SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section) 240.14a-11(c) or (section)
240.14a-12
OPTICAL CABLE CORPORATION
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(Name of Registrant as Specified in Its Charter)
OPTICAL CABLE CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No filing fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
OPTICAL CABLE CORPORATION
5290 CONCOURSE DRIVE
ROANOKE, VIRGINIA 24019
February 12, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Optical Cable Corporation (the "Company") to be held on March 9, 1999, at 10:00
a.m. local time at the Hotel Roanoke and Conference Center at 110 Shenandoah
Avenue, Roanoke, Virginia 24016.
You are being asked to elect the Company's Board of Directors and to ratify
the appointment of KPMG LLP as independent accountants for the Company. We will
also be pleased to report on the affairs of the Company and a discussion period
will be provided for questions and comments of general interest to shareholders.
Whether or not you are able to attend, it is important that your shares be
represented and voted at this meeting. Accordingly, please complete, sign and
date the enclosed proxy and mail it in the envelope provided at your earliest
convenience. Your prompt response would be greatly appreciated.
Sincerely,
/s/ Robert Kopstein
Robert Kopstein
Chairman, President and
Chief Executive Officer
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, AND RETURN
PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED TO ENSURE THAT YOUR VOTE
WILL BE COUNTED. YOU MAY VOTE IN PERSON IF YOU SO DESIRE EVEN IF YOU HAVE
PREVIOUSLY SENT IN YOUR PROXY.
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<PAGE>
OPTICAL CABLE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MARCH 9, 1999
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Optical
Cable Corporation, a Virginia corporation (the "Company"), is scheduled to be
held on March 9, 1999 at 10:00 a.m., local time, at the Hotel Roanoke and
Conference Center located at 110 Shenandoah Avenue, Roanoke, Virginia 24016 for
the following purposes:
1. To elect five directors to serve for the terms of office specified in
the accompanying proxy statement and until their successors are duly
elected and qualified;
2. To ratify the selection of KPMG LLP as independent accountants for the
Company for fiscal year 1999; and
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only shareholders of record at the close of business on January 29, 1999
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. All shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the meeting, you are urged to
complete, sign and date the enclosed form of proxy and return it promptly in the
envelope provided. Shareholders attending the meeting may revoke their proxy and
vote in person.
FOR THE BOARD OF DIRECTORS
/s/ Kenneth W. Harber
Kenneth W. Harber
Secretary
Roanoke, Virginia
February 12, 1999
<PAGE>
OPTICAL CABLE CORPORATION
5290 CONCOURSE DRIVE
ROANOKE, VIRGINIA 24019
PROXY STATEMENT
TO BE MAILED ON OR ABOUT FEBRUARY 12, 1999
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 9, 1999
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of common stock, no par
value (the "Common Stock"), of Optical Cable Corporation, a Virginia corporation
(the "Company"), in connection with the solicitation by the Board of Directors
of the Company of proxies for use at the Annual Meeting of Shareholders to be
held on Tuesday, March 9, 1999, or at any adjournment thereof, pursuant to the
accompanying Notice of Annual Meeting of Shareholders. The purposes of the
meeting and the matters to be acted upon are set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. The Board of Directors is
not currently aware of any other matters that will come before the Annual
Meeting.
Proxies for use at the Annual Meeting are being solicited by and on behalf
of the Board of Directors of the Company. These proxy solicitation materials are
first being mailed on or about February 12, 1999 to all shareholders entitled to
vote at the Annual Meeting. Proxies will be solicited chiefly by mail. The
Company will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy material to the beneficial
owners of the shares and will reimburse them for their reasonable out-of-pocket
expenses in so doing. Should it appear desirable to do so in order to ensure
adequate representation of shares at the Annual Meeting supplemental
solicitations may also be made by mail or by telephone, telegraph or personal
interviews by directors, officers and regular employees of the Company, none of
whom will receive additional compensation for these services. All expenses
incurred in connection with this solicitation will be borne by the Company.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Annual Meeting and a return envelope for the
proxy are enclosed. A shareholder may revoke the authority granted by his or her
execution of a proxy at any time before the effective exercise of such proxy by
filing with the Secretary of the Company a written notice of revocation or a
duly executed proxy bearing a later date, or by voting in person at the Annual
Meeting. Shares of the Company's Common Stock represented by executed and
unrevoked proxies will be voted in accordance with the choice or instructions
specified thereon. If no specifications are given, the proxies intend to vote
the shares represented thereby in favor of the matters as set forth in this
Proxy Statement and the accompanying Notice of Annual Meeting of Shareholders,
and in accordance with their best judgment on any other matters which may
properly come before the Annual Meeting.
<PAGE>
RECORD DATE AND VOTING RIGHTS
Only shareholders of record at the close of business on January 29, 1999
are entitled to notice of and to vote at the Annual Meeting. As of the record
date, 37,862,936 shares of Common Stock were issued and outstanding. Each share
of Common Stock is entitled to one vote on all matters that may properly come
before the Annual Meeting. The holders of a majority of the outstanding shares
of Common Stock, present in person or by proxy, will constitute a quorum at the
Annual Meeting. Abstentions and broker non-votes will be counted for purposes of
determining the presence of a quorum. "Broker non-votes" are shares held by
brokers or nominees which are present in person or represented by proxy, but
which are not voted on a particular matter because instructions have not been
received from the beneficial owner.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting. Accordingly, abstentions or broker non-votes will not affect the
election of candidates receiving the plurality of votes.
All other matters to come before the Annual Meeting require the approval of
the holders of a majority of the votes cast at the Annual Meeting. For this
purpose, abstentions and non-votes will be deemed shares not voted on such
matters, will not count as votes for or against the proposals, and will not be
included in calculating the number of votes necessary for the approval of such
matters.
Votes at the Annual Meeting will be tabulated by Inspectors of election
appointed by the Company.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Five directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting. Unless otherwise specified, the enclosed proxy
will be voted in favor of the persons named below to serve until the next Annual
Meeting and until their successors are elected and qualified. Each person named
below is now a director of the Company. In the event any of these nominees shall
be unable to serve as a director, the shares represented by the proxy will be
voted for the person, if any, who is designated by the Board of Directors to
replace the nominee. All nominees have consented to be named and have indicated
their intent to serve if elected. The Board of Directors has no reason to
believe that any of the nominees will be unable to serve or that any vacancy on
the Board of Directors will occur. The five nominees receiving the greatest
number of votes cast for the election of directors will be elected.
The names of the nominees and certain other information about them are set
forth below:
<TABLE>
<CAPTION>
NOMINEE AGE DIRECTOR SINCE OFFICE HELD WITH COMPANY
- ------- --- -------------- ------------------------
<S> <C> <C> <C>
Robert Kopstein 49 1983 Chairman of the Board,
President, Chief Executive
Officer and Director
Luke J. Huybrechts 53 1995 Senior Vice President of Sales
and Director
Kenneth W. Harber 48 1995 Vice President of Finance,
Treasurer, Secretary and
Director
Randall H. Frazier 48 1996 Director
John M. Holland 53 1996 Director
</TABLE>
MR. KOPSTEIN has been President and a Director of the Company since 1983
and Chairman of the Board and Chief Executive Officer since 1989. From 1981 to
1983, Mr. Kopstein worked at Phalo Corporation as the Plant Manager for its
Fiber Optic Cable Division, from 1979 to 1981 he worked at ITT's Electro-Optical
Products Division as a Project Engineer on cable development projects for the
United States military, and from 1977 to 1979 he worked at Rochester Corporation
as a Product Engineer on the development of cables for military-oriented
applications.
MR. HUYBRECHTS was elected a Director of the Company in August 1995 and has
been Senior Vice President of Sales since joining the Company in 1986. Prior
thereto, Mr. Huybrechts worked at ITT's Electro-Optical Products Division for 10
years in marketing, sales and research and development. Mr. Huybrechts has
served on the Board of Directors of Cybermotion Inc. since 1998.
3
<PAGE>
MR. HARBER was elected a Director of the Company in August 1995 and has
been Vice President of Finance, Treasurer and Secretary of the Company since
1989. Prior to joining the Company as an accounting manager in 1986, Mr. Harber
was an accounting supervisor at an architecture and engineering firm.
MR. FRAZIER was elected a Director of the Company in April of 1996. Mr.
Frazier is President of R. Frazier, Inc., a company founded in 1988. Mr. Frazier
was self-employed in various chemical and engineering businesses prior to the
founding of R. Frazier, Inc.
MR. HOLLAND was elected a Director of the Company in April of 1996. Mr.
Holland is currently President of Cybermotion Inc., a company he co-founded in
1984. Mr. Holland also currently serves as the Chairman of the International
Service Robot Association. Mr. Holland's previous employment experience includes
the Electro-Optics Product Division of ITT where he was responsible for the
design of the earliest fiber optic systems and the development of automated
manufacturing systems for optical fiber.
DIRECTOR COMPENSATION
Each non-employee director is paid $500.00 for each meeting that he
attends, including committee meetings. In addition, the Company reimburses the
non-employee directors for their reasonable out-of-pocket expenses related to
attending meetings of the Board of any compensation for their services as
directors other than the compensation they receive as officers of the Company.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of four meetings during the Company's
fiscal year ended October 31, 1998. Each Director attended in person or
telephonically at least 75% of the meetings held by the Board of Directors and
all committees thereof on which he served.
The Board of Directors has established two standing committees: the Audit
Committee and the Compensation Committee. Additionally, the Board of Directors
has established a Stock Option Plan Subcommittee of the Compensation Committee.
The Board of Directors does not have a Nominating Committee. The Audit Committee
is comprised of Messrs. Frazier and Holland, while the Compensation Committee is
comprised of Messrs. Kopstein, Frazier and Holland. The Stock Option Plan
Subcommittee is comprised of Messrs. Frazier and Holland.
The Audit Committee recommends annually to the Board of Directors the
appointment of the independent public accountants of the Company, discusses and
reviews the scope and the fees of the prospective annual audit, reviews the
results of the annual audit with the Company's independent public accountants,
reviews compliance with existing major accounting and financial policies of the
Company, reviews the adequacy of the financial organization of the Company,
reviews management's procedures and policies relative to the adequacy of the
Company's internal accounting controls and compliance with federal and state
laws relating to accounting practices, and reviews and approves transactions, if
any, with affiliated parties.
The Compensation Committee reviews and approves annual salaries and bonuses
for all officers and carries out the responsibilities required by the rules of
the U.S. Securities and
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<PAGE>
Exchange Commission. The Stock Option Plan Subcommittee is responsible for
administering the Optical Cable Corporation 1996 Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE DIRECTORS NAMED
ON THE ENCLOSED PROXY.
5
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of KPMG LLP as the Company's
independent accountants for fiscal year 1999. Although action by the
shareholders in this matter is not required, the Board of Directors believes
that it is appropriate to seek shareholder ratification of this appointment.
A representative of KPMG LLP is expected to attend the Annual Meeting. The
representative will have the opportunity to make a statement, if he or she so
desires, and will be available to respond to appropriate questions from
shareholders. In the event the shareholders do not ratify the selection of KPMG
LLP, the selection of other independent accountants will be considered by the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF KPMG LLP AS
INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR 1999.
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of January 29, 1999 regarding
the beneficial ownership of the Company's Common Stock of (i) each person known
to the Company to be the beneficial owner, within the meaning of Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of more
than 5% of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each executive officer or former executive officer of the Company
named in the Summary Compensation Table (see "Executive Compensation") and (iv)
all executive officers and directors of the Company as a group. Unless otherwise
indicated, the address of each named beneficial owner is c/o Optical Cable
Corporation, 5290 Concourse Drive, Roanoke, Virginia 24019. Except to the extent
indicated in the footnotes, each of the beneficial owners named below has sole
voting and investment power with respect to the shares listed.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
- ---------------- ---------------- ----------------
<S> <C> <C>
Robert Kopstein 36,000,000 95.1%
Luke J. Huybrechts 1,000 *
Kenneth W. Harber 10,085 *
Randall H. Frazier -- --
John M. Holland -- --
All directors and executive officers 36,011,085 95.1%
as a group (5 persons)
</TABLE>
- ----------
* Less than 1%
EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES
EXECUTIVE OFFICERS
The Executive Officers of the Company are: Robert Kopstein, President and
Chief Executive Officer; Luke J. Huybrechts, Senior Vice President of Sales; and
Kenneth W. Harber, Vice President of Finance, Treasurer and Secretary. See the
information concerning nominees for directors above for certain information
concerning each of these officers.
7
<PAGE>
OTHER SIGNIFICANT EMPLOYEES
The following table contains information as to certain other significant
employees of the Company.
<TABLE>
<CAPTION>
NAME AGE OFFICE HELD WITH COMPANY
- ---- --- ------------------------
<S> <C> <C>
Ted Leonard 46 Vice President of Sales, Western Region
James Enochs 38 Vice President of Sales, Southeastern Region
Paul Oh 56 Vice President of Sales, Far East
Susan Adams 38 Vice President of Marketing
</TABLE>
- ----------
MR. LEONARD has been Vice President of Sales, Western Region since 1992.
Before joining the Company, Mr. Leonard worked in engineering management at
Alcatel Telecommunications Cable. Prior to that he worked at ITT's
Electro-Optical Products Division.
MR. ENOCHS has been Vice President of Sales, Southeastern Region since
1992. Before that he was Distribution Sales Manager from 1990 to 1992 and Inside
Sales Manager from 1988 to 1990.
DR. OH has been Vice President of Sales, Far East since 1989. Before
joining the Company, Dr. Oh worked at Samsung Electronics Co. as the
Technical/Managing Director of fiber optic products. Prior to that he worked at
ITT's Electro-Optical Products Division.
MS. ADAMS has been Vice President of Marketing since 1992. Ms. Adams worked
as Marketing Services Coordinator from 1984 to 1987 and Director of Marketing
from 1987 to 1992.
There are no family relationships among the directors, executive officers,
or other significant employees of the Company.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation paid by
the Company to the Chief Executive Officer and to all other executive officers
of the Company whose total salary and bonus exceeded $100,000 for the year ended
October 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------- ------
NAME AND FISCAL OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEARS SALARY($) BONUS($) COMPENSATION($) GRANTED(#) COMPENSATION ($)
- ------------------ ----- --------- -------- ---------------- ---------- ----------------
(2)
<S> <C> <C> <C> <C> <C> <C>
Robert Kopstein 1998 521,889 29,370 -- -- 17,373
Chairman, President and 1997 451,523 70,366 -- -- 12,667
Chief Executive Officer 1996 363,600 87,923 6,150,000 (1) -- 13,310
Luke J. Huybrechts 1998 102,700 57,730 -- -- 17,259
Senior Vice President of 1997 98,450 59,016 -- 10,000 15,354
Sales 1996 94,200 57,338 -- 40,000 9,934
Kenneth W. Harber 1998 96,800 58,084 -- 2,299 13,129
Vice President of 1997 93,300 59,332 -- 8,000 18,742
Finance, Treasurer and 1996 89,500 57,503 -- 40,000 9,488
Secretary
</TABLE>
----------
(1) Represents distributions to Mr. Kopstein primarily to pay his income
tax liability resulting from the Company's status as an S Corporation,
which status terminated March 31, 1996.
(2) These amounts are the Company's matching contributions to the Company's
401(k) retirement savings plan on behalf of the individual executive
officers.
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<PAGE>
STOCK OPTION GRANTS
No new stock options were granted to the executive officers named in the
Summary Compensation Table above during the fiscal year ended October 31, 1998.
However, prior stock option grants to participants in the Company's Stock Option
Plan have a "replacement" feature, whereby the participant automatically
receives a replacement option to purchase additional shares of the Company's
Common Stock equal to the number of shares surrendered, if any, to the Company
by the participant in payment of the exercise price with respect to stock
options exercised.
The following table sets forth certain information concerning such stock
options received by executive officers named in the Summary Compensation Table
above during the year ended October 31, 1998.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
POTENTIAL
NUMBER OF % OF TOTAL OPTIONS REALIZABLE VALUE AT ASSUMED
SHARES UNDERLYING GRANTED TO EMPLOYEES EXERCISE EXPIRATION ANNUAL RATES OF STOCK PRICE
NAME OPTIONS GRANTED IN FISCAL YEAR PRICE DATE APPRECIATION FOR OPTION TERM (3)
- ---- --------------- -------------- ----- ---- --------------------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. 2,299 (1) 100% $10.875(2) 2/28/2006 $26,252 $27,502
Harber
</TABLE>
- ----------
(1) Represents the number of replacement stock options automatically
granted to Mr. Harber upon the exercise of previously granted and
vested stock options to purchase 10,000 shares of Common Stock. The
replacement stock options are granted in accordance with the terms of
the "replacement" feature set forth in the prior stock option grant
agreement. The number of options is equal to the number of previously
owned shares of Common Stock which Mr. Harber surrendered to the
Company in payment of the exercise price of stock options exercised.
These replacement options vest on the same schedule set forth in the
original stock option grant which was made March 1, 1996. The
replacement options do not have a replacement feature.
(2) Exercise price is equal to the closing price of the Common Stock on
the date the options having the "replacement" feature were exercised.
(3) Amounts represent hypothetical gains that could be achieved if
exercised at end of the option term. The dollar amounts under these
columns assume 5% and 10% compounded annual appreciation in the Common
Stock from the date the respective options were granted. These
calculations and assumed realizable values are required to be
disclosed under Securities and Exchange Commission rules and,
therefore, are not intended to forecast possible future appreciation
of Common Stock or amounts that may be ultimately realized upon
exercise.
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<PAGE>
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning stock options
exercised during the fiscal year ended October 31, 1998 by executive officers
named in the Summary Compensation Table above and the value of unexercised
options held by such executive officers as of October 31, 1998.
<TABLE>
<CAPTION>
OPTIONS EXERCISED FISCAL YEAR-END OPTION VALUES
----------------- -----------------------------
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON EXERCISE (#) RECEIVED ($)(1) OPTIONS AT OCT. 31, 1998 AT OCT. 31, 1998 (2)
--------------- --------------- ------------------------ --------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- -------------------------
NAME
- ----
<S> <C> <C> <C> <C> <C> <C>
Luke J. Huybrechts 10,000 $99,380 -- 40,000 -- $306,270
Kenneth W. Harber 10,000 $83,750 575 39,724 -- $307,200
</TABLE>
- ----------
(1) Represents the difference between the exercise price of the outstanding
options and the closing price of the Common Stock on the date the option was
exercised.
(2) Represents the difference between the exercise price of the outstanding
options and the closing price of the Common Stock on October 31, 1998, which was
$12.313 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert Kopstein, the Chairman, Chief Executive Officer and President of the
Company, serves on the Compensation Committee of the Board of Directors.
EMPLOYMENT AGREEMENTS
Mr. Kopstein has an employment arrangement pursuant to which Mr. Kopstein
receives a base salary equal to one percent of the previous fiscal year's net
sales and an incentive bonus of one percent of any increase between the current
fiscal year's net sales and the prior fiscal year's net sales. The Company
calculates and pays Mr. Kopstein's incentive bonus on a monthly basis by
comparing of the prior month's net sales with the net sales for the
corresponding month in the prior fiscal year. Such calculations are not
cumulative; therefore, depending on monthly net sales fluctuations during any
given fiscal year, Mr. Kopstein might receive monthly incentive bonuses with
respect to net sales increases in certain months even though annual cumulative
net sales decreased when compared to the prior fiscal year. Compensation under
this arrangement amounted $551,259 during the period from November 1, 1997 to
October 31, 1998.
Mr. Kopstein's employment arrangement, in place since February 1, 1995, is
governed by employment agreements which generally expire after one year. Mr.
Kopstein and the Company entered into an employment agreement dated as of March
12, 1997 which expired October 31, 1998. Prior to the expiration of this
employment agreement, Mr. Kopstein and the Company entered into another
employment agreement, dated as of November 1, 1998, to
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<PAGE>
renew Mr. Kopstein's employment arrangement through October 31, 1999. All other
terms of the employment agreement dated as of November 1, 1998 are substantially
similar to the terms of the employment agreement dated March 12, 1997.
In addition to the compensation Mr. Kopstein receives under his employment
agreement, the Company makes matching contributions to the Company's 401(k)
retirement savings plan for the benefit of Mr. Kopstein. Such additional
compensation totaled $17,373 in fiscal 1998.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of a majority of independent, non-management directors. The members of
the Committee are Messrs. Kopstein, Frazier and Holland. The Committee has
responsibility for developing and implementing the Company's compensation policy
for senior management, and for determining the compensation for the executive
officers of the Company. The goal of the Committee is to achieve fair
compensation for the individuals and to enhance shareholder value by continuing
to closely align the financial rewards of management with those of the Company's
shareholders. The Company's stock incentive plan is administered by the Stock
Option Plan Subcommittee. The members of the Stock Option Plan Subcommittee are
Messrs. Frazier and Holland, who are both non-employee, independent directors.
Criteria for Compensation Levels
The Company seeks to attract and retain qualified executives and employees
who are creative, motivated and dedicated. The Committee attempts to create and
administer a compensation program to achieve that goal with consistency
throughout the Company. With respect to its executive officers, the Company
competes with other manufacturers and fiber optic related industries in North
America. The Committee is very much aware of the need to hire and retain highly
qualified executives in the specialized field of fiber optics.
Executive officer compensation is generally comprised of three components:
base salary, monthly and annual incentive bonus compensation and long-term
incentive stock options. Executive officers receive a greater percentage of
their total compensation in the form of incentive compensation.
In establishing the level of compensation for each executive officer,
including the Chief Executive Officer, the Committee considers many factors,
including, but not limited to, the executive officer's: contribution to the
advancement of corporate goals, impact on financial results, business
production, development of the management team, strategic accomplishments such
as development of new customers and products, geographical responsibilities,
product development and seniority. The Committee also considers the
competitiveness and fairness of the compensation. The amount of base
compensation, incentive bonuses, and long-term incentive compensation for each
executive officer is determined by the Committee using the subjective factors
set forth above. Salary and incentive compensation awards are reviewed
semiannually or as deemed appropriate.
12
<PAGE>
Base Salary
In determining the base salary of each executive officer, other than the
Chief Executive Officer, the Committee is guided by the recommendations of the
Chief Executive Officer. The base salary of the Chief Executive Officer for
fiscal 1998 was based on the terms of his employment agreement which expired on
October 31, 1998. A new employment agreement with substantially similar terms
has been entered into by the Chief Executive officer extending his employment
arrangement until October 31, 1999. Pursuant to the terms of the employment
agreements set forth above, Mr. Kopstein has received, and will receive, a base
salary equal to one percent of the previous fiscal year's net sales and
incentive bonuses as set forth below. Base compensation paid to Mr. Kopstein
under such employment agreement amounted to $521,889 and $451,523 for the fiscal
years ended October 31, 1998 and 1997, respectively.
The Committee believes the terms of the Chief Executive Officer's
employment agreement, providing for the payment a base salary as set forth above
and incentive bonuses as described more fully below, provide a level of
compensation commensurate with his talents, skills and responsibilities. Mr.
Kopstein's compensation reflects a subjective analysis by the Committee of the
criteria set forth under "Criteria for Compensation Levels" set forth above.
Additionally, the Committee has considered such factors as the Chief Executive
Officer's contribution to the development of the technologies used by the
Company and the fact his responsibilities include matters which typically would
be handled by a chief operating officer. The committee believes the formula used
to determine Mr. Kopstein's compensation pursuant to his employment agreement
encourages growth of the Company.
Incentive Bonuses
The incentive bonuses received by the Chief Executive Officer during fiscal
1998 were paid in connection with his employment agreement. Pursuant to the
terms of his employment agreement, Mr. Kopstein receives an incentive bonus
equal to one percent of any increase between the current fiscal year's net sales
and the prior fiscal year's net sales. The Company calculates and pays such
incentive bonus to Mr. Kopstein on a monthly basis by comparing the prior
month's net sales with the net sales for the corresponding month in the prior
fiscal year. Such calculations are not cumulative; therefore, depending on
monthly net sales fluctuations during any fiscal year, Mr. Kopstein might
receive monthly incentive bonuses with respect to net sales increases in certain
months even though annual cumulative net sales decreased when compared to the
prior fiscal year. Mr. Kopstein received incentive bonuses totaling $29,370 and
$70,306 for the fiscal years ended October 31, 1998 and 1997, respectively.
Each year the executive officers are eligible for discretionary bonuses
granted by the Committee. The amount of bonuses to be paid to such executive
officers is determined by the Committee using subjective factors discussed
above, and taking into account the amount of other compensation received by such
executive officer. Additionally, the executives officers, other than the Chief
Executive Officer, are also included in a monthly and lump-sum bonus plan which
is based on a percentage of the previous month's sales.
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<PAGE>
Long-Term Incentive Compensation
The Company adopted the Optical Cable Corporation 1996 Stock Incentive Plan
on March 1, 1996 (the "Plan"). All of the executive officers participate in the
Plan with the exception of the Chief Executive Officer. Additionally, many of
the Company's employees participate in the Plan. The Plan is administered by the
Stock Option Plan Subcommittee. All grants under the Plan are approved by either
the full Board of Directors or the Stock Option Plan Subcommittee, or both. The
Chief Executive Officer does not participate in the Plan because his large
holdings of the Company's Common Stock already properly align his interests with
those of the shareholders.
The Plan is intended to provide a means for key employees to increase their
personal financial interest in the Company, and stimulate efforts of those
employees and strengthen their desire to remain with the Company. The Company
has reserved 4,000,000 shares of Common Stock for issuance in connection with
incentive awards granted under the Plan. Under the Plan, qualified incentive
stock options are granted at not less than fair market value on the date of
grant; although nonstatutory stock options may be granted at not less than 85%
of fair market value on the date of grant. The options granted to date are
intended to be qualified incentive stock options.The options granted to date
vest 25 percent after two years, 50 percent after three years, 75 percent after
four years and 100 percent after five years.
The Stock Option Plan Subcommittee receives recommendations from the
Committee, including the Chief Executive Officer (who is also a member of the
Committee but does not receive compensation under the plan and does not vote on
grants pursuant to the plan) for each employee, and considers individual and
Company performance in awarding long-term compensation pursuant to the Plan. The
Committee anticipates that over the next few years, awards will generally be in
the form of qualified incentive stock options. The Committee believes that
awards of stock options, which reward Company stock price appreciation over the
long-term, are particularly appropriate in light of the nature of the Company's
business and long-term business plans.
Chief Executives Officer's Fiscal Year 1998 Compensation
As set forth in the Summary Compensation above, Mr. Kopstein's total
compensation for the fiscal year ended October 31, 1998 was $568,632. Such
annual compensation included a base salary of $521,889, pursuant to Mr.
Kopstein's employment agreement, incentive bonuses totaling of $29,370, and
matching contributions to the Company's 401(k) retirement savings plan for the
benefit of Mr. Kopstein totaling $17,373.
Compliance with Section 162(m) of the Internal Revenue Code
The Company is subject to Section 162(m) of the Internal Revenue Code,
which imposes a $1 million limit on the amount of compensation that may be
deducted by the Company for a taxable year with respect to each of the Chief
Executive Officer and the four most highly compensated executive officers of the
Company. Performance-based compensation (such as compensation pursuant to the
stock incentive plan), if it meets certain requirements, is not subject to the
deduction limit. The Committee has reviewed the impact of Section 162(m) on the
Company and believes that it is unlikely that the compensation paid to
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Mr. Kopstein or any of the other executive officers during the current fiscal
year will exceed the limit. Furthermore, the Plan is generally designed to
comply with the requirements of the performance-based compensation exception for
the $1 million limit. The Committee will continue to monitor the impact of the
Section 162(m) limit on the Company and to assess alternatives for avoiding any
loss of tax deductions.
The Compensation Committee:
---------------------------
Randall H. Frazier
John M. Holland
Robert Kopstein
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PERFORMANCE GRAPH
The following graph compares the cumulative total return based on share
price (assuming reinvestment of dividends) since April 2, 1996, the date on
which the Company's common stock began trading on the Nasdaq National Market, of
(i) the Company's common stock, (ii) the Nasdaq Market Index and (iii) a peer
group index comprised of the following companies: AFC Cable Systems, Andrew
Corporation, Belden, Inc., Cable Design Technologies, Inc., and Encore Wire
Corp.
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG OPTICAL CABLE CORPORATION THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------
4/2/96 10/96 10/97 10/98
------ ----- ----- -----
<S> <C> <C> <C> <C>
OPTICAL CABLE CORPORATION $100.00 $416.67 $331.25 $410.42
PEER GROUP 100.00 113.27 109.62 70.15
NASDAQ STOCK MARKET (U.S.) 100.00 109.72 114.41 161.94
</TABLE>
- ----------
* $100 INVESTED ON 4/2/98 IN STOCK OR INDEX INCLUDING REINVESTMENT OR
DIVIDENDS FISCAL YEAR ENDING OCTOBER 31.
16
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who own more than 10 percent of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10 percent shareholders are required by the regulation to furnish
the Company with copies of the Section 16(a) forms which they file.
Except as set forth below, to the Company's knowledge, based solely on
review of copies of such reports furnished to the Company, and written
representations that no other reports were required during the fiscal year ended
October 31, 1998, all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten percent beneficial owners
were complied with by such persons. Messrs. Huybrechts and Harber have each been
late in reporting, on one occasion, a stock option grant received pursuant to
the Company's stock incentive plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TAX INDEMNIFICATION AGREEMENT
Mr. Kopstein has entered into a Tax Indemnification Agreement with the
Company, pursuant to which he will indemnify the Company for any income tax
liability of the Company arising from its S Corporation status being denied for
any periods prior to its termination, but only to the extent such denial results
in a refund to Mr. Kopstein of personal income taxes paid with respect to such
periods.
OTHER MATTERS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting other than those referred to in this Proxy Statement. If any
other matters properly come before the Annual Meeting, it is the intention of
the persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
at the Company's 2000 Annual Meeting of Shareholders must be received by the
Company no later than October 15, 1999 in order that they may be included in the
proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year ended October 31,
1998 including the financial statements and notes thereto is being mailed to the
shareholders of record along with this Proxy Statement. The Annual Report is not
incorporated by reference in this Proxy Statement and is not considered to be
part of the proxy material.
INFORMATION INCORPORATED BY REFERENCE
The Company hereby incorporates herein by reference the Company's annual
report on Form 10-K for the fiscal year ended October 31, 1998, including the
financial statements and financial statement schedule attached as exhibits
thereto, previously filed with the U.S. Securities and Exchange Commission.
17
<PAGE>
FURTHER INFORMATION
The Company will provide without charge to each person from whom a proxy is
solicited by the Board of Directors, upon the written request of any such
person, a copy of the Company's annual report on Form 10-K, including the
financial statements and financial statement schedule attached as exhibits
thereto, required to be filed with the U.S. Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended, for the Company's
fiscal year ended October 31, 1998. Such written requests should be sent to the
Company at its principal executive offices, 5290 Concourse Drive, Roanoke,
Virginia 24019, attention Corporate Secretary.
Upon request, the Company will also furnish any other exhibit of the annual
report on Form 10-K upon advance payment of reasonable out-of-pocket expenses of
the Company related to the Company's furnishing of such exhibit. Requests for
copies of any exhibit should be directed to the Company at its principal
executive offices, 5290 Concourse Drive, Roanoke, Virginia 24019, attention
Corporate Secretary.
By Order of the Board of Directors
/s/ Kenneth W. Harber
Kenneth W. Harber
Secretary
Date: February 12, 1999
18
EXHIBIT 99
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF OPTICAL CABLE
CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 9, 1999
The undersigned appoints Luke J. Huybrechts and Kenneth W. Harber, or
either of them, with full power of substitution, to attend the Annual Meeting of
Stockholders of Optical Cable Corporation on March 9, 1999, and at any
adjournments thereof, and to vote all shares which the undersigned would be
entitled to vote if personally present upon the following matters set forth in
the Notice of Annual Meeting and Proxy Statement.
1. Election of Directors
[ ] FOR the FIVE nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary for the FIVE nominees
below) listed below
Robert Kopstein, Luke J. Huybrechts, Kenneth W. Harber, Randall H.
Frazier, and John M. Holland
INSTRUCTION: To withhold authority for any individual nominee, write that
nominee's name in the space provided below:
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2. To ratify the appointment of KPMG LLP as independent accountants for the
Company for fiscal year 1999;
[ ] FOR this proposal [ ] AGAINST this proposal [ ] ABSTAIN
and
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3. In their discretion, upon such other business as may properly come before the
meeting and any adjournments thereof.
PLEASE DATE, SIGN, AND RETURN PROXY
PROMPTLY. Receipt of Notice of Annual
Meeting and Proxy Statement is hereby
acknowledged
------------------------------------------
Shareholder's signature
------------------------------------------
Joint Holder's Signature (If applicable)
Date: ____________________________________
When properly executed, this proxy will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR the election of the
nominees of the Board of Directors in the election of directors, FOR proposal 2.
above, and in accordance with the judgment of the person(s) voting the proxy
upon such other matters properly coming before the meeting and any adjournments
thereof. Please sign exactly as name(s) appear above.
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