NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
OPTEK TECHNOLOGY, INC.
1215 West Crosby Road
Carrollton, Texas 75006
To Be Held March 17, 1998
Notice is hereby given that the Annual Meeting of
Stockholders of Optek Technology, Inc. will be held on Tuesday,
March 17, 1998, at 10:00 a.m., Dallas, Texas time at the offices
of the Company, 1215 West Crosby Road, Carrollton, Texas 75006,
for the following purposes:
1. To elect a Board of Directors of six (6) persons
as nominated in the accompanying Proxy Statement,
such Directors to hold office until the next
annual meeting of stockholders and until their
successors are elected;
2 2. To approve the 1998 Stock Option Plan for
employees
and selected independent contractors of the
Company;
and
3. To transact such procedural matters as may
properly be brought before the meeting or any
adjournment or adjournments thereof.
Said meeting may be adjourned from time to time without
other notice than by announcement at said meeting, or at any
adjournment thereof, and any and all business for which said
meeting is hereby noticed may be transacted at any such
adjournment.
The Board of Directors has fixed January 16, 1998 as the
date for taking of a record of the stockholders entitled to
notice of and to vote at the meeting and at any adjournment or
adjournments thereof. The stock transfer books will not be
closed.
Enclosed is a form of Proxy solicited by the Board of
Directors of the Company. Stockholders who do not plan to
attend the meeting in person are requested to date, sign and
return the enclosed Proxy in the enclosed envelope, to which no
postage need be affixed if mailed in the United States. Your
Proxy may be revoked at any time before it is exercised and will
not be used if you attend the meeting and prefer to vote in
person.
BY ORDER OF THE BOARD OF DIRECTORS
THOMAS R. FILESI
President and Chief Executive Officer
Carrollton, Texas
February 6, 1998
PAGE
<PAGE>
OPTEK TECHNOLOGY, INC.
1215 West Crosby Road
Carrollton, Texas 75006
PROXY STATEMENT
Solicitation by the Board of Directors
of Proxies from Stockholders for
the Annual Meeting of Stockholders
to be held on March 17, 1998
The Board of Directors of Optek Technology, Inc.
(hereinafter called Optek or the Company ) solicits your
proxy in the enclosed form, which you are requested to fill out,
sign as indicated and return to the Company in the enclosed
self-addressed envelope, which requires no postage if mailed in
the United States. The approximate date on which this Proxy
Statement and form of proxy will be sent to security holders is
February 11, 1998.
Any proxy given pursuant to this solicitation may be
revoked by the person giving it at any time before it is
exercised by filing a written revocation or a duly executed
proxy bearing a later date. Any written revocation may be
delivered in person or mailed to the Company at the address set
out above. A stockholder who attends the Annual Meeting in
person may revoke his proxy at the Annual Meeting and vote in
person if he so desires.
Proxies are being solicited by mail and all expenses of
solicitation have been or will be borne by the Company.
January 16, 1998 has been fixed as the date of record for
the determination of stockholders of the Company entitled to
notice of and to vote at the Annual Meeting or at any
adjournments thereof. At the close of business on that date,
4,265,955 shares of Common Stock, par value $0.01 per share (the
Common Stock ), were issued and outstanding, each share
entitling the holder thereof to one vote. Cumulative voting in
the election of Directors is not allowed.
The presence, in person or by proxy, of record holders of
a majority of the shares of Common Stock outstanding as of the
date of record constitutes a quorum for the transaction of
business. Abstentions and broker non-votes will be counted as
present for purposes of determining the existence of a quorum.
Because Directors are elected by a plurality of the votes cast
by stockholders, abstentions and broker non-votes are not
counted and have no effect in determining which candidates have
received the highest number of votes and are elected, except in
affecting the total number of votes cast for a nominee. The
vote of a majority of the shares represented at the meeting is
required to approve the 1998 Stock Option Plan; therefore, an
abstention or non-vote will have the same effect as a vote
against the Plan. Under certain circumstances, if you do not
exercise the voting rights of stock in which you hold a
beneficial interest, those shares might be voted by the record
holder.
All shares of the Company s Common Stock represented by
proxies received in time and in proper form and condition and
not revoked will be voted as specified in the proxy, or in the
absence of specific direction, the proxy will be voted by the
person designated therein:
1. FOR the election as Directors of the Company of the
six (6) nominees named below to hold office until the
next annual meeting of stockholders and until their
respective successors shall be duly elected. In the
event any of such nominees becomes unable to serve as
a Director, the proxies will be voted in accordance
with the best judgment of the person acting under it.
2. FOR approval of the 1998 Stock Option Plan as
approved by the Board of Directors.
<PAGE>
The management knows of no other matters to be submitted
to the 1998 Annual Meeting with respect to which the
stockholders are entitled to vote, but if other procedural
matters do properly come before the meeting, the persons named
in the proxy will vote according to the best judgment of the
appointed proxy.
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the
Company s Common Stock held at January 16, 1998 by (i) each
stockholder known by the Company to own beneficially more than
5% of the Company s Common Stock, (ii) each of the Company s
executive officers and Directors, and (iii) all executive
officers and Directors as a group. To the Company's knowledge,
the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws,
where applicable, and the information contained in the footnotes
to the table.
<TABLE>
Name and Address Number of
Outstanding
Shares
Owned Percent
age
of
Outstan
ding
Share Number of
Shares
Beneficia
lly
Owned(1) Percen
tage of
Benefi
cial
Ownership
<S> <C> <C> <C> <C>
First Source
Financial LLP
2850 W. Golf Rd.,
5th Floor
Rolling Meadows,IL
60008 0 0 3,150,000(2) 42.5%
James D. Crownover
P.O. Box 7812
Horseshoe Bay,TX 78657 262,602 6.2 262,602 6.2
Thomas R. Filesi
1180 Emerald Sound Blvd.
Oak Point, TX 75068 301,000 7.1% 375,499(3) 8.7%
Grant A. Dove
15301 Dallas Parkway,
Suite 840
Dallas, TX 75248 20,800 * 206,601(4) 4.6%
Michael E. Cahr 30,500 * 51,500(5) 1.2%
William H. Daughtrey, Jr. 1,000 * 8,000(6) *
Rodes Ennis 26,100 * 47,100(7) 1.1%
Wayne Stevenson - - 19,250(8) *
Richard G. Dahlberg 28,423 * 49,755(9) 1.2%
Thomas S. Garrett 94,334 2.2% 102,333(10) 2.4%
William J. Collinsworth 450 * 13,784(11) *
Robert J. Kosobucki 11,863 * 29,998(12) *
All executive officers and
Directors as a group (10
persons) 514,470 12.1 903,820(13) 19.5%
____________________________
* Less than 1%.
<PAGE>
(1) Includes shares of Common Stock not outstanding
which are subject to rights to acquire shares exercisable or to
become exercisable within 60 days of January 16, 1998.
(2) Consists of 3,150,000 shares which may be
acquired at any time prior to October 31, 1998 upon exercise of a
warrant at an exercise price of $0.50 per share. The exercise
price and number of shares are also subject to adjustment
upon the occurrence of certain events in order to address
dilution.
(3) Includes 36,000 shares which are presently
exercisable pursuant to Incentive Stock Options at a price of
$2.31 per share. Also includes 8,500 shares which are presently
exercisable at a price of $2.125 per share, 20,000 shares
exercisable at a price of $6.05 per share, 6,666 shares which are
presently exercisable or will become exercisable on or before
March 19, 1998 at a price of $11.969 per share and 3,333
shares which are presently exercisable at a price of $10.12 per
share pursuant to options issued under the Company s Long-Term
Stock Investment Plan.
(4) Includes 3,500 shares which are presently
exercisable at a price of $2.13 per share and 3,500
shares which are presently exercisable at a price
of $1.04 per share pursuant to options
awarded under the Company s Directors Formula
Award Plan. Also includes 8,759 shares
which are presently exercisable at a price of
$1.11 per share, 38,462 shares which are
presently exercisable at a price of $0.65 per
share and 131,580 shares which are presently
exercisable at a price of $0.19 per share, all
issuable pursuant to warrants issued for services
performed by Mr. Dove as Chairman of the Board
during the fiscal quarters ended April 30,
1993, July 31, 1993 and October 29, 1993.
(5) Includes 3,500 shares which are presently
exercisable at a price of $2.13 per share, 3,500
shares which are presently exercisable at a price
of $1.04 per share, 3,500 shares which are
presently exercisable at a price of $0.44 per
share, 3,500 shares which are presently
exercisable at a price of $1.83 per share, 3,500
shares which are presently exercisable at a
price of $11.97 per share and 3,500 shares which
will become exercisable at a price of
$13.38 per share after the 1998 annual meeting
pursuant to options awarded under the
Company s Directors Formula Award Plan. Also
includes 5,500 shares owned of record
by Mr. Cahr s wife of which Mr. Cahr may be
deemed the beneficial owner.
(6) Includes 3,500 shares which are presently
exercisable at a price of $11.97 per share and
3,500 shares which will become exercisable at a
price of $13.38 per share after the 1998
annual meeting pursuant to options awarded under
the Company s Directors Formula Award
Plan.
(7) Includes 3,500 shares which are presently
exercisable at a price of $2.11 per share, 3,500
shares which are presently exercisable at a price
of $1.04 per share, 3,500 shares which are
presently exercisable at a price of $0.44 per
share, 3,500 shares which are presently
exercisable at a price of $1.83 per share, 3,500
shares which are presently exercisable at a
price of $11.97 per share and 3,500 shares which
will become exercisable at a price of
$13.38 per share after the 1998 annual meeting
pursuant to options awarded under the
Company s Directors Formula Award Plan.
(8) Includes 1,750 shares which are presently
exercisable at a price of $2.13 per share pursuant
to the Company s Long-Term Stock Investment Plan
and 3,500 shares which are presently
exercisable at a price of $1.04 per share, 3,500
shares which are presently exercisable at a
price of $0.44 per share, 3,500 shares which are
presently exercisable at a price of $1.83
per share, 3,500 shares which are presently
exercisable at a price of $11.97 per share and
3,500 shares which will become exercisable at a
price of $13.38 after the 1998 annual
meeting pursuant to options awarded under the
Company s Directors Formula Award Plan.
<PAGE>
(9) Includes 13,333 shares which are presently
exercisable at a price of $6.05 per share, 5,333
shares which are presently exercisable or will
become exercisable on or before March 19,
1998 at a price of $11.97 per share and 2,666
shares which are exercisable at a price of
$10.12 per share pursuant to options issued under
the Company s Long-Term Stock
Investment Plan.
(10) Includes 5,333 shares which are presently
exercisable or will become exercisable on or
before March 19, 1998 at a price of $11.97 per
share and 2,666 shares which are exercisable
at a price of $10.12 per share pursuant to
options issued under the Company's Long-Term
Stock Investment Plan.
(11) Includes 6,667 shares which are presently
exercisable at a price of $10.25 per share and
6,667 shares which are presently exercisable at a
price of $10.12 per share pursuant to
options issued under the Company s Long-Term
Stock Investment Plan.
(12) Includes 10,136 shares which are presently
exercisable at a price of $6.05 per share, 5,333
shares which are presently exercisable or will
become exercisable on or before March 19,
1998 at a price of $11.97 per share and 2,666
shares which are exercisable at a price of
$10.12 per share pursuant to options issued under
the Company's Long-Term Stock
Investment Plan.
(13) Includes 135,299 shares which may be acquired
upon exercise of employee stock options
presently exercisable or will become exercisable
on or before March 19, 1998, 75,250 shares
which are presently exercisable or will become
exercisable after the 1998 annual meeting
pursuant to options issued to the Company's
non-employee Directors, and 178,801 shares
which are presently exercisable pursuant to
warrants issued for services rendered.
Compliance With Section 16(a) of the Exchange Act.
Based solely upon a review of Forms 3, 4 and 5 furnished
to the Company and upon written
representations received by the Company, the following persons
were all Directors, executive officers or
beneficial owners of more than 10 percent of the Company s Common
Stock during fiscal 1997 who failed
to file any such report on a timely basis, and the following
table summarizes the timeliness of all reports filed
by them during that fiscal year:
Reports Filed
Name Timely 1-10 Days Late Over 10
Days Late
Grant A. Dove 1
Michael E. Cahr 2 1
William H. Daughtrey, Jr. 1 2
Rodes Ennis 1 2
Thomas S. Garrett 1 1 1
Based thereon, none of such persons failed to file any
report under Section 16(a) of the Exchange Act
with respect to the Company s most recent fiscal year.
PAGE
<PAGE>
ELECTION OF DIRECTORS AND INFORMATION
AS TO DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
At the 1998 Annual Meeting, the stockholders of the
Company will elect six (6) directors, in each
case to hold office until the next Annual Meeting and until their
respective successors shall be duly elected.
To be elected a Director, each nominee must receive a plurality
of all votes cast at the meeting. There will
be submitted by the Board of Directors to the 1998 Annual Meeting
for election as Directors the following
six (6) nominees:
Grant A. Dove
Thomas R. Filesi
Michael E. Cahr
William H. Daughtrey, Jr.
Rodes Ennis
Wayne Stevenson
All of the nominees are now Directors of the Company and were
elected to their present terms of office at
the Annual Meeting of Stockholders in March 1997. Certain
information concerning each of these nominees
is set forth below. In the event any of the nominees becomes
unable to serve as a Director, the proxy will
be voted in accordance with the best judgment of the person
acting under it; however, no circumstances are
at present known which would render any nominee unavailable.
The Directors and executive officers of the Company are as
follows:
Name Age Position
Grant A. Dove 69 Director and Chairman of the
Board
Thomas R. Filesi 62 Director, President and Chief
Executive Officer
Michael C. Cahr 57 Director
William H. Daughtrey 57 Director
Rodes Ennis 61 Director
Wayne Stevenson 62 Director
Richard G. Dahlberg 44 Senior Vice President,
Engineering
Thomas S. Garrett 51 Senior Vice President,
Operations
William J. Collinsworth 47 Vice President,
Finance and Chief Financial
Officer
Robert J. Kosobucki 46 Vice President,
Worldwide Sales and Marketing
Mr. Dove was elected a Director of the Company in July
1989 and Chairman of the Board in March
1993. His agreement to serve as Chairman of the Board will expire
on May 1, 1998. Currently, he is
managing partner of Technology Strategies & Alliance, a strategic
planning and investment banking firm. He
spent 28 years with Texas Instruments, retiring in 1987 as
Executive Vice President. He then served as
Chairman and Chief Executive Officer of Microelectronics and
Computer Technology Corporation, a research
and development consortium, retiring in 1992. He currently
serves on the boards of the Cooper Cameron
Corporation, an oilfield services company; U.S. WEST, Inc., a
telecommunications company; Intervoice, Inc.,
<PAGE>
a company engaged in telecommunications equipment and software
sales; and Fore Front Group, Inc., a
company engaged in personal computer and internet software.
Mr. Filesi became President and a Director of the Company
in April 1991. Before joining Optek,
he was with Motorola, Inc. Semiconductor Products Sector for 21
years, completing his tenure there as
Director of Manufacturing RF Products.
Mr. Cahr was elected a Director of the Company in August
1988. He is Chairman of Allscrips
Pharmaceuticals, Inc., a private company engaged in the sale of
prepackaged pharmaceuticals, having
previously served as President and Chief Executive Officer from
January 1995 to December 1997. Until late
1994 he was Manager of Venture Capital at Allstate Venture
Capital in Northbrook, Illinois, having been with
Allstate since 1987.
Mr. Daughtrey was elected a Director of the Company in
March 1992. Mr. Daughtrey is currently
President of Princeton Associates, Inc., a management consulting
firm. Prior to founding Princeton
Associates, Inc. in January 1991, he was Group Managing Partner
for Virginia/Maryland Management
Consulting Services at Coopers & Lybrand, Richmond, Virginia from
December 1984. On September 1,
1995, JGB Industries, Inc., a company for which Mr. Daughtrey had
served as interim President and Chief
Executive Officer from November 1993 to August 1995, filed for
protection under Chapter 11 of the
Bankruptcy Code.
Mr. Ennis was elected a Director of the Company in
February 1987. Mr. Ennis acts as a general
management consultant and formerly served as President of the
Journeys and Hardy Divisions of Genesco,
Inc., a footwear retailer, from March 1990 to December 1992.
Mr. Stevenson was elected a Director of the Company in
September 1992. Mr. Stevenson is the
Chairman and Chief Executive Officer of CSI Control Systems
International, Inc. located in Carrollton, Texas,
a private company engaged in the manufacture and installation of
environmental controls for the commercial
market, a position he has held since 1986.
Mr. Dahlberg was elected Vice President, Engineering in
March 1994 and became a Senior Vice
President in December 1997. Mr. Dahlberg has been employed by
the Company since 1983 and has served
in various engineering capacities. He is a Registered
Professional Engineer in the State of Texas.
Mr. Garrett joined the Company in October 1991 as Vice
President, Operations and became a Senior
Vice President in December 1997. In April 1988 he founded
Garrett Consulting Group and was President of
that firm until December 1990, at which time it merged with
Northwest Technology Group, Inc. These
companies provided comprehensive consulting services to the
micro-electronics and other high technology
related industries.
Mr. Collinsworth joined the Company as Vice President,
Finance, and Chief Financial Officer in
October 1996. From 1991 until joining the Company, he was an
independent financial consultant specializing
in start-up and troubled companies. In that role, he worked with
several private companies and also served
as interim Chief Operating Officer and Chief Financial Officer
for Intellicall, Inc., a provider of
telecommunications services and equipment, from April 1992 to
September 1993 and Chief Financial Officer
for Value Added Communications, Inc. ( VAC ), a provider of
telecommunications services and equipment,
from June 1994 to October 1994. In November 1995, VAC filed for
protection under Chapter 11 of the
Bankruptcy Code.
Mr. Kosobucki joined the Company as Vice President,
Worldwide Sales and Marketing in July 1995.
Prior to his employment by the Company and from 1991 he served in
various strategic marketing and sales
capacities for Summagraphics Corp., a manufacturer of
computer-based printers and plotters, most recently
as Director of Strategic Sales and Product Marketing. He is a
Registered Professional Engineer in the State
of New York.
<PAGE>
Directors are elected annually and serve until their
successors are duly elected and qualified. Officers
serve at the discretion of the Board, subject to contractual
rights. There is no family relationship between any
Director, nominee for Director or executive officer of the
Company.
The Company s Board of Directors has appointed a
Compensation Committee, composed of the non-
employee Directors Cahr, Ennis and Stevenson; an Audit Committee,
composed of the non-employee Directors
Ennis, Daughtrey and Stevenson; and a Board Affairs Committee
composed of the non-employee Directors
Daughtrey, Cahr and Stevenson. The Compensation Committee
administers the Company s employee benefit
plans and sets executive compensation. The Audit Committee has
been appointed to review the Company s
financial statements and its relationship with its independent
auditors. The Board Affairs Committee selects
nominees for the Board of Directors to be presented for
consideration to the Company s stockholders and
reviews the remuneration of non-employee Directors; the committee
will consider nominees recommended by
stockholders submitted in the manner provided for stockholders
proposals herein.
During the fiscal year ended October 31, 1997, the
Compensation Committee held four meetings, the
Audit Committee held one meeting and the Board Affairs Committee
held two meetings. During the fiscal
year ended October 31, 1997, the Company s Board of Directors
held a total of six meetings, and each
incumbent Director then serving attended at least 75% of the
aggregate number of meetings of the Board and
its Committees.
PAGE
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes monetary and non-monetary
compensation awarded to, earned by or
paid to the Company s five most highly compensated officers
during the three fiscal years ended October 31,
1997:
</TABLE>
<TABLE>
Annual Compensation
Long Term
Compensation
Awards
Number of
Shares Subject
to Options
Name and Principal Position Year Salary Bonus Granted
<S> <C> <C> <C> <C>
Thomas R. Filesi, President
and Chief 1997 $185,000 $200,000 10,000
Executive Officer 1996 $175,000 $175,000 10,000
1995 $175,000 $150,00 30,000
Richard G. Dahlberg 1997 $100,00 $80,000 8,000
Senior Vice President,
Engineering 1996 $91,400 $65,000 8,000
1995 $91,400 $60,000 20,000
Thomas S. Garrett 1997 $121,00 $80,000 8,000
Senior Vice President,
Operations 1996 $115,000 $75,000 8,000
1995 $115,000 $65,000 20,000
William J. Collinsworth, 1997 $135,000 $70,000 20,000
Vice President, Finance 1996 $5,192(1)$0 20,000
Robert J. Kosobucki 1997 $100,000 $70,000 8,000
Vice President, World Wide 1996 $89,811(2) $52,000 8,000
Sales and Marketing 1995 $36,538(3) $23,000 30,000
</TABLE>
(1) Represents compensation paid for October 1996
(2) Does not include $44,900 paid for moving expenses
(3) Represents compensation paid from July 1995 - October 27,
1995
<PAGE>
<PAGE>
Option Grants
The following table contains information about stock
options granted to the executive officers named
in the preceding table during the fiscal year ended October 31,
1997:
<TABLE>
Percentage Potential
of Total Realizable
Options Value
Number Granted at Assumed
of to Annual Rates
Shares Employ- of Stock Price
lying ees in Exercise Expi- Appreciation
Options Fiscal Price ration for Option Term
Name Granted Year ($/Share) Date 5%($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Thomas R. Filesi 10,000 5.6% $10.12 1/18/07 $63,644 $161,287
Richard G. Dahlberg 8,000 4.4% $10.12 1/18/07 $50,915 $129,029
Thomas S. Garrett 8,000 4.4 $10.12 1/18/07 $50,915 $129,029
William J.
Collinsworth 20,000 11.1% $10.12 1/18/07 $127,288 $322,573
Robert J. Kosobucki 8,000 4.4% $10.12 1/18/07 $50,915 $129,029
</TABLE>
Option Exercises And Fiscal Year End Option Values
The following table reflects option exercises during the
fiscal year ended October 31, 1997, the
number of shares underlying both exercisable and unexercisable
options as of the fiscal year end and the value
of unexercised in the money options as of the fiscal year end:
Number
of Shares Value of
Underlying Unexer-
Number Unexercised cised in
of Options the Money
Shares at Fiscal Options at
Acquired Value Year End Year End(2)
on Realized Exer- Unexer- Exer- Unexer
Name Exercise (1) cisable cisable cisable cisable
Thomas R. Filesi 100,000 $981,000 67,833 26,667 $967,358 $241,842
William J.
Collinsworth 0 0 6,667 33,333 $52,503 $265,097
Richard G.
Dahlberg 26,000 $297,310 16,000 20,000 $177,414 $177,374
Thomas S. Garrett 49,668 $542,873 2,667 19,999 $16,418 $177,362
Robert J.
Kosobucki 4,875 $73,573 14,458 23,334 $156,794 $227,467
[/TABLE]
(1) For purposes of calculating the value realized, the
Company has used the closing price as reported by
Nasdaq on the date of exercise.
(2) For purposes of calculating the value of unexercised in
the money options, the Company has used the
closing price as reported by Nasdaq as of October 31,
1997.
Employment Agreements
The Company has entered into employment agreements with
the President and Vice Presidents of the
Company. The agreements provide a term of three years and two
years, respectively, with evergreen
provisions extending the term an additional year at the end of
each year of service unless either party gives
notice of intent not to renew at least six months and three
months, respectively, prior to the end of each year
of service. These agreements also provide for a lump sum payment
of the lesser of the compensation payable
during the balance of the term or the amount $1.00 less than a
parachute payment under the Internal
Revenue Code if certain terms of the executives employment are
altered and the executive elects to terminate
<PAGE>
after a change of control of the Company. All such agreements
contain provisions assigning all discoveries
by the employee to the Company and restricting use or disclosure
of confidential information.
The Company has entered into a consulting agreement with
Mr. Dove, the Chairman of the Board,
providing for a term through May 30, 1998, under which Mr. Dove
receives compensation at the rate of
$25,000 per fiscal quarter. Such agreement also provides for a
lump sum payment of the lesser of the
compensation payable during the balance of the term or the amount
$1.00 less than a "parachute payment"
under Internal Revenue Code of 1986, as amended, if certain terms
of Mr. Dove's engagement are altered and
he elects to terminate after a change in control of the Company.
For fiscal 1997, the Company paid Mr. Dove
a discretionary bonus of $30,000 related to his performance under
the consulting agreement.
Compensation Committee Report on Executive Compensation
The Compensation Committee reviews and recommends to the
Board of Directors the compensation
payable to the executive officers of the Company. The
determination of base salary has been based in the past
largely upon that level required to compete with other employers
in the industry in which the Company is
engaged. The Compensation Committee annually reviews compensation
payable to the executives and the
award of options and other nonmonetary benefits to those
individuals.
At present, the Compensation Committee has determined to
increase the base salaries of the
Company s more highly paid personnel only modestly from year to
year. The intent of this policy is to have
base salaries in the lower range of competitive industry
companies, but to use at risk cash bonuses to
augment total cash compensation when Optek performs well.
As a result, the chief executive officer and other
officers of the Company were awarded bonuses
based upon their performance related to goals established prior
to the beginning of the fiscal year. The
Committee believes that providing key managerial personnel the
means to achieve additional compensation
through these programs stimulates the kind of productive efforts
evidenced during the 1997 fiscal year.
Further, to provide longer-term incentives, the
Compensation Committee has awarded stock options
which will provide a return to these executives commensurate with
the Company's success. During 1997, the
Committee approved awards of ten year stock options to key
managerial personnel in order to give incentive
to management to implement a long-term strategic plan and to
align their interests with those of the
stockholders.
Michael E. Cahr
Rodes Ennis
Wayne Stevenson
Directors Compensation
Non-employee Directors of the Company receive a yearly fee
of $12,000 paid in quarterly
installments, $1,000 for each Directors meeting attended, $2,000
per year committee chairman fee to be paid
in quarterly installments, and $750 for each committee meeting
attended outside of the regularly scheduled
board meetings and are reimbursed for travel expenses incurred in
connection with each such meeting.
Each non-employee Director of the Company is also awarded
upon election at an annual meeting of
stockholders options to acquire up to 3,500 shares of the Common
Stock pursuant to the Company s Directors
Formula Award Plan. These awards contain the following rights:
1. Stock Options - Options to acquire common stock
which are not entitled to treatment as incentive
stock options under the Internal Revenue Code.
<PAGE>
2. Reload Options - Options to reacquire shares of
common stock which are used to exercise stock
options at the market price used for such
exercise.
3. Alternative Appreciation Rights - Rights to
acquire an equivalent number of shares equal in terms
of present market value to the difference between
current market value and exercise price of the
stock purchasable pursuant to any of the
preceding options.
The exercise price of all options granted is 100% of the
fair market value of the Company s Common
Stock on the date of grant, determined on a formula basis upon
the price of the Common Stock for the twenty
trading days preceding the date of the award. Each option
awarded pursuant to the plan vests and becomes
fully exercisable if such individual continues to serve as a
Director until the next annual meeting of
stockholders. Options granted under the plan expire ten years
from the date of grant, and no option may be
exercised by any person after the expiration of its term.
In addition, each non-employee Director of the Company is
entitled to participate under the Directors'
Formula Compensation Plan. Under the plan, each participant may
by written election to the Company
delivered by December 31 of a calendar year elect, in lieu of all
or part of the annual retainer otherwise
payable to him during the following calendar year: (a) to defer
payment of such amounts until after he has
ceased to be a Director, to be paid in ten annual installments
bearing interest at the prime rate or upon his
death; (b) to receive shares of the Company s Common Stock, the
number of shares to equal the amount of
the retainer for which an election is given divided by the
greater of (i) the fair market value of the Company s
Common Stock on the date of grant, determined on a formula basis
upon the price of the Common Stock for
the twenty trading days preceding the date of the award; or (ii)
$5.00 per share; or (c) to receive options to
purchase at an exercise price equal to 50% of the fair market
value determined in the manner set forth above
the number of shares of the Company s Common Stock determined by
dividing the amount elected by the
difference between the market price of the Common Stock and the
exercise price.
Compensation Committee Interlocks and Insider Participation
During 1997, Mr. Dove served on the Compensation Committee
of CSI Control Systems
International, Inc., a private company of which Mr. Stevenson is
Chairman and Chief Executive Officer.
During this same period, Mr. Stevenson served on the Company's
Compensation Committee.
Transaction with First Source
Effective October 31, 1997, the Company completed
agreements terminating the Company's loan
agreements with First Source. Under the loan agreements, First
Source was entitled to receive approximately
$2.4 million in the event that the Company entered into certain
transactions to sell its assets and, in addition,
was entitled to certain covenants and security interests. In
consideration of the termination and release of such
obligations, the Company agreed to pay First Source $1.545
million in two installments, one installment of
$750,000 due on March 31, 1998 and the balance due on June 30,
1998. At the same time, the warrant held
by First Source was amended to eliminate negative covenants.
PAGE
<PAGE>
HISTORICAL STOCK PERFORMANCE
The following graph compares the cumulative stockholder
return on the Company s Common Stock
with the cumulative return of (1) equity securities listed on the
NASDAQ Market Index and (2) other
companies reporting results who are classified in the same
Standard Industrial Classification number as the
Company.
Graph depicts comparative performance reflecting the
following data points:
Compare 5-Year Cumulative Total Return
Among Optek Technology, Inc.
Nasdaq Market Index and SIC Code Index
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Optek Technology,Inc. 100 50.00 78.57 214.29 585.71 1036.00
Nasdaq Market Index 100 155.36 186.40 347.73 374.54 528.46
SIC Code Index 100 131.23 139.52 165.50 194.35 254.71
</TABLE>
PAGE
<PAGE>
INFORMATION CONCERNING THE 1998 STOCK OPTION PLAN
The Company's 1998 Stock Option Plan (the "Plan") will be
submitted to the stockholders of the
Company for their approval and ratification at the Annual Meeting
of Stockholders to be held on March 17,
1998. The affirmative vote of stockholders holding a majority of
the shares of Common Stock represented, in
person or by proxy, at a meeting at which a quorum shall be
present is required for such approval.
General
The Board of Directors and Compensation Committee approved
the Plan for submission to the
stockholders on January 29, 1998. The Plan, as approved,
provides for the reservation and issuance pursuant
to the Plan of up to 750,000 shares of the Company's Common
Stock.
Administration
The Plan will be administered by a Committee as appointed
from time to time by the Board of Directors
of the Company (the "Committee") consisting of not less than two
members of the Board who are Non-Employee
Directors as defined by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934.
Subject to the express provisions of the Plan, the
Committee has sole discretion and authority to
determine from among eligible employees and independent
contractors those to whom and the time or times at
which such awards may be made and the form and amount of such
awards. The Committee also has complete
authority to impose limitations, restrictions and conditions upon
any such award and to interpret the Plan, adopt,
amend and rescind rules and regulations relating to the Plan, and
to make all other determinations necessary in
the administration of the Plan.
Eligibility
Any executive officer or other key employee of the Company
is eligible to participate in the Plan and
certain independent contractors, such as managerial consultants
and financial and legal advisors, may be granted
awards under the Plan.
Terms of Awards
The Plan contemplates that awards may contain a
combination of five different kinds of rights:
1. Stock Options - Options to acquire common stock which
are not entitled to treatment as incentive
stock options under the Internal Revenue Code.
2. Incentive Stock Options - Options to acquire common
stock which are entitled to treatment as
incentive stock options under the Internal Revenue Code.
3. Reload Options - Options to reacquire shares of common
stock which are used to exercise stock
options or incentive stock options, but which are not
entitled to treatment as incentive stock options
under the Internal Revenue Code.
4. Alternative Appreciation Rights - Rights to acquire an
equivalent number of shares equal in present
market value to the difference between current market
value and exercise price of the stock purchasable
pursuant to any of the preceding options.
<PAGE>
5. Limited Rights - Rights to receive cash equal to the
difference between the exercise price and
current market price of the stock purchasable pursuant to
the previously described options exercisable
in the event of certain changes of control which are not
approved in advance by the Company's Board
of Directors.
(a) Exercise Price. The exercise price of all
options granted under the Plan is 100% of the fair
market value of the Company's Common Stock on the date of grant,
as determined by the Committee.
However, in the case of incentive stock options granted to an
optionee who owns more than 10% of the voting
power of all classes of stock of the Company, the exercise price
must not be less than 110% of the fair market
value on the date of grant. The last reported sale price of the
Company's Common Stock on February 3, 1998,
as reported on the Nasdaq National Market, was $22.25.
(b) Exercise of Options. At the time of grant of an
option and within the parameters of the Plan,
the Committee may determine the time or times at which and the
period or periods during which such option
will become or be exercisable and whether such option shall
become exercisable in full or in installments (which
may be cumulative or noncumulative). The practice of the Company
has been to grant options which vest
cumulatively over a period of three years, with 33 1/3% of the
options vesting on each anniversary of the date
of grant. The Plan requires that each employee granted an option
remain in the continuous employ of the
Company or its subsidiary for such period or periods from the
date of grant of the option as the Committee may
determine before the right to exercise the option shall vest. The
Plan further requires that no option granted
under the Plan be exercisable unless, at the time of exercise,
the optionee has been continuously employed by
the Company or its subsidiary from the date on which the option
was granted, subject to certain exceptions which
may be granted in case of termination of employment.
Each exercise of an option must be made by written notice
to the Company. The exercise price upon
such exercise may be made in full at the time of purchase or upon
such terms as may be determined by the
Committee and may be paid in cash or, with the consent of the
Committee, in whole or in part in the Company's
Common Stock at its fair market value as determined by the
Committee.
(c) Termination of Options. Options granted under
the Plan expire ten years from the date of
grant, unless a shorter period is provided in the option
agreement. All options also terminate upon the
termination of the employment of any participant. No option may
be exercised by any person after the expiration
of its term. An incentive stock option granted to an optionee
who, immediately before the grant of such option,
owns more than 10% of the voting power of all classes of stock of
the Company, may not have a term of more
than five years.
(d) Nontransferability of Options. An option is not
transferable by the optionee, other than by will
or the laws of descent and distribution, and is exercisable only
by the optionee during his or her lifetime or, if
the optionee dies, by a person who acquires the rights to
exercise the option by bequest or inheritance. Upon
the death of any participant, his estate or other person
obtaining such rights may exercise such options for a
period of one year to the extent the participant could have at
the date of his death.
(e) Other Provisions. The specific terms of each
option shall be evidenced by a stock option
agreement in such form as is determined from time to time by the
Committee. Such agreement may contain any
provision not inconsistent with the terms of the Plan and with
the laws of the state of incorporation of the
Company, including terms as to forfeitures, vesting and other
matters, deemed appropriate by the Committee.
Tax Information
In general, unless an option granted has a readily
ascertainable fair market value, a recipient is not
required to recognize or report any gain upon the initial
issuance of the option. Since options for the Company's
common stock are not actively traded, the mere issuance of
options under the Plan should not result in a taxable
event.
<PAGE>
Rather, the initial taxable event will occur upon exercise
of the option or disposition of the Common
Stock acquired, depending upon whether the award is made as a
non-qualified option or an incentive stock
option. The Internal Revenue Code of 1986 (referred to herein as
the "Code") provides different tax treatments
for these types of options. Each recipient of a nonqualified
option (such as a Stock Option or Reload Option)
will be required to report as compensation the amount realized
when the option is exercised, calculated as the
difference between the market value of the common stock acquired
on the date of exercise and the aggregate
exercise price.
Similarly, if a recipient elects to exercise Alternate
Appreciation Rights or Limited Rights with respect
to an option, the amount realized (which will be equal to the
difference between the fair market value of the
common stock underlying the option and the exercise price per
share) will be reportable at that time such rights
are exercised.
Conversely, upon any exercise of Stock Options, Reload
Options, Alternate Appreciation Rights or
Limited Rights, the Company will be entitled to a tax deduction
equal to the amount reportable by the individual,
subject to certain restrictions.
After the exercise of a Stock Option, Reload Option or
Alternative Appreciation Right, any stock
acquired will be treated as a capital asset of the participant.
Upon resale, the individual would be required to
report the difference between the resale price and the market
value of the Common Stock on the date of exercise
as a capital gain (or loss) for income tax purposes.
However, different tax effects will follow if an award is
issued as an Incentive Stock Option. Upon
exercise of an incentive stock option, the optionee will
recognize no income unless the alternative minimum tax
rules apply. The Company will not be allowed a deduction for
federal tax purposes in connection with the
exercise of an incentive stock option.
An incentive stock option must be exercised while the
optionee is an employee of the Company or a
subsidiary of the Company, or not more than three months after
the optionee ceases to be an employee. The
following additional conditions must be satisfied for an option
to be eligible for incentive stock option treatment:
(i) the option must be exercisable only within ten years of the
date of grant; (ii) the exercise price must not be
less than the fair market value of the shares at the time the
option is granted; (iii) the option plan must be
approved by the shareholders; (iv) the option must be
non-transferable other than by death and must be
exercisable during the optionee's lifetime only by him; (v) if
the optionee owns more than 10% of the total
combined voting power of all classes of the Company's stock
immediately before the option is granted, the
exercise price must be at least 110% of the fair market value of
the shares and the option must be exercisable
only within five years of the date of grant; and (vi) no optionee
may be granted an incentive stock option which,
when aggregated with all other incentive stock options granted to
such optionee by the Company or any
subsidiary, would result in shares having an aggregate fair
market value (determined as of the date of grant of
the option) in excess of $100,000 becoming first available for
purchase upon exercise of an option during any
calendar year.
Upon the sale of shares acquired upon exercise of an
incentive stock option at least two years after the
grant of option and one year after exercise of the option, any
gain will be taxed to the optionee as capital gain.
If these holding periods are not satisfied, however, the
incentive stock option will be treated in the same manner
as a non-qualified option, and the optionee will recognize
ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the
stock at the date of the option exercise or the sale
price of the stock, with the Company being entitled to a
deduction in the same amount.
If shares of the Company's Common Stock which were
acquired on exercise of an incentive stock option
("prior statutory option shares") are exchanged in connection
with the exercise of an incentive stock option within
two years after the date the option covering such prior statutory
option shares was granted or within one year
after the date of purchase, then the exchange will be treated as
a disqualifying disposition of such prior statutory
option shares and the excess of the fair market value of such
shares on the date they were purchased over the
purchase price will be recognized by the optionee as ordinary
income. If before the expiration of such holding
<PAGE>
periods prior statutory option shares acquired pursuant to an
incentive stock option are exchanged in connection
with the exercise of an incentive stock option at a price less
than their fair market value on the exercise date,
ordinary income will be limited to the amount (if any) by which
the fair market value on the date of the
exchange exceeds the option price paid for such prior statutory
option shares.
Any excess of the fair market value of the prior statutory
option shares at the date of the exchange over
the option price paid for such prior statutory option shares,
which is not recognized as ordinary income as
described above, will not be recognized as taxable gain at the
time of the exchange. A number of the acquired
shares, equal in number to the prior statutory option shares
surrendered in the exchange, will have a basis equal
to the optionee's basis in the surrendered shares, increased by
any ordinary income recognized on the exchange.
Any additional shares acquired in the exchange will have a zero
basis. Any loss recognized on disposition of
the prior statutory option shares is a capital loss. In any
event, the Company will be allowed a deduction in the
amount of the ordinary income recognized by the optionee.
The exercise of an incentive stock option, or the
disposition of shares acquired by exercise of an
incentive stock option, may subject the optionee to the
alternative minimum tax under Section 55 of the Code.
The items of tax preference included in the calculation of the
alternative minimum tax include the amount by
which the fair market value of shares purchased pursuant to the
exercise of an incentive stock option exceeds
the exercise price.
In determining gain or loss recognized on any disposition
of shares acquired pursuant to an exercise,
an optionee's tax basis for purposes of the alternative minimum
tax will be increased by the amount by which
the fair market value of the shares at the time of exercise
exceeds the option price. In many cases, an optionee
can avoid becoming subject to the alternative minimum tax by
exercising his incentive stock option in
installments over several years (rather than all in one year) and
by exercising the option only in years in which
such optionee has a relatively small amount of other items of tax
preference.
Upon the death of an optionee who has not exercised his or
her option, the value of such option
(determined under applicable Treasury regulations) will be
includable in the optionee's estate for federal estate
tax purposes. Upon the exercise of such option, the holder's
basis in the option shares will include the value
of the option included in the estate plus the price paid for the
option shares.
The foregoing summary of the effect of federal income
taxation upon the optionee and the Company
with respect to the grant of options and purchase of share under
the plan does not purport to be complete, and
reference should be made to the applicable provisions of the
Code. In addition, this summary does not discuss
the provisions of the income tax laws of any state or foreign
country in which the participant may reside.
Amendment of the Plan
The Committee may amend the Plan or condition or modify
awards under the Plan in response to
changes in securities or other laws or rules, regulations or
regulatory interpretations thereof applicable to this
Plan or to comply with stock exchange rules or requirements. In
addition, the Committee may terminate, modify
or amend the Plan in any respect, except that without stockholder
approval the Committee may not (i) increase
the maximum number of shares of Common Stock which may be issued
under the Plan, (ii) extend the period
during which any award may be granted or exercised, or (iii)
extend the term of the Plan.
Term of Plan
The Plan shall become effective on the date approved by
the holders of a majority of shares at the 1998
Annual Meeting of Stockholders. No awards shall be made after
the last day of Optek's 2007 fiscal year;
provided, however, that the Plan and all awards made prior to
such date shall remain in effect until such awards
have been satisfied.
<PAGE>
Prior Awards
No awards have been made under the Plan to date.
Potential Antitakeover Effects
If awards are made and exercised under the Plan, the
voting power of key personnel associated with
the Company may thereby be increased, as previously discussed.
This increased voting power may, in some
circumstances, permit such persons to influence a stockholder
vote in a manner that could thwart or discourage
proposed takeovers or changes in ownership of the Common Stock of
the Company.
Similarly, the ability to grant limited rights, which
would allow participants to receive cash in the event
of changes in control not approved in advance by the Company's
Board of Directors may, in some cases, thwart
or discourage attempts to change control of the Company.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected KPMG
Peat Marwick LLP as the Company s
auditors for fiscal 1998. Representatives of KPMG Peat Marwick
LLP are expected to be present at the
Annual Meeting of Stockholders to be held on March 17, 1998 to
make any statement if they desire to do so
and to respond to any appropriate questions of the stockholders.
STOCKHOLDERS PROPOSALS
The day by which proposals of stockholders intended to be
presented at the 1999 annual meeting of
stockholders must be received by the Company for inclusion in the
Company s proxy statement and form of
proxy relating to that meeting is October 9, 1998.
It is important that proxies be returned promptly.
Stockholders are requested to date, sign and return
the enclosed proxy in the enclosed envelope, to which no postage
need be affixed if mailed in the United
States. If you attend the 1999 Annual Meeting, you may revoke
your proxy and vote in person if you so
desire; otherwise your proxy will be voted for you.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas R. Filesi, President
Carrollton, Texas
February 6, 1998
PAGE
<PAGE>
NOTICE: Upon written request from a stockholder of record at
January 16, 1998 (or from any
beneficial owner representing that he/she is or was entitled to
vote at the meeting), the Company will
furnish without charge a copy of its Annual Report on Form 10-K
for the fiscal year ended October 31,
1997, as filed with the Securities and Exchange Commission,
including financial statements and schedules
thereto and a list of exhibits not contained therein. The
Company will furnish copies of the full text of
any of the exhibits described in the list of exhibits
accompanying the Annual Report on Form 10-K, if
requested, upon payment in advance of the prescribed fee limited
to the Company s reasonable expenses
incurred in providing copies of the exhibits. Requests should be
directed to:
William J. Collinsworth
Vice President - Finance
Optek Technology, Inc.
1215 West Crosby Road
Carrollton, Texas 75006
<PAGE>
OPTEK TECHNOLOGY, INC.
1998 STOCK OPTION PLAN
ARTICLE I - GENERAL
1.1. Establishment of the Plan. Optek Technology, Inc., a
Delaware corporation (hereinafter referred to as the "Company"),
hereby establishes a stock option plan to be known as the Optek
Technology, Inc. 1998 Stock Option Plan (hereinafter referred to as
the "Plan"), as set forth in this document.
The Plan shall become effective upon approval by the Company's
stockholders (the "Effective Date") and shall remain in effect as
provided in Section 1.3 hereof.
1.2. Purpose. The purposes of this Plan are to: (1) better
align the interests of the management of Optek Technology, Inc.
("Optek") and its subsidiaries and affiliates (collectively
referred to as the "Company") with the stockholders by reinforcing
the relationship between participants' reward and stockholder
gains; (2) provide management with an equity ownership in the
Company which will fluctuate with and reflect Company performance;
(3) maintain competitive compensation levels; and (4) provide an
incentive to management to continue employment with the Company.
1.3. Administration.
(a) The Plan shall be administered by a Committee appointed
by the Board of Directors of Optek (the "Committee"), as constitut-
ed from time to time, which shall consist of two or more members of
the Board who are Non-Employee Directors, as defined by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended.
(b) The Committee shall have the authority, in its sole
discretion and from time to time to:
(i) designate the employees or classes of employees and
independent contractors eligible to participate in the Plan;
(ii) grant awards provided in the Plan in such form and
amount as the Committee shall determine;
(iii) impose such limitations, restrictions and condi-
tions upon any such award as the Committee shall deem appro-
priate; and
(iv) interpret the Plan, adopt, amend and rescind rules
and regulations relating to the Plan, and make all other
determinations and take all other action necessary or advis-
able for the implementation and administration of the Plan.
<PAGE>
(c) Decisions and determinations of the Committee on all
matters relating to the Plan shall be in its sole discretion and
shall be conclusive. No member of the Committee shall be liable
for any action taken or decision made in good faith relating to the
Plan or any award thereunder.
1.4. Eligibility for Participation. Participants in the Plan
shall be selected by the Committee from the executive officers and
other key employees of the Company who occupy responsible manageri-
al or professional positions and who have the capability of making
a substantial contribution to the success of the Company. The
Committee may also make awards under this Plan (other than
Incentive Stock Options) to independent contractors, such as
managerial consultants and financial or legal advisors, whom the
Committee believes may contribute significantly to the success of
the Company. In making this selection and in determining the form
and amount of awards, the Committee shall consider any factors
deemed relevant, including the individual's functions, responsibil-
ities, value of services to the Company and past and potential
contributions to the Company's profitability and sound growth.
1.5. Types of Awards Under Plan. Awards under the Plan may
be in the form of any one or more of the following:
(i) Stock Options;
(ii) Incentive Stock Options;
(iii) Reload Options;
(iv) Alternative Appreciation Rights; and/or
(v) Limited Rights.
1.6. Aggregate Limitation on Awards.
(a) Shares of stock which may be issued under the Plan shall
be authorized and unissued or treasury shares of Common Stock of
Optek ("Common Stock"). The maximum number of shares of Common
Stock which may be issued under the Plan shall be 750,000.
(b) For purposes of calculating the maximum number of shares
of Common Stock which may be issued under the Plan:
(i) all the shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted
when cash or shares of Common Stock are used as full or
partial payment for shares issued upon exercise of a Stock
Option, Incentive Stock Option or Reload Option; and
<PAGE>
(ii) only the shares issued (including the shares, if
any, withheld for tax withholding requirements) as a result of
an exercise of Alternative Appreciation Rights shall be
counted.
(c) In addition to shares of Common Stock actually issued
pursuant to the exercise of Stock Options, Incentive Stock Options,
Reload Options or Alternate Appreciation Rights, there shall be
deemed to have been issued a number of shares equal to the number
of shares of Common Stock in respect of which Limited Rights (as
described in Article IV) shall have been exercised.
(d) Shares tendered by a participant as payment for shares
issued upon exercise of a Stock Option, Incentive Stock Option or
Reload Option shall not be available for issuance under the Plan.
(e) Any shares of Common Stock subject to a Stock Option,
Incentive Stock Option or Reload Option which for any reason is
terminated unexercised or expires shall again be available for
issuance under the Plan, but shares subject to a Stock Option,
Incentive Stock Option or Reload Option which are not issued as a
result of the exercise of Limited Rights shall not again be
available for issuance under the Plan.
(f) Upon the granting of any award hereunder, the maximum
number of shares which might be acquired pursuant thereto shall be
deducted from the total amount available for award until such time
as the award is actually exercised, at which time the amount
available shall be adjusted for the actual amount calculated
hereunder upon such exercise.
1.7. Effective Date and Term of Plan.
(a) The Plan shall become effective on the date approved by
the holders of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote at the 1998 Annual Meeting
of Stockholders of Optek.
(b) No awards shall be made under the Plan after the last day
of the Company's 2007 fiscal year provided, however, that the Plan
and all awards made under the Plan prior to such date shall remain
in effect until such awards have been satisfied or terminated in
accordance with the Plan and the terms of such awards.
ARTICLE II - OPTIONS
2.1. Awards of Options.
(a) The Committee may from time to time, and subject to the
provisions of the Plan and such other terms and conditions as the
Committee may prescribe, grant to any participant in the Plan one
or more options to purchase for cash or shares the number of shares
of Common Stock ("Stock Options") allotted by the Committee. The
date a Stock Option is granted shall mean the date selected by the
Committee as of which the Committee allots a specific number of
shares to a participant pursuant to the Plan.
<PAGE>
(b) The Committee also may, from time to time and subject to
the provisions of the Plan and such other terms and conditions as
the Committee may prescribe, grant to any participant in the Plan
one or more "incentive stock options" (intended to qualify as such
under the provisions of Section 422 of the Internal Revenue Code of
1986, as amended ("Incentive Stock Options")) to purchase for cash
or shares the number of shares of Common Stock allotted by the
Committee. The date an Incentive Stock Option is granted shall mean
the date selected by the Committee as of which the Committee allots
a specific number of shares to a participant pursuant to the Plan.
(c) Concurrently with the award of Stock Options and/or the
award of Incentive Stock Options to any participant in the Plan,
the Committee may authorize reload options ("Reload Options") to
purchase for cash or shares a number of shares of Common Stock.
The number of Reload Options shall equal
(i) the number of shares of Common Stock used to exercise the
underlying Stock Options or Incentive Stock Options; and
(ii) to the extent authorized by the Committee, the number of
shares of Common Stock used to satisfy any tax withhold-
ing requirement incident to the exercise of the underly-
ing Stock Options or Incentive Stock Options.
The grant of a Reload Option will become effective upon the
exercise of underlying Stock Options, Incentive Stock Options or
Reload Options through the use of shares of Common Stock held by
the optionee for at least 12 months. Notwithstanding the fact that
the underlying option may be an Incentive Stock Option, a Reload
Option is not intended to qualify as an "incentive stock option"
under Section 422 of the Internal Revenue Code of 1986.
(d) The term "Option" shall mean Stock Option, Incentive
Stock Option or Reload Option, as the context requires.
2.2. Stock Option Agreements. Each grant of a Stock Option
or an Incentive Stock Option shall be evidenced by a written agree-
ment, executed by the Company and the holder of the Option (the
"optionee"), stating the number of shares of Common Stock subject
to the Option evidenced thereby, and in such form as the Committee
may from time to time determine. Each Stock Option Agreement and
Incentive Stock Option Agreement shall state whether the Committee
has authorized Reload Options with respect to the underlying Stock
Options and/or Incentive Stock Options. Upon the exercise of an
underlying Stock Option, Incentive Stock Option or other Reload
Option, the Reload Option will be evidenced by an amendment to the
underlying Stock Option Agreement or Incentive Stock Option
Agreement.
<PAGE>
2.3. Stock Option Price. The option price per share of
Common Stock deliverable upon the exercise of a Stock Option or an
Incentive Stock Option shall be 100% of the fair market value of a
share of Common Stock on the date the Option is granted, except
that, if an Incentive Stock Option is awarded to any employee who
owns stock possessing more than 10 percent of the combined voting
power of all classes of Optek's stock, then the option price per
share shall be 110% of the fair market value of a share of Common
Stock on the date the Incentive Stock Option is granted. The
option price per share of Common Stock deliverable upon the
exercise of a Reload Option shall be the fair market value of a
share of Common Stock on the date the grant of the Reload Option
becomes effective.
2.4. Term and Exercise. Each Stock Option or Incentive Stock
Option shall be fully exercisable at such time or times (but not
less than six months from the date of its grant) and in such
increments (which may be cumulative or non-cumulative) as shall be
determined by the Committee and, unless a shorter period is
provided by the Committee or another Section of this Plan, may be
exercised during a period of ten years from the date of grant
thereof, except that, if an Incentive Stock Option is awarded to
any employee who owns stock possessing more than 10 percent of the
combined voting power of all classes of Optek's stock, then the
Incentive Stock Option may be exercised during a period of five
years from the date of grant thereof. The term of any Reload
Option shall be equal to the remaining option term of the underly-
ing Stock Option and/or Incentive Stock Option. No Option shall be
exercisable after the expiration of its option term.
2.5. Maximum Amount of Incentive Stock Option Grant. The
aggregate fair market value (determined on the date the option is
granted) of Common Stock subject to an Incentive Stock Option
granted to an optionee by the Committee which became exercisable
for the first time in any calendar year shall not exceed $100,000.
2.6. Manner of Payment. Each Option agreement shall set
forth the procedure governing the exercise of the Option granted
thereunder, and shall provide that, upon such exercise in respect
of any shares of Common Stock subject thereto, the optionee shall
pay to the Company, in full, the option price for such shares with
cash or with previously owned Common Stock valued at its fair
market value on the date of exercise.
2.7. Delivery of Shares. As soon as practicable after
receipt of payment, the Company shall deliver to the optionee a
certificate or certificates for such shares of Common Stock. The
optionee shall become a stockholder of the Company with respect to
Common Stock represented by share certificates so issued and as
such shall be fully entitled to receive dividends, to vote and to
exercise all other rights of a stockholder.
<PAGE>
2.8. Death of Optionee.
(a) Upon the death of an optionee, any rights to the extent
exercisable on the date of death may be exercised by the optionee's
estate, or by a person who acquires the right to exercise such
Stock Option by bequest or inheritance or by reason of the death of
the optionee, provided that such exercise occurs within both the
remaining effective term of the Stock Option and one year after the
optionee's death.
(b) The provisions of this Section shall apply notwithstand-
ing the fact that the optionee's employment may have terminated
prior to death, but only to the extent of any rights exercisable on
the date of death.
2.9. Retirement or Disability. Upon the termination of an
optionee's employment by reason of permanent disability or
retirement (as each is determined by the Committee), the optionee
may, within 36 months from the date of such termination of
employment, exercise any Options to the extent such Options were
exercisable at the date of such termination of employment.
Notwithstanding the foregoing, the tax treatment available pursuant
to Section 422 of the Internal Revenue Code of 1986 upon the
exercise of an Incentive Stock Option will not be available to an
optionee who exercises any Incentive Stock Option more than (i) 12
months after the date of termination of employment due to permanent
disability or (ii) three months after the date of termination of
employment due to retirement.
2.10. Termination for Other Reasons. Except as provided in
Section 2.8 and 2.9, or except as otherwise determined by the
Committee, all Options shall terminate upon the termination of the
optionee's employment.
2.11. Effect of Termination - Reload Options Further, no
additional Reload Options shall be granted to optionees when Stock
Options, Incentive Stock Options and/or Reload Options are
exercised pursuant to the terms of this Plan following termination
of the optionee's employment.
2.12. Effect of Exercise. The exercise of any Option shall
cancel that number of related Alternate Appreciation Rights and/or
Limited Rights, if any, which is equal to the number of shares of
Common Stock purchased pursuant to said option.
PAGE
<PAGE>
ARTICLE III - ALTERNATE APPRECIATION RIGHTS
3.1. Award of Alternate Rights. Concurrently with or subse-
quent to the award of any Stock Option, Incentive Stock Option or
Reload Option to purchase one or more shares of Common Stock, the
Committee may, subject to the provisions of the Plan and such other
terms and conditions as the Committee may prescribe, award to the
optionee with respect to each share of Common Stock, a related
alternate appreciation right ("Alternate Right"), permitting the
optionee to be paid the appreciation on the option in lieu of
exercising the option.
3.2. Alternate Rights Agreement. Alternate Rights shall be
evidenced by written agreements in such form as the Committee may
from time to time determine.
3.3. Exercise. An optionee who has been granted Alternate
Rights may, from time to time, in lieu of the exercise of an equal
number of options, elect to exercise one or more Alternate Rights
and thereby become entitled to receive from the Company payment in
Common Stock of the number of shares determined pursuant to Section
3.4. Alternate Rights shall be exercisable only to the same extent
and subject to the same conditions as the options related thereto
are exercisable, as provided in this Plan. The Committee may, in
its discretion, prescribe additional conditions to the exercise of
any Alternate Rights.
3.4. Shares to be Received. Upon the exercise of an
Alternate Right, the optionee shall be entitled to receive the
number of shares determined by dividing (a) the product of (i) the
number of shares with respect to which the Alternate Right is being
exercised and (ii) the amount, if any, by which (A) the fair market
value of a share of Common Stock on the exercise date exceeds (B)
the exercise price of the related option by (b) the fair market
value of a share of Common Stock on the date of exercise of such
Alternate Right. As soon as practicable after exercise, the
Company shall deliver to the optionee a certificate or certificates
for such shares of Common Stock.
3.5. Effect of Exercise. The exercise of any Alternate
Rights shall cancel the number of Stock Options, Incentive Stock
Options, Reload Options and Limited Rights, if any, to which such
Alternate Rights apply.
3.6. Retirement or Disability. Upon termination of the
optionee's employment (including employment as a director of the
Company after an optionee terminates employment as an officer or
key employee of the Company) by reason of permanent disability or
retirement (as each is determined by the Committee), the optionee
may, within six months from the date of such termination, exercise
any Alternate Rights to the extent such Alternate Rights are
otherwise exercisable during such six-month period under this Plan.
<PAGE>
3.8. Death of Optionee or Termination for Other Reasons.
Except as provided in Section 3.7, or except as otherwise deter-
mined by the Committee, all Alternate Rights shall terminate upon
the termination of the optionee's employment or upon the death of
the optionee.
ARTICLE IV - LIMITED RIGHTS
4.1. Award of Limited Rights. Concurrently with or subse-
quent to the award of any Stock Option, Incentive Stock Option,
Reload Option or Alternate Right, the Committee may, subject to the
provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the optionee with respect to each
share of Common Stock, a related limited right permitting the
optionee, during a specified limited time period, to be paid the
appreciation on the option in lieu of exercising the option
("Limited Right").
4.2. Limited Rights Agreement. Limited Rights granted under
the Plan shall be evidenced by written agreements in such form as
the Committee may from time to time determine.
4.3. Exercise Period. Limited Rights are exercisable in full
for a period of seven months following the date of a Change in
Control of Optek if such Change in Control was not approved by the
Board of Directors serving immediately prior to the Control
Transaction or other transaction resulting in the Change of Control
(the "Exercise Period"); provided, however, that Limited Rights may
not be exercised under any circumstances until the expiration of
the six-month period following the date of grant.
As used in the Plan, a "Change in Control" shall be deemed to
have occurred if
(a) individuals who were directors of Optek immediately prior
to a Control Transaction shall cease, within one year of such
Control Transaction, to constitute a majority of the Board of
Directors of Optek (or of the Board of Directors of any successor
to Optek or to all or substantially all of its assets), or
(b) any entity, person or Group other than Optek or a
subsidiary of Optek acquires shares of Optek in a transaction or
series of transactions that result in such entity, person or Group
directly or indirectly owning beneficially fifty-one percent (51%)
or more of the outstanding shares.
<PAGE>
As used herein, "Control Transaction" shall be (i) any tender
offer for or acquisition of capital stock of Optek, (ii) any
merger, consolidation, or sale of all or substantially all of the
assets of Optek which has been approved by the stockholders, (iii)
any contested election of directors of Optek or (iv) any combina-
tion of the foregoing which results in a change in voting power
sufficient to elect a majority of the Board of Directors of Optek.
As used herein, "Group" shall mean persons who act in concert as
described in Sections 13(d)(3) and/or 14(d)(2) of the Securities
Exchange Act of 1934, as amended.
4.4. Amount of Payment. The amount of payment to which an
optionee shall be entitled upon the exercise of each Limited Right
shall be equal the product of (a) the number of shares with respect
to which the Limited Right is being exercised and (b) the amount,
if any, which is equal to the difference between (a) the Market
Price per share of Common Stock covered by the related option on
the date the Limited Right is exercised and (ii) the exercise price
of the related option. Market Price is defined to be the greater
of (i) the highest price per share of the Company's Common Stock
paid in connection with any Change in Control and (ii) the highest
price per share of the Company's Common Stock reflected in the
consolidated trading tables of the Wall Street Journal (presently
the NASDAQ National Market System) during the 60-day period prior
to the Change in Control.
4.5. Form of Payment. Payment of the amount to which an
optionee is entitled upon the exercise of Limited Rights, as
determined pursuant to Section 4.4, shall be made solely in cash.
4.6. Effect of Exercise. If Limited Rights are exercised,
the Stock Options, Incentive Stock Options, Reload Options and
Alternate Rights, if any, related to such Limited Rights cease to
be exercisable to the extent of the number of shares with respect
to which the Limited Rights were exercised. Upon the exercise or
termination of the options, and Alternate Rights, if any, related
to such Limited Rights, the Limited Rights granted with respect
thereto terminate to the extent of the number of shares as to which
the related options and Alternate Rights were exercised or
terminated.
4.7. Retirement or Disability. Upon termination of the
optionee's employment (including employment as a director of this
Company after an optionee terminates employment as an officer or
key employee of this Company) by reason of permanent disability or
retirement (as each is determined by the Committee), the optionee
may, within six months from the date of termination, exercise any
Limited Right to the extent such Limited Right is otherwise
exercisable during such six-month period under this Plan.
4.8. Death of Optionee or Termination for Other Reasons.
Except as provided in Sections 4.7 and 4.9, or except as otherwise
determined by the Committee, all Limited Rights granted under the
Plan shall terminate upon the termination of the optionee's
employment or upon the death of the optionee.
<PAGE>
4.9. Termination Related to a Change in Control. The require-
ment that an optionee be terminated by reason of retirement or
permanent disability or be employed by the Company at the time of
exercise pursuant to Sections 4.7 and 4.8 respectively, is waived
during the Exercise Period as to any optionee who (i) was employed
by the Company at the time of the Change in Control and (ii) is
subsequently terminated by the Company other than for just cause or
who voluntarily terminates if such termination was the result of a
good faith determination by the optionee that as a result of the
Change in Control he is unable to effectively discharge his present
duties or the duties of the position which he occupied just prior
to the Change in Control. As used herein, "just cause" shall mean
willful misconduct or dishonesty or conviction of or failure to
contest prosecution for a felony, or excessive absenteeism
unrelated to illness.
ARTICLE V - MISCELLANEOUS
5.1. General Restriction. Each award under the Plan shall be
subject to the requirement that, if at any time the Committee shall
determine that (i) the listing, registration or qualification of
the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or Federal law, or (ii) the
consent or approval of any governmental regulatory body, or (iii)
an agreement by the grantee of an award with respect to the
disposition of shares of Common Stock, is necessary or desirable as
a condition of, or in connection with, the granting of such award
or the issue or purchase of shares of Common Stock thereunder, such
award may not be consummated in whole or in part unless such
listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
5.2. Non-Assignability. No award under the Plan shall be
assignable or transferable by the recipient thereof, except by will
or by the laws of descent and distribution or, excluding Incentive
Stock Options, pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended, or Title
I of the Employee Retirement Income Security Act, or the rules
thereunder. During the life of the recipient, such award shall be
exercisable only by such person or by such person's guardian or
legal representative.
5.3. Withholding Taxes. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the
Plan, the Company shall have the right to require the grantee to
remit to the Company an amount sufficient to satisfy any Federal,
state and/or local withholding tax requirements (including
employment taxes) prior to the delivery of any certificate or
certificates for such shares. Alternatively, the Company may issue
or transfer such shares sufficient to satisfy the withholding tax
requirements. For withholding tax purposes, the shares of Common
Stock shall be valued on the date the withholding obligation is
incurred.
<PAGE>
5.4. Right to Terminate Employment. Nothing in the Plan or
in any agreement entered into pursuant to the Plan shall confer
upon any participant the right to continue in the employment of the
Company or effect any right which the Company may have to terminate
the employment of such participant.
5.5. Non-Uniform Determinations. The Committee's determina-
tions under the Plan (including without limitation determinations
of the persons to receive awards, the form, amount and timing of
such awards, the terms and provisions of such awards and the
agreements evidencing same) need not be uniform and may be made by
it selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are
similarly situated.
5.6. Rights as a Shareholder. The recipient of any award
under the Plan shall have no rights as a stockholder with respect
thereto unless and until certificates for shares of Common Stock
are issued to him.
5.7. Definitions. In this Plan the following definitions
shall apply:
(a) "Subsidiary" means any corporation or other entity of
which, at the time, more than 50% of the shares or other interests
entitled to vote generally in an election of directors or persons
performing similar functions are owned directly or indirectly by
Optek or any subsidiary thereof.
(b) "Affiliate" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with Optek.
(c) "Fair market value" as of any date and in respect of any
share of Common Stock means the amount determined in good faith by
the Committee in its sole discretion.
(d) "Option price" means the purchase price per share of
Common Stock deliverable upon the exercise of a Stock Option,
Incentive Stock Option or Reload Option.
5.8. Leaves of Absence. The Committee shall be entitled to
make such rules, regulations and determinations as it deems
appropriate under the Plan in respect of any leave of absence taken
by the recipient of any award. Without limiting the generality of
the foregoing, the Committee shall be entitled to determine (i)
whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan and (ii)
the impact, if any, of any such leave of absence on awards under
the Plan theretofore made to any recipient who takes such leave of
absence.
<PAGE>
5.9. Newly Eligible Persons. The Committee shall be entitled
to make such rules, regulations, determinations and awards as it
deems appropriate in respect of any person who becomes eligible to
participate in the Plan or any portion thereof after the commence-
ment of an award or incentive period.
5.10. Adjustments. In any event of any change in the
outstanding Common Stock by reason of a stock dividend or distribu-
tion, recapitalization, merger, consolidation, split-up, combina-
tion, exchange of shares or the like, the Committee may appropri-
ately adjust the number of shares of Common Stock which may be
issued under the Plan, the number of shares of Common Stock subject
to Options theretofore granted under the Plan, the option price of
Options theretofore granted under the Plan, and any and all other
matters deemed appropriate by the Committee.
5.11. Amendment of the Plan.
(a) The Committee may, without further action by the
stockholders and without receiving further consideration from the
participants, amend this Plan or condition or modify awards under
this Plan in response to changes in securities or other laws or
rules, regulations or regulatory interpretations thereof applicable
to this Plan or to comply with stock exchange rules or require-
ments.
(b) The Committee may at any time and from time to time
terminate or modify or amend the Plan in any respect, except that
without stockholder approval the Committee may not (i) materially
increase the maximum number of shares of Common Stock which may be
issued under the Plan (other than increases pursuant to Section
5.10), (ii) materially increase the benefits accruing to partici-
pants under the Plan, (iii) extend the period during which any
award may be granted or exercised, (iv) materially modify the
requirements as to eligibility for participation in the Plan, or
(v) extend the term of the Plan. The termination or any modifica-
tion or amendment of the Plan, except as provided in subsection
(a), shall not without the consent of a participant, affect his or
her rights under an award previously granted to him or her.
<PAGE>
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
OPTEK TECHNOLOGY, INC.
The undersigned stockholder of Optek Technology, Inc. (the
"Company"), revoking all prior proxies,
does by these presents name, constitute and appoint Thomas R.
Filesi and William J. Collinsworth, and each of
them, the true and lawful proxy and attorney-in-fact of the
undersigned, with full power of substitution, to vote
all shares of the Common Stock, par value $0.01 per share, of the
Company standing in the name of the
undersigned on the books of the Company at the close of business
on January 16, 1998 or in respect of which
the undersigned is entitled to vote at the Company's Annual
Meeting of Stockholders, to be held on March 17,
1998 at 10:00 a.m., Dallas, Texas time at the offices of the
Company, 1215 West Crosby Road, Carrollton,
Texas 75006, and at any and all adjournments thereof, on the
following matters:
<PAGE>
1. Election of Directors
FOR all nominees WITHHOLD
listed to the right
(except AUTHORITY to vote
as marked to the for all nominees
contrary below)
Nominees: Grant Dove, Thomas R. Filesi, Michael E. Cahr,
William H. Daughtrey, Jr., Rodes Ennis
and Wayne Stevenson.
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, write that nominee's
name in the space provided below.)
2. Approval of the Optek Technology, Inc. 1998 Stock
Option Plan
FOR AGAINST ABSTAIN
3. To transact such procedural matters as may properly
be brought before the meeting or any
adjournment or adjournments thereof.
IF NO SPECIFIC DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
MATTERS NO. 1 AND
2.
The undersigned hereby acknowledges receipt of the Notice
of Annual Meeting of Stockholders and the
Proxy Statement each dated February 6, 1998.
Dated
Stockholder's Signature
Stockholder's Signature
Please complete, sign and mail this proxy promptly in
the enclosed self-addressed envelope, which requires no
postage if mailed in the United States.
NOTE: Please sign exactly as your name is shown on
the left. If stock stands in two or more names, please
have all sign. If this Proxy is executed by a corporation,
it should be signed in the name of the corporation by an
officer thereunto duly authorized. If this Proxy is to be
signed as attorney, executor, administrator, trustee,
guardian, or in any representative capacity, the title of
the person signing should be given in full and any neces-
sary documentary evidence of authority to sign this
Proxy should be presented.
<PAGE>
