining Term but for such repayment, over (B) the interest which would accrue on such amount at the Redeployment Rate applicable for such amount for the Remaining Term. Borrower agrees to pay to Lender the amount of the result of such calculation with respect to any Fixed Rate Loan concurrently with the repayment of such Fixed Rate Loan. Solely for the purpose of calculating the payment due under this Section 6.6, it shall be assumed that principal payments with respect to Fixed Rate Loans of any Tranche were applied to the Loans of such Tranche in the order of the respective Redeployment Calculation Dates of such Loans, with Loans having the earliest Redeployment Calculation Dates being deemed to have been paid first. SECTION 7 MAKING OF PAYMENTS; SETOFF. SECTION 7.1 Making of Payments. All payments of principal of, or interest on, the Notes and of all fees and other Liabilities shall be made to Lender in immediately available Dollars. All such payments shall be made to Lender's Account No. 019-0045799 at Household Bank (or such other account as Lender may from time to time specify), not later than 11:30 a.m., Chicago time, on the date due; and funds received after that hour shall be deemed to have been received by Lender on the next following Business Day. Anything in this Agreement to the contrary notwithstanding, under no circumstances shall receipt by Agent Bank of funds of Borrower constitute repayment of Loans. SECTION 7.2 Due Date Extension. If any payment of principal, interest or fees with respect to any of the Loans falls due on a Saturday, Sunday or other day which is not a Business Day, then such due date shall be extended to the next following Business Day, and additional interest or fees, as the case may be, shall accrue and be payable for the period of such extension. SECTION 7.3 Setoff. Borrower agrees that Lender, Agent Bank (as agent of Lender) and any holder of a Note shall have all rights of set-off provided by applicable law, and in addition thereto, Borrower agrees that at any time (a) any payment or amount owing under or in connection with this Agreement or the Related Documents is then due to Lender or any such holder of a Note or (b) any Event of Default exists, Lender (or Agent Bank as Lender's agent) and any such holder of a Note may apply to the payment of such payment or other amount any and all balances, credits, deposits, accounts or moneys of Borrower then or thereafter with Lender (or Agent Bank as Lender's agent) or such holder of a Note. SECTION 7.4 Other Accounts. As security for the Notes and all other Liabilities, Borrower agrees that Borrower and Opcom will maintain their sole operating accounts (i.e., the Operating Accounts) with Agent Bank, and that it will not, and will not permit any of it Subsidiaries to, maintain any bank or similar accounts with any other financial institution other than the Household Loan Receipt Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, Borrower and its Subsidiaries may maintain petty cash accounts, expense accounts, group medical accounts for Borrower and payroll accounts at the financial institutions listed on Schedule III hereto; provided that in all cases (w) the aggregate amount of funds on deposit in each such petty cash account shall not exceed $5,000 and in each such payroll account shall not at any time exceed the sum of all accrued payroll and payroll taxes then payable by Borrower or its Subsidiaries on account of payroll obligations payable from such account, (x) Borrower shall have irrevocably instructed the relevant financial institution, at the request of Lender, to provide Lender with information concerning such accounts, (y) such financial institution shall have acknowledged such instructions in writing for the benefit of Lender, and (z) Borrower shall, at Lender's request, cause each such financial institution to provide Lender with daily reports of the balance in each such account. SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS. SECTION 8.1 Increased Costs. If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority or agency charged with the interpretation or administration thereof, or compliance by Lender with any request or directive (whether or not having the force of law) of any such authority or agency, shall subject Lender to any tax, duty or other charge with respect to, or shall otherwise increase the effective cost of, the Loans or Lender's obligation to make, issue or maintain the Loans, or shall change the basis of taxation of payments to Lender of the principal of or interest on the Loans or any other amounts due under this Agreement in respect of the Loans or Lender's obligation to make the Loans (except for changes in the rate of tax on the overall net income of Lender), or shall impose on Lender any other condition affecting the Loans or the Lender's obligation to make the Loans and the result of any of the foregoing is to increase the cost to Lender of making or maintaining the Loans, or to reduce the amount of any rate of return or any sum received or receivable by Lender under this Agreement or under the Notes with respect thereto, then upon written notice of such occurrence by Lender (which notice shall contain a statement setting forth a description of such occurrence), Borrower shall pay Lender such additional amount or amounts as will compensate Lender for such increased cost or such reduction. SECTION 8.2 Funding Losses. Borrower hereby agrees that upon demand by Lender (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed) Borrower will indemnify Lender against any net loss or expense which Lender may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of funds acquired by Lender to fund or maintain Loans), as reasonably determined by Lender, as a result of any failure of Borrower to borrow any Loan on a date specified therefor in a notice (whether written or oral) of borrowing pursuant to this Agreement. For this purpose, all notices to Lender pursuant to this Agreement shall be deemed to be irrevocable. SECTION 8.3 Discretion of Lender as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, Lender shall be entitled to obtain the funds used by it to fund and maintain all or any part of the Loans in any manner it sees fit. SECTION 8.4 Conclusiveness of Statements; Survival of Provisions. In making the determinations contemplated by this Section 8, Lender may make such estimates, assumptions, allocations and the like that Lender in good faith determines to be appropriate; and, subject to the foregoing clause, determinations and statements of Lender pursuant to this Section 8 shall be conclusive absent demonstrable error. The provisions of this Section 8 shall survive termination of this Agreement. SECTION 9 COLLATERAL SECURITY; WARRANT. SECTION 9.1 Borrower. Except with respect to Section 9.1.3 below, concurrently with or prior to the making of the initial Loan under the Original Credit Agreement, Borrower executed and delivered to Lender the following: 9.1.1 Borrower's Personal Property. A security agreement in the form of Exhibit F covering all personal property of Borrower (herein, as the same may be amended, modified or supplemented from time to time with Lender's prior written consent, called the "Borrower Security Agreement"), and pledge agreements in the forms of Exhibit G-1 (covering stock issued by U.S. companies) and Exhibit G-2 (covering stock issued by Mexican companies), together covering the stock of all direct Subsidiaries of Borrower (herein collectively, as the same or either thereof may be amended, modified or supplemented from time to time with Lender's prior written consent, called the "Borrower Pledge Agreement"). 9.1.2 Borrower's Real Estate. Fee and leasehold mortgages, deeds of trust, deeds to secure debt, assignments of leases and rents, security agreements and fixture filings, covering all real estate owned or leased by Borrower, and substantially in the form of Exhibit H (herein, as the same may be amended, modified or supplemented from time to time with Lender's prior written consent, called the "Borrower Mortgages" and individually called a "Borrower Mortgage"). 9.1.3 Life Insurance. Within 90 days of the Amended and Restated Closing Date, Borrower shall execute and deliver, an assignment, in the form of Exhibit E (herein, as the same may be amended, modified or supplemented from time to time with Lender's prior written consent, called the "Insurance Assignment"), of the "key man" life insurance policies referred to in Section 11A.4. SECTION 9.2 Subsidiaries. Concurrently with or prior to the making of the initial Loan under the Original Credit Agreement, the Subsidiaries of Borrower, listed below shall have executed and delivered to Lender the following: 9.2.1 Personal Property. In the case of Opcom, a security agreement in the form of Exhibit I covering all personal property of Opcom (herein, as the same may be amended, modified or supplemented from time to time with Lender's prior written consent, called the "Subsidiary Security Agreement"). 9.2.2 Real Estate. In the case of each of the Mexican Subsidiaries, (a) Constitutions de Hipoteca Unilateral covering all real estate beneficially owned by such Subsidiary, and substantially in the forms of Exhibits J-1 and J-2, and (b) assignments in form and substance satisfactory to Lender, covering such Subsidiary's beneficial interests in the trusts holding legal title to the real estate covered by such Constitutions de Hipoteca Unilateral (the documents described in the foregoing clauses (a) and (b) may be herein, as the same or any thereof may be amended, modified or supplemented from time to time with Lender's prior written consent, collectively called the "Subsidiary Mortgages" and individually called a "Subsidiary Mortgage"). SECTION 9.3 Warrant. On or prior to the Amended and Restated Closing Date, Borrower shall execute and deliver to the Lender an Amended and Restated Warrant in the form of Exhibit K (herein, as the same may be amended, modified or supplemented from time to time with Lender's prior written consent, called the "Warrant Agreement"). SECTION 9.4 Change of Location or Name. So long as any of the Liabilities shall remain outstanding or Lender shall continue to have any Commitment, neither Borrower nor any of its Subsidiaries will change (a) the location of its principal place of business, chief executive office, major executive office, chief place of business or its records concerning its business and financial affairs, or (b) its name or the name under or by which it conducts its business, in each case without first giving Lender at least 30 days' advance written notice thereof and having taken any and all action required or desirable to maintain and preserve the first perfected Lien and security interest in favor of Lender on all property thereof free and clear of any Lien whatsoever except for Permitted Liens; provided, however, that notwithstanding the foregoing, neither Borrower nor any of its Subsidiaries shall change the location of its principal place of business, chief executive office, major executive office, chief place of business or its records concerning its business and financial affairs to (y) Louisiana or (z) any place outside the contiguous continental United States of America (except that the chief executive office of each of the Mexican Subsidiaries may continue to be located in Juarez, Chihuahua, Mexico). SECTION 9.5 Deliveries; Further Assurances. Borrower agrees that it will, at its sole expense, or will cause its Subsidiaries, at their sole expense, to (i) without any request by Lender, immediately deliver or cause to be delivered to Lender, in due form for transfer (i.e., endorsed in blank or accompanied by duly executed undated blank stock or bond powers), all securities, chattel paper, instruments and documents, if any, at any time representing all or any of the Collateral, (ii) upon request of Lender furnish or cause to be furnished to Lender such surveys, mortgagee title commitments or policies, appraisals, opinions of counsel and other documents as Lender may reasonably specify (it being agreed that, without limiting the foregoing, Lender may require all items specified in Section 12.1.9 of the Original Credit Agreement), (iii) without request by Lender, cause Lender's Lien hereunder and under the Collateral Documents to be at all times duly noted on any certificate of title issuable with respect to any of the Collateral and forthwith deliver or cause to be delivered to the Lender each such certificate of title, and (iv) execute and deliver, or cause to be executed and delivered, to Lender in due form for filing or recording (and pay the cost of filing or recording the same in all public offices deemed necessary or advisable by Lender) such assignments (including, without limitation, assignments of life insurance), security agreements, mortgages, deeds of trust, pledge agreements, consents, waivers, financing statements, stock or bond powers, and other documents, and do such other acts and things, all as may from time to time be necessary or desirable to establish and maintain to the satisfaction of Lender a valid perfected Lien on and security interest in all assets of Borrower and its Subsidiaries now or hereafter existing or acquired (free of all other Liens whatsoever other than Permitted Liens) to secure payment and performance of the Liabilities. SECTION 9.6 Subsequently Acquired Property. As further security for the payment of the Liabilities, so long as any of the Liabilities shall remain outstanding or Lender shall continue to have any Commitment, Borrower shall, and shall cause each of the Subsidiaries (other than Optek International) to: (a) acquire and maintain its property in a manner which will enable it to allow such property to become subject to the Liens of the Collateral Documents; (b) obtain and maintain the consent or approval of any Person whose consent or approval is required to the granting of a Lien on any such property to or for the benefit of Lender; (c) execute and deliver from time to time within ten (10) days of its purchase or acquisition of any real property or of property subject to a titling statute or of any other personal property, asset or other right with a fair market value in excess of $50,000, any and all amendments and supplements to the Collateral Documents as may be necessary to grant and perfect a first lien on and security interest in all such property in favor of Lender, in form and substance satisfactory to Lender, and in such number of counterparts as Lender may require, by which it shall pledge, mortgage and grant a perfected Lien on such property, asset or right to Lender; (d) execute and deliver to Lender, in form and substance satisfactory to Lender and in such number of counterparts as Lender may require, (i) an assignment of its rights under any contract to construct any property with a fair market value in excess of $50,000 promptly upon entering into such contract, and (ii) such other agreements and instruments (including, with limitation, acknowledgements by other contract parties) as may be necessary to grant a Lien on and security interest in its rights and interests under such contract and each such property, whether under construction or otherwise; and (e) execute and deliver to Lender, in form and substance satisfactory to Lender and in such number of counterparts as Lender may require, assignments of its rights (as sublessee or otherwise) under each lease to which it is a party (other than any lease which explicitly prohibits such an assignment), promptly upon entering into such lease. SECTION 10 REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this Agreement and to make Loans hereunder, Borrower represents and warrants to Lender that: SECTION 10.1 Due Organization, Authorization, etc. Borrower and each of its Subsidiaries is a corporation duly existing and in good standing under the laws of its respective state of incorporation and is duly qualified and in good standing in each jurisdiction where, because of the nature of its activities or properties, such qualification is required. The execution, delivery and performance by Borrower and its Subsidiaries of this Agreement and the Related Documents to which they respectively are parties, and the consummation of the Related Transactions, are within their respective corporate powers, have been duly authorized by all necessary corporate action (including, without limitation, shareholder approval, if any is required), have received all necessary governmental and other consents and approvals (if any shall be required), and do not and will not contravene or conflict with, or create a Lien or right of termination or acceleration under, any Requirement of Law or Contractual Obligation binding upon any of them. This Agreement and each of the Related Documents to which Borrower, or any Subsidiary of Borrower is a party are (or when executed and delivered will be) the legal, valid, and binding obligations of such Person enforceable against such Person in accordance with their respective terms, except that (a) the enforceability thereof may be subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought, and (c) the enforceability of provisions in the Related Documents relating to indemnity and contribution may be limited by applicable state or Federal securities laws or principles of public policy underlying such laws. SECTION 10.2 Certain Agreements. Borrower has furnished to Lender true, correct and complete copies of each of the Related Documents (including all schedules and written disclosures in connection therewith). At the time of the initial Loan under the Original Credit Agreement, all warranties of Borrower, its Subsidiaries, and (to the best knowledge of Borrower) each other party thereto set forth in the Related Documents (or with respect to the Purchase Documents, those set forth in Sections 3.2, 3.3 and 3.4 of the Purchase Agreement) were true and correct in all material respects, without any waiver or modification thereof and no default of Borrower, or any of its Subsidiaries, or, to the best knowledge of Borrower, any other party, existed under any Related Document. SECTION 10.3 Financial Information; Financial Condition. Other than the historical financial information concerning the Division, which has been prepared as described in the Purchase Agreement, all balance sheets, all statements of operations, of shareholders' equity and of changes in financial position, and other financial data (other than projections) which have been or shall hereafter be furnished to Lender for the purposes of or in connection with this Agreement, the Related Documents or the Related Transactions (including the financial information referred to below, except for the financial statements described in clause (d) below and the projections referred to in clauses (e) and (f) below) have been and will be prepared in accordance with GAAP consistently applied throughout the periods involved. All such information (other than projections) whether or not prepared in accordance with GAAP, does and will present fairly the financial condition of the entities involved as of the dates thereof and the results of their operations for the periods covered thereby. The projections described in clauses (e) and (f) below are based upon historical financial information and management's reasonable assumptions accepted by Lender; all other projections which shall hereafter be furnished to Lender for purposes of or in connection with this Agreement, the Related Documents or the Related Transactions will represent management's best estimates of future performance, based upon historical financial information and reasonable assumptions of management. Such financial data include, without limitation, the following financial statements and reports which have been furnished to Lender prior to the Amended and Restated Closing Date: (a) the audited consolidated balance sheet of Borrower and its Subsidiaries as of October 30, 1987 and the related statements of earnings, stockholders' equity and changes in financial position for the Fiscal Year ending on such date; (b) unaudited balance sheets and statements of income, shareholders' equity and changes in financial position, each certified by the chief financial officer of Borrower, for Borrower and its Subsidiaries for the two Fiscal Quarters ending April 29, 1988 and for the Reporting Period ending May 27, 1988; (c) pro forma consolidated balance sheet of Borrower and its Subsidiaries as of the Original Closing Date after giving effect to all Related Transactions occurring in connection with the Original Credit Agreement; (d) unaudited income statements and balance sheets for the Division for the fiscal year ending December 31, 1987, three months ending March 31, 1988 and month ending April 30, 1988; (e) projections, dated June 29, 1988, for Borrower and its Subsidiaries for the fiscal years 1988 through 1995, based on Borrower's, the Mexican Subsidiaries' and the Division's historical financial statements and records, after giving effect to all Related Transactions occurring in connection with the Original Credit Agreement; (f) pro forma projected income statements, balance sheets, and funds flow statements of Borrower, giving effect to the assumption of the Opcom Revolving Loan and the Opcom Working Capital Loans, and covering the five fiscal years subsequent to the Amended and Restated Closing Date on an annual basis (the first full fiscal year subsequent to the Amended and Restated Closing Date on a monthly basis, and the second full fiscal year subsequent to the Amended and Restated Closing Date on either a monthly or quarterly basis); and (g) Borrower's 1993 Fiscal Year audited annual report (final draft), and unaudited quarterly and monthly financials, including a balance sheet, income statement and statement of cash flow (such financials must pertain to the monthly periods ending not more than 41 days prior to the Amended and Restated Closing Date and the quarterly periods ending not more than 105 days prior to the Amended and Restated Closing Date). There has been, and on the date of the Amended and Restated Closing Date there will have been, no material adverse change since October 29, 1993 in the financial condition, operations, assets, business or prospects of such respective entity and its Subsidiaries from that reflected in the financial information referred to above. On the Original Closing Date and after giving effect to the Related Transactions occurring in connection with the Original Credit Agreement, (i) the assets of Borrower, at a fair valuation, exceeded its respective liabilities, including contingent liabilities, (ii) the remaining capital of Borrower was not unreasonably small to conduct its business and (iii) Borrower had not incurred debts, and did not intend to incur debts, beyond its ability to pay such debts as they mature. For purposes of this Section 10.3, "debt" means any liability on a claim, and "claim" means a (x) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (y) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. SECTION 10.4 Litigation and Contingent Obligations. Except as set forth (including estimates of the dollar amounts involved) in Schedule IV hereto and except for claims as to which the insurer has admitted coverage in writing and which are fully covered by insurance, no claims, litigation (including, without limitation, derivative actions), arbitration, governmental investigation or proceeding or inquiry is pending or, to the best of Borrower's knowledge, threatened against Borrower, or any Subsidiary of Borrower (i) which would, if adversely determined, materially and adversely affect the financial condition, operations, assets, business or prospects of Borrower, or any of its Subsidiaries or the ability of Borrower, or any Subsidiary of Borrower to perform its respective obligations in connection with this Agreement and the Related Documents, or (ii) which relates to any of the Related Transactions, and there is (except as disclosed in the letter referred to in Section 10.14) no basis known to Borrower for any of the foregoing. Other than any liability incident to such claims, litigation or proceedings, neither Borrower, nor any of its Subsidiaries has any material Contingent Obligations not provided for or referred to in the financial statements delivered under Section 10.3 or in Schedule XI hereto. SECTION 10.5 Liens. At all times on and after the making of the initial Loan under the Original Credit Agreement, none of the assets of Borrower or any of its Subsidiaries will be subject to any Lien, except for Permitted Liens which (except for Permitted Liens described in clause (iii) of Section 11B.20 and securing Indebtedness listed in Part 1 of Schedule XI) are junior to the Lien of the Collateral Documents. Except as described in Schedule V and except for Permitted Liens, Lender will obtain, as security for the Liabilities, (i) a legally valid and binding first mortgage Liens on all real property and interests in real property described in the Borrower Mortgages and the Subsidiary Mortgages as being mortgaged thereby, and (ii) a first perfected Lien on all other property described in the Collateral Documents as being pledged, assigned or granted thereby. The legal descriptions attached to the Borrower Mortgages, and the Subsidiary Mortgages together with the descriptions of other property described in the Collateral Documents, correctly describe the property used in the business or operations of Borrower and its Subsidiaries in a manner sufficient to create an enforceable Lien on or security interest in such property. SECTION 10.6 Absence of Default. Neither Borrower nor any of its Subsidiaries is in material default under any contract or contracts (a) to which it is a party or by which it is bound, and (b) (i) pursuant to which Borrower and/or such Subsidiary provides goods or services to a customer which contributed more than $500,000 of gross revenue during the prior fiscal year of Borrower or which is reasonably expected to contribute more than $500,000 of gross revenue during the current fiscal year of Borrower, or (ii) pursuant to which Borrower and/or such Subsidiary incurs Lease Obligations in excess of $50,000 during any fiscal year of Borrower, or (iii) which cannot be replaced without material expense, delay or interruption of business (including, without limitation, any Material Licensing Agreement). SECTION 10.7 Plans and Welfare Plans. During the twelve- consecutive-month period prior to the Original Closing Date and of each Loan requested hereunder, no steps have been taken to terminate any Plan, and no contribution failure has occurred with respect to any Plan sufficient to give rise to a lien under section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Plan which could result in the incurrence by Borrower of any material liability, fine or penalty. Except as described in Schedule XII, neither Borrower nor any of its Subsidiaries has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of title I or ERISA. SECTION 10.8 Investment Company Act. Neither Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. SECTION 10.9 Regulations G, U and X. Neither Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation G, U or X of the Board of Governors of the Federal Reserve System). None of Borrower, any Affiliate of Borrower or any Person acting on its behalf has taken or will take action to cause the execution, delivery or performance of this Agreement or the Notes, the making or existence of the Loans or the use of proceeds of the Loans to violate Regulation G, U or X of the Board of Governors of the Federal Reserve System. SECTION 10.10 Proceeds. The proceeds of the initial Revolving Loans and Working Capital Loans made on the Original Closing Date were used (i) for the payment in full of the obligations of Borrower pursuant to the Purchase, (ii) for the costs, expenses, fees and taxes incurred by Borrower in connection therewith, including, without limitation, costs, expenses, fees and taxes incurred pursuant to Section 14.4, and (iii) for working capital purposes. The proceeds of the Revolving Loans and Working Capital Loans after the Amended and Restated Closing Date will be used for working capital purposes, to pay for capital improvements, and for other purposes permitted hereunder. SECTION 10.11 Confirmation of Warranties in Purchase Agreement. All representations and warranties set forth in Sections 3.2, 3.3 and 3.4 of the Purchase Agreement were true and correct in all material respects on the Original Closing Date. SECTION 10.12 Insurance. Schedule V hereto sets forth a true and correct summary of all insurance carried by Borrower and its Subsidiaries. In the opinion of the officers of Borrower, Borrower and its Subsidiaries are adequately insured for their benefit under policies issued by insurers of recognized responsibility. No notice of any pending or threatened cancellation or premium increase has been received by Borrower or any of its Subsidiaries with respect to any of such insurance policies. Borrower and its Subsidiaries are in substantial compliance with all conditions contained in such insurance policies. SECTION 10.13 Material Disruptions. Neither the business nor the properties of Borrower or any of its Subsidiaries is affected, or anticipated to be affected, by any existing event of Force Majeure or other existing casualty which would have a materially adverse effect on the financial condition, business, assets, operations or prospects of Borrower or any of its Subsidiaries or the ability of Borrower of any of its Subsidiaries to perform its respective obligations hereunder or under any Related Document. SECTION 10.14 Patents, Trademarks, etc. Each of Borrower and its Subsidiaries owns and possesses, or licenses under valid and enforceable license agreements, all such patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights and copyrights as are necessary for the conduct of its business as now conducted or presently proposed to be conducted without any infringement upon rights of others, and, except as set forth in Part 1 of Schedule VI, there is no individual trademark, patent or patent license the loss of which would have a materially adverse effect on the financial condition, business, assets, operations or prospects of Borrower or any of its Subsidiaries or the ability of Borrower or any of its Subsidiaries to perform its respective obligations under this Agreement or any Related Document (any such licensing agreement, whether or not set forth on Schedule VI, being herein called a "Material Licensing Agreement"). Parts 1 and 2 of Schedule VI together contain a complete list of all license agreements relating to patent rights, trademark rights, trade name rights, service mark rights and copyrights held by Borrower or any of its Subsidiaries under license agreements. All such license agreements have been validly assigned to Lender as security for the Liabilities, and pursuant to the Collateral Documents, Lender has acquired a valid perfected first security interest therein. SECTION 10.15 Ownership of Properties; Property Schedule. Borrower and its Subsidiaries will have good and marketable title to all of its respective properties and assets, real and personal, of any nature whatsoever, subject only to Permitted Liens and Permitted Exceptions. Schedule VII contains descriptions of all real and personal property (i) in which Borrower or any of its Subsidiaries has an interest as of the date hereof, (ii) with respect to which the Collateral Documents will not create a valid and perfected first lien and security interest, and (iii) which cannot be replaced without material expense, delay or interruption of business. SECTION 10.16 Business Locations; Trade Names. Schedule VIII lists each of the locations where Borrower or any of its Subsidiaries maintains an office, a place of business or any records; and Schedule VIII also lists each name under or by which Borrower or any of its Subsidiaries conducts its business. SECTION 10.17 Accuracy of Information. All factual information (other than projections) heretofore or contemporaneously herewith furnished by or on behalf of Borrower or any of its Subsidiaries to Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information (other than projections) hereafter furnished by or on behalf of Borrower or any of its Subsidiaries to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information not misleading. SECTION 10.18 Subsidiaries. Borrower does not have any Subsidiaries other than as listed in Schedule XV. SECTION 10.19 Hazardous Materials. Except as disclosed in the documents delivered pursuant to Section 12.1.9(h) of the Original Credit Agreement or listed in Schedule IX hereto, neither Borrower nor any other Person has ever caused or permitted any Hazardous Material other than asbestos, and neither Borrower nor (to the knowledge of Borrower after due inquiry) any other Person has ever caused or permitted any asbestos, to be placed, held, located or disposed of on, under or at any real property legally or beneficially owned (or any interest or estate in real property which is owned) or operated by Borrower or any of its Subsidiaries (including, without limitation, any property owned by a land trust the beneficial interest in which is owned in whole or in part by Borrower or any of its respective Subsidiaries), and no such real property has ever been used (by Borrower or by any other Person) as (i) a dump site or permanent storage site for any Hazardous Material or (ii) (except for temporary storage of Hazardous Materials in the ordinary course of business and in compliance with all applicable Federal, state and local laws, regulations and orders and with sound industry practice) a temporary storage site for any Hazardous Material. SECTION 10.20 Agent's Fees. No agent, broker, investment banker, Person, or firm acting on behalf of Borrower or any Affiliate of Borrower, or under the authority of any such Person, is or will be entitled to any broker's or finder's fee or any other commission or similar fee, directly or indirectly, from any of the parties hereto in connection with any of the transactions contemplated herein. SECTION 10.21 Taxes. Borrower and each of its Subsidiaries has filed all tax returns that are required to be filed by it, and has paid or provided adequate reserves for the payment of all taxes, including, without limitation, all payroll taxes and Federal and state withholding taxes, and all assessments payable by it that have become due, other than those that are not yet delinquent or that are disclosed on Schedule IV and are being contested in good faith by appropriate proceedings and with respect to which reserves have been established, and are being maintained, in accordance with GAAP. None of the Acquired Assets is subject to any lien for tax liabilities of Seller, and the Assumed Liabilities include no tax liabilities of Seller. There is no ongoing audit or, to Borrower's knowledge, other governmental investigation of the tax liability of Borrower or any of its Subsidiaries and there is no unresolved claim by a taxing authority concerning Borrower's or any of such Subsidiary's tax liability, for any period for which returns have been filed or were due. The liability stated for taxes as of October 30, 1987 in the financial statements described in Section 10.3(a) is sufficient in all material respects for all taxes as of such date. As used in this Section 10.21, the term "taxes" includes all taxes of any nature whatsoever and however denominated, including, without limitation, exercise, import, governmental fees, duties and all other charges, as well as additions to tax, penalties and interests thereon, imposed by any government or instrumentality, whether Federal, state, local, foreign or other. SECTION 10.22 Securities Laws. Neither Borrower, nor any Affiliate of Borrower, nor anyone acting on behalf of any such Person, has directly or indirectly offered any interest in the Notes or any other Liability for sale to, or solicited any offer to acquire any such interest from, or has sold any such interest to any Person that would subject the issuance or sale of the Notes or any other Liability to registration under the Securities Act of 1933, as amended. SECTION 10.23 Governmental Authorizations. Borrower and its Subsidiaries have all licenses, franchises, permits and other governmental authorizations necessary for all businesses presently carried on by them (including owning and leasing the real and personal property owned and leased by them), except where failure to obtain such licenses, franchises, permits and other governmental authorizations would not (i) subject Borrower or any such Subsidiary or any of its officers to criminal liability or (ii) have a material adverse effect on the business, condition (financial or otherwise) or prospects of Borrower or such Subsidiary or on the Collateral. SECTION 10.24 Compliance with Laws. Without limiting the representations and warranties contained in Section 10.19, Borrower and each of its Subsidiaries: (i) is not in violation of any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any governmental authority, which violation would subject Borrower or any such Subsidiary or any of its officers to criminal liability or have a material adverse effect on the business, condition (financial or otherwise) or prospects of Borrower or such Subsidiary or on the Collateral, and no such violation has been alleged, (ii) has filed in a timely manner all reports, documents and other materials required to be filed by it with any governmental bureau, agency or instrumentality, and the information contained in each of such filings is true, correct and complete in all respects, except where failure to make such filings would not have a material adverse effect on the business, condition (financial or otherwise) or prospects of Borrower or such Subsidiary or on the Collateral, and (iii) has retained all records and documents required to be retained by it pursuant to any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any governmental authority. SECTION 10.25 Employees and Labor. There is no unfair labor practice complaint against Borrower or any of its Subsidiaries pending before the National Labor Relations Board or any state or local agency nor is there a labor strike or other labor dispute, pending or threatened, affecting any of the foregoing; there is no existing representation question respecting the employees of Borrower or any of its Subsidiaries, nor are there organizational attempts affecting any of the employees of any of the foregoing; there is no grievance pending or threatened affecting Borrower or any of its Subsidiaries; and no labor disputes or work stoppages involving Borrower or any of its Subsidiaries are pending or threatened. No customer or supplier of Borrower or any of its Subsidiaries is involved in, or threatened with or affected by, any labor dispute, arbitration, lawsuit or administrative proceeding which may have a material adverse effect on Borrower's or any of its Subsidiaries' businesses, assets, financial condition, operations or prospects. SECTION 10.26 Purchase. At the time of the making of the initial Loan under the Original Credit Agreement: (a) the Purchase had been consummated in accordance with the terms of the Purchase Agreement; (b) all consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate the Purchase were obtained, given, filed or taken and shall be in full force and effect and all applicable waiting periods will have elapsed; and (c) all actions by Borrower pursuant to or in furtherance of the Purchase were taken in compliance with all applicable laws. SECTION 10.27 Assignment of Claims Act. The aggregate amount of all Accounts of the Borrower and its Subsidiaries which are subject to the Federal Assignment of Claims Act, 31 U.S.C. Section 3727, does not and will not at any one time exceed $10,000. SECTION 10.28 Bulk Sales Notices. Borrower has complied, or caused Seller to comply, with all bulk sales laws applicable to the Purchase. SECTION 11 COVENANTS. Until the expiration or termination of the Commitments and thereafter until the Notes and all other Liabilities are paid in full, Borrower agrees that, unless at any time Lender shall otherwise expressly consent in writing: SECTION 11A AFFIRMATIVE COVENANTS. SECTION 11A.1 Reports, Certificates and Other Information. It will furnish or cause to be furnished to Lender: 11A.1.1 Audit Report. As soon as available, but in any event within 90 days after the end of each Fiscal Year of Borrower: (i) copies of the consolidated and consolidating balance sheet of Borrower and each of its Subsidiaries as at the end of such Fiscal Year and the related statements of earnings, stockholders' equity and cash flows for such Fiscal Year, in each case setting forth the figures for the previous year, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein, certified, without a going concern or like qualification or qualifications arising out of the scope of the audit, by KPMG Peat Marwick (or such other independent certified public accountants of recognized standing as shall be selected by Borrower with Lender's approval); (ii) a certificate from the accountants identified in clause (i) of this Section 11A.1.1 containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in Sections 11A and 11B, and to the effect that, in making the examination necessary for the signing of the annual audit report of Borrower by such accountants, they have not become aware of any non-compliance by Borrower, or any Event of Default or Unmatured Event of Default, under this Agreement or the Related Documents; and (iii) such other information regarding Borrower and its Subsidiaries as Lender shall reasonably request. 11A.1.2 Quarterly Reports. As soon as available, but in any event within 45 days after the end of each Fiscal Quarter of Borrower: (i) copies of the unaudited consolidated and consolidating balance sheet of Borrower and each of its Subsidiaries as at the end of such Fiscal Quarter and the related unaudited statements of earnings, stockholders' equity and cash flows for such Fiscal Quarter and the portion of the Fiscal Year through such Fiscal Quarter, in each case setting forth in comparative form the figures for the corresponding periods of the previous Fiscal Year, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and certified by the chief financial officer of Borrower as presenting fairly the financial condition and results of operations of Borrower and its Subsidiaries (subject to normal year-end audit adjustments); and (ii) such other information regarding Borrower and its Subsidiaries as Lender shall reasonably request. 11A.1.3 Monthly Reports. As soon as available, but in any event within 30 days after the end of each Reporting Period: (i) copies of the unaudited consolidated and consolidating balance sheet of Borrower and each of its Subsidiaries as at the end of such Reporting Period and the related unaudited statements of earnings and cash flows for such Reporting Period and the portion of the Fiscal Year through such Reporting Period, in each case setting forth in comparative form the figures for the corresponding periods of the previous Fiscal Year, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and certified by the chief financial officer of Borrower as presenting fairly the financial condition and results of operations of Borrower and its Subsidiaries (subject to normal year-end audit adjustments); and (ii) such other information regarding Borrower and its Subsidiaries as Lender shall reasonably request. 11A.1.4 Business Plan. As soon as available, but in any event: (i) within 30 days after the beginning of each Fiscal Year of Borrower, a copy of the plan and forecast (including a projected closing consolidated and consolidating balance sheet, income statement and funds flow statement) of Borrower for such Fiscal Year; and (ii) within 30 days after the end of the second Fiscal Quarter of Borrower in each Fiscal Year, an update of each plan and forecast delivered with respect to the Fiscal Year in which such Fiscal Quarter occurs, reflecting changes in such plan resulting from actual and then anticipated results and forecasts. 11A.1.5 Compliance Certificates. Contemporaneously with the furnishing of a copy of each annual audit report and of each set of statements provided for in Sections 11A.1.1, 11A.1.2 and 11A.1.3, a duly completed certificate in substantially the form of Exhibit L, signed by the chief financial officer of Borrower, containing, among other things, a computation of, and showing compliance with, each of the applicable financial ratios and restrictions contained in this Section 11A and in Section 11B and to the effect that as of such date no Event of Default or Unmatured Event of Default has occurred and is continuing. 11A.1.6 Auditors' Materials. Promptly upon receipt thereof, copies of all detailed financial and management reports regarding Borrower or any of its Subsidiaries submitted to Borrower by independent public accountants in connection with each annual or interim audit report made by such accountants of the books of Borrower or any of its Subsidiaries. 11A.1.7 Reports to SEC and to Shareholders. Promptly upon the filing or making thereof, copies of each material filing and report made by Borrower or any of its Subsidiaries with or to any securities exchange or the Securities and Exchange Commission and of each communication from Borrower to shareholders generally. 11A.1.8 Notice of Default, Litigation, License and ERISA Matters. Forthwith upon learning of the occurrence of any of the following, written notice thereof, describing the same and the steps being taken by Borrower with respect thereto: (i) the occurrence of an Event of Default or an Unmatured Event of Default, (ii) the institution of, or any adverse determination or materially adverse development in, any litigation, arbitration proceeding or governmental proceeding which would, if adversely determined, materially and adversely affect the financial condition, operations, assets, business or prospects of Borrower or any of its Subsidiaries or the ability of Borrower or any Subsidiary of Borrower, to perform its respective obligations in connection with this Agreement and the Related Documents, (iii) the institution of any steps by Borrower, or any other Person to terminate any Plan, or the failure to make a required contribution to any Plan if such failure is sufficient to give rise to a lien under section 302(f) of ERISA, or the taking of any action with respect to a Plan which could result in the requirement that Borrower or any of its Subsidiaries furnish a bond or other security to the PBGC or such Plan, or the occurrence of any event with respect to any Plan which could result in the incurrence by Borrower or any of its Subsidiaries of any material liability, fine or penalty, or any material increase in the contingent liability of Borrower or any of its Subsidiaries with respect to any post-retirement Welfare Plan benefit, (iv) the commencement of any dispute which might lead to the modification, transfer, revocation, suspension or termination of any Related Document, (v) any expectation of the termination (without renewal), loss, suspension or other impairment of Borrower's or any of its Subsidiaries' rights under any Material Licensing Agreement or (vi) any event which would have a material adverse effect on the business, operations, assets, financial condition or prospects of Borrower or any of its Subsidiaries or the ability of Borrower or any Subsidiary of Borrower to perform its respective obligations under this Agreement or the Related Documents. 11A.1.9 Insurance Reports. (i) Within 90 days after the end of each Fiscal Year of Borrower, a certificate signed by its chief financial officer that summarizes the insurance policies carried by Borrower and its Subsidiaries (such certificate to be in form and substance satisfactory to Lender), and (ii) written notification 30 days prior to any cancellation or material change of any such insurance by Borrower or any of its Subsidiaries and within 5 days after receipt of any notice (whether formal or informal) of cancellation or change by any of its insurers. 11A.1.10 Information Concerning Subsidiaries. Forthwith upon learning thereof, written notice of the occurrence with respect to any Subsidiary of Borrower of any of the events the occurrence of which in relation to Borrower would constitute an Event of Default or an Unmatured Event of Default under Section 13.1.5. 11A.1.11 List of Officers and Directors. (i) Not less than 10 Business Days after each anniversary date of the Amended and Restated Closing Date, a complete list of the officers and directors of Borrower and each of its Subsidiaries, and (ii) within 15 Business Days of any change in the information provided pursuant to the foregoing clause (i), written notice of such change. 11A.1.12 Weekly Reports. On the third Business Day of each week, a report detailing cash flow and loan activity, a summary of bookings, billings and backlog, orders not scheduled for delivery and delinquencies, a summary of key indicators and a cash flow forecast. 11A.1.13 Borrowing Certificate. Not later than the fifteenth day of each month, (a) a certificate, substantially in the form of Exhibit N (the "Borrowing Certificate") with respect to all Loans made during the period from the fifteenth day of the previous month through the date of such Certificate, signed by the President or a Vice President of Borrower, and (b) such other documents as Lender may reasonably request in support of all Loans requested during such period. 11A.1.14 Notice of Triggering Event. Borrower shall provide Lender notice of the occurrence of a Triggering Event as soon as possible and in any event no later than 20 days prior to the occurrence of a Triggering Event. Such notice shall specify the estimated date of consummation of the transaction or series of transactions contemplated thereby and the nature of such Triggering Event. 11A.1.15 Other Information. From time to time furnish to Lender such other information concerning Borrower and any Subsidiary of Borrower as Lender may reasonably request. SECTION 11A.2 Corporate Existence; Foreign Qualification. Borrower will do and cause to be done at all times all things necessary to (i) maintain and preserve the corporate existence of Borrower and each Subsidiary of Borrower, (ii) be, and ensure that each Subsidiary of Borrower, is, duly qualified to do business and in good standing as a foreign corporation in each jurisdiction where the nature of its business makes such qualification necessary, and (iii) comply, and cause its Subsidiaries to comply, with all Contractual Obligations and Requirements of Law binding upon such entity. SECTION 11A.3 Books, Records and Inspections. Borrower will (i) maintain, and cause each of its Subsidiaries to maintain, complete and accurate books and records; (ii) permit, and cause each of its Subsidiaries to permit, access at reasonable times by Lender to its books and records; (iii) permit, and cause each of its Subsidiaries to permit, Lender to inspect at reasonable times its properties and operations; and (iv) permit, and cause each of its Subsidiaries to permit, Lender to discuss its business, operations and financial condition with its officers. SECTION 11A.4 Insurance. (i) Borrower will maintain "key man" insurance with respect to each person listed on Schedule XIV under one or more policies in form and substance satisfactory to Lender, in an amount not less than the amount specified in Schedule XIV with respect to such person, and cause such insurance to be subjected to the provisions of the Insurance Assignment, (ii) Borrower will maintain, and cause each of its Subsidiaries to maintain, such insurance as may be required by law, or by the Collateral Documents or otherwise by Lender, all to such extent and against such hazards and liabilities, as is customarily maintained by prudent companies similarly situated, (iii) Borrower will furnish Lender a certificate of a duly authorized officer of Borrower setting forth the nature and extent of all insurance maintained by Borrower and its Subsidiaries in accordance with this Section, (iv) with respect to each physical damage and liability insurance policy and with respect to each life insurance policy referred to in clause (i), Borrower will (A) cause such policy to provide, pursuant to endorsements in form and substance satisfactory to Lender, that Lender is named as an additional insured (under liability policies) or loss payee (under physical damage and life insurance policies) and that the insurer will give Lender 30 days' prior written notice of the termination or other material modification of such policy and (B) notify Lender within 5 days of obtaining any new policy, or increasing coverage under, terminating, or otherwise materially modifying any existing policy, describing in detail in such notice any such new policy, increase, termination or modification, and (v) with respect to each physical damage and liability insurance policy, Borrower will cause such policy to provide, pursuant to endorsements in form and substance satisfactory to Lender, that the insurance shall not be invalidated as against Lender, by any action or inaction of any Person other than Lender, regardless of any breach or violation of any warranty, declaration or condition contained in such policy, and, as against Lender, the insurers shall waive any rights of subrogation to the extent that the named insured has waived such rights (and Borrower hereby irrevocably and unconditionally waives any right of subrogation against Lender, except for claims arising out of the gross negligence or willful misconduct of Lender). SECTION 11A.5 Taxes and Liabilities. Borrower will pay, and cause each of its Subsidiaries to pay, when due all taxes, assessments and other material liabilities except as contested in good faith and by appropriate proceedings with respect to which reserves have been established, and are being maintained, in accordance with GAAP. SECTION 11A.6 Current Ratio. Borrower will maintain at all times a minimum Current Ratio of 1.5:1. SECTION 11A.7 Adjusted Net Worth. Borrower will maintain an Adjusted Net Worth at all times during each fiscal period listed below of at least the amounts set forth opposite such period: Adjusted Net Worth Period (in $ millions) First Fiscal Quarter of 1994 $ 800,000 Second Fiscal Quarter of 1994 1,200,000 Third Fiscal Quarter of 1994 1,900,000 Fourth Fiscal Quarter of 1994 2,500,000 First Fiscal Quarter of 1995 3,000,000 Second Fiscal Quarter of 1995 3,750,000 Third Fiscal Quarter of 1995 4,500,000 Fourth Fiscal Quarter of 1995 5,500,000 First Fiscal Quarter of 1996 6,750,000 Second Fiscal Quarter of 1996 8,000,000 Third Fiscal Quarter of 1996 9,250,000 Fourth Fiscal Quarter of 1996 10,500,000 First Fiscal Quarter of 1997 11,750,000 Second Fiscal Quarter of 1997 13,000,000 Third Fiscal Quarter of 1997 14,250,000 Fourth Fiscal Quarter of 1997 15,500,000 First Fiscal Quarter of 1998 16,750,000 Second Fiscal Quarter of 1998 18,000,000 Third Fiscal Quarter of 1998 19,250,000 Fourth Fiscal Quarter of 1998 20,500,000 SECTION 11A.8 Plans and Welfare Plans. Borrower will maintain, and cause each of its Subsidiaries to maintain, each Plan and each Welfare Plan as to which it may have any liability, in compliance in all material aspects with all applicable Requirements of Law. SECTION 11A.9 Collateral Documents. Borrower will cause the Liens created by the Collateral Documents, as security for the payment and performance of the Notes and all other Liabilities, to be and remain valid, perfected Liens on and security interests in all assets of Borrower and its Subsidiaries now or hereafter existing or acquired (free of all other Liens whatsoever other than Permitted Liens). SECTION 11A.10 Compliance with Laws. Borrower will comply and cause each of its Subsidiaries to comply, with all Federal, state and local laws, rules and regulations related to its businesses (including, without limitation, all such laws, rules and regulations relating to Hazardous Materials or the disposal thereof). SECTION 11A.11 Maintenance of Permits. Borrower will maintain, and cause each of its Subsidiaries to maintain, all permits, licenses and consents as may be required for the conduct of its business by any state, Federal or local government agency or instrumentality (including, without limitation, any such license, consent or permit relating to Hazardous Materials or the disposal thereof). SECTION 11A.12 Lender as Observer. At all times permit a representative (who shall be, at the time of such meeting, an employee of the Lender having substantial responsibility for administering the account of the Borrower or the Borrower's relationship with the Lender) of Lender to attend and observe all meetings of Borrower's Board of Directors and each committee thereof, and cause Lender to receive reasonably adequate notice of all such meetings; provided, however, that Lender shall not be entitled to attend or observe any portion of a meeting relating solely and exclusively to action proposed to be taken by Borrower with respect to Borrower's relationship with Lender. The Borrower acknowledges and agrees that attendance by a designee of Lender at any meeting of Borrower's Board of Directors or any committee thereof shall not constitute approval by Lender of or consent by Lender to any action authorized at such meeting, or constitute a waiver or modification of any provision of this Agreement or any Related Document or any right of Lender hereunder or thereunder. The Borrower agrees to reimburse Lender for all reasonable travel, lodging, and meal expenses incurred in connection with the foregoing. SECTION 11A.13 Opcom Warrant. To the extent Opcom resumes doing any business, Borrower shall cause Opcom to issue to Lender a warrant having substantially the same rights as in the Opcom Warrant being returned to Opcom on the Amended and Restated Closing Date, provided, to the extent that, as a result of issuing such warrant, an ownership change would occur within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, or any successor provision with respect to Borrower or Opcom, Opcom shall not resume doing any business. SECTION 11A.14 Title Policy. Within ninety (90) days of the Amended and Restated Closing Date, Borrower will deliver an Abstractor's Certificate reflecting that there have been no changes to the state of title to the properties covered by the Mortgages since the Original Closing Date and endorsements ratifying the previously issued title insurance after execution of the Third Amendments to the Borrower Mortgages and, if necessary, a revolving credit endorsement to such policies, all in form and substance satisfactory to Lender. SECTION 11A.15 Subsidiary Mortgages. Borrower shall within ninety (90) days of the Amended and Restated Closing Date take all such actions as shall be necessary to supplement the Subsidiary Mortgages to reflect, among other things, the terms of the Third Amendment, the Fourth Amendment and the Amended and Restated Credit Agreement and to preserve and protect the rights of Lender under such Mortgages. SECTION 11B NEGATIVE COVENANTS. SECTION 11B.1 Working Capital. Borrower will not permit the Working Capital, at any time during any period specified below, to be less than the amount specified under the heading "Minimum" nor greater than the amount specified under the heading "Maximum" for such period: Minimum Maximum Period ($ in millions) ($ in millions) 1994 Fiscal Year $4,500,000 $12,000,000 1995 Fiscal Year and thereafter 5,000,000 15,000,000 SECTION 11B.2 Net Cash Ratio. Borrower will not permit its ratio (as measured on the last day of any Reporting Period) of Net Cash Generated to Total Fixed Charges for the twelve Reporting Periods ending on the last day of such Reporting Period (or if such Reporting Period ends on or before October 31, 1994, for the period from October 30, 1993 to the last day of such Reporting Period, treated as a single accounting period) during each period listed below to be less than the ratio listed below opposite such period: Period Ratio First Fiscal Quarter of 1994 No calculation Second Fiscal Quarter of 1994 No calculation Third Fiscal Quarter of 1994 0.00 : 1.00 Fourth Fiscal Quarter of 1994 0.25 : 1.00 First Fiscal Quarter of 1995 0.50 : 1.00 Second Fiscal Quarter of 1995 1.00 : 1.00 Third Fiscal Quarter of 1995 1.00 : 1.00 Fourth Fiscal Quarter of 1995 1.00 : 1.00 First Fiscal Quarter of 1996 1.25 : 1.00 Second Fiscal Quarter of 1996 1.25 : 1.00 Third Fiscal Quarter of 1996 1.25 : 1.00 Fourth Fiscal Quarter of 1996 1.25 : 1.00 First Fiscal Quarter of 1997 1.50 : 1.00 Second Fiscal Quarter of 1997 1.50 : 1.00 Third Fiscal Quarter of 1997 1.50 : 1.00 Fourth Fiscal Quarter of 1997 1.50 : 1.00 First Fiscal Quarter of 1998 1.75 : 1.00 Second Fiscal Quarter of 1998 1.75 : 1.00 Third Fiscal Quarter of 1998 1.75 : 1.00 Fourth Fiscal Quarter of 1998 1.75 : 1.00 SECTION 11B.3 Total Liabilities Ratio. Borrower will not permit its ratio of (a) Total Liabilities excluding contingent interest payable pursuant to Section 4.7 to (b) Adjusted Net Worth to exceed at any time during any period set forth below, the ratio set forth opposite such period below: Period Ratio 1994 Fiscal Year 35.00 : 1.00 1995 Fiscal Year 15.00 : 1.00 1996 Fiscal Year 10.00 : 1.00 1997 Fiscal Year 5.00 : 1.00 1998 Fiscal Year 3.00 : 1.00 SECTION 11B.4 Annual Interest Coverage Ratio. Borrower will not permit its Interest Coverage Ratio Number 1 measured on the last day of any Reporting Period for any twelve consecutive Reporting Periods ending on such last day (or if such Reporting Period ends on or before October 31, 1994, for the period from October 30, 1993 to the last day of such Reporting Period treated as a single accounting period) to be less than the ratio listed below for the period during which such Reporting Period occurs: Period Ratio First Fiscal Quarter of 1994 1.00 : 1.00 Second Fiscal Quarter of 1994 1.00 : 1.00 Third Fiscal Quarter of 1994 1.10 : 1.00 Fourth Fiscal Quarter of 1994 1.10 : 1.00 First Fiscal Quarter of 1995 1.20 : 1.00 Second Fiscal Quarter of 1995 1.20 : 1.00 Third Fiscal Quarter of 1995 1.30 : 1.00 Fourth Fiscal Quarter of 1995 1.30 : 1.00 First Fiscal Quarter of 1996 1.40 : 1.00 Second Fiscal Quarter of 1996 1.40 : 1.00 Third Fiscal Quarter of 1996 1.50 : 1.00 Fourth Fiscal Quarter of 1996 1.50 : 1.00 First Fiscal Quarter of 1997 1.60 : 1.00 Second Fiscal Quarter of 1997 1.60 : 1.00 Third Fiscal Quarter of 1997 1.70 : 1.00 Fourth Fiscal Quarter of 1997 1.70 : 1.00 First Fiscal Quarter of 1998 1.80 : 1.00 Second Fiscal Quarter of 1998 1.80 : 1.00 Third Fiscal Quarter of 1998 1.90 : 1.00 Fourth Fiscal Quarter of 1998 1.90 : 1.00 11B.5 Quarterly Interest Coverage Ratio. Borrower will not permit its Interest Coverage Ratio Number 2 measured on the last day of any Reporting Period for any three consecutive Reporting Periods ending on such last day to be less than the ratio listed below for the period during which such Reporting Period occurs: Period Ratio First Fiscal Quarter of 1994 1.00 : 1.00 Second Fiscal Quarter of 1994 1.00 : 1.00 Third Fiscal Quarter of 1994 1.25 : 1.00 Fourth Fiscal Quarter of 1994 1.25 : 1.00 First Fiscal Quarter of 1995 1.50 : 1.00 Second Fiscal Quarter of 1995 1.50 : 1.00 Third Fiscal Quarter of 1995 1.75 : 1.00 Fourth Fiscal Quarter of 1995 1.75 : 1.00 First Fiscal Quarter of 1996 2.00 : 1.00 Second Fiscal Quarter of 1996 2.00 : 1.00 Third Fiscal Quarter of 1996 2.00 : 1.00 Fourth Fiscal Quarter of 1996 2.00 : 1.00 First Fiscal Quarter of 1997 2.50 : 1.00 and every Fiscal Quarter thereafter SECTION 11B.6 Purchase, Redemption, Dividend, Interest and Payment Restrictions. Neither Borrower, nor any of its Subsidiaries, will purchase, redeem or otherwise acquire any shares of the capital stock of Borrower or any Affiliate of Borrower (including Opcom) or declare or pay any dividends on Borrower's or Opcom's capital stock, make any distribution or payment to Borrower's or Opcom's stockholders (in their capacity as such) or set aside any funds for any such purpose, or make any other payment of any nature whatsoever to Borrower or any of its Affiliates or shareholders (in their capacity as such) other than Borrower's Subsidiaries; provided, that if no Event of Default or Unmatured Event of Default shall exist or result therefrom, Borrower and its Subsidiaries may do the following: (i) repurchase or redeem common or preferred stock of Borrower in accordance with any management and employee incentive plan or shareholder agreements (the "Senior Management Agreements"); provided, that the aggregate amount expended for such repurchases during any Fiscal Year of Borrower shall not exceed five percent (5%) of Borrower's total Stockholders' equity, as shown on the audited financial statements for the preceding Fiscal Year delivered pursuant to Section 11A.1.1; (ii) repurchase shares of capital stock of Borrower as permitted or required by the Warrant; and (iii) make payments permitted pursuant to Section 11B.17; it being understood, that each of Borrower's Subsidiaries may declare and pay dividends on shares of such Subsidiary's capital stock and make distributions or payments to such Subsidiary's stockholders (except that Opcom may not take such actions). SECTION 11B.7 Gross Capital Expenditures. Neither Borrower, nor any of its Subsidiaries, will directly or indirectly (by way of the acquisition of the securities of a Person or otherwise) make or commit to make Gross Capital Expenditures, except that Borrower and its Subsidiaries may, so long as no Event of Default or Unmatured Event of Default shall exist or would result therefrom, make Gross Capital Expenditures in the ordinary course of business during any Fiscal Year of Borrower not to exceed the aggregate amounts set forth below with respect to each Fiscal Year: Fiscal Year Amount (in millions of dollars) 1994 $1,000,000 1995 3,000,000 1996 and every Fiscal Year thereafter 4,000,000 ; provided, if, in the immediately preceding Fiscal Year, (i) the Adjusted Operating Profit is less than $6,000,000 and (ii) no Event of Default or Unmatured Event of Default shall exist or result from the making of the proposed Gross Capital Expenditures, then the maximum amount of Gross Capital Expenditures for such Fiscal Year shall not exceed the aggregate amount set forth below with respect to such Fiscal Year: Fiscal Year Amount (in millions of dollars) 1995 $1,500,000 1996 and thereafter 2,000,000 SECTION 11B.8 Guaranties, Loans, Advances or Investments. Neither Borrower, nor any of its respective Subsidiaries, will become or be guarantor or surety of, or otherwise incur any Contingent Obligation or become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services, or otherwise) with respect to, any undertaking of any other Person, or make or permit to exist any loans or advances to, or investments in, any other Person, except for (i) the endorsement, in the ordinary course of collection, of instruments payable to it or to its order, (ii) investment in Cash Equivalents, (iii) if no Event of Default shall have occurred and be continuing or will result from such activities, loans or advances to, or guaranties of loans or advances to, officers and employees of Borrower in the ordinary course of Borrower's business and not exceeding $100,000 in the aggregate at any one time outstanding (provided, that if any Unmatured Event of Default shall have occurred and be continuing, Borrower may maintain in effect any loans, advances or guaranties described in this clause (iii) which were in effect on the date such event occurred, but shall not make any new loans, advances or guaranties until such Unmatured Event of Default has been cured or waived by Lender in writing), (iv) indemnification of officers and directors provided for in the by- laws of Borrower or such Subsidiary; provided, that such indemnification is similar to that of other similarly situated companies, (v) the unsecured guaranty by Borrower in favor of the Seller of the obligations of Borrower under the Purchase Agreement, (vi) those certain loans made on April 8, 1988 in an aggregate principal amount of $25,827.21 to certain officers and employees of the Borrower to satisfy certain indebtedness of such officers and employees to Massey Investment Company, which loans are evidenced by promissory notes bearing interest at the prime rate of First City Bank of Dallas, (vii) the investments of each such entity in and outstanding loans of each such entity to its Subsidiaries as at the Amended and Restated Closing Date (not exceeding $7,000,000 in principal and accrued interest in the case of loans by Borrower to Opcom), and additional loans, advances or contributions by any such entity to any Subsidiary thereof (other than loans, advances or contributions by Borrower to Opcom) not exceeding $50,000 in the aggregate for all such loans, contributions or advances made during the term of this Agreement, provided that nothing in this Section 11B.8 shall be deemed to prohibit the accrual of liabilities of Opcom to the Borrower on account of intercompany allocations of general and administrative expenses, so long as such liabilities are paid by Opcom in full not less frequently than each month, and the aggregate accrued and unpaid amount of such liabilities at any time does not exceed $100,000. SECTION 11B.9 Mergers, Consolidations, Sales. Neither Borrower, nor any of its Subsidiaries, will (a) be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or stock of any class of, or any partnership or joint venture interest in, any other Person, other than a merger of any Subsidiary of Borrower into Borrower, or (b) sell, transfer, convey or lease all or any substantial part of its assets or sell or assign with or without recourse any receivables, other than any sale, transfer, conveyance or lease in the ordinary course of business. SECTION 11B.10 Leases. Neither Borrower, nor any of its Subsidiaries, will incur or permit to exist any Lease Obligations (other than (i) leases which are cancelable at the option of Borrower or such Subsidiary without penalty and on no more than 90 days' notice and (ii) the lease between Borrower and Cliamatech with respect to the plant of Optron de Mexico, as such lease is in effect on the Amended and Restated Closing Date) which require the payment of amounts of rental in excess of an aggregate, for all such leases at any one time outstanding, of $200,000, in any one fiscal year. SECTION 11B.11 Unconditional Purchase Obligations. Neither Borrower, nor any of its Subsidiaries, will enter into or be a party to any contract for the purchase of materials, supplies or other property or services, if such contract requires that payment be made by it regardless of whether delivery is ever made of such materials, supplies or other property or services. SECTION 11B.12 Regulations G, U and X. Neither Borrower, nor any of its Subsidiaries, will use or permit any proceeds of the Loans to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying margin stock" in contravention of Regulations G, U and X of the Board of Governors of the Federal Reserve System, as amended from time to time. SECTION 11B.13 Subsidiaries. Notwithstanding any provision of this Agreement to the contrary, neither Borrower, nor any of its Subsidiaries, will create or permit to exist any Subsidiary other than those listed on Schedule XV. SECTION 11B.14 No Amendment of Certain Documents. Borrower will not enter into or permit to exist any amendment or modification of the Purchase Documents, or any amendment or modification of the Senior Management Agreements, the Optek Technology, Inc. Directors' Formula Award Plan or the Optek Technology, Inc. Long Term Stock Investment Plan which would increase the percentage of Borrower's common stock subject to such agreements. SECTION 11B.15 Other Agreements. Neither Borrower, nor any of its Subsidiaries, will enter into any agreement containing any provision which would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered or to be delivered by it hereunder or in connection herewith. SECTION 11B.16 Business Activities. Neither Borrower, nor any of its Subsidiaries, will engage in any type of business except the businesses described in Schedule X and the activities incidental and related thereto. SECTION 11B.17 Transactions with Affiliates. Borrower will not enter into, cause, suffer or permit to exist: (a) any arrangement or contract with any of its Affiliates requiring any payments to be made by Borrower to an Affiliate with respect to services, where compensation is due whether or not such services shall be received by Borrower; and (b) any other transaction, arrangement, or contract (including, without limitation, any employment contract or agreement as to payment of a director's fees) with any of its Affiliates which would not be entered into by a prudent Person in the position of Borrower, or which is on terms which are less favorable than those otherwise reasonably attainable on an arm's- length basis from, any Person which is not one of its Affiliates. SECTION 11B.18 Environmental Liabilities. Neither the Borrower, nor any of its Subsidiaries, will violate any Requirement of Law regarding Hazardous Material; and, without limiting the foregoing, they will not, and will not permit any Person to, dispose of any Hazardous Material into or onto, or (except in accordance with applicable law) from, any real property owned or operated by Borrower or any of its Subsidiaries nor allow any lien imposed pursuant to any law, regulation or order relating to Hazardous Materials or the disposal thereof to be imposed or to remain on such real property. SECTION 11B.19 Indebtedness. Neither the Borrower, nor any of its Subsidiaries, will incur or permit to exist any Indebtedness except (i) the Loans and the other Liabilities, (ii) deferred taxes, (iii) current accounts payable arising in the ordinary course of business and not overdue, (iv) non-current accounts payable which Borrower is contesting in good faith and by appropriate proceedings, and with respect to which reserves have been established, and are being maintained, in accordance with GAAP, (v) Indebtedness shown on Part 1 of Schedule XI, (vi) Indebtedness in respect of the deferred payment of insurance premiums, provided, that the aggregate amount of such premiums which may be deferred in any fiscal year shall not exceed $100,000 and (vii) other Indebtedness hereafter incurred in connection with Permitted Liens. SECTION 11B.20 Liens. Neither the Borrower, nor any of its Subsidiaries, will create or permit to exist any Lien with respect to any assets now or hereafter existing or acquired, except the following (herein collectively called the "Permitted Liens"): (1) Liens for current taxes not delinquent or for taxes being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, (2) Liens arising in the ordinary course of business for sums being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, or for sums not due, and in either case not involving any deposits or advances for borrowed money or the deferred purchase price of property or services, (3) Liens in connection with the acquisition of fixed assets after the date hereof and attaching only to the property being acquired, if the indebtedness secured thereby does not exceed one hundred percent (100%) of the fair market value of such property at the time of acquisition thereof nor $300,000 in the aggregate at any one time outstanding, (4) Liens incurred in the ordinary course of business for amounts not yet due and payable in connection with worker's compensation, unemployment insurance or other forms of governmental insurance or benefits, (5) Liens shown on Part 1 of Schedule XI, (6) Liens in favor of the holders of Notes pursuant to the Collateral Documents, (7) mechanic's, worker's, materialmen's and other like Liens arising in the ordinary course of business in respect of obligations which are not delinquent or which are being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, DAT Permitted Exceptions, and (9) Liens on computer software and equipment securing obligations under capital leases not exceeding $150,000 in aggregate principal amount at any one time outstanding. SECTION 11B.21 Compensation. Borrower will not permit (x) the salary and (y) other remuneration (which shall mean an amount equal to (i) gross salary shown on the relevant Form W-2 or gross income on the relevant Form 1099, plus accrued bonuses and director's fees for such year, less (ii) base salary for such year, less (iii) accrued bonuses and director's fees for the previous year and paid in the current year) to be paid during any Fiscal Year to the persons holding the positions listed in Schedule XVI (or any successor of any thereof in the capacity shown in Schedule XVI), to exceed, in the aggregate for each such person, the amount for such person shown in Schedule XVI, to be adjusted as of the first day of each Fiscal Year to an amount not exceeding 110% of the maximum allowable amount (as set forth in Schedule XVI and subsequently adjusted) for the preceding Fiscal Year. SECTION 12 CONDITIONS. The obligation of Lender to make the Loans is subject to the following precedent or concurrent: SECTION 12.1 Effectiveness of this Agreement. The effectiveness of this Agreement shall be subject to the prior or concurrent satisfaction (in form and substance satisfactory to Lender) of each of the conditions precedent set forth below. 12.1.1 No Default. No Event of Default, or Unmatured Event of Default, shall have occurred and be continuing on the Amended and Restated Closing Date. 12.1.2 Warranties and Representations. All warranties and representations contained in this Agreement and the Related Documents shall be true and correct as of the Amended and Restated Closing Date, with the same effect as though made on the Amended and Restated Closing Date. 12.1.3 Litigation. In the opinion of Lender, in its sole and absolute discretion, (i) no litigation (including, without limitation, derivative actions), arbitration, governmental investigation or proceeding or inquiry shall, on the Amended and Restated Closing Date, be pending, or to the knowledge of Borrower, threatened which seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or to obtain relief as a result of, the Related Transactions, or would be materially adverse to, or be detrimental to the interests of, any of the parties to this Agreement or the Related Documents or any of the Related Transactions, and (ii) no material adverse development shall have occurred in any litigation (including, without limitation, derivative actions), arbitration, government investigation or proceeding or inquiry disclosed in Schedule IV. 12.1.4 Fees. Borrower shall have paid or caused to be paid to Lender the closing fees referred to in Section 5.3 which are due and payable on or prior to the date of the Amended and Restated Closing Date. 12.1.5 Documents. Lender shall have received all of the following, each duly executed and dated the date of the Amended and Restated Closing Date (or such earlier date as shall be satisfactory to Lender), in form and substance satisfactory to Lender: (a) Revolving Note. Revolving Note duly executed and delivered and conforming to the requirements hereof. (b) Working Capital Note. Working Capital Note duly executed and delivered and conforming to the requirements hereof. (c) Amendment to Mortgage. Amendments to each of the Borrower Mortgages and the Subsidiary Mortgage, each duly executed and delivered by Borrower or its applicable Subsidiary and in form and substance satisfactory to Lender. (d) Filing. Evidence that each of the amendments referred to in (c) has been duly recorded in the appropriate official land or real property records. (e) Warrant. The Warrant duly executed and delivered. (f) Letter from Opcom. The letter dated January 20, 1994 from Opcom to Lender, in form and substance satisfactory to Lender, confirming certain matters. (g) Resolutions. Certified copies of resolutions of the Board of Directors of Borrower and each Subsidiary of Borrower authorizing or ratifying the execution, delivery and performance, respectively, of those documents and matters required of it with respect to this Agreement or the Related Documents. (h) Consents, etc. Certified copies of all documents evidencing any necessary corporate action, consents and governmental approvals (if any) with respect to this Agreement, the Related Documents, any other document provided for hereunder and the Related Transactions. (i) Incumbency and Signatures. A certificate of the Secretary or an Assistant Secretary of Borrower and each of its Subsidiaries certifying the names of the individual or individuals authorized to sign this Agreement and the Related Documents to which such entity is a party, together with a sample of the true signature of each such individual. (Lender may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein.) (j) Opinions of Counsel. The opinion of Hewitt & Hewitt, counsel for Borrower, addressed to the Lender, in the form of Exhibit M. (k) Charter and By-Laws. Certified copies of the corporate charter and by-laws of Borrower and each of its Subsidiaries (including Borrower). (l) Insurance. Evidence that Borrower and its Subsidiaries are maintaining insurance of the type required by this Agreement and the Collateral Documents (including without limitation casualty, liability, worker's compensation and "key man" insurance), together with certificates of insurance naming Lender as an additional insured (for liability insurance) or loss payee (for physical damage and life insurance and specifying, among other things, such matters as shall be required by Section 11A.4. Such evidence shall include, without limitation, a certificate, in form and substance satisfactory to Lender and signed by the chief financial officer of Borrower summarizing the insurance policies carried by Borrower, Borrower and its Subsidiaries. (m) Other Documents. Copies of the Employment Agreements certified to be true and accurate copies thereof by the Secretary of Borrower. (n) List of Directors and Officers. A complete list of the officers and directors of Borrower and each of its Subsidiaries as at the date of the Amended and Restated Closing Date. (o) Good Standing and Franchise Tax Certificates. Certificates of good standing and attesting to the fact that all applicable franchise taxes have been duly paid for Borrower and each of its Subsidiaries in each jurisdiction in which the business of such entity requires it to be qualified. (p) Financial Statements. Borrower shall have furnished Lender with each of the financial statements listed in Section 10.3. (q) Confirmatory Certificate (Borrower). A duly completed certificate confirming satisfaction of the conditions set forth in Sections 12.1.1, 12.1.2, and 12.1.4, signed by the President or Vice President of Borrower. (r) Other. Such other documents (including, without limitation, evidence of compliance with any applicable bulk sales statutes) as Lender may reasonably request. 12.1.6 Legality. No statute, regulation, rule, injunction, judgment or restraining or other order prohibiting or otherwise restraining transactions contemplated hereby shall be in effect or shall have been proposed as at the Amended and Restated Closing Date; and Lender shall be satisfied that the transactions contemplated hereby comply with all applicable statutes, regulations, rules, injunctions, judgments and orders then in effect. SECTION 12.2 All Loans. The obligation of Lender to make each Loan is subject to the further conditions precedent that: 12.2.1 No Default; Reaffirmation of Warranties and Representations. (a) No Event of Default, or Unmatured Event of Default under Section 13.1.5, shall have occurred and be continuing or will result from the making of such Loan, (b) the warranties and representations contained in this Agreement and the Related Documents shall be (except insofar as they are, by their express terms, limited to a specific date) true and correct as of the date of such requested Loan, with the same effect as though made on the date of such Loan, and (c) there shall have been no material adverse change or notice of prospective material adverse change with respect to insurance maintained by Borrower or any of its Subsidiaries. 12.2.2 Litigation; Adverse Changes. (a) No claims, litigation (including, without limitation, derivative actions), arbitration, governmental proceeding, investigation or inquiry not disclosed in writing by Borrower to Lender prior to the date of the last previous Loan hereunder shall be pending or known to be threatened against Borrower, or any Subsidiary of Borrower, (b) no material development not so disclosed shall have occurred in any claim, litigation (including, without limitation, derivative actions), arbitration, governmental proceeding, investigation or inquiry so disclosed, and (c) no event, condition or development shall have occurred or developed at any time (whether before or after the making of the last previous Loan hereunder), which (in the case of each of the foregoing clauses (a) through (c)) in the opinion of Lender has affected or is likely to affect materially and adversely the financial condition, operations, assets, business or prospects of Borrower or any of its Subsidiaries or the ability of Borrower or any Subsidiary of Borrower, to perform its respective obligations in connection with this Agreement and the Related Documents. 12.2.3 Minimum Loan Balance. In the case of any Revolving Loan (other than the initial Revolving Loan), there shall be outstanding Revolving Loans in a minimum principal amount of $1,000 and in the case of Working Capital Loans (other than the initial Working Capital Loan), there shall be outstanding Working Capital Loans in a minimum principal amount of $1,000. SECTION 12.3 Extensions of Working Capital Commitment. If a Working Capital Commitment Extension Request is made pursuant to Section 2.2 to extend the Working Capital Loan Termination Date to a date on or after October 31, 1998, and if Lender consents to such extension, Borrower shall promptly furnish to Lender (a) certified copies of resolutions of the Boards of Directors of Borrower authorizing or ratifying the execution, delivery and performance, respectively, of those documents and matters required of Borrower in connection with Section 2.2 and this Section 12.4, (b) an opinion of counsel for Borrower addressed to Lender, in such form and substance as Lender may reasonably request, and (c) such other documents as Lender may reasonably request. SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT. SECTION 13.1 Events of Default. Each of the following shall constitute an Event of Default under this Agreement: 13.1.1 Non-Payment of Loans. Default in the payment when due, whether by acceleration or otherwise, of any principal of or interest or premium on any Loan. 13.1.2 Non-Payment of Fees, etc. Default, and continuance thereof for 5 days, in the payment when due, whether by acceleration or otherwise, of any amount payable hereunder or under the Related Documents (other than any amount described in Section 13.1.1). 13.1.3 Non-Payment of Other Indebtedness. (i) Default in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other Indebtedness of, or guaranteed by, Borrower or any of its Subsidiaries if the aggregate amount of such Indebtedness which is accelerated or due and payable, or which may be accelerated or otherwise become due and payable, by reason of such default is $250,000 or more, or (ii) default in the performance or observance of any obligation or condition with respect to any such other Indebtedness of, or guaranteed by, Borrower and/or any of its Subsidiaries if the effect of such default is to accelerate the maturity of any such Indebtedness of $250,000 or more or to permit the holder or holders of such Indebtedness of $250,000 or more, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. 13.1.4 Other Material Obligations. Default in the payment when due, or in the performance or observance of, any material obligation of, or material condition agreed to by, Borrower or any of its Subsidiaries with respect to any material purchase or lease of goods or services or any Material Licensing Agreement, and continuance thereof beyond any period or grace provided therein, if such default could have a material adverse effect on the business, condition (financial or otherwise) or prospects of Borrower or such Subsidiary (except only to the extent that the existence of any such default is being contested by Borrower in good faith and by appropriate proceedings and Borrower has established, and is maintaining, adequate reserves therefor in accordance with GAAP). 13.1.5 Bankruptcy, Insolvency, etc. (a) Borrower or any Subsidiary of Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, debts as they become due; or (b) Borrower or any Subsidiary of Borrower applies for, consents to, or acquiesces in the appointment of, a trustee, receiver or other custodian or similar Person for Borrower, or such Subsidiary or any property of any thereof, or makes a general assignment for the benefit of creditors; or (c) in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian or similar Person is appointed for Borrower, or any Subsidiary of Borrower or for a substantial part of the property of any thereof, unless (i) Borrower or such Subsidiary institutes appropriate proceedings to contest or discharge such appointment within 10 days and thereafter continuously and diligently prosecutes such proceedings and (ii) such appointment is in fact discharged within 60 days of such appointment; or (d) any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding is commenced in respect of Borrower, or any Subsidiary of Borrower, unless (i) such case or proceeding is not commenced by Borrower, or any Subsidiary of Borrower, (ii) such case or proceeding is not consented to or acquiesced in by Borrower or such Subsidiary, (iii) Borrower or such Subsidiary institutes appropriate proceedings to dismiss such case or proceeding within 10 days and thereafter continuously and diligently prosecutes such proceedings and (iv) such case or proceeding is in fact dismissed within 60 days after the commencement thereof; or (e) Borrower, or any Subsidiary of Borrower, takes any action to authorize, or in furtherance of, any of the foregoing. 13.1.6 Non-compliance with Certain Provisions. Failure of Borrower to comply with the provisions of each of Sections 6.1(a) through (c), 7.4, 9.5, 9.6, 11A.2 through 11A.7, 11A.9, 11B.1 through 11B.16, and 11B.19 through 11B.20 hereof. 13.1.7 Non-compliance with Other Provisions. Failure by Borrower to comply with or to perform any provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 13) and continuance of such failure for 30 days after notice thereof from Lender. 13.1.8 Warranties and Representations. Any warranty or representation made by or on behalf of Borrower or any of its Subsidiaries herein or in any of the Related Documents or otherwise in connection herewith or therewith is inaccurate or incorrect or is breached or false or misleading in any material respect as of the date such warranty or representation is made; or any schedule, certificate, financial statement, report, notice, or other writing furnished by or on behalf of Borrower or any of its Subsidiaries to Lender is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified (provided, however, that delivery to Lender of any projections required to be delivered hereunder shall not be deemed to constitute a warranty that any results shown therein shall or can be achieved). 13.1.9 Plans. With respect to any Plan as to which any company in the Controlled Group may have any liability, (i) Borrower or any other Person shall institute any steps to terminate such Plan if as a result of such termination Borrower could be required to make a contribution to such Plan, or could incur a liability or obligation to such Plan, in excess of $200,000; or (ii) a contribution failure occurs with respect to any such Plan sufficient to give rise to a lien under section 302(f) of ERISA. 13.1.10 Related Documents. At any time after the initial Loan, Borrower shall fail to comply with or to perform any provision of any of the Purchase Documents or the Collateral Documents applicable to it; or any party (including Borrower) to any other Related Document shall fail to comply with or to perform any provision of such Related Document applicable to it, if such failure could have a material adverse effect on the business, condition (financial or otherwise) or prospects of Borrower; or any of the Purchase Documents or the Collateral Documents shall fail to remain in full force and effect or any action shall be taken to discontinue any of the Purchase Documents or the Collateral Documents or to contest the validity, binding nature or enforceability of any thereof; or any of the other Related Documents shall fail to remain in full force and effect or any action shall be taken to discontinue any of the other Related Documents or to contest the validity, binding nature or enforceability of any thereof, if such failure to remain in force, invalidity or unenforceability could have a material adverse effect on the business, condition (financial or otherwise) or prospects of Borrower. 13.1.11 Collateral. Any portion or portions of the Collateral shall be seized or taken by governmental or similar authority; or Borrower or any Subsidiary of Borrower shall fail to maintain the liens, security interest and priority of the Collateral Documents as against any Person; or the title and rights of Borrower, or any Subsidiary of Borrower to any portion or portions of the Collateral shall have become the subject matter of litigation which might, in the opinion of Lender, upon final determination result in impairment or loss of the security provided by the Collateral Documents. 13.1.12 Change in Ownership. Allstate Insurance Company shall cease to own, directly or indirectly, twenty percent (20%) or more of the issued and outstanding capital stock of each class of Borrower. 13.1.13 Litigation. There shall be entered against Borrower or any of its Subsidiaries one or more judgments, awards or decrees, or orders of attachment, garnishment or any other writ, which exceed $250,000 at any one time outstanding, remaining unpaid for more than 30 days, excluding judgments or decrees (i) for which there is full insurance and with respect to which the insurer has assumed responsibility in writing, (ii) for which there is full indemnification (upon terms and by creditworthy indemnitors which are satisfactory to Lender) or (iii) which have been in force for less than the applicable period for filing an appeal so long as execution is not levied thereunder (or in respect of which Borrower or the appropriate Subsidiary shall at the time in good faith be prosecuting an appeal or proceeding for review and in respect of which a stay of execution or appropriate appeal bond shall have been obtained pending such appeal or review). SECTION 13.2 Effect of Event of Default. If any Event of Default described in Section 13.1.5 shall occur, the Commitments (if not theretofore terminated) shall immediately terminate and the Notes and all other Liabilities shall become immediately due and payable, all without notice of any kind; and, in the case of any other Event of Default, Lender may declare the Commitments (if not theretofore terminated) to be terminated and the Notes and all other Liabilities to be immediately due and payable, whereupon the Commitments (if not theretofore terminated) shall immediately terminate and the Notes and all other Liabilities shall become immediately due and payable, all without further notice of any kind. Lender shall promptly advise Borrower of any such declaration but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 13 may be waived by Lender in writing. SECTION 14 GENERAL. SECTION 14.1 Waiver; Amendments. No delay on the part of Lender or any holder of a Note or other Liability in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or a Note or any Related Document shall in any event be effective unless the same shall be in writing and signed and delivered by the holders of the majority of the aggregate outstanding principal amount of the Loans and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 14.2 Confirmations. Borrower and Lender (or any holder of a Note) agree from time to time, upon written request received by it from the other, to confirm to the other in writing the aggregate unpaid principal amount of the Loans then outstanding under such Note. SECTION 14.3 Notices. Notices forwarded by mail shall be deemed to have been given three days after the date sent if sent by registered or certified mail, postage paid, and: (i) if to Borrower, addressed to Borrower at its address shown below its signature hereto, with a copy to Borrower; (ii) if to Lender, addressed to Lender at the address shown below its signature hereto; or in the case of any party, at such other address as such party may, by written notice received by the other parties to this Agreement, have designated as its address for notices. Notices given by telegram or telex shall be deemed to have been given when sent if addressed to the party to whom sent, at its address as aforesaid. Notices of borrowing pursuant to Section 2.4 shall be effective upon receipt by Lender and shall be in writing (or by telephone to be confirmed in writing by Borrower). Lender shall be entitled to rely upon all telephone notices and the Borrower shall hold Lender harmless from any loss, cost or expense ensuring from any such reliance. SECTION 14.4 Costs, Expenses and Taxes. Borrower agrees to pay on demand all out-of-pocket costs and expenses of Lender (including the reasonable fees and out-of-pocket expenses of counsel for Lender and of local counsel, if any, whom may be retained by said counsel and all costs of appraisals, surveys, environmental reviews and the like required to be made or done in connection herewith) in connection with the preparation, execution and delivery of this Agreement, the Related Documents and all other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. Borrower further agrees to pay all out-of-pocket costs and expenses (including reasonable attorneys' fees and legal expenses) incurred by Lender in connection with the administration, enforcement, waiver or amendment of this Agreement, the Related Documents and any such other instruments or documents. In addition, Borrower agrees to pay, and to save Lender harmless from all liability for, any document, stamp, filing, recording, mortgage or other taxes which may be payable in connection with the execution, delivery, recording or filing of this Agreement or any of the Related Documents, the borrowings hereunder or of any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided for in this Section 14.4 shall survive any termination of this Agreement. SECTION 14.5 Indemnification. (a) In consideration of Lender's execution and delivery of this Agreement and Lender's extension of the Commitments, Borrower hereby agrees to indemnify, exonerate and hold Lender and each of its officers, directors, employees, and agents (including, without limitation, the Agent Bank, and herein collectively called for purposes of this Section 14.5 "Lender Parties" and individually called a "Lender Party") free and harmless from and against any and all claims, demands, actions, causes of action, suits, losses, costs (including, without limitation, all documentary, recording, filing, mortgage or other stamp taxes or duties), charges, liabilities and damages, and expenses in connection therewith (irrespective of whether such Lender Party is a party to the action for which indemnification hereunder is sought), and including, without limitation, reasonable attorneys' fees and disbursements (called in this clause (a) the "Indemnified Liabilities"), incurred by Lender Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or involving any Loan, or (b) the execution, delivery, performance or enforcement of this Agreement, the Related Documents and any instrument, document or agreement executed pursuant hereto by any of Lender Parties, including, without limitation, the ordinary negligence of any lender Party, except for any such Indemnified Liabilities arising on account of the relevant Lender Party's gross negligence or willful misconduct and, to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. (b) Without limiting the generality of the indemnity set out in the preceding clause (a), Borrower hereby further agrees to indemnify, exonerate and hold Lender and all Lender Parties free and harmless from and against any and all claims, demands, actions, causes of action, suits, losses, costs, charges, liabilities and damages, and expenses in connection therewith, of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Lender or any Lender Party for, with respect to, or as a direct or indirect result of, the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission or release from, any real property owned or operated by Borrower or any of its Subsidiaries of any Hazardous Material (including, without limitation, any claims, demands, actions, causes of action, suits, losses, costs, charges, liabilities and damages, asserted or arising under the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, or any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning, any Hazardous Material), regardless of whether caused by, or within the control of, Borrower or any of its Subsidiaries. (c) Without limiting the generality of the indemnities set out in the preceding clauses (a) and (b), Borrower hereby further agrees to indemnify, exonerate and hold Lender and all Lender Parties free and harmless from and against any claims, demands, actions, causes of action, suits, losses, costs, charges, liabilities and damages, and expenses in connection therewith, including, without limitation, reasonable counsel fees (called in this clause (c) the "Indemnified Liabilities") under Federal or state securities laws or otherwise (A) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement, prospectus or offering memorandum or in any preliminary prospectus or preliminary offering memorandum or any amendment or supplement to any thereof or in any other writing prepared in connection with the offer, sale or resale of any securities of Borrower or any of its Subsidiaries, or (B) arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading. If and to the extent that the foregoing undertakings in this paragraph may be unenforceable for any reason, Borrower agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. In the event of any conflict between the provisions of this paragraph (c) and the Warrant, the Warrant shall control. (d) All obligations provided for in this Section 14.5 shall survive any termination of this Agreement and shall not be reduced or impaired by any investigation made by or on behalf of Lender or any Lender Party. SECTION 14.6 Confirmation of Collateral Documents. Borrower confirms that the Collateral Documents to which it is a party (including, in its capacity as successor by merger of Optron) remain in full force and effect that each provision thereof (except to the extent specifically modified by the amendments to the Mortgages delivered pursuant to Section 12.1.5(c)) is ratified and confirmed in each and every respect. Borrower also confirms and agrees that the Loans extended by Lender hereunder are secured by the Collateral granted pursuant to the Collateral Documents and that the Indebtedness created hereby comprises "Liabilities" under each of the Collateral Documents to which it is a party, and it hereby assigns, conveys and hypothecates to Lender, and grants to Lender a security interest in, the Collateral described in such Collateral Documents for the purpose of securing the obligations of Borrower under this Agreement. SECTION 14.7 SUBMISSION TO JURISDICTION. LENDER MAY ENFORCE ANY CLAIM ARISING OUT OF THIS AGREEMENT OR THE RELATED DOCUMENTS IN ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO, ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH CLAIM, BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 208 S. LASALLE STREET, CHICAGO, ILLINOIS 60604, TO RECEIVE FOR AND ON BEHALF OF BORROWER SERVICE OF PROCESS IN ILLINOIS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF SAID COURTS BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AND AGREES THAT SUCH SERVICE, WHEN EVIDENCED BY POSTAL RETURN RECEIPT, TO THE FULLEST EXTENT PERMITTED BY LAW, (I) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THEM IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (II) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO THEM. NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR PRECLUDE LENDER FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT HEREOF IN ANY OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH EITHER OF THEM MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED IN CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 14.8 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. WHENEVER POSSIBLE EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT. ALL OBLIGATIONS OF BORROWER, BORROWER OR ANY OF THEIR RESPECTIVE SUBSIDIARIES AND RIGHTS OF LENDER AND ANY OTHER HOLDER OF A NOTE OR LIABILITY EXPRESSED HEREIN OR IN THE RELATED DOCUMENTS SHALL BE IN ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED BY APPLICABLE LAW OR IN ANY OTHER WRITTEN INSTRUMENT OR AGREEMENT RELATING TO ANY OF THE LIABILITIES. SECTION 14.9 Sales of Notes; Participation. Lender may assign to one or more banks or other Persons all or any part of, or may grant participations to one or more banks or other Persons in or to, any Loan or Loans or the Notes or any of them, and to the extent of any such assignment or participation (unless otherwise stated therein) the assignee or participant of such assignment or participation shall have the same rights and benefits, and shall be bound by the same obligations, duties and Commitments, hereunder and thereunder as it would have if it were Lender hereunder; provided, however, that Lender will continue to act in its capacity as "agent" for all purposes of this Agreement; and provided, further, that Lender will not transfer the Loans or the Notes in a manner so as to require the Notes or the Loans to be registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. SECTION 14.10 JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY RELATED DOCUMENT TO WHICH IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. SECTION 14.11 Successors and Assigns. This Agreement shall be binding upon Borrower, Lender and their respective successors and assigns, and shall inure to the benefit of Borrower, Lender and their respective successors and assigns; provided, however, that Borrower shall not have any right to assign its rights or delegate its duties under this Agreement. This Agreement and the Related Documents contain the entire agreement of the parties hereto with respect to the matters covered hereby. Delivered at Chicago, Illinois, as of the day and year first above written. OPTEK TECHNOLOGY, INC. By: /s/ D. VINSON MAILEY __________________________ Name Printed: D. Vinson Mailey Its: Vice President - Finance 1215 West Crosby Road Carrollton, Texas 75006 Attention: D. Vinson Marley Telecopy: (214) 542-1739 Telephone: (214) 542-9461 HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. By: /s/ ROBERT M. COSEO _______________________________ Name Printed: Robert M. Coseo Its: Vice President 2700 Sanders Road Prospect Heights, Illinois 60070 Attention: HCFS Corporate Finance Administration IN-W Telecopy: (708) 205-7411 Telex: 254336 (Answerback: HFCHQPHTS) Telephone: (708) 564-5000 EX-10 4 EXHIBIT 10 ASSET PURCHASE AGREEMENT dated as of December 30, 1994 by and among HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC., HCFS CORPORATE FINANCE VENTURE, INC., DOMINION CAPITAL, INC. and VIRGINIA FINANCIAL VENTURES, INC. TABLE OF CONTENTS Page No. ARTICLE I DEFINITIONS ARTICLE II FORMATION AND CAPITALIZATION OF BUYER 2.1 Formation of Buyer..... 6 2.2 Capitalization of Buyer..... 6 ARTICLE III FORMATION OF MANAGEMENT COMPANY; SUPPORT SERVICES AGREEMENT 3.1 Formation of Management Company; Management Agreement..... 7 3.2 Support Services Agreement..... 7 ARTICLE IV PURCHASE AND SALE OF PURCHASED ASSETS 4.1 Agreement to Buy and Sell Purchased Assets..... 7 4.2 Closing..... 8 4.3 Transfer of Purchased Assets; Assignments and Endorsements...8 4.4 Creation of the Escrow Account..... 9 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND HCFS VENTURER 5.1 Organization; Qualification..... 9 5.2 Authority Relative to this Agreement; Binding Obligation...10 5.3 Operation of the Management Company..... 10 5.4 Consents and Approvals..... 10 5.5 Non-Contravention..... 10 5.6 Ownership of Purchased Assets..... 10 5.7 Amount of Fees; Gross Book Value..... 11 5.8 Validity of Notes and Loan Documents..... 11 5.9 No Borrower Default..... 11 5.10 Seller's Compliance with Loan Documents; No Default..... 11 5.11 No Defenses of Borrowers; Evidence of Obligations..... 11 5.12 No Escrows..... 11 5.13 No Other Indebtedness Secured..... 12 5.14 Insurance..... 12 5.15 Litigation..... 12 5.16 No Brokers..... 12 5.17 Compliance with Law..... 12 5.18 Full Disclosure..... 12 5.19 ERISA..... 13 5.20 Updating of Representations and Warranties..... 13 5.21 Seller's Knowledge..... 13 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF DOMINION AND DOMINION VENTURER 6.1 Organization; Qualification..... 14 6.2 Corporate Power..... 14 6.3 Consents and Approvals..... 14 6.4 Non-Contravention..... 14 6.5 No Brokers..... 14 6.6 Litigation...... 14 6.7 Public Utility Holding Company Act..... 14 6.8 Dominion's Knowledge..... 15 ARTICLE VII ADDITIONAL AGREEMENTS 7.1 Payment of Interest and Fees after the Closing Date..... 15 7.2 Servicing of the Purchased Loans; Notices; Power of Attorney..... 15 7.3 Communication with Borrowers..... 16 7.4 Investigation of Loan Portfolio and Warrants..... 16 7.5 Confidentiality..... 17 7.6 Public Announcements..... 17 7.7 Expenses..... 17 7.8 HSR Act Filings..... 18 7.9 Bulk Sales Laws...... 18 7.10 Loans for which Consent is not Obtained by Closing...... 18 ARTICLE VIII CONDITIONS TO CLOSING 8.1 Conditions to Seller's Obligations..... 19 8.2 Conditions to the Obligations of Dominion and Dominion Venturer..... 20 ARTICLE IX INDEMNIFICATION 9.1 Indemnification..... 22 9.2 Third Party Claims..... 22 9.3 Limitations on Indemnification..... 24 9.4 Survival; Investigation..... 25 ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10.1 Termination..... 25 10.2 Effect of Termination..... 26 10.3 Extension; Waiver..... 26 10.4 Amendment..... 26 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1 Notices..... 26 11.2 Severability..... 28 11.3 Headings..... 28 11.4 Governing Law..... 28 11.5 Assignments; Binding Effect..... 28 11.6 Survival..... 28 11.7 Entire Agreement..... 28 11.8 Counterparts..... 28 11.9 Construction..... 28 Exhibits Exhibit A - Schedule of Loans Exhibit B - Schedule of Warrants Exhibit C - Form of Management Agreement Exhibit D - Form of Support Services Agreement Exhibit E - Venture Agreement Exhibit F - Form of Instrument of Assignment and Assumption for Purchased Loans Exhibit G - Form of Instrument of Assignment for Purchased Warrants Exhibit H - Form of Escrow Agreement Exhibit I - Form of Opinion of McGuire, Woods, Battle & Boothe Exhibit J - Form of Opinion of Katten Muchin & Zavis Exhibit K - Form of Pre-Closing Escrow Agreement Exhibit L - Formation Agreement ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT ("Agreement") is made as of December 30, 1994 by and among HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC., a Delaware corporation ("Seller"), HCFS CORPORATE FINANCE VENTURE, INC., a Delaware corporation and a wholly-owned subsidiary of Seller ("HCFS Venturer"), DOMINION CAPITAL, INC., a Virginia corporation ("Dominion"), and VIRGINIA FINANCIAL VENTURES, INC., a Virginia corporation and a wholly-owned subsidiary of Dominion ("Dominion Venturer"). RECITALS A. HCFS Venturer and Dominion Venturer have formed First Source Financial LLP, an Illinois registered limited liability partnership ("Buyer"). B. As set forth in this Agreement, Seller wishes to sell to Buyer certain loans (individually, a "Loan" and collectively, the "Loan Portfolio") that are more particularly described in Exhibit A hereto and the warrants, restructuring fees or other income upside (other than the stock of Rexene Corporation) associated with such Loans (collectively, the "Warrants") that are more particularly described in Exhibit B hereto. C. Subject to the terms and conditions of this Agreement, HCFS Venturer and Dominion Venturer desire to cause Buyer to buy the Loans in the Loan Portfolio (the "Purchased Loans") and all of the Warrants associated with such Loans (the "Purchased Warrants" and, together with the Purchased Loans, the "Purchased Assets"). D. As a condition to the obligations of Dominion and Dominion Venturer under this Agreement and in connection with Buyer's purchase of the Purchased Assets, Buyer and a newly created subsidiary of Seller named First Source Financial, Inc. (the "Management Company") will enter into a management agreement (the "Management Agreement") in substantially the form attached hereto as Exhibit C and Seller and the Management Company will enter into a support services agreement (the "Support Services Agreement") in substantially the form attached hereto as Exhibit D. NOW, THEREFORE, in consideration of the foregoing and the agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings indicated below: "Accrued Interest Amount" has the meaning set forth in Section 4.1(d). "Aggregate Purchase Price" has the meaning set forth in Section 4.1(b). "Agreement" has the meaning set forth in the first paragraph hereof. "Asset Loss" has the meaning set forth in Section 9.3(b). "BGG" has the meaning set forth in Section 5.16. "Borrower" means each person who is now or, will hereafter be, liable for the full or partial payment or performance of any Loan, whether such obligation is direct, indirect, primary, secondary, joint or several. "Buyer" has the meaning set forth in the Recitals. "Closing" has the meaning set forth in Section 4.2. "Closing Date" has the meaning set forth in Section 4.2. "Collateral" means any real or personal property securing the payment of the Notes. "Consent Date" has the meaning set forth in Section 7.10(b). "Credit Files" means all documents in the possession of Seller pertaining to the Loan Portfolio and the Warrants, which files shall include the Notes and, to the extent Seller actually has such documents in its possession, the Loan Documents and, as applicable, general credit information, credit records, payment histories, signed proposal or commitment letters, appraisals, insurance policies, certificates of insurers, title insurance policies or attorney's title opinions. "Dominion" has the meaning set forth in the first paragraph hereof. "Dominion Venturer" has the meaning set forth in the first paragraph hereof. "DRI" has the meaning set forth in Section 6.2. "Encumbrances" has the meaning set forth in Section 4.3(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Escrow Agent" has the meaning set forth in Section 4.4. "Escrow Agreement" has the meaning set forth in Section 4.4. "Escrow Amount" has the meaning set forth in Section 4.4. "Fees" means the unamortized fees payable by the Borrowers with respect to origination of the Purchased Loans. "Formation Agreement" means the Formation Agreement dated as of December 27, 1994 between HCFS Venturer and Dominion Venturer, a copy of which is attached as Exhibit L. "Gross Book Value" means the face amount recorded on the Seller's books, in accordance with generally accepted accounting principles in effect as of the date hereof, with respect to each Loan or Warrant. "HCFS Venturer" has the meaning set forth in the first paragraph hereof. "HSR Act" has the meaning set forth in Section 5.4. "Indemnified Party" has the meaning set forth in Section 9.2. "Indemnifying Party" has the meaning set forth in Section 9.2. "Initial Reserve" means $10 million. "Internal Rating" means the rating assigned to each Loan in the Loan Portfolio as a result of Seller's internal review and assessment. Such Rating measures the loss potential of the Loans in the Loan Portfolio on a scale ranging from one to seven, with an Internal Rating of one indicating the lowest probability for loss of principal and an Internal Rating of seven indicating the highest probability for such loss. Schedule 1.1 includes guidelines considered by Seller in assigning an Internal Rating to a Loan. "Legal Action" has the meaning set forth in Section 9.2(b). "Loan" has the meaning set forth in the Recitals. "Loan Documents" means all original documents, other than the Notes, relating to the Purchased Assets including without limitation, to the extent such documents exist with respect to any Loan, security agreements, pledge agreements, deeds of trust, financing statements, other documents relating to Collateral, guarantees and documents evidencing Seller's rights in the Purchased Warrants. "Loan Purchase Price" has the meaning set forth in Section 4.1(a). "Loan Portfolio" has the meaning set forth in the Recitals. "Management Agreement" has the meaning set forth in the Recitals. "Management Company" has the meaning set forth in the Recitals. "Notes" means the original executed promissory note or notes evidencing the indebtedness of the Borrowers under the Purchased Loans. "Participation Interests" means, in respect of a Loan, an interest therein that constitutes a contractual right arising under an agreement between Seller and a financial institution, pursuant to which agreement Seller has the right to receive a portion of the principal and interest received by such financial institution under a Note with a Borrower, but has no rights against such Borrower itself and pursuant to which Seller may have assumed certain ongoing funding obligations. "Pre-Closing Escrow Agent" means LaSalle National Bank or its successors, as escrow agent under the Pre-Closing Escrow Agreement. "Pre-Closing Escrow Agreement" means the Escrow Agreement dated as of December 30, 1994 among Seller, HCFS Venturer, Dominion, Dominion Venturer and the Pre-Closing Escrow Agent, a copy of which is attached to this Agreement as Exhibit K. "Pre-Closing Escrow Amount" means an aggregate of $10,000,000 which has been deposited with the Pre-Closing Escrow Agent by Seller and Dominion in equal amounts contemporaneously with the execution of this Agreement. "Person" means any individual, corporation, general partnership, limited partnership, limited liability partnership or any other entity authorized by law. "Prepaid Interest Amount" has the meaning set forth in Section 4.1(e). "Purchased Assets" has the meaning set forth in the Recitals. "SEC" has the meaning set forth in Section 6.7. "Purchased Loans" has the meaning set forth in the Recitals. "Purchased Warrants" has the meaning set forth in the Recitals. "Seller" has the meaning set forth in the first paragraph hereof. "Support Services Agreement" has the meaning set forth in the Recitals. "Survival Date" has the meaning set forth in Section 9.4. "Venture Agreement" has the meaning set forth in Section 2.1. "Warrants" has the meaning set forth in the Recitals. "Warrant Purchase Price" has the meaning set forth in Section 4.1(b). "Withheld Loan" has the meaning set forth in Section 7.10(a). "Withheld Loan Purchase Price" has the meaning set forth in Section 7.10(b). "1935 Act" has the meaning set forth in Section 6.7. ARTICLE II FORMATION AND CAPITALIZATION OF BUYER 2.1 Formation of Buyer. Subject to the terms of the Formation Agreement, HCFS Venturer and Dominion Venturer have formed Buyer as a registered limited liability partnership under the laws of the State of Illinois which after the Closing will be operated according to the terms and provisions of the Venture Agreement attached hereto as Exhibit E (the "Venture Agreement"), as the same may be required to be amended in connection with the execution of the credit facility contemplated by Section 2.2(d). 2.2 Capitalization of Buyer. (a) Pre-Closing Escrow. Contemporaneously with the execution and delivery of this Agreement, each of HCFS Venturer and Dominion Venturer has deposited $5,000,000 with the Pre-Closing Escrow Agent to be held pursuant to the terms of the Pre-Closing Escrow Agreement. At the Closing, the Pre-Closing Escrow Amount will be paid by the Pre-Closing Escrow Agent to Buyer and will be applied by the Buyer as a credit against the obligations of HCFS Venturer and Dominion Venturer under Section 2.2(b). (b) Contribution for Partnership Interests. At the Closing, Seller agrees to cause HCFS Venturer and Dominion agrees to cause Dominion Venturer to contribute, and HCFS Venturer and Dominion Venturer each agree to contribute, $45 million to Buyer, which when combined with the $5,000,000 contributed pursuant to the Pre- Closing Escrow Agreement shall be in satisfaction of their obligation to fund "Mandatory Capital" under the Venture Agreement. (c) Commitment for Special Capital. By virtue of their execution of the Venture Agreement but subject to the provisions of the Formation Agreement and to the Closing occurring, HCFS Venturer and Dominion Venturer have committed to contribute an additional $25 million to Buyer as special capital on the terms referred to in the Venture Agreement. Subject to the provisions of the Formation Agreement and to the Closing occurring, Seller agrees to cause HCFS Venturer, and Dominion agrees to cause Dominion Venturer, to perform its obligations with respect to such commitment. (d) Negotiation of Credit Facility. Before the Closing and as a condition to the obligations of Seller, Dominion and Dominion Venturer under this Agreement, Seller and Dominion will negotiate a credit facility to provide initial funds to Buyer with such financial institutions and on such terms as Seller and Dominion shall determine (with such determination being made by each of them in their sole discretion). At the Closing, Seller, Dominion, HCFS Venturer and Dominion Venturer will cause Buyer to take such actions as may be necessary to close such credit facility. The parties acknowledge that as of the date hereof, the parties do not know the final terms, the effects on the Buyer's operations or the economic impact of the Venturers' investment in the Buyer of the financing arrangements being discussed with financial institutions as of the date hereof. ARTICLE III FORMATION OF MANAGEMENT COMPANY; SUPPORT SERVICES AGREEMENT 3.1 Formation of Management Company; Management Agreement. Seller has formed the Management Company and, at the Closing and as a condition to the obligations of Dominion and Dominion Venturer under this Agreement to close, will cause the Management Company to enter into a Management Agreement in substantially the form attached hereto as Exhibit C, as the same may be required to be amended in connection with the execution of the credit facility contemplated by Section 2.2(d). 3.2 Support Services Agreement. Before the Closing and as a condition to the obligations of Dominion and Dominion Venturer under this Agreement, Seller and the Management Company shall enter into a Support Services Agreement in substantially the form attached hereto as Exhibit D, as the same may be required to be amended in connection with the execution of the credit facility contemplated by Section 2.2(d). ARTICLE IV PURCHASE AND SALE OF PURCHASED ASSETS 4.1 Agreement to Buy and Sell Purchased Assets. (a) Sale and Purchase of Purchased Loans. Subject to the terms and conditions set forth in this Agreement, at the Closing, Seller agrees to sell to Buyer, and HCFS Venturer and Dominion Venturer agree to cause Buyer to buy from Seller, the Purchased Loans for consideration (the "Loan Purchase Price") equal to the Gross Book Value of the Purchased Loans as of the Closing Date minus the amount of the Fees as of the Closing Date and minus the Initial Reserve. (b) Sale and Purchase of Warrants. Subject to the terms and conditions set forth in this Agreement, at the Closing, Seller agrees to sell to Buyer, and HCFS Venturer and Dominion Venturer agree to cause Buyer to buy from Seller, the Warrants for consideration (the "Warrant Purchase Price" and, together with the Loan Purchase Price, the "Aggregate Purchase Price") equal to the Gross Book Value of the Warrants as of the Closing Date. (c) Dominion's Right to Exclude Certain Loans and Warrants; Adjustment to Aggregate Purchase Price. (i) At any time before the Closing Date, Dominion shall have the right, with the consent of Seller, to exclude any of the following Loans from the Loan Portfolio: (A) any Loan with an Internal Rating of five or higher or (B) any other Loan which Dominion concludes, based upon the results of its investigation pursuant to Section 7.4, should have loss exposure parameter ratings equivalent to an Internal Rating of five (as calculated in accordance with the specifications contained in Schedule 1.1) or which has a reasonable probability for loss of principal. (ii) Seller shall not unreasonably withhold consent to the exclusion of any Loan which Seller reasonably agrees meets the criteria for exclusion contained in Section 4.1(c)(i). (iii) If any Loan is excluded pursuant to the provisions of this Section 4.1(c), such Loan and any Warrant associated with such Loan shall not be included in the Purchased Assets. In such case, the Gross Book Values of such Loan and any Warrant associated therewith and, the Fees relating to such Loan shall not be considered in the calculation of the Aggregate Purchase Price. (d) Payment of Accrued Interest to Seller. At the Closing, HCFS Venturer and Dominion Venturer agree to cause Buyer to pay to Seller all unpaid interest accrued (the "Accrued Interest Amount") up to, but not including, the Closing Date on each of the Purchased Loans for the month or other applicable payment period in which the Closing Date occurs. (e) Payment of Prepaid Interest to Buyer. At the Closing, Seller agrees to pay to Buyer all prepaid interest paid by any Borrower to Seller or HCFS Venturer or the respective affiliates of such parties with respect to any of the Purchased Loans (the "Prepaid Interest Amount") as of the Closing Date. 4.2 Closing. Subject to the satisfaction of the conditions set forth in this Agreement, the closing (the "Closing") of the purchase and sale of the Purchased Assets and the other matters contemplated by this Agreement shall take place on December 30, 1994 (the "Closing Date") and shall be deemed to occur as of 11:59 p.m. on such date. The Closing shall occur at the offices of Katten, Muchin & Zavis, or at such other time or place as may be mutually agreed upon by the parties hereto. 4.3 Transfer of Purchased Assets; Assignments and Endorsements. (a) Endorsement of Notes; Transfer of Purchased Assets; Execution of Other Documents. At the Closing, Seller shall endorse (such endorsement to be without recourse) the Notes to Buyer (in certain cases, in lieu of such endorsement, Seller shall cause the issuance of new notes in substitution of the existing Notes). In addition, Seller shall transfer the Purchased Loans to Buyer, and Buyer shall assume Seller's obligations related to the Purchased Loans, in accordance with the terms of an instrument of assignment and assumption in substantially the form attached hereto as Exhibit F and Seller shall transfer the Purchased Warrants to Buyer in accordance with the terms of an instrument of assignment in substantially the form attached hereto as Exhibit G. Seller shall transfer the Purchased Assets pursuant to this Section 4.3(a) free and clear of any liens, security interests or other encumbrances (collectively, "Encumbrances"). Furthermore, Seller shall execute such individual assignments of security agreements, mortgages, financing statements, deeds of trust and other documents or instruments as Buyer or Dominion, each in its reasonable discretion, deems to be necessary or appropriate for the transfer to Buyer of Seller's right, title and interest in the Purchased Assets. Seller shall be responsible for the preparation of such assignments, assumptions and other documents or instruments and the payment of any costs associated with such preparation. Buyer shall be responsible for the recording of such assignments and for the payment of any costs associated with such recording. (b) Delivery. At the Closing, (i) Seller shall deliver to Buyer the Notes, the Loan Documents and all other documents or instruments reasonably requested by Buyer or Dominion to transfer title to the Purchased Assets to Buyer and (ii) Buyer shall deliver to Seller all documents and instruments reasonably requested by Seller to evidence Buyer's assumption of the obligations arising under the Purchased Assets. 4.4 Creation of the Escrow Account. At the Closing, Seller shall deposit $10 million (the "Escrow Amount") in an account designated by an escrow agent reasonably agreed upon by Seller and Dominion (the "Escrow Agent") and, together with Buyer, Dominion and the Escrow Agent, shall execute and deliver an Escrow Agreement to the Escrow Agent in substantially the form attached hereto as Exhibit H (the "Escrow Agreement"). ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND HCFS VENTURER Seller and HCFS Venturer represent and warrant the following to Dominion and Dominion Venturer as of the date hereof: 5.1 Organization; Qualification. Each of Seller and HCFS Venturer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and each such corporation has corporate power and authority to own all of its assets and to carry on its business as it is presently being conducted. 5.2 Authority Relative to this Agreement; Binding Obligation. Each of Seller and HCFS Venturer has corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and HCFS Venturer and the consummation of the transactions contemplated hereby have been duly authorized by the Boards of Directors of Seller and HCFS Venturer, and no other corporate proceedings on the part of Seller or HCFS Venturer are necessary with respect thereto. This Agreement constitutes a valid and binding obligation of each of Seller and HCFS Venturer, enforceable against each such party according to its terms, except as such enforceability may be limited by the bankruptcy laws and similar laws relating to or affecting creditors' rights generally and general principles of equity. 5.3 Operation of the Management Company. The Management Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has conducted no business other than business conducted in preparation for the consummation of the transactions contemplated hereby. 5.4 Consents and Approvals. Except as required by the Hart- Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and as listed on Schedule 5.4, there is no requirement applicable to either Seller or HCFS Venturer to make any filing with, or to obtain any consent or approval from, any governmental body or any unaffiliated business entity, as a condition to the consummation of the transactions contemplated by this Agreement. 5.5 Non-Contravention. Except as set forth on Schedule 5.5, the execution and delivery by Seller and HCFS Venturer of this Agreement and the consummation of the transactions contemplated hereby will not (i) violate or result in a material breach of any provision of the Certificate of Incorporation or Bylaws of Seller or HCFS Venturer, (ii) result in a default or give rise to any right of termination, cancellation or acceleration (whether immediately or after the giving of notice or the passage of time, or both), under the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, lease or other instrument or obligation to which Seller or HCFS Venturer is a party or by which any such party or any of the Purchased Assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Seller or HCFS Venturer, any of the Purchased Assets or the business of Seller or HCFS Venturer. 5.6 Ownership of Purchased Assets. Seller is the legal and equitable owner of the Purchased Assets and, for all Purchased Assets other than the Participation Interests, the Notes and the Loan Documents, free and clear of any Encumbrances, and, except for obtaining the consents of, or providing notices to, those Borrowers and other persons listed on Schedule 5.6, Seller has the right to assign the Purchased Assets, the Notes and the other Loan Documents to Buyer. Neither Seller nor HCFS Venturer has, directly or indirectly, assigned or transferred to any other person (i) any of the Purchased Assets, the Notes or the Loan Documents or (ii) any rights with respect to the Purchased Assets or under the Notes or the Loan Documents, except for the interests in the Loans to AEC/Sterling and Optek, Inc. sold to Mitsui Nevitt Capital Corporation. At the Closing, Buyer will acquire title to the Purchased Assets, the Notes and the Loan Documents free and clear of any Encumbrances. 5.7 Amount of Fees; Gross Book Value. The amount of Fees relating to each Loan and the Gross Book Value of each Loan and each Warrant set forth on Schedule 5.7 are correct as of the date of this Agreement. 5.8 Validity of Notes and Loan Documents. The Notes and the Loan Documents have been validly authorized, executed and delivered by, and are binding obligations of, Seller, and, to the best of Seller's knowledge, the Borrowers and all other parties thereto. 5.9 No Borrower Default. Except as set forth in Schedule 5.9, there are no defaults with respect to the payment of principal or interest under the Notes nor, to the best of Seller's knowledge, any other material violations by any of the Borrowers of the representations, warranties or covenants under the Loan Documents relating to such Borrowers. 5.10 Seller's Compliance with Loan Documents; No Default. Each of Seller and HCFS Venturer, as applicable, has complied in all material respects with, and is not in default under, the terms, conditions and covenants of any of the Notes or the Loan Documents. 5.11 No Defenses of Borrowers; Evidence of Obligations. Except as set forth in Schedule 5.11, (i) to Seller's knowledge, no defenses exist with respect to the enforcement of the Notes and the Loan Documents against the Borrowers and (ii) the Notes evidence and the Loan Documents and Warrants, in all material respects, evidence the Borrowers' obligations with respect to the Purchased Assets, in each case as necessary to allow Buyer to collect the principal, interest, fees and expenses and to exercise the warrants under such Notes and Loan Documents upon consummation of the transactions contemplated hereby. 5.12 No Escrows. Except for an aggregate amount not in excess of $100,000, there are no escrows for taxes or insurance premiums currently held by Seller or HCFS Venturer under any of the Notes or the Loan Documents. 5.13 No Other Indebtedness Secured. There is no indebtedness secured by the Loan Documents other than as set forth in the Notes and the Loan Documents. Except as described in Schedule 5.13, none of Seller or HCFS Venturer has any obligation to extend any further credit under the Loan Documents. 5.14 Insurance. Except as set forth in Schedule 5.14, none of Seller or HCFS Venturer has received any notice of cancellation as to any of the insurance policies on which the Loan Documents require any such party to be listed as a loss payee or additional insured with respect to any Collateral. 5.15 Litigation. Except as described on Schedule 5.15, there are no actions, suits, claims, investigations or proceedings (legal, administrative or arbitrative) whether at law or in equity and whether civil or criminal in nature, before any court, arbitrator, governmental department, commission, agency or instrumentality, pending or, to Seller's knowledge, threatened against Seller or HCFS Venturer (i) affecting, or with respect to, the Purchased Assets, the Collateral, the Notes or the Loan Documents, or (ii) which could materially affect the ability of Seller or HCFS Venturer to consummate the transactions contemplated hereby. 5.16 No Brokers. Except for amounts payable to Benedetto, Gartland & Greene, Inc. ("BGG") or as otherwise set forth herein or in the Venture Agreement, no amount will be payable to any broker, agent or finder employed by Seller, HCFS Venturer or their respective affiliates in connection with the transactions contemplated hereby. 5.17 Compliance with Law. Except as set forth in Schedule 5.17, each of Seller, HCFS Venturer and, as of the Closing Date, the Management Company has operated its business with respect to the Loan Portfolio and the Warrants in compliance in all material respects with all laws, regulations, orders, judgments or decrees of any federal, state, local or foreign court or governmental authority applicable to the Loan Portfolio or the Warrants. None of Seller, HCFS Venturer or, as of the Closing Date, the Management Company has received notice of, or has knowledge of, any facts, events or conditions which allege or with the passage of time could give rise to an allegation of, a failure to be in compliance in any material respects with such laws, regulations, orders, judgments or decrees. The parties recognize and agree that, as of the Closing, Management Company may not be fully licensed in all jurisdictions where licensing may be required, but that such failure shall not materially and adversely affect Buyer's interest in the Loans or Loan Documents. 5.18 Full Disclosure. To the knowledge of Seller and HCFS Venturer, the representations and warranties made by Seller and HCFS Venturer herein and the historical financial information furnished to Dominion or Dominion Venturer prior to Closing related to the Purchased Assets and the business operations related thereto do not contain an untrue statement of a material fact or omit to state a material fact necessary to make such information, in the light of the circumstances under which such information was reviewed, not misleading. 5.19 ERISA. The Purchased Assets are free and clear of all Encumbrances in respect of ERISA. 5.20 Updating of Representations and Warranties. The representations and warranties contained in this Article V shall be deemed re-made on and as of the Closing Date. If Seller or HCFS Venturer becomes aware of information that causes a representation or warranty contained in this Article V to become untrue before the Closing Date, such party shall immediately disclose such information in writing (in reasonable specificity as to the nature of the untruth) to Dominion. If Seller's or HCFS Venturer's representations or warranties in question become untrue prior to Closing and Seller or HCFS Venturer notifies Dominion or Dominion Venturer in writing of such untruth prior to Closing, Seller and HCFS Venturer shall not be in default hereunder and the sole right of Dominion and Dominion Venturer shall be to terminate this Agreement. If Dominion or Dominion Venturer does not terminate this Agreement in accordance with this Section 5.20, the representations and warranties made in this Article V shall be deemed to be modified by such information disclosed pursuant to this Section 5.20. Dominion and Dominion Venturer are prohibited from making any claims against Seller or HCFS Venturer after the Closing with respect to any breaches of the representations and warranties made by Seller or HCFS Venturer contained in this Agreement that Dominion or Dominion Venturer had actual knowledge of before the Closing pursuant to a written notice delivered in accordance with this Section 5.20. 5.21 Seller's Knowledge. As used in this Article V, the phrase "Seller's knowledge" shall mean the actual knowledge of all personnel of Seller involved in the origination, underwriting or portfolio management of the Purchased Loans, except for (i) clerical and secretarial personnel and (ii) loan operations personnel reporting to Rebecca A. Reese. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF DOMINION AND DOMINION VENTURER Dominion and Dominion Venturer represent and warrant the following to Seller and HCFS Venturer as of the date hereof: 6.1 Organization; Qualification. Each of Dominion and Dominion Venturer is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has corporate power and authority to own all of its assets and to carry on its business as it is presently being conducted. 6.2 Corporate Power. Each of Dominion and Dominion Venturer has corporate power to execute and deliver this Agreement and to consummate the transactions contemplated hereby. 6.3 Consents and Approvals. Except as required by the HSR Act, there is no requirement applicable to Dominion or Dominion Venturer to make any filing with, or to obtain any consent or approval from, any governmental body or unaffiliated business entity, as a condition to the consummation of the transactions contemplated by this Agreement. 6.4 Non-Contravention. The execution and delivery of this Agreement by Dominion and Dominion Venturer and the consummation of the transactions contemplated hereby will not (i) violate or result in a breach of any provision of the Articles of Incorporation or Bylaws of Dominion or Dominion Venturer, (ii) result in a default or give rise to any right of termination, cancellation or acceleration (whether immediately or after the giving of notice or the passage of time, or both), under the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, lease or other instrument or obligation to which either Dominion or Dominion Venturer is a party or by which either such party may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Dominion or Dominion Venturer or the business of either such party. 6.5 No Brokers. Except for amounts payable to BGG or as otherwise set forth herein or in the Venture Agreement, no amount will be payable to any broker, agent or finder employed by Dominion, Dominion Venturer or their respective affiliates in connection with the transactions contemplated hereby. 6.6 Litigation. There are no actions, suits, claims, investigations or proceedings (legal, administrative or arbitrative) pending or, to Dominion's knowledge, threatened against Dominion or Dominion Venturer which could materially affect the ability of either such party to consummate the transactions contemplated hereby, whether at law or in equity and whether civil or criminal in nature, before any court, arbitrator, governmental department, commission, agency or instrumentality. 6.7 Public Utility Holding Company Act. DRI is an exempt holding company under Section 3(a)(1) of the Public Utility Holding Company Act of 1935 (the "1935 Act") pursuant to Rule 2 and, as such, is exempt from all provisions of the 1935 Act except Section 9(a)(2). None of DRI, Dominion, Dominion Venturer or, based solely upon Dominion Venturer being a partner in Buyer, Buyer is required to obtain any approval or other authorization from the Securities and Exchange Commission ("SEC") under the 1935 Act in connection with any such party's execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Section 9(a)(2) of the 1935 Act will not require Buyer to obtain any approvals or authorizations from the SEC under the 1935 Act except to the extent that Buyer acquires, directly or indirectly, five percent or more of the outstanding voting securities of any public utility company as defined in the 1935 Act. 6.8 Dominion's Knowledge. As used in this Article VI, the phrase "Dominion's knowledge" shall mean the actual knowledge of all officers of Dominion. ARTICLE VII ADDITIONAL AGREEMENTS 7.1 Payment of Interest and Fees after the Closing Date. (a) Payment of Interest. Except for the Accrued Interest Amount, Buyer shall not be required to pay to Seller or HCFS Venturer any accrued and unpaid interest on any Purchased Loan. Any installments of interest that are received by Buyer after the Closing Date shall be retained by Buyer or, if delivered to Seller or HCFS Venturer, shall be promptly remitted to, or as otherwise directed by, Buyer. (b) Other Payments. Except as otherwise provided herein or in the Management Agreement, all payments received by Seller or HCFS Venturer or the affiliates of such parties after the Closing Date with respect to any Purchased Asset shall belong to Buyer, and Seller and HCFS Venturer shall deliver or cause the delivery of any such payments to, or as otherwise directed by, Buyer promptly after such party's receipt thereof. 7.2 Servicing of the Purchased Loans; Notices; Power of Attorney. (a) Servicing of the Purchased Loans. As of the Closing Date, Seller shall have no further obligation to service the Purchased Loans, and Buyer shall assume all of Seller's obligations with respect to such servicing. (b) Notices. (i) After the Closing Date, Seller and HCFS Venturer shall forward to Buyer all notices or other information concerning any of the Purchased Assets promptly after such party's receipt thereof, and HCFS Venturer and Dominion Venturer shall cause Buyer to notify the Borrowers of Buyer's purchase of the Purchased Assets and direct that all payments and communications with respect to such Purchased Assets be sent as directed by Buyer. (ii) After the Closing Date, if required under existing policies, Seller shall notify all companies providing hazard, collision or any other types of insurance for the protection of the Purchased Assets or the Collateral of the consummation of the transactions contemplated hereby. (c) Further Assurances. Each of the parties hereto will use its best efforts to implement the provisions of this Agreement; provided that the foregoing obligation shall not be interpreted as limiting in any manner the ability of a party to act in its sole discretion in respect of any matter for which sole discretion is provided herein [including but not limited to Sections 2.2(d), 8.1(d) and 8.2(h)]. From time to time after the Closing, upon the request of Buyer, the parties hereto will, without further consideration, execute and deliver such additional documents and take such other actions that Buyer may reasonably deem necessary or desirable to (i) consummate the transactions contemplated hereby, (ii) vest title to the Purchased Assets in Buyer or (iii) enable Buyer to collect amounts due with respect to the Purchased Assets or pursue remedies for default by any Borrower under any Note or any Loan Document. 7.3 Communication with Borrowers. From the date hereof to and including the Closing Date, Seller shall grant to Buyer and Buyer's authorized representatives including, without limitation, Buyer's attorneys, accountants and financial advisors, the right to communicate directly with the Borrowers regarding the Loan Portfolio and the Warrants; provided, however, that none of Dominion, Dominion Venturer or their attorneys, accountants or financial advisors shall act on behalf of Buyer with respect to this Section 7.3. 7.4 Investigation of Loan Portfolio and Warrants. From the date hereof until and including the Closing Date, Seller and HCFS Venturer and their respective affiliates shall afford Dominion and Dominion Venturer and the authorized representatives of such parties (including, without limitation, the attorneys, accountants and financial advisors of such parties) such access, during normal business hours, to (i) all books and records relating to the Loan Portfolio and the Warrants including, without limitation, the Credit Files and (ii) any personnel of Seller, HCFS Venturer or their respective affiliates who possess knowledge with respect to the Loan Portfolio and the Warrants, as Dominion or Dominion Venturer may reasonably request to enable it to make a full investigation of the Loan Portfolio and the Warrants. Seller, HCFS Venturer and their respective affiliates shall also cause their respective employees and advisors to furnish to Dominion, Dominion Venturer and the authorized representatives of such parties such data and other information as such parties may reasonably request in writing to make such an investigation to the extent such data and information is available without unreasonable effort or expense. 7.5 Confidentiality. (a) Confidentiality Agreement. Each party hereto agrees to hold, and to cause its employees, representatives and advisors to hold, in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all documents and information furnished by any other party hereto in connection with the transactions contemplated by this Agreement, and not to use such information for any purpose other than in connection with the transactions contemplated hereby, except to the extent that such information has been or shall have become (i) generally available to the public otherwise than as a result of disclosure by such party or its employees, representatives and advisors, (ii) available on a non-confidential basis from a source other than a party hereto, (iii) known to such party prior to the date such information was furnished as contemplated by this Section, (iv) known to such party as a result of the regular business relationships between the parties hereto existing without regard to this Agreement or (v) part of normal and customary disclosure to legitimate constituencies including, but not limited to, shareholders, rating agencies, analysts and lenders or prospective lenders. (b) Survival of Confidentiality; Termination. (i) The confidentiality agreement contained in Section 7.5(a) will terminate upon the consummation of the transactions contemplated hereby. (ii) If the Closing does not occur, any party in possession of confidential information originating from another party shall return the originals or any copies of documents constituting such confidential information to such party and shall not retain any copies of such materials, and each party shall continue to honor its obligations under Section 7.5(a). 7.6 Public Announcements. Except for announcements or filings required by law, each party hereto will advise and consult with the others before making, or authorizing the making of, any press release or other statement to any third party with respect to this Agreement or the transactions contemplated hereby. 7.7 Expenses. Each party hereto shall bear its own expenses and the expenses of its respective affiliates incurred in connection with the transactions contemplated hereby. If the Closing occurs, Buyer shall bear only those expenses directly related to the formation of Buyer in an amount not to exceed $4 million (which amount shall include a fee payable to BGG in an amount not to exceed $2 million) plus the fees and expenses related to the credit facility referred to in Section 2.2(c). If this Agreement is terminated or the Closing does not occur for any reason, then notwithstanding the parties' obligations under the first sentence of this Section, they agree that the expenses directly related to the formation of Buyer shall be borne by the parties as follows: (i) the fees and expenses of BGG shall be borne by Seller; (ii) the expenses incurred on or before December 30, 1994 including the fees and expenses contemplated under Section 7.8 shall be divided equally between Dominion and Seller; and (iii)the expenses incurred after December 30, 1994 shall be borne by Seller. 7.8 HSR Act Filings. Each party hereto shall cooperate with the others to make all required filings under the HSR Act. Buyer shall bear the expense of such filings, including related legal fees. 7.9 Bulk Sales Laws. The parties hereto acknowledge and agree that the transactions contemplated hereby will be consummated without regard to compliance with the "bulk sales laws" of any state or jurisdiction. Accordingly, notwithstanding the provisions of Article IX, Seller will indemnify and hold harmless Dominion, Dominion Venturer and Buyer from any and all claims made by creditors of Seller or HCFS Venturer relating to provisions of such "bulk sales laws" which may be applicable to the transactions contemplated hereby and from all costs (including reasonable attorney's fees) incurred in the defense of any claims made under such laws. 7.10 Loans for which Consent is not Obtained by Closing. (a) If Seller does not obtain the consent of a Borrower required as a precondition to assignment of that Loan under the applicable Loan Documents to the inclusion of a Loan in the Purchased Assets, such Loan (a "Withheld Loan") and any Warrant associated with such Loan shall not be included in the Purchased Assets at Closing. In such case, the Gross Book Values of the Withheld Loan and any Warrant associated therewith, the Fees relating to such Loan and any portion of the Initial Reserve attributable to such Loan shall not be considered in the calculation of the Aggregate Purchase Price. (b) At such time as the Seller obtains the consent of a Borrower to the inclusion of a Withheld Loan in the Purchased Assets (the "Consent Date"), such Withheld Loan and any Warrant associated with such Loan shall become Purchased Assets and Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller [subject to the satisfaction, or waiver by Dominion, of the conditions set forth in Sections 8.2(a)-(d) as of the Consent Date in respect of the Withheld Loan and receipt of funding at the applicable advance rate for such Loan under the credit facility contemplated under Section 2.2(d)], such Assets for a purchase price (the "Withheld Loan Purchase Price") equal to (i) the outstanding principal amount of the Withheld Loan as of the Consent Date, plus (ii) the book value of any Warrant related thereto as of the Consent Date, minus (iii) the portion of the Initial Reserve attributable to such Withheld Loan and minus (iv) the Fees relating to such Withheld Loan as of the Consent Date. Seller shall also be deemed to make as of the Consent Date the representations and warranties in Article V of this Agreement (other than those relating to consents of borrowers or other parties) to the extent applicable to the Withheld Loan. ARTICLE VIII CONDITIONS TO CLOSING 8.1 Conditions to Seller's Obligations. Seller's obligations under this Agreement shall be contingent and specifically conditioned upon the satisfaction or waiver by Seller at or before the Closing, of the following matters: (a) Each of Dominion and Dominion Venturer shall have complied in all material respects with all of the covenants, agreements and conditions required by this Agreement to be complied with by Dominion or Dominion Venturer, as the case may be, before or as of the Closing; (b) All of the representations and warranties of Dominion and Dominion Venturer set forth in this Agreement shall be true and correct in all material respects at and as of the Closing Date, as though such representations and warranties were made at and as of the Closing Date; (c) All governmental consents, authorizations, orders or approvals required to consummate the transactions contemplated by this Agreement and to permit Buyer to operate the business contemplated in the Venture Agreement shall have been obtained and all waiting periods specified by law with respect thereto shall have passed; (d) Buyer shall have obtained a credit facility to provide initial funding to Buyer as contemplated by Section 2.2(d) which shall be satisfactory to Seller in its sole discretion; (e) The amount of Loans and Warrants excluded pursuant to Dominion's exercise of its exclusion right set forth in Section 4.1(c) shall not have exceeded $75 million; (f) Neither Dominion nor Dominion Venturer shall be in receivership or dissolution, or have made any assignment for the benefit of its respective creditors, or admitted in writing its inability to pay its debts as they mature, or have been adjudicated a bankrupt, or have filed a petition in voluntary bankruptcy, a petition or answer seeking reorganization or an arrangement with creditors under the federal bankruptcy law or any other similar law or statute of the United States or any state, nor shall any such petition have been filed against it; (g) All consents of Borrowers specified on Schedule 5.6 shall have been obtained; provided, however, that if consents of Borrowers, which are obligated in the aggregate in respect of $75 million or less of the Gross Book Value of the Purchased Assets, have not been obtained as of the Closing Date, this condition shall be deemed satisfied. (h) Seller and HCFS Venturer shall have received an opinion, dated as of the Closing Date, of McGuire, Woods, Battle & Boothe, counsel for Dominion and Dominion Venturer, in substantially the form attached hereto as Exhibit I; and (i) No order of any court or administrative agency shall be in effect which restrains or prohibits the consummation of the transactions contemplated hereby or which would limit or affect, in any material respect, Buyer's ability to conduct its business as contemplated by the Venture Agreement, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any court or governmental agency or other regulatory or administrative agency or commission, seeking to prohibit or delay or challenging the validity of any of the transactions contemplated by this Agreement. 8.2 Conditions to the Obligations of Dominion and Dominion Venturer. The obligations of Dominion and Dominion Venturer under this Agreement shall be contingent and specifically conditioned upon the satisfaction or waiver by either Dominion or Dominion Venture, at or before the Closing, of the following matters: (a) Seller and HCFS Venturer shall have complied in all material respects with all of the covenants, agreements and conditions required by this Agreement to be complied with by such parties before or as of the Closing; (b) All of the representations and warranties of Seller and HCFS Venturer set forth in this Agreement shall be true and correct in all material respects at and as of the Closing Date, as though such representations and warranties were made at and as of the Closing Date; (c) Neither Seller nor HCFS Venturer shall be in receivership or dissolution, or have made any assignment for the benefit of its respective creditors, or admitted in writing its inability to pay its debts as they mature, or have been adjudicated a bankrupt, or have filed a petition in voluntary bankruptcy, a petition or answer seeking reorganization or an arrangement with creditors under the federal bankruptcy law or any other similar law or statute of the United States or any state, nor shall any such petition have been filed against it; (d) All governmental consents, authorizations, orders or approvals required to consummate the transactions contemplated by this Agreement and to permit Buyer to operate the business contemplated in the Venture Agreement shall have been obtained and all waiting periods specified by law with respect thereto shall have passed; (e) All consents of Borrowers specified on Schedule 5.6 shall have been obtained; provided, however, that if consents of Borrowers, which are obligated in the aggregate in respect of $75 million or less of the Gross Book Value of the Purchased Assets, have not been obtained as of the Closing Date, this condition shall be deemed satisfied. (f) Seller shall have caused the Management Company to execute and deliver the Management Agreement to Buyer; (g) Seller shall have, and shall have caused the Management Company to have, executed and delivered the Support Services Agreement to the other party thereto; (h) Buyer shall have obtained a credit facility to provide initial funding to Buyer as contemplated by Section 2.2(d) which shall be satisfactory to Dominion in its sole discretion; (i) Seller shall not have unreasonably withheld its consent to Dominion's exercise of its exclusion right set forth in Section 4.1(c); (j) Dominion and Dominion Venturer shall have received an opinion, dated as of the Closing Date, of Katten Muchin & Zavis, counsel for Seller and HCFS Venturer, in substantially the form attached hereto as Exhibit J; (k) No order of any court or administrative agency shall be in effect which restrains or prohibits the consummation of the transactions contemplated hereby or which would limit or affect, in any material respect, Buyer's ability to conduct its business as contemplated by the Venture Agreement, and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any court or governmental agency or other regulatory or administrative agency or commission, seeking to prohibit or delay or challenging the validity of any of the transactions contemplated by this Agreement; and (l) Buyer shall have received a guaranty from Household Finance Corporation of Seller's indemnification obligations for breach of certain of Seller's representations and undertakings under this Agreement, the form and content of such guaranty to be satisfactory to Dominion Venturer in its sole discretion. ARTICLE IX INDEMNIFICATION 9.1 Indemnification. (a) By Seller and HCFS Venturer. Subject to the limitations contained in this Article IX, Seller and HCFS Venturer, jointly and severally, shall indemnify and hold Dominion, Dominion Venturer and Buyer harmless from any damage, loss, liability or expense (including, without limitation, reasonable expenses of investigation and litigation and reasonable attorneys', accountants' and other professional fees) arising out of a breach of (i) any representation or warranty made by Seller or HCFS Venturer to any such party in this Agreement or (ii) any agreement made by Seller or HCFS Venturer with any such party in this Agreement. (b) By Dominion and Dominion Venturer. Subject to the limitations contained in this Article IX, Dominion and Dominion Venturer, jointly and severally, shall indemnify and hold Seller and HCFS Venturer harmless from any damage, loss, liability or expense (including, without limitation, reasonable expenses of investigation and litigation and reasonable attorneys', accountants' and other professional fees) arising out of a breach of (i) any representation or warranty made by Dominion or Dominion Venturer to any such party in this Agreement or (ii) any agreement made by Dominion or Dominion Venturer with any such party in this Agreement. 9.2 Third Party Claims. The obligation of any party hereto (the "Indemnifying Party") to indemnify any other party hereto (the "Indemnified Party") under the provisions of this Article IX with respect to claims resulting from the assertion of liability by those not parties to this Agreement (including governmental claims for penalties, fines and assessments) shall be subject to the following terms and conditions: (a) Notice. The Indemnified Party shall give prompt written notice to the Indemnifying Party of any assertion of liability by a third party which might give rise to a claim for indemnification based on the provisions of this Article IX, which notice shall state, to the extent known, the nature, basis and amount of the assertion; provided, however, that no delay on the part of the Indemnified Party in giving such notice shall relieve the Indemnifying Party of any obligation to indemnify unless (and then solely to the extent that) the Indemnifying Party is prejudiced by such delay. (b) Defense of a Legal Action by the Indemnifying Party. If any action, suit or proceeding (a "Legal Action") is brought against the Indemnified Party with respect to which the Indemnifying Party may have liability under the provisions of this Article IX, the Legal Action shall be defended (such defense to include all proceedings for appeal or review which counsel for the Indemnified Party shall reasonably deem appropriate) by the Indemnifying Party. (c) Defense of a Legal Action by the Indemnified Party. Notwithstanding the provisions of the previous subsection of this Agreement, until the Indemnifying Party shall have assumed the defense of the Legal Action, the defense shall be handled by the Indemnified Party. Furthermore, (i) if the Indemnified Party shall have reasonably concluded that there are likely to be defenses available to it that are different from or in addition to those available to the Indemnifying Party; (ii) if the Indemnifying Party fails to provide the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party has sufficient financial resources to defend and fulfill its indemnification obligation with respect to the Legal Action; (iii) if the Legal Action involves other than money damages and seeks injunctive or other equitable relief; or (iv) if a judgment against the Indemnified Party in the Legal Action will, in the good faith of the Indemnified Party, establish a custom or precedent which will be adverse to the best interest of the continuing business of the Indemnified Party, the Indemnifying Party shall not be entitled to assume the defense of the Legal Action and the defense shall be handled by the Indemnified Party. If the defense of the Legal Action is handled by the Indemnified Party under the provisions of subsections (i), (ii) or (iii) of this Section 9.2(c), the Indemnifying Party shall pay all legal and other expenses reasonably incurred by the Indemnified Party in conducting such defense. (d) Rights of the Indemnified Party. In any Legal Action initiated by a third party and defended by the Indemnifying Party (i) the Indemnified Party shall have the right to be represented by advisory counsel and accountants, at its own expense, (ii) the Indemnifying Party shall keep the Indemnified Party fully informed as to the status of such Legal Action at all stages thereof, whether or not the Indemnified Party is represented by its own counsel, (iii) the Indemnifying Party shall make available to the Indemnified Party and its attorneys, accountants and other representatives, all books and records of the Indemnifying Party relating to such Legal Action and (iv) the Indemnifying Party and the Indemnified Party shall render to each other such assistance as may be reasonably required in order to ensure the proper and adequate defense of such Legal Action. (e) Consent to Settlement. In any Legal Action initiated by a third party and defended by the Indemnifying Party, the Indemnifying Party shall not make settlement of any claim without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld. If the settlement discharges the Indemnified Party from any further liability in connection with the Legal Action and does not otherwise involve injunctive or equitable relief against the Indemnified Party and the Indemnified Party nevertheless withholds consent thereto, then (i) the Indemnified Party shall pay all legal and other expenses incurred in continuing the defense of such Legal Action and (ii) in no event shall the Indemnifying Party's liability on account of such Legal Action exceed the amount of the settlement. 9.3 Limitations on Indemnification. (a) All damages to which the Indemnified Party may be entitled pursuant to the provisions of this Article IX shall be net of any insurance coverage with respect thereto. (b) If and to the extent any breach by Seller or HCFS Venturer of any representation, warranty or agreement made herein results in a loss with respect to any of the Purchased Assets (an "Asset Loss"), then: (i) If, and to the extent, that any party hereto would, in the absence of this Section 9.3(b)(i), be entitled to indemnification under this Article IX by reason of an Asset Loss, then the Indemnifying Party shall indemnify Buyer in respect of such Asset Loss and, upon such indemnification, Dominion, Dominion Venturer, HCFS or HCFS Venturer shall not be entitled to indemnification in respect of such Asset Loss. (ii) Neither Seller nor HCFS Venturer shall have any obligation to reimburse Buyer, Dominion or Dominion Venturer for any portion of an Asset Loss that is attributable to the inability of any Borrower to pay for its obligations with respect to any Purchased Asset. In the case of such inability, the portion of the Asset Loss attributable to a Borrower's nonpayment shall be reimbursed from the Initial Reserve or the Escrow and only the portion of the Asset Loss attributable directly to the breach of a representation, warranty or agreement made herein shall be reimbursed pursuant to the indemnification provisions of this Article IX. 9.4 Survival; Investigation. Subject to Section 5.20 hereof, the representations and warranties of each party contained in this Agreement shall survive any investigation by any party to whom such representations and warranties are made and shall not terminate until the third anniversary of the Closing Date (the "Survival Date"), at which time they shall lapse. Notwithstanding the provisions of the preceding sentence, any representation or warranty in respect of which indemnification may be sought under Section 9.1 shall survive the Survival Date if written notice, given in good faith, of a specific breach thereof is given to the Indemnifying Party before the Survival Date, whether or not liability has actually been incurred. ARTICLE X TERMINATION, AMENDMENT AND WAIVER 10.1 Termination. This Agreement may be terminated at any time before the Closing Date: (a) by mutual consent of the Boards of Directors of Seller and Dominion; (b) by Seller if any condition contained in Section 8.1 of this Agreement has not been fulfilled (unless such failure is the result of Seller's breach of a representation, warranty or agreement; provided that the parties understand that Seller's action in exercising its rights to act in its sole discretion under Sections 2.2(d) and 8.1(d) shall not under any circumstances be considered a breach by Seller of any representation, warranty or agreement); (c) by Dominion or Dominion Venturer if any condition contained in Section 8.2 of this Agreement has not been fulfilled (unless such failure is the result of the breach of a representation, warranty or agreement of Dominion or Dominion Venturer; provided that the parties understand that Dominion's action in exercising its rights to act in its sole discretion under Sections 2.2(d) and 8.2(h) shall not under any circumstances be considered a breach by Dominion or Dominion Venturer of any representation, warranty or agreement) or if Seller withholds its consent to Dominion's exercise of its exclusion right set forth in Section 4.1(c); (d) by Dominion or Dominion Venturer pursuant to Section 5.20 of this Agreement; or (e) by any party hereto if the Closing has not occurred by 11:59 p.m. Chicago, Illinois time, February 28, 1995. 10.2 Effect of Termination. If this Agreement is terminated as provided in Section 10.1, it shall become wholly void and of no further force and effect, and there shall be no further liability or obligation on the part of any party hereto except to pay such expenses as are required of such party and to comply with the confidentiality provisions of Section 7.5. 10.3 Extension; Waiver. At any time before the Closing, Buyer and Seller may (i) extend the time for the performance of any of the obligations of any other party hereto, (ii) waive a breach of a representation or warranty by any other party hereto, or (iii) waive compliance by any other party hereto with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in a written instrument signed by the party giving the extension or waiver. In addition, no waiver exercised pursuant to the terms of this Section 10.4 shall be deemed a waiver of any subsequent breach of, or compliance with, any term, covenant or condition of this Agreement. 10.4 Amendment. This Agreement and the Exhibits and Schedules hereto may be amended at any time before the Closing if Dominion and Seller approve any such amendment in writing. ARTICLE XI MISCELLANEOUS PROVISIONS 11.1 Notices. Any notice, request, demand or other communication required or permitted under this Agreement shall be given in writing and shall be delivered or sent by registered or certified mail, return receipt requested in a prepaid envelope, by overnight mail or courier, or by facsimile transmission, to the address set forth below or such other addresses as such party shall hereafter specify in writing in accordance with this Section: If to Seller or HCFS Venturer: Household Commercial Financial Services, Inc. 2700 Sanders Road Prospect Heights, Illinois 60070 Attention: Edward A. Szarkowicz Telecopy: (708) 564-6238 with a copy to: Katten Muchin & Zavis 525 West Monroe Street, Suite 1600 Chicago, Illinois 60606-3693 Attention: Gregory P.L. Pierce Telecopy: (312) 902-1061 If to Buyer: To Seller and Dominion at the addresses listed herein. with a copy to: McGuire, Woods, Battle & Boothe One James Center 901 East Cary Street Richmond, Virginia 23219 Attention: Thomas H. Tullidge, Jr. Telecopy: (804) 775-1061 and Katten Muchin & Zavis 525 West Monroe Street, Suite 1600 Chicago, Illinois 60606-3693 Attention: Gregory P.L. Pierce Telecopy: (312) 902-1061 If to Dominion or Dominion Venturer: Dominion Capital, Inc. Riverfront Plaza, West Tower 901 East Byrd Street Richmond, Virginia 23219 Telecopy: (804) 775-5819 with a copy to: McGuire, Woods, Battle & Boothe One James Center 901 East Cary Street Richmond, Virginia 23219 Attention: Thomas H. Tullidge, Jr. Telecopy: (804) 775-1061 Such notice or other communication shall be deemed to have been given (i) when delivered, if sent by registered or certified mail, facsimile transmission or delivered personally or (ii) on the following business day if sent by overnight mail or overnight courier. 11.2 Severability. Each part of this Agreement is intended to be severable. If any term, covenant, condition or provision of this Agreement is unlawful, invalid or unenforceable, such illegality, invalidity or unenforceability shall not affect the remaining provisions of this Agreement, which shall remain in full force and effect and shall be binding upon the parties hereto. 11.3 Headings. The headings of the Articles and Sections of this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provision thereof. 11.4 Governing Law. The parties agree that this Agreement shall be construed, and the rights and obligations of the parties under the Agreement shall be determined, in accordance with the laws of the State of Illinois, without regard to its conflicts of laws provisions. 11.5 Assignments; Binding Effect. This Agreement shall not be assigned by any party hereto without the express written consent of all of the other parties hereto. This Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. 11.6 Survival. Seller and Dominion agree that the covenants, warranties and representations contained herein shall survive the Closing, shall not merge into the Closing Documents and shall be independently enforceable. 11.7 Entire Agreement. This Agreement, including any attachments, exhibits and schedules referred to herein and attached hereto, the Formation Agreement and the Venture Agreement constitute the entire agreement between the parties pertaining to the subject matter hereof and thereof and supersede any and all prior agreements, representations and understandings of the parties, written or oral, with respect to the subject matter hereof and thereof. 11.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. 11.9 Construction. Unless the context requires otherwise, singular nouns and pronouns used herein shall be deemed to include the plural, and pronouns of one gender shall be deemed to include the equivalent pronoun of the other gender. 11.10 Additional Indemnification. In consideration of the execution of this Agreement by Dominion and Dominion Venturer and the execution of the Venture Agreement by Dominion Venturer, if the Closing does not occur for any reason, HCFS agrees, subject to the last sentence of this Section, to indemnify, defend, and hold Dominion and Dominion Venturer harmless from any damage, loss, liability or expense (including, without limitation, reasonable expenses of investigation and litigation and reasonable attorneys', accountants' and other professional fees) arising out of (i) the execution and delivery or the existence of this Agreement and the Venture Agreement including without limitation any liability arising from any representation, warranty or agreement made by HCFS or HCFS Venturer in this Agreement or the Venture Agreement or (ii) any termination of this Agreement or the Venture Agreement pursuant to the terms hereof or thereof. Notwithstanding the failure of the Closing to occur, the indemnification obligations of HCFS set forth in this Section shall not be construed to relieve Dominion and Dominion Venturer of their obligations under Sections 7.5 and 7.7 of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. By: /s/ D.P. DEKKER _____________________________________ Title: Senior Vice President HCFS CORPORATE FINANCE VENTURE, INC. By: /s/ D.P. DEKKER _____________________________________ Title: Senior Vice President DOMINION CAPITAL, INC. By: /s/ D. HEAVENRIDGE _____________________________________ Title: President VIRGINIA FINANCIAL VENTURES, INC. By: /s/ D. HEAVENRIDGE _____________________________________ Title: President HOUSEHOLD FINANCE CORPORATION ("HFC") hereby covenants and agrees, that, in the event that HCFS does not pay any amount which HCFS may owe from time to time to Dominion or Dominion Venturer, pursuant to Section 11.10, HFC will promptly pay same on demand by Dominion or Dominion Venturer. HOUSEHOLD FINANCE CORPORATION By: /s/ GLEN O. FICK ___________________________ Title: Senior Vice President EXHIBIT A Schedule of Loans AEC/Sterling Amerisource ATCO Axia Big V Camping World Color Tile Comdata Converse Crosman Deknatel Denwest Desa El Dorado Equitable Health O Meter Huddle House Logan Michaels of Oregon Micropore Miles Homes Omega Optek, Inc. Petrolane/QFB Pioneer Plastics Roller Bearing Technetics Corp. Thermadyne Thrifty Tucson Electric Wayn-Tex EXHIBIT B Schedule of Warrants AEC/Sterling Logan Optek, Inc. (including restructuring fees) Technetics Corp. EXHIBIT C Form of Management Agreement Attached hereto. EXHIBIT D Form of Support Services Agreement Attached hereto. EXHIBIT E Venture Agreement Attached hereto. EXHIBIT F Form of Instrument of Assignment and Assumption for Purchased Loans Attached hereto. EXHIBIT G Form of Instrument of Assignment for Purchased Warrants Attached hereto. EXHIBIT H Form of Escrow Agreement Attached hereto. EXHIBIT I Form of Opinion of McGuire, Woods, Battle & Boothe Attached hereto. EXHIBIT J Form of Opinion of Katten Muchin & Zavis Attached hereto. EXHIBIT K Form of Pre-Closing Escrow Agreement Attached hereto. EXHIBIT L Form of Formation Agreement Attached hereto. SCHEDULE 5.4 Governmental Consents of HCFS None. SCHEDULE 5.5 Non-Contravention re: HCFS None. SCHEDULE 5.6 Required Consents of and Notices to Borrowers SCHEDULE 5.7 Fees and Gross Book Value Attached hereto. SCHEDULE 5.9 Defaults of Borrowers Attached hereto. SCHEDULE 5.11 Defenses of Borrowers None. SCHEDULE 5.13 Obligations to Extend Credit See Attached. SCHEDULE 5.14 Notices re: Insurance None. SCHEDULE 5.15 Litigation None. EX-11 5 EXHIBIT 11 FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT ("Amendment") is made as of the 24th day of March, 1995 by and among HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC., a Delaware corporation ("Seller"), HCFS CORPORATE FINANCE VENTURE, INC., a Delaware corporation and a wholly-owned subsidiary of Seller ("HCFS Venturer"), DOMINION CAPITAL, INC., a Virginia corporation ("Dominion"), and VIRGINIA FINANCIAL VENTURES, INC., a Virginia corporation and a wholly-owned subsidiary of Dominion ("Dominion Venturer"). RECITALS A. The parties hereto have previously entered into that certain Asset Purchase Agreement made as of December 30, 1994 ("Agreement"). All terms not otherwise defined herein shall have the meanings set forth in the Agreement. B. It is a condition precedent to Closing that Buyer shall have obtained a credit facility as contemplated by Section 2.2(d) of the Agreement. The parties to such credit facility have required, as a condition precedent to making such credit facility available to Buyer, that certain amendments be made to the Agreement, without which amendments such parties would be unwilling to enter into the credit facility. The parties hereto desire to amend the Agreement in order to, among other things, satisfy such requirements to allow the credit facility to be made available to Buyer. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do agree as follows: 1. Article I of the Agreement is hereby amended by changing the definition of "Initial Reserve" from "$10 Million" to "$10,572,000 (Ten Million Five Hundred Seventy-Two Thousand Dollars)". 2. Section 4.2 of the Agreement is (i) hereby deleted in its entirety and (ii) hereby replaced by the following Section 4.2: Section 4.2 Closing. Subject to the satisfaction of the conditions set forth in this Agreement, the closing (the "Closing") of the purchase and sale of the Purchased Assets and the other matters contemplated by this Agreement shall take place on such date as is mutually agreed upon by the parties hereto (the "Closing Date") and shall be deemed to occur as of 11:59 p.m. on such date. The Closing shall occur at the offices of Katten, Muchin & Zavis, or at such other place as may be mutually agreed upon by the parties hereto. 3. The following sentence is hereby added to the Agreement immediately following the end of Section 11.5 and immediately before Section 11.6 of the Agreement: Except as otherwise provided herein, and except for Buyer's rights pursuant to Sections 7.1, 7.2(b), 7.2(c), 7.3, 7.7, 7.9, 7.10(b), 9.1(a), 9.3(b), 10.3 and 11.11 hereof, this Agreement is not intended to confer any rights or remedies upon any party except the parties hereto. 4. The following Section 11.11 is hereby added to the Agreement immediately after Section 11.10 of the Agreement: Section 11.11 Loan Eligibility. Seller and HCFS Venturer hereby represent and warrant to Buyer that as of the Closing Date each of the Purchased Loans shall be an "Eligible Loan" as such term is defined in each of that certain CXC Credit Agreement and Committed Credit Agreement dated as of March 24, 1995 among First Source Financial LLP, as borrower, the lenders named therein, First Source Financial, Inc., as servicer, Citicorp North America, Inc., as agent, Financial Security Assurance Inc., as surety provider, HCFS Venturer, and Dominion Venturer ("Credit Agreements"). Notwithstanding anything to the contrary contained in this Agreement, Buyer's sole remedy in the event that the representation and warranty contained in this Section 11.11 is breached, shall be the repurchase by Seller of the loan or loans which are not Eligible Loans, to the extent said repurchase is required pursuant to, and in accordance with the terms of, either of the Credit Agreements. 5. Any documents or agreements referred to in the Agreement as being executed simultaneously with, or on or about the same time as, the Agreement, shall, to the extent not previously executed, be executed on or about the date hereof. 6. Any provisions in the Agreement which benefit or otherwise convey rights upon Buyer (as defined in the Agreement) shall not be amended or modified without the prior written consent of Buyer. 7. Exhibits A, B, and H to the Agreement, and Schedules 5.6, 5.7, 5.9, 5.13 and 5.15 to the Agreement, are (i) hereby deleted in their entirety and (ii) replaced with Exhibits A, B, and H attached to this Amendment, and Schedules 5.6, 5.7, 5.9, 5.13 and 5.15 attached to this Amendment. 8. Except as specifically modified by this Amendment, the Agreement shall remain in full force and effect in accordance with the terms thereof and is hereby adopted, ratified, and confirmed. All references in the Agreement to the "Agreement" shall hereafter refer to the Agreement as amended by this Amendment. IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed as of the date above written. HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. By: /s/ GLEN O. FICK ________________________________ Title: President HCFS CORPORATE FINANCE VENTURE, INC. By: /s/ D.P. DEKKER _________________________________ Title: Senior Vice President DOMINION CAPITAL, INC. By: /s/ DAVID HEAVENRIDGE _________________________________ Title: President VIRGINIA FINANCIAL VENTURES, INC. By: /s/ DAVID HEAVENRIDGE _________________________________ Title: President EXHIBIT A Schedule of Loans Alliance Amerisource Corp. ATCO Axia, Inc. Big V Supermarket Camping World Color Tile, Inc. Comdata Network Community Distributors Converse Crosman Deknatel Denwest Desa International El Dorado Equitable Health-O-Meter HIMSCORP Huddle House Logan Michaels of Oregon Micropore Miles Homes Omega Optek Petrolane Pioneer Roller Bearing Technetics Thermadyne Thrifty Payless Tucson Electric Wayn-Tex EXHIBIT B Schedule of Warrants Logan Optek Technetics EXHIBIT H Form of Escrow Agreement Attached hereto. SCHEDULE 5.6 Required Consents of and Notices to Borrowers Attached hereto. SCHEDULE 5.7 Fees and Gross Book Value Attached hereto. SCHEDULE 5.9 Defaults of Borrowers Attached hereto. SCHEDULE 5.13 Obligations to Extend Credit None. SCHEDULE 5.15 Litigation None. EX-12 6 EXHIBIT 12 NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH REGISTRATION REQUIREMENTS OR AN AVAILABLE EXEMPTION THEREFROM AND EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THIS WARRANT. WARRANT To Purchase Common Stock of OPTEK TECHNOLOGY, INC. THIS IS TO CERTIFY that Household Commercial Financial Services, Inc., a Delaware corporation, or registered assigns, is entitled upon the due exercise hereof at any time during the Exercise Period (as hereinafter defined) to purchase, in whole or in part, from Optek Technology, Inc., a Delaware corporation (the "Company"), the number of shares of Common Stock, $0.01 par value, of the Company as provided in Section 2.1 (subject to adjustment) at the price for each share of such Common Stock so purchased as provided in Section 2.1 (subject to adjustment) and to exercise the other rights, powers and privileges hereinafter provided, all on the terms and conditions and pursuant to the provisions hereinafter set forth. This Warrant (or, if this Warrant is dated a date subsequent to the Closing Date (as hereinafter defined), then the predecessor Warrant dated the Closing Date) has been issued to Household Commercial Financial Services, Inc. pursuant to the Secured Credit Agreement (as hereinafter defined) in consideration of the loans by Household Commercial Financial Services, Inc. as provided therein. This Warrant is an amendment and restatement of, and is issued in replacement of, the warrant dated as of November 27, 1991, which was an amendment and restatement of, and was issued in replacement of, the warrant dated as of January 31, 1991, both of which were issued to Household Commercial Financial Services, Inc. Dated as of January 20, 1994. TABLE OF CONTENTS Page No. ARTICLE I DEFINITIONS...... 1 ARTICLE II EXERCISE OF WARRANT...... 8 2.1 Right to Exercise, Number of Shares and Exercise Price...... 8 2.2 Notice of Exercise; Issuance of Common Stock...... 9 2.3 Fractional Shares...... 10 2.4 Continued Validity...... 10 ARTICLE III REGISTRATION, TRANSFER AND EXCHANGE...... 11 ARTICLE IV ANTIDILUTION PROVISIONS AND RIGHTS UPON EXTRAORDINARY TRANSACTIONS...... 12 4.1 Adjustment of Number of Shares Purchasable and Exercise Price...... 12 (a) Adjustment to Exercise Price...... 12 (b) Adjustment to Number of Shares Issuable Pursuant to this Warrant...... 13 (c) Adjustment to the Schedules of Minimum Prices...... 14 (d) Minimum Adjustment...... 15 (e) Maximum and Minimum Exercise Price...... 15 4.2 Diluting Events and Related Matters...... 15 (a) Issuance of Stock...... 15 (b) Issuance of Warrants, Options or Other Rights....... 16 (c) Issuance of Convertible Securities...... 17 (d) Dividends...... 18 (e) Dividends in Securities...... 19 (f) Other Distributions...... 19 (g) Reorganization, Reclassification, Recapitalization, Merger or Sale of Company...... 19 (h) Splits and Combinations...... 19 (i) Readjustments...... 20 (j) Determination of Consideration for Rights or Options.... 21 (k) Determination of Consideration upon Payment of Cash, Property or Merger...... 21 (l) Record Date...... 22 (m) Shares Outstanding...... 22 (n) Date of Determination...... 22 4.3 Rights of the Holder upon Rights Offering, Mergers, Reorganizations and Other Transfers...... 22 (a) Participation in Rights Offerings...... 22 (b) Participation in Stock Dispositions...... 22 (c) Adjustment to Repurchase Payment...... 23 4.4 Certificates, Notices and Consents...... 24 4.5 No Implied Consent...... 26 ARTICLE V NO IMPAIRMENT...... 27 ARTICLE VI RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT; PREEMPTIVE RIGHTS...... 28 ARTICLE VII LISTING ON SECURITIES EXCHANGE...... 28 ARTICLE VIII RESTRICTIONS ON TRANSFER...... 28 8.1 Notice of Proposed Transfer; Transfers Without Registration...... 29 8.2 Registration and Qualification...... 29 (a) Piggyback Registration...... 29 (b) Demand Registration...... 32 (c) Termination of Repurchase Rights...... 33 8.3 Registration and Qualification Procedures...... 34 8.4 Allocation of Expenses...... 35 8.5 Indemnification...... 36 8.6 Legend on Certificates...... 38 8.7 Supplying Information...... 39 8.8 Damages...... 39 8.9 Holdback Agreements...... 40 8.10 Rule 144 Reporting...... 40 8.11 Consent for Additional Registration Rights...... 41 ARTICLE IX REPURCHASES...... 42 9.1 Obligation of Company...... 42 9.2 Option of Company...... 43 9.3 Delayed Repurchases...... 45 ARTICLE X FINANCIAL AND BUSINESS INFORMATION...... 45 10.1 Delivery of Financial and Business Information...... 45 10.2 Disputed Financial Statements...... 47 ARTICLE XI MISCELLANEOUS...... 48 11.1 Nonwaiver and Expenses...... 48 11.2 Holder Not a Stockholder...... 48 11.3 Notice Generally...... 48 11.4 Payment of Certain Expenses...... 48 11.5 Successors and Assigns...... 48 11.6 Amendment...... 49 11.7 Headings...... 49 11.8 GOVERNING LAW...... 49 11.9 Subsidiaries...... 49 11.10 No Section 338 Election or Step-Up in Asset Value on Books of the Company...... 49 11.11 Limitation on Interest...... 49 NOTICE OF EXERCISE FORM ASSIGNMENT FORM ARTICLE I DEFINITIONS The terms defined in this ARTICLE I, whenever used in this Warrant, shall have the respective meanings hereinafter specified. Whenever used in this Warrant, any noun or pronoun shall be deemed to include both the singular and plural and to cover all genders. "Adjusted Operating Profits" means an amount equal to the Net Income of the Company and its Subsidiaries for the four most recent fiscal quarters of the Company before deduction of any amount which, in conformity with generally accepted accounting principles, would be set forth opposite the caption "income tax expense" (including deferred income taxes) (or any like caption) on a consolidated income statement of the Company, and excluding any amounts which, in conformity with generally accepted accounting principles, would be set forth opposite the captions "extraordinary pre-tax gain" and "extraordinary pre-tax loss" (or any like captions) on such consolidated income statement, plus the amount which, in accordance with generally accepted accounting principles, would be set forth opposite the caption "interest expense" (or any like caption) on such consolidated income statement, plus an amount which, in conformity with generally accepted accounting principles, is equal to any amortization or depreciation for such fiscal period, to the extent the same are deducted from net revenues, in conformity with generally accepted accounting principles, in determining Net Income for such fiscal period. "Affiliate" of any person means any other person which, directly or indirectly, controls or is controlled by or is under common control with, such person. A person shall be deemed to be "controlled by" any other person if such other person possesses, directly or indirectly, power (a) to vote 10% or more of the securities having ordinary voting power, or if not having ordinary voting power, having at the time voting power, for the election of directors of such person; or (b) to direct or cause the direction of the management and policies of such person whether by contract or otherwise. "Applicable Rate" shall have the meaning provided in Section 11.11. "Assignment" means the form of Assignment appearing at the end of this Warrant. "Basic Exercise Price" shall have the meaning provided in Section 2.1(b)(i). "Closing Date" means January 20, 1994. "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's authorized Common Stock, $0.01 par value, and any class of capital stock of the Company now or hereafter authorized having the right to share in distributions either of earnings or assets of the Company without limit as to amount or percentage. "Common Stock on a Fully Diluted Basis" means, at any date as at which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock (which issued and outstanding shares shall be 3,222,305 shares on the date this Warrant is issued), and all shares issuable pursuant to the Company's incentive stock option plan or restricted stock bonus plan or pursuant to an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company may implement after receiving written approval of a majority of the Holders in their sole discretion (which approval must include Household if Household is a Holder) (whether or not options or awards with respect to such shares have been granted) or issuable upon exercise of any warrant (including this Warrant), rights to subscribe for or options (whether or not vested) to purchase Common Stock or Convertible Securities or upon the conversion of any Convertible Securities. On the Closing Date the number of shares of Common Stock on a Fully Diluted Basis shall be 8,042,268 shares, including 3,150,000 shares of Common Stock initially issuable pursuant to this Warrant. "Common Stock Repurchase Price" in effect as of any date shall mean a per share value equal to the result obtained by dividing (a) an amount equal to (i) the product of the Company's Adjusted Operating Profits (at the end of the Quarterly Fiscal Period of the Company immediately preceding such date) and seven (7) less (ii) the amount of Funded Indebtedness (at the end of the Quarterly Fiscal Period of the Company immediately preceding such date), plus (iii) the proceeds that would be received by the Company upon exercise of all warrants, rights to subscribe for or options to purchase Common Stock or Convertible Securities or upon conversion of any Convertible Securities, plus (iv) the fair market value of proceeds received by the Company (other than proceeds in the form of services of employees of the Company and cash proceeds which are reflected in the amount of Funded Indebtedness in clause (ii) above) upon any issuances or sales by it of Common Stock, Convertible Securities or warrants, rights to subscribe for or options to purchase Common Stock or Convertible Securities, multiplied by a fraction the numerator of which (which shall never be less than zero) is four minus the number of full Quarterly Fiscal Periods since such issuance or sale and the denominator of which is four, by (b) the number of shares of Common Stock on a Fully Diluted Basis on such date, all as determined by a firm of independent public accountants of recognized standing selected by the Company and reasonably acceptable to the Holder; provided, however, that the Common Stock Repurchase Price in effect on the date of any notice given to or by the Company under Section 9.2 will not be less than an amount equal to the Minimum Price as set forth below associated with the date of such notice plus an amount equal to the weighted average Exercise Price actually paid by such Holder for all shares of Common Stock issued to such Holder upon the exercise of the Warrant which have not theretofore been repurchased by the Company pursuant to Section 9.1 or 9.2 of the Warrant. Minimum For Date of Notice Price _________________________________________ ________ Closing Date through January 31, 1994 $ 3.98 February 1, 1994 through January 31, 1995 $ 5.23 February 1, 1995 through January 31, 1996 $ 6.92 February 1, 1996 through January 31, 1997 $ 8.39 Thereafter $10.49 "Company" means Optek Technology, Inc., a Delaware corporation. "Convertible Securities" means evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, additional shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event. "Default Rate" means at any time 4.50% plus the rate per annum then most recently announced by The First National Bank of Chicago, a national banking association ("FNBC"), as its corporate base rate at Chicago, Illinois (or if such rate is not being quoted by FNBC, the rate which is the successor to such rate, and if FNBC is not quoting any such rate, the rate conceptually equivalent to such rate which the domestic commercial bank having the highest combined capital and surplus of any bank having its principal office in Chicago, Illinois is quoting). "Diluting Event" means any transaction or event which is identified as a Diluting Event in Section 4.2(a) - (h). "Exercise Period" means the period commencing on the Closing Date and terminating at 5:00 p.m., Chicago time, on October 31, 1998, subject to the provisions of Section 4.3(c). "Exercise Price" means the price per share of Common Stock as set forth in Section 2.1 as such price may be adjusted from time to time pursuant to Article IV. "Exercise Price and Other Factors" shall have the meaning provided in Section 4.1. "First Alternative Exercise Price" shall have the meaning provided in Section 2.1(b)(ii). "Funded Indebtedness" means all indebtedness of the Company and its Subsidiaries, on a consolidated basis, if appropriate, solely for money borrowed and owing, less the aggregate amount of all cash and cash equivalents of the Company and its Subsidiaries but not including the amount of any indebtedness of the Company represented by Convertible Securities and not including additional interest pursuant to Section 4.7 of the Secured Credit Agreement, less the product of (x) the Opcom Minority Percentage and (y) the sum of the Opcom Revolving Loan and the Opcom Working Capital Loan (each as defined in the Secured Credit Agreement). "Holder" means the person in whose name this Warrant is registered on the books of the Company maintained for such purpose. "Household" means Household Commercial Finance Services, Inc., a Delaware corporation. "Independent Counsel" means counsel to the Company, unless counsel to the Holder disagrees in writing with the opinion or advice of such counsel with respect to the issue in question within 15 days after receipt of such opinion or advice, in which case the Company and Holder shall select another counsel, not the regular counsel of the Company or the Holder and experienced in Securities Act matters, who shall render an opinion with respect to the issue in question. The opinion or advice of such other counsel so given shall be conclusive and binding on the Company and the Holder. The legal fees and expenses of such other counsel incurred in connection with the rendering of such opinion shall be borne equally by the Holder and the Company. "Market Value" per share of Common Stock on any date shall mean the average of the daily market prices for the 30 consecutive trading days preceding such date. The market price for each such day shall be the last sale price on such day on such stock exchange on which such stock is listed or admitted to trading, or, if no sale takes place on such day on any such exchange, the average of the closing bid and asked prices on such day and officially quoted on any such exchange, or, if the Common Stock is not then listed or admitted to trading on any stock exchange, the market price for each such business day shall be the last sale price on such day if reported by the National Association of Securities Dealers Automated Quotation System or, if not so reported, the average of the reported closing bid and asked price quotations for such day, as reported by the National Association of Securities Dealers Automated Quotation System or, if not so reported, as furnished by the National Quotation Bureau, Inc., or, if such firm at the time is not engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business as selected by the Holder, or if there is no such firm, as determined by any member of the National Association of Securities Dealers, Inc. selected by the Holder. "Maximum Rate" means the maximum lawful rate of interest (if any) permitted by applicable usury laws, which rate shall change when and as such laws change, to the extent permitted by such laws, effective on the day such change in law becomes effective. "Net Income" for any fiscal period of the Company shall mean consolidated net income or loss of the Company and its Subsidiaries (including, without limitation, Opcom), if any, as it would appear on the consolidated statement of income of the Company for such fiscal period prepared in accordance with generally accepted accounting principles and as it may be adjusted pursuant to Section 9.3 or Section 10.2. "Notice of Cashless Exercise" shall have the meaning provided in Section 2.2(b)(ii). "Notice of Exercise" means the form of Notice of Exercise appearing at the end of this Warrant. "Organic Change" shall have the meaning provided in Section 4.3(b). "Plan Adjusted Operating Profits" for any fiscal year shall be the amount so identified in Schedule I hereto. "Quarterly Fiscal Period" means a period comprised of thirteen or fourteen weeks, as applicable, representing a fiscal quarter of the Company, the first of which in any fiscal year shall begin on the first day of the Company's fiscal year and the remainder of which in such year shall begin on the day following the termination of the preceding Quarterly Fiscal Period. "Registration Agreement" shall have the meaning provided in Section 8.2. "Registration Period" means any period beginning on the date of any notice of repurchase delivered pursuant to Section 9.2 and ending at 5:00 p.m., Chicago time, 30 days thereafter. "Repurchase Price" means the Common Stock Repurchase Price or the Warrant Repurchase Price, as applicable. "Second Alternative Exercise Price" shall have the meaning provided in Section 2.1(b)(iii). "Secured Credit Agreement" means the Amended and Restated Secured Credit Agreement among the Company and Household Commercial Financial Services, Inc., as the same may be amended, modified or supplemented from time to time. "Securities Act" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Shares" shall have the meaning provided in Section 2.1. "Stockholder's Consideration Per Share" shall have the meaning provided in Section 4.3(c). "Subsidiary" means a corporation, partnership or other entity of which a person and/or such person's other Subsidiaries, individually or in the aggregate, own, directly or indirectly, such number of outstanding shares or other interests as have more than 50% of the ordinary voting power (or, at the time extraordinary powers are available to holders of shares or other interests, such number of outstanding shares or other interests as have more than 50% of voting power) for the election of directors or the members of any similar governing body. "Unsold Amount" shall mean that portion of any Warrant with respect to which the holder thereof requested registration pursuant to Section 8.2 of shares of Common Stock issuable upon exercise thereof and which was not registered by the Company as permitted hereby or not sold pursuant to such registration. "Unsold Shares" shall mean any shares of Common Stock that the holder thereof requested be registered pursuant to Section 8.2 and which were not registered by the Company as permitted hereby or not sold pursuant to such registration. "Warrant" and "Warrants," including "this Warrant," mean (a) the warrant dated as of the Closing Date issued to Household and (b) all warrants issued upon the partial exercise, transfer or division of or in substitution for such warrant. "Warrant Repurchase Price" in effect as of any date shall mean a per share value equal to the difference between the Common Stock Repurchase Price (without regard to the proviso contained in the definition of "Common Stock Repurchase Price") and the Exercise Price then in effect; provided, however, that the Warrant Repurchase Price in effect on the date of any notice given to or by the Company under Section 9.2 will not be less than the difference between the Minimum Price associated with the date of such notice as set forth in the schedule below and the Exercise Price then in effect. Minimum For Date of Notice Price ________________________________________ _______ Closing Date through January 31, 1994 $ 4.48 February 1, 1994 through January 31, 1995 $ 5.73 February 1, 1995 through January 31, 1996 $ 7.42 February 1, 1996 through January 31, 1997 $ 8.89 Thereafter $10.99 ARTICLE II EXERCISE OF WARRANT 2.1 Right to Exercise, Number of Shares and Exercise Price. Subject to and upon compliance with the conditions of this ARTICLE II, the Holder shall have the right, at its option, at any time and from time to time during the Exercise Period, unless the Company shall have given notice to the Holder pursuant to Section 9.2 and the Registration Period shall have expired without termination pursuant to Section 8.2(c) of the Company's rights under Section 9.2, to exercise this Warrant in whole or in part. The aggregate number of shares of Common Stock which may be purchased from time to time during the Exercise Period by the Holder upon exercise of this Warrant shall be as set forth below, subject to adjustment as provided in ARTICLE IV hereof (the "Shares"): (a) The number of shares of Common Stock issuable upon the exercise of the Warrant shall be 3,150,000 (subject to adjustment as provided herein). The initial Exercise Price shall be fifty cents ($0.50) (subject to adjustment as provided herein). (b) On January 31 of each year (and applicable for the period through and including January 30 of the next succeeding year), the Exercise Price shall be adjusted to the extent provided as follows: (i) If the Company's cumulative Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year are equal to or greater than Plan Adjusted Operating Profits through the end of the most recently ended fiscal year as set forth in Schedule I hereto, then the Exercise Price through January 30 of the next succeeding year shall be fifty cents ($0.50) (subject to adjustment as provided herein) (the "Basic Exercise Price") (ii) If the Company's cumulative Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year are less than 100% of Plan Adjusted Operating Profits but at least 90% of Plan Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year as set forth on Schedule I hereto, then the Exercise Price through January 30 of the next succeeding year shall be twenty-five cents ($0.25) (subject to adjustment as provided herein) (the "First Alternative Exercise Price") (iii) If the Company's cumulative Adjusted Operating Profits for the period from November 1, 1993 through the end of the most recently ended fiscal year are less than 90% of Plan Adjusted Operating Profits through the end of the most recently ended fiscal year as set forth on Schedule I hereto, then the Exercise Price through January 30 of the next succeeding year shall be one cent ($0.01) (the "Second Alternative Exercise Price"). 2.2 Notice of Exercise; Issuance of Common Stock. (a) To exercise this Warrant, the Holder shall deliver to the Company at its principal office at 1215 West Crosby Road, Carrollton, Texas 75006 Attention: President (i) a Notice of Exercise duly executed by the Holder and specifying the number of shares of Common Stock to be purchased and (ii) this Warrant. (b) Payment of the Exercise Price shall be made in the manner selected by the Holder as set forth below: (i) At the option of the Holder, (A) by wire transfer to an account in a bank located in the United States designated for such purpose by the Company or (B) by certified or official bank check payable to the order of the Company and drawn on a member of the Chicago or New York Clearing House; or (ii) In lieu of delivering the cash Exercise Price as set forth in Section 2.2(b)(i), the Holder may instruct the Company in writing ("Notice of Cashless Exercise") to deduct from the number of shares of Common Stock that would otherwise be issued upon such exercise a number of shares of Common Stock equal to the quotient obtained from dividing (x) the product obtained by multiplying (1) the number of shares of Common Stock for which the Warrant is being exercised and (2) the Exercise Price then in effect, by (y) the Market Value of a share of Common Stock. The Notice of Cashless Exercise may be given by completing the appropriate box in the Notice of Exercise at the end of this Warrant. Upon receipt of the cash payment described in Section 2.2(b)(i) or the Notice of Cashless Exercise described in Section 2.2(b)(ii), the Company shall, as promptly as practicable, and in any event within five days thereafter, cause to be issued and delivered to the Holder, or, subject to ARTICLE VIII, the transferee designated in the Notice of Exercise, a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise registered in the name of the Holder or the name of the transferee so designated. (c) Unless otherwise requested by the Holder, this Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or transferee so designated in the Notice of Exercise shall be deemed to have become the holder of record of such shares for all purposes, as of the close of business on the date the Notice of Exercise, together with payment or Notice of Cashless Exercise as herein provided, and this Warrant, is received by the Company. (d) If this Warrant is exercised in part, the Company shall, at the time of delivery of the certificate or certificates for Common Stock, unless this Warrant has then expired, issue and deliver to the Holder or the transferee so designated in the Notice of Exercise a new Warrant evidencing the rights of the Holder or such transferee to purchase the aggregate number of shares of Common Stock for which this Warrant shall not have been exercised, and this Warrant shall be cancelled. 2.3 Fractional Shares. The Company shall not issue fractional shares of Common Stock or scrip representing fractional shares of Common Stock upon exercise of this Warrant. As to any fractional share of Common Stock which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall purchase from the Holder such unissued fractional share at a price equal to an amount calculated by multiplying such fractional share (calculated to the nearest 1/100th of a share) by the Common Stock Repurchase Price, unless such Common Stock Repurchase Price is a negative amount, in which case such fractional share shall be multiplied by its Exercise Price determined in accordance with this Warrant. Payment of such amount shall be made in cash or by check payable to the order of the Holder at the time of delivery of any certificate or certificates arising upon such exercise. 2.4 Continued Validity. A holder of shares of Common Stock issued upon the exercise of this Warrant, in whole or in part, shall continue to be entitled to all rights provided to holders of Common Stock issuable on the exercise of this Warrant, whether or not this Warrant has been fully exercised. The Company will, at the time of the exercise of this Warrant, in whole or in part, upon the request of the holder of the shares of Common Stock issued upon the exercise thereof, acknowledge in writing, in form reasonably satisfactory to such holder, its continuing obligation to afford to such holder all rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant; provided, however, that if such holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder all such rights. ARTICLE III REGISTRATION, TRANSFER AND EXCHANGE The Company shall keep at the Company's principal office referred to in Section 2.2 or at the offices of Kilgore & Kilgore in Dallas, Texas or at such other address as shall be specified in a written notice to the Holder a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration, transfer and exchange of this Warrant. The Company will not at any time, except upon the dissolution, liquidation or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer of this Warrant. Upon surrender for registration of transfer of this Warrant at such office, the Company shall execute and deliver, in the name of the designated transferee or transferees, one or more new Warrants representing the right to purchase a like aggregate number of shares of Common Stock. At the option of the Holder, this Warrant may be exchanged for other Warrants representing the right to purchase a like aggregate number of shares of Common Stock upon surrender of this Warrant at such office. Whenever this Warrant is so surrendered for exchange, the Company shall execute and deliver the Warrants which the Holder making the exchange is entitled to receive. Every Warrant presented or surrendered for registration of transfer or exchange shall be accompanied by an Assignment duly executed by the holder thereof or its attorney duly authorized in writing. All warrants issued upon any registration of transfer or exchange of warrants shall be the valid obligations of the Company, evidencing the same rights, and entitled to the same benefits as the warrants surrendered upon such registration of transfer or exchange. Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the loss, theft, destruction or mutilation of this Warrant and (in case of loss, theft or destruction) the written agreement of the Holder to indemnify the Company (or, if the Holder is not Household Commercial Financial Services, Inc. and if the Company reasonably requests, a bond) against any resulting loss or expense and in case of mutilation upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant. No service charge shall be made for any registration of transfer or exchange of Warrants, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer as provided in Section 11.4. The Company and any agent of the Company may treat the person in whose name this Warrant is registered as the owner of this Warrant for all purposes whatsoever, and neither the Company nor any agent of the Company shall be affected by notice to the contrary. This Warrant, if properly assigned, may be exercised by a new holder without first having a new Warrant issued. ARTICLE IV ANTIDILUTION PROVISIONS AND RIGHTS UPON EXTRAORDINARY TRANSACTIONS 4.1 Adjustment of Number of Shares Purchasable and Exercise Price. Subject to the provisions of this ARTICLE IV, the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price at the time of any calculation pursuant to this Article IV, the number of shares of Common Stock issuable upon exercise of this Warrant at the time of any calculation pursuant to this Article IV and the schedules of minimum prices set forth in the definitions of Common Stock Repurchase Price and Warrant Repurchase Price (together, "Exercise Price and Other Factors") shall be subject to adjustment from time to time as set forth below in the order set forth below. After making any antidilution adjustment, pursuant to this Article IV, the adjustments described in Section 2.1(d) must be made. (a) Adjustment to Exercise Price. If a Diluting Event, as identified in Section 4.2, occurs (unless otherwise specified in Section 4.2), the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price shall each be reduced to the lower of the prices calculated by: (i) Dividing (A) an amount equal to the sum of (x) the number of shares of Common Stock on a Fully Diluted Basis (but not including Shares issuable upon exercise of this Warrant) immediately prior to such Diluting Event multiplied by the then existing Basic Exercise Price, First Alternative Exercise Price or Second Alternative Exercise Price, as applicable, plus (y) the aggregate consideration, if any, received or deemed to be received by the Company upon such Diluting Event, by (B) the total number of shares of Common Stock on a Fully Diluted Basis (but not including Shares issuable upon exercise of this Warrant) immediately after such Diluting Event; and (ii) Multiplying the then existing Basic Exercise Price, First Alternative Exercise Price or Second Alternative Exercise Price, as applicable, by a fraction (a) the numerator of which is (x) the sum of (i) the number of shares of Common Stock on a Fully Diluted Basis immediately prior to such Diluting Event (but not including shares of Common Stock issuable upon exercise of this Warrant) multiplied by the Common Stock Repurchase Price immediately prior to such Diluting Event plus (ii) the aggregate consideration, if any, deemed to be received by the Company upon such Diluting Event, divided by (y) the total number of shares of Common Stock on a Fully Diluted Basis immediately after such Diluting Event (but not including shares of Common Stock issuable upon exercise of this Warrant), and (b) the denominator of which shall be the Common Stock Repurchase Price immediately prior to such Diluting Event. Notwithstanding the foregoing, if the Common Stock Repurchase Price is less than or equal to zero, the Basic Exercise Price and the First Alternative Exercise Price and the Second Alternative Exercise Price shall be reduced in accordance with clause (i) above. (b) Adjustment to Number of Shares Issuable Pursuant to this Warrant. Upon any adjustment of the Basic Exercise Price, First Alternative Exercise Price and the Second Alternative Exercise Price as provided in this Section 4.1 or Section 4.2, the Holder shall thereafter be entitled upon exercise of this Warrant under Section 2.1 to receive, at the Exercise Price in effect after such adjustment (which may be the Basic Exercise Price, the First Alternative Exercise Price or Second Alternative Exercise Price): (i) If the Warrant Repurchase Price in effect immediately prior to and after a Diluting Event are each positive numbers, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) which, when multiplied by the Warrant Repurchase Price in effect immediately after the Diluting Event (and after giving effect to the number of shares of Common Stock issuable upon the exercise of this Warrant as determined under this clause (i) immediately after the Diluting Event), shall equal the product of (A) the Warrant Repurchase Price in effect immediately prior to such Diluting Event and (B) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such Diluting Event. (ii) If the Warrant Repurchase Price in effect immediately prior to or after a Diluting Event is not a positive number, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) which, when multiplied by the Exercise Price per share of Common Stock in effect immediately after the Diluting Event, shall equal the product of (A) the Exercise Price per share of Common Stock immediately prior to such Diluting Event and (B) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such Diluting Event. The Company shall not engage in any Diluting Event if as a result of such event and the adjustment pursuant to this Section 4.1(b), an ownership change would occur within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, or any successor provision. If notwithstanding the foregoing, a Diluting Event inadvertently occurs which would result in such an ownership change if the full adjustments provided herein were made, then the number of shares subject to this Warrant shall only be of adjusted to the extent possible without causing such an ownership change, and notwithstanding such partial adjustment, the Holder shall retain all applicable rights with respect to breach of the foregoing sentence. (c) Adjustment to the Schedules of Minimum Prices. Upon any adjustment of the Basic Exercise Price, First Alternative Exercise Price and the Second Alternative Exercise Price or any other adjustment as provided in this Section 4.1 or Section 4.2 (unless otherwise specified in Section 4.2): (i) the Minimum Prices in the schedule set forth in the definition of Warrant Repurchase Price will be adjusted upward or downward so that the result obtained by multiplying (1) such Minimum Price prior to such adjustment, by (2) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to the Diluting Event is equal to the result obtained by multiplying (3) such Minimum Price, after such adjustment, by (4) the number of shares of Common Stock issuable upon exercise of this Warrant immediately after the Diluting Event and the related application of Section 4.1(b); and (ii) the Minimum Prices in the schedule set forth in the definition of Common Stock Repurchase Price will be adjusted upward or downward so that the result obtained by multiplying (1) such Minimum Price prior to such adjustment, by (2) the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to the Diluting Event is equal to the result obtained by multiplying (3) such Minimum Price, after such adjustment, by (4) the number of shares of Common Stock issuable upon exercise of this Warrant immediately after the Diluting Event and the related application of Section 4.1(b); the Minimum Prices in effect at the time any shares of Common Stock were issued upon exercise of this Warrant shall remain the Minimum Prices in effect with respect to such shares of Common Stock only, notwithstanding the occurrence of any Diluting Event; provided, however, that if an event set forth in Sections 4.2(e) or 4.2(h) shall occur, the Minimum Prices in effect shall be adjusted as set forth in the last sentence of Section 4.2(h). (d) Minimum Adjustment. In the event any adjustment of the Exercise Price and Other Factors pursuant to this Section 4.1 shall result in an adjustment of the Basic Exercise Price, the First Alternative Exercise Price or the Second Alternative Exercise Price of less than $0.01 per share of Common Stock, no such adjustment shall be made, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to $0.01 or more per share of Common Stock; provided, however, that upon any adjustment of the Exercise Price and Other Factors resulting from (i) the declaration of a dividend upon, or the making of any distribution in respect of, any stock of the Company payable in Common Stock or Convertible Securities or (ii) the reclassification, by subdivision, combination or otherwise, of the Common Stock into a greater or smaller number of shares, the foregoing figure of $0.01 per share (or such figure as last adjusted) shall be proportionately adjusted; and provided, further, that upon exercise or repurchase of this Warrant, the Company shall make all necessary adjustments not theretofore made to the Exercise Price and Other Factors up to and including the date upon which this Warrant is exercised or repurchased. (e) Maximum and Minimum Exercise Price. At no time shall the Exercise Price per share of Common Stock exceed $0.50 except as provided in subsection (g) or (h) of Section 4.2. Subject to Article V, at no time shall the Exercise Price per share of Common Stock be less than the par value per share of Common Stock. 4.2 Diluting Events and Related Matters. Except as otherwise expressly provided, upon the occurrence of a Diluting Event, as identified in subsections (a)-(h) below, the Exercise Price and Other Factors shall be adjusted as set forth in Section 4.1: (a) Issuance of Stock. If the Company shall issue or sell any shares of Common Stock, including any treasury shares (but excluding any shares issued pursuant to warrants or options outstanding on the date hereof or any shares issued pursuant to the Company's existing incentive stock option plan or restricted stock bonus plan, directors' formula award plan or long term stock incentive plan, in each case as in effect and in an amount permitted on the date hereof, whether or not options or awards with respect to such shares have been granted (at prices not less than the prices at which such warrants and options are exercisable on the date hereof) or any shares issuable pursuant to an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company may implement after receiving the written approval of a majority of the Holders in their sole discretion (which approval must include Household if Household is a Holder) whether or not options or awards with respect to such shares have been granted (at prices not less than prices which are so approved as described above)) for the consideration per share less than (x) the Exercise Price in effect immediately prior to the time of such issue or sale or (y) the Common Stock Repurchase Price in effect immediately prior to the time of such issue or sale, then a Diluting Event shall have occurred and the Exercise Price and Other Factors shall be adjusted as set forth in Section 4.1. (b) Issuance of Warrants, Options or Other Rights. (i) Characterization of Transaction for Antidilution Adjustment. In case the Company shall in any manner grant (whether directly or by assumption in a merger or otherwise) any rights to subscribe for or to purchase, or any options for the purchase of Common Stock or for the purchase of Convertible Securities (but excluding options or awards granted pursuant to the Company's existing incentive stock option plan, restricted stock bonus plan, directors' formula award plan or long term stock incentive plan, in each case as in effect and in an amount permitted on the date hereof or granted pursuant to an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company may implement after receiving the written approval of a majority of the Holders in their sole discretion (which approval must include Household if Household is a Holder) in amounts permitted pursuant to the approval described above), whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which shares of Common Stock are issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities shall be less than (1) the Exercise Price in effect immediately prior to the time of the granting of such rights or options, or (2) the Common Stock Repurchase Price existing immediately prior to the time of such granting of such rights or options, then a Diluting Event shall have occurred and the maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of the maximum amount of such Convertible Securities issuable upon the exercise of such rights or options shall (as of the date for adjustment required by subsection (n) below) be deemed to be outstanding and to have been issued for such price per share. Except as otherwise specified in Section 4.2(i), no further adjustments described in Section 4.1 of the Exercise Price and Other Factors shall be made upon the actual issuance of such Common Stock or of such rights or options or upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities. (ii) Adjustment to Price. The price per share for which shares of Common Stock are issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities shall be determined by dividing (1) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights or options, plus, in the case of such Convertible Securities, the minimum aggregate amount of additional consideration if any, payable upon the conversion or exchange thereof plus the net amount received or receivable upon the issuance of such Convertible Securities (in each case without double counting), by (2) the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options. (c) Issuance of Convertible Securities. (i) Characterization of Transaction for Antidilution Adjustment. In case the Company shall in any manner issue or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the rights to convert or exchange thereunder are immediately exercisable, and the price per share for which shares of Common Stock are issuable upon such conversion or exchange shall be less than (1) the Exercise Price in effect immediately prior to the time of such issue or sale or (2) the Common Stock Repurchase Price existing immediately prior to the time of such issuance or sale, then a Diluting Event shall have occurred and the Exercise Price and Other Factors shall be adjusted as provided in Section 4.1 and the maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date for adjustment required by subsection (n) below) be deemed to be outstanding and to have been issued for such price per share. Except as otherwise specified in Section 4.2(i), (x) no further adjustments of the Exercise Price and Other Factors shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities and (y) if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Exercise Price and Other Factors have been or are to be made pursuant to other provisions of Sections 4.1 and 4.2, no further adjustment of the Exercise Price and Other Factors shall be made by reason of such issue or sale. (ii) Adjustment to Price. The price per share for which shares of Common Stock are issuable upon such conversion or exchange shall be determined by dividing (1) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (2) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. (d) Dividends. In case the Company shall declare, in any 12- month period, dividends upon the Common Stock (excluding a dividend payable in Common Stock referred to in subsection (e) below or in warrants, rights or Convertible Securities referred to in subsection (b) or (c) above) which in the aggregate is in excess of either 50% of Net Income for such 12-month period or 15% of the Net Worth of the Company (as shown on the most recent year end consolidated balance sheet described in ARTICLE X hereof), then a Diluting Event shall have occurred and the Basic Exercise Price and the First Alternative Exercise Price in effect immediately prior to the declaration of such dividend shall each be reduced by an amount equal to the aggregate amount of such dividends in excess of (x) the lesser of (a) 50% of Net Income for such 12-month period and (b) 15% of Net Worth divided by (y) all outstanding shares of Common Stock with respect to which such dividend is payable. Such reductions shall take effect as of the date on which a record date is established for the purpose of such dividend, or, if a record date is not established, the date as of which the holders of Common Stock of record entitled to such dividend are to be determined. Appropriate readjustment of the Basic Exercise Price and the First Alternative Exercise Price shall be made in the event that any dividend referred to in this subsection (d) shall be lawfully abandoned. (e) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, then a Diluting Event shall have occurred, and such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution, shall be deemed to have been issued or sold without consideration. (f) Other Distributions. In case the Company shall distribute or grant to the holders of shares of Common Stock (whether or not on a pro rata basis) any evidence of its indebtedness or any assets (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) or rights or options to subscribe or purchase any such evidence of its indebtedness or assets (excluding rights or options to subscribe or purchase Common Stock or Convertible Securities), then a Diluting Event shall have occurred and the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price in effect immediately prior to such distribution or grant shall each be reduced by an amount equal to the aggregate amount of such distribution divided by the number of outstanding shares of Common Stock with respect to which such distribution was made immediately prior to such distribution, and other adjustments shall be made as set forth in Section 4.1 hereof. Such reductions shall take effect as of the date on which a record date is established for the purpose of such distribution or grant, or, if a record date is not established, the date as of which the holders of Common Stock of record entitled to such distribution or grant are to be determined. (g) Reorganization, Reclassification, Recapitalization, Merger or Sale of Company. In case the Company or a successor thereto issues Common Stock, options, other rights or Convertible Securities in connection with any consolidation or merger of the Company or any of its Subsidiaries with or into another corporation or in connection with the sale or other disposition of all or substantially all of the business or assets of the Company or any of its Subsidiaries and the consideration per share realized by the Company by reason of any such transaction, determined as applicable in accordance with subsection (k) of this Section 4.2, is less than (i) the Exercise Price in effect immediately prior to such event, or (ii) the Common Stock Repurchase Price in effect immediately prior to such event, then a Diluting Event shall have occurred and the Exercise Price and Other Factors shall be adjusted as set forth in Section 4.1. (h) Splits and Combinations. In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then a Diluting Event shall have occurred and the Exercise Price and Other Factors in effect immediately prior to such combinations, notwithstanding Section 4.1, shall be adjusted as follows: Each of the Basic Exercise Price, the First Alternative Exercise Price and the Second Alternative Exercise Price in effect immediately after such event shall equal the product of (a) the Basic Exercise Price, the First Alternative Exercise Price or the Second Alternative Exercise Price, as applicable, in effect immediately prior to such event and (b)(i) the number of outstanding shares of Common Stock immediately prior to such event, divided by (ii) the number of outstanding shares of Common Stock immediately after such event. The number of shares of Common Stock issuable upon the exercise of the Warrant immediately after such event shall equal the product of (c) the number of shares of Common Stock issuable upon the exercise of the Warrant immediately prior to such event and (d)(i) the number of outstanding shares of Common Stock immediately after such event, divided by (ii) the number of shares of outstanding Common Stock immediately prior to such event. Each Minimum Price in the schedule set forth in the definitions of Warrant Repurchase Price and Common Stock Repurchase Price immediately after such event shall be equal to the product of (e) the applicable Minimum Price immediately prior to such event and (f)(i) the number of outstanding shares of Common Stock immediately prior to such event, divided by (ii) the number of outstanding shares of Common Stock immediately after such event. (i) Readjustments. In the event (i) the purchase price provided for in any rights or options referred to in subsection (b) above, or (ii) the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities referred to in subsection (b) or (c) above or (iii) the rate at which any Convertible Securities referred to in subsection (b) or (c) above are convertible into or exchangeable for Common Stock shall change (other than under or by reason of provisions designed to protect against dilution), the Exercise Price and Other Factors in effect at the time of such event shall forthwith be readjusted to the Exercise Price and Other Factors which would have been in effect at such time had such rights, options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or exercise rate, as the case may be, at the time initially granted, issued or sold. On the expiration of any such option or right or the termination of any such right to convert or exchange such Convertible Securities, the Exercise Price and Other Factors then in effect hereunder shall forthwith be readjusted to the Exercise Price and Other Factors which would have been in effect at the time of such expiration or termination had such right, option or Convertible Security never been issued, and the Common Stock issuable thereunder shall no longer be deemed to be outstanding. (j) Determination of Consideration for Rights or Options. In case any rights or options to purchase any shares of Common Stock or Convertible Securities shall be issued in connection with the issue or sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to the rights or options, such rights or options shall be deemed to have been issued without consideration. (k) Determination of Consideration upon Payment of Cash, Property or Merger. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor, after deduction of any accrued interest, dividends or any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair market value of such other consideration on the date of issue of such securities, as determined in good faith by the Board of Directors of the Company, less any expenses incurred by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase such Common Stock or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company and its Subsidiary, if applicable, survive, the amount of consideration therefor shall be deemed to be the fair market value thereof on the date of issue, as determined in good faith by the Board of Directors of the Company, for such portion of the assets and business of the non-surviving corporation as the Board of Directors shall attribute to such Common Stock, Convertible Securities, rights or options, as the case may be. In the event of any consolidation or merger of the Company or any of its Subsidiaries in which the Company or its Subsidiary, if applicable, does not survive or in the event of any sale or other disposition of all or substantially all of the business or assets of the Company or any of its Subsidiaries for stock or other securities of any corporation, the Company shall be deemed to have issued a number of shares of its Common Stock for stock or securities of the other corporation computed on the basis of the actual exchange ratio on which the transaction was predicated and for a consideration equal to the fair market value on the date of such transaction of such stock or securities of the other corporation. (l) Record Date. In case the Company shall establish a record date of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock or in Convertible Securities or (ii) to subscribe for or purchase Common Stock or Convertible Securities, then effective as of such record date such Common Stock or Convertible Securities shall be deemed to have been issued or sold. (m) Shares Outstanding. Except as provided to the contrary herein, the number of shares of Common Stock deemed to be outstanding for purposes of Section 4.2(d), (f) and (h) at any given time shall be the number of shares of Common Stock actually issued and outstanding at such time, plus any shares of Common Stock issuable in respect of scrip certificates which have been issued in lieu of fractional shares of Common Stock. (n) Date of Determination. For purposes of Section 4.1 and 4.2, the date as of which the Exercise Price and Other Factors shall be adjusted shall be the earlier of the date upon which the Company shall (1) enter into a firm contract for the issuance of shares of Common Stock, rights or other options or Convertible Securities, as the case may be, or (2) issue such shares of Common Stock, rights or other options or Convertible Securities, as the case may be. 4.3 Rights of the Holder upon Rights Offering, Mergers, Reorganizations and Other Transfers. (a) Participation in Rights Offerings. In the event the Company shall effect an offering of Common Stock or other stock pro rata among its stockholders, the Holder shall be entitled, at the Holder's option, regardless of whether the Warrant is otherwise then exercisable, in lieu of the adjustments set forth in Sections 4.1 and 4.2 to the extent that such option is exercised by the Holder, to elect to participate in each and every such offering as though this Warrant had been exercised and the Holder were, at the time of any such rights offering, then a holder of that number of shares of Common Stock to which the Holder is then entitled on the exercise hereof. (b) Participation in Stock Dispositions. In the event that the Company shall offer, approve, accept or recommend an offering, sale, transfer, redemption, cancellation or other disposition of Common Stock (including, without limitation, by way of any merger, capital reorganization, or reclassification or recapitalization of the capital stock of the Company) to any person (other than in any offering described in subsection (a) above) or in the event that the Company liquidates or dissolves following a sale or transfer of all or substantially all of its assets to any entity, the Company shall arrange as part of such offering, sale or other disposition for the participation of the Holder, with respect to including this Warrant or the Shares issuable upon exercise hereof in such offering, sale or other disposition upon identical terms, without such Holder incurring any liability under Section 16(b) of the Securities Exchange Act of 1934, as amended, and after taking into account the Exercise Price, but without taking into account any minimum prices in the definition of the Repurchase Prices. Such participation shall be at the Holder's option, regardless of whether the Warrant is otherwise then exercisable, in lieu of the adjustments set forth in Sections 4.1 and 4.2, to the extent such option is exercised by the Holder. In case of the consolidation or merger of the Company or any of its Subsidiaries with or into another corporation (each such event is herein called an "Organic Change") and in which the Holder does not participate as contemplated by the preceding paragraph, then after any required adjustment in the Exercise Price and Other Factors on account of such Organic Change, there shall thereafter be deliverable upon the exercise of this Warrant or any portion hereof (in lieu of or in addition to the number of shares of Common Stock theretofore deliverable) the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock represented by that portion of this Warrant so exercised would have been entitled upon such Organic Change, and at the same aggregate Exercise Price, as adjusted. Prior to and as a condition of the consummation of any Organic Change described, the Company shall make appropriate, written adjustments in the application of the provisions herein set forth satisfactory to the holders of the Warrants entitled to not less than a majority of the shares of Common Stock issuable upon the exercise thereof with respect to the rights and interests of the holders of the Warrants so that the provisions set forth herein shall thereafter be applicable, as nearly as possible, in relation to any shares of stock or other securities or other property thereafter deliverable upon exercise of the Warrants. Any such adjustment shall be made by and set forth in a supplemental agreement between the Company and the successor entity and be approved by the holders of the Warrants entitled to not less than a majority of the shares of Common Stock issuable upon the exercise thereof. (c) Adjustment to Repurchase Payment. In the event (i) the Board of Directors of the Company shall adopt a resolution authorizing the sale or other disposition by the Company of all or substantially all of the business or assets of the Company, the Company shall engage an investment banking firm to assist in such sale or disposition, or the Company shall enter into a written agreement in principle relating to such sale or disposition, or (ii) the stockholders of the Company shall exchange or sell all or substantially all of their shares of Common Stock (including, without limitation, by way of a merger, reorganization or recapitalization), the Company or its stockholders shall engage an investment banking firm to assist in such exchange or sale, the Board of Directors of the Company shall adopt a resolution recommending such sale or exchange to the stockholders of the Company, or the Company shall enter into a written agreement in principle relating to such exchange or sale or (iii) the Board of Directors of the Company shall adopt a resolution authorizing the Company to sell shares of Common Stock, the Company shall engage an investment banking firm to assist in such sale, or the Company shall enter into a written agreement in principle relating to such sale, in any case within 180 days after the date of a repurchase pursuant to Section 9.2, for a consideration per share (determined by reference to all of the consideration received in such transaction by the stockholders of the Company (or which would be received thereby if all of any such consideration received by the Company in such transaction were distributed to the stockholders and to the holders of Common Stock repurchased in such repurchase pursuant to Section 9.2 or issuable upon exercise of the portion of the Warrant repurchased in such repurchase), as determined by an investment banking firm selected by the Company and acceptable to the Holders (the "Stockholder's Consideration Per Share")) greater than the consideration per share which was paid to the Holders on the date of such repurchase, then immediately upon the closing of the transaction resulting from such event the Company shall pay to such Holders an amount equal to (x) the number of shares of Common Stock repurchased and/or represented by that portion of the Warrant repurchased, multiplied by (y) the difference between the Stockholder's Consideration Per Share and the consideration per share received by the Holders in such repurchase. The calculation of the amount to be paid a Holder pursuant to this Section 4.3(c) shall be made after taking into account any adjustment to the Exercise Price and Other Factors pursuant to Sections 4.1 and 4.2 resulting from such transactions described in clauses (i), (ii) or (iii) above. The obligation of this Section 4.3(c) survives any repurchase of the Warrant or the Common Stock issuable upon the exercise thereof. 4.4 Certificates, Notices and Consents. (a) Upon the occurrence of any Diluting Event requiring adjustments of the Exercise Price and Other Factors pursuant to Sections 4.1 and/or 4.2, a certificate signed (i) by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company or (ii) by any independent firm of certified public accountants of recognized standing selected by, and at the expense of, the Company setting forth in reasonable detail the events requiring the adjustment and the method by which such adjustment was calculated, shall be mailed (by first class mail, postage prepaid) to the Holder specifying the adjusted Exercise Price and Other Factors after giving effect to the adjustment(s). The certificate of any independent firm of certified public accountants of recognized standing selected by the Board of Directors of the Company and reasonably acceptable to the Holder shall be conclusive evidence, absent manifest error, of the correctness of any computation made under Sections 4.1 and/or 4.2. (b) In case the Company after the date hereof shall propose to (i) pay any dividend payable in stock to the holders of shares of Common Stock or to make any other distribution to the holders of shares of Common Stock, (ii) offer to the holders of shares of Common Stock rights to subscribe for or purchase any additional shares of any class of stock or any other rights or options or (iii) effect any reclassification involving merely the subdivision or combination of outstanding shares of Common Stock, or (iv) any capital reorganization or any consolidation or merger, or any sale or other disposition of all or substantially all of the business or assets of the Company, or the liquidation, dissolution or winding up of the Company or (v) engage in any Diluting Event not otherwise mentioned in this subsection (b), then, in each such case, the Company shall mail (by first class mail, postage prepaid) to the Holder notice of such proposed action, which shall specify the date on which the books of the Company shall close, or a record date shall be established, for determining holders of Common Stock entitled to receive such stock dividends or other distribution of such rights or options, or the date on which such reclassification, reorganization, consolidation, merger, sale, transfer, other disposition, liquidation, dissolution or winding up shall take place or commence, as the case may be, and the date as of which it is expected that holders of Common Stock of record shall be entitled to receive securities or other property deliverable upon such action, if any such date is to be fixed. Such notice shall be mailed, in the case of any action covered by clause (i) or (ii) above, at least 30 days prior to the date upon which such action takes place, and, in the case of any action covered by clause (iv) above, at lease 30 days prior to the date upon which such action takes place and 30 days prior to any record date to determine holders of Common Stock entitled to receive such securities or other property. (c) Failure to file any certificate or notice or to mail any notice, or any defect in any certificate or notice, pursuant to this Section 4.4, shall not affect the legality or validity of the adjustment of the Exercise Price and Other Factors, the number of shares purchasable upon exercise of this Warrant, or any transaction giving rise thereto. 4.5 No Implied Consent. Nothing in this Warrant is intended to permit any action or event which is prohibited by the Secured Credit Agreement as long as such Secured Credit Agreement remains in effect. ARTICLE V NO IMPAIRMENT The Company shall not, and shall not permit its Subsidiaries to, directly or indirectly, by any action, including, without limitation, amending its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant and any required issuance of additional shares of Common Stock pursuant to Sections 4.1 and 4.2, (c) obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant, (d) not issue any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding up of the Company or which has disproportionately greater voting rights under any circumstance, (e) not permit any Subsidiary of the Company to issue, sell or transfer any capital stock or other equity interest in such Subsidiary, or to sell all or substantially all of the assets of such Subsidiary, to any person or entity other than the Company, except in connection with the Opcom warrant and the exercise of such warrant or in connection with an employee or director stock option plan, restricted stock bonus or ownership plan, stock appreciation plan or similar equity appreciation plan which the Company or Opcom may implement after receiving the written approval of a majority of the Holders (which approval must include Household if Household is a Holder), (f) not undertake any reverse stock split, combination, reorganization or other reclassification of its capital stock which would have the effect of making this Warrant exercisable for less than one share of Common Stock, (g) not take or permit the taking of any action which could subject the holder of this Warrant or shares of Common Stock issuable upon exercise thereof to liability under Section 16(b) of the Securities Exchange Act of 1934, as amended and (h) not change the Company's fiscal year from a fiscal year ending at the end of October as identified on Schedule I hereto. Upon the request of the Holder, the Company will at any time and from time to time during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to the Holder, the continued validity of this Warrant and the Company's obligations hereunder. ARTICLE VI RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT; PREEMPTIVE RIGHTS The Company will at all times reserve and keep available, solely for issuance, sale and delivery upon the exercise of this Warrant, a number of shares of Common Stock equal to the number of full shares of Common Stock issuable upon the exercise of this Warrant. All shares of Common Stock issuable upon the exercise of this Warrant shall, when issued upon such exercise, (a) be duly and validly authorized and issued, fully paid and nonassess-able, and (b) be free from all taxes, liens and charges with respect to the issue thereof other than any stock transfer taxes in respect of any transfer occurring contemporaneously with such issue. No stockholder of the Company has or shall have any preemptive rights to subscribe for such shares of Common Stock. ARTICLE VII LISTING ON SECURITIES EXCHANGE If the Company shall list any shares of Common Stock on any securities exchange, it will during the Exercise Period, at its expense, list thereon, maintain and, when necessary, increase such listing of, all shares of Common Stock issued or, to the extent permissible under the rules of the applicable securities exchange or automated quotation system, issuable upon the exercise of this Warrant so long as any shares of Common Stock shall be so listed. ARTICLE VIII RESTRICTIONS ON TRANSFER The conditions contained in the following sections of this ARTICLE VIII are intended to insure compliance with the Securities Act in respect of the transfer of Warrants or Common Stock issuable upon the exercise of Warrants. Reference in this ARTICLE VIII to shares of Common Stock issuable upon the exercise of Warrants includes shares of Common Stock theretofore issued upon the exercise of any Warrants which are then evidenced by certificates required to bear the legend set forth in Section 8.6. 8.1 Notice of Proposed Transfer; Transfers Without Registration. The Holder or the holder of any shares of Common Stock issuable upon the exercise of this Warrant, by acceptance hereof or thereof, agrees to give written notice to the Company, prior to any transfer of this Warrant, such shares of Common Stock or any portion thereof which bear the legend described in Section 8.6, of its intention to make such transfer, which notice shall include a brief description of such proposed transfer. A copy of such notice shall be sent to Independent Counsel. If in the opinion of Independent Counsel the proposed transfer may be effected without registration or qualification under any Federal or State law, such counsel shall, as promptly as practicable, notify the Company and the Holder of such opinion and of the terms and conditions, if any, to be observed in such transfer, whereupon the Holder shall be entitled to transfer such shares of Common Stock in accordance with the terms of the notice delivered to the Company and the opinion of Independent Counsel. In the event this Warrant shall be exercised as an incident to such transfer, such exercise shall relate back and for all purposes of this Warrant be deemed to have occurred as of the date of such notice regardless of delays incurred by reason of the provisions of this ARTICLE VIII which may result in the actual exercise on any later date. 8.2 Registration and Qualification. The provisions of Section 8.2(a), 8.2(b) and 8.9 below are subject to the terms of the First Amended and Restated Registration Rights Agreement, dated as of July 1, 1988 (the "Original Registration Agreement"), among the Company, Household and the stockholders listed therein, as the same may be amended, modified or supplemented from time to time with the consent required by Section 8.11 (the "Registration Agreement"), and if, prior to an amendment of the Original Registration Agreement as amended by any effective amendment thereof, any conflict exists between the provisions of the Original Registration Agreement as amended by any effective amendment thereof, and Section 8.2(a), 8.2(b) and 8.9, the applicable conflicting provisions of the Original Registration Agreement as amended by any effective amendment thereof shall control, but only to the extent of the conflict and the holder of any Warrant and the shares of Common Stock issuable upon exercise thereof shall have the applicable conflicting rights contained in the Original Registra- tion Agreement as amended by any effective amendment thereof but only to the extent of the conflict, until such time as the Original Registration Agreement as amended by any effective amendment thereof is so amended. (a) Piggyback Registration. If the Company proposes (whether on its own behalf or at the request of any other person or entity) to register any security under the Securities Act on any registration form (otherwise than for the registration of securities to be offered and sold pursuant to (a) an employee benefit plan, (b) a dividend or interest reinvestment plan, (c) other similar plans or (d) reclassifications of securities, mergers, consolidations and acquisitions of assets on Form S-4 or any successor thereto) prescribed by the Commission permitting a secondary offering or distribution, not less than 60 days prior to each such registration, the Company shall give to the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof written notice of such proposal which shall describe in detail the proposed registration and distribution (including those jurisdictions where registration or qualification under the securities or blue sky laws is intended) and, upon the written request of any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof given within 30 days after the date of any such notice, proceed to include in such registration such shares of Common Stock as have been requested by any such holder to be included in such registration; provided, however, that the Company shall not be required to include fewer than 50,000 shares (subject to adjustment upon any combination or split of shares or similar event) of Common Stock in any such registration pursuant to this Section 8.2(a). Any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof shall in its request describe briefly the proposed disposition of such shares of Common Stock. The Company will in each instance use its best efforts to cause any shares of Common Stock issuable upon the exercise of the Warrants (the holders of which shall have so requested registration thereof) to be registered under the Securities Act and qualified under the securities or blue sky laws of any jurisdiction requested by a prospective seller, all to the extent necessary to permit the sale or other disposition thereof (in the manner stated in such request) by a prospective seller of the securities so registered. If the managing underwriter, who shall be selected by the Company (subject to the approval, not unreasonably withheld, of a majority of the holders that have requested registration (which must include Household if Household is then a holder and requesting registration) to manage the distribution of the shares of Common Stock being registered, advises the Company in writing that, in its opinion, the inclusion of the shares of Common Stock requested to be included in such registration by a holder of a Warrant or shares of Common Stock issuable upon the exercise thereof with the securities being registered by the Company and other prospective sellers would materially adversely affect the distribution of all such securities, then: (a) (i) if such registration has been initially proposed by the Company, the Company shall include in such registration the number of shares proposed to be registered by the Company and by the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof before including any other securities in the registration, and, if an additional reduction in the number of securities being registered is necessary, the Company shall include in such registration such shares of the Company and the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof pro rata based on the number of shares originally proposed to be registered by the Company and by the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof or (ii) if such registration has been initially proposed by a holder of securities other than the Company or the holders of Warrants or shares of Common Stock issuable upon exercise thereof, the Company shall include in such registration the number of shares proposed to be registered by such other holder and the holders of Warrants or shares of Common Stock issuable upon exercise thereof before including any other securities in the registration and, if an additional reduction in the number of securities being registered is necessary, the Company shall include in such registration such shares of such other holder and the holders of Warrants or shares of Common Stock issuable upon exercise thereof pro rata based on the number of shares originally proposed to be registered by such other holder and by each holder of Warrants or shares of Common Stock issuable upon exercise thereof; or (b) any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof may, at its sole option, delay its offering and sale for a period not to exceed 120 days after the effective date of such registration as such managing underwriter shall reasonably request. In the event of such delay, the Company: (i) shall use its best efforts to effect any registration or qualification under the Securities Act and the securities or blue sky laws of any jurisdiction as may be necessary to permit such prospective seller to make its proposed offering and sale following the end of such period of delay; and (ii) during such period of delay and for at least 90 days thereafter, shall not file or cause to be effected any other registration of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock, whether on its own behalf or at the request of any other person or entity, and shall not sell any shares of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock. The holder of a Warrant or shares of Common Stock issuable upon the exercise thereof who has requested shares of Common Stock to be included in a registration pursuant to this Section 8.2(a) by acceptance hereof or thereof, agrees to execute an underwriting agreement with such underwriter that is (i) reasonably satisfactory to such holder and (ii) in customary form. Nothing in this Section 8.2(a) shall be deemed to require the Company to proceed with any registration of its securities after giving the notice herein provided. (b) Demand Registration. The holders of the Warrants and of any shares of Common Stock issuable upon the exercise thereof may, on up to four separate occasions (unless such request is withdrawn in accordance with the terms hereof) (the "Demands"), require the Company to effect the registration of the Shares pursuant to the provisions of this Section 8.2(b). Such Demands shall consist of two demands for which the Company shall pay all the fees and expenses as set forth in Section 8.4 (the "Free Demands") and two demands for which the holders shall pay their proportionate share of the fees and expenses set forth in Section 8.4 (the "Charged Demands"). If the holders of the Warrants and of any shares of Common Stock issuable upon the exercise thereof representing a total of more than 50% of the shares of Common Stock then issued and issuable upon the exercise of the Warrants (which must include Household if Household is then a holder) shall give notice to the Company to the effect that such holders intend to (i) transfer all or any part of the Shares or (ii) exercise all or any part of the Warrants and transfer all or any part of the Shares under such circumstances that a public distribution (within the meaning of the Securities Act) of the Shares will be involved, then the Company shall (A) within 10 days after receipt of such notice, give written notice of the proposed registration to the other holders of warrants and shares of Common Stock issuable upon exercise thereof, and (B) within 30 days after receipt of such notice, file a registration statement pursuant to the Securities Act to the effect that such shares may be sold under the Securities Act as promptly as is practicable thereafter and the Company will use its best efforts to cause any such registration to become effective and to keep the prospectus included therein current for at least six months after the effective date thereof or until the distribution shall have been completed, whichever first occurs; provided, however, that such holders shall furnish the Company with such appropriate information (relating to the intention of such holders) in connection therewith as the Company may reasonably request in writing; and provided, further, that the Company shall not be required to register fewer than 200,000 (subject to adjustment upon any combination or split of shares or similar event) shares of Common Stock in any registration pursuant to this Section 8.2(b). As long as the Company is not in default on its obligations under Section 10.1, the Company's obligation to file a registration statement, at any time when it is impossible or impracticable to include the Company's fiscal year-end financial statements as the most recent certified financial statements required to be included therein, shall be suspended until the Company's next fiscal year- end financial statements are due in accordance with Section 10.1(b), unless the request for registration pursuant to this Section 8.2(b) has been withdrawn. The managing underwriter for offerings made pursuant to this Section 8.2(b) shall be selected by the parties requiring registration hereunder (which must include Household if Household is then a holder and requesting registration), subject to the consent, not unreasonably withheld, of the Company. If the managing underwriter for any offering made pursuant to this Section 8.2(b) advises the Company in writing that, in its opinion, the inclusion of all of the shares of Common Stock requested to be included in such registration by the holders of Warrants and shares of Common Stock issuable upon the exercise thereof would materially adversely affect the distribution of all such securities, then (a) there shall be included in such registration shares of the holders of Warrants or shares of Common Stock issuable upon the exercise thereof pro rata based on the number of shares originally proposed to be registered by each holder of Warrants or shares of Common Stock issuable upon the exercise thereof or (b) any holder of a Warrant or shares of Common Stock issuable upon the exercise thereof may, at its sole option, delay its offering and sale for a period not to exceed 120 days after the effective date of such registration as such managing underwriter shall reasonably request. In the event of such delay, the Company (i) shall use its best efforts to effect any registration or qualification under the Securities Act and the securities or blue sky laws of any jurisdiction as may be necessary to permit such prospective seller to make its proposed offering and sale following the end of such period of delay; and (ii) during such period of delay and for at least 90 days thereafter, shall not file or cause to be effected any other registration of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock, whether on its own behalf or at the request of any other person or entity, and shall not otherwise sell any of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock. A registration shall not reduce the number of Demands available to the holders under this Section 8.2(b) until such registration has become effective and the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof participating in the demand registration are able to register and sell at least 80% of the shares of Common Stock originally requested to be included in such registration; provided, however, that if in connection with a proposed Demand made pursuant to Section 8.2(b) the holders of the Warrants or shares of Common Stock issuable upon the exercise thereof participating in the demand registration are able to register and sell more than 50% but less than 80% of the shares of Common Stock originally requested to be included in such registration, the number of Free Demands shall be reduced by one, and the number of Charged Demands shall be increased by one. (c) Termination of Repurchase Rights. The Company shall have no repurchase rights pursuant to Section 9.2 with respect to any shares of Common Stock or portion of the Warrant exercisable for shares of Common Stock that a Holder has requested be registered pursuant to Section 8.2(a) or 8.2(b) if such request pursuant to Section 8.2(a) or 8.2(b) is given prior to (i) the date of any notice under Section 9.2, or (ii) the expiration of the Registration Period with respect to all shares of Common Stock or the entire portion of the Warrant specified in any notice delivered pursuant to Section 9.2; provided, however, that subject to the last sentence of Section 8.2(a), the Company may repurchase pursuant to Section 9.2 any Unsold Shares or Unsold Amount that the Company was requested to register prior to any notice under Section 9.2, and the holders of Unsold Shares and unsold Amounts may not override any such repurchase by requesting registration within the applicable Registration Period. 8.3 Registration and Qualification Procedures. Whenever the Company is required by the provisions of Section 8.2 to use its best efforts to effect the registration of any of its securities under the Securities Act, the Company will, as expeditiously as is possible: (a) prepare and file with the Commission a registration statement with respect to such securities; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and the prospectus current and to comply with the provisions of the Securities Act with respect to the sale of all securities covered by such registration statement whenever the seller of such securities shall desire to sell the same, including the offering or sale of such securities on a continuous or delayed basis pursuant to Rule 415 under the Securities Act as the same shall be in effect from time to time; (c) furnish to each seller such number of copies of preliminary prospectuses and prospectuses and each supplement or amendment thereto and such other documents as each seller may reasonably request in order to facilitate the sale or other disposition of the securities owned by such seller in conformity with (i) the requirements of the Securities Act and (ii) the seller's proposed method of distribution; (d) register or qualify the securities covered by such registration statement under the securities or blue sky laws of such jurisdictions within the United States as each seller shall reasonably request, and do such other reasonable acts and things as may be required of it to enable each seller to consummate the sale or other disposition in such jurisdictions of the securities owned by such seller; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or consent to a general and unlimited service of process in any such jurisdictions, (ii) qualify as a dealer in securities or (iii) register or qualify at its own expense securities of such seller in any jurisdiction not described in the notice of the Company referred to in the first paragraph of Section 8.2, in any case in order to accomplish any of the foregoing; (e) furnish, at the request of any seller on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the seller making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as the seller of such securities may reasonably request and are customarily included in such opinion and (ii) letters, dated, respectively, (1) the effective date of the registration statement and (2) the date such securities are delivered to the underwriters, if any, for sale pursuant to such registration, from a firm of independent certified public accountants of recognized standing selected by the Company, addressed to the underwriters, if any, and to the seller making such request, covering such financial, statistical and accounting matters with respect to the registration in respect of which such letters are being given as the seller of such securities may reasonably request and are customarily included in such letters; (f) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders as soon as reasonably practicable, but not later than 16 months after the effective date of the registration statement, an earnings statement covering a period of at least 12 months beginning after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; (g) enter into and perform an underwriting agreement with the managing underwriter, if any, selected as provided in Section 8.2, as the case may be, containing customary terms of offer and sale of the securities, payment provisions, underwriting discounts and commissions, representations, warranties, covenants, indemnities, terms and conditions; and (h) keep each seller advised in writing as to the initiation and progress of any registration under Section 8.2, as the case may be. 8.4 Allocation of Expenses. If the Company is required by the provisions of Section 8.2 to use its best efforts to effect the registration or qualification under the Securities Act or any state securities or blue sky laws of any of the shares of Common Stock issuable upon the exercise of the Warrants, the Company will pay all expenses in connection therewith, including, without limitation, (a) all expenses incident to filing with the National Association of Securities Dealers, Inc., (b) registration fees, (c) printing expenses, (d) the Company's accounting and legal fees and expenses, (e) expenses of any special audits incident to or required by any such registration or qualification, (f) premiums for insurance in such amount, if any, deemed appropriate by the managing underwriter and (g) expenses of complying with the securities or blue sky laws of any jurisdictions in connection with such registration or qualification; provided, however, that the holders of any Warrant or shares of Common Stock issuable upon exercise thereof participating in a Charged Demand shall be liable for the amount of such expenses in connection with such Charged Demand made pursuant to Section 8.2(b) equal to the product of (a) all such expenses and (b) the proportion which the number of shares of Common Stock issuable upon exercise of the Warrants for which registration has become effective and which are sold pursuant to Section 8.2(b) bears to the total number of all shares included in such registration; and provided, further, that the Company shall not be liable for (1) any discounts or commissions to any underwriter or (2) any stock transfer taxes incurred in respect of the shares of Common Stock issuable upon the exercise of the Warrants sold by the sellers. 8.5 Indemnification. In connection with any registration or qualification of securities under Section 8.2 or 8.3, the Company hereby indemnifies the Holder and the holders of any shares of Common Stock issuable upon the exercise of the Warrants and each underwriter thereof, including each person, if any, who controls the Holder or such stockholder or underwriter within the meaning of Section 15 of the Securities Act, against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) caused by any untrue, or alleged untrue, statement of a material fact contained in any registration statement, preliminary prospectus, prospectus or notification or offering circular (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or caused by any omission, or alleged omission, to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information furnished in writing to the Company by the Holder or any such stockholder or underwriter expressly for use therein. The Company and each officer, director and controlling person of the Company or underwriter within the meaning of Section 15 of the Securities Act are hereby indemnified by the Holder and by the holders of any shares of Common Stock issuable upon the exercise of the Warrants against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) caused by any untrue, or alleged untrue, statement of a material fact contained in any registration statement, preliminary prospectus or notification or offering circular (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or caused by any omission, or alleged omission, to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Holder or any such stockholder expressly for use therein. Promptly upon receipt by a party indemnified under this Section 8.5 of notice of the commencement of any action against such indemnified party in respect of which indemnity or reimbursement may be sought against any indemnifying party under this Section 8.5, such indemnified party shall notify the indemnifying party in writing of the commencement of such action, but the failure so to notify the indemnifying party shall not relieve it of any liability which it may have to any indemnified party, unless such failure shall materially adversely affect the defense of such action. In case notice of commencement of any such action shall be given to the indemnifying party as above provided, the indemnifying party shall be entitled to participate in and, to the extent it may wish, jointly with any other indemnifying party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and satisfactory to such indemnified party. The indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the indemnified party unless (a) the indemnifying party agrees to pay the same, (b) the indemnifying party fails to assume the defense of such action with counsel reasonably satisfactory to the indemnified party or (c) the named parties to any such action (including any impleaded parties) have been advised by such counsel that representation of such indemnified party and the indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party); provided that the indemnifying party shall not be required to pay the fees and expenses of more than one counsel to indemnified parties claiming indemnification pursuant to this Section 8.5. No indemnifying party shall be liable for any settlement entered into without its consent. If the indemnification provided for in this Section 8.5 shall for any reason be unenforceable by an indemnified party, although otherwise available in accordance with its terms, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, liabilities or expenses with respect to which such indemnified party has claimed indemnification, in such proportion as is appropriate to reflect the relative fault of the indemnified party on the one hand and the indemnifying party on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The Company, each holder of the Warrants and each holder of Shares of Common Stock issued upon the exercise thereof agree that it would not be just and equitable if contribution pursuant hereto were to be determined by pro rata allocation or by any other method of allocation which does not take into account such equitable considerations. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to herein shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim which is the subject hereof. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. Each Holder of the Warrants and each holder of shares of Common Stock issued upon the exercise thereof and bearing the legend required by Section 8.6, by acceptance thereof, agrees to the indemnification provisions of this Section 8.5. 8.6 Legend on Certificates. In case any shares of Common Stock are issued upon the exercise in whole or in part of the Warrants or are thereafter transferred, in either case under such circumstances that no registration under the Securities Act is required, each certificate representing such shares shall bear on the face thereof the following legend: The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and any transfer thereof is subject to the conditions specified in the Warrant, dated as of November 27, 1991, originally issued by Optek Technology, Inc. (the "Company") to Household Commercial Financial Services, Inc. A copy of the form of such Warrant is on file with the Secretary of the Company at 1215 West Crosby Road, Carrollton, Texas 75006 and will be furnished without charge by the Company to the holder of this certificate upon written request to the Secretary of the Company at such address. In case (a) a registration statement covering shares of Common Stock represented by a certificate bearing the legend specified above becomes effective under the Securities Act or (b) the Company receives an opinion of Independent Counsel that such legend is no longer necessary on such certificate to protect the Company from a violation of the Securities Act, the Company shall, or shall instruct its transfer agent and registrar to, issue in lieu thereof a new certificate or certificates for such shares in the name of the holder of such shares without such legend on the face thereof. 8.7 Supplying Information. The Company, the Holder and each holder of shares of Common Stock issuable upon the exercise of the Warrant shall cooperate with each other in supplying such information as may be necessary for any of such parties to complete and file any information reporting forms presently or hereafter required by the Commission or any commissioner or other authority administering the blue sky or securities laws of any jurisdiction where shares of Common Stock are proposed to be sold pursuant to Section 8.2 or 8.3. 8.8 Damages. In the event the Company fails to comply with any provision of Section 8.2 or 8.3, upon written request of the Holder of the warrant or any holder of shares of Common Stock issuable upon the exercise thereof, the Company shall promptly obtain from an independent investment banking firm acceptable to such person an opinion estimating the net proceeds which such person would have received (after deducting underwriting commissions and discounts and any other expenses that would have been for the account of such Holder or holder of shares of Common Stock in connection with the registration or qualification of such shares of Common Stock) upon the sale of shares of Common Stock proposed to be sold pursuant to such registration or qualification. Such opinion of the independent investment banking firm shall be (a) delivered in writing to the Company, with a copy to such person, within 15 days after the date of the request of such person to the Company and (b) conclusive and binding on the Company and such person. Within 21 days of receipt by the Company of such estimate, if such person so elects, the Company shall pay to such person an amount equal to such estimated net proceeds related to the Warrants or shares of Common Stock, as the case may be. Payment of such amount shall be made by, at the option of such person, (i) wire transfer to an account in a bank located in the United States designated by such person for such purpose or (ii) a certified or official bank check drawn on a member of the Chicago or New York Clearing House payable to the order of such person. Upon payment to such person of such amount, such person shall assign to the Company, this Warrant and, if issued, the shares of Common Stock issued upon the exercise of this Warrant proposed to be sold pursuant to the registration or qualification in question, without any representation or warranty (other than that such Holder has good and valid title thereto free and clear of liens, claims, encumbrances and restrictions of any kind arising by or through such Holder). If less than all of the shares of Common Stock issuable upon exercise of this Warrant were proposed to be sold pursuant to the registration or qualification in question, the Company shall cancel the Warrant and issue in the name of, and deliver to, the Holder, pursuant to Section 2, a new Warrant for the shares of Common Stock issuable upon the exercise thereof not required to be assigned to the Company pursuant to the provisions of the preceding sentence. The Company agrees that the amount of actual damages that would be sustained by the Holder as a result of the failure of the Company to comply with any provisions of Section 8.2 or 8.3 is not capable of ascertainment on any other basis. 8.9 Holdback Agreements. The Company agrees: (i) not to effect any public sale or distribution of or otherwise dispose of any of its capital stock or securities convertible into or exchangeable or exercisable for any such capital stock during the seven days prior to or 135 days after the date any registration pursuant to Section 8.2(a) or 8.2(b) has become effective, except as part of such registration and except pursuant to any registration of securities to be offered and sold pursuant to (A) an employee benefit plan, (B) a dividend or interest reinvestment plan, (C) other similar plans or (D) reclassifications of securities, mergers, consolidations and acquisitions of assets on Form S-4 or any successor thereto; and (ii) to cause each person or entity which owns any capital stock of the Company as of the date of this Warrant (other than persons or entities holding nonrestricted stock that can be freely traded pursuant to Section 4(1) of the Securities Act and persons or entities who obtained stock pursuant to a registration described in Section 8.9(i)(A), (B), (C) or (D)) and each person or entity which purchases the Company's capital stock or securities convertible into or exchangeable or exercisable for any such capital stock at any time after the date of this Warrant (other than in a public offering and other than persons or entities holding nonrestricted stock that can be freely traded pursuant to Section 4(1) of the Securities Act and persons or entities who obtained stock pursuant to a registration described in Section 8.9(i)(A), (B), (C) or (D)) to agree not to effect any such public sale or distribution during such period. 8.10 Rule 144 Reporting. With a view to making available to the holders of Warrants and of shares of Common Stock issuable upon exercise thereof the benefits of certain rules and regulations of the Commission which may permit the sale of Warrants or shares of Common Stock issuable upon exercise thereof to the public without registration, the Company agrees to: (a) make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act or any successor rule or regulation from time to time in effect; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to the Holder or a holder of Common Stock issuable upon exercise of Warrants forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and the Exchange Act, a copy of the most recent annual or quarterly report of the Company filed with the Commission and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as the Holder or such holders may reasonably request in availing themselves of any rule or regulation of the Commission allowing them to sell securities without registration under the Securities Act. 8.11 Consent for Additional Registration Rights. The Company shall not grant rights to register any of its securities under the Securities Act to any person or entity, and shall not permit the amendment, supplement or modification of any such rights existing as of the Closing Date, without the consent of the holders of Warrants and shares of Common Stock issuable upon exercise thereof representing more than 50% of the shares of Common Stock issued or issuable upon exercise of the Warrants (which must include Household if Household is then a Holder), except for the rights described by the Registration Agreement. ARTICLE IX REPURCHASES Reference in this ARTICLE IX to issued shares of Common Stock shall mean shares of Common Stock theretofore issued upon the exercise of any Warrants, together with any additional shares of Common Stock or other securities issued with respect to such shares pursuant to any transaction described in Section 4.2(e), (f), (g) or (h), and, for purposes of this ARTICLE IX, references to a Holder or Holders shall include any holder of shares of Common Stock issued upon the exercise of any Warrants. 9.1 Obligation of Company. From time to time prior to the later to occur of (i) October 31, 1998 and (ii) payment in full of all Liabilities (as defined in the Secured Credit Agreement), upon written notice to the Company from a Holder, the Company will, subject to the terms and conditions of the Secured Credit Agreement, on the date (not less than 90 days from the date of such notice) designated in such notice (unless delayed pursuant to Section 9.3), repurchase from such Holder all or any portion of this Warrant or all or any number of issued shares of Common Stock held by such Holder designated in such notice for: (a) in the case of all or a portion of the Warrant, an amount equal to the product of (i) the lesser of (x) the Warrant Repurchase Price in effect on the date of such notice and (y) the Market Value as of the date of such notice reduced by the Exercise Price then in effect and (ii) the number of shares of Common Stock represented by the Warrant on the date of such notice or the portion of the Warrant to be repurchased; and (b) in the case of issued shares of Common Stock, an amount equal to the product of (i) the lesser of (x) the Common Stock Repurchase Price and (y) the Market Value as of the date of such notice and (ii) the number of shares of Common Stock to be repurchased. Upon receipt by the Company of any notice pursuant to this Section 9.1, the Company shall, within five days thereof, send a copy of such notice to each Holder of the Warrants and issued shares of Common Stock held by such Holders. Thereafter, each other Holder of the Warrants and/or such issued shares of Common Stock shall be entitled to exercise its rights pursuant to the preceding paragraph by giving not less than 30 days' notice of such request for repurchase. The date designated for such repurchase shall be the same day designated by the Holder initially requesting such repurchase. On each date designated for the repurchase of Warrants and/or issued shares of Common Stock pursuant to this Section 9.1 (unless delayed pursuant to Section 9.3), each appropriate Holder shall assign to the Company the Warrant or portion thereof and/or the issued shares of Common Stock being repurchased, without any representation or warranty (other than that such Holder has good and valid title thereto free and clear of liens, claims, encumbrances and restrictions of any kind arising by or through such Holder), against payment of the amounts set forth above by, at the option of such Holder, (i) wire transfer to an account in a bank located in the United States designated by the Holder for such purpose, or (ii) a certified or official bank check drawn on a member of the Chicago or New York Clearing House payable to the order of the Holder. If less than all of this Warrant is being repurchased, the Company shall cancel this Warrant and issue in the name of, and deliver to, the appropriate Holders, pursuant to Section 2, new Warrants for the portion not being repurchased. Any Warrants repurchased pursuant to this Section 9.1 shall be cancelled and shall not be reissued by the Company. The Company shall not be obligated under this Section 9.1 to repurchase any Warrant or portion thereof and/or issued shares of Common Stock (i) to the extent such a repurchase would (a) violate the corporate laws of the Company's state of incorporation, as determined by an opinion of Independent Counsel or (b) unless waived by the Lender (as defined in the Secured Credit Agreement), result in an "Event of Default" or "Unmatured Event of Default" as such terms are defined in the Secured Credit Agreement, (ii) unless, if the Secured Credit Agreement is in effect, the Lender shall loan to the Company under such Secured Credit Agreement sufficient funds for such repurchase at a rate applicable to Revolving Loans in Tranche Six (as defined in the Secured Credit Agreement) or (iii) with respect to which the Holder requested registration pursuant to Section 8.2(a) or 8.2(b) prior to the expiration of the applicable Registration Period and after the Company delivered a notice of repurchase pursuant to Section 9.2. The Company shall repurchase any Warrant or portion thereof and/or issued shares of Common Stock requested to be, but not (due to operation of this paragraph), repurchased pursuant to this Section 9.1 before repurchasing any other Warrant or portion thereof and/or issued shares of Common Stock pursuant to this Section 9.1. 9.2 Option of Company. The Company shall have the right, (subject to clause (g) of ARTICLE V) upon the giving of written notice to the Holder from time to time prior to the later to occur of (i) October 31, 1998 and (ii) payment in full of all Liabilities (as defined in under the Secured Credit Agreement), upon the giving of written notice to the Holder, but subject to the terms and conditions of the Secured Credit Agreement, to repurchase from a Holder all or any portion of this Warrant or all or any number of issued shares of Common Stock held by such Holder (except for such portion of this Warrant or shares of Common Stock with respect to which the Company's right to repurchase has terminated pursuant to Section 8.2(c)) for: (a) in the case of all or a portion of the Warrant (other than an Unsold Amount), an amount equal to the product of (i) the Warrant Repurchase Price in effect on the date of such notice and (ii) the number of shares of Common Stock represented on the date of such notice by the Warrant; and (b) in the case of issued shares of Common Stock (other than Unsold Shares), an amount equal to the product of (i) the Common Stock Repurchase Price in effect on the date of such notice and (ii) the number of shares of Common Stock to be repurchased; and (c) in the case of a repurchase of Unsold Shares, an amount equal to the product of (i) the greater of (x) the Common Stock Repurchase Price in effect on the date of such notice and (y) the Market Value as of the date of such notice and (ii) the number of Unsold Shares to be repurchased; and (d) in the case of a repurchase of an Unsold Amount, an amount determined by multiplying (i) the greater of (x) the Warrant Repurchase Price in effect on the date of such notice, and (y) the Market Value as of the date of such notice reduced by the Exercise Price then in effect and (ii) the number of shares of Common Stock issuable on the date of such notice upon exercise of the portion of the Unsold Amount to be repurchased; provided, however, that without the prior written consent of all of the Holders, the Company shall not make such a repurchase without simultaneously repurchasing from each Holder a proportionate amount of such Warrants and issued shares of Common Stock held by such Holders; and provided further, that an additional payment may be required by the terms of Section 4.3(c). If the Company exercises its rights to repurchase under this Section 9.2, all Unsold Shares and Unsold Amounts must be repurchased before the Company may repurchase other Common Stock or any other portion of a Warrant. Such notice of repurchase shall (a) designate the date of repurchase, which date shall be not less than 60 or more than 120 days from the date of such notice, (b) state the Warrant Repurchase Price and the Common Stock Repurchase Price and number of shares of Common Stock subject to this Warrant or portion thereof and/or the number of issued shares of Common Stock to be repurchased and (c) indicate the method by which calculations were made. On the date so designated (unless delayed pursuant to Section 9.3), the Holder shall assign to the Company the Warrant or portion thereof and/or the number of issued shares of Common Stock to be repurchased without any representation or warranty (other than that the Holder has good and valid title thereto free and clear of liens, claims, encumbrances and restrictions of any kind), against payment of the amounts set forth above by, at the option of the Holder, (i) wire transfer to an account in a bank located in the United States designated by the Holder for such purpose or (ii) a certified or official bank check drawn on a member of the Chicago or New York Clearing House payable to the order of the Holder. If less than all of this Warrant is being repurchased, the Company shall cancel this Warrant and shall issue in the name of, and deliver to the appropriate Holders pursuant to Section 2 new Warrants for the portion hereof not being repurchased. Any Warrants repurchased pursuant to this Section 9.2 shall be cancelled and shall not be reissued by the Company. 9.3 Delayed Repurchases. Any repurchase by the Company of all or any portion of this Warrant or issued shares of Common Stock pursuant to Sections 9.1 or 9.2 which is delayed by (a) the failure of the Company to deliver financial statements within the time periods required in Section 10.1 or (b) an objection by the Holder to any financial statements delivered in accordance with Section 10.1 shall be consummated within 10 days after, as the case may be, the delivery of such financial statements or the resolution of such objection. ARTICLE X FINANCIAL AND BUSINESS INFORMATION 10.1 Delivery of Financial and Business Information. The Company will deliver to the Holder: (a) As soon as practicable after the end of each of the first three Quarterly Fiscal Periods in each fiscal year of the Company, and in any event within 45 days thereafter, two copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter (reflecting, among other things, Funded Indebtedness), and (ii) consolidated statements of income, retained earnings and changes in financial position of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter; setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year (reflecting, among other things, Adjusted Operating Profits, and for the first fiscal year of the Company setting forth comparative figures as if the Company had existed during the previous fiscal year with a comparable corporate structure). Such statements shall be (1) prepared in accordance with generally accepted accounting principles consistently applied, (2) in reasonable detail and (3) certified as complete and correct by the principal financial or accounting officer of the Company; (b) As soon as practicable after the end of each fiscal year of the Company, and in any event within 90 days thereafter, two copies of: (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and (ii) consolidated statements of income, retained earnings and changes in financial position of the Company and its Subsidiaries for such year; setting forth in each case in comparative form the figures for the previous fiscal year (except in the case of the figures for the first fiscal year of the Company which shall be set forth in comparative form as though the Company had existed during the previous fiscal year with a comparable corporate structure), all in reasonable detail and accompanied by a report thereon by a firm of independent certified public accountants of recognized standing selected by the Company, which report shall state that such financial statements fairly present the financial position of the company being reported upon at the end of such year and the results of their operations and changes in their financial position for such year in conformity with generally accepted accounting principles applied consistently (except for changes in accounting principles with which such accountants concur) and that their examination of such financial statements has been made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and other auditing procedures as they considered necessary in the circumstances; (c) Promptly upon their becoming available one copy of each report, notice or proxy statement sent by the Company to its stockholders generally, and of each regular or periodic report (pursuant to the Securities Exchange Act of 1934, as amended) and any registration statement, prospectus or written communication (other than transmittal letters) (pursuant to the Securities Act), filed by the Company with (i) the Commission or (ii) any securities exchange on which shares of the Common Stock are listed; (d) With reasonable promptness, such other data and information as from time to time may be reasonably requested by the Holder; and (e) Promptly upon, and in any event within 10 days after, the adoption, initiation or undertaking of any plan, arrangement, negotiations, intention or commitment to enter into any of the transactions described in Sections 4.1, 4.2, or 4.3, notice of any such transactions, including information in reasonable detail pertaining to the terms, conditions and consummation of any such transactions. 10.2 Disputed Financial Statements. The Holder shall have the right at any time after receipt thereof to object to any financial statements delivered to the Holder pursuant to subsections (a) or (b) of Section 10.1 by specifying in writing to the Company the nature of its objection, and, unless such objection is resolved by agreement of the Company and the Holder, the Company and the Holder shall each have the right to submit the disputed financial statements to separate firms of independent accountants of recognized standing for a joint resolution (based upon written submissions) of the objection of the Holder (which firms of independent accountants may, in either case, be the firm of accountants regularly retained by the Company or the Holder). If such firms cannot jointly resolve the objection of the Holder, then, unless otherwise directed by agreement of the Company and the Holder, such firms shall in their sole discretion choose another firm of independent certified public accountants of recognized standing not the regular auditor of the Holder or of the Company, which firm shall resolve such objection. In either case, the determination so made shall be conclusive and binding on the Company solely for purposes of this Warrant, the Holder and all persons claiming under or through either of them, and any adjustment in the disputed financial statements and the applicable Repurchase Price resulting from such determination shall be made. The cost of any such determination shall be borne by the Company if it results in an increase in the applicable Adjusted Operating Profits or by the Holder if it results in no adjustment or a decrease in the Adjusted Operating Profits. ARTICLE XI MISCELLANEOUS 11.1 Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder's rights, power or remedies. If the Company fails to make, when due, any payments provided for herein or fails to comply with any other provision of this Warrant, the Company shall pay to the Holder (a) interest at the Default Rate on any amounts due and owing to the Holder and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, incurred by the Holder in collecting any amounts due pursuant to this Warrant or in otherwise enforcing any of its rights, powers or remedies hereunder. 11.2 Holder Not a Stockholder. Except as otherwise provided herein, prior to the exercise of this Warrant as hereinbefore provided, the Holder shall not be entitled to any of the rights of a stockholder of the Company, including, without limitation, the right as a stockholder to (a) vote or consent, or (b) receive dividends or any other distributions made to stockholders. 11.3 Notice Generally. Any notice, demand or delivery to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if sent by first class mail, postage prepaid, addressed to (a) the Holder at its last known address appearing on the books of the Company maintained for such purpose or (b) the Company at its principal office referred to in Section 2.2. The Holder and the Company may each designate a different address by notice to the other pursuant to this Section 11.3. 11.4 Payment of Certain Expenses. The Company shall pay all expenses in connection with, and all taxes (other than stock transfer taxes and income taxes) and other governmental charges that may be imposed in respect of, the issue, sale and delivery of (a) the shares of Common Stock issuable upon the exercise of this Warrant or (b) this Warrant. 11.5 Successors and Assigns. This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder. 11.6 Amendment. This Warrant may not be modified or amended except by an instrument in writing signed by the party against which enforcement is sought. 11.7 Headings. The headings of the Articles and Sections of this Warrant are for convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 11.8 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS FOR CONTRACTS ENTERED INTO AND TO BE PERFORMED IN SUCH STATE. 11.9 Subsidiaries. The provisions of this Warrant referring to "Subsidiaries" of the Company or to "consolidated" financial statements shall only apply during such times as the Company has one or more Subsidiaries. 11.10 No Section 338 Election or Step-Up in Asset Value on Books of the Company. The Company acknowledges that the definition of Adjusted Operating Profits is based upon the assumption that neither the Company nor any of its Subsidiaries will (or will be deemed to) make a Section 338 election under the Internal Revenue Code of 1986, as amended, or otherwise write-up the value of any of its assets on its books used for computing Adjusted Operating Profits. The Company hereby agrees and covenants that neither it nor any of its Subsidiaries will (or will be deemed to) make any such election or write-up. 11.11 Limitation on Interest. (a) Notwithstanding anything to the contrary contained in this Warrant, if for any period of time interest pursuant to this Warrant shall be calculated at the Maximum Rate rather than at any other rate which would otherwise be applicable hereunder (hereafter, any "Applicable Rate") and thereafter such Applicable Rate shall become less than the Maximum Rate, the rate of interest payable pursuant to this Warrant shall be the Maximum Rate until the Holder shall have received the amount of interest which the Holder would have received pursuant to this Warrant had the rate of interest pursuant to this Warrant not been limited to the Maximum Rate during the period the Applicable Rate exceeded the Maximum Rate. (b) It is the intention of the parties hereto to comply with applicable usury laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Warrant, in no event shall this Warrant require the payment or permit the collection of interest, as defined under applicable usury laws, in excess of the Maximum Rate. If any such excess of interest is contracted for, charged or received under this Warrant so that the amount of interest contracted for, charged or received under this Warrant shall exceed the Maximum Rate, then (i) the provisions of this Section 11.11 shall govern and control, (ii) the Company shall not be obligated to pay the amount of such interest to the extent that it is in excess of the Maximum Rate, (iii) any such excess which may have been collected by a Holder either shall be applied as a credit against any unpaid amount due to such Holder or refunded to the Company, at the Holder's option, and (iv) the effective rate of interest shall be automatically reduced to the Maximum Rate. It is further agreed that, without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under this Warrant which are made for the purpose of determining whether such rate exceeds the Maximum Rate shall be made, to the extent permitted by applicable usury laws, by amortizing, prorating, allocating the spreading in equal parts during the remaining Exercise Period, all interest at any time contracted for, charged or received from the Company or otherwise by the holder or holders thereof in connection with this Warrant. Dated as of January 20, 1994. OPTEK TECHNOLOGY, INC. By: /s/ D. VINSON MAILEY ___________________________ Vice President Attest: /s/ CHRISTOPHER M. HEWITT _________________________ Secretary (AFFIX CORPORATE SEAL) NOTICE OF EXERCISE FORM (To be executed only upon partial or full exercise of the within Warrant) The undersigned registered Holder of the within Warrant irrevocably exercises the within Warrant for and purchases __________ shares of Common Stock of Optek Technology, Inc. and [Make appropriate selection by placing an "X" in the box and completing the blank associated with that box] [ ] (a) agrees to make payment therefor in the amount of $__________, [ ] (b) pursuant to Section 2.2(b)(ii) of the within Warrant instructs and agrees that __________ shares of Common Stock of Optek Technology, Inc. be withheld in payment therefor, all at the price and on the terms and conditions specified in the within Warrant and requests that a certificate (or _____________ certificates in denominations of _______ shares) for the shares of Common Stock of Optek Technology, Inc. hereby purchased be issued in the name of and delivered to (choose one] (a) the undersigned or (b) ___________________, whose address is ______________________, and if such shares of Common Stock shall not include all the shares of Common Stock issuable as provided in the within Warrant, that a new Warrant of like tenor for the number of shares of Common Stock of Optek Technology, Inc. not being purchased hereunder be issued in the name of and delivered to [choose one] (a) the undersigned or (b) _____________________ whose address is _____________________. Dated:__________________, 19__ By /s/ ______________________________ (Signature of Registered Holder) Signature Guaranteed: /s/ __________________________ By /s/ _______________________ [Title] ________________ NOTICE: The signature of this Notice of Exercise must correspond exactly with the name of the Holder as specified on the face of the within Warrant. The signature to this Notice of Exercise must be guaranteed by a commercial bank or trust company in the United States or a member firm of the New York Stock Exchange. ASSIGNMENT FORM (To be executed only upon the assignment of the within Warrant) FOR VALUE RECEIVED the undersigned registered Holder of the within Warrant hereby sells, assigns and transfers unto _________ _____________________, whose address is ______________________ all of the rights of the undersigned under the within Warrant, with respect to _______ shares of Common Stock of Optek Technology, Inc. and if such shares of Common Stock shall not include all the shares of Common Stock issuable as provided in the within Warrant, that a new Warrant of like tenor for the number of shares of Common Stock of Optek Technology, Inc. not being transferred hereunder be issued in the name of and delivered to the undersigned, and does hereby irrevocably constitute and appoint _______________ Attorney to register such transfer on the books of Optek Technology, Inc. maintained for the purpose, with full power of substitution in the premises. Dated:__________________, 19__ By: /s/ ___________________________ (Signature of Registered Holder) Signature Guaranteed: /s/ __________________________ By /s/ _______________________ [Title] ________________ NOTICE: The signature to this Assignment must correspond exactly with the name of the Holder as specified on the face of the within Warrant. The signature to this Assignment must be guaranteed by a commercial bank or trust company in the United States or a member firm of the New York Stock Exchange. Schedule I Cumulative Plan Adjusted Operating Profits For the Period from November 1, 1993 through the Fiscal Year Plan Adjusted Ending, Operating Profits ____________________ _________________ 10/31/94 $ 6,413,000 10/31/95 $15,060,000 10/31/96 $25,262,000 10/31/97 $37,515,000 10/31/98 $51,851,000 EX-13 7 EXHIBIT 13 ASSIGNMENT FORM (To be executed only upon the assignment of the within Warrant) FOR VALUE RECEIVED the undersigned registered Holder of the within Warrant hereby sells, assigns and transfer unto First Source Financial LLP, whose address is 2700 Sanders Road, Prospect Heights, Illinois 60070, all of the rights of the undersigned under the within Warrant, with respect to Three Million One Hundred Fifty Thousand and 00/100 shares of Common Stock of Optek Technology, Inc. and if such shares of Common Stock shall not include all the shares of Common Stock issuable as provided in the within Warrant, that a new Warrant of like tenor for the number of shares of Common Stock of Optek Technology, Inc. not being transferred hereunder be issued in the name of and delivered to the undersigned, and does hereby irrevocably constitute and appoint Gregory P.L. Pierce, Attorney to register such transfer on the books of Optek Technology, Inc. maintained for the purpose, with full power of substitution in the premises. Dated: March 24, 1995 By: /s/ GLEN O. FICK ________________________________ (Signature of Registered Holder) Signature Guaranteed: /s/ BANK OF AMERICA __________________________________ By: _____________________________ [Title] NOTICE: The signature to this Assignment must correspond exactly with the name of the Holder as specified on the face of the within Warrant. The signature to this Assignment must be guaranteed by a commercial bank or trust company in the United States or a member firm of the New York Stock Exchange. EX-14 8 EXHIBIT 14 [SIDLEY & AUSTIN LETTERHEAD] To the Parties Specified on Schedule I Re: Escrow Arrangement Ladies and Gentlemen: We have acted as attorneys for Citicorp North America, Inc. ("CNAI") in connection with the Credit Agreement dated as of March 24, 1995 among First Source Financial LLP, Certain Financial Institutions Party thereto, First Source Financial, Inc., Financial Security Assurance Inc., HCFS Corporate Finance Venture, Inc. and Virginia Financial Ventures, Inc. (the "Credit Agreement") and certain other agreements, documents, and instruments related thereto ("Other Agreements"). All capitalized terms used in this letter and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. In connection with the execution and delivery to us of the Credit Agreement and the Other Agreements, each of you agrees that the delivery of the Credit Agreement and the Other Agreements to the parties described on Schedule I hereto is not completed, and that the Credit Agreement and the Other Agreements will not become effective, until each of you shall provide written certification to us to that effect ("Written Certification"). Each of you has instructed us to hold, and we have agreed to hold, the Credit Agreement and the Other Agreements as escrow agent, and each of you has asked us to deliver, and we have agreed to deliver, such Credit Agreement and the Other Agreements to the parties described on Schedule I upon receipt by us of the Written Certification. Each of you agrees that (1) our responsibility to hold such Credit Agreement and the Other Agreements will be fulfilled if we do so in accordance with our normal records retention policy, and (2) our responsibility to deliver the Credit Agreement and the Other Agreements to the parties described on Schedule I will be satisfied upon delivery of the Credit Agreement and the Other Agreements to you or to Federal Express with proper delivery instructions. We take no responsibility for the failure of, or improper delivery by, Federal Express. If we have not received the Written Certification by 5:00 p.m. (New York time) on March 31, 1995 (the "Deadline"), we will destroy the Credit Agreement and the Other Agreements and they shall not be deemed to have been delivered by you for any purpose. If we receive the Written Certification before the Deadline, we will deliver the Credit Agreement and the Other Agreements to the parties described on Schedule I, and the Credit Agreement and the Other Agreements shall be deemed to have been delivered to the aforementioned parties immediately prior to the Written Certification described above. Neither the undersigned nor Sidley & Austin shall have any responsibility to verify the statements made in the Written Certification, and the undersigned and Sidley & Austin shall be entitled to rely exclusively upon such certifications. If you are in agreement with the terms and conditions of this letter, please execute and return to me one copy of this letter. This agreement may be executed by the parties hereto in separate counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Very truly yours, /s/ THOMAS W. ALBRECHT ______________________ Thomas W. Albrecht Acknowledged and agreed to this 24th day of March, 1995. FIRST SOURCE FINANCIAL LLP By: HCFS Corporate Finance Venture, Inc., a Delaware corporation By: /s/ D.P. DEKKER _______________________ Name: D.P. Dekker Title: By: Virginia Financial Venture, Inc., a Virginia corporation By: /s/ HAYDEN D. McMILLIAN _______________________ Name: Hayden D. McMillian Title: FIRST SOURCE FINANCIAL, INC. By: /s/ D.P. DEKKER _______________________ Name: Title: CITICORP NORTH AMERICA, INC., as Agent By: /s/ KENNETH WORMSER _______________________ Name: Title: FINANCIAL SECURITY ASSURANCE INC., By: /s/ FREDERICK UTLEY _______________________ Name: Title: HCFS CORPORATE FINANCE VENTURE, INC. By: /s/ D.P. DEKKER _______________________ Name: Title: VIRGINIA FINANCIAL VENTURES, INC. By: /s/ HAYDEN D. McMILLIAN _______________________ Name: Title: CITIBANK, N.A. By: /s/ KENNETH WORMSER _______________________ Title: CXC INCORPORATED By: Citicorp North America, Inc., as its attorney-in-fact By: /s/ MICHAEL STORM _______________________ Title: HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. By: /s/ D.P. DEKKER _______________________ Title: HOUSEHOLD FINANCE CORPORATION By: /s/ GLEN O. FICK _______________________ Title: DOMINION RESOURCES, INC. By: /s/ DAVID L. HEAVENRIDGE _______________________ Title: DOMINION CAPITAL, INC. By: /s/ DAVID L. HEAVENRIDGE _______________________ Title: SCHEDULE I ESCROW LETTER FIRST SOURCE FINANCIAL LLP FIRST SOURCE FINANCIAL, INC. CITICORP NORTH AMERICA, INC., as Agent FINANCIAL SECURITY ASSURANCE INC., HCFS CORPORATE FINANCE VENTURE, INC. VIRGINIA FINANCIAL VENTURES, INC. CITIBANK, N.A. CXC INCORPORATED HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. HOUSEHOLD FINANCE CORPORATION DOMINION RESOURCES, INC. DOMINION CAPITAL, INC. March 26, 1995 Sidley & Austin One First National Plaza Chicago, Illinois 60030 Attention: Thomas W. Albrecht Ladies and Gentlemen: Reference is hereby made to your letter dated March 24, 1995 to the parties specified on Schedule I attached hereto regarding the escrow arrangement with respect to the Credit Agreement dated as of March 24, 1995 among First Source Financial LLP, certain financial institutions party thereto, First Source Financial, Inc., Financial Security Assurance Inc., HCFS Corporate Finance Venture, Inc. and Virginia Financial Ventures, Inc. (the "Letter"). With respect to such Letter we hereby release for delivery the "Credit Agreement" and the "Other Agreement" (as such terms are defined in the Letter). This letter shall serve as the "Written Certification" of our release of the above-referenced agreements. Very truly yours, FIRST SOURCE FINANCIAL LLP By: HCFS Corporate Finance Venture, Inc. By: /s/ D.P. DEKKER _______________________ Name: Title: By: Virginia Financial Venture, Inc. By: /s/ HAYDEN D. McMILLIAN _______________________ Name: Hayden D. McMillian Title: Vice President FIRST SOURCE FINANCIAL, INC. By: /s/ D.P. DEKKER _______________________ Name: Title: CITICORP NORTH AMERICA, INC., as Agent By: /s/ KENNETH WORMSER _______________________ Name: Title: HCFS CORPORATE FINANCE VENTURES, INC. By: /s/ D.P. DEKKER _______________________ Name: Title: VIRGINIA FINANCIAL VENTURES, INC. By: /s/ HAYDEN D. McMILLIAN _______________________ Name: Hayden D. McMillian Title: Vice President CITIBANK, N.A. By: /s/ KENNETH WORMSER _______________________ Title: CXC INCORPORATED By: Citicorp North America, Inc., as its attorney-in-fact By: /s/ MICHAEL STORM _______________________ Title: HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC. By: /s/ D.P. DEKKER _______________________ Title: HOUSEHOLD FINANCE CORPORATION By: /s/ GLEN O. FICK _______________________ Title: Senior Vice President DOMINION RESOURCES, INC. By: /s/ HAYDEN D. McMILLIAN _______________________ Title: Attorney-in-fact DOMINION CAPITAL, INC. By: /s/ HAYDEN D. McMILLIAN _______________________ Title: Attorney-in-fact March 27, 1995 Sidley & Austin One First National Plaza Chicago, Illinois 60030 Attention: Thomas W. Albrecht Ladies and Gentlemen: Reference is hereby made to your letter dated March 24, 1995 to the parties specified on Schedule I attached hereto regarding the escrow arrangement with respect to the Credit Agreement dated as of March 24, 1995 among First Source Financial LLP, certain financial institutions party thereto, First Source Financial, Inc., Financial Security Assurance Inc., HCFS Corporate Finance Venture, Inc. and Virginia Financial Ventures, Inc. (the "Letter"). With respect to such Letter we hereby release for delivery the "Credit Agreement" and the "Other Agreement" (as such terms are defined in the Letter). This letter shall serve as the "Written Certification" of our release of the above-referenced agreements. By: Virginia Financial Venture, Inc. FINANCIAL SECURITY ASSURANCE INC. By: /s/ GEOFF DURRO _______________________ Name: Geoff Durro Title: Managing Director -----END PRIVACY-ENHANCED MESSAGE-----