OPTICAL COATING LABORATORY, INC.
2789 Northpoint Parkway, Santa Rosa, California 95407-7397
Telephone 707/545-6440, Facsimile 707/525-7410
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 30, 1995
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Optical Coating Laboratory, Inc. to be held on Tuesday, March 30, 1995,
at 4:00 p.m. in the Sonoma Ballroom of The Doubletree Hotel, 3555 Round
Barn Boulevard, Santa Rosa, California, for the following purposes:
1. To elect directors of the Company to serve for the ensuing
year and until their successors are elected.
2. To approve the 1995 Incentive Compensation Plan.
3. To ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the year ending
October 31,1995.
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 31, 1995,
as the record date for determining those stockholders who will be entitled
to vote at the meeting.
Whether or not you plan to attend the meeting, please review this material,
decide how you wish to vote, execute the enclosed proxy card and return it
promptly in the envelope provided. If a sufficient number of stockholders
do this, the necessity for expensive and time consuming additional
solicitation will be avoided.
Thank you for your cooperation in returning your proxy card as soon as
possible.
By Order of the Board of Directors,
/s/ Joseph C. Zils
JOSEPH C. ZILS
General Counsel and Secretary
Santa Rosa, California
February 24, 1995
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR
SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE
PRESENCE OF A QUORUM MAY BE ASSURED. THE PROMPT RETURN OF YOUR SIGNED PROXY,
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, WILL AID THE COMPANY IN
REDUCING THE EXPENSE OF ADDITIONAL PROXY SOLICITATION. THE GIVING OF SUCH
PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND
THE MEETING.
OPTICAL COATING LABORATORY, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 30, 1995
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
Management on behalf of the Board of Directors of Optical Coating Laboratory,
Inc. (hereinafter called "the Company") of proxies to be voted at the
Annual Meeting of Stockholders to be held at 4:00 p.m. on Thursday,
March 30, 1995, in the Sonoma Ballroom of The Doubletree Hotel, 3555
Round Barn Boulevard, Santa Rosa, California. This Proxy Statement,
the proxy card and the Company's Annual Report to Stockholders were first
mailed to stockholders on or about February 24, 1995.
VOTING RIGHTS AND SOLICITATION
The Board of Directors of the Company has fixed the close of business on
January 31, 1995, as the record date (hereinafter the "Record Date") for
the determination of the stockholders of the Company entitled to vote at
the Annual Meeting (the "Stockholders" or "Stockholders of Record") As of
the Record Date, the Company had 8,978,152 shares of common stock, $.01
par value (the "Common Stock"), issued and outstanding. All of the shares
of the Company's Common Stock outstanding on the Record Date are entitled
to vote at the Annual Meeting, and Stockholders of Record entitled to vote
at the meeting will have one vote for each share so held on the matters to
be voted upon.
Any Stockholder of Record executing a proxy retains the right to revoke it
by notice in writing to the Secretary of the Company at any time prior to
its use. All properly executed proxies received by Management and not
revoked will be voted as directed or, if no direction is indicated, will
be voted for the election of the nominees of Management and in favor of
the other items presented by Management. The expense of soliciting proxies
in the enclosed form will be paid by the Company. In addition to the
original and follow-on mailings of the proxies and soliciting materials,
employees of the Company may solicit proxies by mail, telephone, facsimile
and personal interviews. The Company will request brokers, custodians,
nominees and other record holders to forward the proxies and soliciting
materials to persons for whom they hold shares of the Company and to
request authority for the exercise of proxies; in such cases, the Company
will reimburse such holders for their reasonable expenses.
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the Annual Meeting for 1996 must
be received by the Company no later than October 26, 1995, for inclusion
in the proxy statement relating to that meeting. No Stockholder proposals
were received for presentation at the Annual Meeting for 1995.
PROPOSAL 1:
ELECTION OF DIRECTORS
All proxies in the form enclosed received by Management will be voted
(unless authority to vote is withheld) for the election of the nominees
listed on pages 3 and 4 as the directors of the Company to hold office
until the next Annual Meeting of Stockholders and until their respective
successors shall be elected and qualified. So far as is known to Management,
all of the nominees will be candidates at the Annual Meeting, but should
any of the nominees not be a candidate at the Annual Meeting, all such
proxies so received will be voted in favor of the remainder of those
nominated and for such substitute nominees (if any) as shall be designated
by the present Board of Directors to fill the vacancy. In the event that
additional persons are nominated for election as directors, the proxies
intend to vote all shares in such a manner as will assure the election of
as many of the nominees listed below as possible. The specific nominees to
be voted for will be determined by the proxies.
Pursuant to the Company's By-Laws, unless waived by the Board of Directors,
to effect the nomination for director of any person other than the nominees
listed on pages 3 and 4, the Board of Directors must have received notice of
such person's candidacy at least 90 days before the date that had been the
Record Date of the Company's previous year's Annual Meeting. Accordingly,
notice of any such individual's candidacy must have been received by the
Company by October 29, 1994. No such notice was received.
Biographical summaries and ages as of the Record Date of individuals
nominated by the Board of Directors for election as directors appear below
and on page 4 of this Proxy Statement. Data with respect to the number
of shares of the Company's Common Stock beneficially owned by each of them,
directly or indirectly, as of the Record Date, appears on page 6 of this
Proxy Statement.
NOMINEES
HERBERT M. DWIGHT, JR.; AGE 64; CHAIRMAN OF THE BOARD, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF THE COMPANY.
Mr. Dwight was elected to the positions of Chairman of the Board, President
and Chief Executive Officer on August 19, 1991. He was appointed Chief
Financial Officer effective January 1, 1994. Mr. Dwight was President and
Chief Executive Officer of Spectra Physics from 1967 to 1988 and Chairman,
President and Chief Executive Officer of Superconductor Technologies, Inc.
from 1988 through August 1991 and continued to serve as Chairman from 1991
until his resignation in May 1994. Mr. Dwight also serves as a director of
Laserscope Surgical Systems, Applied Materials, Inc., Applied Magnetics
Corporation and Trans Ocean Limited.
DOUGLAS C. CHANCE; AGE 53; PRESIDENT AND CHIEF EXECUTIVE OFFICER, WYSE
TECHNOLOGY.
Mr. Chance has been a director of the Company since 1973. He was appointed
President and Chief Executive Officer of Wyse Technology in November 1994
where he continues to serve in those capacities. Mr. Chance served as
President, Chief Executive Officer and director of Octel Communications
Corporation from October 1990 to November 1993. Following his resignation
as President and Chief Executive Officer, Mr. Chance served as a consultant
and director of Octel Communications Corporation until November 1994.
Mr. Chance was Executive Vice President, Networked Systems Sector,
Hewlett-Packard Company, from May 1987 to October 1990 and held various
executive and administrative positions with Hewlett-Packard Company from
1966 to 1987.
JOHN MCCULLOUGH; AGE 62; VICE PRESIDENT OF THE COMPANY
Mr. McCullough has been a director of the Company since 1985 and has been
a Vice President of the Company since January 1992. Mr. McCullough served
as Executive Vice President of the Company from December 1988 to January
1992 and as Senior Vice President of the Company from 1978 to December 1988.
JULIAN SCHROEDER; AGE 48; VICE PRESIDENT, CORPORATE FINANCE, B D S SECURITIES
CORPORATION
Mr. Schroeder has been a director of the Company since 1989. He has been
Vice President, Corporate Finance, of B D S Securities Corporation (formerly
Smith Management Corp.) since March 1989. He was a principal of Schroeder
Consulting Company, a financial consulting firm, from January 1985 to
February 1989.
RENN ZAPHIROPOULOS; AGE 68; RETIRED PRESIDENT AND CHIEF EXECUTIVE OFFICER
OF VERSATEC, INC. (A XEROX COMPANY)
Mr. Zaphiropoulos has been a director of the Company since 1988. Mr.
Zaphiropoulos was President and Chief Executive Officer of Versatec, Inc.
(A Xerox Company) from 1969 until his retirement on January 1, 1988, and
Corporate Vice President of Xerox Corporation from 1984 until his retirement
on January 1, 1988. He currently is a director of various privately-held
corporations and holds executive seminars in management worldwide.
COMPENSATION OF DIRECTORS
Directors who are not otherwise employees of the Company were paid an
annual retainer in fiscal 1994 of $12,000 and received an additional fee
of $1,250 per day for attendance at any meetings of the Board or a
Committee of the Board. Directors who are employees of the Company receive
no separate compensation for serving as a director. Directors may be
reimbursed for any expenses related to membership on the Board. The Board
of Directors has established an ongoing annual award of Common Stock of
the Company to the three outside, non-employee directors. Under this program,
1,000 shares of the Common Stock of the Company, plus payment of associated
withholding taxes, are awarded annually to each of the outside directors as
part of their remuneration for their services as directors. The term of
this award is five years beginning April 1992 and expiring April 1997.
Accordingly, for fiscal 1994, Directors Chance, Schroeder and Zaphiropoulos
were each awarded 1,000 shares of the Common Stock of the Company with a
fair market value at the time of award of $6,750, plus payment of related
withholding taxes.
BOARD MEETINGS AND COMMITTEES
During fiscal 1994, there were four regular meetings of the Board of
Directors. Attendance by each director at the meetings of the Board
and its Committees during fiscal 1994 was 100%.
Audit Committee. The Board of Directors has an Audit Committee consisting
of the three outside, non-employee directors: Julian Schroeder (Chairman),
Douglas C. Chance and Renn Zaphiropoulos, who also serve as members of the
Compensation and Stock Option Committee. The Audit Committee met four times
in fiscal 1994. The Audit Committee meets independently with representatives
of the Company's independent auditors and with representatives of Management.
The Committee recommends the engagement of the Company's independent
auditors, consults with the auditors as to the adequacy of internal
accounting procedures and reviews and approves financial statements and
reports. Compensation and Stock Option Committee. The Board of Directors
has a Compensation and Stock Option Committee consisting of the three outside,
nonemployee directors with Mr. Zaphiropoulos serving as Chairman. The
Committee met three times during fiscal 1994. The Committee is responsible
for reviewing and reporting to the Board on incentive compensation plans,
stock option grants and the administration of the Company's various
incentive compensation and stock option plans, as well as reviewing and
reporting to the Board on recommended annual compensation for officers,
including salaries, bonuses, the Company's Management Incentive Plan and
other forms of compensation and remuneration.
Executive Committee. The Company has an Executive Committee consisting of
three directors: Herbert M. Dwight, Jr. (Chairman), Douglas C. Chance and
John McCullough. Pursuant to the Company's ByLaws, the Executive Committee
has all the powers and authority of the Board of Directors in the management
of the business and affairs of the Company, except those powers which by law
cannot be delegated by the Board of Directors. The Executive Committee did
not meet during fiscal 1994. There is no nominating committee of the
Board or any committee performing the functions of such a committee.
COMMON STOCK OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information as of the Record Date
regarding beneficial ownership of the Company's Common Stock by (i) each
person or group who, to the Company's knowledge, beneficially owns more
than 5% of the outstanding shares of the Company's Common Stock; (ii) each
of the Company's directors; (iii) the Chief Executive Officer and each of
the Company's four other most highly compensated executive officers (the
"Named Executive Officers"); and (iv) all directors and executive officers
as a group:
<TABLE>
COMMON STOCK
NO. OF SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
OWNED STOCK
DIRECTORS, OFFICERS AND
5% STOCKHOLDERS
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
Employee Stock Ownership Plan
of the Company (1) 1,577,104 17.6%
c/o Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Hakuto Co., Ltd. 907,440 10.1%
1-13 Shinjuku 1-Chome
Shinjuku-ku, Tokyo 150, Japan
The TCW Group, Inc.(2) 517,500 5.8%
865 South Figueroa Street
Los Angeles, CA 90017
Dimensional Fund Advisors Inc.(3) 450,414 5.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
DIRECTORS:
Douglas C. Chance 17,200 .2%
John McCullough(4) 48,590 .5%
Julian Schroeder 18,500 .2%
Renn Zaphiropoulos 7,000 *
NAMED EXECUTIVE OFFICERS:
Herbert M. Dwight, Jr.(5) 596,251 6.2%
Klaus F. Derge(6) 83,500 .9%
Laurence D. Parson (7) 38,418 .4%
Norman E. Strandlund(8) 89,886 1.0%
Josef Wally(9) 20,766 .2%
All Directors and Executive
Officers as a group (13 persons)(10) 1,111,952 11.3%
</TABLE>
* Represents less than 0.1% of the outstanding Common Stock
(1) Pursuant to the terms of the Trust Agreement under the
Company's Employee Stock Ownership Plan ("ESOP+"), the Trustees vote
the shares held in the ESOP+ upon instructions given by individual
participants as to the individual participant's vested shares, and in
the discretion of the Trustees otherwise.
(2) The number of shares shown above as owned by The TCW Group, Inc.
was communicated to the Company by copy of a Schedule 13G filing under
the Securities Exchange Act of 1934 (the "1934 Act") filed by The TCW Group,
Inc. on February 15, 1995. In this Schedule 13G, The TCW Group, Inc.,
identifying itself as a Parent Holding Company in accordance with Sec.
240.13d(b)(1)(ii)(G) of the 1934 Act, reported that it had sole voting
and dispositive power with respect to 517,500 Shares of the Company's
Common Stock. The Schedule 13G further states that the filing by The
TCW Group, Inc. shall not be construed as an admission by The TCW Group,
Inc. that it is the beneficial owner of these shares.
(3) The number of shares shown above as owned by Dimensional Fund Advisors
Inc. ("Dimensional"), was communicated to the Company by copy of a Schedule
13G filing under the Securities Exchange Act of 1934 (the "1934 Act") filed
by Dimensional on January 30, 1995. Dimensional, a registered investment
advisor, is deemed to have beneficial ownerhsip of 450,414 shares of the
Company's Common Stock as of December 31, 1994, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company,or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
(4) Includes 12,000 shares under options exercisable within 60 days of the
Record Date and 18,731 shares held for the benefit of Mr. McCullough in the
Company''s Employee Stock Ownership Plan.
(5) Includes 567,000 shares under options exercisable within 60 days of
the Record Date and 2,851 shares held for the benefit of Mr. Dwight in the
Company's Employee Stock Ownership Plan.
(6) The 83,500 shares shown for Mr. Derge are shares under options
exercisable within 60 days of the Record Date.
(7) Includes 27,937 shares under options exercisable within 60 days of
the Record Date and 7,247 shares held for the benefit of Mr. Parson in the
Company's Employee Stock Ownership Plan.
(8) Includes 39,834 shares under options exercisable within 60 days of the
Record Date and 9,954 shares held for the benefit of Mr. Strandlund in the
Company's Employee Stock Ownership Plan.
(9) Includes 11,750 shares under options exercisable within 60 days of the
Record Date and 9,016 shares held for the benefit of Mr. Wally in the
Company's Employee Stock Ownership Plan.
(10) Includes 852,404 shares under options exercisable within 60 days of
the Record Date and 83,861 shares held for the benefit of all officers in
the Company's Employee Stock Ownership Plan.
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's Chief
Executive Officer and the four other most highly paid executive officers
for the three fiscal years ended October 31, 1994:
<TABLE>
LONG-TERM
COMPENSATION
AWARDS
OTHER ANNUAL OPTIONS ALL OTHER
YEAR SALARY BONUS COMPENSATION (#) COMPENSATION
($)(3) ($)(1) ($)(2) (4)
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr.(5) 1994 $323,920 $33,448 $ 3,169 600,000 $9,942
Chairman of the Board, 1993 314,051 20,589 10,366 -- 4,537
President and 1992 299,998 41,700 7,166 -- 10,040
Chief Executive Officer
Klaus F. Derge(6) 1994 176,900 12,164 12,000 10,000 --
Vice President, 1993 158,400 7,472 11,686 -- --
International Operations 1992 60,000 -- -- 80,000 40,000
Laurence D. Parson(7) 1994 130,327 3,915 2,441 10,000 9,394
Vice President and 1993 121,660 6,013 8,207 6,000 19,088
General Manager, 1992 -- -- -- -- --
Glare/Guard Division
Norman E. Strandlund 1994 170,034 17,960 2,092 10,000 9,249
Vice President and 1993 161,417 4,392 10,544 8,000 14,503
General Manager, 1992 153,459 16,719 8,156 20,000 5,611
Santa Rosa Division
Josef Wally 1994 130,286 9,296 3,135 5,000 9,665
Vice President, 1993 123,010 5,812 12,247 5,000 2,877
Corporate Controller 1992 121,926 12,171 7,813 10,000 4,581
and Secretary
</TABLE>
(1) Bonuses were paid to the Named Executive Officers under the
Company's 1994, 1993 and 1992 Management Incentive Plans.
(2) Includes for fiscal 1994, 1993 and 1992, for the Named Executive
Officers, a special medical expense reimbursement benefit and an automobile
allowance benefit. The amounts shown for fiscal 1994 under "Other Annual
Compensation" include an automobile allowance paid in the first two months
of the fiscal year under the Company's prior automobile allowance program.
AUTOMOBILE
MEDICAL ALLOWANCE PAID
FOR FISCAL 1994: REIMBURSEMENT UNDER 1993 PROGRAM
Herbert M. Dwight, Jr. $919 $2,250
Laurence D. Parson 941 1,500
Norman E. Strandlund 592 1,500
Josef Wally 1,635 1,500
(3) In January 1994, the Company chose to include the automobile allowance
in the base salaries of all participants, including the Named Executive
Officers. Thus, the base salaries shown for the Named Executive Officers,
excluding Mr. Derge, include the fiscal 1994 annual automobile allowances
aggregating $7,621 for each of the Named Executive Officers.
Mr. Derge participates in separate medical and automobile expense
reimbursement programs through the Company's subsidiary in Reinheim,
Germany. For fiscal 1994, he received $2,461 in medical expense payments.
For automobile expenses, Mr. Derge was reimbursed for actual expenses incurred
for business purposes.
(4) Includes for fiscal 1994, 1993 and 1992, for each Named Executive
Officer, an employee life insurance benefit and contributions made by the
Company under the Employee Stock Ownership Plan (ESOP+).
LIFE INSURANCE ESOP+
FOR FISCAL 1994: PREMIUM CONTRIBUTION
Herbert M. Dwight, Jr. $702 $9,240
Klaus Derge(6) -- --
Laurence D. Parson 174 9,220
Norman E. Strandlund 271 8,978
Josef Wally 425 9,240
(5) During fiscal 1994, options for 500,000 shares held by Mr. Dwight were
cancelled and reissued to extend the expiration date. The options were
regranted effective July 1, 1994 for a period of five years. No change
was made to option price, and all other terms of the original option
agreements were unchanged.
(6) Mr. Derge joined the Company in July 1992 which is reflected in his
fiscal 1992 base salary. "All Other Compensation" for fiscal 1992 includes
reimbursement of extraordinary travel expenses incurred by Mr. Derge in
his efforts to establish the Company's German subsidiary, OCLI Optical
Coating Laboratory GmbH (OCLI GmbH). Mr. Derge participates in a separate
life insurance plan and does not participate in the Company's ESOP+.
(7) Mr. Parson was appointed Vice President in June 1993. For fiscal
1993, "All Other Compensation" includes a payment of $18,931 for accrued
vacation time that was not used prior to Mr. Parson's appointment as an
officer of the Company.
<TABLE>
II. OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
PERCENT OF POTENTIAL
TOTAL REALIZABLE VALUE
OPTIONS AT ASSUMED RATES
GRANTED TO OF STOCK PRICE
OPTIONEES EMPLOYEE'S EXERCISE APPRECIATION FOR
GRANTED IN FISCAL PRICE EXPIRATION OPTION TERM(4)
NAME (#)(1) YEAR(2) ($/SHARE)(3) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr. 400,000 48.8% $ 6.875 7/01/99 $759,774 $1,678,903
100,000 12.2% 10.250 7/01/99 0 82,226
100,000 12.2% 6.125 12/17/98 169,223 373,937
Klaus F. Derge 10,000 1.2% 6.125 12/17/98 16,922 37,394
Laurence D. Parson 10,000 1.2% 6.125 12/17/98 16,922 37,394
N.E. Rick Strandlund 10,000 1.2% 6.125 12/17/98 16,922 37,394
Josef Wally 5,000 .6% 6.125 12/17/98 8,461 18,697
</TABLE>
(1) The 400,000 option shares shown in the above table for Mr. Dwight were
originally granted on 8/19/91 and would have expired on 8/19/96 and 100,000
option shares were originally granted on 9/18/92 and would have expired on
9/18/97. Effective July 1, 1994, the 500,000 total option shares were
cancelled and regranted for the purpose of extending the expiration dates.
The exercise prices and all other terms and conditions of the original grants
were unchanged. The options listed in the table for the four other Named
Executive Officers, and the remaining 100,000 option shares shown for Mr.
Dwight, were granted on December 17, 1993, pursuant to the Company's 1993
Incentive Compensation (Stock Option) Plan. The options become exercisable
in three annual installments commencing one year from the date of grant.
The options have a maximum term of five years, subject to earlier termination
of unvested options in the event of the optionee's cessation of service with
the Company.
(2) The Company granted options totaling 819,900 shares to employees in
fiscal 1994. This amount includes the aforementioned 500,000 option shares
regranted to Mr. Dwight during fiscal 1994.
(3) The exercise price of each option may be paid in cash, in existing
shares of Common Stock valued at fair market value on the exercise date or
through a cashless exercise procedure involving a sameday-sale of the
purchased shares.
(4) The 5% and 10% assumed rates of appreciation are stipulated by the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of its Common Stock. There is
no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
option term will be at the assumed levels or at any other defined level.
Unless the market price of the Company's Common Stock does, in fact,
appreciate over the option term, no value will be realized from the option
grants.
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises
in fiscal 1994 by the named executive officers and the value of such
officers' unexercised options at October 31, 1994.
<TABLE>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YE(#) FISCAL YE ($)(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Herbert M. Dwight, Jr. 0 0 567,000/ $12,563/
33,000 6,188
Klaus F. Derge 0 0 83,500/ $ 656/
6,500 1,219
Laurence D. Parson 0 0 27,937/ $ 6,421/
16,000 1,219
Norman E. Strandlund 0 0 39,834/ $14,199/
16,750 1,219
Josef Wally 0 0 11,750/ $ 1,594/
8,250 563
</TABLE>
(1) The Company's fiscal year ended October 31, 1994. The closing
price ofthe Company's Common Stock on the Nasdaq National Market
System on October 31, 1994 was $6.3125 per share.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The report of the Compensation and Stock Option Committee shall not
be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act
of 1933, as amended (the "Securities Act"), or under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), except to the extent that
the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
COMPENSATION PHILOSOPHY
The Compensation and Stock Option Committee has two principal objectives in
determining executive compensation policies: first, to attract, develop,
reward and retain key executive talent; and second, to motivate executive
officers to perform to the best of their abilities and to achieve short-term
and long-term corporate objectives that will contribute to the overall goal
of enhancing stockholder value. The Compensation and Stock Option Committee
has adopted the following executive compensation policies in the furtherance
of these objectives:
o The Company will compensate competitively with the practices of other
leading technology companies of similar size;
o Performance at the corporate, division and individual executive officer
level will determine the bonus portion of compensation;
o The attainment of realizable but challenging objectives will determine
performance based compensation; and
o The Company will encourage executive officers to hold substantial,
long-term equity stakes in the Company so that the interests of
executive officers will be aligned with the interests of stockholders.
Accordingly, stock or stock options will constitute a portion of
compensation.
Each of the foregoing policies assists the Compensation and Stock Option
Committee in the determination of appropriate compensation for its executive
officers. The policy relating to competitive compensation with other
leading companies provides one objective standard with which the Company's
compensation practices can be compared. The Company's emphasis on stock
based performance provides the single most important link between executive
compensation, stockholder return and Company performance since the effects
of changes in the Company's performance are ultimately reflected in the
market value of the Company's stock.
ELEMENTS OF EXECUTIVE COMPENSATION
(I) BASE SALARY. In establishing base salaries for the Company's executive
officers, the Committee compares salary levels in effect for comparable
positions with other U.S. technology companies of similar size using data
from the Radford Benchmark Salary Survey and the American Electronics
Association (AEA) Executive Compensation Survey. In addition, the Committee
gives consideration to the specific functional responsibilities of the
position. The Company's executive officers' base salaries are currently set
near the median range of the comparison groups for officers in corporate
areas and slightly above the median range for officers responsible for an
operating division.
The Committee believes that the comparison of executive officer base
compensation to the indices of the Radford Benchmark Salary Survey and
AEA Executive Compensation Survey groups is applicable since the Company
competes against this broader group of companies for executive management
talent. The Committee believes that the Company's most direct competitors
for executive talent are not necessarily only the companies that would be
included in a peer group established to compare stockholder returns. In
recruiting executive management personnel, the Company searches for
executives with experience in innovative and advanced management practices
of outstanding companies in different industries. Thus, the compensation
comparison groups are not the same as the peer group companies used in the
Comparison of Five Year Cumulative Total Return graph included in this Proxy
Statement.
The Committee reviews executive officers' base salaries annually in December,
and adjustments are made on the basis of the executive officers' personal
performance for the year, the overall financial performance of the Company
and changes in the general level of base salaries of persons in comparable
positions in the comparison groups surveyed. In determining increases in
base salaries for executive officers, the Committee places the greatest
weight on the individual's personal performance against previously
established objectives and the performance of the Company for the fiscal
year. For fiscal 1994, the Committee established a Company-wide wage and
salary budget consisting of a maximum of 4% for merit increases plus 1%
for promotional and equity adjustments. However, due to the losses
sustained by the Company in the prior fiscal year, no merit increases were
awarded to Mr. Dwight or any other executive officer.
(II) INCENTIVE COMPENSATION. The Company's executive officers participate
in a Management Incentive Plan approved annually by the Compensation and
Stock Option Committee. The total budget for the 1994 Management Incentive
Plan (the "Plan" or "1994 Plan") was set at a maximum of 15% of 1994 pretax
profits. The 1994 Plan provides for 80% of a participant's potential payout
to be based on the Company meeting certain prescribed quantitative operating
profit and pretax earnings targets. Twenty percent (20%) of a participant's
potential payout was based upon the achievement of previously established,
individual qualitative objectives. Under the Plan, the participant's "base
bonus" was the amount they would earn if their division and/or the Company
as a whole achieved budgeted profit levels for each quarter and for the
entire year and the individual achieved all qualitative objectives.
Under the Plan, the CEO's "base bonus" was set at 35% of his actual base
salary. Other executive officer participants' "base bonus" was set at 25%
of their actual base salary. Participants could earn up to 10% of their
base bonus each quarter depending on the quarterly profit performance of
Their Division/the Company and up to 40% of their annual base bonus depending
on their Division's/the Company's profits for the fiscal year. Executive
officer participants had the potential to earn up to 20% of their base bonus
at year-end depending upon the rating of their performance against their
qualitative objectives for the year.
(III) LONG-TERM STOCK OPTION AWARDS. The Company's stock option program
was established to increase the commitment of key employees to the Company,
to align their interests with those of other stockholders and to reward
them for superior performance. Annual Company-wide option grants are set
at approximately 2% of total outstanding shares. Stock option grants for
the Company's executive officers are reviewed annually by the Compensation
and Stock Option Committee at its December meeting. Awards to executive
officers and all other eligible participants (the "Participants") are
approximated by multiplying the mid-point of the Participant's salary
range by a constant factor which results in an "option dollar value." The
option dollar value is then prorated to adjust for the number of shares
available for grant under the option Plans and to meet the guidelines of
the Company's Stock Option Policy. The actual number of options granted to
a Participant using these guidelines is adjusted by measuring the
Participant's performance against preestablished goals.
CEO COMPENSATION
The Compensation and Stock Option Committee applies the foregoing principles
and policies in determining the compensation of Mr. Dwight, the Company's
chief executive officer. Under these guidelines, Mr. Dwight was not eligible
to receive a merit increase at the beginning of fiscal 1994, nor were any
other of the Named Executive Officers, due to the operating losses of the
Company reported for the prior fiscal year. As described in footnote (3)
of the Summary Compensation Table, the base salaries for fiscal 1994 shown
for Mr. Dwight and the other Named Executive Officers include an automobile
allowance paid under a new Company program which became effective in
January 1994. As a result, Mr. Dwight's salary for fiscal 1994 includes an
automobile allowance of $7,621. Mr. Dwight also received $2,250 during the
first two months of fiscal 1994 under the Company's former program for
automobile allowance payments. Mr. Dwight received quantitative quarterly
bonuses totaling $16,333 under the guidelines of the Company's 1994
Management Incentive Plan on the basis of the Company achieving its
performance objectives during the first and second quarters of fiscal 1994.
No bonuses were earned by Mr. Dwight in the third and fourth quarters of
fiscal 1994. Mr. Dwight earned an annual, qualitative bonus of $17,115 for
fiscal 1994 for leading the Company to profitable performance for the year.
The Compensation and Stock Option Committee awarded Mr. Dwight an option for
100,000 shares of Common Stock to fulfill the commitment made by the Company
to Mr. Dwight in its offer of employment. Also during fiscal 1994, the
Committee elected to extend the expiration dates of two of Mr. Dwight's
earlier option awards as recognition of Mr. Dwight's performance under
the difficult business situation prevailing since 1991. The options were
extended for a period of five years beginning July 1, 1994. The option
prices and all other terms and conditions of the original option grants
were unchanged.
Mr. Dwight received an automobile allowance, a special medical expense
reimbursement annual benefit of up to $10,000, and an excess life insurance
premium payment. Mr. Dwight also participated in the standard employee
benefit programs of the Company.
COMPENSATION AND STOCK OPTION COMMITTEE
RENN ZAPHIROPOULOS, CHAIRMAN
DOUGLAS C. CHANCE
JULIAN SCHROEDER
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation and Stock Option Committee is a former or
current officer or employee of the Company or any of its subsidiaries.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors
and persons who own more than ten percent of the Common Stock of the
Company to file reports of ownership on Form 3 and changes in ownership
on Forms 4 or 5 with the Securities and Exchange Commission (the
"Commission"). Such officers, directors and ten percent stockholders
are also required to furnish the Company with copies of all Section 16(a)
reports they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that Forms 3, 4
and 5 have been filed as required or were not required to be filed,
the Company believes that, during the fiscal year ended October 31, 1994,
all Section 16(a) filing requirements were complied with that were
applicable to its officers, directors and ten percent stockholders,
with the exception of one late filing on Form 4 made by Herbert M. Dwight, Jr.,
the Company's Chief Executive Officer, during fiscal 1994.
<TABLE>
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG OPTICAL COATING LABORATORY, INC., THE NASDAQ STOCK
MARKET-US INDEX AND A PEER GROUP
CUMULATIVE TOTAL RETURN
10/89 10/90 10/91 10/92 10/93 10/94
<S> <C> <C> <C> <C> <C> <C>
Optical Coating Laboratory, Inc. 100 65 99 124 94 86
Peer Group 100 64 91 81 98 96
NASDAQ Stock Market - US 100 74 126 141 181 182
</TABLE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
TRANSACTION WITH KLAUS F. DERGE
The Company's subsidiary in Germany, OCLI Optical Coating Laboratory GmbH,
is located in an office suite in Reinheim, Germany, that was leased by Mr.
Klaus F. Derge, the Company's Vice President, International Operations, for
Mr. Derge's personal business use. The Company utilizes these offices and
pays Mr. Derge approximately $126,000 per year for its occupancy of the
office suite and for office services. It is the Company's opinion that the
terms of this arrangement are as fair as could have been obtained from
unaffiliated persons.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
directors and officers. Such agreements require the Company to indemnify
such individuals to the full extent permitted by Delaware law if certain
claims are brought against them in their capacities with the Company.
EMPLOYMENT CONTRACTS, CHANGE IN CONTROL AND SEVERANCE ARRANGEMENTS
Effective August 19, 1991, Mr. Dwight accepted an employment offer from
the Company and entered into an agreement to serve as the Company's
Chairman, President and Chief Executive Officer at the pleasure of the
Board of Directors. Under the terms of the agreement, Mr. Dwight's base
salary was set at $300,000 per year, to be adjusted annually at the
discretion of the Compensation and Stock Option Committee based upon the
Company's performance and Mr. Dwight's contribution thereto. Among other
provisions, the agreement included a grant to Mr. Dwight of an option to
purchase 400,000 shares of Company Common Stock. Under this option award,
100,000 shares were vested upon grant and 150,000 option shares vested in
each of the two years thereafter. The option is now fully vested. Also,
included in the agreement was consideration for additional options in
amounts up to 100,000 option shares annually to be awarded to Mr. Dwight
at the discretion of the Compensation and Stock Option Committee based upon
the performance of the Company and Mr. Dwight's contribution thereto for
the two years following the date of his employment. Mr. Dwight was granted
an additional option in fiscal 1992 for 100,000 shares. No stock options were
granted to Mr. Dwight in fiscal 1993. The agreement also provides that in the
event of a Change in Control of the Company (as defined in the Company's
Restated Certificate of Incorporation), all unvested options held by Mr.
Dwight will immediately vest.
Mr. John McCullough entered into an Employment Agreement with the Company
effective August 19, 1991, pursuant to which Mr. McCullough agreed to
perform services at the officer level for approximately 75 days per year
through October 31, 1992 at a base salary of $135,000 per year and for
approximately 50 days per year from November 1, 1992 through October 31, 1995
at a base salary of $90,000 per year. Effective November 20, 1987, the
Company entered into Employment Agreements with certain executive officers
of the Company, including Messrs. Laurence D. Parson, Norman E. Strandlund
and Josef Wally. On November 20, 1991, the Agreements were extended for an
additional term of two years and again, on November 20, 1993, the Agreements
were extended for a two year term expiring on November 20, 1995. At
November 20, 1993, Messrs. Dwight and Derge also entered into Employment
Agreements with the Company. These Employment Agreements, among other
provisions, provide that the officer has the right to terminate his
employment at any time during the period beginning three months after
the occurrence of a "Change in Control"1 and ending twelve months after
the occurrence of such Change in Control and upon such termination shall be
paid an amount equal to eighteen months of his maximum salary in effect
within twelve months of the termination. Except in the case of a termination
by the Company for cause or a voluntary termination in accordance with the
preceding paragraph, if at any time within two years after the occurrence
of a Change in Control either (i) the Company terminates the employment of
an officer who is party to an Employment Agreement or (ii) such officer
terminates his employment following a "Constructive Dismissal"2 by the
Company, then that officer shall be paid an amount equal to thirty-six months
of the officer's maximum salary in effect within twelve months of termination.
The Employment Agreements provide that no amount shall be paid under the
Employment Agreements which would be classified as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Internal Revenue
Code.
_______________
1 "Change in Control" is defined in the Agreements to mean the occurrence of
any of the events described in subparagraph (i) or (ii) below:
(i) the acquisition by any person, entity or group (other than the Company,
any subsidiary of the Company, any employee benefit plan of the Company or
any subsidiary of the Company, or any person or entity organized, appointed
or established by the Company for or pursuant to the terms of any such plan)
alone, or together with any affiliate or associate, of beneficial ownership
of 20% of the shares, and the adoption by the Board of Directors of a
resolution (x) disapproving such acquisition, or (y) declaring operative
the provisions of the respective Employee Security Agreement regarding a
change of control;
(ii) the failure of a majority of the Board of Directors to be "Continuing
Directors," as defined below.
"Continuing Director" means (i) any member of the Board who was a member
of the Board prior to November 20, 1987, or (ii) any person who
subsequently becomes a member of the Board if such person's nomination
for election or reelection is approved by a majority of the Continuing
Directors.
2 "Constructive Dismissal" shall occur if the Company demotes an employee,
reduces an employee's duties, decreases an employee's benefits or
compensation or relocates an employee to a location outside of the community
where the employee is employed as of the date of a Change in Control.
PROPOSAL 2:
OPTICAL COATING LABORATORY, INC.
1995 INCENTIVE COMPENSATION PLAN
PART 1. PLAN PURPOSE, ADMINISTRATION AND ELIGIBILITY
I. PURPOSE
The purpose of this 1995 Incentive Compensation Plan (the "Plan") of Optical
Coating Laboratory, Inc. (the "Company") is to encourage ownership in the
Company by key personnel whose long-term employment is considered essential
to the Company's continued progress and thus to provide them with a further
incentive to continue in the employ of the Company. In adopting the Plan,
the Board of Directors has determined that the additional incentive provided
by the Plan to those employees whose efforts have the most effect on the
Company's success will promote the welfare of the Stockholders in general.
II. ADMINISTRATION
The members of the Compensation and Stock Option Committee, acting as
a separate committee (the "Committee") consisting of three or more directors
of the Company who are not eligible to participate in the Plan, shall
supervise and administer the Plan. The Committee shall, from time to time,
designate the key employees of the Company who shall be granted stock
options ("Stock Options") or stock awards ("Stock Awards") under the Plan
and the amount and nature of the award to be granted to each such employee.
All questions of interpretation of the Plan or of any Stock Options or
Stock Awards issued under it shall be determined by the Committee and
such determination shall be final and binding upon all persons having
an interest in the Plan. Any or all powers and discretion vested in the
Committee under this Plan may be exercised by any subcommittee so authorized
by the Committee.
III. PARTICIPATION IN THE PLAN
Directors, officers and other salaried employees of the Company in key
positions shall be eligible to participate in the Plan.
IV. STOCK SUBJECT TO THE PLAN
The maximum number of shares which may be optioned or awarded under the
Plan shall be Six Hundred Thousand (600,000) shares of the Company's
Common Stock. The limitation on the number of shares which may be optioned
or awarded under the Plan shall be subject to adjustment as provided in
Section XVII of the Plan.
The grant of a Stock Award not pursuant to a Stock Option under the Plan
shall be subject to such restrictions as the Committee shall determine to
be appropriate, including but not limited to restrictions on resale,
repurchase provisions, special vesting requirements or forfeiture provisions.
If any outstanding Stock Option under the Plan for any reason expires or
is terminated without having been exercised in full, or if any Stock
Awards are forfeited, the forfeited share or shares allocable to the
unexercised portion of such Stock Option shall again become available
for grant pursuant to the Plan. Upon the grant of a Stock Award or the
exercise of a Stock Option, the Company may issue new shares or reissue
shares previously repurchased by or on behalf of the Company.
PART 2. STOCK OPTIONS
V. NON-QUALIFIED STOCK OPTIONS AND INCENTIVE STOCK OPTIONS
Any Stock Option granted under the Plan shall be designated by the Committee
as a non-qualified stock option or as an incentive stock option ("ISO")
within the meaning of Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code"). No options granted hereunder shall be exercisable
unless the Plan is approved by the Stockholders of the Company within
twelve (12) months before or after the date such plan is adopted.
VI. TERMS OF STOCK OPTIONS
Each Stock Option granted under the Plan shall be for a period determined
by the Committee not to exceed ten (10) years from the date of grant, shall
be evidenced by a stock option agreement between the Company and the person
to whom such Stock Option is granted, and shall be subject to the following
additional terms and conditions:
A. CONTINUATION OF EMPLOYMENT.
An employee to whom such Stock Option is granted must agree in writing, as
a condition to the granting of the Stock Option, that he or she will remain
in the employ of the Company following the date of granting of the Stock
Option for a period of twelve (12) months.
B. EXERCISE OF THE STOCK OPTION.
Prior to its termination, such Stock Option may be exercised by the person
then entitled to do so, at such time or times and in such amounts as shall
be specified in the stock option agreement. A Stock Option is exercised (i)
by giving written notice of exercise to the Company, specifying the number
of full shares of Common Stock to be purchased and accompanied by full
payment of the option price therefor; provided, however, that to the extent
authorized by the Committee, an optionee may make all or any portion of any
payment due to the Company upon exercise of a Stock Option by delivery of
any property (including securities of the Company or promissory notes) other
than cash, so long as such property constitutes valid consideration for the
Common Stock under applicable law; and (ii) by giving assurances satisfactory
to the Company that the shares of Common Stock to be purchased upon such
exercise are being purchased for investment and not with a view to resale
in connection with any distribution of such shares in violation of the
Securities Act of 1933; provided, however, that in the event the Common Stock
subject to the Stock Option is registered under the Securities Act of 1993,
as amended, or in the event a resale of such Common Stock without such
registration would otherwise be permissible, this condition shall be
inoperative if in the opinion of counsel for the Company such condition is
not required under the Securities Act of 1933, or any other applicable law,
regulation or rule of any governmental agency.
C. OPTION PRICE.
The option price under each Stock Option shall be determined by the Committee
but shall not be less than one hundred percent (100%) of the fair market
value of the Company's Common Stock at the time of granting the Stock Option.
D. TERMINATION OF THE STOCK OPTION.
To the extent not previously exercised, each Stock Option shall terminate
on the date fixed therefor in the stock option agreement; provided, however,
that (i) in the event that an employee who has been granted a Stock Option
shall cease to be employed by the Company or a subsidiary for any reason
other than death, the Stock Option shall terminate to the extent such
employee shall fail to exercise such Stock Option within the time period
fixed by the Committee at the time of grant, but only to the extent his or
her rights to exercise such Stock Option have accrued pursuant to the terms
hereof and have not previously been exercised at the date of such termination;
provided, however, that if such employee shall have his or her employment
terminated for cause the Stock Option shall terminate simultaneously with
such employee's effective date of termination, and any unexercised portion
of the Stock Option shall thereupon expire; and (ii) in the event the
employee shall die while in the employ of the Company or after the
termination of his employment for any reason other than for cause, and
shall not have exercised the Stock Option, it shall be exercisable at any
time within the period fixed by the Committee at the time of its grant, by
the executors or administrators of the employee by bequest or inheritance.
Termination of employment "for cause", as used herein, shall mean discharge
by the Company or any of its subsidiaries for (i) dishonesty, (ii) commission
of a crime, or (iii) divulging trade secrets to competitors or others not
entitled to receive them. The foregoing provisions shall apply with equal
force and effect and equivalent meaning, with such changes as may be
necessary, to a director who has been granted options hereunder.
E. STOCK OPTIONS NOT TRANSFERABLE.
Any Stock Option shall be nontransferable by the optionee otherwise than
by will or the laws of descent and distribution, and shall be exercisable
during the optionee's lifetime only by the optionee, or in the event of
death, by the optionee's representative or any person designated by the
optionee in his stock option agreement.
F. QUALIFICATION OF STOCK.
The right to exercise the Stock Options shall be further subject to the
requirement that if at any time the Board shall determine, in its discretion,
that the listing, registration or qualification of the shares covered by the
Stock Option upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory authority, is
necessary or desirable as a condition of or in connection with the
granting of such Stock Option or the purchase of shares thereunder, the
Stock Option may not be exercised, in whole or in part, unless and until
such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Board of Directors, in its sole discretion.
G. LIMITATION ON INCENTIVE STOCK OPTIONS.
No option designated by the Committee as an ISO entitled to special tax
treatment under Code Section 422A may be granted under the Plan if such
grant, together with any applicable prior grants, would exceed any
maximum established under the Code for ISOs that may be granted to a
single employee. Should it be determined that any such ISO granted under
the Plan exceeds such maximum, the excess portion of such ISO shall be
reclassified as a nonqualified option not entitled to special tax treatment
under Section 422A of the Code.
H. PROCEEDS FROM SALE OF STOCK.
The proceeds of sale of all shares of Stock issued from time to time upon
the exercise of options granted pursuant to the Plan shall be added to the
general funds of the Company and as such shall be used from time to time for
such corporate purposes as the Board of Directors of the Company may
determine.
I. OTHER PROVISIONS.
The stock option agreement may contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the
Committee in its sole discretion.
VII. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
Subject to the terms and conditions and within the limitations of the Plan,
the Committee may modify, extend or renew outstanding Stock Options granted
under the Plan, or accept the surrender of outstanding Stock Options (to
the extent not theretofore exercised) and authorize the granting of new
Stock Options in substitution therefor (to the extent not theretofore
exercised). Notwithstanding the foregoing, however, no modification of
any Stock Option shall, without the consent of the employee, alter or
impair any rights or obligations under any Stock Option theretofore granted
under the Plan.
PART 3. STOCK AWARDS
VIII. STOCK AWARD DETERMINATION
The Committee may grant an eligible employee Stock Awards at such times and
in such amounts as the Committee may designate which in its opinion fully
reflect the performance level and potential of such employee. Such awards
shall be made in accordance with such guidelines as the Committee may from
time to time adopt. Stock Awards shall be independent of any grant of any
Stock Option under this Plan, and shall be made subject to such restrictions
as the Committee may determine to be appropriate.
IX. PAYMENT OF STOCK AWARDS
A. No employee shall have the right to receive payment of any Stock Award
until notified of the amount of such award, in writing, by the Committee or
its authorized delegate.
B. An award of Common Stock may be subject to restrictions ("Restricted
Stock") or acquired by the employee by delivery of a recourse or non-recourse
promissory note ("Loan Stock"), and certificates for such shares will be
deposited in escrow with the Company's Secretary. The employee shall retain
all rights in the Restricted Stock or Loan Stock while it is held in escrow
including, but not limited to, voting rights and the right to receive
dividends, except that the employee shall not have the right to transfer or
assign such shares until all restrictions pertaining to such shares are
terminated and all loans paid in full, at which time the applicable stock
certificates shall be released from escrow and delivered to the employee by
the Company's Secretary.
C. The Committee may permit, on such terms as it deems appropriate, use of
Restricted Stock or Loan Stock as partial or full payment upon exercise of
a stock option under any stock option of a Company plan or this Plan. In
the event shares of Restricted Stock or Loan Stock are so tendered as
consideration for the exercise of an option, a number of the shares issued
upon the exercise of said option, equal to the number of shares of Restricted
Stock or Loan Stock used as consideration therefor, shall be subject to
the same conditions as the Restricted Stock or Loan Stock so submitted plus
any additional conditions that may be imposed by the Committee.
X. DURATION OF RESTRICTIONS AND TERMS OF PROMISSORY NOTES
The Committee will establish the period or periods after which the conditions
on Restricted Stock will lapse and the terms of any promissory notes relating
to Loan Stock.
XI. DEATH OR TOTAL AND PERMANENT DISABILITY OF A PARTICIPATING
EMPLOYEE HOLDING RESTRICTED STOCK
By written notice to the Company, an employee who has received a grant of
Restricted Stock may designate one or more persons (and from time to time
change such designation) who, by reason of his death, shall acquire the
right to receive any vested but unpaid Stock Awards held by the employee
at the time of his death. Such Stock Awards shall be paid to the designated
representative at such time and in such manner as if the employee were
living. In the event of total and permanent disability of an employee
who has participated in the Plan, any unpaid but vested Stock Award shall
be paid to the employee if legally competent or to other legally designated
guardian or representative if the employee is legally incompetent.
After the death or total and permanent disability of an employee, the
Committee may in its sole discretion at any time terminate restrictions upon
stock awarded to the employee. A request to the Committee for the termination
of restrictions or the acceleration of payments not yet due may be made by
the employee's beneficiary or representative, or by a totally and permanently
disabled employee. If at the time of the employee's death, there is no
effective beneficiary designation as to all or some portion of the awards
hereunder, such awards or such portion thereof shall be paid to or on the
order of the legal representative of the employee's estate. In the event of
uncertainty as to the interpretation or effect of any notice of designation,
the Committee's decision with respect thereto shall be conclusive.
XII. RESTRICTIONS AND FORFEITURE OF STOCK AWARDS
The Company's obligation to deliver stock certificates held in escrow is
subject to the condition that the employee remain an active employee of the
Company for the entire deferral and/or restriction period, including
mandatory and optional deferrals. If the employee fails to meet this
condition, the employee's right to any such unpaid amounts or undelivered
stock certificates shall be forfeited. This provision may be waived by
the Committee in exceptional circumstances.
PART 4. STOCK WITHHOLDING
XIII. USE OF SHARES TO SATISFY TAX LIABILITY
Agreements with employees implementing this Plan may permit an
employee who has been granted Restricted Stock, Stock Options or Loan
Stock to elect that the tax liability arising from the lapse of restrictions
on Restricted Stock, exercise of Stock Options, or payment of a non-recourse
note used to purchase Loan Stock be satisfied by the Company's withholding
from the shares to be delivered to the employee that number of shares the
fair market value of which is closest to, without exceeding, such tax
liability. For purposes of this paragraph, "tax liability" shall mean the
minimum federal and state income taxes required to be withheld from such
compensation income arising from the transaction, or, in the discretion of
the Company, such greater amount of taxes (including taxes other than
income taxes) that are required to be withheld from such compensation.
An employee's election under an Agreement with the Company permitting such
election shall be made in writing to the Company at least three (3) days
prior to the event giving rise to the employee's tax liability. An employee
who is subject to the requirements of Section 16(b) of the Securities
Exchange Act of 1934 ("Section 16(b)") desiring to elect the treatment
provided for herein shall give such written notice of the same to the
Company as legal counsel for the Company shall determine is required.
PART 5. GENERAL PROVISIONS
XIV. ASSIGNMENTS
The rights and benefits under this Plan may not be assigned except
for the designation of a beneficiary as provided in Sections VI and XI.
XV. TIME FOR GRANTING STOCK OPTIONS OR STOCK AWARDS
All Stock Options and Stock Awards subject to this Plan shall be granted,
if at all, not later than ten (10) years after the adoption of this Plan
by the Company's Board of Directors.
XVI. LIMITATION OF RIGHTS
A. No Right to a Stock Option or Stock Award. Nothing in the Plan shall
be construed to give any employee of the Company any right to be granted a
Stock Option or Stock Award.
B. No Employment Right. Neither the Plan, nor the granting of a Stock
Option or Stock Award nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Company will employ a grantee for any period of time or
in any position, or at any particular rate of compensation.
C. No Stockholders' Rights for Stock Options. An optionee shall have
no rights as a Stockholder with respect to the shares covered by his or
her Stock Options until the date of the issuance to him of a stock
certificate therefor.
XVII. CHANGES IN PRESENT STOCK
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in the corporate structure or
capitalization affecting the Company's present Common Stock, appropriate
adjustment shall be made by the Board of Directors, in its sole discretion,
in the number and kind of shares which are or may become subject to
Stock Options and Stock Awards granted or to be granted hereunder, and in the
option price of shares which are subject to Stock Options granted hereunder.
XVIII. EFFECTIVE DATE OF THE PLAN
The Plan shall take effect on the date of adoption by the Board of Directors
of the Company, subject to approval by the Stockholders of the Company at a
meeting held within twelve (12) months after the date of such adoption.
Stock Options and Stock Awards may be granted under the Plan at any time
after the adoption of the Plan by the Board of Directors of the Company and
prior to the termination of this Plan.
XIX. AMENDMENT OF THE PLAN
The Board of Directors of the Company may suspend or discontinue the Plan
or revise or amend it in any respect whatsoever; provided, however, that
without approval of the Stockholders no revision or amendment shall change
the number of shares subject to the Plan (except as provided in Section XVII),
change the designation of the class of employees eligible to receive Stock
Options or Stock Awards, or materially increase the benefits accruing to
participants under the Plan.
XX. NOTICE
Any written notice to the Company required by any of the provisions of this
Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
XXI. COMPANY BENEFIT PLANS
Nothing contained in this Plan shall prevent the employee prior to death, or
the employee's dependents or beneficiaries after the employee's death, from
receiving, in addition to any awards provided for under this Plan and any
salary, any payments under a Company retirement plan or which may be
otherwise payable or distributable to such employee, or to the employee's
dependents or beneficiaries under any other plan or policy of the Company or
otherwise.
XXII. UNFUNDED PLAN
Insofar as it provides for Stock Awards, this Plan shall be unfunded.
Although bookkeeping accounts may be established with respect to employees
who are granted Stock Awards under this Plan, any such accounts will be
used merely as a bookkeeping convenience. Except for the holding of
Restricted Stock and Loan Stock in escrow pursuant to Section IX B,
the Company shall not be required to segregate any assets which may at any
time be represented by Stock Awards, nor shall this Plan be construed as
providing for such segregation, nor shall the Company nor the Board nor
the Committee be deemed to be a trustee of shares or cash to be awarded
under the Plan. Any liability of the Company to any employee with respect
to a Stock Award under this Plan shall be based solely upon any contractual
obligations which may be created by the Plan and any agreement consistent
with this Plan; no such obligation of the Company shall be deemed to be
secured by any pledge or other encumbrance on any property of the Company.
Neither the Company nor the Board nor the Committee shall be required to
give any security or bond for the performance of any obligation which may
be created by this Plan.
XXIII. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of California and
construed accordingly.
PROPOSAL 3:
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP as the Company's independent auditors to
audit the Company's consolidated financial statements for the 1995 fiscal
year. The ratification of this appointment by the Stockholders is being
sought as a matter of good corporate practice, although it is not required.
The affirmative vote of the holders of a majority of the shares represented
and voting at the Annual Meeting will be required to ratify the selection
of Deloitte & Touche LLP. In the event Stockholders fail to ratify the
appointment, the Board of Directors will reconsider its appointment of
Deloitte & Touche LLP. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different accounting firm at any
time during the year if the Board feels that such a change would be in the
best interests of the Company and its Stockholders. Representatives of
Deloitte & Touche LLP are expected to be present at the meeting, will have
the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
OTHER MATTERS
Management does not intend to bring any other business before the meeting,
and so far as is known to Management, no matters are to be brought before
the meeting except as specified in the notice of the meeting. However, as
to any other business which may properly come before the meeting, it is
intended that proxies in the form enclosed will be voted in respect thereof,
in accordance with the judgment of the persons voting such proxies.
February 24, 1995
Santa Rosa, California
By Order of the Board of Directors,
/s/ Joseph C. Zils
JOSEPH C. ZILS
General Counsel and Secretary
