SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No 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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) 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:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
OPTICAL CABLE CORPORATION
5290 CONCOURSE DRIVE
ROANOKE, VIRGINIA 24019
February 14, 2001
Dear Shareholder:
You are cordially invited to attend Optical Cable Corporation's (the
"Company") Annual Meeting of Shareholders to be held on March 13, 2001, 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,
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.
- --------------------------------------------------------------------------------
OPTICAL CABLE CORPORATION
Notice of Annual Meeting of Shareholders
March 13, 2001
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 13, 2001 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 2001; 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 26,
2001 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
Kenneth W. Harber
Secretary
Roanoke, Virginia
February 14, 2001
OPTICAL CABLE CORPORATION
5290 CONCOURSE DRIVE
ROANOKE, VIRGINIA 24019
PROXY STATEMENT
TO BE MAILED ON OR ABOUT FEBRUARY 14, 2001
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 13, 2001
Proxy Solicitation
This Proxy Statement is furnished to the holders of common stock, no
par value ("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 13, 2001, 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 14, 2001 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.
Record Date and Voting Rights
Only shareholders of record at the close of business on January 26,
2001 are entitled to notice of and to vote at the Annual Meeting. As of the
record date, 56,392,168 shares of Common Stock were issued and outstanding.
Please note that on September 28, 2000, the Company effected a 3-for-2 stock
split of its Common Stock in the form of stock dividend. 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.
Expansion of the Board
In accordance with the Bylaws of the Company, the Board of Directors
currently intends to increase the number of directors from five to seven prior
to June 14, 2001, in part because Nasdaq rules and regulations require the
Company to add a third independent director to the Audit Committee of the Board
of Directors by that date. Therefore, the Company is currently in the process of
finding a qualified person to add to the Audit Committee. Once this person is
identified, the Board of Directors will take action to expand its size and elect
the person to fill the resulting vacancy. At the same time, the Company
currently intends to add another member of its management to the Board of
Directors.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board has nominated five persons for election as directors 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:
Nominee Age Director Since Office Held with Company
- ------- --- -------------- ------------------------
Robert Kopstein.................... 51 1983 Chairman of the Board,
President, Chief Executive
Officer and Director
Luke J. Huybrechts................. 55 1995 Senior Vice President of Sales
and Director
Kenneth W. Harber.................. 50 1995 Vice President of Finance,
Treasurer, Secretary and
Director
Randall H. Frazier................. 50 1996 Director
John M. Holland.................... 55 1996 Director
2
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.
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 Directors or any of its committees.
Management directors do not receive 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, 2000. 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. 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.
3
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 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.
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 2001. 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 2001.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of January 26, 2001
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 and nominee of the Company, (iii) each executive officer of the Company
named in the Summary Compensation Table (see "Executive Compensation") and (iv)
all executive officers and directors and nominees 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.
Name and Address Number of Shares Percent of Class
---------------- ---------------- ----------------
Robert Kopstein............................................... 54,000,000 95.8%
Luke J. Huybrechts............................................ 6,750(1) *
Kenneth W. Harber............................................. 38,945(2) *
Randall H. Frazier............................................ -- --
John M. Holland............................................... -- --
All directors and executive officers as a group (5 persons)... 54,045,695 95.8%
- -------------------------
* Less than 1%
(1) Includes 3,750 shares that Mr. Huybrechts may acquire through the
exercise of stock options.
(2) Includes 38,586 shares that Mr. Harber may acquire through the exercise
of stock options.
4
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.
Other Significant Employees
The following table contains information as to certain other
significant employees of the Company.
Name Age Office Held with Company
---- --- ------------------------
Ted Leonard................................ 48 Vice President of Sales, Western Region
James Enochs............................... 40 Vice President of Sales, Southeastern Region
Paul Oh.................................... 58 Vice President of Sales, Far East
Susan Adams................................ 40 Vice President of Marketing
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.
5
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 $100,000 for the
year ended October 31, 2000.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
All Other
Name and Fiscal Other Annual Options Compensation
Principal Position Years Salary($) Bonus($) Compensation ($) Granted (#) ($) (1)
- ----------------------------------- --------- ------------- ------------ -------------------- --------------- -----------------
Robert Kopstein 2000 506,988 79,993 -- -- 12,188
Chairman, President and 1999 505,889 34,108 -- -- 13,567
Chief Executive Officer 1998 521,889 29,370 -- -- 17,373
Luke J. Huybrechts 2000 108,172 82,673 -- -- 14,845
Senior Vice President of 1999 105,182 64,870 -- 1,500(2) 13,948
Sales 1998 102,700 57,730 -- -- 17,259
Kenneth W. Harber 2000 102,118 83,158 -- -- 14,213
Vice President of 1999 99,069 65,357 -- -- 13,296
Finance, Treasurer and 1998 96,800 58,084 -- 3,446(2) 13,129
Secretary
- -----------------
(1) These amounts are the Company's matching contributions to the
Company's 401(k) retirement savings plan on behalf of the individual
executive officers.
(2) Represents the number of "replacement" stock options granted during
the fiscal year indicated, as described below.
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,
2000. Stock option grants to participants in the Company's Stock Option Plan,
however, generally 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.
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, 2000 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, 2000.
6
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Value of
Shares Underlying Unexercised Unexercised
Acquired on Value Options at fiscal In-the-money Options
Name Exercise (#) Realized (1) Year-end (#) at October 31, 2000 (2)
- ---- ------------ ------------ --------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
--------------------------- ---------------------------
Luke J. Huybrechts 16,125 $ 507,668 3,750 19,125 $ 31,941 $ 245,095
Kenneth W. Harber 0 0 38,586 21,862 $ 501,596 $ 272,606
- ----------------------
(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, 2000, which was $15.9375 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 a sales commission or 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 the prior month's net sales with the net sales for
the corresponding month in the prior fiscal year. Such calculations are not
cumulative, so, 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 to $586,981 during the period from November 1, 1999 to
October 31, 2000.
Mr. Kopstein's employment arrangement, in place since February 1, 1995,
is governed by employment agreements that generally expire after one year. Mr.
Kopstein and the Company had entered into an employment agreement dated as of
November 1, 1999, which expired October 31, 2000. Prior to the expiration of
this employment agreement, Mr. Kopstein and the Company entered into another
employment agreement, dated as of November 1, 2000, to renew Mr. Kopstein's
employment arrangement through October 31, 2001. Pursuant to the terms of his
employment agreement dated as of November 1, 2000, which are substantially
similar to those of his prior employment agreements, he is employed by the
Company as President and Chief Executive Officer under the following terms. As
described above, he has a monthly salary equal to one percent of net sales for
fiscal year 2000 and is also paid a sales commission monthly of one percent of
the positive difference between the net sales of fiscal year 2001 and fiscal
year 2000, based on the corresponding period of employment. He also agrees not
to compete with the Company within 12 months of the termination of his
employment. He receives such other benefits as are provided comparable
employees.
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 $12,188 in fiscal 2000.
7
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is composed of a
majority of independent, non-management directors. The members of the
Compensation 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 Compensation 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 of the Compensation Committee. 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 Compensation 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 and 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 Compensation Committee using the
subjective factors set forth above. Salary and incentive compensation awards are
reviewed semi-annually or as deemed appropriate.
Base Salary
In determining the base salary of each executive officer, other than
the Chief Executive Officer, the Compensation Committee is guided by the
recommendations of the Chief Executive Officer. The base salary of the Chief
Executive Officer for fiscal 2000 was based on the terms of his employment
agreement that expired on October 31, 2000. A new employment agreement with
substantially similar terms has been entered into by the Chief Executive Officer
extending his employment arrangement until October 31, 2001. Pursuant to the
terms of his employment agreement, as described above, Mr. Kopstein receives a
base salary equal to one percent of the previous fiscal year's net sales. Mr.
Kopstein received a base salary of $506,988 for the fiscal year ended October
31, 2000.
Incentive Bonuses
The sales commissions or incentive bonuses received by the Chief
Executive Officer during fiscal 2000 were paid pursuant to the terms of an
employment agreement, as described above, under which he received 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, so, 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
8
though annual cumulative net sales decreased when compared to the prior fiscal
year. Mr. Kopstein received incentive bonuses totaling $79,993 for the fiscal
year ended October 31, 2000.
Each year the executive officers are eligible for discretionary bonuses
granted by the Compensation Committee. The amount of bonuses to be paid to such
executive officers is determined by the Compensation Committee using subjective
factors discussed above, and taking into account the amount of other
compensation received by such executive officer. Additionally, the executive
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.
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 except 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 the full Board of
Directors. 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 6,000,000 shares of Common Stock for issuance in connection with
incentive awards granted under the Plan. (The Stock Option Plan Subcommittee
increased the number of shares reserved under the Plan from 4,000,000 shares as
a result of the 3-for-2 stock split mentioned above.) Under the Plan, qualified
incentive stock options are granted at not less than fair market value on the
date of grant. The options 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
Compensation Committee, including the Chief Executive Officer (who is also a
member of the Compensation 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.
Compensation of Chief Executive Officer
The Committee believes the terms of the Chief Executive Officer's
employment agreement, as described above, provide a level of compensation
commensurate with his talents, skills and responsibilities. Mr. Kopstein's
compensation reflects a subjective analysis by the Compensation Committee of the
criteria set forth under "Criteria for Compensation Levels" set forth above.
Additionally, the Compensation 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 that
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 the growth of the Company.
As set forth in the Summary Compensation above, Mr. Kopstein's total
compensation for the fiscal year ended October 31, 2000 was $599,169. Such
annual compensation included a base salary of $506,988, pursuant to Mr.
Kopstein's employment agreement, a discretionary bonus of $79,993, and matching
contributions to the Company's 401(k) retirement savings plan for the benefit of
Mr. Kopstein totaling $12,188.
9
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 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.
Randall H. Frazier, Compensation Committee Member
John M. Holland, Compensation Committee Member
Robert Kopstein, Compensation Committee Member
Report of the Audit Committee
The Audit Committee of the Board of Directors of the Company is
composed of two independent directors and operates under a written charter
adopted by the Board of Directors, which is attached hereto as Exhibit A.
Management is responsible for the Company's internal controls and the
financial reporting process. The Company's independent accountants, KPMG LLP,
are responsible for performing an independent audit of the Company's financial
statements in accordance with auditing standards generally accepted in the
United States of America and the issuance of a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the Audit
Committee that the Company's financial statements were prepared in accordance
with accounting principles generally accepted in the United States of America,
and the Audit Committee has reviewed and discussed the audited financial
statements with management and the independent accountants. The Audit Committee
discussed with the independent accountants matters required to be discussed by
Statement on Auditing Standards No. 61, "Communication with Audit Committees,"
which includes, among other things:
o methods used to account for significant unusual
transactions;
o the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of
authoritative guidance or consensus;
o the process used by management in formulating particularly
sensitive accounting estimates and the basis for the
auditors' conclusions regarding the reasonableness of these
estimates; and
o disagreements with management over the application of
accounting principles, the basis for management's accounting
estimates, and the disclosures in the financial statements.
The independent accountants also provided to the Audit Committee the
written disclosures required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Audit Committee
discussed with the independent accountants that firm's independence from the
Company and its management.
10
Based on the Audit Committee's discussion with management and the
independent accountants and the Audit Committee's review of the representation
of management regarding the audited financial statements and of the report of
the independent accountants to the Audit Committee, the Audit Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 2000, for filing with the Securities
and Exchange Commission.
Randall H. Frazier, Audit Committee Member
John M. Holland, Audit Committee Member
Fees Billed by Independent Public Accountants
The following table sets forth the amount of audit fees, financial
information systems design and implementation fees, and all other fees billed or
expected to be billed by KPMG LLP, the Company's principal accountant, for the
year ended October 31, 2000:
Amount
--------------
Audit Fees (1) $ 151,900
Financial Information Systems Design and
Implementation Fees (2) ---
All Other Fees (3) 46,810
--------------
Total Fees $ 198, 710
==============
- -------------------
(1) Includes annual financial statement audit and limited quarterly review
services.
(2) No such services were provided by KPMG LLP for the most recent fiscal
year.
(3) Primarily represents income tax services other than those directly
related to the audit of the income tax accrual.
The Audit Committee of the Board of Directors of the Company has
considered whether the provision of financial information systems design and
implementation and other non-audit services is compatible with maintaining KPMG
LLP's independence.
11
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 Stock Market Index and (iii) a
peer group index composed of the following companies: AFC Cable Systems, Andrew
Corporation, Belden, Inc., Cable Design Technologies, Inc., and Encore Wire
Corp.
[PERFORMANCE GRAPH]
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN*
AMONG OPTICAL CABLE CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP
Cumulative Total Return
------------------------------------------------
4/2/96 10/96 10/97 10/98 10/99 10/00
------ ----- ----- ----- ----- -----
OPTICAL CABLE CORPORATION 100.00 416.69 331.27 410.44 412.52 796.88
NASDAQ STOCK MARKET (U.S.) 100.00 109.73 144.38 161.53 273.05 309.23
PEER GROUP 100.00 111.85 104.76 65.15 60.46 108.64
*$100 INVESTED ON 4/2/96 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING OCTOBER 31.
12
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, 2000, 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 2002 Annual Meeting of Shareholders must be received
by the Company no later than October 15, 2001 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, 2000 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.
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, 2000. Such written requests should be sent to the
Company at its principal executive offices, 5290 Concourse Drive, Roanoke,
Virginia 24019, attention Kenneth W. Harber, Corporate Secretary.
13
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 Kenneth W. Harber, Corporate Secretary.
By Order of the Board of Directors
Kenneth W. Harber
Secretary
Date: February 14, 2001
14
Exhibit A
OPTICAL CABLE CORPORATION
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:
o Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting and legal
compliance.
o Monitor the independence and performance of the Company's independent
auditors.
o Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
o Encourage adherence to and continuous improvements to the Company's
policies, procedures and practices at all levels.
o Review areas of potential significant financial risk to the Company.
o Monitor compliance with legal and regulatory requirements.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors, as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the NASDAQ Exchange. The
Audit Committee shall be comprised of two or more directors as determined by the
Board, each of whom shall be independent nonexecutive directors, free from any
relationship that would interfere with the exercise of his or her independent
judgment. All members of the Committee shall have a basic understanding of
finance and accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise.
The Committee shall meet at least annually, or more frequently as circumstances
dictate. The Audit Committee Chair shall prepare and/or approve an agenda in
advance of each meeting. The Committee should meet privately in executive
session at least annually with management and the independent auditors and as a
committee to discuss any matters that the Committee or each of these groups
believe should be discussed. In addition, the Committee, or at least its Chair,
should communicate with management and the independent auditors quarterly to
review the Company's interim financial statements and significant findings based
upon the auditors' limited quarterly review procedures.
A-1
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
- -----------------
1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
rules and regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices and judgments.
3. In consultation with management and the independent auditors, consider
the integrity of the Company's financial reporting processes and
controls. Discuss significant risk exposures and the steps management
has taken to monitor, control and report such exposures. Review
significant findings prepared by the independent auditors, together
with management's responses.
4. Review with financial management and the independent auditors the
Company 's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9). The Chair
of the Committee may represent the entire Audit Committee for purposes
of this review, or the quarterly review may be accomplished by
conference call with the entire audit committee.
Independent Auditors
- --------------------
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence and performance of the auditors and annually recommend
to the Board of Directors the appointment of the independent auditors
or approve any discharge of auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors. Review and approve requests for significant
management consulting engagements to be performed by the independent
auditors firm and be advised of any other significant study undertaken
at the request of management that is beyond the scope of the audit
engagement letter.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors audit plan-discuss scope, staffing,
locations, reliance upon management and general audit approach. The
Audit Committee should review the independent auditors' audit plan to
see that it is sufficiently detailed and covers any significant areas
of concern that the Audit Committee may have.
9. Prior to filing the annual report on Form 10-K, discuss the results of
the audit with the independent auditors. Discuss certain matters
required to be communicated to audit committees in accordance with
AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
A-2
Legal Compliance
- ----------------
11. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, inquiries reviewed from regulators or
governmental agencies.
Other Audit Committee Responsibilities
- --------------------------------------
12. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's
annual proxy statement.
13. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
A-3
(PROXY CARD)
OPTIONAL CABLE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF OPTICAL CABLE
CORPORATION FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MARCH 13, 2001.
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
Shareholders of Optical Cable Corporation on March 13, 2001, 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
(except as marked to the contrary below) vote for the FIVE
nominees listed below
Nominees: Robert Kopstein, Luke J. Huybrechts, Kenneth W. Harber,
Randall H. Frazier, John M. Holland
(INSTRUCTION: To withhold authority for any individual nominee, write that
nominee's name in the space provided below)
2. To ratify the appointment of KPMG LLP as independent accountants for the
Company for fiscal year 2001;
|_| FOR this proposal |_| AGAINST this proposal |_| ABSTAIN
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.