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
OPTELECOM
(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:
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1998
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of OPTELECOM, Inc. (the "Company")
will be held Monday, May 4, 1998 at 1:30 PM local time at the Company's offices
at 9300 Gaither Road, Gaithersburg, Maryland 20877 or at any adjournment
thereof, for the following purposes:
1. to elect one director for a three-year term.
2. to approve an amendment to the Certificate of Incorporation to
increase the authorized capital stock from 5,000,000 shares to
15,000,000 shares
3. to approve an amendment to the 1996 Directors Stock Option
Plan to increase the number of shares which may be issued upon
exercise of options from 75,000 shares to 200,000 shares
4. to transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on March 23, 1998
will be entitled to notice of, and to vote at, the meeting. A list of
stockholders as of such record date can be inspected by any stockholder for any
purpose germane to the meeting during the ten days preceding the meeting. Any
such inspection must be made at the Company's offices during normal business
hours.
By Order of the Board of Directors
Gaithersburg, Maryland HOWARD E. DEUTCH
March 28, 1998 Secretary
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YOUR ATTENTION IS DIRECTED TO THE PROXY STATEMENT ACCOMPANYING
THIS NOTICE. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE WHICH WILL
REQUIRE NO POSTAGE IF MAILED IN THE UNITED STATES.
------------------------------------------------------------------------
OPTELECOM, INC.
9300 GAITHER ROAD
GAITHERSBURG, MD 20877
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1998
GENERAL
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of OPTELECOM, INC. (the "Company") of
proxies to be voted at an Annual Meeting of Stockholders. In addition to
solicitation of proxies by use of the mails, proxies may be solicited by the
officers and regular employees of the Company, without additional remuneration,
by telephone, facsimile, telegraph, cable or personal interview. The Company
will bear all costs of solicitation. The Company will also request brokerage
houses, nominees, custodians, and fiduciaries to forward proxy material to the
beneficial owners of shares held of record by them and reimburse their expenses.
The approximate date on which this Proxy Statement and accompanying
Proxy will first be sent or given to stockholders is March 28, 1998.
TIME AND PLACE OF MEETING
The Annual Meeting of Stockholders will be held at the Company's
offices at 9300 Gaither Road, Gaithersburg, Maryland 20877, on May 4, 1998 at
1:30 PM local time.
VOTING AND REVOCATION OF PROXIES
All shares of Common Stock, $0.03 par value (the "Common Stock")
represented by effective proxies will be voted at the meeting or any adjournment
thereof in accordance with the instructions indicated thereon. In the absence of
instructions, shares represented by such proxies will be voted in favor of all
proposals. With respect to any other matter that may properly come before the
meeting or any adjournment thereof, proxies will be voted at the discretion of
the Board of Directors. The Board of Directors is not aware of any such other
matters.
The holders of 33-1/3% of the stock issued and outstanding and entitled
to vote, present in person or represented by proxy, shall constitute a quorum.
(See Securities Entitled to Vote and Record Date for the number of shares
outstanding and entitled to vote). The Board of Directors reserves the right to
adjourn the Annual Meeting of Stockholders if a quorum is not obtained by the
date set for the meeting, if a sufficient number of votes in favor of any
proposal described in this Proxy Statement is not obtained by that date, or if
the Board of Directors deems adjournment to be desirable for any other reason.
At any subsequent reconvening of the meeting, the Board of Directors may cause
the proxies solicited hereby to be voted in the same manner as they were voted
or could have been voted at the original meeting, except that any proxies
effectively revoked prior to the reconvening of the meeting shall not be voted.
Any stockholder who executes and delivers a proxy may revoke it at any
time prior to its use either in person at the meeting or by sending written
notice of such revocation (or a later-dated proxy) to the Company.
1
SECURITIES ENTITLED TO VOTE AND RECORD DATE
The Board of Directors has fixed the close of business on March 23,
1998 as the date for determining stockholders entitled to receive notice of, and
to vote at, the Annual Meeting. On that date, after giving effect to both
pre-dividend and post-dividend shares, the Company had the equivalent of
approximately 2,032,617 shares of post-split Common Stock outstanding.
Stockholders will be entitled to one vote on each proposal for each share held
of record on such record date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of December 31, 1997, the name and
address of each person (other than directors of the Company) who is known by the
Company to be the beneficial owner of more than 5% of the Company's outstanding
Common Stock, the number of shares Common Stock so owned beneficially owned by
each such person, and the percentage of the Company's outstanding.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------------- -------------------- --------
Kennedy Capital Management, Inc. 120,024(a) 5.90%
10829 Olive Boulevard
St. Louis, MO 63141-7739
Andrew Sean Brown 40,668(a) 2.00%
42 Ashman Way, Thatcham
Berkshire RG19 4DW
Managing Director of Paragon Audio Visual Limited
("Paragon")
United Kingdom
Darren Neil Brown 40,668(a) 2.00%
12 Herons Way, Thatcham
Berkshire RG19 3SR
Operations Director of Paragon
United Kingdom
Mark David Brown 40,668(1)(a) 2.00%
Waverly, Long Lane, Hermitage
Newbury, Berkshire RG18 9QT
Sales Director of Paragon
United Kingdom
David Arthur Brown 40,668(1)(a) 2.00%
Waverly, Long Lane, Hermitage
Newbury, Berkshire RG18 9QT
Chairman and Marketing Director of Paragon
United Kingdom
Adventatum Jersey Limited (a company formed under 89,916(a) 4.42%
the laws of Jersey), Wellington House, Union
Street, St. Helier, Jersey. Mark David Brown,
David Arthur Brown and Modelege Limited are the
beneficial owners of the Shares owned of record by
Adventatum Jersey Limited.
Modelege Limited (a company formed under the laws 8,580(1)(a) .42%
of England), 64 Queen Street, London, England.
- - ---------------------
(1) These shares are owned by record by Adventatum Jersey Limited.
(a) Sole power to dispose or direct the disposition of these shares.
2
PROPOSAL 1
Directors are divided into three classes. One class of directors is
elected each year to serve for a term of three years and until successors are
duly qualified.
Dr. William H. Culver's term as a director of the Company will expire
at the Annual Meeting of Stockholders. Since the Certificate of Incorporation of
the Company requires that "the Board of Directors shall be divided into three
classes, as nearly equal in number as the then total number of directors
constituting the Whole Board permits," Edmund D. Ludwig shall, if elected, serve
for a term of three years to expire at the Annual Meeting of Stockholders in
2001 and until his successor is elected.
The nominee has indicated that he is willing and able to serve as
director if elected. If the nominee should become unable or unwilling to serve,
it is the intention of the persons designated as proxies to vote instead, at
their discretion, for such other person as may be designated as nominee by the
management of the Company.
Set forth in the table below is certain information regarding the
nominee and each person whose term of office will continue after the meeting.
Except as set forth therein, to the knowledge of the company, no person owns of
record or beneficially more than five percent of the Company's Common Stock.
PRESENT YEAR IN SHARES OF
TERM WHICH COMMON STOCK
EXPIRES AT SERVICE AS A OWNED APPROX
NAME, AGE, POSITION WITH THE COMPANY AND ANNUAL DIRECTOR BENEFICIALLY* ON PERCENT OF
PRINCIPAL OCCUPATION DURING LAST 5 YEARS MEETING IN BEGAN FEB. 20, 1998 CLASS
- - ---------------------------------------- ---------- ------------- ---------------- ----------
Alexander L. Karpinski, 66 - President of Alex 2000 1996 15,750(1) **
International, Inc. since April, 1985; Project
Manager for Teleconsult from April, 1992 to June, 1995.
Calvin T. Mathews, 53 - CFO, Crown Laboratories 2000 1997 9,000(1) **
since April, 1997; Director-Mergers and
Acquisitions of FundMinder, Inc. from October,
1995 to April, 1997; CEO of Schabacker Investment
Management, Inc. from November, 1992 to October,
1995.
Edmund D. Ludwig, 57- President and Chief Executive 1999 1980 153,465(1)(2) 7.55%
Officer of the Company since January 1991.
Gordon A. Smith, 63 Vice President, Eastern Region 1999 1995 21,525(1) 1.06%
of Vanguard Research, Inc. from June 1995 to
present; President and CEO of Datatape, Inc. from
August, 1990 to September 1994.
------------- -----
All directors and officers as a group (4 persons) 199,740(1)(2) 9.83%
* For purposes of this proxy statement, "beneficial ownership" of a security
exists when a person directly or indirectly has or shares "investment power",
which includes the power to dispose or direct the disposition of such
security, or "voting power", which includes the power to vote or direct
the voting of such security.
** Less than 1%
(1) Includes shares of common stock which were subject to options entitling
the holder to acquire the shares subject thereto within 60 days. As of
February 20, 1998, Mr. Karpinski, Mr. Mathews, Mr. Ludwig and Dr. Smith
held such options for the purchase of 15,750, 9,000, 70,500 and 21,525
shares respectively.
(2) Includes 24,990 shares held in trust by the Company for Mr. Ludwig and
23,693 shares which Mr. Ludwig owns jointly with his wife, Mrs. Roberta
Ludwig.
3
REQUIRED STOCKHOLDER VOTE
The affirmative vote of the holders of a majority of the outstanding
Common Stock represented at the meeting is required to elect directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 2
AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
The Company's Certificate of Incorporation presently authorizes the
issuance of a total of 5,000,000 shares of Common Stock, par value $.03 per
share. Of such 5,000,000 presently authorized shares of Common Stock, 2,032,617
shares were issued and outstanding as of February 20, 1998. In addition, an
aggregate of 911,322 shares of Common Stock has been reserved for issuance as of
February 20, 1998, as summarized in the following table:
Shares of Common Stock Reserved for Number of Shares Reserved
----------------------------------- -------------------------
Common Stock Options
1991 Stock Option Plan 755,547
1993 Directors Stock Option Plan 2,025
1996 Directors Stock Option Plan 63,750
Stock Grant Plan 90,000
After giving effect to all shares reserved for issuance, the Company
does not have sufficient uncommitted shares for use in future transactions
involving the issuance of shares of the Company's Common Stock.
The Board of Directors has adopted a proposed amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 5,000,000 to 15,000,000.
The additional stock, if so authorized, could be issued at the
discretion of the Board of Directors without any further action by the
stockholders, except as required by applicable law or regulation, in connection
with acquisitions, efforts to raise additional capital for the Company, and
other corporate purposes. Shares of the Stock will be issued only upon a
determination by the Board of Directors that a proposed issuance is in the best
interests of the Company.
The Company currently has no plans or commitments that would involve
the issuance of additional shares of Common Stock other than those reserved for
issuance under the stock option plans and the stock grant plan. However,
specific objectives of the Company include increasing the marketability and
liquidity of its Common Stock and reducing its price volatility. Management
believes that a program to increase the number of shares outstanding would
encourage and facilitate trades and would establish a more liquid market,
resulting in wider distribution of the Common Stock. Additionally, with the
limited number of shares currently available, institutional investors either may
not be attracted to, or may not be legally permitted to, establish an equity
position in the Company. Attracting institutional investors could provide the
benefit of underlying support for the market price of the stock, decreasing
potential price volatility. Of the 2,032,617 shares of Common Stock issued and
outstanding at February 20, 1998, 171,252 shares were issued in connection with
the Company's acquisition of Paragon Audio Visual Limited. The Company believes
that the acquisition of Paragon is a positive step toward achieving its goal of
significant growth, because the nature and extent of the geographic location of
Paragon in Europe and its compatible product lines will enable the two companies
to take advantage of the specific strengths of each of the organizations. The
Company believes that other synergistic acquisitions are available to it.
The increase in authorized shares will allow the Board of Directors of
the Company to consider and, if in the best interest of the stockholders, take
advantage of any such acquisition possibilities. The Company is continuously
examining its ability to capitalize on new or enhanced technologies in
development that represent potential substantial business opportunities. When
such an opportunity is clearly recognized, an adequate number of shares must be
available to raise capital for funding corporate development of the business
infrastructure. An increase in the authorized number of shares will allow the
Directors to proceed with such funding efforts. In
4
addition, the flexibility vested in the Company's Board of Directors to
authorize the issuance and sale of authorized but unissued shares of Common
Stock could enhance the Board's bargaining capability on behalf of the Company's
stockholders in a takeover situation and could, under some circumstances, be
used to render more difficult or discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities, or the removal of incumbent management, even if such a transaction
were favored by the holders of the requisite number of the then outstanding
shares. Accordingly, stockholders of the Company might be deprived of an
opportunity to consider a takeover proposal which a third party might consider
if the Company did not have authorized but unissued shares of Common Stock.
The Company has in place certain provisions which have an anti-takeover
effect. The Company's Certificate of Incorporation includes provisions which
provide, among other things (i) for a classified Board of Directors, (ii) that
certain business combinations, sales, stock issuances, etc. involving the
Company and a stockholder who, together with its affiliates, is (or at any time
within the previous 3 years has been) the beneficial owner of more than 15% of
the Company's capital stock ("Substantial Stockholder") or any reclassification
of securities or recapitalization of the Company or any reorganization, merger
or consolidation of the Company, with any of its subsidiaries or any similar
transaction which has the effect of increasing the proportionate share of the
outstanding securities of the Company or any subsidiary which is beneficially
owned by any Substantial Stockholder, must (except as otherwise expressly
provided in the Certificate of Incorporation) be approved by holders of at least
66 2/3% of the outstanding shares of the Company's Common Stock, excluding
shares beneficially owned by the interested Substantial Stockholder, and (iii)
that directors may be removed only for cause and upon the affirmative vote of
the holders of at least 66 2/3% of the outstanding shares of the Company's
Common Stock entitled to vote generally in the election of directors at a
meeting of the stockholders called for that purpose.
This proposal is not the result of management's knowledge of any
specific effort to accumulate the Company's securities or to obtain control of
the Company by means of a merger, tender offer, proxy solicitation in opposition
to management or otherwise, The Company is not submitting this proposal to
enable it to frustrate any efforts by another party to acquire a controlling
interest or to seek Board representation.
The submission of this proposal is not a part of any plan by the
Company's management to adopt a series of amendments to the Certificate of
Incorporation or By-laws so as to render the takeover of the Company more
difficult. Except as indicated above, management is not aware of the existence
of any other provisions in its Certificate of Incorporation having an
anti-takeover effect.
Accordingly, the Board of Directors has proposed that Article FOURTH of
the Company's Certificate of Incorporation be amended to increase its authorized
capital stock. As so amended, this provision of the Certificate of Incorporation
would read as set forth below.
The Board of Directors recommends a Vote FOR the proposed amendment to
the Certificate of Incorporation. An affirmative vote by holders of a majority
of the outstanding shares of Common Stock entitled to vote at the Annual Meeting
is required to approve the Amendment.
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The proposed amendment to the first sentence of Article FOURTH of the
Company's Certificate of Incorporation that would be effected if this proposal
is approved by Stockholders at the Meeting are in italicized type and the
proposed deletions are indicated by overstriking.
FOURTH. The total number of shares of all stock which the Corporation
shall be authorized to issued is FIFTEEN million (15,000,000) shares of Common
Stock, $.03 par value per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF THE
PROPOSED AMENDMENT.
5
PROPOSAL 3
PROPOSAL TO APPROVED AN AMENDMENT TO THE 1996 DIRECTORS STOCK OPTION PLAN
BACKGROUND
At the Annual Meeting, the stockholders will be asked to approve an
amendment to the Optelecom, Inc. 1996 Director's Stock Option Plan. This
amendment was adopted by the Board of Directors, subject to stockholder
approval, on May 4, 1998. The Optelecom, Inc. 1996 Director's Stock Option Plan
as proposed to be amended is hereinafter referred to as the "1996 Plan".
Proposed Amendment to the 1996 Plan
The proposed amendment to the 1996 Plan authorizes an increase in the
number of shares of Common Stock which may be issued upon exercise of options
granted or to be granted under the 1996 Plan by 125,000 shares of Common Stock,
from 75,000 shares (after the 1997 stock dividend) to 200,000 shares of Common
Stock in the aggregate.
DESCRIPTION OF THE 1996 PLAN
The full text of the 1996 Plan is set forth as Exhibit A hereto. The
proposed amendments to the 1996 Plan are in italicized type and the proposed
deletions are indicated by overstriking.
FEDERAL INCOME TAX CONSEQUENCES
All options granted under the 1996 Plan are non-incentive stock
options. In general, with respect to non-incentive stock options: (i) no income
is recognized to the optionee at the time the option is granted, (ii) upon
exercise of the option, the optionee recognizes ordinary income in an amount
equal to the difference between the exercise price and the fair market value of
the shares on the date of exercise, and (iii) at disposition of the shares, any
appreciation after the date of exercise is treated as long-term or short-term
capital gain, depending on whether the shares are held for more than one year by
the optionee.
Notwithstanding the foregoing, if an officer, director, or stockholder
subject to Section 16 of the Exchange Act (an "Insider") exercises a
non-incentive stock option within six months of its grant, the income
recognition date is generally the date six months after the date of grant,
unless the insider makes an election under Section 83(b) of the Code to
recognize income as of the date of grant, the Insider recognizes ordinary income
equal to the excess of the fair market value of the shares of Common Stock on
the income recognition date over the option price, and the holding period for
treating any subsequent gain as long-term capital gain begins on the income
recognition date.
Generally the Company will, subject to possible limitations imposed by
Section 162(m), be entitled to a tax deduction equal to the amount of ordinary
income recognized by the optionee on the date of exercise, to the extent such
income is considered reasonable compensation. The amount of ordinary income
recognized by the optionee will be treated as compensation income and will be
subject to income tax withholding by the Company. Treasury Regulations make the
deduction to the Company dependent on the Company's fulfillment of the income
tax withholding requirements with respect to such compensation income.
THE FOREGOING IS BASED UPON FEDERAL TAX LAWS AND REGULATIONS AS
PRESENTLY IN EFFECT AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE
FEDERAL INCOME TAX ASPECTS OF THE 1996 PLAN. ALSO, THE SPECIFIC STATE AND LOCAL
TAX CONSEQUENCES TO EACH OPTIONEE UNDER THE 1996 PLAN MAY VARY, DEPENDING UPON
THE LAWS OF THE VARIOUS STATES AND LOCALITIES AND INDIVIDUAL CIRCUMSTANCES OF
EACH OPTIONEE.
APPROVAL BY STOCKHOLDERS
On February 20, 1998, only 18,750 shares remained available for grant
under the 1996 Plan.
6
The Board of Directors recommends a Vote FOR the proposed amendment to
the 1996 Plan. An affirmative vote by holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting is required to
approve the Amendment.
If the amendment is not approved, then the 1996 Plan in the form as
approved by the stockholders at the 1995 Annual meeting, as amended at the 1997
Annual Meeting will remain in full force and effect and the aggregate number of
shares of Common Stock that are subject to options granted under the 1996 Plan
will not exceed 75,000 shares (after the 1997 stock dividend - which, for
accounting purposes, was treated as a three-for-two stock split) of Common
Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF THE
PROPOSED AMENDMENT.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held 14 meetings during 1997 and all directors
attended at least 75% of such meetings. The Board of Directors does not have a
nominating committee.
Executive Compensation Committee
The duties of the Executive Compensation Committee are to review
executive compensation and make recommendations to the Board of Directors
concerning compensation levels of officers. The members of the Executive
Compensation Committee are Dr. Gordon Smith, Mr. Alexander Karpinski and Mr.
Calvin T. Mathews. The Executive Compensation Committee met three times during
1997.
Audit Committee
The Audit Committee was established in February of 1998. This Committee
is charged with the responsibility for:
1. Reviewing the annual financial report to shareholders
and the annual report (Form 10-K) filed with the Securities
and Exchange Commission;
2. Reviewing the quarterly reporting process;
3. Overseeing the monitoring of the Company's system of internal
controls;
4. Recommending annually to the Board of Directors the selection
of the Company's independent auditors;
5. Determining the independent auditors' qualifications
including the firm's membership in the SEC practice section of
the AICPA and compliance with that organization's requirements
for peer review and independence;
6. Reviewing annually the audit plans of the independent
auditors;
7. Meeting with the independent auditors at the completion of
their annual examination to review their evaluation of the
financial reporting and internal controls of the Company and
any changes required in the originally planned audit program;
8. Reviewing the reports on examinations by regulatory
authorities;
9. Monitoring the Company's policies and procedures for the
review of expenses and perquisites of selected members of
senior management;
10. Performing any special reviews, investigations or
oversight responsibilities required by the Board of Directors;
and
7
11. Reporting to the Board of Directors on the results of the
activities of the Committee.
The members of the Audit Committee are Dr. Gordon Smith, Mr. Alexander
Karpinski and Mr. Calvin T. Mathews. Dr. Smith is the Chairman.
SUMMARY COMPENSATION TABLE
The individuals named below are the most highly compensated executive
officers of the Company as of the end of the fiscal year ended December 31,
1997.
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------- ------------------------------------------
AWARDS PAYOUTS
OTHER
ANNUAL ALL OTHER
NAME AND COMPEN- RESTRICTED OPTIONS LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION STOCK AWARDS ($) (#) PAYOUTS ($) SATION ($)
- - ------------------ ----- ------- ------ ------- ----------------- --- ----------- ----------
William H. Culver 1997 $115,000 0 $8,635 0 0 0 0
Chairman of the
Board and Chief
Scientist - (Retired
on Dec. 31, 1997)
Edmund D. Ludwig 1997 $135,000 $30,000 $5,424 0 0 0 0
President and
Chief Executive
Officer
OPTIONS GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------
% OF TOTAL OPTIONS EXERCISE OR BASE
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
---- ----------- ------------------------ ----------------- ----------
William H. Culver 15,000 12.35% $9.75 12/31/02
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FY-END (#) MONEY OPTIONS AT FY-END ($)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
William H. Culver 2,500 $5,602 33,750 41,250 $219,375 $268,125
Edmund D. Ludwig 0 0 30,000 0 $215,000 0
1996 Directors Stock Option Plan
On May 17, 1995 the Board of Directors approved the 1996 Directors
Stock Option Plan (the "1996 Directors Plan") under which each non-employee
director who attends a Board meeting is granted as remuneration for attendance
at such Board meeting, and option to purchase 500 shares of common stock at the
fair market value of the Common Stock on the date of such Board meeting.
8
At December 31, 1997, options to purchase 45,000 shares were
outstanding under the 1996 Directors Plan at an average exercise price of $7.16
per share. Options for 11,250 shares were exercised at an average exercise price
of $3.33 per share.
Employment Contracts
Mr. Edmund D. Ludwig is compensated pursuant to an employment agreement
which expires December 31, 1998. The agreement continues for successive one-year
periods thereafter unless terminated by either party upon at least on 60 days
notice. Under terms of the agreement, the Board of Directors establishes Mr.
Ludwig's salary each year for the succeeding year. The agreement provides that
if Mr. Ludwig dies, the Company will pay his estate one year's salary. Mr.
Ludwig was elected President and Chief Executive Officer on January 1, 1991.
MISCELLANEOUS
Transactions with Management
There were no material transactions with management.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten 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
and the NASD. Officers, directors and greater than ten-percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Forms 4 were required, the Company
believes that during 1996 all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten-percent beneficial owners were
complied with except that one report disclosing the grant of stock options to
Mr. Karpinski was filed five days late and one report was filed 28 days late,
one report disclosing the grant of stock options to Dr. Smith was filed five
days late and one report was filed 28 days late, and one report disclosing the
grant of stock options to Mr. Mathews was filed five days late and one report
was filed 28 days late.
Accountants
The independent accounting firm of Deloitte & Touche LLP, (the
"Auditor") has audited the accounts of the Company since October 20, 1995. The
Company anticipates that a representative of the Auditors will attend the Annual
Meeting for the purpose of responding to appropriate questions from
stockholders.
NOMINATIONS, OTHER BUSINESS AND DEADLINE FOR STOCKHOLDER PROPOSALS
Under an amendment to the Company's By-Laws adopted in February, 1998,
nominations for director may be made only by the Board or a Board committee or
by a stockholder entitled to vote in accordance with the following procedures. A
stockholder may nominate a candidate for election as a director at an Annual
Meeting of stockholders only by delivering notice to the Company not less than
90 nor more than 120 days prior to the first anniversary of the preceding year's
Annual Meeting, except that if the Annual Meeting is called for a date that is
not within 30 days before or after such anniversary date, notice must be
received not later than the tenth day following the earlier of the date the
Company's notice of the meeting is first given or announced publicly. With
respect to a Special Meeting called to elect directors because the election of
directors is not held on the date fixed for the Annual Meeting, a stockholder
must deliver notice not later than the tenth day following the earlier of the
date that the Company's notice of the meeting is first given or announced
publicly. Any stockholder delivering notice of nomination must include certain
information about the stockholder and the nominee, as well as a written consent
of the proposed nominee to serve if elected.
9
The By-Laws also provide that no business may be brought before an
Annual Meeting except as specified in the notice of the meeting (which includes
stockholder proposals that the Company is required to set forth in its proxy
statement under SEC Rule 14a-8) or as otherwise brought before the meeting by or
at the direction of the Board or by a stockholder entitled to vote in accordance
with the following procedures. A stockholder may bring business before an Annual
Meeting only by delivering notice to the Company within the time limits
described above for delivering notice of a nomination for the election of a
director at an Annual Meeting. Such notice must include a description of and the
reasons for bringing the proposed business before the meeting, any material
interest of the stockholder in such business and certain other information about
the stockholder. These requirements are separate and apart from and in addition
to the SEC's requirements that a stockholder must meet in order to have a
stockholder proposal included in the Company's proxy statement under SEC Rule
14a-8.
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to the Secretary of the Company.
Any stockholder who desires to submit a proposal for consideration at
the Company's Annual Meeting of Stockholders for 1999 must deliver such proposal
to the Secretary of the Company between February 3, 1999 and April 4, 1999.
10
EXHIBIT A
OPTELECOM, INC.
1996 DIRECTORS STOCK OPTION PLAN
ARTICLE I
Purpose
The purpose of the Plan is to provide an incentive to those members of
the Board who are not employees of the Company or of any of its Subsidiaries so
as to enhance their identity with the Company and its financial success.
ARTICLE II
Definitions
The following words and terms as used herein shall have that meaning
set forth therefor in this Article, unless a different meaning is clearly
required by the context. Whenever appropriate, words used in the singular shall
be deemed to include the plural and vice versa, and the masculine gender shall
be deemed to include the feminine gender.
2.1 Board shall mean the Board of Directors of the Company.
2.2 Code shall mean the Internal Revenue Code of 1986, as now in
effect or as hereafter amended.
2.3 Common Stock shall mean the Common Stock, $.03 par value, of
the Company, and any other securities of the Company to the
extent provided in Article VII.
2.4 Company shall mean Optelecom, Inc., a Delaware corporation,
and any successor to it.
2.5 Fair Market Value shall mean the closing bid price of the
Common Stock as reported on the National Association of
Securities Dealers Automated Quotation Service ("NASDAQ") or,
if the Common Stock is traded on a national securities
exchange, the last reported trade price on that day. If the
Common Stock at any time is neither quoted on NASDAQ nor
traded on a national securities exchange, then the price shall
be determined in good faith by the Board.
2.6 Option shall mean an Option granted under this Plan.
2.7 Participant shall mean any member of the Board who
participates in the Plan as provided in Article III.
2.8 Plan shall mean the Optelecom, Inc. 1996 Directors Stock
Option Plan as set forth herein and as amended from time to
time.
2.9 Subsidiary shall mean any corporation that at the time
qualifies as a subsidiary of the Company under the definition
of "subsidiary corporation" contained in Section 425(f) of the
Code, as that section may be amended from time to time.
ARTICLE III
Eligibility
Each member of the Board who is not an employee of the Company or of
any of its Subsidiaries shall be a participant in the Plan. Participation shall
continue for so long as the Board member continues to serve on the Board and is
not employed by the Company or any of its Subsidiaries.
11
ARTICLE IV
Shares Subject to Plan
The total number of shares of the Common Stock which are available for
granting options hereunder shall be 200,000 (subject to adjustment as provided
in this Article IV and in Article VII). The shares of Common Stock issued upon
exercise of an Option shall be made available, in the discretion of the Board,
either from authorized but unissued Common Stock or from any outstanding Common
Stock which has been reacquired by the Company. In the event that any Option
terminates for any reason without having been exercised in full, the unpurchased
shares of Common Stock subject to that Option shall once again become available
for the granting of Options.
ARTICLE V
Grant of Options
On the date of each Board meeting that is held on or after January 1,
1996 but prior to the termination of the Plan, each non-employee Director who
attends a Board meeting shall be granted, as remuneration for attendance at such
Board meeting, an option to purchase 750 shares of Common Stock valued at the
Fair Market Value of the Common Stock on the date of such Board meeting.
ARTICLE VI
Terms and Conditions of Options
All Options granted under the Plan shall be evidenced by an Option
Agreement which shall be in such form as the Board may from time to time approve
and shall be executed on behalf of the Company by one or more of the officers of
the Company. Each such Option Agreement shall be subject to the terms and
conditions of the Plan and shall provide in substance as follows:
6.1 Price Per Share. Each Option Agreement shall specify the purchase
price per share for the shares covered by the Option, which purchase price shall
be equal to the Fair Market Value of the Common Stock on the date of the Board
meeting for which such options are being granted.
6.2 Term and Exercise of Options. Every Option granted hereunder shall
have a term of five years, which term shall commence with the date of its grant.
All granted Options shall vest immediately. In the event that a Participant
ceases to be eligible to participate in the Plan because he or she was
terminated for cause, all unexercised Options previously granted to him or her
hereunder shall terminate immediately. If a Participant dies during the five
year term of an Option, his or her estate, personal representative or the person
that acquires his or her Options by bequest or inheritance or by reason of such
death shall have the right to exercise such Options for a period of 12 months
after the date of such Participant's death. Except as set forth above, all other
Options granted under this Plan shall be exercisable by the Participant at any
time during the five year term thereof whether or not the Participant is a
Director of the Company or of any Subsidiary at the time of such exercise.
6.3 Exercise of Options. Each Option Agreement shall provide that the
Option evidenced thereby shall be exercised by delivering a written notice of
exercise to the Company. Each such notice shall state the number of shares of
Common Stock with respect to which the Option is being exercised and shall be
signed by the person (or persons) exercising the Option and, in the event the
Option is being exercised by any person other than the Participant, shall be
accompanied by proof, satisfactory to counsel for the Company, of the right of
such person to exercise the Option. A certified or cashier's check in full
payment of the purchase price for the number of shares of Common Stock specified
in the notice must accompany such notice.
The date of exercise of an Option shall be the date on which written
notice of exercise and payment of the purchase price shall have been delivered
to the Company, but the exercise of an Option shall not be effective until the
person (or persons) exercising the Option shall have complied with all the
provisions of the Option Agreement governing the exercise of the Option. The
Company shall deliver as soon as practicable after receipt of notice and
payment, certificates for the shares of the Common Stock subject to the Option.
12
6.4 Each Option Agreement shall provide that, unless the Option
evidenced thereby is transferable under Rule 16b-3 or any other Rule, Regulation
or staff position promulgated by the Securities and Exchange Commission ("SEC"),
such Option shall be non-transferable and non-assignable by the Optionee other
than by death, as provided in Article 6.2 above, and during the lifetime of the
Optionee such Option may be exercised only by the Optionee or such Optionee's
legal representative.
Each Option granted hereunder shall be transferable only to
the extent permitted under Rule 16b-3 or any other Rule, Regulation or staff
position promulgated by the SEC.
ARTICLE VII
Effect of Certain Changes
7.1 Anti-Dilution. The aggregate number of shares of Common Stock with
respect to which Options may be granted hereunder, the number of shares of
Common Stock subject to each outstanding Option, and the price per share for
each such Option, may all be appropriately adjusted, as the Board may determine,
for any increase or decrease in the number of shares of issued Common Stock of
the Company resulting from a subdivision or consolidation of shares whether
through reorganization, payment of a share dividend or other increase or
decrease in the number of such shares outstanding effected without receipt of
consideration by the Company, provided; however, that no adjustment in the
number of shares with respect to which Options may be granted under the Plan or
in the number of shares subject to outstanding Options shall be made in the
event of a contribution, directly or indirectly, of Common Stock by the Company
to any Company employee benefit plan.
7.2 Merger or Reorganization. Subject to any required action by the
stockholders, if the Company shall be a party to a transaction involving a sale
of substantially all its assets, a merger or a consolidation, any Option granted
hereunder shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to the Option would have been entitled
if such holder actually owned the stock subject to the option immediately prior
to the time any such transaction became effective, provided; however, that all
unexercised Options under the Plan may be canceled by the Company as of the
effective date of any such transaction by giving notice to the holders thereof
of its intention to do so and by permitting the exercise of Options with respect
to all shares covered thereby, whether or not by its terms such Option is then
exercisable and without regard to any installment exercise provisions therein or
in this Plan.
7.3 Dissolution. In the case of dissolution of the Company, every
Option outstanding hereunder shall terminate, provided; however, that each
Option holder shall have 30 days' prior written notice of such event, during
which time he or she shall have the right to exercise Options with respect to
all shares covered thereby, whether or not, by its terms, such Option is then
exercisable and without regard to any installment exercise provisions therein or
in this Plan.
7.4 Binding Determination. On the basis of information known to the
Company, the Board shall make all determinations under this Article VII.
7.5 Rights of Participants. Except as hereinabove expressly provided in
this Article VII, an Optionee shall have no rights by reason of any subdivision
or consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class or by reason of any dissolution, liquidation, merger, or consolidation
or spin-off of assets or stock of another corporation, and any issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustments by reason thereof
shall be made with respect to the number or price of shares of Common Stock
subject to the Option. The grant of an Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to merge or
to consolidate or to dissolve, liquidate or sell or transfer all or part of its
business or assets.
13
ARTICLE VIII
Amendment and Termination
The Board shall have the right to amend or suspend or terminate this
Plan at any time, provided that unless first approved by the stockholders of the
Company no amendment shall be made to the Plan which: (1) materially modifies
the eligibility requirements of Article III, (2) increases the total number of
shares of Common Stock which may be issued under the Plan, (3) reduces the
purchase price of shares under the Plan, (4) changes the term of the Plan as set
forth in Article XII, (5) extends the term of any Option granted under the Plan,
or (6) otherwise materially increases the benefits of the Plan to Participants.
ARTICLE IX
Issuance of Shares and Compliance with Securities Regulations
The obligation of the Company to sell and deliver the Common Stock
under Options granted under this Plan shall be subject to all applicable laws,
regulations, rules and approvals. The Company shall have no obligation hereunder
to cause any shares of Common Stock to be registered or qualified under any
federal or state law or listed on any stock exchange or admitted to any national
market system.
ARTICLE X
Application of Funds
Any proceeds received by the Company as a result of the exercise of
Options granted under the Plan may be used for any valid corporate purpose.
ARTICLE XI
Notice
Any notice to the Company required or permitted under this Plan shall
be in writing and shall either be delivered in person or sent by registered or
certified mail, return receipt requested, postage prepaid, to the Company at its
offices at 9300 Gaither Road, Gaithersburg, Maryland, 20877.
ARTICLE XII
Term of Plan
The Plan shall terminate on December 31, 2000, by operation of Section
7.3, or on such earlier date as may be determined by the Board. In any event,
termination shall be deemed to be effective as of the close of business on the
day of termination. No Options may be granted after such termination.
Termination of the Plan, however, shall not affect the rights of Participants
under Options previously granted to them, and all unexpired Options shall
continue in force and operation after termination of the Plan until they lapse
or terminate by their own terms and conditions.
ARTICLE XIII
Effective Date
This Plan shall be effective on the day upon which it is approved by
the stockholders of the Company.