SCHEDULE 14A INFORMATION
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Check the appropriate box:
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Section 240.14a-12
OPTICAL COATING LABORATORY, INC.
(Name of Registrant as specified in its Charter)
OPTICAL COATING LABORATORY, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
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(1) Title of each class of securities to which the transaction
applied:
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(2) Aggregate number of securities to which the transaction
applies:
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(3) Per unit price or other underlying value of the transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth
the amount on which the filing fee is calculated and state
how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and
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(LOGO) 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 18, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Optical Coating Laboratory, Inc. (OCLI) to be held on Tuesday, March 18,
1997, at 3:30 p.m. at OCLI's Corporate Offices located at 2789 Northpoint
Parkway, 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 ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the year ending October 31,
1997.
3. 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, 1997,
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 C. ZILS
General Counsel and Secretary
Santa Rosa, California
February 18, 1997
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 18, 1997
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 3:30 p.m. on Tuesday,
March 18, 1997 at OCLI's Corporate Offices located at 2789 Northpoint
Parkway, 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 18, 1997.
VOTING RIGHTS AND SOLICITATION
The Board of Directors of the Company has fixed the close of business on
January 31, 1997, 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 9,791,030 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 1998 must
be received by the Company no later than October 21, 1997, for inclusion in
the proxy statement relating to that meeting. No Stockholder proposals were
received for presentation at the Annual Meeting for 1997.
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 1, 1996. 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 pages 4 and 5 of
this Proxy Statement.
NOMINEES
HERBERT M. DWIGHT, JR.; AGE 66; 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 Applied Materials, Inc., Applied Magnetics Corp., Santa
Rosa Memorial Hospital and Trans Ocean Limited.
DOUGLAS C. CHANCE; AGE 54; 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.
SHOEI KATAOKA, D. SC., DR. ENG.; AGE 68, CONSULTANT, SHARP CORPORATION.
Dr. Kataoka was appointed to the Board of Directors of the Company on
December 16, 1996. Dr. Kataoka has served as a Corporate Consultant to
Sharp Corporation of Japan since 1995. He was previously executive
director and division general manager of Sharp Corporation's Tokyo Branch.
Dr. Kataoka has held various senior level management and technical
positions with Sharp Corporation since joining them in 1985.
JOHN MCCULLOUGH; AGE 63; 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 49; 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 71; 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 1996 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 OCLI
Common Stock for the outside, non-employee directors. Under this program,
1,000 shares of OCLI Common Stock, plus payment of associated withholding
taxes, are awarded annually to each of the outside directors as part of
their remuneration for services as directors. The term of this award is
five years beginning April 1992 and expiring April 1997. For fiscal 1996,
Directors Chance, Schroeder and Zaphiropoulos were each awarded 1,000
shares of OCLI Common Stock, which had a fair market value of $17,375.00 at
the time of the award, plus payment of related withholding taxes.
BOARD MEETINGS AND COMMITTEES
During fiscal 1996, 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 1996 was 100%.
AUDIT COMMITTEE. The Board of Directors has an Audit Committee consisting
of three of its outside, non-employee directors: Julian Schroeder
(Chairman), Douglas C. Chance and Renn Zaphiropoulos. 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. The Audit Committee met four
times in fiscal 1996.
COMPENSATION AND STOCK OPTION COMMITTEE. The Board of Directors has a
Compensation and Stock Option Committee consisting of three of its outside,
non-employee directors: Renn Zaphiropoulos (Chairman), Douglas C. Chance
and Julian Schroeder. 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. The Committee met four times during fiscal 1996.
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 1996.
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 SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
DIRECTORS, OFFICERS AND 5%
STOCKHOLDERS
PRINCIPAL STOCKHOLDERS:
OCLI 401(k)/ESOP Plan (1) 1,575,245 16.1%
c/o Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Hakuto Co., Ltd. 907,440 9.3%
1-13 Shinjuku 1-Chome
Shinjuku-ku, Tokyo 150, Japan
DIRECTORS:
Douglas C. Chance 19,200 .2%
Shoei Kataoka 0 --
John McCullough(2) 43,283 .4%
Julian Schroeder 25,000 .3%
Renn Zaphiropoulos 9,000 .1%
NAMED EXECUTIVE OFFICERS:
Herbert M. Dwight, Jr.(3) 714,568 6.8%
Klaus F. Derge(4) 93,300 1.0%
John M. Markovich (5) 33,553 .3%
Joseph C. Zils(6) 41,958 .3%
Laurence D. Parson(7) 55,061 .6%
All Directors and Executive Officers
as a group (14 persons)(8) 1,177,057 10.9%
_________________
(1) Pursuant to the terms of the Trust Agreement under the OCLI
401(k)/ESOP Plan, 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 19,740 shares held for the benefit of Mr. McCullough in the
OCLI 401(k)/ESOP Plan.
(3)Includes 666,000 shares under options exercisable within 60 days of
the Record Date and 4,309 shares held for the benefit of Mr. Dwight in the
OCLI 401(k)/ESOP Plan.
(4)The 93,300 shares shown for Mr. Derge are shares under options
exercisable within 60 days of the Record Date.
(5)Includes 33,333 shares under options exercisable within 60 days of
the Record Date and 220 shares issued to Mr. Markovich under the OCLI
401(k)/ESOP Plan. Effective January 10, 1997, Mr. Markovich resigned as the
Company's Vice President, Finance and Chief Financial Officer.
(6)Includes 40,000 shares under options exercisable within 60 days of
the Record Date and 1,958 shares held for the benefit of Mr. Zils in the
OCLI 401(k)/ESOP Plan.
(7)Includes 42,600 shares under options exercisable within 60 days of
the Record Date and 8,590 shares held for the benefit of Mr. Parson in the
OCLI 401(k)/ESOP Plan.
(8)Includes 973,133 shares under options exercisable within 60 days of
the Record Date and 51,792 shares held for the benefit of all officers in
the OCLI 401(k)/ESOP 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, 1996:
<TABLE>
<CAPTION> LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER
POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) (#) COMPENSATION(4)
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr.(5) 1996 $325,998 -- $4,018 100,000 $12,897
Chairman of the Board, 1995 325,998 $125,892 13,430 100,000 15,244
President and 1994 323,920 33,448 3,169 600,000 5,889
Chief Executive Officer
Klaus F. Derge(6) 1996 $208,134 -- $3,087 10,000 --
Vice President, 1995 206,103 $19,906 2,931 5,000 --
International Operations 1994 176,900 12,164 2,732 10,000 --
John M. Markovich 1996 $157,690 -- $29,136 10,000 $3,389
Former Vice President, 1995 72,120 $18,077 20,691 60,000 165
Finance and Chief 1994 -- -- -- -- --
Financial Officer
Joseph C. Zils 1996 $150,389 $5,000 $1,515 10,000 $2,802
Vice President, 1995 145,000 37,140 1,752 15,000 5,819
General Counsel, 1994 120,200 4,100 3,258 8,000 9,144
Corporate Secretary and
Acting Chief Financial Officer
Laurence D. Parson 1996 $140,100 -- $1,713 5,000 $3,677
Vice President, Sales 1995 140,100 $10,666 5,608 5,000 5,608
1994 132,100 3,915 9,394 5,000 2,877
</TABLE>
_________________
(1) In January 1994, the Company chose to include an 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. The approximately $9,000 annual benefit was included in the
base salaries of the Named Executive Officers in fiscal 1996 and 1995 and
for ten months of fiscal 1994.
(2)Qualitative bonuses were awarded to certain participants in the 1996
Management Incentive Plan, including a $5,000 bonus awarded to Mr. Zils.
Bonuses included for fiscal 1995 and 1994 were paid under the Company's
Management Incentive Plans for those years. Included in the bonus paid in
fiscal 1995 to Mr. Zils was a $5,000 award under the Company's Spot Bonus
Award program.
(3)Includes for fiscal 1996, 1995 and 1994 for the Named Executive
Officers, excluding Mr. Derge, a special medical expense reimbursement
benefit, and for two months of fiscal 1994, an automobile allowance paid as
a separate benefit.
For Mr. Markovich, "Other Annual Compensation" for fiscal 1996 includes
the forgiveness of a promissory note issued in connection with a $15,000
sign-on award made to Mr. Markovich at the beginning of his employment in
fiscal 1995, which the Company agreed to forgive after the completion of
one year of service, and payment of $14,016 in relocation expenses.
Mr. Derge participates in separate medical and automobile expense
reimbursement programs through the Company's subsidiary in Reinheim,
Germany. For fiscal 1996, he received $3,087 in medical expense
reimbursement payments. For automobile expenses, Mr. Derge is reimbursed
for actual expenses incurred for business purposes.
(4)Includes for fiscal 1996, 1995 and 1994 for each Named Executive
Officer, excluding Mr. Derge, a life insurance benefit and contributions
made by the Company under the OCLI 401(k)/ESOP Plan.
LIFE INSURANCE ESOP
FOR FISCAL 1996: PREMIUM CONTRIBUTION
Herbert M. Dwight, Jr. $9,991 $2,907
Klaus F. Derge -- --
John M. Markovich 482 2,907
Joseph C. Zils 485 2,318
Laurence D. Parson 770 2,907
(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 changes
were required to be made to the exercise price of the options or other
terms of the original option agreements.
(6)Mr. Derge's compensation is paid in German Deutsche marks. For
presentation in this proxy statement, Mr. Derge's compensation has been
converted to U.S. dollars. The exchange rates used for fiscal years 1996,
1995 and 1994 were $.67, $.69 and $.61, respectively.
II. OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
________________________________________________________
PERCENT OF POTENTIAL
NUMBER OF TOTAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED RATES
UNDERLYING GRANTED TO OF STOCK PRICE
OPTIONS OPTIONEES EXERCISE OR APPRECIATION FOR
GRANTED IN FISCAL BASE PRICE EXPIRATION OPTION TERM(3)
NAME (#)(1) YEAR(2) ($/SHARE) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr. 100,000 18.3% $10.75 2/16/01 $297,003 $656,298
Klaus F. Derge 10,000 1.8% $10.75 2/16/01 $29,700 $65,630
John M. Markovich 10,000 1.8% $10.75 2/16/01 $29,700 $65,630
Joseph C. Zils 10,000 1.8% $10.75 2/16/01 $29,700 $65,630
Laurence D. Parson 5,000 0.9% $10.75 2/16/01 $14,850 $32,815
</TABLE>
(1)The option awards shown in the above table were granted on February
16, 1996 pursuant to the Company's 1996 Incentive Compensation Plan. The
options were originally exercisable in three annual installments commencing
one year from the date of grant. Effective December 16, 1996, the
Compensation and Stock Option Committee approved a retroactive revision to
the vesting schedules of all options awarded under the Company's Incentive
Compensation Plans whereby one-third of the options become exercisable
twelve months from the date of grant and the remaining two-thirds become
exercisable on a monthly basis over the next twenty-four months. 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 546,450 shares to employees,
including the Named Executive Officers, in fiscal 1996.
(3)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
1996 by the Named Executive Officers and the value of such officers'
unexercised options at October 31, 1996.
NUMBER OF VALUE OF
SECYRUTUES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS FISCAL
FISCAL YEAR END(1)
SHARES YEAR END(#) ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
(#) ($)
Herbert M. Dwight, Jr. 0 0 631,250/ $2,735,422/
168,750 $327,078
Klaus F. Derge 0 0 92,525/ $291,155/
12,475 $19,783
John M. Markovich 0 0 30,300/ $54,919/
39,700 $60,706
Joseph C. Zils 0 0 38,785/ $129,892/
16,215 $39,170
Laurence D. Parson 4,000 $20,297 41,600/ $140,731/
9,400 $26,331
(1)The Company's fiscal year ended October 31, 1996. The closing price of
the Company's Common Stock on the NASDAQ National Market System on October
31, 1996 was $11.4375 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:
* The Company will compensate competitively with the practices
of other leading technology companies of similar size;
* Performance at the corporate, division and individual
executive officer level will determine the bonus portion of
compensation;
* The attainment of realizable but challenging objectives will
determine performance based compensation; and
* 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, 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 1996, 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 objectives of the 1996
Management Incentive Plan (the "Plan" or "1996 Plan") were i) to motivate
key managers to achieve pre-established financial and operational
objectives for the Company; ii) to reward key managers and employees who
contribute significantly towards the achievement of the Company's financial
and operational objectives; and iii) to stay within the fiscal 1996 budget
for meeting plan at target.
Under the 1996 Plan, the Compensation and Stock Option Committee
approved a combined quantitative and qualitative bonus pool totaling
$1,068,000. The quantitative portion of the pool was established as a
function of actual Company consolidated and division return on asset (ROA)
performance versus planned ROA performance. The qualitative portion of the
pool was established at a fixed maximum of $213,600 to be awarded based on
individual performance.
Performance levels attained in the following areas determined the extent
to which participants of the bonus plan were eligible for bonus awards:
a) OCLI Consolidated ROA Performance Awards -- The Company must have
achieved a minimum of 60% of planned ROA performance for participants to
qualify for awards in this area of the Plan. OCLI Consolidated ROA
Performance was calculated by dividing net after tax earnings by average
assets.
b) Division ROA Performance -- The Divisions must have achieved a
minimum of 70% of planned ROA performance to qualify for awards in this
area of the Plan. Division ROA Performance for the bonus year was
calculated by dividing each Division's consolidated net after tax earnings
by the average assets of the Division.
c) Individual Qualitative Performance -- Individual performance is
defined as each participant's performance rating for the bonus year.
Individual performance awards are separate from payments based upon ROA
performance and may be paid in part or in whole based on the Company's and
the Divisions' performance and/or ability to pay. The Individual
Qualitative Performance bonus is a maximum of 20% of the planned target
payout. Any unallocated amounts go to a discretionary pool to be allocated
back to Plan participants, and all other employees, or rolled over into the
subsequent bonus year. Unallocated amounts are not rolled over for more
than one 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 3% of total outstanding shares, and are reviewed by the
Compensation and Stock Option Committee. 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 1996. The Committee determined that his
current salary level was competitive with salary levels in effect for
comparable positions with other U.S. technology companies of similar size.
The Committee chose to award an additional 100,000 option shares to Mr.
Dwight in recognition of his contribution to the outstanding performance of
the Company in fiscal 1995. No bonuses were awarded to Mr. Dwight under the
1996 Management Incentive Plan.
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, 1996, 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
____________________________________________
10/91 10/92 10/93 10/94 10/95 10/96
Optical Coating
Laboratory, Inc. 100 125 94 87 192 161
PEER GROUP 100 101 122 123 215 269
NASDAQ STOCK MARKET-US 100 113 145 146 197 232
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 is 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 for its occupancy of the office suite and for office
services. Under this arrangement, the Company paid Mr. Derge approximately
$136,000 in fiscal 1996. 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 Mr. Burgess 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 first 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 will become immediately due and
payable. For fiscal 1996, Mr. Burgess realized additional compensation in
the amount of $17,500.43 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 is 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. Mr. McCullough earned additional compensation of $43,425
for his increased activities on behalf of the Company during fiscal 1996.
_______________
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:
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 1997 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 18, 1997
Santa Rosa, California
By Order of the Board of Directors,
/s/Joseph C. Zils
JOSEPH C. ZILS
General Counsel and Secretary
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 Corporate Offices of Optical
Coating Laboratory, Inc. Santa Rosa, California on March 18, 1997 at
3:30 p.m., and any adjournment thereof, and to vote all shares held by
the undersigned on the following:
The Management recommends a vote FOR Items 1 and 2.
1. Election of Directors [ ] For [ ] Withhold
for all
Herbert M. Dwight, Jr.,
Douglas C. Chance,
Shoei Kataoka
John McCullough,
Julian Schroeder,
Renn Zaphiropoulos
2 Ratification of Deloitte &
Touche LLP as the Company's
independent auditors [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, upon such [ ] FOR [ ] AGAINST [ ] ABSTAIN
other matters as may properly
be brought before the meeting
or any adjournment thereof;
SIGNATURE(S)________________________________ DATED ___________, 1997
Please sign exactly as name hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY,
USING THE ENCLOSED ENVELOPE
OPTICAL COATING LABORATORY, INC.
ANNUAL MEETING OF STOCKHOLDERS
MARCH 18, 1997, 3:30 P.M.
You are cordinally invited to attend the Annual Meeting of Stockholders of
Optical Coating Laboratory, Inc. to be held on Tuesday, March 18, 1997 at
3:30 p.m. at OCLI's Corporate Offices in Santa Rosa, California.
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, CA 95407-7397
Tel: 707-545-6440
(Map from Bay Area to OCLI)
Directions to OCLI:
From U.S. 101 North, take the
Highway 12 Sebastopol exit.
Travel about 1 1/2 miles on
Highway 12 to Stony Point Road
(2nd Exit). Turn left on Stony
Point Road and continue to
Northpoint parkway (fourth
stoplight after you turn onto
Stony Point). Turn right on
Northpoint Parkway and
continue to OCLI Visitor Parking
(about 1/2 mile).
