[LOGO] Optical Coating Laboratory, Inc.
1998 PROXY STATEMENT
AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 31, 1998
March 3, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Optical Coating Laboratory, Inc. (OCLI) to be held on Tuesday, March 31,
1998, at 3:30 p.m. at OCLI's Corporate Offices located at 2789 Northpoint
Parkway, Santa Rosa, California. Following the Annual Meeting, we will
review OCLI's 1997 performance and answer your questions. Enclosed with
this Proxy Statement are your Proxy Card and OCLI's 1997 Annual Report.
We look forward to seeing you on March 31 and would like to take this
opportunity to remind you that your vote is important.
Sincerely,
Herbert M. Dwight, Jr.
Chairman of the Board
[LOGO] OPTICAL COATING LABORATORY, INC.
2789 Northpoint Parkway, Santa Rosa, California 95407-7397
Telephone 707-545-6440 - Facsimile 707-525-7410
Notice of the 1998 Annual Meeting of Stockholders
The Annual Meeting of Stockholders of Optical Coating Laboratory, Inc.
(OCLI) will be held on TUESDAY, MARCH 31, 1998, AT 3:30 P.M. at OCLI's
Corporate Offices located at 2789 Northpoint Parkway, Santa Rosa,
California, for the following purposes:
1. Election of seven directors: Herbert M. Dwight, Jr.; Charles J.
Abbe; Douglas C. Chance; Shoei Kataoka; John McCullough; Julian
Schroeder; and Renn Zaphiropoulos, each to serve until the next
Annual Meeting of Stockholders.
2. Ratification of Deloitte & Touche LLP as independent auditors for
1998.
3. To transact any other business properly brought before the Annual
Meeting.
Your Board of Directors recommends a vote FOR the two proposals.
Stockholders of record at the close of business on February 6, 1998 will be
entitled to vote at the Annual Meeting or any adjournments thereof.
Whether or not you plan to attend the Annual 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.
This Proxy Statement is being sent to the Stockholders in connection with
OCLI Management's solicitation of proxies to be voted at the 1998 Annual
Meeting of Stockholders on behalf of the Board of Directors. This Proxy
Statement, Proxy Card and OCLI's 1997 Annual Report to Stockholders are
being distributed on or about March 3, 1998.
By Order of the Board of Directors,
Joseph Zils
Corporate Secretary
Santa Rosa, California
March 3, 1998
TABLE OF CONTENTS
Questions and Answers.............................................. 3
Proposals to be Voted Upon......................................... 5
Information About the Nominees for Director........................ 6
Board Compensation................................................. 8
Board Meetings and Committees...................................... 9
Beneficial Ownership Table......................................... 10
Summary Compensation Table......................................... 12
Option Grants in Last Fiscal Year Table............................ 13
Option Exercises and Year-End Value Table.......................... 14
Ten-Year Option/SAR Repricing Table................................ 14
Report of the Compensation and Stock Option Committee.............. 15
Compensation Committee Interlocks and Insider Participation........ 18
Five-Year Performance Graph........................................ 19
Other Information.................................................. 20
Section 16(a) Beneficial Ownership Reporting Compliance............ 21
Other Business..................................................... 22
OPTICAL COATING LABORATORY, INC.
1998 PROXY STATEMENT
QUESTIONS AND ANSWERS
Q: WHAT AM I VOTING ON?
A: . Election of seven directors: Herbert M. Dwight, Jr.; Charles J. Abbe;
Douglas C. Chance; Shoei Kataoka; John McCullough; Julian Schroeder;
and Renn Zaphiropoulos, each until the next Annual Meeting of
Stockholders.
- Ratification of Deloitte & Touche LLP as independent auditors for
1998.
(See Page 5 for more details.)
Q: WHO IS ENTITLED TO VOTE?
A:Stockholders at the close of business on February 6, 1998 (the "Record
Date") are entitled to vote at the Annual Meeting. Each share of OCLI
Common Stock is entitled to one vote. As of the Record Date, OCLI had
10,677,868 shares of Common Stock issued and outstanding.
Q: HOW DO I VOTE?
A:Sign and date each Proxy Card you receive and return it in the prepaid
envelope. If you return your signed Proxy Card, but do not indicate
your voting preferences, Joseph Zils, Corporate Secretary, and/or Agie
Navarro, Assistant Secretary will vote FOR the two proposals on your
behalf. You have the right to revoke your proxy any time before the
meeting by writing to the Corporate Secretary of OCLI at any time prior
to its use or by submitting a later dated Proxy Card or by voting in
person at the meeting.
Q: IS MY VOTE CONFIDENTIAL?
A:Yes. Proxy cards, ballots and voting tabulations that identify
individual Stockholders are confidential. Only the Inspector of
Election, and certain employees associated with processing proxy cards
and counting the vote, have access to your card. Additionally, all
comments directed to Management (whether written on the Proxy Card or
elsewhere) will remain confidential unless you ask that your name be
disclosed.
Q: WHO WILL COUNT THE VOTE?
A:Representatives of ChaseMellon Shareholder Services, L.L.C. will
tabulate the votes and act as Inspector of Election.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A:It is an indication that your shares are registered differently and are
in more than one account, or you are an employee Stockholder with shares
held in the OCLI 401(k)/ESOP Plan and own shares held in a personal
account. Sign and return all Proxy Cards to ensure that all of your
shares are voted. To provide better Stockholder services, we encourage
all non-employee Stockholders to have your accounts registered in the
same name and address. You may do this by contacting our transfer
agent, ChaseMellon Shareholder Services, L.L.C. at (800) 237-9980 or by
visiting their website at www.chasemellon.com.
Q: WHAT CONSTITUTES A QUORUM?
A:As of the Record Date, 10,677,868 shares of OCLI Common Stock were
issued and outstanding. A majority of the outstanding shares, present
or represented by proxy, constitutes a quorum for the transaction of
adopting proposals at the Annual Meeting. If you submit a properly
executed Proxy Card, then you will be considered part of the quorum. If
you are present or represented by a proxy at the Annual Meeting and you
abstain, your abstention will have the same effect as a vote against the
proposal. Broker non-votes will not be part of the voting power
present.
Q: WHO CAN ATTEND THE ANNUAL MEETING?
A:All Stockholders as of the Record Date can attend the Annual Meeting.
Q: WERE ANY STOCKHOLDER PROPOSALS SUBMITTED FOR 1998?
A:No Stockholder proposals were received for presentation at the Annual
Meeting for 1998.
Q: WHEN ARE THE 1999 STOCKHOLDER PROPOSALS DUE?
A:In order to be considered for inclusion in next year's Proxy Statement,
Stockholder proposals must be submitted in writing by November 3, 1998,
to Joseph Zils, Esq., Corporate Secretary, Optical Coating Laboratory,
Inc., 2789 Northpoint Parkway, Santa Rosa, CA 95407-7397.
Q:HOW DOES A STOCKHOLDER NOMINATE SOMEONE TO BE A DIRECTOR?
A:Under OCLI's By-Laws, unless waived by the Board of Directors, written
notice of any nominations for director of any person other than the
nominees listed on pages 6 and 7, must have been received by the Board
of Directors at least 90 days before the Record Date of OCLI's previous
year's Annual Meeting. Accordingly, notice of any such individual's
candidacy must have been received by OCLI by November 2, 1997. No such
notice was received.
Q: WHO PAYS FOR THIS PROXY SOLICITATION?
A:The expense of soliciting proxies will be paid by OCLI. In addition to
the original mailing, and any follow-on mailings, of the proxies and
soliciting materials, employees of OCLI may also solicit proxies by
mail, telephone, facsimile and personal interviews. OCLI will request
brokerage houses and other custodians, nominees and fiduciaries to
forward the proxies and soliciting materials to persons for whom they
hold shares of OCLI Common Stock and to request authority for the
exercise of proxies. OCLI will reimburse such holders for their
reasonable out-of-pocket expenses.
PROPOSALS TO BE VOTED UPON
1. ELECTION OF DIRECTORS
Nominees for election this year are Herbert M. Dwight, Jr.; Charles J.
Abbe; Douglas C. Chance; Shoei Kataoka; John McCullough; Julian
Schroeder; and Renn Zaphiropoulos.
Biographical summaries of the nominees for director begin on page 6 of
this Proxy Statement. Information regarding the number of shares of
OCLI Common Stock beneficially owned by each of the nominees, directly
or indirectly, as of the Record Date, appears on pages 10 and 11 of
this Proxy Statement.
We need the affirmative vote of a majority of the outstanding shares of
OCLI Common Stock present in person or by proxy and entitled to vote at
the meeting in order to elect the nominees for director. Abstentions
and votes withheld for directors will have the same effect as votes
against.
Your Board recommends a vote FOR the nominees for director.
2. RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee,
has appointed Deloitte & Touche LLP as OCLI's independent auditors to
audit OCLI's consolidated financial statements for the 1998 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. In the event the 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,
at its discretion, can direct the appointment of a different accounting
firm at any time during the year if it is determined that such a change
would be in the best interests of OCLI and its Stockholders.
We need the affirmative vote of a majority of the outstanding shares of
OCLI Common Stock present in person or by proxy and entitled to vote at
the meeting in order to ratify Deloitte & Touche LLP as OCLI's
independent auditors for 1998.
Representatives of Deloitte & Touche LLP are expected to be present at
the meeting. They will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate
questions.
The Audit Committee and the Board recommend a vote FOR Deloitte &
Touche LLP as independent auditors for 1998.
INFORMATION ABOUT THE NOMINEES FOR DIRECTOR
HERBERT M. DWIGHT, JR. DIRECTOR SINCE 1991
Mr. Dwight, age 67, is Chairman of the Board and Chief Executive Officer of
OCLI. Mr. Dwight served as President of OCLI from August 19, 1991 to
November 1997. 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. and Applied Magnetics Corporation.
CHARLES J. ABBE DIRECTOR SINCE 1997
Mr. Abbe, age 56, is President and Chief Operating Officer of OCLI. He
served as Vice President and General Manager of OCLI's Santa Rosa Division
from April 1996 to November 1997 when he was appointed President and COO.
Prior to joining OCLI, Mr. Abbe held various senior management positions
with Raychem Corporation from 1989 to 1996, and was employed from 1971 to
1989 at McKinsey & Company, Inc., one of the pre-eminent management
consulting firms in the world, where he last served as Senior Partner at
their San Francisco office. Mr. Abbe is also a director of Network General
Corporation.
DOUGLAS C. CHANCE DIRECTOR SINCE 1973
Mr. Chance, age 55, is President and Chief Executive Officer of Wyse
Technology. 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 when he joined Wyse Technology. 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.
Mr. Chance is also a director of Centigram Communications Corporation.
SHOEI KATAOKA, D. SC., DR. ENG. DIRECTOR SINCE 1996
Dr. Kataoka, age 69, is a Corporate Consultant to Sharp Corporation of
Japan where he has been retained 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 DIRECTOR SINCE 1985
Mr. McCullough, age 65, is a Vice President of OCLI. Mr. McCullough served
as Executive Vice President of OCLI from December 1988 to January 1992 and
as Senior Vice President of OCLI from 1978 to December 1988.
JULIAN SCHROEDER DIRECTOR SINCE 1989
Mr. Schroeder, age 50, is Director, High Yield Department, International
Research, for Schroder & Co., Inc. in New York City. Mr. Schroeder was
President, Chief Executive Officer and Director of Research of B D S
Securities Corporation from 1995 to 1997. He served as Vice President,
Corporate Finance, B D S Securities Corporation from March 1989 to May
1995. Mr. Schroeder was a principal of Schroeder Consulting Company, a
financial consulting firm, from January 1985 to February 1989. Mr.
Schroeder is also a director of Versus Technology.
RENN ZAPHIROPOULOS DIRECTOR SINCE 1988
Mr. Zaphiropoulos, age 72, serves as a director of various privately-held
corporations and holds executive seminars in management worldwide. 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.
BOARD COMPENSATION
RETAINER AND MEETING FEES
Employee directors receive no additional compensation other than their
normal salary for serving on the Board or its Committees.
Non-employee directors are paid an annual retainer of $12,000 and $1,250
for each meeting attended. In addition, they are paid $500 for
participation in telephonic meetings of the Board or its Committees and are
reimbursed for out-of-pocket expenses.
In fiscal 1997, non-employee directors received $68,000 as a group in
retainer and meeting fees.
ANNUAL STOCK AWARD PROGRAM
Non-employee directors also participate in an Annual Stock Award Program.
Under this program, 1,000 shares of OCLI Common Stock, plus payment of
associated withholding taxes, are awarded annually to each of the non-
employee directors as part of their compensation for services as directors.
The term of the award program is five years beginning April 1997 and
expiring April 2002.
For fiscal 1997, Directors Chance, Kataoka, Schroeder and Zaphiropoulos
were each awarded 1,000 shares of OCLI Common Stock, which had a fair
market value of $12,750.00 at the time of the award, plus payment of
related withholding taxes.
BOARD MEETINGS AND COMMITTEES
During fiscal 1997, the Board held four regularly scheduled meetings.
Attendance by each director at the meetings of the Board and its Committees
during fiscal 1997 was 100%.
AUDIT COMMITTEE
The Audit Committee consists of three non-employee directors: Julian
Schroeder (Chairman), Douglas C. Chance and Renn Zaphiropoulos. The Audit
Committee meets independently with representatives of OCLI's independent
auditors and with representatives of Management. The Committee recommends
the engagement of OCLI's independent auditors, consults with the auditors
as to the adequacy of OCLI's internal accounting procedures and reviews and
approves OCLI's financial statements and reports. The Audit Committee met
three times in fiscal 1997.
COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee consists of three 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 OCLI's various incentive compensation and stock option
plans, as well as reviewing and reporting to the Board on recommended
annual compensation for OCLI's officers, including salaries, bonuses, the
Management Incentive Plan and other forms of compensation and remuneration.
The Committee met four times during fiscal 1997.
EXECUTIVE COMMITTEE
The Executive Committee consists of three directors: Herbert M. Dwight,
Jr. (Chairman), Douglas C. Chance and John McCullough. Under OCLI'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 OCLI, except
those powers which by law cannot be delegated by the Board of Directors.
The Executive Committee did not meet during fiscal 1997.
There is no nominating committee of the Board or any committee performing
the functions of such a committee.
BENEFICIAL OWNERSHIP TABLE
The following table provides certain information as of the Record Date
regarding beneficial ownership of OCLI Common Stock by (i) each person or
group who, to OCLI's knowledge, beneficially owns more than 5% of the
outstanding shares of OCLI Common Stock; (ii) each of the directors; (iii)
the Chief Executive Officer and each of OCLI's four other most highly
compensated executive officers (the "Named Executive Officers"); and (iv)
all directors and executive officers as a group:
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS
COMMON STOCK
______________________________
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
PRINCIPAL STOCKHOLDERS:
OCLI 401(k)/ESOP Plan (1) 1,591,720 14.9%
c/o Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Hakuto Co., Ltd. 907,440 8.5%
1-13 Shinjuku 1-Chome
Shinjuku-ku, Tokyo 150, Japan
Dimensional Fund Advisors Inc. (2) 634,680 5.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
DIRECTORS (*OTHER THAN THOSE INCLUDED IN
THE NAMED EXECUTIVE OFFICERS GROUP):
Douglas C. Chance 20,200 .2%
Shoei Kataoka 1,000 --
John McCullough(3) 43,632 .4%
Julian Schroeder 28,000 .3%
Renn Zaphiropoulos 10,000 .1%
NAMED EXECUTIVE OFFICERS:
Herbert M. Dwight, Jr.(4)* 819,432 7.2%
Charles J. Abbe(5)* 36,687 .3%
Joseph Zils(6) 43,588 .4%
Klaus F. Derge(7) 32,250 .3%
Kenneth D. Pietrelli(8) 72,262 .7%
All Directors and Executive Officers
as a group (17 persons)(9) 1,309,491 11.2%
(1) Under the terms of the Trust Agreement between the OCLI 401(k)/ESOP
Plan (the "Plan") and T. Rowe Price, Trustee for the Plan (the "Trustee"),
the Trustee votes the shares held in the Plan upon instructions given by
individual participants as to the individual participant's vested shares,
and in the discretion of the Trustee otherwise.
(2) Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 634,680
shares of Optical Coating Laboratory, Inc. stock as of December 31, 1997,
all of which shares are held in portfolios of DFA Investment Dimensions
Group Inc., a registered open-end investment company, or in series of the
DFA Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors Inc. serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares.
(3) Includes 20,089 shares held for the benefit of Mr. McCullough in the
OCLI 401(k)/ESOP Plan.
(4) Includes 770,666 shares under options exercisable within 60 days of
the Record Date and 4,507 shares held for the benefit of Mr. Dwight in the
OCLI 401(k)/ESOP Plan.
(5) Includes 31,687 shares under options exercisable within 60 days of the
Record Date for Mr. Abbe.
(6) Includes 36,475 shares under options exercisable within 60 days of
the Record Date and 2,113 shares held for the benefit of Mr. Zils in the
OCLI 401(k)/ESOP Plan.
(7) The 22,250 shares shown for Mr. Derge are shares under options
exercisable within 60 days of the Record Date.
(8) Includes 50,153 shares under options exercisable within 60 days of
the Record Date and 10,164 shares held for the benefit of Mr. Pietrelli
under the OCLI 401(k)/ESOP Plan.
(9) Includes 1,069,050 shares under options exercisable within 60 days
of the Record Date and 61,309 shares held for the benefit of all officers
in the OCLI 401(k)/ESOP Plan.
I. SUMMARY COMPENSATION TABLE
The following table discloses compensation received by OCLI's Chief
Executive Officer and the four other most highly paid executive officers
for the three fiscal years ended October 31, 1997:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- AWARDS
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) (#) COMPENSATION($)
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr. 1997 $325,998 $128,117 $ 1,710 -- $14,058
Chairman of the Board 1996 325,998 -- 4,018 100,000 12,897
and Chief Executive Officer 1995 325,998 125,892 13,430 100,000 15,244
Charles J. Abbe(3) 1997 $199,992 $59,725 $11,822 75,000 $3,271
President and 1996 111,534 -- -- 150,000 1,817
Chief Operating Officer 1995 -- -- -- -- --
Joseph Zils 1997 $162,011 $48,323 $ 4,193 25,000 $2,312
Vice President, 1996 150,389 5,000 1,515 10,000 2,802
Legal Counsel and 1995 145,000 37,140 1,752 15,000 5,819
Corporate Secretary
Klaus F. Derge(4) 1997 $183,321 $24,380 $2,687 -- --
Vice President, Europe 1996 208,134 -- 3,087 10,000 --
1995 206,103 19,906 2,931 5,000 --
Kenneth D. Pietrelli 1997 $150,009 $49,970 $ 4,510 25,000 $2,822
Vice President, 1996 132,246 -- 3,587 15,000 12,500
Corporate Services 1995 121,338 17,150 5,634 20,000 21,164
</TABLE>
(1) Includes for fiscal 1997, 1996 and 1995 for each of the Named Executive
Officers, excluding Mr. Derge, a special medical expense reimbursement
benefit and, for Mr. Abbe, forgiveness of a $10,000 promissory note which
was issued to him by OCLI at the time of his employment.
Mr. Derge participates in separate medical and automobile expense
reimbursement programs through OCLI's subsidiary in Reinheim, Germany. For
fiscal 1997, he received $2,687 in medical expense reimbursement payments.
Mr. Derge is reimbursed for actual automobile expenses incurred for
business purposes.
(2) Includes for fiscal 1997, 1996 and 1995 for each Named Executive
Officer, excluding Mr. Derge, a life insurance benefit and matching
contributions made by OCLI under the OCLI 401(k)/ESOP Plan.
LIFE INSURANCE OCLI 401(K)/ESOP
FOR FISCAL 1997: PREMIUM CONTRIBUTION
Herbert M. Dwight, Jr. $11,778 $2,281
Charles J. Abbe 3,271 --
Joseph Zils 526 1,786
Klaus F. Derge -- --
Kenneth D. Pietrelli 875 1,947
(3) In fiscal 1996, Mr. Abbe was awarded a stock option grant totaling
150,000 shares. These options were cancelled and regranted to Mr. Abbe in
fiscal 1997 for the purpose of repricing the options. (See Table IV -- 10
Year Option/SAR Repricing Table on Page 14 for more details.)
(4) Mr. Derge's compensation is paid in 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 1997, 1996 and 1995
were $.59, $.67 and $.69, respectively.
II. OPTION GRANTS IN LAST FISCAL YEAR TABLE
The following table sets forth certain information regarding stock options
granted during fiscal year 1997 to the Named Executive officers. 5% and 10%
assumed rates of appreciation are stipulated by the Securities and Exchange
Commission. There is no assurance provided to any executive officer or any
other holder of OCLI's securities that the actual stock price appreciation
over the option term will be at the assumed levels or at any other defined
level. Unless the market price of OCLI's Common Stock does, in fact,
appreciate over the option term, no value will be realized from the option
grants.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL
NUMBER OF PERCENT OF REALIZABLE VALUE
SECURITIES TOTAL OPTIONS AT ASSUMED RATES
UNDERLYING GRANTED TO OF STOCK PRICE
OPTIONS OPTIONEES IN EXERCISE OR EXPIRATION APPRECIATION FOR
GRANTED(1) FISCAL YEAR(2) BASE PRICE DATE OPTION TERM
NAME (#) ($/SHARE) 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Herbert M. Dwight, Jr. -- -- -- -- -- --
Charles J. Abbe 75,000 10.5% $10.25 12/16/01 $212,391 $469,330
150,000 21.1% 9.63 5/09/02 398,882 881,424
Joseph Zils 10,000 1.4% $10.25 12/16/01 $28,319 $62,577
15,000 2.1% $10.19 3/18/02 42,219 93,294
Klaus F. Derge -- -- -- -- -- --
Kenneth D. Pietrelli 15,000 2.1% $10.25 12/16/01 $42,478 $93,866
10,000 1.4% $10.19 3/18/02 28,146 62,196
</TABLE>
(1) The option awards shown in the above table were granted under OCLI's
1996 Incentive Compensation Plan. The options carry vesting schedules
whereby one-third of the options become exercisable twelve months from the
date of grant and the remaining two-thirds become exercisable on a monthly
basis over the next twenty-four months. The options have a maximum term of
five years.
(2) OCLI granted options totaling 711,800 shares to employees, including
the Named Executive Officers, in fiscal 1997.
III. OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information on option exercises in fiscal 1997
by the Named Executive Officers and the value of such officers' unexercised
options at October 31, 1997.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
SHARES YEAR END YEAR END
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
(#) ($)
Herbert M. Dwight, Jr. 0 0 750,999/ $3,895,122/
49,001 $117,378
Charles J. Abbe 0 0 0/ $106,001/
225,000 $9,623
Joseph Zils 20,000 $53,750 29,999/ $143,745/
30,001 $73,442
Klaus F. Derge 80,000 $300,000 20,549/ $106,001/
4,451 $9,624
20
Kenneth D. Pietrelli 0 0 44,716/ $231,004/
32,784 $79,622
(1)OCLI's fiscal year ended October 31, 1997. The closing price of OCLI's
Common Stock on the NASDAQ National Market System on October 31, 1997 was
$12.625 per share.
IV. 10-YEAR OPTION/SAR REPRICING TABLE
During fiscal 1997, the Compensation and Stock Option Committee, consisting
of Julian Schroeder, Douglas C. Chance and Renn Zaphiropoulos, unanimously
elected to reprice options that had been awarded to Mr. Abbe in fiscal
1996. The Committee chose to regrant and reprice the options to bring the
exercise price more in line with outstanding options held by other
employees of OCLI in order to restore the incentive value of the option
grant. The Committee elected to regrant the same number of option shares
to Mr. Abbe at the fair market value of OCLI's Common Stock on May 9, 1997,
the effective date of the regrant.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET ORIGINAL
SECURITIES PRICE OF EXERCISE OPTION TERM
UNDERLYING STOCK AT PRICE AT REMAINING AT
OPTIONS/SARS TIME OF TIME OF NEW DATE OF
REPRICED REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE OR AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
(#) ($) ($) ($)
(A) (B) (C) (D) (E) (F) (G)
<S> <C> <C> <C> <C> <C> <C>
Charles J. Abbe 5/9/97 150,000 $9.625 $14.125 $9.625 3 years,
President and 327 days
Chief Operating
Officer
</TABLE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
WHAT IS OUR 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:
-OCLI 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
-OCLI will encourage executive officers to hold substantial, long-
term equity stakes in OCLI 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 OCLI's
compensation practices can be compared. OCLI'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 OCLI's performance are ultimately reflected in the market
value of OCLI's stock.
HOW THE ELEMENTS OF EXECUTIVE COMPENSATION ARE DETERMINED:
- - HOW BASE SALARIES ARE DETERMINED.
In establishing base salaries for OCLI's executive officers, the Committee
compares salary levels in effect for comparable positions with other U.S.
technology companies of similar size using data from the Radford Benchmark
Salary Survey and the American Electronics Association (AEA) Executive
Compensation Survey. In addition, the Committee gives consideration to the
specific functional responsibilities of the position. OCLI'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 OCLI competes
against this broader group of companies for executive management talent.
The Committee believes that OCLI'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, OCLI 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 OCLI 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 OCLI for the fiscal year.
For fiscal 1997, the Committee established a company-wide wage and salary
budget consisting of a maximum of 4.1% for merit increases.
- - HOW BONUSES ARE DETERMINED.
OCLI's executive officers and managers participate in a Management
Incentive Plan approved annually by the Compensation and Stock Option
Committee. The objectives of the 1997 Management Incentive Plan (the
"Plan" or "1997 Plan") were i) to motivate key managers to achieve pre-
established financial and operational objectives for OCLI; ii) to reward
key managers and employees who contribute significantly towards the
achievement of OCLI's financial and operational objectives; and iii) to
stay within the fiscal 1997 budget for meeting plan at target.
Under the 1997 Plan, the Compensation and Stock Option Committee approved a
quantitative pool established as a function of the participants' salaries
factored by the target percentage of base salary for each level. The pool
was generated using the consolidated company operating profit (COP)
performance versus plan for the quarterly award and return on assets (ROA)
performance versus plan for the annual award. The qualitative portion of
the pool was established at 20% of the targeted annual awards based on an
individual's 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 COP Performance Awards -- OCLI must have
achieved a minimum of 60% of planned COP performance for participants to
qualify for awards in this area of the plan.
b) Division COP Performance Awards -- OCLI's Divisions must have
achieved a minimum of 60% of planned COP performance for participants to
qualify for awards in this area of the plan.
c) OCLI Consolidated ROA Performance Awards -- OCLI 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.
d) Division ROA Performance Awards -- OCLI's Divisions must have
achieved a minimum of 60% 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.
e) Individual Qualitative Performance Awards -- 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 OCLI'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.
- - HOW STOCK OPTION AWARDS ARE DETERMINED.
OCLI's stock option program was established to increase the commitment of
key employees to the success of OCLI, 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 OCLI's Stock Option Policy. The actual number of options
granted to a Participant is adjusted by measuring the Participant's
performance against preestablished goals. OCLI also uses stock option
awards when recruiting for certain key positions.
In determining stock option awards for OCLI'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 OCLI by awarding him a significantly higher number
of stock options than policy guidelines would otherwise suggest.
- - HOW WAS THE CEO'S COMPENSATION DETERMINED?
In applying OCLI's compensation principles and policies in its
determination of Mr. Dwight's base salary and incentive compensation for
fiscal 1997, the Compensation and Stock Option Committee voted to maintain
Mr. Dwight's base salary at its current level, but increase his bonus
incentive opportunity under the 1997 Management Incentive Plan by an
additional 10%, up to a maximum of 45% of his base salary, depending on the
fulfillment of predetermined goals established with respect to OCLI's
financial performance during fiscal 1997. For fiscal 1997, Mr. Dwight
earned a bonus of $128,117, or 39.5% of his base salary, under the 1997
Management Incentive Plan. No additional stock options were awarded to Mr.
Dwight in fiscal 1997 in order to preserve available option shares for
awards to other key employees.
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 OCLI.
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 OCLI or any of its subsidiaries.
FIVE-YEAR PERFORMANCE GRAPH
The graph below compares the cumulative total return of OCLI'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, OCLI has selected public
companies which are competitors or manufacture products or serve markets in
OCLI's opto-electronics field and which have a market valuation similar in
range to that of OCLI'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, 1992 in each of (i) OCLI's Common Stock,
(ii) the stocks comprising the NASDAQ Index and (iii) the stocks comprising
the Peer Group, and assumes the reinvestment of dividends.
10/92 10/93 10/94 10/95 10/96 10/97
OCLI 100 75.65 69.47 153.77 128.91 143.89
Peer Group
Weighted Average 100 120.89 121.39 212.69 265.87 342.64
NASDAQ Stock
Market-US 100 128.85 129.55 174.49 205.95 271.02
OTHER INFORMATION
TRANSACTION WITH KLAUS F. DERGE
OCLI'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, OCLI's Vice President, Europe, for Mr. Derge's personal
business use. OCLI utilizes the office space and pays Mr. Derge for its
occupancy and for office services. Under this arrangement, OCLI paid Mr.
Derge approximately $99,000 in fiscal 1997. It is OCLI's opinion that the
terms of this arrangement are as fair as could have been obtained from
unaffiliated persons.
INDEMNIFICATION AGREEMENTS
OCLI has entered into indemnification agreements with each of its directors
and officers. The agreements require OCLI to indemnify the directors and
officers to the full extent permitted by Delaware law if certain claims are
brought against them in their capacities with OCLI.
CHANGE IN CONTROL EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
Effective November 20, 1997, OCLI entered into Change in Control Agreements
(the "Agreements") with the executive officers of OCLI. Similar
Agreements have been in effect since 1987. The Agreements have a two-year
term from November 20, 1997 to November 20, 1999. Each of the Named
Executive Officers and all other executive officers of OCLI, with the
exception of Mr. McCullough, are currently covered by these Agreements.
The 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"1 or a
"Hostile Change in Control"2 (hereinafter "Change in Control"), as defined
below, and ending twelve months after the occurrence of a 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 OCLI for cause or a voluntary
termination, if at any time within two years after the occurrence of a
Change in Control either (i) OCLI terminates the employment of an executive
officer who is party to an Agreement or (ii) such executive officer
terminates his employment following a "Constructive Dismissal"3 by OCLI,
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 Change in Control 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 OCLI, all unvested options held by
the executive officer will immediately vest.
EMPLOYMENT ARRANGEMENT
Effective October 31, 1995, John McCullough entered into an employment
arrangement with OCLI whereby he has agreed to continue to serve as a Vice
President and executive officer of OCLI and continue his participation as a
member of the Board of Directors of OCLI and of Flex Products, Inc.,
OCLI'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 $96,710 for his
increased activities on behalf of OCLI and Flex Products, Inc. during
fiscal 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires OCLI's executive officers and directors and
persons who own more than ten percent of the Common Stock of OCLI 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 OCLI 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, OCLI
believes that, during the fiscal year ended October 31, 1997, all Section
16(a) filing requirements were complied with that were applicable to its
officers, directors and ten percent stockholders.
1 "Change in Control" is defined in the Agreements to mean the
occurrence of any of the events described in subparagraphs (i) or (ii)
below:
(i) The acquisition of more than fifty percent (50%) of the shares of
Common Stock of OCLI then outstanding by an Acquiring Person, alone or
together with such person's Affiliates or Associates, including any such
acquisitions pursuant to a "reorganization" within the meaning of Section
181 of the California Corporations Code; or
(ii) The failure of a majority of the members of the Board of
Directors of OCLI to be Continuing Directors.
2"Hostile Change in Control" is defined in the Agreements to mean the
acquisition of more than twenty percent (20%) of the shares of Common Stock
of OCLI then outstanding by an Acquiring Person, alone or together with
such person's Affiliates or Associates, including any such acquisitions
pursuant to a "reorganization" within the meaning of Section 181 of the
California Corporations Code, and (B) the adoption by OCLI's Board of
Directors of a resolution (i) disapproving the acquisition or (ii)
declaring operative the provisions of this Agreement pertaining to a
Hostile Change in Control.
3"Constructive Dismissal" shall occur if OCLI 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.
OTHER BUSINESS
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 3, 1998
Santa Rosa, California
By Order of the Board of Directors,
Joseph Zils
Corporate Secretary
33
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 31, 1998 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
Herbert M. Dwight, Jr.
Charles J. Abbe
Douglas C. Chance
Shoei Kataoka
John McCullough
Julian Schroeder
Renn Zaphiropoulos
[ ] For [ ] Withhold [ ] FOR ALL EXCEPT
(Instructions: To withhold authority to vote for any individual
Nominee, write that Nominee's name in the space provided below.)
---------------------------------------------------------------
---------------------------------------------------------------
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 ___________, 1998
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 31, 1998, 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 31, 1998 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).
