1998 MANAGEMENT INCENTIVE PLAN
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OBJECTIVES


The objectives of the Optical Coating Laboratory, Inc. (OCLI) Fiscal Year
1998 Management Incentive Plan (MIP) are:

   . To motivate key OCLI managers and employees to achieve Fiscal Year
     (FY) 1998 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 CEO 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 "Superior Merit" bonuses unless approved by the Plan
Administrator.  Concurrent participation in any other type of bonus program
requires the approval of the Plan Administrator.

The quantitative portion of the bonus awards are calculated quarterly and
annually based on OCLI's and the Divisions' financial results.  Qualitative
annual bonus awards are based on each participant's performance to
individual objectives (described in their Personal Action Plan) during the
plan year.  The plan year is defined as the fiscal year beginning November
3, 1997 and ending November 1, 1998.

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.  For purposes of this plan the
1/12/98 salary will be treated as the beginning salary for the plan year.





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1998 MANAGEMENT INCENTIVE PLAN


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
 . 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 quarter or
year in which they leave.

BONUS OPPORTUNITY


The bonus opportunity for each participant by salary grade as a percentage
of base salary is shown below.

                         TARGET BONUS OPPORTUNITY
                    AS A PERCENT OF BASE SALARY EARNED


SALARY GRADE                                     PERCENT

CEO                                                35%

President                                          35%

Vice Presidents                                    25%

Level 14                                           20%

Level 13                                           15%

Level 12                                           15%

Level 11                                           10%



QUARTERLY BONUS DETERMINATION


Quarterly bonus payments will be prorated linearly between 5% and 10% of
the participant's targeted bonus opportunity for COP (Company Operating
Profit) performance between 80% and 100% of plan.  In other words,
achievement of 80% of the quarterly COP plan will payout half of the
quarterly targeted bonus opportunity.  Payments will increase without limit
for performance over plan.

OCLI Consolidated and division COP performance for the quarter is found on
the Quarterly Income Statement displayed as Company Operating Profit.

   



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1998 MANAGEMENT INCENTIVE PLAN


QUARTERLY  BONUS CALCULATION


Quarterly bonus awards will be weighted according to the MIP Annual
Performance Weighting Matrix, page 5.  The 48%/32% annual ratio
proportionally equals the 60%/40% quarterly ratio.  Quarterly bonus awards
will be based on defined targets.


There is no 80% threshold for negative targets.  The target must be met for
any award to be distributed.  Also, any additional award above target will
not be generated until the performance is above zero and will be paid at
the discretion of the plan administrator.

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1998 MANAGEMENT INCENTIVE PLAN


Quarterly bonus award payments will be approved by the Plan Administrator
following a review of the quarterly results by the Finance and Accounting
Department.

ANNUAL BONUS DETERMINATION


The quantitative portion of this annual bonus payment will be based on the
RONA (Return on Net Assets) performance of the Division and/or the overall
Company.

     The Operating Entity RONA performance for the plan year is calculated
     by dividing net operating profit after tax (NOPAT) by net average
     assets.

      -Net operating profit after tax (NOPAT) is defined as the Operating
       Entity's net income plus the after tax interest 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.

      -Net Average assets is defined as the average of the Company's total
       assets minus current liabilities plus current maturities at the
       beginning and at the end of the fiscal year.

The quantitative portion of the annual bonus payments (40% of the target
bonus opportunity) will be equal to a linear extrapolation between 20% and
40% of the participant's targeted bonus opportunity for RONA performance
between 80% and 100% of the RONA contained in the Annual Operating Plan
(AOP).  In other words, achievement of 80% of the RONA target will payout
half of the annual target bonus opportunity.

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



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ANNUAL INDIVIDUAL QUALITATIVE PERFORMANCE BONUS


Individual Performance -- Individual performance is defined as each
participant's performance for the plan year based on an assessment of the
individual's results and contribution by the Division General Manager, the
President in the case of Division General Managers, or the Plan
Administrator in the case of Corporate.






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1998 MANAGEMENT INCENTIVE PLAN


Individual performance awards are separate from payments based upon ROA
performance.  The Individual Qualitative Pool is 20% of the planned target
pay-out.  It does not increase with achievements over plan.  This 20% of
the planned target pay-out will be distributed as a pool to each Division
(pro-rated to reflect the number of participants in each Division).  The
General Manager of each division will be part of the part of the Corporate
pool for distribution purposes. The General Manager of each Division, and
the Plan Administrator in the case of Corporate, shall distribute the funds
based on the criteria defined in the first paragraph of this section.

ANNUAL BONUS PAYMENT


Annual 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, 1999.


AMENDMENTS


The Board of Directors of OCLI reviews the Company's incentive compensation
plans annually to ensure equity 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.