<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:
[ ] 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 CORPORATION
(Name of Registrant as Specified In Its Charter)
[GRAPHIC OMITTED]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] 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 CORPORATION
GALILEO PARK
P.O. BOX 550
STURBRIDGE, MASSACHUSETTS 01566
TELEPHONE (508) 347-9191
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 6, 1999
The Annual Meeting of Shareholders of Galileo Corporation will be held at
the Boca Raton Marriott, 5150 Town Center Circle, Boca Raton, Florida, at 10:00
a.m., on Tuesday, April 6, 1999, for the following purposes:
1. To elect seven directors of the Company.
2. To approve the stock option grant to W. Kip Speyer.
3. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on February 19, 1999
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
March 9, 1999
<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 APRIL 6, 1999
------------------------
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 April 6, 1999, at the Boca Raton
Marriott, 5150 Town Center Circle, Boca Raton, Florida, 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 the approval of the stock option grant to W. Kip Speyer.
On February 19, 1999, the Company had outstanding 10,084,265 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
February 19, 1999 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 March 9, 1999.
<PAGE> 4
SHARE OWNERSHIP
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of February 26, 1999 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>
Andlinger Capital XIII LLC.................................. 4,000,000(2)(4) 33%(3)
105 Harbor Drive
Stamford, Connecticut 06902
Eaton Vance Management...................................... 627,958(4) 6%
24 Federal Street
Boston, Massachusetts 02110
Century Management.......................................... 617,084(4) 6%
1301 Capital of Texas Highway
Suite B228
Austin, Texas 78746
Dimensional Fund Advisors Inc............................... 513,700(4) 5%
1299 Ocean Avenue
Santa Monica, California 90401
Gerhard R. Andlinger........................................ 4,070,000(5) 34%(3)
Charles E. Ball............................................. 4,000,000(6) 33%(3)
John F. Blais, Jr........................................... 806,652 8%
Todd F. Davenport........................................... -0- *
William T. Hanley........................................... 105,978(7) 1%
Robert D. Happ.............................................. 13,750(8) *
Stephen A. Magida........................................... 4,023,000(9) 33%(3)
Gregory Riedel.............................................. 8,604(10) *
Josef W. Rokus.............................................. 26,943(11) *
W. Kip Speyer............................................... 142,906(12) 1%
Stephen P. Todd............................................. -0- *
All executive officers and directors as a group (8
persons).................................................. 5,083,251(13) 42%
</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) Includes 2,000,000 shares Andlinger Capital XIII LLC has the right to
acquire upon exercise of a warrant. Mr. John P. Kehoe, with an address at
766 Madison Avenue, New York, New York 10021, may be deemed to have shared
voting and dispository power of these 4,000,000 shares. Mr. Kehoe disclaims
beneficial ownership of these shares.
(3) Based on 12,084,265 shares outstanding, which includes 2,000,000 shares
Andlinger Capital XIII LLC has the right to acquire upon exercise of a
warrant.
(4) Based on information provided by the beneficial owner.
(5) Includes (a) 70,000 shares owned directly by Mr. Andlinger, and (b)
4,000,000 shares (2,000,000 of which may be acquired upon exercise of a
warrant) held by Andlinger Capital XIII LLC, for which Mr. Andlinger shares
voting and dispository power.
2
<PAGE> 5
(6) Includes 4,000,000 shares (2,000,000 of which may be acquired upon exercise
of a warrant) held by Andlinger Capital XIII LLC. Mr. Ball may be deemed to
have shared voting and dispository power of such shares. Mr. Ball disclaims
beneficial ownership of such 4,000,000 shares.
(7) Includes 77,500 shares subject to options granted to Mr. Hanley under the
1981 Employee Stock Option Plan and the 1991 Employee Stock Option Plan and
2,478 shares owned by Mr. Hanley's spouse. Mr. Hanley resigned from the
Company on November 18, 1998.
(8) Includes 8,750 shares subject to options granted to Mr. Happ under the 1996
Director Stock Option Plan.
(9) Includes (a) 23,000 shares held of record by seven irrevocable trusts of
which Mr. Magida is sole trustee for the benefit of the family members of
Mr. Andlinger; and (b) 4,000,000 shares (2,000,000 of which may be acquired
upon exercise of a warrant) held by Andlinger Capital XIII LLC, for which
Mr. Magida shares voting and dispository power.
(10) Includes 1,604 shares held under the Employee Stock Purchase Plan and 1,000
shares owned by Mr. Riedel's children. Mr. Riedel resigned from the Company
on November 2, 1998.
(11) Includes 18,250 shares subject to options granted to Mr. Rokus under the
1981 Employee Stock Option Plan and the 1991 Employee Stock Option Plan and
3,893 shares held under the Employee Stock Purchase Plan.
(12) Includes 40,000 shares subject to options granted to Mr. Speyer under the
1991 Employee Stock Option Plan.
(13) Includes 62,000 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 and 2,000,000 shares which may
be acquired by Andlinger Capital XIII LLC upon exercise of a warrant.
Excludes all shares and options to purchase shares held by Mr. Hanley and
Mr. Riedel or their families.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. One report covering the purchase of 2,000 shares of Common
Stock by Allen Busching, who resigned as a director of the Company in December
1998, was filed after the time such filing was required.
3
<PAGE> 6
CHANGE IN CONTROL
On January 26, 1999, pursuant to a previously announced Securities Purchase
Agreement dated December 22, 1998 (the "Purchase Agreement"), Andlinger Capital
XIII LLC, a Connecticut limited liability company ("Andlinger Capital"),
purchased from the Company 2,000,000 shares of the Company's common stock
together with warrants to purchase an additional 2,000,000 shares of the
Company's common stock for an aggregate purchase price of $6,000,000 in a
private transaction. Upon consummation of this transaction, Andlinger Capital
acquired beneficial ownership of an aggregate of 4,000,000 newly issued shares
of the Company's common stock (of which 2,000,000 shares are attributable to the
warrants) representing approximately 33% of the issued and outstanding common
stock of the Company (including as outstanding for the purposes of determining
such percentage the 2,000,000 shares issuable upon exercise of the warrants).
The acquisition of these securities by Andlinger Capital, taking into account
the terms of the Purchase Agreement described below, may constitute a change in
control of the Company.
Under the terms of the Purchase Agreement, the Company's Board of Directors
has been enlarged to seven members, including three individuals designated by
Andlinger Capital. The Purchase Agreement provides that, for as long as
Andlinger Capital and its affiliates continue to own in the aggregate not less
than 50% of its initial investment, including as owned shares issuable under the
warrants, the Company and its Board of Directors will support the nomination of
and take certain actions such that the nominees recommended by the Board of
Directors to the stockholders of the Company for election as directors at each
annual meeting of the stockholders includes at least the number of directors
selected by Andlinger Capital equal to one less than a majority of the directors
following such election, and that Andlinger Capital will be entitled to have at
least one of its designees appointed to each committee of the Board of
Directors. In addition, pursuant to the terms of the Purchase Agreement, the
Company has amended its By-Laws to provide for supermajority Board of Directors
voting requirements for specified actions of the Company, including mergers,
acquisitions, divestitures and financings, so long as Andlinger Capital and its
affiliates continue to own not less than 98% of its initial investment.
Based on information received from Andlinger Capital, the members of
Andlinger Capital are Gerhard A. Andlinger, Stephen A. Magida (manager of
Andlinger Capital), Charles E. Ball and John P. Kehoe; and Andlinger Capital's
source of funds to pay the purchase price under the Purchase Agreement was cash
contributions by the members of Andlinger Capital from (i) personal funds in the
amount of $5,550,000 in the case of Mr. Andlinger, (ii) a loan in the amount of
$75,000 from Mr. Andlinger's personal funds at a rate of 10% per annum in the
case of Mr. Magida, (iii) a loan in the amount of $75,000 from Mr. Andlinger's
personal funds at a rate of 10% per annum in the case of Mr. Kehoe, and (iv) a
loan in the amount of $300,000 from Mr. Andlinger's personal funds at a rate of
10% per annum in the case of Mr. Ball.
4
<PAGE> 7
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at seven for the
coming year. The persons named below, all of whom are members of the present
Board of Directors, 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. Pursuant to the
terms of the Securities Purchase Agreement described above in "CHANGE IN
CONTROL," Messrs. Andlinger, Ball and Magida were selected as nominees by
Andlinger Capital XIII LLC.
Unless otherwise directed, the persons named in the proxy intend to vote
for the election of these nominees. 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>
Gerhard R. Andlinger........... Chairman and Chief Executive Officer of Andlinger & 1999
(68) Company, Inc., a private investment company.
Charles E. Ball................ Principal of Andlinger & Company, Inc. and an employee of 1999
(48) ANC Management Corp., a management company affiliated
with Andlinger & Company.
John F. Blais, Jr.............. President of Optical Filter Corporation, a subsidiary of 1998
(60) the Company.
Todd F. Davenport.............. President and Founder of Cardiant Medical Corporation 1998
(48) since April, 1995, and President of St. Jude Medical,
Inc., (International Division) from 1992 to 1995.
Robert D. Happ................. Former regional managing partner of KPMG Peat Marwick 1995
(58) LLP, a public accounting firm, from which he retired in
1994. Mr. Happ is also a director of CAI Wireless
Systems, Inc., and CS Wireless Systems, Inc., both of
which are owners and operators of wireless cable TV
systems, and a Trustee of Cambridgeport Mutual Holding
Company, a mutual bank holding company.
Stephen A. Magida.............. Manager of Andlinger Capital XIII LLC. Self-employed 1999
(55) attorney since May 1994. Prior thereto, Mr. Magida had
been a partner of Dechert Price & Rhoads, attorneys.
W. Kip Speyer.................. President and Chief Executive Officer of the Company 1998
(50) since November 18, 1998. Mr. Speyer is also President of
Leisegang Medical, Inc., a subsidiary of the Company.
</TABLE>
The Board of Directors held 13 meetings during the fiscal year ended
September 30, 1998. Each director attended at least 75% of all meetings of the
Board and of 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 (Messrs. Ball, Davenport and Happ) and a
Compensation Committee (Messrs. Davenport, Happ and Magida). The Company does
not have a nominating committee.
The Audit Committee held two meetings during the fiscal year ended
September 30, 1998. 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
5
<PAGE> 8
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, whose functions are described under
"Compensation Committee Report" below, held eight meetings during the fiscal
year ended September 30, 1998.
DIRECTOR COMPENSATION
Director Fees. During fiscal year 1998, the compensation of Board members
(other than full-time employees of the Company) was $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.
Director Stock Options. Under the 1996 Director Stock Option Plan (the
"1996 Plan"), nonstatutory options to purchase 2,500 shares of the Company's
Common Stock were granted to each nonemployee director 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. On February 23,
1999, the Board of Directors amended the 1996 Plan to provide for a grant to
each of Messrs. Davenport and Happ of options to purchase 10,000 shares of
Common Stock at a price of $5.25 per share, the fair market value of the Common
Stock on the grant date, and to then terminate the 1996 Plan. Accordingly, no
additional grants will be made under the 1996 Plan at the Annual Meeting or
otherwise. The terms of the February 23 option grants were the same as prior
grants under the 1996 Plan, except that options for half of the shares become
exercisable six months after grant and the other half eighteen months after
grant.
Including the February 23 option grants described above, Mr. Happ has been
granted options to purchase a total of 22,500 shares of Common Stock at prices
from $5.25 to $25.75 per share, and Mr. Davenport has been granted an option to
purchase 10,000 shares of Common Stock at $5.25 per share.
Employment Agreements. On November 16, 1998, Mr. Speyer entered into an
Employment Agreement with the Company pursuant to which Mr. Speyer agreed to
continue as President and Chief Executive Officer of the Company at an annual
salary of $250,000, with the opportunity to receive incentive bonus compensation
up to 40% of his salary. The Employment Agreement terminates on September 30,
2001. If the Employment Agreement is terminated by the Company without cause
prior to such date, the Company has agreed to pay Mr. Speyer his salary through
such date, including the full amount of his incentive bonus. Since September 30,
1998, the Company has granted to Mr. Speyer options to purchase a total of
200,000 shares of the Company's Common Stock, subject to shareholder approval in
the case of the option to purchase 100,000 of such shares. See "Approval of
Stock Option Grant" on page 11 of this proxy statement.
Mr. Blais has an employment agreement with the Company providing for him to
serve as president of Optical Filter Corporation at an annual salary of $100,000
through January 30, 1999 and as president emeritus on a half-time basis at an
annual salary of $50,000 for two years thereafter. In December, 1998, the Board
of Directors temporarily extended his services as president of Optical Filter
Corporation on a full-time basis and authorized an increase in salary to
$200,000.
Indemnification Agreements. The Company has entered into an
Indemnification Agreement with each nonemployee director 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.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The Compensation Committee Report on Executive Compensation set forth below
describes the Company's compensation policies applicable to executive officers
and the Committee's basis for Mr. Hanley's compensation as Chief Executive
Officer for the fiscal year ended September 30, 1998.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
compensation of all executive officers of the Company, administers the Company's
Stock Option Plan, including the grant of stock options thereunder, and acts on
other compensation matters.
The Committee 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 Committee may review publicly available executive compensation
surveys of technology oriented manufacturing companies with annual sales
comparable to those of the Company. The Committee 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 judgement on the officer's performance during the last
year. No adjustments to base salary were made in fiscal year 1998.
In fiscal year 1998, Mr. Hanley and the other executive officers
voluntarily reduced their base salaries by 20%, effective July 27, 1998, in view
of the financial performance of the Company. Consequently, Mr. Hanley's base
salary was reduced from $220,000 to $176,000. These voluntary salary reductions
were accepted by the Compensation Committee.
The Variable Pay Plan for executive officers in 1998 was part of a variable
pay plan in effect for all of the Company's employees. Under this plan,
executive officers were to be 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 was to be determined by multiplying his base salary by the
following two factors: first, his participation rate percentage, which was 50%
of his base salary for 1998, and second, the pay-out percentage, which is
determined by a formula specified in the Plan based on the Company's actual
earnings per share versus the earnings per share in the Company's Operating Plan
for fiscal year 1998. The participation rate times the pay-out percentage times
base compensation equals the Variable Pay Plan bonus. For fiscal year 1998,
because the Company did not meet the earnings per share objective contained in
its 1998 Operating Plan, Mr. Hanley and the other executive officers did not
receive a variable pay bonus.
In fiscal year 1998, the Committee granted a stock option to purchase
10,000 shares of Common Stock of the Company to Mr. Riedel. In granting this
stock option, the Committee took into account the level of Mr. Riedel's base
salary and the number of stock options previously granted to him and currently
held by the other officers. The Company has no specific plan or formula for
determining the frequency of grants or number of options granted.
By the Compensation Committee,
Robert D. Happ
7
<PAGE> 10
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
chief executive officer and each of the other executive officers of the Company
whose salary and bonus exceeded $100,000 for the fiscal year ended September 30,
1998:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND SALARY BONUS OPTIONS COMPENSATION(1)
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------ ---- -------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
William T. Hanley(2)................ 1998 213,318 -- -- 12,043
President and Chief Executive 1997 189,252 -- 60,000 14,130
Officer 1996 180,000 113,400 25,000 13,686
Gregory Riedel(3)................... 1998 145,404 -- 10,000 3,679
Vice President, Finance and 1997 118,285 17,000 30,000 2,700
Chief Financial Officer
Josef W. Rokus...................... 1998 116,333 -- -- 12,476
Vice President, Corporate
Development and Secretary 1997 104,619 18,000 10,000 13,821
1996 100,000 37,800 -- 12,051
</TABLE>
- - ---------------
(1) All Other Compensation in 1998 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................ 3,555 -- -- 8,487
Gregory Riedel................... 3,403 -- -- 276
Josef W. Rokus................... 2,613 -- 1,385 8,479
</TABLE>
- - ---------------
(2) Mr. Hanley resigned from the Company on November 18, 1998.
(3) Mr. Riedel joined the Company on December 9, 1996 and resigned from the
Company on November 2, 1998.
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth certain information concerning options
granted to executive officers of the Company in fiscal year 1998:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES OR BASE -------------------------------
GRANTED IN FISCAL PRICE EXPIRATION 0% 5% 10%
NAME (#)(1) YEAR 1998 ($/SHARE) DATE ($) ($) ($)
---- ---------- ---------- --------- ---------- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Gregory Riedel....... 10,000 4.7% 4.625 8/06/08 0 29,086(3) 73,711(3)
</TABLE>
- - ---------------
(1) One grant of 10,000 shares was made to Mr. Riedel on August 6, 1998. Options
become exercisable as to 25% of the shares annually beginning one year after
grant. All of such options have terminated following Mr. Riedel's
resignation from the Company on November 2, 1998.
(2) Based upon the last trading price ($3.625) of the Company's Common Stock on
September 30, 1998, 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 the 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 $7.53 and
$12.00, or 63% and 159% above the exercise price, respectively.
8
<PAGE> 11
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 1998 and the value of the remaining
options held by each such executive officer at year-end, measured using the last
trading price ($3.625) of the Company's Common Stock on September 30, 1998:
<TABLE>
<CAPTION>
NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
SHARES OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William T. Hanley.............. -- -- 71,250 63,750 -- --
Gregory Riedel................. -- -- 7,500(1) 32,500(2) -- --
Josef W. Rokus................. -- -- 18,250 8,750 -- --
</TABLE>
- - ---------------
(1)(2) All options held by Mr. Riedel have since terminated following his
resignation from the Company on November 2, 1998.
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
- - ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000.................... $27,300 $36,400 $45,500 $51,750 $58,000
150,000..................... 33,300 44,400 55,500 63,000 70,500
175,000..................... 35,700 47,600 59,500 67,500 75,500
200,000..................... 35,700 47,600 59,500 67,500 75,500
225,000..................... 35,700 47,600 59,500 67,500 75,500
250,000..................... 35,700 47,600 59,500 67,500 75,500
300,000..................... 35,700 47,600 59,500 67,500 75,500
400,000..................... 35,700 47,600 59,500 67,500 75,500
450,000..................... 35,700 47,600 59,500 67,500 75,500
500,000..................... 35,700 47,600 59,500 67,500 75,500
</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 base
salary is covered by the Pension Plan. Years of service for the persons named in
the Summary Compensation Table above and eligible for participation in the
Pension Plan are as follows: Mr. Hanley, 16 and Mr. Rokus, 14. Mr. Hanley
resigned from the Company on November 18, 1998, and is no longer an active
participant in the Pension Plan.
OTHER EXECUTIVE COMPENSATION ARRANGEMENTS
Mr. Hanley resigned as President and Chief Executive Officer of the Company
on November 18, 1998. Pursuant to a Consulting Agreement dated November 24, 1998
between Mr. Hanley and the Company, Mr. Hanley has agreed to act as a consultant
to the Company for a fee of $10,000 per month for a period of twelve months.
On January 1, 1999, Mr. Rokus entered into an Employment Agreement with the
Company pursuant to which the Company has agreed to pay Mr. Rokus an annual
salary of $130,000. The Employment Agreement terminates on December 31, 1999. In
the event Mr. Rokus is terminated by the Company without cause prior to such
date, the Company has agreed to pay Mr. Rokus his salary through such date.
9
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Optical Filter Corporation ("OFC"), a wholly-owned subsidiary of the
Company, leases approximately 25,000 square feet of office space from a realty
trust of which the sole beneficiary is John F. Blais, Jr., the former majority
stockholder of OFC and currently its President and a director of the Company.
The lease, which was entered into prior to the acquisition of OFC by the
Company, expires in December 2006 and provides for monthly payments of $19,500
subject to annual adjustment to reflect changes in the fair market value of the
real estate. The Company is responsible for certain insurance, utilities and
other operating costs. Rents paid to the realty trust during fiscal 1998 were
approximately $179,000.
The Company has an Indemnification Agreement with Stephen P. Todd, Interim
Chief Financial Officer of the Company since October 28, 1998, pursuant to which
the Company has agreed to indemnify Mr. Todd against liability incurred in any
litigation by reason of his office, including compensation for time spent in
litigation defense. Mr. Todd serves the Company through a consulting agreement
with Argus Management Corporation that is terminable by Argus Management
Corporation or the Company at any time.
10
<PAGE> 13
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, 1998, 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 *
[PERFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
9/93 9/94 9/95 9/96 9/97 9/98
<S> <C> <C> <C> <C> <C> <C>
GALILEO CORPORATION 100.00 67.50 150.00 495.00 247.50 72.50
NASDAQ STOCK MARKET(U.S.) 100.00 100.83 139.28 165.24 226.81 231.84
S & P TECHNOLOGY SECTOR 100.00 116.42 183.66 225.63 366.43 414.86
</TABLE>
- - ---------------
* Assumes $100 invested on September 30, 1993 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.
APPROVAL OF STOCK OPTION GRANT
On recommendation of the Compensation Committee, on February 23, 1999, the
Board of Directors granted to Mr. Speyer, the President and Chief Executive
Officer of the Company, subject to shareholder approval, an option to purchase
100,000 shares of the Company's Common Stock (the "Option"). If approved by the
shareholders, the Option will have an exercise price per share of $5.25, the
fair market value of a share of Common Stock on the date of grant, and will
become exercisable for 50,000 shares on August 23, 1999 and for the remaining
50,000 shares on August 23, 2000, except that the Option becomes immediately
exercisable as to all shares upon a change in control of the Company, as defined
in the Option. The term of the Option will expire on February 23, 2009, provided
that if Mr. Speyer's employment with the Company terminates earlier,
11
<PAGE> 14
the Option will terminate three months thereafter. The Option will not be
effective unless approved by shareholders at the Annual Meeting.
In addition to the Option, Mr. Speyer holds options under the Company's
1991 Employee Stock Option Plan to acquire a total of 150,000 shares of Common
Stock at prices of $3.875 to $21.50 per share with expiration dates from August
6, 2006 to December 31, 2008. The closing price of the Common Stock on the
Nasdaq National Market on March 1, 1999 was $5.25. Mr. Speyer also has an
employment agreement with the Company described under "Employment Agreement" on
page 6 of this proxy statement.
The Compensation Committee determined that as the recently appointed chief
executive officer of the Company, Mr. Speyer should be granted options to
purchase a sufficient number of shares of Common Stock to provide an appropriate
incentive for him to lead the Company through the current restructuring of its
business and achieve the Company's strategic objectives. The Committee wished to
grant to Mr. Speyer options for a total of 200,000 shares of Common Stock, which
exceeds the annual participant grant limitation contained in the 1991 Employee
Stock Option Plan. Accordingly, options for 100,000 shares were granted to Mr.
Speyer under the Plan, and the Option for an additional 100,000 shares was
granted separately from the Plan but subject to shareholder approval at the
Annual Meeting.
If the total fair market value of the shares subject to the Option on the
date of shareholder approval exceeds the fair market value of such shares on the
date of grant ($5.25 per share), the Company will record a compensation charge
against earnings in the amount of such excess over the eighteen-month vesting
period of the Option.
FEDERAL INCOME TAX CONSEQUENCES
The Option is a nonstatutory stock option that will not be treated as an
incentive stock option under Section 422 of the Internal Revenue Code of 1986,
as amended. The grant of the Option to Mr. Speyer will not result in taxable
income to him or a deduction to the Company. Upon the exercise of the Option,
Mr. Speyer will recognize compensation income, and the Company will become
entitled to a deduction, in the amount by which the market value of the shares
at the time of exercise exceeds their exercise price. If Mr. Speyer 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 a capital gain or loss, which will be long or short-term depending
upon the holding period of the shares.
VOTE REQUIRED
Approval of the Option requires 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 will
have the effect of negative votes.
The Board of Directors recommends a vote FOR approval of the Option.
INFORMATION CONCERNING AUDITORS
On recommendation of the Audit Committee, the Board of Directors has
selected Ernst & Young LLP as auditors of the Company for the current fiscal
year. Ernst & Young LLP has served as the Company's auditors since its
incorporation in 1973. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting with an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
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 2000 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 November 10, 1999. In
addition, in
12
<PAGE> 15
order for a shareholder proposal made outside of Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to be considered timely
within the meaning of Rule 14a-4(c) of the Exchange Act, such proposal must be
received by the Company not later than January 24, 2000.
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.
March 9, 1999
13
<PAGE> 16
SKU#4620-PS-99
<PAGE> 17
100,000 Shares
GALILEO CORPORATION
Nonstatutory Stock Option Certificate
-------------------------------------
Galileo Corporation, Inc. (the "Company", a Delaware corporation, hereby
grants to the person named below an option (the "Option") to purchase shares of
Common Stock, $.01 par value of the Company (the "Common Stock") subject to the
following terms and conditions and those attached to this certificate:
Name of Optionholder: W. Kip Speyer
Address: 10361 Parkstone Way
Boca Raton, Florida 33498
###-##-####
Social Security No.
Number of Shares: 100,000
Option Price: $5.25
Date of Grant: February 23, 1999
Exercisability Schedule: On or after August 23, 1999 as to 50,000 shares
On or after August 23, 2000 as to 50,000 additional
shares.
Expiration Date: February 23, 2009
Notwithstanding the foregoing, in the event of a Change in Control of the
Company (as defined Section 3 of the attached reruns and conditions), this
Option shall become exercisable as to all shares without regard to any deferred
exercise period.
THIS OPTION IS SUBJECT TO APPROVAL BY THE SHAREHOLDERS OF Tile COMPANY AND
SHALL BE VOID AND WITHOUT EFFECT IF NOT SO APPROVED RIGHTS MAY BE EXERCISED
UNDER THIS OPTION UNLESS AND UNTIL THIS OPTION IS APPROVED BY THE SHAREHOLDERS
OF THE COMPANY.
This Option shall not be treated as an Incentive Stock Option under section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
By acceptance of this Option, the Optionholder agrees to the terms and
conditions hereof.
GALILEO CORPORATION
By: _____________________________
Vice President
<PAGE> 18
NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS
1. 1991 STOCK OPTION PLAN. This Option is granted separately and not under
the Company's 1991 Stock Option Plan (the "Plan"). However, this Option is
subject to the terms and conditions of the Plan except as otherwise expressly
provided herein. The determinations of the Compensation Committee of the
Company's Board of Directors (the "Committee") regarding the interpretation and
administration of this Option arc final and binding. Copies of the Plan may be
obtained upon written request without charge from the Company.
2. OPTION PRICE. The price to be paid for each share of Common Stock issued
upon exercise whole or rely part of this Options is the Option Price set forth
on the first page of this certificate.
3. EXERCISABILITY SCHEDULE. This Option may be exercised at any time and
from time to time for the number of shares and in accordance with the
exercisability schedule set forth on the first page of this certificate;
provided however, that in the event of a Change in Control of the Company, this
Option shall become exercisable as to all shares without regard to any deferred
exercise period. For this purpose, "Change in Control" means a change in control
of the Company 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, a Change in
Control shall be deemed to have occurred if:
(a) any "person" (as such term is used 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
stone proportions as their ownership of 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 40% or more of the combined
voting power of the Company's then outstanding securities;
(b) during any period of 24 consecutive months (not including any period
prior to the date of this Option), individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in subsections (a), (c) or
(d) of this Section 3) whose election by the Board of Directors of the Company
or nomination for election by the shareholders of the Company was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or nomination
for election was previously so approved cease for any reason to constitute a
majority thereof;
(c) the shareholders of the Company approve a merger or consolidation of
the Company with other corporation other than (i) 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 convened 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 consolidation or (ii) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as defined above) acquires 40% or
more of the combined voting power of the Company's then outstanding securities;
or
(d) 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.
This Option may be exercised only for the purchase of whole shares and may
not be exercised as to any shares after the Expiration Date.
4. METHOD OF EXERCISE. To exercise this Option, the Optionholder must
deliver written notice of exercise to the Company specifying the number of
shares with respect to which the Option is being exercised accompanied by
payment of the Option Price for such shares in cash, by certified check or in
such other form, including shares of Common Stock valued at their Fair Market
Value on the date of delivery, as the
<PAGE> 19
Committee may approve. Promptly following such notice, the Company will deliver
to the Optionholder a certificate representing the number of shares for which
the Option is being exercised.
5. RIGHTS AS A STOCKHOLDER OR EMPLOYEE. The Optionholder has no rights in
shares as to which the Option Inks not been exercised and payment made as
provided above. The Optionholder has no rights to continued employment by the
Company or its Affiliates by virtue of the grant of this Option.
6. RECAPITALIZATION, MERGERS ETC. As provided in the Plan, in the event of
corporate transactions affecting the Company's outstanding Common Stock, the
Committee will equitably adjust the number and kind of shares subject to this
Option and the exercise price hereunder or make provision for a cash payment If
such transaction involves a consolidation or merger of the Company with another
entity, the sale or exchange of all or substantially all of the assets of the
Company or a reorganization or liquidation of the Company, then in lieu of the
foregoing, the Committee may upon written notice to the Optionholder provide
that this Option shall terminate on a date not less than 20 days after the date
of such notice unless theretofore exercised. In connection with such notice, the
Committee may in it's discretion accelerate or waive any deferred exercise
period.
7. OPTION NOT TRANSFERABLE. Except as otherwise permitted by the Committee,
this transferable by the Optionholder otherwise than by will or the laws of
descent and distribution, and is exercisable during the Optionholder's lifetime
only by the Optionholder. The naming of a Designated Beneficiary does not
constitute a transfer.
8. EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT. If the
Optionhoider's status as an employee of the Company or an Affiliate is
terminated for any reason other than by disability or death, the Optionholder
may exercise the rights which were available to the Optionholder at the time of
such termination only within three months from the date of termination. If such
status is terminated as a result of disability, such rights may be exercised
only within twelve months from the date of termination. Upon the death of the
Optionholder, his or her Designated Beneficiary shall in lieu of any other
rights hereunder have the right, at any time within twelve months after the date
of death, to exercise in whole or m part any rights that were available to the
Optionholder at the time of death. Notwithstanding the foregoing, no rights
under this Option may be exercised after the Expiration Date,
9. COMPLIANCE WITH SECURITIES LAWS. As a condition to the Optionholder's
right to purchase shares of Common Stock hereunder, the Company may, in its
discretion, require that (a) the shares of Common Stock reserved for issue upon
the exercise of this Option shall have been duly listed, upon official notice of
issuance, upon any national securities exchange or automated quotation system on
which the Company's Common Stock may then be listed or quoted, (b) either (i) a
registration statement under the Securities Act of 1933 with respect to the
shares shall be in effect, or (ii) in the opinion of counsel for the Company,
the proposed purchase shall be exempt from registration under that Act and the
Optionholder shall have made such undertakings and agreements with the Company
as the Company may reasonably require, and (c) such other actions, if any, as
counsel for the Company shall consider necessary to comply with any law
applicable to the issue of such shares by the Company shall have been taken by
the Company or the Optionholder, or both. The certificates representing the
shares purchased under this Option may contain such legends as counsel for the
Company considers necessary to comply with any applicable law.
10. PAYMENT OF TAXES. The Optionholder must pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by law
to be withheld with respect to the exercise of this Option. The Committee may,
in its discretion, require any other Federal or state taxes imposed on the sale
the shares to be paid by the Optiontholder. In the Committee's discretion, such
tax obligations may be paid whole or in part in shares of Common Stock,
including shares retained from the exercise of this Option, valued at their
Fair Market Value on the date of delivery. The Company and its Affiliates may,
permitted by law, deduct any such tax obligations from any payment of any kind
otherwise due to the Optionholder.
<PAGE> 20
[4620-GALILEO CORPORATION][FILE:GAC77B.ELX][VERSION-1][2/17/99]
GAC77B DETACH HERE
- - --------------------------------------------------------------------------------
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GALILEO CORPORATION
ANNUAL MEETING OF SHAREHOLDERS APRIL 6, 1999
The undersigned hereby appoints W. Kip Speyer 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 April 6, 1999, and at all adjournments thereof, hereby
revoking any proxy heretofore given with respect to such shares,
- - ------------- --------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- - ------------- --------------
<PAGE> 21
[4320-GALILEO CORPORATION][FILE:GAC77A.ELX][VERSION-1 F2][03/02/99]
DETACH HERE
GAC77A
[ ] Please mark
votes as in
this example.
Shares will be voted as specified by the shareholder. IF NO SPECIFICATION IS
MADE, THE PROXY WILL BE VOTED FOR THE PROPOSALS BELOW. If other matters come
before the meeting, the proxies or substitutes may vote upon such matters
according to their best judgment.
1. Proposal to elect Directors.
NOMINEES: Gerhard R. Andlinger, Charles
E. Bail, John F. Blais, Jr., Todd F.
Davenport, Robert D. Happ, Stephen A.
Magida, W. Kip Speyer.
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]________________________________________
For all nominees except as noted above
2. Proposal to approve stock option grant. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE [ ]
AT LEFT
Please sign exactly as your name(s)
appear(s) at left. 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.
Signature:_____________ Date:________ Signature:_____________ Date:________
