<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] 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 CORPORATION
(Name of Registrant as Specified In Its Charter)
GALILEO CORPORATION
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $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:
4) Proposed maximum aggregate value of transaction:
[ ] 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 CORPORATION
GALILEO PARK
P.O. BOX 550
STURBRIDGE, MASSACHUSETTS 01566
TELEPHONE (508) 347-9191
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 14, 1997
The Annual Meeting of Shareholders of Galileo Corporation will be held in
the John Foster Room of the Boston Harbor Hotel, 70 Rowes Wharf, Boston,
Massachusetts, at 10:00 a.m. on Tuesday, January 14, 1997, for the following
purposes:
1. To elect five directors of the Company.
2. To vote on a proposed amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from 18,000,000 to 36,000,000.
3. To vote on a proposal to approve the Company's 1997 Employee Stock
Purchase Plan.
4. To vote on a proposed amendment to the Company's 1991 Stock Option Plan
to increase the number of shares of Common Stock available under the
Plan from 350,000 to 550,000 shares.
5. To vote on a proposed amendment to the Company's 1991 Stock Option Plan
to limit the number of shares that may be granted to any individual
within any fiscal year to 100,000 shares of Common Stock.
6. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on November 21, 1996,
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, 1996
<PAGE> 3
GALILEO 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 14, 1997
------------------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Galileo Corporation (the "Company") for use at the Annual Meeting of
Shareholders of the Company to be held on January 14, 1997 in the John Foster
Room of the Boston Harbor Hotel, 70 Rowes Wharf, Boston, 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, for approval of the proposed increase in the number of authorized
shares of common stock, for approval of the proposed 1997 Employee Stock
Purchase Plan, and for approval of the proposed amendments to the 1991 Stock
Option Plan.
On November 21, 1996, the Company had outstanding 6,842,942 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, 1996 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, 1996.
<PAGE> 4
SHARE OWNERSHIP
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of November 21, 1996 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>
Dimensional Fund Advisors Inc........................... 385,000(2) 5.6%
1299 Ocean Avenue
Santa Monica, California 90401
William T. Burgin....................................... 24,999(3) *
Allen E. Busching....................................... 5,500(4) *
Kenneth W. Draeger...................................... 3,750(5) *
William T. Hanley....................................... 58,500(6) *
Robert D. Happ.......................................... 2,250(7) *
Josef W. Rokus.......................................... 22,116(8) *
David W. Skiles......................................... 12,000(9) *
All executive officers and directors as a group (7
persons).............................................. 129,115(10) 1.9%
</TABLE>
- ---------------
* 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 10,000 shares subject to options granted to Mr. Burgin under the
1996 Director Stock Option Plan.
(4) Includes 5,000 shares subject to options granted to Mr. Busching under the
1996 Director Stock Option Plan.
(5) All shares held by Mr. Draeger are subject to options granted to Mr.
Draeger under the 1996 Director Stock Option Plan.
(6) Includes 25,000 shares subject to options granted to Mr. Hanley under the
1981 Employee Stock Option Plan and 12,500 shares granted under the 1991
Employee Stock Option Plan.
(7) Includes 1,250 shares subject to options granted to Mr. Happ under the 1996
Director Stock Option Plan.
(8) Includes 14,000 shares subject to options granted to Mr. Rokus under the
1981 Employee Stock Option Plan, 1,250 shares granted under the 1991
Employee Stock Option Plan and 2,066 shares held under the Employee Stock
Purchase Plan.
(9) All shares held by Mr. Skiles are subject to options granted to Mr. Skiles
under the 1991 Employee Stock Option Plan.
(10) Includes 84,750 shares subject to options granted to officers and directors
under the 1981 Employee Stock Option Plan, the 1991 Employee Stock Option
Plan, and the 1996 Director Stock Option Plan.
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.
2
<PAGE> 5
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, 1996 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.
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 are 1979
(53) the sole general partners of The Bessemer Venture
Partnerships, venture capital limited partnerships. Mr.
Burgin is also a director of James River Corporation, a
manufacturer of paper products.
Allen E. Busching........ Principal of B&B Capital, a venture capital firm. 1989
(64) 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....... Chairman and Chief Executive Officer, DecisionOne 1993
(56) Holdings, Inc., 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. Mr. 1984
(49) Hanley is also a director of Incom, Inc., a manufacturer
of fiberoptic products, and a director of The Hanson
Group, Ltd, a manufacturer of plastic injection molded
products.
Robert D. Happ........... Former regional managing partner of KPMG Peat Marwick 1995
(56) 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 six meetings during the fiscal year ended
September 30, 1996. 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee and a Compensation Committee of the
Board of Directors, each consisting of the four nonemployee directors. The
Company does not have a nominating committee.
3
<PAGE> 6
The Audit Committee held two meetings during the fiscal year ended
September 30, 1996. 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 nonaudit services provided by the independent auditors, giving due
consideration to the impact of such services on their independence.
The Compensation Committee did not meet during the fiscal year ended
September 30, 1996.
DIRECTOR COMPENSATION
Director Fees. During fiscal year 1996, 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.
1996 Director Stock Option Plan. The 1996 Director Stock Option Plan (the
"1996 Plan") was approved at the Annual Meeting of Shareholders on January 19,
1996. The 1996 Plan is an amendment and restatement of the 1989 Director Stock
Option Plan (the "1989 Plan") and supersedes the 1989 Plan. No additional grants
will be made under the 1989 Plan, but the rights of the holders of outstanding
options under the 1989 Plan have not been affected.
Under the 1996 Plan, each nonemployee director as of November 10, 1995 was
granted nonstatutory options to purchase 2,500 shares of the Company's Common
Stock on the director's election at each Annual Meeting of Shareholders. 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.
Pursuant to the 1989 Plan and the 1996 Plan, the Company's directors have
been granted options to purchase the following number of shares at the indicated
prices per share:
<TABLE>
<CAPTION>
NUMBER OF PRICE
NAME SHARES PER SHARE
---------------------------------------------- --------- ---------
<S> <C> <C>
William T. Burgin............................. 10,000 $ 9.00
2,500 11.625
Allen E. Busching............................. 5,000 8.50
2,500 11.625
Kenneth W. Draeger............................ 5,000 5.25
2,500 11.625
Robert D. Happ................................ 5,000 8.1875
2,500 11.625
</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, 1996.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Company's Board of Directors determines the compensation of all
executive officers of the Company. A committee of the Board, which consists of
the nonemployee directors, administers the Company's Stock Option Plan.
The Board of Directors generally reviews the compensation of all executive
officers 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. The Board of Directors made no change
in the base salary of any of the Company's executive officers during fiscal year
1996.
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 earnings per share results of the Company
versus the earnings per share 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 1996,
and second, the pay-out percentage, which is determined by a formula specified
in the Plan and in 1996 ranged from 60% if the Company's actual earnings per
share equaled 88% of the earnings per share in its Operating Plan for fiscal
year 1996 to 150% if the actual earnings per share were approximately 196% of
the Operating Plan earnings per share. The participation rate times the pay-out
percentage times base compensation equals the Variable Pay Plan bonus. For
fiscal year 1996, the pay-out percentage was 126%. As a result, Mr. Hanley's
variable pay bonus for fiscal year 1996 was 63% of his base salary.
The Board granted a stock option to purchase 25,000 shares of stock to Mr.
Hanley in fiscal year 1996. In granting this stock option, the Board took into
account the level of Mr. Hanley's base salary and the number of stock options
previously granted and currently held by Mr. Hanley and the other executive
officers. The Company has no specific plan or formula for determining the
frequency of grants or number of options granted. No other stock options were
granted to executive officers in fiscal year 1996.
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
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 whose salary and bonus exceeded $100,000 for the fiscal year
ended September 30, 1996:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
SECURITIES ALL OTHER
--------------------- UNDERLYING COMPENSATION(1)
NAME AND SALARY BONUS OPTIONS ---------------
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- -------------------------------------------------- ---- ------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
William T. Hanley................................. 1996 180,000 113,400 25,000 13,686
President and Chief Executive 1995 183,462(2) 45,000 25,000 15,571
Officer 1994 180,000 29,400 -- 15,719
David W. Skiles................................... 1996 110,000 55,440 -- 3,054
Vice President and General 1995 110,000 22,000 10,000 3,554
Manager Remote Sensor Products 1994 110,000 -- -- 1,269
Josef W. Rokus.................................... 1996 100,000 37,800 -- 12,051
Vice President, Finance, Chief 1995 101,923(2) 15,000 5,000 11,257
Financial Officer and Secretary 1994 100,000 10,000 -- 10,729
</TABLE>
- ---------------
(1) All Other Compensation in 1996 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>
<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................ 4,156 -- 4,154 5,376
David W. Skiles.................. 1,996 -- 1,058 --
Josef W. Rokus................... 3,519 405 2,308 5,819
</TABLE>
(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 biweekly.
OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth certain information concerning options
granted to executive officers of the Company in fiscal year 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------------------------------- AT
% OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OR OPTION TERM(2)
GRANTED FISCAL YEAR BASE PRICE EXPIRATION ----------------------------
NAME (#)(1) 1996 ($/SHARE) DATE 0%($) 5%($)(3) 10%($)(3)
- ------------------------------------- ---------- ------------ ----------- ---------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
William T. Hanley.................... 25,000 24.5% 10.375 11/10/02 0 105,625 246,125
</TABLE>
- ---------------
(1) Grant was made on November 10, 1995. Option becomes exercisable as to 25% of
the shares annually beginning one year after grant.
(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
6
<PAGE> 9
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 $14.60 and
$20.22, or 41% and 95% above the base exercise price, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table provides information as to options exercised by each of
the named executive officers in fiscal year 1996 and the value of the remaining
options held by each such executive officer at year-end, measured using the last
trading price ($24.75) of the Company's Common Stock on September 30, 1996:
<TABLE>
<CAPTION>
NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE ----------------------------- -----------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- -------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William T. Hanley............... 10,278 75,800 41,250 43,750 816,250 668,750
David W. Skiles................. 500 10,000 9,500 10,000 167,250 168,750
Josef W. Rokus.................. 5,000 33,750 21,250 3,750 428,125 61,875
</TABLE>
PENSION PLAN TABLE
The following table shows the estimated annual benefits payable under the
Company's Pension Plan:
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- --------- -------- -------- -------- -------- --------
<C> <S> <C> <C> <C> <C> <C>
$125,000 .................. $27,570 $36,760 $45,950 $52,200 $58,450
150,000 .................. 33,570 44,760 55,950 63,450 70,950
175,000 .................. 33,570 44,760 55,950 63,450 70,950
200,000 .................. 33,570 44,760 55,950 63,450 70,950
225,000 .................. 33,570 44,760 55,950 63,450 70,950
250,000 .................. 33,570 44,760 55,950 63,450 70,950
300,000 .................. 33,570 44,760 55,950 63,450 70,950
400,000 .................. 33,570 44,760 55,950 63,450 70,950
450,000 .................. 33,570 44,760 55,950 63,450 70,950
500,000 .................. 33,570 44,760 55,950 63,450 70,950
</TABLE>
All employees who joined the Company prior to January 1, 1996 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 base
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, 14; Mr. Skiles,
4; and Mr. Rokus, 12.
7
<PAGE> 10
PERFORMANCE GRAPH
<TABLE>
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, 1996, as compared with that of the Nasdaq Stock Market U.S. Index
and the Standard & Poor's Technology Sector Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG GALILEO CORPORATION,
THE NASDAQ STOCK MARKET U.S. INDEX AND THE STANDARD & POOR'S TECHNOLOGY SECTOR
INDEX *
<CAPTION>
GALILEO CORPORATION NASDAQ STOCK MARKET-US S&P TECHNOLOGY SECTOR
------------------- ---------------------- ---------------------
<S> <C> <C> <C>
9/91 100 100 100
9/92 122 112 102
9/93 89 147 123
9/94 60 148 143
9/95 133 204 226
9/96 440 242 277
<FN>
- ---------------
* Assumes $100 invested on September 30, 1991 in the Company's Common Stock, the
Nasdaq Stock Market U.S. Index and the Standard & Poor's Technology Sector
Index, with all dividends, if any, being reinvested.
</TABLE>
8
<PAGE> 11
AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has unanimously voted to recommend that the
shareholders adopt an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 18,000,000 to
36,000,000 shares. If the amendment is approved, the shares may be issued from
time to time by the Board of Directors. Stockholders do not have, and the
proposed amendment would not create, any preemptive rights.
INCREASE OF AUTHORIZED COMMON STOCK
The Board of Directors recommends that the number or authorized shares of
Common Stock be increased to 36,000,000 shares. The Company currently has
18,000,000 shares of Common Stock authorized. As of November 21, 1996, the
Company had 6,842,942 shares outstanding and 278,500 shares reserved for
issuance under the Company's Stock Option Plans. Accordingly, as of that date,
10,878,558 shares of Common Stock were authorized and not outstanding or
reserved for issuance.
The Board believes that it is desirable to have a sufficient number of
shares of Common Stock available, as the occasion may arise, for possible future
financings and acquisition transactions, stock dividends or splits, stock
issuances pursuant to employee benefit plans and other proper corporate purposes
and accordingly recommends the proposed increase. Having such additional shares
available for issuance in the future would give the Company greater flexibility
by allowing shares to be issued without incurring the delay and expense of a
special shareholders meeting.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting is
required to approve this proposal. For this purpose, abstentions will have the
effect of negative votes, and broker non-votes will not be counted as present or
represented.
The Directors recommend a vote FOR this proposal.
PROPOSAL TO ADOPT THE 1997 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Board of Directors has voted, subject to the approval of the
shareholders, to adopt the Galileo Corporation 1997 Employee Stock Purchase Plan
(the "Purchase Plan") effective as of January 1, 1997. The purpose of the
Purchase Plan is to provide eligible employees of the Company and its
subsidiaries an opportunity to purchase the Company's Common Stock on favorable
terms. The Plan would be available to all employees whose customary employment
is more than 20 hours per week and who have completed three months of employment
with the Company. The Purchase Plan replaces the Galileo Electro-Optics
Corporation Employee Stock Purchase Plan that has been in effect since 1986.
The maximum number of shares available for purchase under the Purchase Plan
is 100,000 shares. The closing price of the Company's Common Stock on November
21, 1996, as reported by the Nasdaq National Market System, was $24.25.
The following summary of the 1997 Employee Stock Purchase Plan is qualified
by reference to the full text of the Plan attached as Appendix A to this proxy
statement.
GRANT OF RIGHTS AND ADMINISTRATION OF THE PLAN
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986 (the "Code").
Rights to purchase Common Stock under the Purchase Plan are granted at the
discretion of the Company's Board of Directors, or a committee appointed by the
Board, which determines the frequency and duration of individual offerings under
the Plan, the purchase price and the date(s) when stock may be purchased. The
purchase price per share of Common Stock in an offering can
9
<PAGE> 12
not be less than 85% of the lower of its fair market value at the beginning of
the offering period or the applicable exercise date payable through payroll
deductions. Eligible employees participate voluntarily and may withdraw from any
offering at any time before stock is purchased. Participation terminates
automatically upon termination of employment.
In accordance with Section 423 of the Code, no employee may subscribe for
shares under the Plan if, immediately after having subscribed, the employee
would own 5% or more of the voting stock of the Company (including stock which
may be purchased through subscriptions under the Plan or any other options) nor
may an employee buy more than $25,000 worth of stock (determined at the time the
purchase right is granted) through the Plan in any calendar year. The Purchase
Plan provides that no employee may allocate more than 10% of the employee's
total compensation to the purchase of stock through the Purchase Plan.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE EMPLOYEE STOCK PURCHASE PLAN
Participants do not realize taxable income at the commencement of an
offering or at the time shares are purchased under the Purchase Plan.
If no disposition of shares purchased under the Purchase Plan is made by
the participant within two years from the offering commencement date or within
one year from the purchase date, then (a) upon sale of such shares, 15% of the
fair market value of the stock at the commencement of the offering period (or,
if less, the amount realized on sale of such shares in excess of the purchase
price) is taxed to the participant as ordinary income with any additional gain
taxed as a long-term capital gain and any loss sustained is treated as a long-
term capital loss and (b) no deduction is allowed to the Company for Federal
income tax purposes.
If the participant dies at any time while owning shares purchased under the
Purchase Plan, then (a) 15% of the fair market value of the stock at the
commencement of the offering period (or, if less, the fair market value of such
shares on the date of death in excess of the purchase price) is taxed to the
participant as ordinary income in the year of death and (b) no deduction is
allowed to the Company for Federal income tax purposes.
If shares of Common Stock purchased under the Purchase Plan are disposed of
prior to the expiration of the two-year and one-year holding periods described
above, then (a) the participant realizes ordinary income in the year of
disposition in an amount equal to the excess of the fair market value of the
shares on the date of purchase over the purchase price thereof, and (b) the
Company is entitled to deduct such amount. Any further gain or loss is treated
as a short-term or long-term capital gain or loss and will not result in any
deduction by the Company.
VOTES REQUIRED
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting is
required to approve the adoption of the Purchase Plan. For this purpose,
abstentions will have the effect of negative votes, and broker non-votes will
not be counted as present or represented.
The Directors recommend a vote FOR this proposal.
AMENDMENTS TO 1991 EMPLOYEE STOCK OPTION PLAN
GENERAL
The Company's 1991 Stock Option Plan (the "Plan") provides for the grant of
incentive stock options ("ISOs"), non-qualified stock options and stock
appreciation rights ("SARs") to key employees of the Company. In addition,
non-qualified stock options and SARs may be granted to consultants to the
Company. All employees and consultants capable of contributing significantly to
the successful performance of the Company are eligible to participate.
The Plan provides for issuance of a maximum of 350,000 shares of Common
Stock. The number of shares issuable under the Plan is subject to adjustment for
stock splits, stock dividends and other transactions
10
<PAGE> 13
affecting the Company's capital stock. If any award expires or is terminated
unexercised, the shares which would otherwise have been issuable are again
available for award under the Plan. The Plan is administered by a Committee of
the Board of Directors (the "Committee"), comprised of at least three
disinterested directors appointed by the Board. The Committee may delegate to
one or more executive officers of the Company the power to make awards to
participants who are not subject to Section 16 of the Securities Exchange Act of
1934. The Board of Directors may also administer the Plan. The exercise price of
stock options and SARs may not be less than the fair market value of the
underlying Common Stock on the date of grant.
As of November 21, 1996, approximately 78 employees were eligible to
participate in the Plan. The closing price of the Company's Common Stock as
reported by the Nasdaq National Market System on November 21, 1996 was $24.25.
As of November 21, 1996, options to purchase an aggregate of 239,000 shares of
the Company's Common Stock had been granted under the Plan. Of the foregoing,
options to purchase an aggregate of 75,000 shares of Common Stock had been
granted to executive officers and options to purchase an aggregate of 164,000
shares of Common Stock had been granted to all other employees. After taking
into account shares available as a result of expiration or termination of
options granted under the Plan, 116,000 shares of Common Stock remain available
for awards under the Plan. To date, no incentive stock options or stock
appreciation rights have been granted under the Plan.
PROPOSED AMENDMENTS TO THE PLAN
The Board of Directors has voted, subject in each case to approval of the
shareholders, to adopt the following two amendments to the Plan:
Proposed Amendment 1
This amendment would increase the aggregate number of shares of Common
Stock that may be subject to grants under the Plan from 350,000 to 550,000,
subject to adjustment for stock splits, stock dividends and other transactions
affecting the Company's capital stock. The Board of Directors believes that this
increase is necessary so that the Company can continue to attract and retain
qualified employees and provide an incentive for them to achieve long-term
performance goals.
Proposed Amendment 2
This amendment would limit the number of shares subject to stock options or
SARs that may be granted under the Plan to any one person within any fiscal year
to 100,000 shares of Common Stock, subject to adjustment for stock splits, stock
dividends and other transactions affecting the Company's capital stock. This
amendment is intended to ensure that the gain recognized on the exercise of
certain stock options and SARs granted to the Company's highest paid executive
officers will not be subject to the $1,000,000 limitation on the deductibility
of executive compensation imposed by Section 162(m) of the Internal Revenue
Code. Although the Company has not typically granted stock options or SARs that
approach these limits, such limits will give the Company the flexibility to
grant such awards should the Committee determine that it would be in the best
interest of the Company to do so.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Generally, neither the grant nor the exercise of
an ISO will result in taxable income to the optionee or a deduction to the
Company. Unless the optionee disposes of such stock within two years after the
grant of the option or within a year after its exercise (a "disqualifying
disposition"), any gain or loss recognized on the disposition of stock will be
long-term capital gain or loss. In that case, the Company will not be entitled
to a deduction in either the year of the exercise or the year of the
disposition. The exercise of an ISO may result in alternative minimum tax
liability for the optionee unless there is a disqualifying disposition in the
year of exercise.
If an optionee acquiring stock upon the exercise of an ISO disposes of the
stock in a disqualifying disposition, the difference between the fair market
value of the stock at the date of exercise and the exercise price (or the
difference between the net proceeds of sale and the exercise price if that is
less) will be ordinary compensation income in the year of disposition. The
Company will generally be entitled to a deduction at the
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<PAGE> 14
time of such a disposition equal in amount to the amount of ordinary
compensation income recognized by the optionee. Any further gain realized will
be taxed as long or short-term capital gain and will not result in any deduction
by the Company.
Non-qualified Stock Options. The grant of a non-qualified stock option
under the 1991 Plan normally will not, under present federal income tax laws and
regulations, result in taxable income to the optionee or a deduction to the
Company. Upon the exercise of a non-qualified stock option, the optionee will
recognize compensation income, and the Company will become entitled to a
deduction, in the amount by which the market value of the stock at the time of
exercise exceeds its exercise price. If the optionee thereafter sells such
shares, the amount by which the net proceeds of sale exceed or are exceeded by
the market value of such shares at the date of exercise will constitute capital
gain or loss, which will be long-term or short-term depending upon the holding
period of the shares.
Stock Appreciation Rights. A grantee will not realize taxable income upon
the grant of an SAR. On the exercise of an SAR, in general, (a) any cash
received and the fair market value of any shares received will constitute
ordinary income to the grantee at the time of exercise, and (b) the Company will
be entitled to deduct such amount.
VOTES REQUIRED
The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting is
required to approve the two proposed amendments to the Plan. For this purpose,
abstentions will have the effect of negative votes, and broker non-votes will
not be counted as present or represented.
The Directors recommend a vote FOR each of these proposals.
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 1998 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, 1997.
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, 1996
12
<PAGE> 15
APPENDIX A
GALILEO CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The purpose of the 1997 Employee Stock Purchase Plan (the "Plan") is to
provide employees of Galileo Corporation (the "Company") and its subsidiaries
who wish to become shareholders of the Company an opportunity to purchase common
stock of the Company (the "Common Stock"). The Plan is intended to qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION OF THE PLAN
The Plan will be administered by a committee (the "Committee") comprised of
not fewer than two members of the Board of Directors of the Company (the
"Board") appointed by the Board to administer the Plan. In the absence of the
appointment of a committee, the Board will act as the Committee. The Committee
has authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the operation of the Plan as it will from time to time
consider advisable and to interpret the provisions of the Plan. The Committee's
decisions will be final and binding.
3. ELIGIBILITY
Subject to Section 8, all employees of the Company and any of its
Participating Subsidiaries whose customary employment is more than 20 or more
hours per week are eligible to participate in an Offering under the Plan if they
have completed the following service requirement as of the Offering Date: (a)
for regular employees, three months of employment or (b) for all other
employees, including temporary employees, two years of employment. A
"Participating Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code which is designated from time to time by the Board to
participate in the Plan.
4. SHARES SUBJECT TO THE PLAN
(1) Amount. Subject to adjustment under subsection (b), the aggregate
number of shares which may be issued pursuant to the Plan is 100,000 shares of
Common Stock. If any right granted under the Plan expires, terminates or is
unexercised in full, the unpurchased shares will again be available for purchase
under the Plan. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(2) Adjustment. In the event that the Committee determines that any stock
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares or other transaction affects the
Common Stock such that an adjustment is required in order to preserve the
benefits intended to be provided by the Plan, then the Committee (subject to any
limitation required under the Code) will equitably adjust any or all of (i) the
number and kind of shares that may be purchased under the Plan and (ii) the
Exercise Price with respect to such shares in any Offering.
5. OFFERINGS
The Plan will be implemented by one or more offerings (each of which is an
"Offering") on a date or series of dates (each of which is an "Offering Date")
designated from time to time by the Committee. The total period from an Offering
Date to the last date on which rights granted on that Offering Date are
exercisable (the "Offering Period") will in no event be longer than 27 months.
The Committee, when it authorizes an Offering, will designate an exercise price
(the "Exercise Price") which may not be less than the lesser of (a) 85% of the
fair market value of a share of Common Stock on the Offering Date on which such
right was granted or (b) 85% of the fair market value of a share of Common Stock
on the date the right is exercised. The Committee may also designate one or more
exercise periods during the Offering Period.
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Participation in an Offering will be limited to eligible employees who elect to
participate in such Offering in the manner, and within the time limitations,
established by the Committee when it authorizes the Offering.
6. GRANT OF PURCHASE RIGHTS
Each eligible employee may participate in an Offering (a "Participant") by
completing and delivering to the Company an enrollment form specifying the
percentage, in whole percentages, to be deducted from the employee's
compensation and authorizing the purchase of Common Stock for the employee in
accordance with the terms of the Offering and the Plan. A Participant is then
granted the right to purchase on the last day of each exercise period (an
"Exercise Date") during the Offering Period a number of shares of Common Stock
determined by dividing the Participant's payroll deductions accumulated prior to
such Exercise Date by the Exercise Price. Unless a Participant files a new
enrollment form or withdraws from the Plan, the deductions and purchases
authorized under the enrollment form will remain in effect for each succeeding
Offering Period.
7. METHOD OF PAYMENT AND EXERCISE OF RIGHTS
The method of payment for stock purchased upon exercise of rights granted
will be through regular payroll deductions. Amounts deducted from a
Participant's compensation will be credited to a bookkeeping account maintained
in the name of the participant. No interest will be credited or paid on amounts
held in the account. Unless the Participant has withdrawn as provided in Section
9, rights granted under the Plan will be exercised automatically on each
Exercise Date. Any amounts held in the account and not used for the purchase of
shares on an Exercise Date will be held in the account until the next Exercise
Date or, if the Offering has terminated with such Exercise Date, will be
promptly returned to such employee by the Company. Unless waived by the
Committee, any stock purchased under the Plan may not be sold, transferred or
otherwise disposed of until the earlier of (a) six months from the date of
purchase, or (b) the Participant's termination of employment with the Company.
8. LIMITATIONS ON GRANTS
(a) No employee may be granted a right hereunder if such employee,
immediately after the right is granted, would own stock or rights to purchase
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company, or of any subsidiary, computed in accordance
with Section 423(b)(3) of the Code.
(b) No employee will be granted a right which permits his rights to
purchase shares under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate which exceeds $25,000 (or such other maximum as
may be prescribed from time to time by the Code) of the fair market value of
such stock (determined at the time such right is granted) for each calendar year
in which such right is outstanding at any time in accordance with the provisions
of Section 423(b)(8) of the Code.
(c) No Participant may make payroll deductions which, when aggregated with
payroll deductions under any other Offering in which the Participant then
participates, exceed 10% of the Participant's total compensation. Total
compensation for this purpose includes base pay or salary, bonuses and overtime,
excluding commissions.
9. WITHDRAWAL FROM OFFERING
A Participant in an Offering may withdraw from an Offering as to all (but
not part) of the unexercised rights granted under such Offering by giving
written notice of such cancellation to the Company before any Exercise Date. Any
amounts withheld for the purchase of stock from the employee's compensation
through payroll deductions will be paid to the employee, without interest, upon
such withdrawal and the rights granted with respect to the Offering will be
automatically terminated. A withdrawing Participant may not again participate
until the commencement of a new Offering.
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<PAGE> 17
10. TERMINATION OF EMPLOYMENT
Upon the termination of employment for any reason, including the death of
the Participant, before the date on which any rights granted under the Plan are
exercisable, all such rights will immediately terminate, and amounts withheld
for the purchase of Common Stock from the Participant's compensation through
payroll deductions will be paid to the Participant or to the Participant's
estate, without interest.
11. MISCELLANEOUS
(a) No Right To Employment. Neither the Plan nor any right hereunder will
be deemed to give any employee the right to continued employment or to limit the
right of the Company to discharge any employee at any time.
(b) No Rights As Shareholder. No Participant will have any rights as a
shareholder in the stock covered by a right granted hereunder until such right
has been exercised, full payment has been made for the corresponding stock and
the stock certificate is actually issued.
(c) Rights Not Transferable. Rights under the Plan are not assignable or
transferable by a participating employee and are exercisable only by the
employee.
(d) Effective Date. Subject to the approval of the shareholders of the
Company, the Plan will be effective on January 1, 1997.
(e) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, subject to such shareholder approval as the
Board determines to be necessary or advisable to comply with any tax or
regulatory requirement.
(f) Governing Law. The provisions of the Plan will be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
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APPENDIX B
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GALILEO CORPORATION
ANNUAL MEETING OF SHAREHOLDERS JANUARY 14, 1997
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 Corporation at the Annual Meeting
of Shareholders to be held January 14, 1997, 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 contrary below) all nominees listed 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 BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
2. Proposal to increase the number of authorized shares of Common
Stock [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the 1997 Employee Stock Purchase Plan [ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to increase the number of shares available under the
1991 Stock Option Plan [ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
5. Proposal to limit the number of shares that may be granted under
the 1991 Stock Option Plan to any individual within any fiscal year [ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
Shares will be voted as specified by the shareholder. IF NO SPECIFICATION IS
MADE, THE PROXY WILL BE VOTED FOR ALL OF THE ABOVE PROPOSALS. 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 below. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If more than one name is
shown, including the case of
joint tenants, each party should
sign. Thank you.
Date....................., 19....
Signed...........................
Signed...........................
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE> 20
APPENDIX C
GALILEO CORPORATION
1991 STOCK OPTION PLAN
SECTION 1. Purpose
The purpose of the Galileo Corporation 1991 Stock Option Plan (the "Plan")
is to attract and retain key employees and consultants, to provide an incentive
for them to assist the Company to achieve long-range performance goals and to
enable them to participate in the long-term growth of the Company.
SECTION 2. Definitions
"Affiliate" means any business entity in which the Company owns directly or
indirectly 50 percent or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option or Stock Appreciation Right awarded under the
Plan.
"Company" means Galileo Corporation.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not fewer than three members of the Board
appointed by the Board to administer the Plan, each of whom is a "disinterested
person" as defined in Rule 16b-3 under Section 16(b).
"Common Stock" or "Stock" means the Common Stock of the Company.
"Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Committee, to receive amounts due or exercise
rights of the Participant in the event of the Participant's death. In the
absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Non-qualified Stock Option" means an option to purchase shares of Common
Stock under Section 6 that is not intended to be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Non-qualified Stock Option.
"Participant" means a person selected by the Committee to receive an Award
under the Plan.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Section 16(b)" means Section 16(b) of the Securities Exchange Act of 1934,
or any successor provision.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
value of shares of Common Stock over the exercise price awarded to a Participant
under Section 7.
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SECTION 3. Administration
The Plan shall be administered by the Committee. The Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount of such Awards for the group and a maximum for any
one Participant.
Subject to any disinterested administration requirements for exemptive
relief under Section 16(b) with respect to Awards to Reporting Persons, the
Board may also make Awards and exercise administrative authority under the Plan
to the same extent as the Committee.
SECTION 4. Eligibility
All employees, and in the case of Awards other than Incentive Stock
Options, consultants of the Company or any Affiliate capable of contributing
significantly to the successful performance of the Company, other than any
person who has irrevocably elected not to be eligible, are eligible to be
Participants in the Plan.
SECTION 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b), Awards may be made under
the Plan for up to 350,000 shares of Common Stock. If any Award in respect to
shares of Common Stock expires or is terminated unexercised or is forfeited for
any reason, the shares of such Award, to the extent of such expiration,
termination or forfeiture, shall again be available for award under the Plan,
subject, however, in the case of Incentive Stock Options, to any limitation
required under the Code. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below market value, or other similar transaction
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available under
the Plan, then the Committee, subject, in the case of Incentive Stock Options,
to any limitation required under the Code, shall equitably adjust any or all of
(i) the number and kind of shares in respect of which Awards may be made under
the Plan, (ii) the number and kind of shares subject to outstanding Awards, and
(iii) the exercise price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect to
an outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.
SECTION 6. Stock Options
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Non-qualified Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(b) The Committee shall establish the option price at the time each Option
is awarded, which price shall be not less than 100 percent of the Fair Market
Value of the Common Stock on the date of award.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
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<PAGE> 22
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of shares of
Common Stock owned by the optionee valued at their Fair Market Value on the date
of delivery, or such other lawful consideration as the Committee may determine.
(e) The Committee may provide for the automatic award of an Option upon the
delivery of shares to the Company in payment of an Option for up to the number
of shares so delivered.
SECTION 7. Stock Appreciation Rights
(a) Subject to the provisions of the Plan, the Committee may award SARs in
tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs shall have an
exercise price of not less than 100 percent of the Fair Market Value of the
Common Stock on the date of award, or in the case of SARs in tandem with
Options, the exercise price of the related Option.
(b) An SAR related to an Option that can only be exercised during limited
periods following a change in control of the Company may entitle the Participant
to receive an amount based upon the highest price paid or offered for Common
Stock in any transaction relating to the change in control or paid during the
thirty-day period immediately preceding the occurrence of the change in control
in any transaction reported in the stock market in which the Common Stock is
normally traded.
SECTION 8. General Provisions Applicable to Awards
(a) Reporting Person Limitations. Notwithstanding any other provision of
the Plan, to the extent required to qualify for the exemption provided by Rule
16b-3 under Section 16(b), any Option or SAR issued under the Plan to a
Reporting Person shall not be transferable other than by will or the laws of
descent and distribution and shall be exercisable during the Participant's
lifetime only by the Participant or the Participant's guardian or legal
representative.
(b) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(c) Committee Discretion. Each type of Award may be made alone or in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of Award or at any time thereafter.
(d) Settlement. The Committee shall determine whether Awards are settled
in whole or in part in cash, Common Stock, other securities of the Company,
Awards or other property. The Committee may permit a Participant to defer all or
any portion of a payment under the Plan.
(e) Cash Awards. In the discretion of the Committee, any Award under the
Plan may provide cash payments to the Participant in lieu of or in addition to
an Award.
(f) Termination of Employment. The Committee shall determine the effect on
an Award of the disability, death, retirement or other termination of employment
of a Participant and the extent to which, and the period during which, the
Participant's legal representative, guardian, or Designated Beneficiary may
receive payment of an Award or exercise rights thereunder.
(g) Change in Control. In order to preserve a Participant's rights under
an Award in the event of a change in control of the Company, the Committee in
its discretion may, at the time an Award is made or at any time thereafter, take
one or more of the following actions: (i) provide for the acceleration of any
time period relating to the exercise or realization of the Award, (ii) provide
for the purchase of the Award upon the
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Participant's request for an amount of cash or other property that could have
been received upon the exercise or realization of the Award had the Award been
currently exercisable or payable, (iii) adjust the terms of the Award in a
manner determined by the Committee to reflect the change in control, (iv) cause
the Award to be assumed, or new rights substituted therefor, by another entity,
or (v) make such other provisions as the Committee may consider equitable and in
the best interests of the Company.
(h) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(i) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Non-qualified Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
SECTION 9. Miscellaneous.
(a) No Right To Employment. No persons shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Shareholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed or
acquired under the Plan until he or she becomes the holder thereof.
(c) Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective on October 23, 1991. Awards may be made
before, but expressly subject to, such approval.
(d) Amendment Of Plan. The Board may amend, suspend or terminate the Plan
or any portion hereof at any time, provided that no amendment shall be made
without shareholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirement for
exemptive relief under Section 16(b).
(e) Governing Law. The provisions of the Plan shall be governed and
interpreted in accordance with the laws of Massachusetts.
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