UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
| ☐ |
Preliminary
Proxy Statement |
| ☐ |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ |
Definitive
Proxy Statement |
| ☐ |
Definitive
Additional Materials |
| ☐ |
Soliciting
Material under §240.14a-12 |
Optex
Systems Holdings, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
| Payment
of Filing Fee (Check the appropriate box): |
| ☒ |
No
fee required. |
| ☐ |
Fee
paid previously with preliminary materials. |
| ☐ |
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
Optex
Systems Holdings, Inc.
1420
Presidential Drive
Richardson,
TX 75081
January
22, 2024
To
the Shareholders of Optex Systems Holdings, Inc.:
You
are cordially invited to attend the 2024 Annual Meeting of Shareholders (the “Annual Meeting”) of Optex Systems Holdings,
Inc., a Delaware corporation (the “Company”), to be held virtually at 10:00 a.m. Central Time on February 21, 2024, to consider
and vote upon the following proposals:
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1. |
To
elect four nominees to the Company’s Board of Directors (the “Board”), each for a term expiring at the next annual
meeting of shareholders of the Company, and until his successor has been duly elected and qualified (to which we refer as “Proposal
1” or the “Director Election” proposal). |
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|
|
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2. |
To
ratify the appointment of Whitley Penn LLP as the Company’s independent registered public accounting firm for the fiscal year
ending September 29, 2024 (to which we refer as “Proposal 2” or the “Auditor Ratification” proposal). |
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|
|
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3. |
To
transact such other business as may be properly brought before the Annual Meeting and any adjournment or postponement thereof. |
The
Annual Meeting will be a virtual meeting to be held as a listen-only conference call by calling 877-407-3088 (Toll Free). There will
not be a physical meeting location. If you encounter any technical difficulties with the virtual meeting platform on the meeting day,
please call 877-804-2062 (toll free) or email proxy@equitystock.com.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES in the Director Election proposal and “FOR” the
Auditor Ratification proposal.
The
Board has fixed the close of business on January 16, 2024 as the record date for determining the shareholders of the Company entitled
to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. Accordingly, only shareholders of record
at the close of business on January 16, 2024 are entitled to notice of, and to vote at, the Annual Meeting or any postponement or adjournment
thereof.
Please
review in detail the accompanying notice and proxy statement for a more complete statement of matters to be considered at the Annual
Meeting.
Your
vote is very important to us regardless of the number of shares you own. Whether or not you are able to attend the Annual Meeting in
person, please read the proxy statement and promptly vote your proxy via the internet, by telephone or, if you received a printed form
of proxy in the mail, by completing, dating, signing and returning the enclosed proxy in order to assure representation of your shares
at the Annual Meeting. Granting a proxy will not limit your right to vote virtually at the meeting if you wish to do so.
| |
By
Order of the Board of Directors: |
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|
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/s/
Danny Schoening |
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Danny
Schoening, |
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Chairman
of the Board of Directors |
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
The
2024 Annual Meeting of shareholders (the “Annual Meeting”) of Optex Systems Holdings, Inc. (the “Company”) will
be held virtually beginning at 10:00 a.m. Central Time on February 21, 2024. At the Annual Meeting, the holders of the Company’s
outstanding common stock will act on the following matters:
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1. |
To
elect four nominees to the Company’s Board of Directors (the “Board”), each for a term expiring at the next annual
meeting of shareholders of the Company, and until his successor has been duly elected and qualified (to which we refer as “Proposal
1” or the “Director Election” proposal). |
| |
|
|
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2. |
To
ratify the appointment of Whitley Penn LLP as the Company’s independent registered public accounting firm for the fiscal year
ending September 29, 2024 (to which we refer as “Proposal 2” or the “Auditor Ratification” proposal). |
| |
|
|
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3. |
To
transact such other business as may be properly brought before the Annual Meeting and any adjournment or postponement thereof. |
The
Annual Meeting will be a virtual meeting to be held as a listen-only conference call by calling 877-407-3088 (Toll Free). There will
not be a physical meeting location. If you encounter any technical difficulties with the virtual meeting platform on the meeting day,
please call 877-804-2062 (toll free) or email proxy@equitystock.com.
Shareholders
of record at the close of business on January 16, 2024 are entitled to notice of and to vote at the Annual Meeting and any postponement
or adjournment thereof.
We
hope you will be able to attend the Annual Meeting virtually, but in any event, please vote according to the instructions on the enclosed
proxy as promptly as possible. If you are able to be virtually present at the Annual Meeting, you may revoke your proxy and vote in person.
Important
Notice Regarding the Availability of Proxy Materials for the Annual
Meeting
of Shareholders to be Held on February 21, 2024
Pursuant
to rules of the U.S. Securities and Exchange Commission, we have elected to provide access to our proxy materials both by sending you
this full set of proxy materials, including a proxy card, and by notifying you of the availability of our proxy materials on the Internet.
This Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended October 1, 2023, are available at www.optex.vote.
| Dated:
January 22, 2024 |
By
Order of the Board of Directors: |
| |
|
| |
/s/
Danny Schoening |
| |
Danny
Schoening, |
| |
Chairman
of the Board of Directors |
TABLE
OF CONTENTS
OPTEX
SYSTEMS HOLDINGS, INC.
1420
Presidential Drive
Richardson,
TX 75081
ANNUAL
MEETING OF SHAREHOLDERS
To
Be Held February 21, 2024
PROXY
STATEMENT
The
Board of Directors (the “Board”) of Optex Systems Holdings, Inc. (the “Company”) is soliciting proxies from its
shareholders to be used at the 2024 Annual Meeting of shareholders (the “Annual Meeting”) to be held virtually on February
21, 2024, beginning at 10:00 a.m. Central Time, and at any postponements or adjournments thereof. This proxy statement contains information
related to the Annual Meeting. This proxy statement and the accompanying form of proxy are first being sent to shareholders on or about
January 22, 2024.
ABOUT
THE ANNUAL MEETING
Why
am I receiving this proxy statement?
You
are receiving this proxy statement because you have been identified as a shareholder of the Company as of the record date, which our
Board has determined to be January 16, 2024 (the “Record Date”), and thus you are entitled to vote at the Annual Meeting.
This document serves as a proxy statement used to solicit proxies for the Annual Meeting. This document and the Appendix hereto contain
important information about the Annual Meeting and the Company and you should read it carefully.
If
you are a shareholder of the Company and your shares are registered directly in your name with the Company’s transfer agent, Equity
Stock Transfer LLC, you are considered, with respect to those shares, the shareholder of record or record holder, and the proxy materials
(including proxy card) are being sent directly to you by the Company.
If
your shares of common stock are held by a bank, broker, agent or other nominee, you are considered the beneficial owner of such shares
held in “street name,” and the proxy materials are being forwarded to you together with a voting instruction card by such
bank, broker, agent or other nominee.
Who
is entitled to vote at the Annual Meeting?
Only
shareholders as of the close of business on the Record Date will be entitled to vote at the Annual Meeting. On the Record Date, there
were 6,823,693 shares of our common stock issued and outstanding and entitled to vote. Each shareholder is entitled to one vote for each
share of our common stock held by such shareholder on the Record Date on each of the proposals presented in this proxy statement.
How
do I access the proxy materials over the Internet?
Electronic
copies of this proxy statement, the accompanying notice of Annual Meeting and the Company’s annual report on Form 10-K for the
year ended October 1, 2023 are available at www.optex.vote and at https://ir.stockpr.com/optexsys/all-sec-filings. All materials will
remain posted at least until the conclusion of the Annual Meeting.
How
do I attend the Annual Meeting?
Shareholders
may attend the Annual Meeting via phone call. In order to attend the virtual Annual Meeting, you must:
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● |
access
an audio-only conference call by calling 877-407-3088 (Toll Free) or +1 877-407-3088 (International); and |
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|
|
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● |
present
your unique 12-digit control number. |
Record
holders can find their unique 12-digit control number on their proxy card.
Beneficial
owners who hold their shares in “street name” must follow the following instructions in order to register for the Annual
Meeting and obtain their 12-digit control number:
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● |
obtain
a legal proxy from your broker, bank or other agent; |
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● |
email
the legal proxy to our transfer agent, Equity Stock Transfer, at proxy@equitystock.com, |
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○ |
with
“Legal Proxy” appearing in the subject line of the email; and |
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○ |
including
proof from your broker, bank or other agent of your legal proxy (e.g., a forwarded email from your broker, bank or other agent with
your legal proxy attached, or an image of your valid proxy attached to your email), |
so
that your request for registration is received by Equity Stock Transfer no later than 5:00 p.m. Eastern Time, on February 19, 2024;
and
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● |
receive
a confirmation of your registration, with your unique 12-digit control number, by email from Equity Stock Transfer. |
Shareholders
may submit live questions on the conference line while attending the virtual Annual Meeting.
What
if I have technical difficulties or trouble accessing the virtual Annual Meeting?
We
will have technicians ready to assist you with any technical difficulties you may have in accessing the virtual Annual Meeting. If you
encounter any difficulties, please call: 877-804-2062 (Toll Free) or email proxy@equitystock.com.
How
do I participate in and vote at the Annual Meeting?
If
you are a record holder, you can participate and vote your shares in the Annual Meeting by visiting www.optex.vote and entering
the 12-digit control number included on your proxy card.
If
you are a beneficial owner of shares held in “street name,” you can participate and vote at the meeting by obtaining
a legal proxy from your broker, bank or other agent and emailing a copy to proxy@equitystock.com no later than 5:00 p.m. Eastern Time,
on February 19, 2024. You will then be able to vote your shares at the meeting by going to www.optex.vote and entering the same control
number used to enter the meeting.
Even
if you plan to attend the Annual Meeting, we recommend that you also vote by proxy as described below so that your vote will be counted
if you later decide not to participate in the Annual Meeting.
How
do I vote without participating in the Annual Meeting?
Record
holders may vote without participating in the Annual Meeting by any of the following means:
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1. |
By
Internet.* The website address for Internet voting is www.optex.vote. The deadline for Internet voting is 7:00 p.m. Eastern Time,
on February 20, 2024. |
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2. |
By
Email.* Mark, date, sign and email the enclosed proxy card to proxy@equitystock.com ATTN: Shareholder Services. |
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3. |
By
mail. Mark, date, sign and mail promptly the enclosed proxy card to Equity Stock Transfer, 237 W 37th Street, Suite 602,
New York, NY 10018, ATTN: Shareholder Services. |
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4. |
By
Fax.* Mark, date, sign and fax the enclosed proxy card to 646-201-9006 ATTN: Shareholder Services. |
*
If you vote by Internet, fax or email, please do not mail your proxy card.
Because
of possible delays with the mail, we recommend you use the Internet, email or fax to vote.
If
you are a beneficial owner of shares held in “street name,” you must email to proxy@equitystock.com a legal proxy
from your broker, bank or other agent authorizing you to vote your shares no later than 5:00 p.m. Eastern Time, on February 19, 2024.
Once submitted, you will receive a control number enabling you to vote your shares by any of the means set forth above.
If
I am a record holder, will my shares be voted if I do not return my proxy card?
If
your shares are registered in your name or if you have stock certificates, they will not be voted if you do not return your proxy card
by a method discussed above or vote at the Annual Meeting.
If
I hold my shares in “street name” by my broker, will my broker vote my shares for me?
Generally,
if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker, bank, agent
or other nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote
the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine”
matters, as discussed further below. Thus, your broker will not be able to vote your shares of common stock without specific instructions
from you for “non-routine” matters.
If
your shares are held by your broker, bank, agent or other nominee, you will need to obtain a proxy form from the institution that holds
your shares and follow the instructions included on that form regarding how to instruct your broker or other agent to vote your shares.
What
are “broker non-votes”?
If
you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute “broker
non-votes.” “Broker non-votes” occur on a matter when a broker is not permitted to vote on that matter without instructions
from the beneficial owner and instructions are not given. These matters are referred to as “non-routine” matters. Since brokers
are permitted to vote on “routine” matters without instructions from the beneficial owner, “broker non-votes”
do not occur with respect to “routine” matters.
Proposal
1 (the Director Election proposal) is a “non-routine” matter.
We
consider Proposal 2 (the Auditor Ratification proposal) to be a “routine” matter.
The
determination of “routine” and “non-routine” matters is determined by brokers and those firms responsible to
tabulate votes cast by beneficial owners of shares held in street name and other nominees. Firms casting such votes have generally been
guided by rules of the New York Stock Exchange (“NYSE”) when determining if proposals are considered “routine”
or “non-routine”. When a matter to be voted on is the subject of a contested solicitation, banks, brokers and other nominees
do not have discretion to vote your shares with respect to any proposal to be voted on.
What
constitutes a quorum for purposes of the Annual Meeting?
A
quorum is present if holders of at least a majority of the issued and outstanding shares entitled to vote are present or represented
by proxy at the Annual Meeting. This permits the conduct of business at the meeting. On the Record Date, there were 6,823,693 shares
of common stock and no shares of preferred stock issued and outstanding and entitled to vote. Accordingly, the holders of 3,411,847 shares
eligible to vote must be present or represented by proxy at the Annual Meeting to have a quorum. Proxies received but marked as abstentions
or broker non-votes, if any, will be included in the calculation of the number of votes considered to be present at the meeting for purposes
of a quorum. Your shares will be counted toward the quorum at the Annual Meeting only if you vote in person at the virtual meeting, you
submit a valid proxy or your broker, bank, agent or other nominee submits a valid proxy.
What
vote is required to approve each item?
The
following votes are required to approve each proposal, assuming in each case that a quorum is present:
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● |
Proposal
1 (Director Election proposal) – The election of the directors requires a plurality (the four nominees receiving the
most “FOR” votes) of the votes cast on the proposal. Withhold votes and broker non-votes will not affect the outcome
of the vote on Proposal 1. |
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|
|
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● |
Proposal
2 (Auditor Ratification proposal) – The ratification of the appointment of Whitley Penn LLP as the Company’s
independent registered public accounting firm for the fiscal year ending September 29, 2024 requires that holders of a majority of
the stock represented in person or by proxy and entitled to vote on the proposal vote “FOR” the proposal. Abstentions
will have the same effect as a vote against the proposal. In addition, since brokers may exercise discretionary voting power with
respect to this proposal, a shareholder’s failure to provide voting instructions will not prevent a broker vote and can therefore
affect the outcome of the proposal. |
How
are shares voted that are represented by proxy?
Shares
represented by proxies will be voted as specified in such proxies, and if no choice is specified, will be voted in accordance with the
Board’s recommendations consistent with Delaware law and NYSE rules: “FOR” each of the nominees in the Director Election
proposal and “FOR” the Auditor Ratification proposal. With respect to any other matter that properly comes before the Annual
Meeting, the proxyholder(s) will vote as recommended by the Board or, if no recommendation is given, in his or their own discretion.
Can
I change my vote?
Yes.
Any record holder voting by proxy has the right to revoke their proxy at any time before the polls close at the Annual Meeting by sending
a written notice stating that they would like to revoke his, her or its proxy to the Corporate Secretary of the Company; by providing
a duly executed proxy card bearing a later date than the proxy being revoked; or by attending the Annual Meeting virtually and voting
in person. Attendance alone at the Annual Meeting will not revoke a proxy.
Beneficial
owners owning common stock in “street name” that have instructed their broker, bank, agent or other nominee to vote their
shares of common stock must follow directions received from their broker, bank, agent or other nominee to change those instructions.
Who
is soliciting this proxy? Who is paying for this proxy solicitation?
We
are soliciting this proxy on behalf of the Board. The Company will bear the costs of and will pay all expenses associated with this solicitation,
including the printing, mailing and filing of this proxy statement, the proxy card and any additional information furnished to shareholders.
In addition to mailing these proxy materials, certain Company officers and other employees may, without compensation other than their
regular compensation, solicit proxies through further mailing or personal conversations, or by telephone, facsimile or other electronic
means. We will also, upon request, reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy materials to the beneficial owners of the Company’s stock and to obtain proxies.
What
should I do if I receive more than one set of voting materials?
You
may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting
instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction
card for each brokerage account in which you hold shares. If you are a record holder and your shares are registered in more than one
name, you will receive more than one proxy card. Please vote your shares applicable to each proxy card and voting instruction card that
you receive.
How
can I find out the results of the voting at the Annual Meeting?
Preliminary
voting results will be announced at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K filed
with the Securities and Exchange Commission within four business days of the Annual Meeting.
Who
can provide me with additional information and help answer my questions?
If
you would like additional copies, without charge, of this proxy statement or if you have questions about the proposals being considered
at the Annual Meeting, including the procedures for voting your shares, you should contact Karen Hawkins, the Company’s Chief Financial
Officer and Corporate Secretary, by telephone at (972) 764-5700.
Householding
of Annual Disclosure Documents
The
SEC previously adopted a rule concerning the delivery of annual disclosure documents. The rule allows us or brokers holding our shares
on shareholders’ behalf to send a single set of our annual report and proxy statement to any household at which two or more of
our shareholders reside, if either we or the brokers believe that such shareholders are members of the same family. This practice, referred
to as “householding,” benefits both shareholders and us. It reduces the volume of duplicate information received by shareholders
and helps to reduce our expenses. The rule applies to our annual reports, proxy statements and information statements. Once shareholders
receive notice from their brokers or from us that communications to their addresses will be “householded,” the practice will
continue until shareholders are otherwise notified or until they revoke their consent to the practice. Each shareholder will continue
to receive a separate proxy card or voting instruction card.
Those
shareholders who either (i) do not wish to participate in “householding” and would like to receive their own sets of our
annual disclosure documents in future years or (ii) who share an address with another one of our shareholders and who would like to receive
only a single set of our annual disclosure documents should follow the instructions described below:
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● |
Shareholders
whose shares are registered in their own name should contact our transfer agent, Equity Stock Transfer LLC, and inform them of their
request by calling them at (212) 575-5757 or writing them at Equity Stock Transfer LLC, 237 West 37th Street, Suite 602,
New York, NY 10018. |
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|
|
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● |
Shareholders
whose shares are held by a broker or other nominee should contact such broker or other nominee directly, and inform them of their
request. Shareholders should be sure to include their name, the name of their brokerage firm and their account number on such request. |
MANAGEMENT
AND CORPORATE GOVERNANCE
Corporate
Leadership Structure
Our
Board directs the management of the business and affairs of our company as provided in our certificate of incorporation, our by-laws
and the General Corporation Law of Delaware. Members of our Board of Directors keep informed about our business through discussions with
senior management, by reviewing analyses and reports sent to them, and by participating in regularly scheduled Board and committee meetings.
As
of January 16, 2024, our Board of Directors consists of four directors, which includes three independent directors and one non-independent
director as discussed below. Our directors serve for a one-year term and until their successors are elected and duly qualify.
Our
Company is led by Danny Schoening, who has served as COO since 2009, was appointed CEO and Director in 2013, and became Chairman in 2017.
In his role as Chairman, Mr. Schoening presides over meetings of the full Board of Directors, provides guidance to the Board and management
on a variety of key issues, and is responsible for long-range strategic planning for the Company. As Chief Executive Officer, Mr. Schoening
is responsible for the active management, day-to-day leadership, and overall performance of the Company.
Our
Board leadership structure is used by other smaller public companies in the United States, and we believe that this leadership structure
appropriately strikes the balance between strong and informed Company leadership and appropriate oversight by independent directors.
We believe that our directors provide effective oversight of the risk management function, especially through dialogue between the full
Board and our management.
Our
Board of Directors believes that sound governance practices and policies provide an important framework to assist them in fulfilling
their duty to shareholders. Our Board of Directors actively supports management’s adoption and implementation of many “best
practices” in the area of corporate governance, including annual review of internal control changes, compensation practices, executive
management and auditor retention.
Directors
and Executive Officers
The
following table sets forth information regarding the members of our Board of Directors and our executive officers and a key employee
as of the Record Date.
| Name |
|
Age |
|
Position |
| |
|
|
|
|
| Danny
Schoening |
|
59 |
|
Chairman
and Director, Chief Executive Officer, Chief Operating Officer |
| Karen
L. Hawkins |
|
58 |
|
Chief
Financial Officer |
| Dale
Lehmann |
|
65 |
|
Director,
Compensation Committee Chair |
| Rimmy
Malhotra |
|
47 |
|
Director,
Nominating Committee Chair |
| Dayton
Judd |
|
52 |
|
Director,
Audit Committee Chair |
| Billy
Bates |
|
61 |
|
General
Manager, Applied Optics Center (Key Employee) |
Danny
R. Schoening (59). Mr. Schoening joined Optex Systems, Inc. (Texas) in January 2008. Upon the acquisition of the assets of Optex
Systems, Inc. (Texas) by Optex Systems, Inc. (Delaware), Danny became the COO of Optex Systems, Inc. (Delaware) (as of September 28,
2008) and he commenced service with Optex Systems Holdings as its Chief Operating Officer as of the date of the reorganization, March
30, 2009 and was appointed Chief Executive Officer and as a Director in 2013. He has been instrumental in establishing the systems and
infrastructure required to continue Optex System’s rapid growth. This activity was rewarded with Optex System’s recent ISO
9001:2000 Certification. From February 2004 to January 2008, Danny was the Vice President of Operations for The Finisar Corporation AOC
Division for 4 years where he led a team of up to 200 employees to produce vertical cavity lasers for the data communications industry
at production rates of hundreds of thousands of units per week. Prior to Finisar, Danny was the Director of Operations for multiple divisions
of Honeywell International. Serving the Automotive, Medical, Aerospace, and Consumer Commercial Markets. During this 17-year period,
Danny was recognized with Honeywell’s Lund Award, their highest award for developing employee resources. Danny has a broad experience
level in the following technologies: Mechanical Assembly Processes, Micro-Electronic Assembly Processes, Laser Manufacturing, Plastic
Molding, Metal Machining, Plating, Thick Film Printing, Surface Mount Technology, Hall Effect Technology and MEMS based Pressure Devices.
Danny received a Bachelor’s of Science in Manufacturing Engineering Technology from the University of Nebraska, an MBA from Southern
Methodist University, and holds three U.S. patents. The Board of Directors has determined that Danny is suited to sit on our Board because
of his industry experience and his extensive experience as an executive officer of the Company.
Karen
L. Hawkins (58). On November 19, 2014, Karen Hawkins was appointed as our Chief Financial Officer. Ms. Hawkins had previously
served as our Vice President, Finance and Controller, since the date of the reorganization, March 30, 2009 and was the controller of
Optex Systems, Inc. (Delaware), effective September 28, 2009. She began her employment with Optex Systems, Inc. (Texas) in April 2007.
Ms. Hawkins has over 30 years’ experience in Financial Accounting and Management, primarily focused in the Defense and Transportation
Industries. She has a strong background in both Financial & Cost Accounting, with extensive Government Pricing, Financial Analysis,
and Internal Auditing experience. Her past history also includes Program Management, Materials Management and Business Development. She
brings over 25 years’ direct experience in Government Contracting with a strong knowledge of Cost Accounting Standards Board and
Federal Acquisition Regulation. Her previous employment includes General Dynamics — Ordinance and Tactical Division, Garland (formerly
known as Intercontinental Manufacturing) for over 13 years from November, 1994 through March, 2007. During her tenure there she served
in the roles of Controller (Accounting & IT), Program Manager over a $250M 3-year Army Indefinite Delivery/Indefinite Quantity (Indefinite
Delivery/Indefinite Quantity) type contract, as well as Materials Manager with oversight of Purchasing, Production Control & Warehousing
functions. Prior to her employment at General Dynamics, Ms. Hawkins served in various finance and accounting positions at Luminator,
a Mark IV Industries Co, and Johnson Controls, Battery Division - Garland. Karen received her Bachelor’s Degree in Business Administration
in Accounting from Stephen F. Austin State University in Texas in 1986 and became a Certified Public Accountant in 1992.
Dale
E. Lehmann (65) joined the Board in November 2019 as an industry expert having over 30 years of management, strategy, product
development, delivery and operational experience in the electro-optical industry. Dale was the Director of Business Development &
Strategy for General Dynamics Global Imaging Technologies Group from 2014 through 2017. Prior to that, Dale was the Senior Vice President
& General Manager of the Infrared Products Group for L-3 Communications/Cincinnati Electronics from 1995 through 2014. Dale currently
sits on the Board of Directors for Adimec USA, a provider of application specific imaging solutions. The Board of Directors has determined
that Dale is suited to sit on our Board because of his experience with companies in similar industries and his related subject matter
expertise.
Rimmy
Malhotra (47) joined the Board in November 2019 and holds the role of Nominating Committee Chair. From 2013 to the present, Mr.
Malhotra has served as the Managing Member and Portfolio Manager for Nicoya Fund LP, a private investment partnership. Previously, from
2008 to 2013 he served as portfolio manager of the Gratio Values Fund, a mutual fund registered under the Investment Company Act of 1940.
Prior to this, he was an Investment Analyst at a New York-based hedge fund. Mr. Malhotra serves as a member of the boards of directors
of InfuSystem Holdings, Inc. (NYSE:INFU), HireQuest, Inc. (NASDAQ: HQI), and Scott’s Liquid Gold-Inc. (OTC:SLGD). He earned an
MBA in Finance from The Wharton School and a Master’s degree in International Relations from the University of Pennsylvania where
he was a Lauder Fellow. Mr. Malhotra holds undergraduate degrees in Computer Science and Economics from Johns Hopkins University. The
Board of Directors has determined that Mr. Malhotra is suited to sit on our Board include his experience with public equity, including
his service on the boards of directors of multiple public companies, and his qualifications as a financial matters expert.
Dayton
Judd (52) joined the Board in October 2022 and holds the role of Audit Committee Chair. He is the founder and Managing Partner
of Sudbury Capital Management, LLC (“Sudbury”). He also serves as the Chairman and CEO of FitLife Brands, Inc. (NASDAQ: FTLF)(“FitLife”).
He has served as a director of FitLife since June 2017 and Chief Executive Officer since February 2018. Prior to founding Sudbury, Mr.
Judd worked from 2007 through 2011 as a Portfolio Manager at Q Investments, a multi-billion dollar hedge fund in Fort Worth, Texas. Prior
to Q Investments, he worked with McKinsey & Company from 1996 through 1998, and again from 2000 through 2007. He graduated from Brigham
Young University in 1995 with a Bachelor’s Degree, summa cum laude, and a Master’s Degree, both in Accounting. He also earned
an M.B.A. with high distinction from Harvard Business School in 2000, where he was a Baker Scholar. Mr. Judd has previously served on
the board of directors for RLJ Entertainment (NASDAQ: RLJE) from 2015 until the sale of the company in 2018, and for Otelco (NASDAQ:
OTEL) from 2019 until the sale of the company in 2021. He has also served on the board of directors for several private companies. Mr.
Judd is a Certified Public Accountant. The Board of Directors has determined that Mr. Judd is suited to sit on our Board because of his
qualifications as a financial matters expert and his experience as director and/or CEO of other public companies.
Bill
Bates (61). Mr. Bates joined the Company in 2014. He has thirty-five years of experience related to optical component and system
manufacturing. He is currently the General Manager of the Applied Optics Center in Dallas, Texas where he oversees the Thin-film Coating
and Optical Assembly Operations where he has served since November of 2014. He has held various positions throughout his thirty-five
years of experience within Litton Industries, Northrop Grumman Corporation, and L-3 Communications. He previously served as Vice President
and General Manager within the Warrior Systems Division of L-3 Communications. Mr. Bates received a Bachelor of Science of Business Administration
from DeVry University and an MBA from the University of Texas at Dallas.
Family
Relationships
There
are no family relationships among the officers and directors.
Board
Meetings
We
are incorporated under the laws of the State of Delaware. The interests of our shareholders are represented by the Board of Directors,
which oversees our business and management.
The
Board of Directors meets regularly during the year and holds special meetings and acts by unanimous written consent whenever circumstances
require. The Board held 4 meetings (including special meetings) and took action by unanimous written consent 6 times during our fiscal
year ended October 1, 2023. In the fiscal year ended October 1, 2023, all directors attended a minimum of 75% of the meetings of the
Board of Directors and of the committees on which they served.
Board
Independence
Our
Board of Directors has determined that three of our directors standing for re-election (all except Mr. Schoening) meet the independence
requirements of NASDAQ. In reaching its conclusions, the Board of Directors considered all relevant facts and circumstances with respect
to any direct or indirect relationships between the Company and each of the directors.
Board
Committees
The
Company has a separately-designated audit committee, of which Dayton Judd serves as the chair and the “audit committee financial
expert.” The Company has a separately-designated compensation committee, of which Dale Lehman serves as the chair. The Company
has a separately-designated nominating committee, of which Rimmy Malhotra serves as the chair. Each committee consists of independent
directors Dayton Judd, Rimmy Malhotra and Dale Lehmann.
Audit
Committee
The
purpose of the Audit Committee is to serve as representative of the Board for the general oversight of the Company affairs relating to
the (i) the quality and integrity of the Company’s financial statements; (ii) the Company’s compliance with legal and regulatory
requirements; (iii) the independent auditor’s qualifications and independence; and (iv) the performance of the Company’s
financial reporting and internal control processes.
The
Audit Committee had 4 meetings during our fiscal year ended October 1, 2023.
The
Audit Committee’s charter is accessible on the Company’s website under “Investor Relations – Governance –
Governance Documents”.
Audit
Committee Report
Management
has the primary responsibility for the Company’s internal controls and financial reporting process. The independent registered
public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board and issuing an opinion thereon. The Audit Committee’s
responsibility is to monitor and oversee these processes. As part of its ongoing activities, the Audit Committee has:
| |
● |
reviewed
and discussed with management and the independent registered public accounting firm the Company’s audited consolidated financial
statements for the fiscal year ended October 1, 2023; |
| |
|
|
| |
● |
discussed
with the independent registered public accounting firm the matters required to be discussed by Public Company Accounting Oversight
Board Auditing Standard No. 1301 (Communications with Audit Committees), and SEC Regulation S-X, Rule 2-07 (Communication with Audit
Committee); |
| |
|
|
| |
● |
received
the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements
of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications
with the Audit Committee concerning independence, and discussed with the independent registered public accounting firm its independence
from the Company; and |
based
on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company’s annual report on Form 10-K for the fiscal year ended October 1, 2023, for filing
with the Securities and Exchange Commission.
Audit
Committee
Dayton
Judd
Rimmy
Malhotra
Dale
Lehman
Compensation
Committee
The
purpose of the Compensation Committee is to (i) discharge the responsibilities of the Board relating to compensation of the CEO and other
reportable officers (defined in the same manner as “officer” in rule 16a-1(f) of the Securities Exchange Act of 1934, as
amended); (ii) produce annually the Compensation Committee report on Executive Compensation for inclusion in the Company’s proxy
statement (if required); (iii) ensure that the Company’s compensation plans for the CEO and other reportable officers are competitive
and support the Company’s overall business strategy; (iv) review, evaluate and recommend for board approval the director and reportable
officer compensation plans; (v) review and discuss with management any compensation, discussion and analysis to be included in the Company’s
annual proxy statement (as applicable); and (vi) to monitor the Company’s overall compensation policies and employment benefit
plans.
The
Compensation Committee had 2 meetings and took action by unanimous written consent 1 time during our fiscal year ended October 1, 2023.
The
Compensation Committee’s charter is accessible on the Company’s website under “Investor Relations – Governance
– Governance Documents”.
Nominating
Committee
The
purpose of the Nominating Committee is (i) to identify individuals qualified to become members of the Board consistent with criteria
agreed to by the Board; (ii) to recommend to the Board of Directors nominees for election to the Board of Directors or to recommend candidates
to fill vacancies on the Board of Directors and (iii) to address related matters.
The
Nominating Committee had no meetings and took action by unanimous written consent one time during our fiscal year ended October 1, 2023.
The
Nominating Committee’s charter is accessible on the Company’s website under “Investor Relations – Governance
– Governance Documents”.
Board
Nominations
The
Board of Directors nominates directors for election at each annual meeting of shareholders and appoints new directors to fill vacancies
when they arise. The Nominating Committee has the responsibility to identify, evaluate, recruit, and recommend qualified candidates to
the Board of Directors for nomination or election.
One
of the Board of Directors’ objectives in evaluating director nominations is to ensure that its membership is composed of experienced
and dedicated individuals with a diversity of backgrounds, perspectives, and skills. The Nominating Committee will select nominees for
director based on their character, judgment, diversity of experience, business acumen, and ability to act on behalf of all shareholders.
We do not have a formal diversity policy, however, the Nominating Committee endeavors to have a Board representing diverse viewpoints
as well as diverse expertise at policy-making levels in many areas, including business, accounting and finance, marketing and sales,
business development, human capital management, public company governance, growth through mergers and acquisitions, risk management and
in other areas that are relevant to our activities.
The
Nominating Committee believes that nominees for director should have experience, such as those mentioned above, that may be useful to
the Company and the Board of Directors, high personal and professional ethics and the willingness and ability to devote sufficient time
to carry out their duties as directors effectively.
The
following is a summary of certain types of diversity characteristics of our Board:
| Board
Diversity Matrix (As of January 16, 2024) |
| Total
Number of Directors |
|
4 |
| |
|
Female |
|
Male |
|
Non-Binary |
|
Did
Not
Disclose
Gender |
| Part
I: Gender Identity |
| Directors |
|
|
|
4 |
|
|
|
|
| Part
II: Demographic Background |
| African
American or Black |
|
|
|
|
|
|
|
|
| Alaskan
Native or Native American |
|
|
|
|
|
|
|
|
| Asian |
|
|
|
1 |
|
|
|
|
| Hispanic
or Latinx |
|
|
|
|
|
|
|
|
| Native
Hawaiian or Pacific Islander |
|
|
|
|
|
|
|
|
| White |
|
|
|
3 |
|
|
|
|
| Two
or More Races or Ethnicities |
|
|
|
|
|
|
|
|
| LGBTQ+ |
|
|
| Did
Not Disclose Demographic Background |
|
|
Prior
to each annual meeting of shareholders, the Nominating Committee identifies nominees first by evaluating the current directors who are
willing to continue in service. These candidates are evaluated based on the criteria described above and the needs of the Board of Directors
with respect to the talents and experience of its directors. In the event that a director does not wish to continue in service, the Nominating
Committee determines not to re-nominate the director, a vacancy is created on the Board of Directors as a result of a resignation, an
increase in the size of the Board, or other relevant event, the Nominating Committee will consider various candidates for Board membership,
including those suggested by the Nominating Committee members, by other Board members, by any executive search firm engaged by the Nominating
Committee, by management, or by shareholders.
Shareholders
wishing to bring a nomination for a director candidate before a shareholders meeting must give written notice to our Corporate Secretary,
either by personal delivery or by United States mail, postage prepaid. The shareholder’s notice must be received by the Corporate
Secretary not later than (a) with respect to an Annual Meeting of Shareholders, 90 days prior to the anniversary date of the immediately
preceding annual meeting, and (b) with respect to a special meeting of shareholders for the election of directors, the close of business
on the tenth day following the date on which notice of the meeting is first given to shareholders. The shareholder’s notice must
set forth all information relating to each person whom the shareholder proposes to nominate that is required to be disclosed under applicable
rules and regulations of the SEC, including the written consent of the person proposed to be nominated to being named in the proxy statement
as a nominee and to serving as a director if elected. The shareholder’s notice must also set forth as to the shareholder making
the nomination (i) the name and address of the shareholder, (ii) the number of shares held by the shareholder, (iii) a representation
that the shareholder is a holder of record of stock of the Optex Systems Holdings, entitled to vote at the meeting and intends to appear
in person or by proxy at the meeting to nominate the person named in the notice, and (iv) a description of all arrangements or understandings
between the shareholder and each nominee.
Shareholder
Communications with the Board of Directors
Shareholders
may communicate directly with the Board of Directors or any Board member by writing to them at Optex Systems Holdings, Inc., 1420 Presidential
Drive, Richardson, TX 75081. The outside of the envelope should prominently indicate that the correspondence is intended for the Board
of Directors or for a specific director. The secretary will forward all such written communications to the director to whom it is addressed
or, if no director is specified, to the entire Board of Directors.
Director
Attendance at Annual Meetings of Shareholders
Directors
are encouraged to attend annual meetings, although such attendance is not required. All four directors then in office (not including
Mr. Hagenbuch, who did not run for re-election) attended the Company’s 2023 Annual Meeting of Shareholders.
Code
of Ethics
Our
Board of Directors has adopted a Code of Business Conduct and Ethics, which has been distributed to all directors and executive officers,
and is available to employees and given to new employees at the time of hire. The Code of Business Conduct and Ethics applies, among
other persons, to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons
performing similar functions. A copy of our Code of Business Conduct and Ethics can be found under the “Investor Relations”
section of our website (www.optexsys.com) under the section for corporate governance. We also intend to disclose any amendments
or waivers of our Code on our website. We undertake to provide a copy of the Code of Business Conduct and Ethics to anyone without charge
who requests a copy in writing addressed to: Optex Systems Holdings, Inc., Attn: Corporate Secretary, 1420 Presidential Drive, Richardson,
TX 75081.
Policy
against Hedging
Under
our Insider Trading Policy, no insider may engage in hedging transactions involving Company securities, including forward sale or purchase
contracts, equity swaps, collars or exchange funds.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth, for the fiscal years indicated, all compensation paid, distributed or accrued for services, including salary
and bonus amounts, rendered in all capacities by our named executive officers.
| Name and
Principal Position | |
Fiscal
Year | | |
Salary | | |
Bonus
(1) | | |
Stock Awards
(2) | | |
Non-Equity
Incentive
Plan
Compensation(1) | | |
All
Other
Compensation | | |
Total | |
| Danny Schoening, | |
| 2023 | | |
$ | 303,546 | | |
$ | - | | |
$ | 79,329 | | |
$ | 76,228 | | |
$ | - | | |
$ | 459,103 | |
| CEO, COO & Board Chairman | |
| 2022 | | |
| 293,841 | | |
| 88,810 | | |
| 16,335 | | |
| - | | |
| - | | |
| 398,986 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Karen Hawkins | |
| 2023 | | |
| 218,774 | | |
| - | | |
| 27,765 | | |
| 56,082 | | |
| - | | |
| 302,621 | |
| CFO | |
| 2022 | | |
| 209,534 | | |
| 64,093 | | |
| 5,445 | | |
| - | | |
| - | | |
| 279,072 | |
| |
(1) |
Amounts
shown represent bonuses earned in the fiscal year indicated, even if paid in the subsequent fiscal year. Discretionary bonuses are
shown in the “Bonus” column. Non-discretionary bonuses are shown in the “Non-Equity Incentive Plan Compensation”
column. |
| |
|
|
| |
(2) |
The
amounts in the “Stock awards” column reflect the dollar amounts recognized as the executive portion of compensation expense
for financial statement reporting purposes for each named executive officer, as required by FASB ASC 718, disregarding any estimates
for forfeitures relating to service-based vesting conditions. The amounts include, for 2023, the grant date fair value of performance
shares granted in the 2023 fiscal year, reported based on the probable outcome of the performance conditions as of the grant date
and consistent with the aggregate compensation cost to be recognized over the service period determined as of the grant date under
FASB ASC 718, disregarding any estimates for forfeitures. On January 2, 2019, the Company granted 150,000 RSUs to its Chief Executive
Officer, Danny Schoening, and 50,000 RSUs to its Chief Financial Officer, Karen Hawkins. The RSUs granted to Mr. Schoening and Ms.
Hawkins vested as follows: 34% on January 1, 2020, 33% on January 1, 2021 and 33% on January 1, 2022 (as subsequently adjusted for
Mr. Schoening as described below). The total market value of the restricted stock units based on the share price of $1.32 as of January
2, 2019 was $264 thousand. The cost of the shares is amortized on a straight-line basis across the vesting periods. On December 1,
2021, the Company executed an amended and restated twelve-month employment agreement for Danny Schoening, effective as of December
1, 2021 and expiring on November 30, 2022. The amended agreement modified the RSU Agreement vesting requirements for his remaining
49,500 unvested RSUs from January 1, 2022 to vesting upon a “change of control date” as defined in the employment agreement.
On November 28, 2022, the Company executed an amended and restated thirty-six-month employment agreement for Danny Schoening, effective
as of December 1, 2022 and expiring on November 30, 2025. The amended agreement modified the RSU Agreement vesting requirements for
his remaining 49,500 unvested units from vesting upon a “change of control date” to vesting on January 1, 2023. On May
3, 2023, the Board of Directors approved a grant of 100,000 and 35,000 performance shares to Mr. Schoening and Ms. Hawkins, respectively.
Each performance share represents a contingent right to receive one share of common stock. The performance shares vest in five equal
increments if, in each case and during a five-year performance period beginning on October 2, 2023, the average VWAP per share of
common stock over a 30 consecutive trading day period equals or exceeds $3.70, $4.45, $5.35, $6.40, or $7.70. The maximum potential
value of Mr. Schoening’s performance share award (based on all 100,000 shares at the highest vesting price of $7.70) is $770,000.
The maximum potential value of Ms. Hawkins’ performance share award (based on all 35,000 shares at the highest vesting price
of $7.70) is $269,500. |
Employment
Agreements
Danny
Schoening
On
November 28, 2022, the Company entered into a new employment agreement with Danny Schoening. Pursuant to the agreement, which is dated
as of December 1, 2022, Mr. Schoening will continue to serve as the Company’s President and Chief Executive Officer through November
30, 2025. Mr. Schoening’s base salary initially is $304,912 per annum, and will be increased to $314,060 on December 1, 2023 and
$323,481 on December 1, 2024.
Mr.
Schoening will be eligible for a performance bonus based on a one-year operating plan adopted by the Board of Directors. The bonus will
be based on financial and/or operating metrics decided annually by the Board or its Compensation Committee and tied to such one-year
plan. The target bonus will equate to 30% of Mr. Schoening’s base salary. The Board has discretion in good faith to alter the performance
bonus upward or downward by 20%. Mr. Schoening is entitled to 200 hours paid vacation and paid time off (PTO) each year and all other
benefits accorded to our other senior executive(s).
The
updated employment agreement also served to amend Mr. Schoening’s RSU Agreement, dated January 2, 2019, which had been previously
amended as of December 1, 2021, by changing the third and final vesting date for the restricted stock units granted under such agreement
from the “change of control date” to January 1, 2023.
The
employment agreement may be terminated by either party upon written notice. Other events of termination consist of: (i) death or permanent
disability of Mr. Schoening; (ii) termination by the Company for cause (including in connection with the conviction of a felony, commission
of fraudulent, illegal or dishonest acts, certain willful misconduct or gross negligence, continued failure to perform material duties
or cure material breach after written notice, violation of securities laws and material breach of the employment agreement), (iii) termination
by the Company without cause and (iv) termination by Mr. Schoening for good reason (including continued breach by the Company of its
material obligations under the agreement after written notice, the requirement for Mr. Schoening to move more than 100 miles away for
his employment without consent, and merger or consolidation that results in more than 66% of the combined voting power of the Company’s
then outstanding securities or those of its successor changing ownership or a sale of all or substantially all of its assets, without
the surviving entity assuming the obligations under the agreement). For a termination by the Company for cause or upon death or permanent
disability of Mr. Schoening, Mr. Schoening will be paid accrued and unpaid salary and any bonus earned through the date of termination.
For a termination by the Company without cause or by Mr. Schoening with good reason, Mr. Schoening will also be paid six months’
base salary in effect.
Karen
Hawkins
Effective
January 1, 2024, the Company entered into a new employment agreement with Karen Hawkins. Pursuant to the agreement, Ms. Hawkins will
continue to serve as the Company’s Chief Financial Officer through December 31, 2026. Thereafter, the term of the agreement will
automatically extend for successive additional 12-month periods unless Ms. Hawkins or the Company provides written notice of termination
at least 90 days prior to the end of the term then in effect. Ms. Hawkins’ initial annual base salary under the new agreement is
$224,328. Ms. Hawkins’ base salary will be reviewed annually in accordance with the then-current Company policy.
Ms.
Hawkins will be eligible for a performance bonus based upon a one-year operating plan adopted by the Company’s Board. The bonus
will be based on financial and/or operating metrics decided annually by the Board or the Compensation Committee and tied to such one-year
plan. The target bonus will equate to 30% of Ms. Hawkins’ base salary. The Board will have discretion in good faith to alter the
performance bonus upward or downward by 20%. Ms. Hawkins is entitled to 200 hours paid vacation and paid time off (PTO) each year and
all other benefits accorded to our other senior executive(s).
The
employment agreement may be terminated by either party upon written notice. Other events of termination consist of: (i) death or permanent
disability of Ms. Hawkins; (ii) termination by the Company for cause (including in connection with the conviction of a felony, commission
of fraudulent, illegal or dishonest acts, certain willful misconduct or gross negligence, continued failure to perform material duties
or cure material breach after written notice, violation of securities laws and material breach of the employment agreement), (iii) termination
by the Company without cause and (iv) termination by Ms. Hawkins for good reason (including continued breach by the Company of its material
obligations under the agreement after written notice, the requirement for Ms. Hawkins to move more than 100 miles away for her employment
without consent, and merger or consolidation that results in more than 66% of the combined voting power of the Company’s then outstanding
securities or those of its successor changing ownership or a sale of all or substantially all of its assets, without the surviving entity
assuming the obligations under the agreement). For a termination by the Company for cause or upon death or permanent disability of Ms.
Hawkins, Ms. Hawkins will be paid accrued and unpaid salary and any bonus earned through the date of termination. For a termination by
the Company without cause or by Ms. Hawkins with good reason, Ms. Hawkins will also be paid six months’ base salary in effect.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information regarding the outstanding equity awards held by the named executive officers at October 1, 2023.
| | |
Number
of Shares
or Units
of Stock
that have
not Vested | | |
Market Value
of Shares
or Units
of Stock
that have
not Vested | | |
Equity Incentive Plan
Awards: Number
of Unearned Shares,
Units or Other Rights
that have
not Vested(1) | | |
Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares,
Units or Other Rights that have
not Vested(1) | |
| Name | |
| | | |
| | | |
| | | |
| | |
| Danny Schoening | |
| - | | |
$ | - | | |
| 100,000 | | |
$ | 416,000 | |
| | |
| | | |
| | | |
| | | |
| | |
| Karen Hawkins | |
| - | | |
| - | | |
| 35,000 | | |
| 145,600 | |
| (1) | Represents
performance shares. On May 3, 2023, the Board of Directors approved a grant of 100,000 and
35,000 performance shares to Mr. Schoening and Ms. Hawkins, respectively. Each performance
share represents a contingent right to receive one share of common stock. The performance
shares vest in five equal increments if, in each case and during a five-year performance
period beginning on October 2, 2023, the average VWAP per share of common stock over a 30
consecutive trading day period equals or exceeds $3.70, $4.45, $5.35, $6.40, or $7.70. |
Post-Termination
Compensation
We
have not entered into change of control agreements with any of our named executive officers.
The
change of control provisions that govern awards made under our 2023 Equity Incentive Plan are described below.
Except
to the extent the Compensation Committee provides a result more favorable to holders of awards, in the event of a change of control:
| ● | each
holder of a stock option shall have the right (a) at any time after the change of control
to exercise the stock option in full whether or not it was exercisable before the change
of control; and (b) by sending us written notice within 60 days after the change of control,
to receive in exchange for the stock option cash equal to the excess of the change of control
price (as defined in the 2023 Plan) of the shares covered by the stock option over the exercise
price of such option; provided that this right does not exist with respect to any portion
of an option that was forfeited or cancelled upon a participant’s termination of employment
or service prior to the date of the change of control; |
| ● | each
holder of restricted stock and/or restricted stock unit(s) that are not vested before a change
of control will vest on the date of the change of control, and each holder of such restricted
stock and/or restricted stock unit(s) may receive, by sending us written notice within 60
days after the change of control, in exchange for the restricted stock and/or restricted
stock unit(s), cash equal to the change of control price of such restricted stock and/or
restricted stock unit(s) on the date of surrender; |
| ● | each
holder of a performance share and/or performance unit for which the performance period has
not expired may receive, by sending us written notice within 60 days after the change of
control, in exchange for the performance share and/or performance unit, cash equal to the
value of the performance share and/or performance unit (as determined in accordance with
the 2023 Plan) multiplied by a percentage based on the number of months elapsed from the
beginning of the performance period to the date of the change of control divided by the number
of months in the performance period; |
| ● | each
holder of a performance share and/or performance unit that has been earned but not yet paid
will receive cash equal to the value of the performance share and/or performance unit (as
determined in accordance with the 2023 Plan); and |
| ● | each
holder of a stock appreciation right shall have the right (a) at any time after the change
of control to exercise the stock appreciation right in full whether or not it was exercisable
before the change of control; and (b) by sending us written notice within 60 days after the
change of control, to receive in exchange for the stock appreciation right cash equal to
the excess of the change of control price of the shares covered by the stock appreciation
right over the exercise price of such stock appreciation right; provided that this right
does not exist with respect to any portion of a stock appreciation right that was forfeited
or cancelled upon a participant’s termination of employment or service prior to the
date of the change of control. |
For
these purposes, the value of a performance share is equal to, and the value of a performance unit the value of which is equal to the
fair market value of one or more shares, is based on the change of control price.
“Change
of control” is defined to mean the occurrence of any one of the following events:
| ● | any
“person” (as defined in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) of the Exchange Act, but not including (A) the Company or any of its subsidiaries,
(B) a trustee or other fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (C) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (D) an entity owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their ownership of stock
in the Company) becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company (not including in
the securities that are beneficially owned by such person any securities acquired directly
from the Company or its affiliates) representing fifty percent (50%) or more of either the
then outstanding shares of Company’s common stock or the combined voting power of the
Company’s then outstanding voting securities; or |
| ● | the
following individuals cease for any reason to constitute a majority of the number of directors
then serving: individuals who, on the date of the Company’s 2023 annual meeting of
shareholders, constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for election by the Company’s
shareholders was approved by a vote of at least one-half (1/2) of the directors then still
in office who either were directors on the date of the Company’s 2023 annual meeting
of shareholders, or whose appointment, election or nomination for election was previously
so approved; or |
| ● | consummation
of a merger or consolidation of the Company with any other corporation or approval of the
issuance of voting securities of the Company in connection with a merger or consolidation
of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable
stock exchange requirements, other than (A) a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent) at least fifty percent (50%) of the combined
voting power of the voting securities of the Company or such surviving entity or any parent
outstanding immediately after such merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction) in which
no person is or becomes the beneficial owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person any securities
acquired directly from the Company or its affiliates) representing fifty percent (50%) or
more of either the then outstanding shares of Company’s common stock or the combined
voting power of the Company’s then outstanding voting securities; |
| ● | the
shareholders of the Company approve a plan of complete liquidation or dissolution of the
Company or the Company consummates the sale or disposition of all or substantially all of
the Company’s assets (in one transaction or a series of related transactions within
any period of twenty-four (24) consecutive months), other than a sale or disposition by the
Company of all or substantially all of the Company’s assets to an entity, at least
fifty percent (50%) of the combined voting power of the voting securities of which are owned
by persons in substantially the same proportions as their ownership of the Company immediately
prior to such sale; or |
| ● | consummation
of a sale or disposition of all or substantially all of the assets or equity of an affiliate
or division of the Company, if the Compensation Committee determines, in its sole discretion,
that the economic effect of such sale or disposition on the employees of such affiliate or
division, as the case may be, is tantamount to a change of control set forth in (i)-(iv)
above, provided, however, that in such case, a change of control shall only be deemed
to occur with respect to such employees, and not with respect to any other participants. |
Nevertheless,
no “change of control” is deemed to have occurred if there is consummated any transaction or series of integrated transactions
immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the
assets of the Company immediately following such transaction or series of transactions.
Director
Compensation
The
following table provides information regarding compensation paid to non-employee directors for services rendered during the fiscal year
ended October 1, 2023. Mr. Schoening receives compensation as our Chief Executive Officer and does not receive additional compensation
for his services as a director or Chairman.
| Name | |
Fees
Earned or Paid
in Cash (1) | | |
Stock
Awards(2) | | |
Total Compensation | |
| Rimmy Malhotra | |
$ | 36,000 | | |
$ | 35,000 | | |
$ | 71,000 | |
| Dale Lehmann | |
| 36,000 | | |
| 35,000 | | |
| 71,000 | |
| Dayton Judd | |
| 36,000 | | |
| 38,625 | | |
| 74,625 | |
| Lawrence Hagenbuch (served until Feb 2023) | |
| 15,000 | | |
| 8,750 | | |
| 23,750 | |
| (1) |
Director
fees paid quarterly. |
| (2) |
Represents
restricted shares granted to each independent director, with 20,000 shares vesting each year. The amounts in the “Stock Awards”
column reflect the dollar amounts recognized as the director portion of compensation expense for financial statement reporting purposes
for each named director, as required by FASB ASC 718, disregarding any estimates for forfeitures relating to service-based vesting
conditions. |
Restricted
Shares Awarded to Independent Board Members
On
April 30, 2020, the Company’s Board voted to increase the annual Board compensation for the then three independent directors from
$22,000 to $36,000, with an effective date of January 1, 2020, in addition to granting 100,000 restricted shares to each independent
director which vest at a rate of 20% per year (20,000 shares) each January 1st, over the succeeding five years, through January
1, 2025. The total market value for the 300,000 shares is $525 thousand based on the stock price of $1.75 as of April 30, 2020. The Company
amortizes the fair market value to stock compensation expense on a straight-line basis across the five-year vesting period beginning
on April 30, 2020. As a result of Lawrence Hagenbuch’s departure from the Board in February 2023, his then-remaining 40,000 unvested
restricted shares were forfeited. As of October 1, 2023, 60,000 (60%) of the restricted shares had vested. As of January 16, 2024, 80,000
(80%) of the restricted shares had vested.
On
May 9, 2023, the Board of Directors approved a grant of 40,000 shares of restricted stock to Mr. Judd outside of the 2023 Equity Incentive
Plan. The shares vest 50% on each of January 1, 2024 and January 1, 2025. As of the grant date, the fair value of the shares was $124
thousand, to be amortized on a straight-line basis through January 1, 2025.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On
January 16, 2024, we had 6,823,693 shares of common stock outstanding, zero options, zero warrants, and zero granted and unvested restricted
stock units. The following table sets forth certain information with respect to the beneficial ownership of our securities as of January
16, 2024, for (i) each of our directors and executive officers; (ii) all of our directors and executive officers as a group; and (iii)
each person who we know beneficially owns more than 5% of our common stock.
Beneficial
ownership data in the table has been calculated based on Commission rules that require us to identify all securities that are exercisable
or convertible into shares of our common stock within 60 days of January 16, 2024 and treat the underlying stock as outstanding for the
purpose of computing the percentage of ownership of the holder. However, the numbers below do not include any shares underlying unvested
performance shares held by Mr. Schoening and Ms. Hawkins, as vesting of those shares is conditioned on the stock price.
Except
as indicated by the footnotes following the table, and subject to applicable community property laws, each person identified in the table
possesses sole voting and investment power with respect to all capital stock held by that person. The address of each named executive
officer and director, unless indicated otherwise by footnote, is c/o our corporate headquarters.
Except
as otherwise set forth below, the address of each of the persons listed below is our address.
| Title of
Class | |
Name
of Beneficial Owner | |
Number
of Shares | | |
Percentage
of
Outstanding Shares | |
| | |
| |
| | |
| |
| 5% Holders | |
Collin McBirney,
Topline Capital Partners, LP(1) | |
| 806,063 | | |
| 11.8 | % |
| | |
Howard Deshong, Galileo Partners,
LLC(2) | |
| 423,300 | | |
| 6.2 | % |
| | |
Punch & Associates Investment
Management, Inc. (3) | |
| 442,186 | | |
| 6.5 | % |
| | |
| |
| | | |
| | |
| Directors and officers: | |
Danny Schoening | |
| 914,168 | | |
| 13.4 | % |
| | |
Karen Hawkins | |
| 32,951 | | |
| 0.5 | % |
| | |
Dayton Judd (4)(6) | |
| 869,383 | | |
| 12.7 | % |
| | |
Rimmy Malhotra (5)(6) | |
| 108,565 | | |
| 1.6 | % |
| | |
Dale Lehmann (6) | |
| 166,558 | | |
| 2.4 | % |
| | |
| |
| | | |
| | |
| Directors and officers as
a group (5 Individuals) (7) | |
| |
| 2,091,625 | | |
| 30.6 | % |
| (1) |
Represents
806,063 common shares reported as held by Topline Capital Partners, LP on a Form 4 filed on April 7, 2023. According to a Schedule
13G filed on December 21, 2022, Collin McBirney is the member-manager of Topline Capital Management, LLC, which is the investment
manager and general partner of Topline Capital Partners, LP, and the address for all three is 544 Euclid Street, Santa Monica, CA
90402. |
| |
|
| (2) |
Represents
423,300 common shares reported as held by Galileo Partners, LLC on a Schedule 13G filed on February 16, 2022. According to this Schedule
13G, Howard Deshong is the managing member of Galileo Partners, LLC, and the address for both is 1033 Gayley Ave, Ste 204, Los Angeles,
CA 90024. |
| |
|
| (3) |
Represents
442,186 common shares reported as held by Punch & Associates Investment Management, Inc. on a Schedule 13G filed on February
13, 2023. According to this Schedule 13G, Howard D. Punch, Jr. is the president of Punch & Associates Investment Management,
Inc., and the address for both is 7701 France Ave. So., Suite 300, Edina, MN 55435. |
| |
|
| (4) |
Represents
804,383 common shares reported as held by Sudbury Capital Fund, LP (the “Fund”) and 65,000 common shares reported as
held by Dayton Judd or his IRA, on a Form 4 filed on May 11, 2023. According to a Schedule 13D/A filed on October 25, 2022, Sudbury
Holdings, LLC (“Holdings”) provides management services to the Fund, Sudbury Capital GP, LP (“GP”) acts as
the general partner of the Fund, the GP has delegated management of the Fund’s investment program to Sudbury Capital Management,
LLC (the “Investment Advisor”), Mr. Judd is the managing member of the Investment Advisor and partner and manager of
the GP, and the address for all is 136 Oak Trail, Coppell, TX 75019. Dayton Judd is a director of the Company. |
| (5) |
Represents
101,677 common shares held directly by Mr. Malhotra and 6,888 common shares held by Nicoya Fund LLC. Mr. Malhotra is the managing
member of Nicoya Capital LLC, which is the managing member of Nicoya Fund LLC. Mr. Malhotra is a director of the Company. |
| |
|
| (6) |
Includes
20,000 unvested restricted shares for each independent director. |
| |
|
| (7) |
Represents
common shares held by Danny Schoening, Karen Hawkins, Rimmy Malhotra, Dale Lehmann and Dayton Judd. |
Information
with respect to our equity compensation plans
2023
Equity Incentive Plan
On
February 16, 2023, the Company’s stockholders approved the Company’s 2023 Equity Incentive Plan (the “2023 Plan”),
under which 600,000 shares of common stock are reserved for issuance. The 2023 Plan permits the grant of stock options, performance shares,
performance units, restricted stock, restricted stock units and stock appreciation rights to officers, other employees, individuals engaged
to become officers or employees, consultants, advisors and non-executive directors of the Company. In connection with the approval of
the 2023 Plan, the Company’s 2016 Restricted Stock Unit Plan and 2009 Stock Option Plan were both canceled.
A
description of the 2023 Plan is incorporated herein by reference to “Proposal 3” in our definitive proxy statement on Schedule
14A filed with the SEC on January 17, 2023.
Pay
Versus Performance
The
Company is providing the following disclosure in response to Item 402(v) of Regulation S-K. The information set forth below was not used
by the Compensation Committee in setting compensation for our named executive officers as set forth in the Summary Compensation Table.
The disclosure in this section is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended,
or the Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language
in any such filing.
Pay
Versus Performance Table
| (a) | | |
(b) | | |
(c) | | |
(d) | | |
(e) | | |
(f) | | |
(g) | |
| Year | | |
Summary
Compensation Table Total for PEO (1) | | |
Compensation
Actually Paid to PEO (2) | | |
Summary
Compensation Table Total for Non-PEO Named Executive Officer (1) | | |
Compensation
Actually Paid to Non-PEO Named Executive Officer (2) | | |
Value
of Initial Fixed $100 Investment Based on Total Shareholder Return (3) | | |
Net
Income (thousands) | |
| | 2023 | | |
$ | 459,103 | | |
$ | 819,170 | | |
$ | 302,421 | | |
$ | 420,256 | | |
$ | 163.78 | | |
$ | 2,263 | |
| | 2022 | | |
| 398,986 | | |
| 410,371 | | |
| 279,072 | | |
| 271,812 | | |
| 128.28 | | |
| 1,283 | |
1.
Reflects, in column (b), total compensation reported in the Summary Compensation Table (SCT) for our chief executive officer, and, in
column (d), total compensation reported in the SCT for our sole non-PEO named executive officer, i.e., our chief financial officer, in
each case for the years 2023 and 2022.
2.
Reflects, in column (c), compensation actually paid to our PEO and, in column (e), compensation actually paid to our non-PEO named executive
officer, in each case for the years 2023 and 2022, consisting of the respective amounts set forth in columns (b) and (d) of the table,
adjusted as set forth in the applicable table below, as determined in accordance with SEC rules.
3.
Represents the cumulative total shareholder return (TSR) of the Company for the measurement periods ending on October 1, 2023 and October
2, 2022, respectively. The TSR reflected in this column for each applicable fiscal year is calculated based on a fixed investment of
$100 at the applicable measurement point on the same cumulative basis as is used in Item 201(e) of Regulation S-K.
The
following table sets forth the adjustments made during each year represented in the Pay Versus Performance Table to arrive at compensation
“actually paid” to our PEO during each of the years in question:
| Adjustments
to Determine Compensation “Actually Paid” for PEO | |
2023 | | |
2022 | |
| Deduction for amounts reported
under the “Stock awards” column and stock portion of “Non-Equity Plan Incentive Compensation” column (not
applicable) in the SCT | |
$ | (76,228 | ) | |
$ | (16,335 | ) |
| Deduction for amounts reported under the “Option
awards” columns in the SCT | |
| - | | |
| - | |
| Increase for Fair Value* as of year-end of
awards granted during year that remain outstanding and unvested as of year end | |
| 416,000 | | |
| - | |
| Increase for Fair Value* as of the vesting
date of awards granted during year that vested during year | |
| - | | |
| - | |
| Increase/deduction for Change in Fair Value*
from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | |
| - | | |
| 27,720 | |
| Increase/deduction for Change in Fair Value*
from prior year-end to vesting date of awards granted prior to year that vested during year | |
| 20,295 | | |
| - | |
| Deduction of Fair Value* as of prior year-end
of awards granted prior to year that were forfeited during year | |
| - | | |
| - | |
| Increase based upon Incremental
Fair Value*, if any, of awards modified during year(1) | |
| - | | |
| - | |
| Increase based upon dividends or other earnings
paid during year prior to vesting date of award that are not otherwise included in total compensation | |
| - | | |
| - | |
| Total Adjustments | |
| 360,067 | | |
| 11,385 | |
*Awards
include those in the “Stock awards” column and the stock portion of the “Non-Equity Incentive Plan Compensation”
column (not applicable). The Fair Value or Change in Fair Value, as applicable, of the equity award adjustments was computed in accordance
with FASB ASC Topic 718. The valuation assumptions used to calculate such Fair Values, such as assumed volatility and risk-free rate
differ from those used at the time of grant due to the fluctuation in the stock price and the corresponding Monte Carlo Value simulations
valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. For performance share awards granted in 2023,
the fair value represents the product of the number of shares underlying the award and the closing price of our common stock
at fiscal year end.
| (1) | During
fiscal year 2022, the vesting period for outstanding restricted stock units was deferred
based on a potential change in control, and in fiscal year 2023 the vesting periods was changed
to 1/1/2023, the cumulative effect of the changes was a twelve-month delay in the vesting
period. The impact of these modifications was immaterial and impractical to calculate for
this chart. |
The
following table sets forth the adjustments made during each year represented in the Pay Versus Performance Table to arrive at compensation
“actually paid” to our Non-PEO named executive officer during each of the years in question:
| Adjustments
to Determine Compensation “Actually Paid” for Non-PEO Named Executive Officers | |
2023 | | |
2022 | |
| Deduction for amounts reported
under the “Stock awards” column and stock portion of “Non-Equity Plan Incentive Compensation” column in the
SCT | |
$ | (27,765 | ) | |
$ | (5,445 | ) |
| Deduction for amounts reported under the “Option
awards” column in the SCT | |
| - | | |
| - | |
| Increase for Fair Value* as of year-end of
awards granted during year that remain outstanding and unvested as of year-end | |
| 145,600 | | |
| - | |
| Increase for Fair Value* as of the vesting
date of awards granted during year that vested during year | |
| - | | |
| - | |
| Increase/deduction for Change in Fair Value*
from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | |
| - | | |
| - | |
| Increase/deduction for Change in Fair Value*
from prior year-end to vesting date of awards granted prior to year that vested during year | |
| - | | |
| (1,815 | ) |
| Deduction of Fair Value* as of prior year-end
of awards granted prior to year that were forfeited during year | |
| - | | |
| - | |
| Increase based upon Incremental Fair Value*,
if any, of awards modified during year | |
| - | | |
| - | |
| Increase based upon dividends or other earnings
paid during year prior to vesting date of award that are not otherwise included in total compensation | |
| - | | |
| - | |
| Total Adjustments | |
| 117,835 | | |
| (7,260 | ) |
*Awards
include those in the “Stock awards” column and the stock portion of the “Non-Equity Incentive Plan
Compensation” column. The Fair Value or Change in Fair Value, as applicable, of the equity award adjustments was computed in
accordance with FASB ASC Topic 718. The valuation assumptions used to calculate such Fair Values, such as assumed volatility and
risk-free rate differ from those used at the time of grant due to the fluctuation in the stock price and the corresponding Monte
Carlo Value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. For performance share
awards granted in 2023, the fair value represents the product of the number of shares underlying the award and the closing price of
our common stock at fiscal year end.
Pay
Versus Performance Comparative Disclosure
The
Company believes that the amount of “compensation actually paid” to our PEO and other NEO is appropriately aligned with the
Company’s total shareholder return and net income. The PEO’s total compensation shown in the Summary Compensation Table for
2023 was approximately 15% higher than the amount for 2022, and his compensation actually paid in 2023 was approximately 100% higher
than the amount in 2022. For the non-PEO named executive officer, the total compensation shown in the Summary Compensation Table for
2023 was approximately 8% higher than the amount for 2022, and compensation actually paid in 2023 was approximately 55% higher than the
amount in 2022. This compares to a TSR in 2023 that was approximately 28% higher than the TSR in 2022, and a net income in 2023 that
was approximately 76% higher than in 2022.
Equity
Compensation Plan Table
The
following table provides information about our common stock that may be issued upon the exercise, vesting and/or settlement of the named
securities outstanding under all our existing equity compensation plans as of October 1, 2023:
| Plan category | |
(a)
Number
of securities
to be issued
upon exercise
of
outstanding
options,
warrants and
rights | | |
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights | | |
(c)
Number
of securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a)) | |
| Equity compensation plans approved
by security holders | |
| - | | |
$ | - | | |
| 561,000 | |
| Equity compensation plans not approved by security
holders | |
| - | | |
| - | | |
| - | |
| Total | |
| - | | |
| - | | |
| 561,000 | |
The
amounts in column (c) of the table above do not include 135,000 unvested performance shares.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions
with Executive Management
See
the “Executive Compensation” section for a discussion of the material elements of compensation awarded to, earned by or paid
to our named executive officers. Other than as stated in the “Executive Compensation” section, we have not entered into any
transactions with executive management. There are no transactions disclosable under Item 404 of Regulation S-K.
Director
Independence
As
of January 16, 2024, the Company has three independent directors, as such term is defined under NASDAQ standards and one non independent
director.
PROPOSAL
1
THE
ELECTION OF DIRECTORS
General
Four
directors are to be elected at this Annual Meeting to serve until the 2025 annual meeting of shareholders or until, for each director,
a successor has been elected and qualified. Unless otherwise instructed, the person or persons named in the accompanying proxy intend(s)
to vote the shares represented by the proxy for the election of the nominees listed below. Although it is not contemplated that the nominees
will decline or be unable to serve as directors, in such event, proxies will be voted by the proxy holder(s) for such other persons as
may be designated by the Board.
The
following table sets forth the nominees for the Board of Directors. See the “Management” Section for biographical
information for each of the nominees.
Nominee
for Director
| Name |
|
Age |
|
Position |
| |
|
|
|
|
| Danny
R. Schoening |
|
59 |
|
Chairman
and Director, Chief Executive Officer, Chief Operating Officer |
| Dale
E. Lehmann |
|
65 |
|
Director,
Nominating Committee Chair |
| R.
Rimmy Malhotra |
|
47 |
|
Director,
Compensation Committee Chair |
| Dayton
Judd |
|
52 |
|
Director,
Audit Committee Chair |
Vote
Required
The
election of the directors requires a plurality (the four nominees receiving the most “FOR” votes) of the votes cast on the
proposal.
Board
Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES IN PROPOSAL 1.
PROPOSAL
2
RATIFICATION
OF THE APPOINTMENT OF WHITLEY PENN LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2024
The
Audit Committee has appointed Whitley Penn LLP (“Whitley Penn”) as our independent registered public accounting firm for
the fiscal year ending September 29, 2024 and the Board has directed that the selection of Whitley Penn be submitted to a vote of shareholders
at the Annual Meeting for ratification.
The
shareholder vote is not binding on the Audit Committee. If the appointment of Whitley Penn is not ratified, the Audit Committee will
evaluate the basis for the shareholders’ vote when determining whether to continue the firm’s engagement, but may ultimately
determine to continue the engagement of the firm or another audit firm without re-submitting the matter to shareholders. Even if the
appointment of Whitley Penn is ratified, the Audit Committee may in its sole discretion terminate the engagement of the firm and direct
the appointment of another independent auditor at any time during the year if it determines that such an appointment would be in the
best interests of our Company and our shareholders.
Representatives
of Whitley Penn are expected to attend the Annual Meeting, where they will be available to respond to appropriate questions and, if they
desire, to make a statement.
Principal
Accountant Fees and Services
The
following table sets forth the fees paid to date for audit services rendered during fiscal years ended October 1, 2023 and October 2,
2022, respectively.
| Fee Category | |
2023 | | |
2022 | |
| Audit Fees (1) | |
$ | 165,383 | | |
$ | 134,593 | |
| | |
| | | |
| | |
| Tax Fees | |
| 8,725 | | |
| 9,450 | |
| |
(1) |
Audit
Fees are fees for professional services performed for the audit of our annual consolidated financial statements and review of consolidated
financial statements included in our 10-Q filings for the fiscal years ended October 1, 2023 and October 2, 2022, respectively. |
Vote
Required
The
ratification of the appointment of Whitley Penn LLP as the Company’s independent registered public accounting firm for the fiscal
year ending September 29, 2024 requires that holders of a majority of the stock represented in person or by proxy and entitled to vote
on the proposal vote “FOR” the proposal.
Board
Recommendation
THE
BOARD RECOMMENDS A VOTE “FOR” PROPOSAL 2.
PROPOSAL
3 - OTHER MATTERS
The
Board knows of no matter to be brought before the Annual Meeting other than the matters identified in this proxy statement. However,
with respect to any other matter that properly comes before the Annual Meeting, the proxy holder(s) will vote as recommended by the Board
or, if No recommendation is given, in his or their own discretion.
SHAREHOLDER
PROPOSALS FOR THE 2025 MEETING
Our
bylaws provide that, for matters to be properly brought before an annual meeting, business must be either (i) specified in the notice
of annual meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought
before the annual meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the annual meeting
by a shareholder.
Shareholder
proposals intended for inclusion in our proxy statement relating to the next annual meeting in 2025 pursuant to Rule 14a-8 must be received
by us no later than September 24, 2024. If the date of next year’s annual meeting is moved by more than 30 days before or after
the anniversary date of this year’s Annual Meeting, then the deadline for inclusion of a shareholder proposal in our proxy materials
is instead a reasonable time before we begin to print and send our proxy materials for that meeting. Any such proposal must comply with
Rule 14a-8 of Regulation 14A of the proxy rules of the SEC.
Notice
to us of a shareholder proposal submitted otherwise than pursuant to Rule 14a-8 also will be considered untimely if received at our principal
executive offices other than during the time period set forth below and will not be placed on the agenda for the meeting. In addition
to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to our Secretary. While the Company’s bylaws do not currently contain an advance
notice provision, to be considered timely, a shareholder’s notice must be delivered to the Secretary at our principal executive
offices not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth
(120th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the
date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by
the shareholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual
meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th)
day following the day on which public announcement of the date of such meeting is first made by us.
Notice
to us of a proxy solicitation in support of director nominees other than the Company’s nominees in accordance with Rule 14a-19
for the Company’s next annual meeting must be postmarked or transmitted electronically to us at our principal executive office
no later than December 23, 2024, except that, if the date of next year’s annual meeting is moved by more than 30 days before or
after the anniversary date of this year’s Annual Meeting, then notice must be provided by the later of 60 calendar days prior to
the date of next year’s annual meeting or the 10th calendar day following the day on which public announcement of the date of next
year’s annual meeting is first made by us.
ANNUAL
REPORT
Upon
written request to the Secretary, Optex Systems Holdings, Inc. at 1420 Presidential Drive, Richardson, TX 75081, we will provide without
charge to each person requesting a copy of our 2023 Annual Report, including the financial statements filed therewith. We will furnish
a requesting shareholder with any exhibit not contained therein upon specific request. In addition, this Proxy Statement, as well as
our 2023 Annual Report, are available on our Internet website at www.optexsys.com
| BY
ORDER OF THE BOARD OF DIRECTORS |
|
| |
|
| /s/
Danny Schoening |
|
| Danny
Schoening |
|
| Chairman
of the Board of Directors |
|
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