1997 MANAGEMENT INCENTIVE PLAN               
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OBJECTIVES

The objectives of the Optical Coating Laboratory, Inc. (OCLI) Fiscal Year
1997 Management Incentive Plan (MIP) are:

     To motivate key OCLI managers to achieve Fiscal Year (FY) 1997
     financial objectives; and

     To reward key OCLI managers and employees who contribute
     significantly towards the achievement of OCLI's financial and
     operational objectives.

ADMINISTRATION

The Human Resources Department, in coordination with the Finance &
Accounting Department, will administer the MIP under the direction of the
Chairman of the Board and President of OCLI (Plan Administrator).

ELIGIBILITY

Employees in Salary Grades 11 and above, or equivalent (for non-US
subsidiaries), are eligible to participate in the MIP.  MIP participants
are not eligible for "Spot" bonuses or "Superior Merit" bonuses.
Concurrent participation in any other type of bonus program requires the
approval of the Plan Administrator.

Bonus awards are calculated annually based on OCLI's and the Divisions'
financial results and on each participant's individual performance during
the plan year.  The plan year is defined as the fiscal year beginning
November 4, 1996 and ending October 31, 1997.

Employees who are newly hired, promoted or transferred into or out of
eligible positions and those who move from one eligibility level to another
will receive pro rata bonus awards based on actual base pay earned during
the plan year in the eligible positions.

In addition, participants who leave OCLI during the plan year under any of
the following conditions may be eligible for pro rata bonus awards:

  participants who retire under the provisions of one of the Company's
  retirement plans or the Social Security Act; or
                                             
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1997 MANAGEMENT INCENTIVE PLAN

  a disabled participant or the spouse or legal representative of a
  deceased participant.

Participants leaving the Company under any conditions other than those
outlined above are not eligible for bonus awards for the plan year in which
they leave.

APPROVED BONUS POOL

The Board of Directors approved a combined quantitative and qualitative
bonus pool totaling $1,232,000 which is a function of actual OCLI
Consolidated and Division Return on Asset (ROA) Performance (defined on
Page 3) versus budgeted ROA Performance.  The qualitative portion of the
pool is a fixed maximum of $246,400 based on Individual Performance
(defined on Page 4).

The size of the approved pool at budgeted performance was based on the
number of participants, salary grades and actual salaries at the beginning
of the plan year and budgeted OCLI Consolidated and Division ROA
Performance.  A bonus pool will be accrued and distributed as a function of
OCLI's Consolidated and Divisional ROA Performance relative to budget plus
a straight line accrual for the qualitative portion.  The pool will not be
adjusted due to a change in the composition of the participants due to
hirings, terminations, salary increases or promotions.  As the composition
of the plan participants changes due to the addition or deletion of
individuals or changes in salary grades or salaries, individual
participant's pro rata percentage of the distribution will change
accordingly (i.e., the total amount of the pool at a given level of ROA
performance is fixed).

The pro rata percentages for each participant at the beginning of the plan
year by salary grade are shown below.

                            TARGET BONUS OPPORTUNITY
                       AS A PERCENT OF BASE SALARY EARNED

                     SALARY GRADE                PERCENT

                      CEO                            35%
                      Vice Presidents                25%
                      Level 14                       20%
                      Level 13                       15%
                      Level 12                       15%
                      Level 11                       10%

                                             
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1997 MANAGEMENT INCENTIVE PLAN


BONUS DETERMINATION

Performance levels attained in the following areas determine the extent to
which participants in this incentive plan are eligible for cash awards.

     OCLI Consolidated ROA Performance -- OCLI must achieve a minimum
     of 60% of budgeted Return on Assets (ROA) Performance to qualify for
     OCLI Consolidated ROA Performance awards.

     OCLI Consolidated ROA Performance for the plan year is calculated
     by dividing net after tax earnings by average assets.

            -  Net after tax earnings is defined as OCLI's consolidated
       net after tax earnings for the plan year, as certified by the
       Company's independent auditors, including appropriate accruals for
       all incentive awards estimated to be payable for that plan year.

            -  Average assets is defined as the average of the four
       quarter's average consolidated total assets.  A quarter's average
       consolidated total assets is defined as the total assets, as
       reported on OCLI's consolidated balance sheet at the beginning of
       each quarter plus the total assets as reported on OCLI's balance
       sheet at the end of each quarter, divided by two.

     Division ROA Performance --  Divisions must achieve a minimum of
     70% of planned Return of Assets (ROA) Performance to qualify for
     Division ROA performance awards.

     Division ROA Performance for the plan year is calculated by
     dividing net after tax earnings by average assets.

            -    Net after tax earnings is defined as the Division's
       consolidated net after tax earnings for the plan year, as
       determined by the Company's Chief Financial Officer, including
       appropriate accruals for all incentive awards estimated to be
       payable for that plan year.

            -    Average assets is defined as the average of the four
       quarter's average division total assets.  A quarter's division
       total average assets is defined as the total assets, as reported on
       the Division's balance sheet at the beginning of each quarter plus
       the total assets as reported on the Division's balance sheet at the
       end of each quarter, divided by two.
                                             
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1997 MANAGEMENT INCENTIVE PLAN


     Individual Performance -- Individual performance is defined as
     each participant's performance rating for the plan 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.  Such
     payments are subject to the approval of the Plan Administrator.

     Multiplier -- A compounding multiplier of 10% for each 10%
     increment that ROA Performance exceeds budgeted ROA target is applied
     to calculate the bonus pool available.  Any impact due to this
     multiplier's effect will be applied to the quantitative portion of the
     MIP payouts.  The formula allows for interpolation between the 10%
     ranges.

PERFORMANCE WEIGHTING

The percent of target bonus opportunity (see Page 2) is broken down by the
following performance measures.

                        MIP PERFORMANCE WEIGHTING MATRIX
             
                                       DIVISION   
PERFORMANCE               CORPORATE    GENERAL        DIVISION
MEASURE                   STAFF        MANAGERS       MANAGEMENT
OCLI                                         
Consolidated ROA            80%           20%            10%
Performance

Division                                     
ROA                          0%           60%            70%
Performance

Individual                                   
Qualitative                 20%           20%            20%
Performance
(Pool)
  TOTAL                    100%          100%           100%



                                             
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1997 MANAGEMENT INCENTIVE PLAN


The Individual Qualitative Performance is a maximum of 20% of the planned
target pay-out.  Any unallocated amounts go to a discretionary pool to be
allocated back to MIP participants and all other employees at the
discretion of the Plan Administrator or rolled over into the subsequent
plan year.  In no case will any unallocated amounts be rolled over for more
than one year.

BONUS CALCULATION

Bonus awards are based on the following thresholds and targets.  The scales
allow for interpolation between percentage points.

                 OCLI CONSOLIDATED AND DIVISION ROA PERFORMANCE

                                  THRESHOLD                         
                            (QUANTITATIVE BONUS POOL 
ENTITY                         BEGINS ACCRUING AT)                TARGET
Santa Rosa Division                 3.71% ROA                    5.30% ROA
Hillend Technical Division             TBD                          TBD
MMG Division                           TBD                          TBD
OCLI Consolidated                   2.28% ROA                     3.8% ROA

All Division participants are included in the plan for their Division.  The
MMG and Hillend Technical Division plans will be an addendum to this
document.


    RECOMMENDED POTENTIAL INDIVIDUAL PERFORMANCE BONUS PAYOUT AS A PERCENT OF
      TARGET INDIVIDUAL PERFORMANCE BONUS OPPORTUNITY (QUALITATIVE PORTION)

INDIVIDUAL                          NEEDS         FULLY      
PERFORMANCE                         IMPROVEMENT   EFFECTIVE  SUPERIOR

% of Individual                                   
Performance Opportunity             0 - 19        20 - 79    80 - 100

                                             
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1997 MANAGEMENT INCENTIVE PLAN


BONUS PAYMENT

Bonus award payments will be approved by the Plan Administrator following
the certification of OCLI's Consolidated Financial Statements by an
independent auditor.  Payments will be distributed to eligible participants
during the second payroll in January, 1998.

AMENDMENTS

The Board of Directors of OCLI reviews the Company's incentive compensation
plans annually to ensure equability both within the Company and in relation
to current economic conditions.  The Board of Directors reserves the right
to amend, suspend, terminate or make exceptions to this plan at any time.
The effects of any unusual and material accounting or non-recurring
transactions may be excluded from the bonus calculations with the approval
of the Plan Administrator.  For example, performance objectives may be
adjusted to reflect major acquisitions and/or divestitures during the plan
year.