<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Galileo Electro-Optics Corporation
(Name of Registrant as Specified In Its Charter)
Galileo Electro-Optics Corporation
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of 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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange 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 the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
GALILEO ELECTRO-OPTICS CORPORATION
GALILEO PARK
P.O. BOX 550
STURBRIDGE, MASSACHUSETTS 01566
TELEPHONE (508) 347-9191
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 19, 1996
The Annual Meeting of Shareholders of Galileo Electro-Optics Corporation
will be held at the Publick House, Sturbridge, Massachusetts at 10:00 a.m. on
Friday, January 19, 1996 for the following purposes:
1. To elect five directors of the Company.
2. To approve the 1996 Director Stock Option Plan.
3. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on November 21, 1995
will be entitled to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR PROXY
WILL NOT BE USED.
By Order of the Board of Directors,
Josef W. Rokus
Secretary
December 11, 1995
<PAGE> 3
GALILEO ELECTRO-OPTICS CORPORATION
GALILEO PARK
P.O. BOX 550
STURBRIDGE, MASSACHUSETTS 01566
TELEPHONE (508) 347-9191
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 19, 1996
------------------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Galileo Electro-Optics Corporation (the "Company") for use at the Annual Meeting
of Shareholders of the Company to be held on January 19, 1996 at the Publick
House, Sturbridge, Massachusetts at 10:00 a.m. and at any adjournments thereof.
The Company will bear the cost of this solicitation of proxies, including, upon
request, reimbursement of brokerage houses and other nominees for their
reasonable expenses in forwarding solicitation material to beneficial owners of
stock. In addition to the use of the mails, employees of the Company may devote
part of their time to the solicitation of proxies by telephone, facsimile or in
person, but no additional compensation will be paid to them.
The authority granted by an executed proxy may be revoked at any time
before its exercise by filing with the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date or by voting in person
at the meeting. Shares represented by valid proxies will be voted in accordance
with the specifications in the proxies. If no specifications are made, the
proxies will be voted to elect the directors nominated by the Board of Directors
and for approval of the proposed 1996 Director Stock Option Plan.
On November 21, 1995, the Company had outstanding 6,491,932 shares of
Common Stock, $.01 par value (the "Common Stock"), which is its only outstanding
class of voting stock. Only shareholders of record at the close of business on
November 21, 1995 will be entitled to vote at the meeting. The holders of Common
Stock are entitled to one vote for each share registered in their names on the
record date with respect to all matters to be acted upon at the meeting. A
majority in interest of the outstanding Common Stock represented at the meeting
in person or by proxy constitutes a quorum for the transaction of business.
Abstentions and broker non-votes will be considered as shares present for
purposes of determining the presence of a quorum.
The approximate date on which this proxy statement and accompanying proxy
are first being sent or given to security holders is December 11, 1995.
<PAGE> 4
SHARE OWNERSHIP
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of November 21, 1995 by (i) persons known by
the Company to be beneficial owners of more than 5% of its Common Stock, (ii)
the directors and nominees for election as directors of the Company, (iii) the
executive officers of the Company named in the Summary Compensation Table, and
(iv) all executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK
BENEFICIALLY OWNED(1)
-----------------------
BENEFICIAL OWNER SHARES PERCENT
---------------- ------ -------
<S> <C> <C>
The TCW Group, Inc........................................... 421,000(2) 6.5%
865 South Figueroa Street
Los Angeles, California 90017
Dimensional Fund Advisors, Inc............................... 381,000(2) 5.9%
1299 Ocean Avenue
Santa Monica, California 90401
William T. Burgin............................................ 134,551(3) 2.1%
Allen E. Busching............................................ 5,500(4) *
Kenneth W. Draeger........................................... 2,500(5) *
William T. Hanley............................................ 66,278(6) 1.0%
Robert D. Happ............................................... 1,000 *
Josef W. Rokus............................................... 31,671(7) *
David W. Skiles.............................................. 7,500(8) *
All executive officers and directors as a group (7
persons)................................................... 249,000(9) 3.8%
<FN>
- ---------------
* Indicates less than 1%
(1) Unless otherwise indicated, each beneficial owner has sole voting and
investment power with respect to the shares listed in the table.
(2) Based on information provided by the beneficial owner.
(3) Includes 109,552 shares held by The Bessemer Venture Partnerships. Mr.
Burgin may be deemed to beneficially own these shares since he is a general
partner of The Deer & Co. Partnerships which are the sole general partners
of The Bessemer Venture Partnerships. Also includes 10,000 shares subject
to options granted to Mr. Burgin under the 1989 Director Stock Option Plan.
(4) Includes 5,000 shares subject to options granted to Mr. Busching under the
1989 Director Stock Option Plan.
(5) All shares held by Mr. Draeger are subject to options granted to Mr. Draeger
under the 1989 Director Stock Option Plan.
(6) Includes 45,278 shares subject to options granted to Mr. Hanley under the
1981 Employee Stock Option Plan.
(7) Includes 25,000 shares subject to options granted to Mr. Rokus under the
1981 Employee Stock Option Plan and 1,871 shares held under the Employee
Stock Purchase Plan.
(8) All shares held by Mr. Skiles are subject to options granted to Mr. Skiles
under the 1991 Employee Stock Option Plan.
(9) Includes 95,278 shares subject to options granted to officers and directors
under the 1981 Employee Stock Option Plan, the 1991 Employee Stock Option
Plan and the 1989 Director Stock Option Plan.
</TABLE>
2
<PAGE> 5
The Company's executive officers and directors and persons who own
beneficially more than 10% of the Company's Common Stock are required under
Section 16(a) of the Securities Exchange Act of 1934 to file reports of
ownership and changes in ownership of Company securities with the Securities and
Exchange Commission. Copies of those reports must also be furnished to the
Company.
Based solely on a review of the copies of reports furnished to the Company
and written representations of the Company's executive officers and directors
that no other reports were required, the Company believes that during the fiscal
year ended September 30, 1995 the executive officers and directors of the
Company and all persons who beneficially owned more than 10% of the Company's
Common Stock complied with all applicable Section 16(a) filing requirements.
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at five for the
coming year. The persons named below have been nominated by the Board of
Directors for election at the Annual Meeting as directors of the Company to
serve until the next Annual Meeting and until their respective successors are
duly elected and qualified. Each has consented to being named a nominee in this
proxy statement and has agreed to serve as a director if elected at the Annual
Meeting. Unless otherwise directed, the persons named in the proxy intend to
vote for the election of these nominees, all of whom are members of the present
Board of Directors. If any nominee is unable to serve, proxies will be voted for
such other candidates as may be nominated by the Board of Directors.
Under the Company's by-laws, the affirmative vote of the holders of a
majority of the Common Stock represented at the meeting in person or by proxy
will be required to elect directors. Abstentions have the effect of negative
votes.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING PAST FIVE DIRECTOR
NAME AND AGE YEARS AND OTHER DIRECTORSHIPS SINCE
------------ ------------------------------------ --------
<S> <C> <C>
William T. Burgin........... General Partner of The Deer & Co. Partnerships which 1979
52 are the sole general partners of The Bessemer Venture
Partnerships, venture capital limited partnerships. Mr.
Burgin is also a director of James River Corp., a
manufacturer of paper products.
Allen E. Busching........... Principal of B&B Capital, a venture capital firm. 1989
63 Previously Chairman, President and Chief Executive
Officer of Lambda Electronics, Inc., formerly Veeco
Instruments, Inc., an electronics company acquired by
Unitech plc, a worldwide electronics firm with which
Mr. Busching served as Managing Director. Mr. Busching
is also a director of North Shore University Hospital,
Manhasset, NY.
Kenneth W. Draeger.......... President and Chief Executive Officer, DecisionOne 1993
55 Corp., formerly Decision Servcom, Inc., formerly
Decision Data Service, Inc., a computer maintenance
company. Previously President of Agfa Compugraphic, a
manufacturer of equipment for the printing industry.
William T. Hanley........... President and Chief Executive Officer of the Company. 1984
48 Mr. Hanley is also a director of Incom, Inc., a
manufacturer of fiberoptic products.
Robert D. Happ.............. Retired. Previously a managing partner of KPMG Peat 1995
55 Marwick LLP, a public accounting firm, from which he
retired in 1994. Mr. Happ is also a director of CAI
Wireless Systems, Inc., an owner and operator of
wireless cable TV systems.
</TABLE>
The Board of Directors held seven meetings during the fiscal year ended
September 30, 1995. Each director attended at least 75% of all meetings of the
Board and all meetings of committees of the Board on which he served held during
the last fiscal year.
3
<PAGE> 6
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee of the Board of Directors but
did not have Compensation or Nominating Committees for fiscal year 1995. At its
November 10, 1995 meeting, the Board of Directors established a Compensation
Committee consisting of the four nonemployee directors.
The Audit Committee, consisting of all of the directors except Mr. Hanley,
held two meetings during the fiscal year ended September 30, 1995. The Audit
Committee meets periodically with management and the Company's independent
certified public accountants to discuss their evaluation of internal accounting
controls, the quality of financial reporting and related matters. The
independent auditors have free access to the Audit Committee, without the
presence of management, to discuss the results of their audits. The Board of
Directors, upon the Committee's recommendation, approves the extent of non-audit
services provided by the independent auditors, giving due consideration to the
impact of such services on their independence.
DIRECTOR COMPENSATION
DIRECTOR FEES. During fiscal year 1995, the compensation of Board members
(other than full-time employees of the Company) was set at $10,000 per year plus
$1,500 per meeting attended ($250 for meetings attended by conference
telephone). Members of the committees of the Board of Directors receive $1,000
to attend each committee meeting not held on the same day as a Board of
Directors meeting.
1989 DIRECTOR STOCK OPTION PLAN. Under the Company's 1989 Director Stock
Option Plan (the "1989 Plan") each nonemployee director as of March 15, 1989 was
granted nonstatutory options to purchase 10,000 shares of the Company's Common
Stock, 5,000 of which became exercisable immediately and 1,250 of which became
exercisable on each of the next four anniversaries of the date of grant. Options
to purchase 5,000 shares of Common Stock are granted automatically to each new
nonemployee director on the date of the director's first election, with 25
percent of the shares becoming exercisable on each of the next four
anniversaries of the date of grant. The 1989 Plan provides that outstanding
options would become immediately exercisable upon the death or disability of the
optionee or upon a change in control of the Company, as defined in the 1989
Plan. The option exercise price is the fair market value of the Common Stock on
the date of grant. No option may be exercised more than one year after the date
of the optionee's termination as a director for any reason. An amendment and
restatement of the 1989 Plan is proposed for approval at the Annual Meeting. See
"1996 Director Stock Option Plan" below.
<TABLE>
Pursuant to the 1989 Plan, the Company's directors have been granted
options to purchase the following number of shares at the indicated prices per
share:
<CAPTION>
NUMBER OF PRICE
NAME SHARES PER SHARE
---- --------- ---------
<S> <C> <C>
William T. Burgin.............................. 10,000 $ 9.00
Allen E. Busching.............................. 5,000 8.50
Kenneth W. Draeger............................. 5,000 5.25
Robert D. Happ................................. 5,000 8.1875
</TABLE>
INDEMNIFICATION AGREEMENTS. The Company has entered into Indemnification
Agreements with each director who is not an officer of the Company providing for
indemnification by the Company for liabilities and expenses incurred by reason
of service to or at the request of the Company in connection with any threatened
or pending legal proceeding. The Indemnification Agreements, among other things,
provide procedures and remedies applicable to the determination of the right to
indemnification, particularly in the event of a change in control of the
Company, as defined.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The Board of Directors Report on Executive Compensation set forth below
describes the Company's compensation policies applicable to executive officers
and the Board's basis for Mr. Hanley's compensation as Chief Executive Officer
for the fiscal year ended September 30, 1995.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Company's Board of Directors determines the compensation of all
executive officers of the Company. The Plan Administrative Committee of the
Board administers the Company's 1991 Employee Stock Option Plan, including the
grant of stock options thereunder. Mr. Hanley, who was the only employee of the
Company serving on the Board of Directors during fiscal year 1995, did not
participate in the determination of his compensation or the grant of stock
options to him.
The Board of Directors reviews the compensation of all executive officers
at least once a year. The Company's executive compensation contains the
following three elements: base salary, bonus earned under the Company's Variable
Pay Plan and periodic stock option grants. In setting base salary compensation
for executive officers, the Board reviews publicly available executive
compensation surveys of technology oriented manufacturing companies with annual
sales comparable to those of the Company. In 1995 these surveys were "1995
Executive Compensation Survey for Electronics, Software and Information
Technology Companies" (American Electronics Association), "1995 Officer
Compensation Report -- The Executive Compensation Survey for Small to
Medium-Sized Businesses" (Aspen Publishers, Inc.) and "Executive Compensation:
The Middle Market Survey," Sixth Edition 1994 (Ernst & Young). Executive
compensation information for the companies included in the Standard & Poor's
High Tech Index shown in the Performance Graph below as a group is not available
to the Company. The Board considers making an adjustment to the base salary of
each executive officer based upon the relationship of current compensation to
the comparable compensation levels reported in the surveys and a subjective
judgment on the officer's performance during the last year. In 1995, the
compensation and benefits of the Chief Executive Officer and the other executive
officers were at the lower end of the range of comparably sized companies in the
surveys. The Board determined not to increase the base salary or benefits of the
Chief Executive Officer or any other executive officer in 1995.
The Variable Pay Plan for executive officers is part of a variable pay plan
in effect for all of the Company's employees. Under this plan, executive
officers are compensated based on the operating profit results of the Company
versus the operating profit goal in the Company's Operating Plan for the fiscal
year. Specifically, the Chief Executive Officer's variable pay bonus is
determined by multiplying his base salary by the following two factors: first,
his participation rate percentage, which was 50% of his base salary for 1995,
and second, the pay-out percentage, which is determined by a formula specified
in the Plan and in 1995 ranged from 25% if the Company's actual operating profit
equaled the operating profit in its Operating Plan for fiscal year 1995 to 100%
if the actual operating profit was approximately four times the Operating Plan
operating profit. There is no pay-out if the Company does not meet its Operating
Plan operating profit. The participation rate times the pay-out percentage times
base compensation equals the Variable Pay Plan bonus. For fiscal year 1995, the
pay-out percentage was 50%. As a result, Mr. Hanley's variable pay bonus for
fiscal year 1995 was 25% of his base salary.
The Board granted the following stock options to executive officers in
fiscal year 1995: 25,000 shares to Mr. Hanley, 10,000 shares to Mr. Skiles and
5,000 shares to Mr. Rokus. In granting these stock options, the Board took into
account the level of base salaries of the executive officers compared to the
comparable compensation levels in the compensation surveys referred to above and
the number of stock options previously granted and currently held by the
executive officers. The Company has no specific plan or formula for determining
the frequency of grants or number of options granted.
By the Board of Directors,
William T. Burgin
Allen E. Busching
Kenneth W. Draeger
William T. Hanley
Robert D. Happ
5
<PAGE> 8
SUMMARY COMPENSATION TABLE
<TABLE>
The following table sets forth certain compensation information for the
Chief Executive Officer of the Company and each of the other executive officers
of the Company during the fiscal year ended September 30, 1995:
<CAPTION>
LONG-TERM
COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS COMPENSATION(1)
------------------- ------------ ---------------
SECURITIES
UNDERLYING
NAME AND SALARY BONUS OPTIONS
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------ ---- ------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
William T. Hanley..................................... 1995 183,462(2) 45,000 25,000 15,571
President and Chief Executive Officer 1994 180,000 29,400 -- 15,719
1993 180,000 -- -- 15,529
David W. Skiles....................................... 1995 110,000 22,000 10,000 3,554
Vice President, Sales and Marketing 1994 110,000 -- -- 1,269
1993 114,231 -- 10,000 --
Josef W. Rokus........................................ 1995 101,923(2) 15,000 5,000 11,257
Vice President, Finance, Chief 1994 100,000 10,000 -- 10,729
Financial Officer and Secretary 1993 100,000 -- -- 10,279
<FN>
- ---------------
(1) All Other Compensation in 1995 includes Company matching funds under the
Company's 401(k) Plan and Employee Stock Purchase Plan, vacation and paid
absence allowance pay-outs and the Company portion of split dollar life
insurance premiums as follows:
</TABLE>
<TABLE>
<CAPTION>
EMPLOYEE
STOCK PURCHASE VACATION AND LIFE
401(K) PLAN PLAN PAID ABSENCE INSURANCE
NAME OF CONTRIBUTIONS CONTRIBUTIONS ALLOWANCES PREMIUMS
OFFICER ($) ($) ($) ($)
------- ------------- -------------- ------------ --------
<S> <C> <C> <C> <C>
William T. Hanley............... 4,497 -- 4,153 6,921
David W. Skiles................. 1,364 -- 2,115 --
Josef W. Rokus.................. 3,027 375 2,308 5,547
<FN>
(2) The annual rates of compensation of Mr. Hanley and Mr. Rokus were unchanged
from 1994 to 1995. The change in compensation shown was due to a change in
payroll processing periods from monthly to bi-weekly.
</TABLE>
OPTION GRANTS IN FISCAL YEAR 1995
The following table sets forth certain information concerning options
granted to executive officers of the Company in fiscal year 1995:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
--------------------------------------------------------- --------------------------------
% OF TOTAL
OPTIONS
GRANTED TO
SECURITIES EMPLOYEES
UNDERLYING IN EXERCISE OR
OPTIONS FISCAL YEAR BASE PRICE EXPIRATION
NAME GRANTED(#)(1) 1995 ($/SHARE) DATE 0%($) 5%($)(3) 10%($)(3)
---- ------------- ----------- ----------- ---------- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
William T. Hanley....... 25,000 27.2% 8.25 7/18/02 0 84,000 195,750
David W. Skiles......... 10,000 10.9% 8.25 7/18/02 0 33,600 78,300
Josef W. Rokus.......... 5,000 5.4% 8.25 7/18/02 0 16,800 39,150
<FN>
- ---------------
(1) All grants were made on July 18, 1995. Options become exercisable as to 25%
of the shares annually beginning one year after grant.
</TABLE>
6
<PAGE> 9
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates prescribed by the rules of the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. No gain to the
optionee is possible without an increase in price of the Common Stock, which
will benefit all shareholders proportionately.
(3) In order to realize the potential values set forth in the 5% and 10% columns
of this table, the per share price of the Common Stock would be $11.61 and
$16.08, or 41% and 95% above the base exercise price, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
The following table provides information as to options exercised by each of
the named executive officers in fiscal year 1995 and the value of the remaining
options held by each such executive officer at year-end, measured using the last
trading price ($7.50) of the Company's Common Stock on September 30, 1995:
<CAPTION>
NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE ---------------------------- ----------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William T. Hanley................... -- -- 45,278 25,000 138,927 *
David W. Skiles..................... -- -- 5,000 15,000 3,750 3,750
Josef W. Rokus...................... 7,778 10,695 25,000 5,000 78,125 *
<FN>
- ---------------
* The exercise price of the options was greater than the market price of the
Common Stock as of September 30, 1995.
</TABLE>
PENSION PLAN TABLE
<TABLE>
The following table shows the estimated annual benefits payable under the
Company's Pension Plan:
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 .......................... $27,786 $37,048 $46,310 $52,560 $58,810
150,000 .......................... 33,786 45,048 56,310 63,810 71,310
175,000 .......................... 33,786 45,048 56,310 63,810 71,310
200,000 .......................... 33,786 45,048 56,310 63,810 71,310
225,000 .......................... 33,786 45,048 56,310 63,810 71,310
250,000 .......................... 33,786 45,048 56,310 63,810 71,310
300,000 .......................... 33,786 45,048 56,310 63,810 71,310
400,000 .......................... 33,786 45,048 56,310 63,810 71,310
450,000 .......................... 33,786 45,048 56,310 63,810 71,310
500,000 .......................... 33,786 45,048 56,310 63,810 71,310
</TABLE>
All employees who joined the Company prior to January 1, 1995 and who work
at least 1,000 hours per year are eligible for participation in the Company's
Pension Plan. Upon retirement at age 65, the Pension Plan will pay an annual
pension equal to the sum of (a) 1% of the employee's average total salary during
the highest five consecutive years in his last ten years of service multiplied
by credited years of service and (b) 6/10 of 1% of such average total
compensation in excess of the employee's Social Security-covered compensation
multiplied by credited years of service (up to a maximum of 25 years). Only
salary is covered by the Pension Plan. Years of service for the persons named in
the Summary Compensation Table above are as follows: Mr. Hanley, 13; Mr. Skiles,
3; and Mr. Rokus, 11.
7
<PAGE> 10
PERFORMANCE GRAPH
The following graph shows the cumulative total shareholder return on the
Company's Common Stock on a yearly basis over the five-year period ended
September 30, 1995, as compared with that of the Nasdaq Stock Market U.S. Index
and the Standard & Poor's High Tech Composite Index.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG GALILEO
ELECTRO-OPTICS CORPORATION, THE NASDAQ STOCK MARKET U.S. INDEX
AND THE STANDARD & POOR'S HIGH TECH COMPOSITE INDEX
<CAPTION>
9/90 9/91 9/92 9/93 9/94 9/95
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
GALILEO ELECTRO OPTICS CORP GAEO 100 113 138 100 68 150
NASDAQ STOCK MARKET--US INAS 100 157 176 231 233 321
S & P HIGH TECH COMPOSITE IHTC 100 123 125 151 176 277
<FN>
- ---------------
* Assumes $100 invested on September 30, 1990 in the Company's Common Stock, the
Nasdaq Stock Market U.S. Index and the Standard & Poor's High Tech Composite
Index, with all dividends, if any, being reinvested.
</TABLE>
8
<PAGE> 11
1996 DIRECTOR STOCK OPTION PLAN
GENERAL
On November 10, 1995, the Board of Directors adopted, subject to
shareholder approval, the 1996 Director Stock Option Plan (the "Plan") as an
amendment and restatement of the Company's 1989 Director Stock Option Plan (the
"1989 Plan"). If the Plan is approved by shareholders, the Plan will supersede
the 1989 Plan, and no additional grants will be made thereunder. The rights of
the holders of outstanding options under the 1989 Plan will not be affected. The
purpose of the Plan is to attract and retain qualified persons to serve as
outside directors of the Company and to link the interests of outside directors
with shareholders. Grants of options under the Plan are automatic as described
below, but all questions of interpretation are determined by the Board of
Directors. All four of the Company's nonemployee directors have participated in
the 1989 Plan and will be eligible to participate in the 1996 Plan. For a
description of the grants under the 1989 Plan to the Company's current
directors, see "Director Compensation -- 1989 Director Stock Option Plan" above.
The following summary of the amended Plan is qualified by reference to the
full text of the Plan attached as Appendix A to this proxy statement.
PROPOSED AMENDMENTS TO THE 1989 PLAN
Approval of the Plan would amend the 1989 Plan to (a) increase the number
of shares of Common Stock available for grants to an aggregate of 200,000 shares
and (b) change the grant formula from the one-time grant of options to purchase
5,000 shares of Common Stock upon the director's election to the Board to the
grant of options to purchase 2,500 shares to each director on the director's
election at each annual meeting. The Board of Directors believes that the
increase in the number of options granted to directors is needed to provide a
meaningful financial incentive tied to an increase in the market price of the
Common Stock.
SHARES SUBJECT TO AWARDS
As of November 21, 1995, 70,000 shares were available for grants under the
1989 Plan. The proposed Plan would increase the number of shares available for
grant to 200,000 shares (subject to adjustment to reflect stock dividends,
recapitalizations or other changes affecting the Common Stock). If any
outstanding or future option expires or is terminated unexercised, the shares
which would have been issuable will again be available for grant under the Plan.
The closing price of the Common Stock on the Nasdaq National Market on November
21, 1995 was $10.00.
DESCRIPTION OF OPTIONS
Under the Plan, each nonemployee director receives options to purchase
2,500 shares of Common Stock on the director's election at each annual meeting
of shareholders of the Company. Options become exercisable one year after grant
or earlier upon the death or disability of the director and upon a change in
control of the Company, as defined in the Plan. No option may be exercised more
than one year after the director's termination as a director for any reason. The
option exercise price is the fair market value of the Common Stock on the date
of grant. The option exercise price may be paid in cash, in shares of Common
Stock having a fair market value equal to the exercise price at the time of
exercise, or a combination of cash and Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
No income is realized by the director at the time an option is granted.
Upon exercise, (a) ordinary income is realized by the director in an amount
equal to the difference between the option price and the fair market value of
the shares on the date of exercise, and (b) the Company receives a tax deduction
for the same amount. Upon disposition of the shares, appreciation or
depreciation after the date of exercise is treated as a short or long-term
capital gain or loss and will not result in any deduction by the Company.
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<PAGE> 12
TERM AND AMENDMENT
The Plan will terminate, and no options may be granted thereunder, ten
years after the date the Plan is approved by shareholders. The Board of
Directors may amend or terminate the Plan without shareholder approval, subject
to restrictions to comply with Rule 16b-3 under the Securities Exchange Act of
1934.
VOTE REQUIRED
Approval of the Plan will require the affirmative vote of a majority of the
shares of Common Stock present or represented and entitled to vote at the Annual
Meeting. Broker non-votes will not be counted as present or represented for this
purpose. Abstentions will be counted as present and entitled to vote and
accordingly will have the effect of negative votes.
The Board of Directors recommends a vote FOR this proposal.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hanley, who is the Chief Executive Officer of the Company and a member
of the Board of Directors, participated in deliberations of the Board concerning
the compensation of executive officers of the Company other than himself.
INFORMATION CONCERNING AUDITORS
On recommendation of the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP as auditors of the Company for the current year.
Ernst & Young has served as the Company's auditors since incorporation in 1973.
No representatives of Ernst & Young are expected to be present at the Annual
Meeting.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
In order for a shareholder proposal to be considered for inclusion in the
Company's proxy materials for the 1997 Annual Meeting, it must be received by
the Company at Galileo Park, P.O. Box 550, Sturbridge, Massachusetts 01566,
Attention: Josef W. Rokus, Secretary, no later than August 13, 1996.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting other than the matters described in the notice. If other business
is properly presented for consideration at the meeting, the enclosed proxy
authorizes the persons named therein to vote the shares in their discretion.
December 11, 1995
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APPENDIX A
GALILEO ELECTRO-OPTICS CORPORATION
1996 DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1996 Director Stock Option Plan (the "Plan") of Galileo
Electro-Optics Corporation (the "Company") is to attract and retain qualified
persons to serve as outside directors of the Company and to encourage stock
ownership in the Company by such directors.
The Plan is an amendment and restatement of the Company's 1989 Director
Stock Option Plan (the "1989 Plan") and supersedes the 1989 Plan, the separate
existence of which shall terminate on the effective date of the Plan. Nothing
herein shall adversely affect the rights and privileges of holders of
outstanding options under the 1989 Plan.
2. ADMINISTRATION
Grants of stock options under the Plan shall be automatic as provided in
Section 7. However, all questions of interpretation of the Plan or of any
options issued under it shall be determined by the Board of Directors of the
Company (the "Board"), and such determination shall be final and binding upon
all persons having an interest in the Plan. Any or all powers vested in the
Board under this Plan may be exercised by a committee consisting of three or
more directors or other persons appointed by the Board.
3. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
The maximum number of shares which may be optioned under the Plan shall be
200,000 shares of the Company's Common Stock, par value $.01 ("Common Stock"),
subject to adjustment as provided in Section 12, including all shares of Common
Stock available for issue under the 1989 Plan on the effective date of the Plan.
If any option granted under the Plan (including any grant under the 1989
Plan) for any reason expires or terminates without having been exercised in
full, the shares allocable to the unexercised portion of such option shall again
become available for grant pursuant to the Plan.
The Company shall at all times reserve such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.
5. NONSTATUTORY STOCK OPTIONS
All options granted under the Plan shall be nonstatutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
6. FORM OF OPTIONS
Each option granted under the Plan shall be evidenced by a written
agreement substantially in the form of Exhibit A hereto or in such other form as
the Board shall from time to time determine.
7. GRANT OF OPTIONS
Options to purchase 2,500 shares of Common Stock shall be granted to each
director on that director's election at each annual meeting of shareholders held
while this Plan remains in effect. Options shall be exercisable one year after
the date of grant of the options, or earlier as provided in Section 8.
No option may be exercised more than one year after the date of the
optionee's termination as a director for any reason.
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8. ACCELERATION OF OPTIONS
Notwithstanding any other provision of the Plan, all outstanding options
shall become immediately exercisable and remain exercisable until they expire by
their terms upon the termination of the optionee's service because of disability
or death or in the event of a change in control of the Company. For purposes of
the Plan, a change in control of the Company means a change in control of a
nature that would be required to be reported in response to item 6(e) of
Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Company is in fact required to
comply therewith; provided, that without limitation, such a change in control
will be deemed to have occurred if:
(i) any "person" (as such term is defined in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or a corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of the
stock of the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities; or
(ii) during any period of 24 consecutive months (not including any
period prior to the effective date), individuals who at the beginning of
such period constitute the Board and any director (other than a director
designated by a person who has entered into an agreement with the Company
to effect a transaction described in paragraphs (i), (iii) or (iv) of this
Section 8 whose election by the Board or nomination for election by the
shareholders of the Company was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation other than (a) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the combined voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as defined above) acquires more than 30%
of the combined voting power of the Company's then outstanding securities;
or
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
9. EXERCISE PRICE; PAYMENT
The exercise price of each option granted under the Plan shall be the fair
market value of the Common Stock on the date of grant. Fair market value shall
be the last sale price for the Common Stock on the business day next preceding
the date of grant as reported by the Nasdaq National Market. However, if the
Board determines that as a result of circumstances existing on any date, the use
of such price is not a reasonable method of determining fair market value on
that date, the Board may use such other method as it determines is reasonable.
Options may be exercised only by written notice to the Company at its head
office accompanied by payment of the full purchase price for the shares as to
which they are exercised. The purchase price may be paid in cash, in shares of
Common Stock which the optionee has then held for at least six months or
purchased on the open market, or partly in cash and partly in such Common Stock.
The value of shares delivered in payment of the purchase price shall be their
fair market value, as determined above, as of the date of exercise. Upon receipt
of such notice and payment, the Company shall promptly issue and deliver to the
optionee (or other person entitled to exercise the option) a certificate or
certificates for the number of shares as to which the exercise is made and for
any number of shares delivered in payment of the purchase price to the extent
that the total value of such shares so delivered (and any cash payment) exceeds
the purchase price.
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<PAGE> 15
10. OPTIONS NOT TRANSFERABLE
To the extent required to qualify for the exemption provided by Rule 16b-3
under the Exchange Act, options granted under the Plan shall not be transferable
by the optionee other than by will or the laws of descent and distribution and
are exercisable during the optionee's lifetime only by the optionee or his
guardian or legal representative. If then permitted by Rule 16b-3, options shall
also be transferable pursuant to a qualified domestic relations order as defined
in the Code or Title I of the Employee Retirement Income Security Act ("ERISA")
or the rules thereunder.
11. LIMITATION OF RIGHTS
Neither the Plan, nor the granting of an option or any other action taken
pursuant to the Plan, shall constitute an agreement or understanding that the
Company will retain a director for any period of time, or at any particular rate
of compensation.
An optionee shall have no rights as a shareholder with respect to the
shares subject to options granted under the Plan until the date of the issuance
of a stock certificate therefor, and no adjustment will be made for dividends or
other rights for which the record date is prior to the date such certificate is
issued.
12. CHANGES IN COMMON STOCK
In the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, or other change in the corporate
structure or capitalization affecting the Company's present Common Stock,
appropriate adjustment shall be made in the maximum number (including the
aggregate number specified in Section 4) and kind of shares or other securities
subject to the Plan, and the number of shares and price per share of stock
subject to outstanding options and kind of shares or other securities which are
or may become subject to options granted or to be granted hereunder.
13. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective immediately upon approval by the
shareholders of the Company by the affirmative vote of a majority of the shares
of stock of the Company present, or represented, and entitled to vote at the
1996 Annual Meeting of Shareholders. The Plan shall terminate ten years after
such approval.
14. AMENDMENT OF THE PLAN
The Board may amend, suspend or terminate the Plan at any time, provided
that to the extent required to qualify the Plan or any other benefit plan of the
Company for exemption under Rule 16b-3 (or any successor provision) under the
Exchange Act, (i) no amendment may be made to change the designation of
participants or the amount, price and timing of options granted hereunder other
than as permitted by such rule and (ii) no amendment affecting the amount of
Common Stock subject to options granted under the Plan, the exercise price of
the options or the timing of grants may be made more than once every six months,
other than to comport with changes in the Code, ERISA or the rules thereunder.
15. GOVERNING LAW
The Plan and options granted thereunder shall be governed by Delaware law.
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<PAGE> 16
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GALILEO ELECTRO-OPTICS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
JANUARY 19, 1996
The undersigned hereby appoints William T. Hanley and Josef W. Rokus, or
either of them, with power of substitution in each, proxies to vote all shares
of Common Stock of the undersigned in Galileo Electro-Optics Corporation at the
Annual Meeting of Shareholders to be held January 19, 1996, and at all
adjournments thereof, hereby revoking any proxy heretofore given with respect to
such shares.
<TABLE>
<S> <C> <C>
1. Proposal to elect Directors / / FOR all nominees listed below / / WITHHOLD authority to vote for
(except as indicated to the all nominees listed below
contrary below)
</TABLE>
William T. Burgin Allen E. Busching Kenneth W. Draeger
William T. Hanley Robert D. Happ
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S
NAME IN THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
2. Proposal to approve the 1996 Director
Stock Option Plan / / FOR / / AGAINST / / ABSTAIN
Shares will be voted as specified by the shareholder. IF NO SPECIFICATION IS
MADE, THE PROXY WILL BE VOTED FOR PROPOSALS NUMBER 1 AND 2. If other matters
come before the meeting, the proxies or substitutes may vote upon such matters
according to their best judgment.
Please sign exactly as name(s) appears Date......................., 19....
below. When signing as attorney, executor,
administrator, trustee or guardian, please Signed.............................
give full title as such. If more than one
name is shown, including the case of joint Signed.............................
tenants, each party should sign. Thank you.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
