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 29, 1996
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Optical Coating Laboratory, Inc. to be held on Friday, March 29, 1996, at
4:00 p.m. at 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 1996 Incentive Compensation Plan.
3. To ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the year ending
October 31,1996.
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, 1996,
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,
JOSEPH ZILS
General Counsel and Secretary
Santa Rosa, California
March 8, 1996
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 29, 1996
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 Friday,
March 29, 1996, at 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
March 8, 1996.
VOTING RIGHTS AND SOLICITATION
The Board of Directors of the Company has fixed the close of business on
January 31, 1996, 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 9,521,977 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 1997 must
be received by the Company no later than October 28, 1996, for inclusion in
the proxy statement relating to that meeting. No Stockholder proposals were
received for presentation at the Annual Meeting for 1996.
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 2 and 3 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 2 and 3, 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 November 2, 1995. 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 3 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 5 of this
Proxy Statement.
NOMINEES
HERBERT M. DWIGHT, JR.; AGE 65; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF THE COMPANY.
Mr. Dwight has served as Chairman of the Board, President and Chief
Executive Officer since August 19, 1991. From December 1993 to April 1995,
Mr. Dwight also served as Chief Financial Officer. Mr. Dwight was a
founder of Spectra Physics Inc., a leading manufacturer and developer of
commercial lasers. He served as Chief Executive Officer of Spectra Physics
from 1967 to 1988. Mr. Dwight was Chairman, President and Chief Executive
Officer of Superconductor Technologies, Inc. from 1988 through August 1991
and continued to serve as Chairman from 1991 until May 1994. Mr. Dwight is
also a director of Trans Ocean Limited, Applied Materials, Inc. and Applied
Magnetics Corp.
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; PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
OF RESEARCH, B D S SECURITIES CORPORATION
Mr. Schroeder has been a director of the Company since 1989. Mr. Schroeder
was appointed President, Chief Executive Officer and Director of Research
of B D S Securities Corporation in May 1995. He has served as Vice
President, Corporate Finance, of B D S Securities Corporation since March
1989. Mr. Schroeder was a principal of Schroeder Consulting Company, a
financial consulting firm, from January 1985 to February 1989.
RENN ZAPHIROPOULOS; AGE 70; 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 1995 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 and $500 for participation in a telephonic meeting of the
Board. Directors who are employees of the Company received 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 1995, 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
$9,875, plus payment of related withholding taxes.
BOARD MEETINGS AND COMMITTEES
During fiscal 1995, there were four regular meetings of the Board of
Directors and one telephonic meeting. Attendance by each director at the
meetings of the Board and its Committees during fiscal 1995 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 1995. 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,
non-employee directors with Mr. Zaphiropoulos serving as Chairman. The
Committee met four times during fiscal 1995. 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 By-Laws, 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 1995.
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:
COMMON STOCK
NUMBER OF PERCENT OF
SHARES OUTSTANDING
BENEFICIALLY SHARES
OWNED
DIRECTORS, OFFICERS
AND 5% STOCKHOLDERS
PRINCIPAL STOCKHOLDERS:
Employee Stock Ownership Plan
of the Company (1) 1,626,136 17.1%
c/o Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Hakuto Co., Ltd. 907,440 9.5%
1-13 Shinjuku 1-Chome
Shinjuku-ku, Tokyo 150, Japan
DIRECTORS:
Douglas C. Chance 18,200 .2%
John McCullough(2) 43,089 .5%
Julian Schroeder 24,000 .3%
Renn Zaphiropoulos 8,000 .1%
NAMED EXECUTIVE OFFICERS:
Herbert M. Dwight, Jr.(3) 681,348 6.7%
Klaus F. Derge(4) 88,600 .9%
N.E. Rick Strandlund (5) 102,890 1.1%
Josef Wally(6) 28,338 .3%
Joseph Zils(7) 34,238 .4%
All Directors and Executive Officers
as a group (14 persons)(8) 1,201,406 11.5%
_________________
(1) Pursuant to the terms of the Trust Agreement under the Company's
Employee Stock Ownership Plan ("ESOP+"), the Trustee votes 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
Trustee otherwise.
(2) Includes 19,546 shares held for the benefit of Mr. McCullough in the
Company's Employee Stock Ownership Plan.
(3)Includes 633,000 shares under options exercisable within 60 days of
the Record Date and 4,089 shares held for the benefit of Mr. Dwight in the
Company's Employee Stock Ownership Plan.
(4)The 88,600 shares shown for Mr. Derge are shares under options
exercisable within 60 days of the Record Date.
(5)Includes 51,600 shares under options exercisable within 60 days of
the Record Date and 11,192 shares held for the benefit of Mr. Strandlund in
the Company's Employee Stock Ownership Plan.
(6)Includes 19,800 shares under options exercisable within 60 days of
the Record Date and 8,538 shares held for the benefit of Mr. Wally in the
Company's Employee Stock Ownership Plan.
(7)Includes 32,500 shares under options exercisable within 60 days of
the Record Date and 1,738 shares held for the benefit of Mr. Zils in the
Company's Employee Stock Ownership Plan.
(8)Includes 942,325 shares under options exercisable within 60 days of
the Record Date and 69,851 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, 1995:
<TABLE>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) (#) COMPENSATION(4)
(1) (2) (3)
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr.(5) 1995 $325,998 $59,788 $13,430 100,000 $15,244
Chairman of the Board, 1994 323,920 33,448 3,169 600,000 5,889
President and 1993 314,051 20,589 10,366 -- 4,537
Chief Executive Officer
Klaus F. Derge 1995 243,542 19,906 11,832 5,000 --
Vice President, 1994 176,900 12,164 12,000 10,000 --
International Operations 1993 158,400 7,472 11,686 -- --
N.E. Rick Strandlund 1995 180,082 35,443 3,835 20,000 7,110
Vice President and 1994 170,034 17,960 2,092 10,000 5,458
General Manager, 1993 161,417 4,392 10,544 8,000 14,503
Santa Rosa Division
Josef Wally 1995 135,210 18,208 2,822 10,000 6,925
Vice President and 1994 130,286 9,296 3,135 5,000 5,147
Corporate Controller 1993 123,010 5,812 12,247 5,000 2,877
Joseph Zils 1995 134,413 23,202 1,752 15,000 5,819
Vice President, 1994 117,493 8,822 3,258 8,000 9,144
General Counsel and 1993 104,577 4,870 8,000 5,000 9,926
Corporate Secretary
</TABLE>
_________________
(1)In January 1994, the Company chose to include the automobile allowance
benefit it paid to certain employees, including the Named Executive
Officers with the exception of Mr. Derge, into the base salaries of the
participants. Thus, the approximately $9,000 annual benefit is included in
the base salaries of the Named Executive Officers in fiscal 1995 and 1994.
(2)Bonuses were paid to the Named Executive Officers under the Company's
1995, 1994 and 1993 Management Incentive Plans. The 1995 bonus shown for
Mr. Zils includes $5,000 awarded under the Company's Spot Bonus Award
program.
(3)Includes for fiscal 1995, 1994 and 1993 for the Named Executive
Officers, excluding Mr. Derge, a special medical expense reimbursement
benefit and for two months of fiscal 1994 and all of fiscal 1993, an
automobile allowance paid as a separate benefit.
Mr. Derge participates in separate medical and automobile expense
reimbursement programs through the Company's subsidiary in Reinheim,
Germany. For fiscal 1995, he received $2,832 in medical expense
reimbursement payments. For automobile expenses, Mr. Derge is reimbursed
for actual expenses incurred for business purposes.
(4)Includes for fiscal 1995, 1994 and 1993, for each Named Executive
Officer, excluding Mr. Derge, a life insurance benefit and contributions
made by the Company under the Employee Stock Ownership Plan (ESOP+).
LIFE INSURANCE ESOP+
FOR FISCAL 1995: PREMIUM CONTRIBUTION
Herbert M. Dwight, Jr. $9,704 $5,540
Klaus Derge -- --
N.E. Rick Strandlund 1,570 5,540
Josef Wally 1,757 5,168
Joseph Zils 403 5,416
(5)During fiscal 1994, options for 500,000 shares held by Mr. Dwight were
canceled and reissued to extend the expiration date. The options were
regranted effective July 1, 1994 for a period of five years. No change was
made to the option prices, and all other terms of the original option
agreements were unchanged.
II. OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF POTENTIAL
NUMBER OF TOTAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED RATES
UNDERLYING GRANTED TO OF STOCK PRICE
OPTIONS OPTIONEES EXERCISE OR APPRECIATION FOR
GRANTED IN FISCAL BASE PRICE EXPIRATION OPTION TERM(4)
NAME (#)(1) YEAR(2) ($/SHARE)(3) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr. 100,000 21.1% $6.25 12/16/99 $173,000 $382,000
Klaus F. Derge 5,000 1.0% $6.25 12/16/99 $9,000 $19,000
N.E. Rick Strandlund 20,000 4.2% $6.25 12/16/99 $35,000 $76,000
Josef Wally 10,000 2.1% $6.25 12/16/99 $17,000 $38,000
Joseph Zils 15,000 3.2% $6.25 12/16/99 $26,000 $57,000
</TABLE>
(1)The options listed in the above table for the Named Executive Officers
were granted on December 16, 1994, pursuant to the Company's 1995 Incentive
Compensation Plan. The options become exercisable in three annual
installments commencing one year from the date of grant. The options have a
maximum term of five years, subject to earlier termination of unvested
options in the event of the optionee's cessation of service with the
Company.
(2)The Company granted options totaling 474,500 shares to employees,
including the Named Executive Officers, in fiscal 1995.
(3)The exercise price of each option may be paid in cash, in existing
shares of Common Stock valued at fair market value on the exercise date or
through an exercise procedure involving a same-day-sale of the purchased
shares.
(4)The 5% and 10% assumed rates of appreciation are stipulated by the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of its Common Stock. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
option term will be at the assumed levels or at any other defined level.
Unless the market price of the Company's Common Stock does, in fact,
appreciate over the option term, no value will be realized from the option
grants.
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
____________________________________
The following table provides information on option exercises in fiscal
1995 by the Named Executive Officers and the value of such officers'
unexercised options at October 31, 1995.
<TABLE> NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
YEAR END YEAR END(1)
(#) ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Herbert M. Dwight, Jr. 0 0 567,000/ $3,610,875/
133,000 $1,001,625
Klaus F. Derge 0 0 83,500/ $436,688/
11,500 $87,063
Rick Strandlund 8,584 $61,613 38,750/ $209,344/
29,250 $208,156
Josef Wally 2,000 $14,821 13,500/ $59,063/
14,500 $102,563
Joseph Zils 3,000 $22,885 23,500/ $110,938/
21,500 $155,313
</TABLE>
(1)The Company's fiscal year ended October 31, 1995. The closing price of
the Company's Common Stock on the NASDAQ National Market System on October
31, 1995 was $13.75 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 US 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 1995, 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.
(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 1995
Management Incentive Plan (the "Plan" or "1995 Plan") was set at a maximum
of 15% of 1995 pretax profits. The 1995 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 stock option grants to
officers and key employees, other than the chief executive officer, are
approximately 2-2.5% of total outstanding shares, and are reviewed by the
Compensation and Stock Option Committee at its December meeting.
Recommended awards to executive officers, and other eligible participants
(the "Participants"), are calculated 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 adjusted 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 is adjusted by measuring the Participant's
performance against preestablished goals. The Company also uses stock
option awards when recruiting for certain key positions.
In determining stock option awards for the Company's chief executive
officer, the Compensation and Stock Option Committee has sought to reward
Mr. Dwight for his accomplishments and leadership and to increase his
ownership and long-term commitment to the Company by awarding him a
significantly higher number of stock options than policy guidelines would
otherwise suggest.
CEO COMPENSATION
In applying the foregoing principles and policies in its determination of
the compensation of Mr. Dwight, the Company's chief executive officer, the
Compensation and Stock Option Committee elected not to increase Mr.
Dwight's base salary for fiscal 1995. The Committee determined that his
current salary level was consistent with salary levels in effect for
comparable positions with other U.S. technology companies of similar size.
However, the Committee awarded an additional 100,000 option shares to Mr.
Dwight because of the positive changes the Company experienced in fiscal
1994 and Mr. Dwight's leadership in facilitating those changes. Under the
1995 Management Incentive Plan, Mr. Dwight earned 100% of his quantitative
quarterly bonuses totaling $45,640 on the basis of the Company achieving
its performance objectives in each quarter of fiscal 1995. Mr. Dwight
earned 62%, or $14,148, of his annual qualitative bonus for fiscal 1995,
which was calculated using an average of the qualitative bonus awards
earned by Mr. Dwight's direct reports.
Mr. Dwight received a special medical expense reimbursement annual benefit
of up to $10,000, which has a carryover provision for any unused balance
from the prior year, and payment of an excess life insurance policy. 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, 1995, all Section
16(a) filing requirements were complied with that were applicable to its
officers, directors and ten percent stockholders.
PERFORMANCE GRAPH
The stock price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or under the Exchange
Act, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under
such acts.
The graph below compares cumulative total return of the Company's Common
Stock with the cumulative total return of the NASDAQ Stock Market-U.S.
Index and a Peer Group. In establishing the Peer Group, the Company has
selected public companies which are competitors or manufacture products or
serve markets in the Company's opto-electronics field and which have a
market valuation similar in range to that of the Company's. The Peer Group
consists of Donnelly Corporation, which is traded on the American Stock
Exchange, and Coherent, Inc., Newport Corporation, Southwall Technologies,
Inc. and Zygo Corporation, all of which are traded on the NASDAQ National
Market System. The graph assumes $100 was invested on October 31, 1991 in
each of (i) the Company's Common Stock, (ii) the stocks comprising the
NASDAQ Index and (iii) the stocks comprising the Peer Group, and assumes
the reinvestment of dividends.
Cumulative Total Return
---------------------------------------------------
(Data Summary) 10/90 10/91 10/92 10/93 10/94 10/95
OCLI 100 154 192 145 133 295
PEER GROUP 100 145 127 153 154 270
NASDAQ STOCK MARKET-US 100 169 191 246 247 333
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
paid Mr. Derge approximately $143,000 in fiscal 1995 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.
TRANSACTION WITH WILLIAM C. BURGESS
In association with its efforts to recruit Mr. Burgess as Vice President,
Human Resources, the Company entered into a loan agreement to cover the
losses he incurred in selling his home and relocating to Santa Rosa,
California. Under the terms of the agreement, the Company has loaned Mr.
Burgess the sum of $92,000 under a promissory note which is secured by a
deed of trust on his new residence in Santa Rosa. The principal and accrued
interest under the note will be forgiven by the Company on a prorata basis
over the next eight years of Mr. Burgess' employment. In the event Mr.
Burgess should choose to terminate his employment during the eight year
period, the balance on the note shall become immediately due and payable.
For fiscal 1995, Mr. Burgess realized additional compensation in the amount
of $15,024 from the forgiveness of principal and interest on the promissory
note.
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 November 20, 1987, the Company entered into "Change in Control"1
Employment Agreements with the executive officers of the Company. The
Agreements were extended for additional two year terms on November 20,
1991, 1993 and 1995. Each of the Named Executive Officers and all other
executive officers of the Company, with the exception of Mr. McCullough,
are currently covered by these Employment Agreements. The Employment
Agreements, among other things, provide that the executive 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 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 executive officer who is party to an
Employment Agreement or (ii) such executive officer terminates his
employment following a "Constructive Dismissal"2 by the Company, then that
executive officer shall be paid an amount equal to thirty-six months of the
executive 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. The Agreements also provide that in the event of a Change in
Control of the Company, all unvested options held by the executive officer
will immediately vest.
Effective October 31, 1995, John McCullough entered into an Employment
Arrangement with the Company whereby he has agreed to continue to serve as
a Vice President and executive officer of the Company and continue his
participation as a member of the Board of Directors of the Company and of
Flex Products, Inc., the Company's 60% owned subsidiary. Under the
agreement, Mr. McCullough will be compensated for certain fixed tasks,
including the aforementioned directorships, at an annual base salary of
$71,000. The agreement also provides that for certain variable tasks that
may be assigned to Mr. McCullough from time to time by the Chief Executive
Officer or his designee, Mr. McCullough will receive the lesser of $150 per
hour or $1,400 per day.
_______________
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:
APPROVAL OF 1996 INCENTIVE COMPENSATION PLAN
For the reasons set forth below, the Board recommends that the Stockholders
approve the Optical Coating Laboratory, Inc. 1996 Incentive Compensation
Plan (the "Plan"). The full text of the Plan is set forth as Exhibit A
hereto, and the reader is urged to refer to it for a complete description
of the proposed Plan. The summary of the principal features of the Plan,
which follows, is qualified entirely by such reference.
The purpose of the Plan is to encourage Common Stock ownership in the
Company by key personnel whose long-term employment is considered essential
to the Company's continued progress, thereby providing them with an
additional incentive to continue in the employ of the Company or its
subsidiaries. The Board 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 Company's
Stockholders generally.
The Company has undertaken an analysis of future stock option grant
requirements to determine the number of option shares it anticipates will
be needed to cover grants in fiscal years 1996, 1997 and 1998. As a result
of this analysis, the Company is requesting a total of 950,000 shares of
the Company's Common Stock to be reserved for issuance pursuant to the
Plan.
PRINCIPAL FEATURES OF THE PLAN
Under the proposed Plan, certain executives and other key employees of the
Company or its subsidiaries (expected to be approximately 120 people),
designated as participants by a Committee composed of the members of the
Compensation and Stock Option Committee of the Board of Directors (the
"Committee"), would be eligible to receive, in addition to a fixed salary,
periodic awards based on their performance and that of the Company as a
whole. The Committee is composed of directors who are not eligible to
participate in the Plan. The performance measurement would involve a
variety of factors, including personal achievement, contribution to the
Company, business volume growth and attainment of financial objectives.
Special awards for extraordinary achievement may be made to any
participant.
Awards may be in the form of stock options, unrestricted stock bonuses,
restricted stock bonuses, stock paid for with a recourse or non-recourse
promissory note ("loan stock"), or any combination thereof. Stock bonuses
may be restricted against sale for varying periods, as determined by the
Committee. Upon award of restricted stock or loan stock, certificates for
such shares will be deposited in escrow with the Company's Secretary. The
employee will retain voting and dividend rights with respect to the shares,
but will not have the right to transfer the shares until all restrictions
pertaining to the shares have terminated or until payment of the promissory
note.
An employee who has been granted restricted stock, stock options or loan
stock may also be permitted under the Plan to elect that the tax liability
(as described below) 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 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 these
purposes, "tax liability" means the minimum federal and state income taxes
required to be withheld, or, in the Company's discretion, any greater
amount of taxes (including taxes other than income taxes) required to be
withheld.
Stock options granted under the Plan will be designated either as incentive
stock options ("ISO's") eligible for special tax treatment under Section
422 of the Code or as non-qualified options. The option price of each
option issued under the Plan will be the fair market value of the Company's
Common Stock subject to the option on the date of grant. Fair market value,
for purposes of the Plan, shall be determined by the Committee. The term of
the options cannot exceed 10 years, and in all other respects, the material
terms of the options will be similar to options granted under the Company's
existing Stock Option Plans. See Exhibit A, Part 2., VI.
MODIFICATION OF THE PLAN
The Board of Directors or the Committee will be authorized to suspend or
discontinue the Plan or modify or amend it in any respect whatsoever;
however, without approval of the Stockholders, no revision or amendment may
change the number of shares subject to the Plan except in the event of a
change in the capital structure of the Company affecting its stock.
TAX TREATMENT
There are no tax consequences to the employee or the Company upon grant of
a stock option. Upon exercise of an option not qualified as an ISO, the
employee will be required to recognize taxable income equal to the
difference between the exercise price and the fair market value of the
shares on the date of exercise (the "spread"), and the Company will be
entitled to a federal income tax deduction equal to the income recognized
by the employee. Except for inclusion of the spread as an item of tax
preference for alternative minimum tax purposes, there are no federal tax
consequences for the employee or the Company upon exercise of an ISO.
Moreover, if the employee holds the shares purchased through the exercise
of an ISO for more than one year from the date of exercise and two years
from the date the option was granted (the "required holding period"), the
spread and all other appreciation in the shares over the exercise price
will be long-term capital gain at the time the shares are sold. The Company
will not receive a deduction if an employee holds stock acquired through
the exercise of an ISO for the required holding period. If the employee
sells such stock before the expiration of the required holding period, the
employee will be required to recognize taxable income equal to the lesser
of the spread or the difference between the amount realized and the
employee's basis in the stock. The Company will receive a deduction equal
to the taxable income recognized by the employee.
Recipients of unrestricted stock bonuses will be taxed on an amount equal
to the fair market value of the shares at the time of grant. The Company
will receive a federal tax deduction equal to the amount of income
recognized by recipients of unrestricted stock bonuses. Recipients of loan
stock purchased with a recourse note will not be taxed upon grant of the
loan stock if the fair market value of the loan stock on the date it is
granted equals the face amount of the promissory note used by the recipient
to purchase the loan stock. Moreover, recipients of loan stock purchased
with a non-recourse note will be taxed only as the note is paid off and
then only to the extent that the fair market value of the shares
corresponding to the paid off principal portion of the note exceeds such
principal portion.
A recipient of a restricted stock bonus will recognize taxable income equal
to the fair market value of the shares at the time the restrictions lapse.
However, the employee may elect to include in income for the year of the
award the fair market value of the restricted stock at the time of grant.
If the election is made, any subsequent appreciation recognized on eventual
sale or disposition of the shares will be capital gain. If the shares are
forfeited following such an election, the recipient obtains no tax benefit
with respect to the forfeiture or prior tax payment. The Company will be
entitled to a federal tax deduction equal to the amount of income
recognized by the employee either when the employee makes such an election
or, if no election is made, if and when the restrictions on the stock
lapse.
VOTES REQUIRED AND BOARD RECOMMENDATION
The Board of Directors believes that the grant of stock options and stock
awards will provide significant incentives to selected key employees who
contribute and are expected to contribute materially to the continued
success of the Company. The favorable vote of a majority of shares present
and voting at the Annual Meeting on this proposal (as long as those shares
voting affirmatively also constitute a majority of the required quorum) is
required for approval of the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PLAN
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 1996 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.
March 8, 1996
Santa Rosa, California
By Order of the Board of Directors,
JOSEPH ZILS
General Counsel and Secretary
EXHIBIT A
OPTICAL COATING LABORATORY, INC.
1996 INCENTIVE COMPENSATION PLAN
PART 1. PLAN PURPOSE, ADMINISTRATION AND ELIGIBILITY
I. PURPOSE
The purpose of this 1996 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 Nine Hundred and Fifty Thousand (950,000) 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 non-qualified
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.
OPTICAL COATING LABORATORY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
The undersigned hereby appoints JOSEPH C. ZILS and AGIE NAVARRO, or
either of them, each with power of substitution as proxies of the
undersigned, to attend the Annual Meeting of Stockholders of Optical
Coating Laboratory, Inc. to be held at the Doubletree Hotel, 3555 Round
Barn Boulevard, Santa Rosa, California on March 29, 1996 at 4:00 p.m., and
any adjournment thereof, and to vote all shares held by the undersigned on
the following:
1.FOR ___; WITHHOLD AUTHORITY FOR ___ the election as directors of the
Company of the five persons listed below: (MANAGEMENT RECOMMENDS A VOTE
FOR ITEM 1.)
Herbert M. Dwight, Jr., Douglas C. Chance, John McCullough,
Julian Schroeder, Renn Zaphiropoulos
(Instructions: To withhold authority to vote for any
individual nominee, write that nominee's name in the space
provided below.)
____________________________________________________________________
2.FOR ___; WITHHOLD AUTHORITY FOR ___ approval of the 1996 Incentive
Compensation Plan. (MANAGEMENT RECOMMENDS A VOTE FOR ITEM 2.)
3.FOR ___; AGAINST ___; ABSTAIN ___ ratification of Deloitte & Touche LLP
as the Company's independent auditors; (MANAGEMENT RECOMMENDS A VOTE FOR
ITEM 3.)
4.In their discretion, upon such other matters as may properly be brought
before the meeting or any adjournment thereof;
with all powers that the undersigned would possess if personally present,
and hereby ratifies and confirms all that said proxies may do in the
premises.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
This proxy, when properly executed, will be voted in the manner directed
therein by the undersigned Stockholder.
If the stock is issued in the names of two or more persons, only one of
them needs to sign the proxy. A proxy executed by a corporation should be
signed in its name by an authorized officer. Executors, administrators and
trustees should so indicate when signing.
Dated: _________________, 1996
______________________________
Signature of Stockholder
______________________________
Signature of Stockholder
Please sign exactly as the name or
names appear at left.
PROXY
(OCLI Logo)
ANNUAL MEETING
OF STOCKHOLDERS
MARCH 29, 1996
