<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended DECEMBER 31, 1998
Commission File Number 0-11309
GALILEO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2526583
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
GALILEO PARK, P.O. BOX 550, STURBRIDGE, MASSACHUSETTS 01566
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (508) 347-9191
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1998
- --------------------------- --------------------------------
COMMON STOCK, PAR VALUE $.01 8,071,250 SHARES
PAGE 1 OF 17
<PAGE> 2
GALILEO CORPORATION
INDEX
PART I. Financial Information:
Page No.
---------
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets at December 31, 1998 and
September 30, 1998.................................................... 3
Condensed Consolidated Statements of Operations for the Three Months
Ended December 31, 1998 and 1997...................................... 4
Condensed Consolidated Statement of Changes in Shareholders' Equity
for the Three Months Ended December 31, 1998.......................... 5
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1998 and 1997...................................... 6
Notes to Condensed Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................................. 14
PART II. Other Information:
Item 5. Other Information............................................... 15
Item 6. Exhibits and Reports on Form 8-K................................ 15
Signatures 17
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GALILEO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Dec. 31, 1998 Sept. 30, 1998
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 754 $ 710
Accounts receivable, net 6,700 7,952
Inventories, net 8,711 8,828
Other current assets 705 1,092
Assets held for sale 7,650 ---
-------- --------
Total current assets 24,520 18,582
Property, plant and equipment, net 6,853 16,128
Excess of cost over the fair value of assets acquired, net 19,203 19,396
Other assets, net 1,334 1,548
-------- --------
Total assets $ 51,910 $ 55,654
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable (See Notes 2 and 5) $ 13,596 $ 11,846
Current portion of other notes payable 190 1,458
Accounts payable 4,363 4,283
Accrued liabilities 4,182 4,400
-------- --------
Total current liabilities 22,331 21,987
-------- --------
Other liabilities 992 1,008
-------- --------
Shareholders' equity:
Common stock 81 81
Additional paid-in capital 52,232 52,176
Accumulated deficit (23,686) (19,545)
Accumulated other comprehensive loss (40) (53)
-------- --------
Total shareholders' equity 28,587 32,659
-------- --------
Total liabilities and shareholders' equity $ 51,910 $ 55,654
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
GALILEO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
December 31,
1998 1997
---------------------
<S> <C> <C>
Net sales $ 10,762 $ 8,563
Cost of sales 6,845 5,775
------------------
Gross profit 3,917 2,788
Engineering expenses 1,099 1,328
Selling and administrative expenses 4,819 2,620
Reduction in carrying value of certain long-
lived assets 1,841 ---
------------------
7,759 3,948
------------------
Operating loss before other income and
income taxes (3,842) (1,160)
Interest income (expense), net (320) 57
Other income, net 27 ---
------------------
Loss before income taxes (4,135) (1,103)
Provision for income taxes 6 8
------------------
Net loss $ (4,141) $(1,111)
==================
Net loss per share - basic and assuming
dilution
$ (0.51) $ (0.16)
==================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
GALILEO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional Other Total
Common Paid-In Accumulated Comprehensive Shareholders'
Stock Capital Deficit Loss Equity
=====================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1998 $81 $52,176 $(19,545) $(53) $ 32,659
--------
Net income -- -- (4,141) -- (4,141)
Currency translation adjustment -- -- -- 13 13
--------
Comprehensive loss (4,128)
--------
Exercise of stock options and
related tax benefit -- 56 -- -- 56
------------------------------------------------------------
Balance, December 31, 1998 $81 $52,232 $(23,686) $(40) $ 28,587
============================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
GALILEO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
December 31,
1998 1997
--------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,141) $(1,111)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Depreciation and amortization 921 665
Reduction in carrying value of certain long-lived assets 1,841 --
Other adjustments, net -- 4
Increase (Decrease) in cash from changes in operating assets and liabilities:
Accounts receivable 1,252 (698)
Inventories 117 243
Accounts payable and accrued liabilities (138) (1,228)
Other changes, net 433 (141)
-------- -------
Total adjustments 4,426 (1,155)
-------- -------
Net cash provided (used) by operating activities $ 285 $(2,266)
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired -- (951)
Capital expenditures (730) (292)
-------- -------
Net cash used in investing activities (730) (1,243)
Cash flows from financing activities:
Proceeds from notes payable in default 1,750 --
Payments on notes payable (1,330) --
Proceeds from issuance of common stock 56 21
-------- -------
Net cash provided by financing activities 476 21
-------- -------
Effect of exchange rate changes on cash 13 44
-------- -------
Net increase (decrease) in cash and cash equivalents 44 (3,444)
Cash and cash equivalents at beginning of period 710 9,546
-------- -------
Cash and cash equivalents at end of period $ 754 $ 6,102
======== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 7
GALILEO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting of normal
recurring adjustments except as disclosed in Note 6) considered necessary for a
fair presentation. The Company's accounting policies are described in the Notes
to Consolidated Financial Statements in the Company's 1998 Form 10K, which
should be read in conjunction with these financial statements.
The results of operations for the three months ended December 31, 1998, are
not necessarily indicative of the results to be expected for the full year.
2. GOING CONCERN
The accompanying condensed consolidated financial statements were prepared
assuming the Company will continue as a going concern. As a result of a number
of developments which have had a materially adverse effect on the results of
operations, the Company incurred recurring operating losses, working capital
deficiencies and, as of December 31, 1998 and September 30, 1998 was in
violation of certain covenants of loan agreements with a bank. These conditions
raised substantial doubt about the Company's ability to continue as a going
concern.
As a result of the aforementioned, the Company has taken a number of steps
to improve its financial condition, which are summarized as follows:
Private Placement - On January 26, 1999, the Company completed a sale of
2,000,000 shares of the Company's common stock, together with warrants for an
additional 2,000,000 shares to an investment entity formed by the principals of
Andlinger & Company, Inc. for an aggregate purchase price of $6.0 million. The
warrants are exercisable for a period of 7 1/2 years at a price of $1.50 per
share, subject to antidilution adjustment.
7
<PAGE> 8
Loan Agreement - Also on January 26, 1999, the Company's bank loan agreement was
amended to reduce maximum borrowings to $13.0 million through June 30, 1999 and
$6.0 million thereafter and to extend the term of the loan through October 31,
2000. The financial covenants were also amended, and the bank agreed to waive
specified previous events of default.
Sale of Non-Strategic Assets - The Company is attempting to sell certain assets
that are non-strategic to the on-going business operations, including assets
associated with the Company's Medical Endoscope Imaging and Telecommunications
businesses. The Company is also evaluating the possibility of a sale of the
Sturbridge, Massachusetts facility. There can be no assurance whether or how
quickly the Company will reach an agreement for the sale of any of the
non-strategic assets.
Cost Reductions - During the three months ended December 31, 1998, the Company
terminated its Telecommunications business and further reduced the workforce by
49 employees. These reductions coupled with reductions in force of 61 employees
in the fourth quarter of fiscal 1998 are expected to result in annualized cost
savings of approximately $5.3 million.
While the Company's management believes that it has taken the appropriate
steps to alleviate the liquidity issue, certain of these steps are contingent
upon future events, some of which are not within the Company's control. Actual
results may differ from management's expectations.
3. ACCOUNTING POLICIES
In the first quarter of fiscal 1998, the Company adopted the Financial
Accounting Standards Board Statement ("SFAS") No. 128, "Earnings per Share."
SFAS No. 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, a basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share are very similar
to the previously reported fully diluted earnings per share. All earnings per
share amounts for all periods have been presented, and where appropriate
restated, to conform to SFAS No. 128.
8
<PAGE> 9
The following table sets forth the computation of basic and diluted
earnings per share:
For the Three Months Ended
December 31,
1998 1997
-----------------------
Numerator:
Net loss $(4,141) $(1,111)
======================
Denominator:
Weighted average shares - basic 8,071 6,874
Dilutive employee stock options -- --
======================
Weighted average shares - assuming
dilution 8,071 6,874
======================
Net loss per common share - basic $ (0.51) $ (0.16)
======================
Net loss per common share -
Assuming dilution $ (0.51) $ (0.16)
======================
4. CLASSIFICATION OF INVENTORIES:
December 31, September 30,
1998 1998
----------------------------
Finished Goods $5,022 $5,223
Work-in-progress 1,999 1,819
Raw Materials 1,606 1,786
-------------------
$8,627 $8,828
===================
9
<PAGE> 10
5. REVOLVING CREDIT FACILITY
In January 1998, the Company entered into a revolving credit facility with
a bank (as amended in August 1998 and January 1999, the "Loan Agreement"). The
Loan Agreement provides for a maximum commitment of $13.0 million through June
30, 1999 and $6.0 million thereafter with interest payable on a monthly basis at
the bank's base rate plus 2% per year. The loan, which is secured by
substantially all assets of the Company, also includes provisions which require
the Company to remit all of the net cash proceeds of asset sales (as defined) to
the bank. The maximum commitment will be reduced by an amount equal to the net
cash proceeds of asset sales and may not be reinstated. The then outstanding
balance of the loan is due and payable in full on October 31, 2000. The
outstanding balance of this facility at December 31, 1998 and September 30, 1998
was $13.6 million and $11.8 million, respectively. The carrying value of this
debt as of December 31, 1998 and September 30, 1998 approximated its fair market
value.
The Loan Agreement requires a $0.1 million amendment fee payable to the
bank on January 2, 1999 that is included in accrued liabilities at December 31,
1998 and September 30, 1998 in the accompanying condensed consolidated financial
statements. An additional amendment fee of $0.2 million is payable in 1999.
As discussed in Note 2, the Company was in violation of certain covenants
contained in the Loan Agreement. The bank waived these violations in the
amendment to the Loan Agreement executed in January 1999. As a result of the
mandatory reduction in the Loan Agreement to $6.0 million at June 30, 1999 and
uncertainties associated with the sale of non-strategic assets, the loan balance
of $13.6 million and $11.8 million is recorded as a current liability at
December 31, 1998 and September 30, 1998, respectively.
6. NONRECURRING CHARGES
The Company has recorded a charge of $1.8 million for costs to reduce the
carrying value of certain long-lived assets to estimated fair market value
primarily related to land and buildings, as well as maintenance and engineering
equipment at the Company's Sturbridge, Massachusetts facility.
During the three months ended December 31, 1998, the Company terminated its
Telecommunications business and further reduced the workforce. The Company has
suspended all investments for this business and related activities. The Company
incurred operating losses related to the Telecommunications business of $0.4
million for the three months ended December 31, 1998.
The Company reduced its workforce by 49 employees during the three months
ended December 31, 1998. The Company recorded one-time operating expenses
associated with the reduction in force and other consolidation costs of
approximately $0.8 million.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues for the three months ended December 31, 1998, increased to $10.8
million from $8.6 million for the comparable prior-year period. During the
quarter, the acquisitions of Les Entreprises Galenica, Inc., ("Galenica") and
OFC Corporation ("OFC") contributed $1.1 million and $3.8 million, respectively.
The increased revenue from the acquisitions was offset by a reduction in revenue
of $1.0 million related to foreign shipment restrictions on the Company's
microchannel plate products by the U.S. Department of Defense and a reduction in
revenue of $1.7 million related to the discontinuance of the Company's Medical
Endoscope Imaging Products.
Gross profit (as a percentage of revenues) for the three months ended
December 31, 1998, of 36.4%, increased from 32.6% from the comparable prior-year
period primarily due to the impact of product mix and improved operating
efficiencies.
Engineering expenses decreased to $1.1 million for the three months ended
December 31, 1998 from $1.3 million in the comparable prior-year periods as a
result of discontinuance of the Company's Medical Endoscope Imaging Products and
Telecommunications businesses in 1998.
Selling and administrative expenses increased to $4.8 million for the three
months ended December 31, 1998 from $2.6 million in the comparable prior-year
periods due to the inclusion of $1.4 million of operating expenses and goodwill
amortization from the acquisitions, as well as severance and other consolidation
costs of $0.8 million.
Interest expense amounted to $0.3 million during the three months ended
December 31, 1998 compared with interest income of $0.1 million during the
comparable prior period. The increase in interest expense is primarily related
to the liquidation of short-term investments held during fiscal 1997 and
increased borrowings under the Company's revolving line of credit.
For both the current and comparable prior-year periods, the Company's
effective tax rate differs from the statutory rate primarily due to available
tax loss carryforwards. The provisions principally relate to foreign taxes.
11
<PAGE> 12
FINANCIAL CONDITION
Beginning in 1997 and continuing through the first quarter of fiscal 1999,
the Company experienced a number of developments, which have had a materially
adverse effect on the results of operations. The Company has incurred recurring
operating losses, has a working capital deficiency and, as of December 31, 1998
and September 30, 1998 was in violation of certain financial covenants of loan
agreements. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. See Note 2 of the Notes to Condensed
Consolidated Financial Statements for additional discussion.
On January 26, 1999, the Company completed a sale of 2,000,000 shares of
the Company's common stock, together with warrants for an additional 2,000,000
shares to an investment entity formed by the principals of Andlinger & Company,
Inc. for an aggregate purchase price of $6.0 million. The warrants are
exercisable for a period of 7 1/2 years at a price of $1.50 per share, subject
to antidilution adjustment.
In January 1998, the Company entered into a revolving credit facility with
a bank (as amended in August 1998 and January 1999, the "Loan Agreement"). The
Loan Agreement provides for a maximum commitment of $13.0 million through June
30, 1999 and $6.0 million thereafter with interest payable on a monthly basis at
the bank's base rate plus 2% per year. The loan, which is secured by
substantially all assets of the Company, also includes provisions which require
the Company to remit all of the net cash proceeds of asset sales (as defined) to
the bank. The maximum commitment will be reduced by an amount equal to the net
cash proceeds of asset sales and may not be reinstated. The then outstanding
balance of the loan is due and payable in full on October 31, 2000. The
outstanding balance of this facility at December 31, 1998 and September 30, 1998
was $13.6 million and $11.8 million, respectively. The carrying value of this
debt as of December 31, 1998 and September 30, 1998 approximated its fair market
value.
In order to meet the required reduction of the debt facility to $6.0
million at June 30, 1999, the Company intends to sell certain non-strategic
assets. If the Company is unsuccessful in selling certain non-strategic assets,
the Company will need to obtain alternative financing to support its current
operations. There is no assurance that such alternative financing will be
available.
The Loan Agreement requires a $0.1 million amendment fee payable to the
bank on January 2, 1999 that is included in accrued liabilities at December 31,
1998 and September 30, 1998 in the accompanying condensed consolidated financial
statements. An additional amendment fee of $0.2 million is payable in 1999.
As discussed in Note 2, the Company was in violation of certain covenants
contained in the Loan Agreement. The bank waived these violations in the
amendment to the Loan Agreement executed in January 1999. As a result of the
mandatory reduction in the Loan Agreement to $6.0 million at June 30, 1999 and
uncertainties associated with the sale of non-strategic assets, the loan balance
of $13.6 million and $11.8 million is recorded as a current liability at
December 31, 1998 and September 30, 1998, respectively.
12
<PAGE> 13
During the three months ended December 31, 1998, the Company decided to
sell certain assets deemed to be non-strategic to its on-going business
operations, including assets associated with the Company's Medical Endoscope
Imaging and Telecommunications Products businesses. The Company is also
evaluating the possible sale of the Sturbridge, Massachusetts facility. There
can be no assurance whether or how quickly the Company will be able to complete
a sale of any of the non-strategic assets.
Giving effect to reclassifying the loan outstanding to current liabilities
and assets held for sale to current assets, the Company's working capital at
December 31, 1998 increased to $2.2 million from a working capital deficit of
$3.4 million at September 30, 1998.
Capital spending for the three months ended December 31, 1998, amounted to
$0.7 million. This compares with $0.3 million of capital expenditures for the
comparable prior-year period. Capital spending during the quarter primarily
relates to machinery and equipment to support the development of new products at
OFC.
Cash flows provided by operating activities amounted to $0.3 million for
the three-months ended December 31, 1998, as compared with cash flows used in
operating activities of $2.3 million in the comparable prior-year period.
YEAR 2000
The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Such software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations leading to disruptions in the Company's
activities and operations. If the Company, its significant customers, or
suppliers fail to make necessary modifications and conversions on a timely
basis, the Year 2000 issue could have a material adverse effect on Company
operations. However, the impact cannot be quantified at this time. The Company
believes that its competitors face a similar risk.
In December 1997, the Company established a corporate-wide strategy to
address and remedy technology issues relating to the Year 2000. This strategy
encompasses four areas: internal technology systems and applications used in its
business operations; manufacturing control systems; external systems of vendors
and service providers; and technology systems of existing customers.
The Company has completed an inventory and assessment of all critical
internal business systems and applications and the majority of remedies
consisting of upgrades or replacements are complete. The Company expects to have
all actions and implementation complete by May 31, 1999, with ongoing testing
and verification to continue through December 31, 1999.
The current assessment process for the inventory, testing and remediation
of manufacturing control and data control systems will continue throughout
calendar 1999. Additionally, the Company is investigating the Year 2000
compliance status of vendors and service providers, and an aggressive surveying
has been completed. The Company will attempt to minimize risk and exposure based
on responses of these critical vendors and service providers through alternative
sources and contingency plans.
13
<PAGE> 14
In the event the Company is unable to fully meet Year 2000 compliance, the
manufacturing operations in Germany and Canada will be adversely impacted. Any
potential future business interruptions, costs, damages or losses related
thereto, are dependent, to a significant degree, upon the Year 2000 compliance
of third parties, both domestic and international, such as government agencies,
customers, vendors and suppliers. While efforts will be made to minimize risk,
no assurance can be made that companies in the entire supply chain will not be
affected. In that respect, failures and disruptions of the business process
remain a possibility, and no assurance can be provided that Year 2000 compliance
can be achieved without significant additional costs.
Previous costs related to Year 2000 compliance were funded through
operating cash flows and the Company's revolving debt facility. Through December
31, 1998, the Company expended approximately $0.1 million paid to third party
consultants and vendors in remediation efforts. Internal expenditures are not
tracked separately. The Company estimates remaining costs to be between $0.2
million and $0.5 million.
The Company believes it is taking appropriate steps to achieve Year 2000
compliance. As previously discussed, many of the compliance issues rely on the
uninterrupted delivery of products and services of third parties. Consequently,
there can be no assurance of uninterrupted business processes, or additional
costs, losses, or damages occurring as a result of the Year 2000 compliance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to its revolving credit
facility. The interest on the revolving credit facility is subject to
fluctuations in the market. The Company does not believe such market risk is
material to the Company's consolidated financial statements.
The Company operates in foreign countries which exposes it to market risk
associated with foreign currency exchange rate fluctuations; however, such risk
is immaterial at this time to the Company's consolidated financial statements.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 5.
The Company will hold its 1999 Annual Meeting of Shareholders on April 6,
1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
3 Amended and Restated By-Laws of the Company, as amended on January
26, 1999.
10.1 Employment Agreement dated November 16, 1998 between the Company
and W. Kip Speyer, President and Chief
Executive Officer of the Company.
10.2 Employment Agreement dated January 1, 1999 between the Company and
Josef W. Rokus, Vice President of the Company.
10.3 Consulting Agreement dated November 19, 1998 between the Company
and William T. Hanley.
10.4 Indemnification Agreement dated December 17, 1998 between the
Company and Stephen P. Todd, Interim Chief Financial Officer of
the Company.
10.5 Nonstatutory Stock Option Agreement dated December 31, 1998
between the Company and W. Kip Speyer, President and Chief
Executive Officer of the Company.
10.6 Second Amendment to Loan Agreement dated January 25, 1999 between
the Company and BankBoston, N.A.
27 Financial Data Schedule (EDGAR filing only).
b. Reports on Form 8-K
1. On October 30, 1998, the Company filed a Current Report on Form 8-K reporting
under "Item 5. Other Events" certain developments affecting its operation and
management, including restatement of the Company's financial statements for the
second and third quarters ended March 31, 1998 and June 30, 1998 of the fiscal
year 1998, the resignation of the Chief Financial Officer of the Company and the
engagement of Argus Management Corporation as a consultant to the Company.
15
<PAGE> 16
2. On November 10, 1998, the Company filed a Current Report on Form 8-K
reporting under "Item 5. Other Events" that discussions to sell certain of the
Company's product lines had terminated.
3. On November 30, 1998, the Company filed a Current Report on Form 8-K
reporting under "Item 5. Other Events" certain changes in the senior management
Hof the Company and the Board of Directors, including the resignation of the
President and Chief Executive Officer of the Company.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GALILEO CORPORATION
Dated: February 16, 1999 /s/ W. Kip Speyer
-------------------------------------------
W. Kip Speyer, President and
Chief Executive Officer (Principal
Executive Officer)
/s/ Stephen P. Todd
--------------------------------------------
Stephen P. Todd, Interim Chief Financial
Officer (Principal Financial and Accounting
Officer)
17
<PAGE> 18
GALILEO CORPORATION
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO.
3 Amended and Restated By-Laws, as amended
on January 26, 1999. 19
10.1 Employment Agreement dated November 16, 1998
between the Company and W. Kip Speyer, President
and Chief Executive Officer of the Company. 33
10.2 Employment Agreement dated January 1, 1999
between the Company and Josef W. Rokus,
Vice President of the Company. 37
10.3 Consulting Agreement dated November 19,
1998 between the Company and William T. Hanley. 40
10.4 Indemnification Agreement dated December 17,
1998 between the Company and Stephen P. Todd,
Interim Chief Financial Officer of the Company. 44
10.5 Nonstatutory Stock Option Agreement dated
December 31, 1998 between the Company and
W. Kip Speyer, President and Chief Executive
Officer of the Company. 46
10.6 Second Amendment to Loan Agreement dated
January 25, 1999 between the Company and
BankBoston, N.A. 49
27 Financial Data Schedule EDGAR
Filing
Only
18
<PAGE> 1
EXHIBIT 3
GALILEO CORPORATION
AMENDED AND RESTATED
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such
other places, both within and without the State of
Delaware, as the board of directors may from time to
time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held in the City of Sturbridge,
Massachusetts, at such place as may be fixed from
time to time by the board of directors, or at such
other place, either within or without the State of
Delaware, as shall be designated from time to time by
the board of directors and stated in the notice of
the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. The annual meeting of the stockholders shall be
held on the third Thursday in January in each year,
or such other date as may be fixed by the board of
directors, at such time as shall be stated in the
notice of the meeting for the purpose of electing
directors and for the transaction of such other
business as may properly come before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the
date of the meeting.
Section 4. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation, may
be called by the president and shall be called by the
president or secretary at the request in writing of a
majority of the board of directors, or at the request
in writing of stockholders owning a majority in
amount of the
19
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entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed
meeting.
Section 5. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose
or purposes for which the meeting is called, shall be
given not less than ten nor more than sixty days
before the date of the meeting, to each stockholder
entitled to vote at such meeting.
Section 6. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten
days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of
shares registered in the name of each stockholder.
Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at
least ten days prior to the meeting, either at a
place within the city where the meeting is to be
held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also
be produced and kept at the time and place of the
meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 7. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided
by statute or by the certificate of incorporation.
Whether or not such quorum shall be present or
represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in
person or represented by proxy, shall, by a majority
vote thereof, have power to adjourn the meeting from
time to time, without notice other than announcement
at the meeting. At such adjourned meeting, at which a
quorum shall be present or represented, any business
may be transacted which might have been transacted at
the meeting as originally notified. If the
adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder of record entitled
to vote at the meeting. The stockholders present or
represented at any duly organized meeting may
continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders
to leave less than a quorum.
Section 8. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having
voting power present in person or represented by
proxy shall decide any question brought before such
meeting, unless the question is one upon which by
express provision of the statutes, the certificate of
incorporation, or these by-laws, a different vote is
required, in
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which case such express provision shall govern and
control the decision of such question.
Section 9. Unless otherwise provided in the certificate of
incorporation, each stockholder shall, at every
meeting of the stockholders, be entitled to one vote
in person or by proxy for each share of the capital
stock having voting power held by such stockholder,
but no proxy shall be voted on after three years from
its date, unless the proxy provides for a longer
period.
Section 10. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any
annual or special meeting of stockholders of the
corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may
be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the
minimum number of votes that would be necessary to
authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous
written consent shall be given to those stockholders
who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The business of the corporation shall be managed
by its board of directors which may exercise all such
powers of the corporation and do all such lawful acts
and things as are not by statute or by the
certificate of incorporation or by these by-laws
directed or required to be exercised or done by the
stockholders.
Section 2. The number of directors which shall constitute the
whole board shall be not less than three nor more
than nine. Within the limits above specified, the
number of directors shall be determined by resolution
of the board of directors or by the stockholders at
the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as
provided in Section 3 of this Article, and each
director elected shall hold office until his
successor is elected and qualified. Directors need
not be stockholders.
Section 3. Vacancies and newly created directorships
resulting from any increase in the authorized number
of directors may be filled by a majority of the
directors then in office, though less than a quorum,
or by a sole remaining director, and the directors so
chosen shall hold office until the next annual
election and until their successors are duly elected
and shall
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qualify, unless sooner displaced. If there are no
directors in office, then an election of directors
may be held in the manner provided by statute.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or
without the State of Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held as soon as practicable after
each annual election of directors on the same day and
at the same place at which such election was held and
no notice of such meeting shall be necessary to the
newly elected directors in order legally to
constitute the meeting, provided a quorum shall be
present. In the event such meeting is not held at
such time and place, the meeting may be held at such
time and place as shall be specified in a notice
given as hereinafter provided for special meetings of
the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be
held without notice at such time and at such place as
shall from time to time be determined by the board.
Section 7. Special meetings of the board may be called by the
president on two days' notice to each director, if
such notice is delivered personally or sent by
telegram, or on at least three days' notice if sent
by mail. Special meetings shall be called by the
president or secretary in like manner and on like
notice on the written request of at least one-half of
the directors then in office.
Section 8. At all meetings of the board a majority of the
directors shall constitute a quorum for the
transaction of business and the act of a majority of
the directors present at any meeting at which there
is a quorum shall be the act of the board of
directors, except as may otherwise be specifically
provided by statute, the Restated Certificate of
Incorporation or these by-laws. If a quorum shall not
be present at any meeting of the board of directors,
the directors present may adjourn the meeting from
time to time, without notice other than announcement
at the meeting, until a quorum is present. The
directors present at any duly organized meeting of
the board of directors may continue to transact
business until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a
quorum.
The corporation shall not, without the consent of the
Required Directors, as defined below, at the time of
such proposed action, (i) amend, alter or repeal any
provision of the Restated Certificate of
Incorporation or by-laws of the corporation, or file
any certificate of designation relating to any
preferred stock; (ii) sell, convey, transfer,
abandon, lease or otherwise dispose of or encumber
all or substantially all of its property or business
or effect a material change in the nature of its
business; (iii) sell, convey, transfer, abandon,
lease or otherwise dispose of or encumber any of the
capital stock of Leisegang Medical, Inc. or Optical
Filter Corporation, or sell all or
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substantially all of the property or business of
either of those corporations, whether or not they
constitute all or substantially all of the property
or business of the corporation, (iv) purchase, lease
or otherwise acquire all or substantially all of the
properties or assets of any other corporation or
entity (whether through the purchase of stock or
assets); (v) merge or consolidate with or into any
other corporation, corporations, entity or entities;
(vi) voluntarily dissolve, liquidate, or wind up or
carry out any partial liquidation or dissolution or
transaction in the nature of a partial liquidation or
dissolution; (vii) issue any shares of its common
stock or any class or series of capital stock, or any
options, warrants, bonds, debentures, notes or other
obligations or securities convertible into or
exchangeable for, or having optional rights to
purchase, its common stock (other than issuances of
common stock upon the exercise of outstanding options
or future awards granted pursuant to the
corporation's 1981 Stock Option Plan, 1991 Stock
Option Plan, 1996 Directors Stock Option Plan or 1997
Stock Purchase Plan) or adopt any new stock option
plan or stock appreciation plan, amend any such plans
or amend or reprice any award or grant thereunder; or
(viii) incur any indebtedness (other than accounts
payable arising in the ordinary course of business)
except as permitted, at the time of such incurrence,
by the corporation's existing credit facility as
amended or restated at such time; provided, however,
that the provisions of this paragraph shall terminate
on the first date that Andlinger Capital XIII LLC
(the "Investor") and its Permitted Transferees, as
defined below, beneficially own in the aggregate less
than 98% of their Initial Common Holdings, as defined
below.
For the purposes of the preceding paragraph: (i)
"Initial Common Holdings" means the aggregate of
2,000,000 shares of the corporation's common stock
plus 2,000,000 shares of such stock issuable upon
exercise of the warrant issued to the Investor at the
closing of the purchase of such securities by the
Investor under the Securities Purchase Agreement
dated as of December 22, 1998 (as if such shares were
issued at such closing); (ii) "Permitted Transferee"
means (a) the members of Investor, (b) the spouse or
children or grandchildren (in each case, natural or
adopted) or any trust for the sole benefit of the
spouse or children or grandchildren (in each case,
natural or adopted) of any member of Investor, (c)
the heirs, executors, administrators or personal
representatives upon the death of any member of
Investor or upon the incompetency or disability of
any member of Investor for purposes of the protection
and management of the assets of such member, and (d)
any affiliate of Investor or its members; and (iii)
"Required Directors" means that number of directors
of the corporation's board of directors equal to the
quotient obtained by dividing (x) five times the
number of directors constituting all directors at the
time of such determination by (y) seven, and, if such
quotient is not a whole number, rounding such
quotient up to the nearest whole number so that, for
example, if the number of all directors on the board
is seven, the number of Required Directors would be
five, and if the number of all directors is nine, the
number of Required Directors would be seven.
Section 9. Unless otherwise restricted by the certificate of
incorporation or by these by-laws, any action
required or permitted to be taken at any meeting of
the board of directors or of any committee thereof
may be taken without a meeting, if all members of the
board or committee, as the case may be, consent
thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board or
committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board
of directors may participate in a meeting of the
board of directors or any committee, by means of
conference, telephone
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or similar communications equipment by means of which
all persons participating in the meeting can hear
each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed
by a majority of the directors then in office,
designate one or more committees, each committee to
consist of one or more of the directors of the
corporation. The board may designate one or more
directors as alternate members of any committee, who
may replace any absent or disqualified member at any
meeting of the committee. In the absence of
disqualification of a member of a committee, the
member or members thereof present at any meeting and
not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint
another member of the board of directors to act at
the meeting in the place of any such absent or
disqualified member. Any such committee, to the
extent provided in the resolution of the board of
directors, shall have and may exercise all the powers
and authority of the board of directors in the
management of the business and affairs of the
corporation, and may authorize the seal of the
corporation to be affixed to all papers which may
require it; but no such committee shall have the
power or authority in reference to amending the
certificate of incorporation, adopting an agreement
of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and
assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a
dissolution, or amending the by-laws of the
corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no
such committee shall have the power or authority to
declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such
name or names as may be determined from time to time
by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the board of
directors when required. Except as otherwise
determined by the board of directors, the provisions
of these by-laws governing meetings of the board of
directors shall apply also to meetings of committees.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of
directors shall have the authority to fix the
compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting
of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of
directors or a stated salary as director. No such
payment shall preclude any director from
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serving the corporation in any other capacity and
receiving compensation therefor. Members of special
or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these
by-laws, notice is required to be given to any
director or stockholder, it shall not be construed to
necessitate personal notice, but such notice may be
given in writing, delivered in person, by mail or
telegraphic means, addressed to such director or
stockholder at his address as it appears on the
records of the corporation, with postage or other
fees thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be
deposited with the United States Postal Service,
lodged with a telegraphic common carrier or delivered
in person to such address.
Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate
of incorporation or of these by-laws, a waiver
thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a
vice-president, a secretary and a treasurer. The
board of directors may also choose a chairman of the
board, additional vice-presidents, one or more
assistant secretaries and assistant treasurers and
any other officers that it deems necessary or
appropriate. Any number of offices may be held by the
same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a
president, one or more vice-presidents, a secretary
and a treasurer.
Section 3. The board of directors may, at any time, appoint
such other officers and agents as it shall deem
necessary who shall hold their offices for such terms
and shall exercise such powers and perform such
duties as shall be determined from time to time by
the board.
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Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any
officer elected or appointed by the board of
directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the
directors then in office. Any vacancy occurring in
any office of the corporation shall be filled by the
board of directors.
THE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board, if any, shall be an
officer of the corporation and, subject to the
direction of the board of directors, shall perform
such executive, supervisory and management functions
and duties as may be assigned to him from time to
time by the board of directors. He shall, if present,
preside at all meetings of stockholders and of the
board of directors unless otherwise determined by the
board of directors.
THE PRESIDENT
Section 7. The president shall be the chief executive officer
of the corporation, shall preside at all meetings of
the stockholders and the board of directors in the
absence of a chairman of the board, shall have
general and active management of the business of the
corporation and shall see that all orders and
resolutions of the board of directors are carried
into effect.
Section 8. The president shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of
the corporation, except where required or permitted
by law to be otherwise signed and executed and except
where the signing and execution thereof shall be
expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 9. In the absence of the president or in the event of
his inability or refusal to act, the vice-president
or in the event there be more than one
vice-president, the vice-presidents in the order
designated by the directors (or in the absence of any
designation, then in the order of their election)
shall perform the duties of the president, and when
so acting, shall have all the powers of and be
subject to all the restrictions upon the president.
The vice-presidents shall perform such other duties
and have such other powers as the board of directors
may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
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Section 10. The secretary shall attend all meetings of the
board of directors and all meetings of the
stockholders and record all the proceedings of the
meetings of the corporation and of the board of
directors in a book to be kept for that purpose and
shall perform like duties for the standing committees
when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and
special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the
board of directors or president, under whose
supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix
the same to any instrument requiring it, and when so
affixed, it may be attested by his signature or by
the signature of such assistant secretary. The board
of directors may give general authority to any other
officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 11. The assistant secretary, or if there be more than
one, the assistant secretaries in the order
determined by the board of directors (of if there be
no such determination, then in the order of their
election), shall, in the absence of the secretary or
in the event of his inability or refusal to act,
perform the duties and exercise the powers of the
secretary and shall perform such other duties and
have such other powers as the board of directors may
from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the
corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements
in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the
name and to the credit of the corporation in such
depositories as may be designated by the board of
directors.
Section 13. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking
proper vouchers for such disbursements, and shall
render to the president and the board of directors,
at its regular meetings, or when the board of
directors so requires, an account of all his
transactions as treasurer and of the financial
condition of the corporation.
Section 14. If required by the board of directors, he shall
give the corporation a bond (which shall be renewed
every six years) in such sum and with such surety or
sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties
of his office and for the restoration to the
corporation, in case of his death, resignation,
retirement or removal from office, of all books,
papers, vouchers, money and other property of
whatever kind in his possession or under his control
belonging to the corporation.
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Section 15. The assistant treasurer, or if there shall be
more than one, the assistant treasurers in the order
determined by the board of directors (or if there be
no such determination, then in the order of their
election), shall, in the absence of the treasurer or
in the event of his inability or refusal to act,
perform the duties and exercise the powers of the
treasurer and shall perform such other duties and
have such other powers as the board of directors may
from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the
name of the corporation by, the president or a vice
president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary
of the corporation, certifying the number of shares
owned by him in the corporation.
Section 2. Any of or all the signatures on the certificate
may be facsimile. In case any officer, transfer agent
or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may
be issued by the corporation with the same effect as
if he were such officer, transfer agent or registrar
at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new
certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by
the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock
to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a
condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed
certificate or certificates, or his legal
representative, to advertise the same in such manner
as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity
against any claim that may be made against the
corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it
shall be
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the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon
its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of
any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less
than ten days before the date of such meeting, nor
more than sixty days prior to any other action. A
determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting;
provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to
vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize
any equitable or other claim to or interest in such
share or shares on the part of any other person,
whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the
certificate of incorporation, if any, may be declared
by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available
for dividends such sum or sums as the directors from
time to time, in their absolute discretion, think
proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for
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repairing or maintaining any property of the
corporation, or for such other purpose as the
directors shall think conducive to the interest of
the corporation, and the directors may modify or
abolish any such reserve in the manner in which it
was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or
officers or such other person or persons as the board
of directors may from time to time designate.
FISCAL YEAR
Section 4. Except as from time to time otherwise provided by
the board of directors, the fiscal year of the
corporation shall commence on the first day of
October.
SEAL
Section 5. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its
organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. Except as may be provided in Section 8 of Article
III, these by-laws may be altered, amended or
repealed or new by-laws may be adopted by the
stockholders or by the board of directors at any
regular or special meeting of the stockholders or of
the board of directors.
ARTICLE IX
INDEMNIFICATION
Section 1. Right to Indemnification. Each person who was or
is made a party or is threatened to be made a party
to or is involved in any action, suit, or proceeding,
whether criminal, administrative or investigative, by
reason of the fact that he or she, or a person of
whom he or she is the legal representative, is or was
a director or officer of the corporation or is or was
serving at the request of the corporation as a
director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust
or other enterprise, including service with respect
to employee benefit plans, whether
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the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or
agent or in any other capacity while serving as a
director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to
the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the
corporation to provide broader indemnification rights
than said law permitted the Corporation to provide
prior to such amendments) against all expenses,
liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection
therewith, provided, however, that the corporation
shall indemnify any such person seeking indemnity in
connection with any suit or proceeding (or part
thereof) initiated by such person only if such
action, suit or proceeding (or part thereof) was
authorized by the board of directors of the
corporation. Such right shall be a contract right and
shall include the right to be paid by the corporation
expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however,
that, the payment of such expenses incurred by a
director or officer in his or her capacity as a
director or officer (and not in any other capacity in
which service was or is rendered by such person while
a director or officer, including, without limitation,
service to an employee benefit plan) in advance of
the final disposition of such proceeding, shall be
made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it
should be determined ultimately that such director or
officer is not entitled to be indemnified under this
Section or otherwise.
Section 2. Right of Claimant to Bring Suit. If a claim under
Section 1 is not paid in full by the corporation
within ninety days after a written claim has been
received by the corporation, the claimant may at any
time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting
such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for
expenses incurred, in defending any proceeding in
advance of its final disposition where the required
undertaking has been tendered to the corporation)
that the claimant has not met the standards of
conduct which make it permissible under the Delaware
General Corporation Law for the corporation to
indemnify the claimant for the amount claimed, but
the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation
(including its board of directors, independent legal
counsel, or its stockholders) to have made a
determination prior to the commencement of such
action that indemnification of the claimant is proper
in the circumstances because he or she has met the
applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual
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<PAGE> 14
determination by the corporation (including its board
of directors, independent legal counsel, or its
stockholders) that the claimant had not met such
applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant had
not met the applicable standard of conduct.
Section 3. Non-Exclusivity of Rights. The rights conferred on
any person by Sections 1 and 2 shall not be exclusive
of any other right which such person may have or
hereafter acquire under any statute, provision of the
certificate of incorporation, by-law, agreement, vote
of stockholders or disinterested directors or
otherwise.
Section 4. Insurance. The corporation may maintain insurance,
at its expense, to protect itself and any such
director, officer, employee or agent of the
corporation or another corporation, partnership,
joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the
corporation would have the power to indemnify such
person against such expense, liability or loss under
the Delaware General Corporation Law.
33
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement dated as of November 16, 1998 is between Galileo
Corporation ("Galileo"), a Delaware corporation with its principal offices at
Galileo Park, P.O. Box 550, Sturbridge, MA 01566, and W. Kip Speyer (the
"Employee") residing at 10361 Parkstone Way, Boca Raton, Florida 33498. Prior to
the date hereof, Employee served as president and general manager of Leisegang
Medical, Inc. ("LMI"), a subsidiary of Galileo, pursuant to the Employment
Agreement dated as of August 6, 1996 among LMI, Employee and Galileo (the "Prior
Agreement"). Since the date hereof, Employee has been serving as president and
chief executive officer of Galileo. The parties desire to set forth the terms
and conditions of Employee's current position, which shall supersede the Prior
Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF EMPLOYEE.
1.1 EMPLOYMENT. Subject to the terms and conditions of this Agreement,
Galileo agrees to employ Employee in a full time capacity as president and chief
executive officer of Galileo with such specific duties as may reasonably be
assigned to Employee from time to time by the Board of Directors of Galileo (the
"Board") for the period commencing on the date hereof and terminating on
September 30, 2001, unless earlier terminated as herein provided. During
Employee's employment hereunder, Employee will continue to serve as president
and a director of LMI and Employee's principal place of work will remain within
20 miles of the Boca Raton municipal limits unless otherwise agreed by him,
provided that Employee acknowledges that he may be required to travel regularly
to Galileo's principal office at Galileo's expense. So long as Employee serves
as president and chief executive officer of Galileo hereunder, Galileo will use
best efforts to cause him to be elected as a director of Galileo. Employee
hereby accepts such employment for the term hereof. Neither Galileo nor Employee
shall have any obligation to continue employment after the term hereof. If
Employee remains employed after the term hereof, Employee's employment and
compensation may be terminated at will, with or without cause and with or
without notice, at any time at the option of Galileo or Employee.
SECTION 2. COMPENSATION. For all services to be rendered by Employee to
Galileo and its subsidiaries pursuant to this Agreement, Galileo shall pay to
and provide the Employee with the following compensation and benefits:
2.1 BASE SALARY AND BONUS. Galileo shall pay to Employee a base salary
at the rate of $250,000 per year, payable in substantially equal biweekly
installments, subject to annual review by the Board, provided that base salary
shall not be decreased during the term hereof. Employee will have the
opportunity to earn an annual incentive cash bonus of up to 40% of base salary.
The bonus for the fiscal year ended September 30, 1999 will be based upon
achievement of net sales by LMI of $9.2 million for such fiscal year, as
provided in the Prior Agreement. The bonuses for the fiscal years ending
September 30, 2000 and 2001 will be based upon achievement of personal and
corporate goals established by agreement of the Board and Employee prior to the
beginning of the fiscal year.
2.2 AUTOMOBILE. Galileo will provide Employee with a leased car for his
personal and business use with an annual rental not exceeding $7,500 and
reimburse Employee for all reasonable operating expenses.
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<PAGE> 2
2.3 PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in all employee benefit plans or programs of Galileo to the extent
that Employee's position, title, tenure, salary, age, health and other
qualifications make Employee eligible to participate. Galileo does not guarantee
the adoption or continuance of any particular employee benefit plan or program
during the term of this Agreement, and Employee's participation in any such plan
or program shall be subject to the provisions, rules and regulations applicable
thereto. Employee shall be entitled to vacation each year for a period of four
weeks during which compensation shall be paid in full, with any additional
vacation time to be allowed only in accordance with applicable Galileo policy.
2.4 EXPENSES. Galileo shall reimburse Employee for all ordinary and
necessary business expenses incurred in the performance of Employee's duties
under this Agreement, provided that Employee accounts properly for such expenses
to Galileo in accordance with the general corporate policy of Galileo as
determined by the Board and in accordance with the requirements of the Internal
Revenue Service regulations relating to substantiation of expenses.
SECTION 3. CONFIDENTIAL INFORMATION. Employee agrees to be bound by the
terms of the attached Galileo agreement as if set forth herein, including
without limitation the terms relating to confidential information, inventions
and Galileo employees. The obligations of Employee under such agreement shall
survive termination of this Agreement for any reason.
SECTION 4. TERMINATION AND SEVERANCE PAYMENT.
4.1 EARLY TERMINATION. Employee's employment hereunder shall terminate
prior to the expiration of the term specified in Section 1.1:
(a) Upon Employee's death or inability by reason of physical or
mental impairment to perform substantially all of Employee's services as
contemplated herein for 90 days or more within any six-month period;
(b) By Galileo or Employee without cause upon not less than 30
days' prior written notice to the other; or
(c) By Galileo in the event of Employee's breach of any material
duty or obligation hereunder, or intentional or grossly negligent conduct that
is materially injurious to Galileo as reasonably determined by the Board, or
willful failure to follow the reasonable directions of the Board.
4.2 SEVERANCE PAYMENT. In the event of termination of the Employee's
employment by Galileo under Section 4.1(b), Galileo shall pay to Employee as
severance an amount equal to base salary at the rate specified in Section 2.1
and the full amount of his bonus (assuming all applicable goals are achieved)
for the balance of the term, payable in equal biweekly installments. In
addition, Galileo will continue the automobile benefit provided in Section 2.2
and the medical and dental insurance benefits of Employee in effect at such
termination for the balance of the term but not after Employee secures other
employment.
SECTION 5. NONCOMPETITION. Employee agrees that so long as he is
employed by Galileo and for two years after termination of his employment with
Galileo for any reason, Employee will not, directly or indirectly, except as a
passive investor in publicly held companies, engage in competition with Galileo
or any of its subsidiaries, or own or control any interest in, or act as a
director, officer or employee of, or consultant to, any firm, corporation or
institution directly or indirectly engaged in competition with Galileo or any of
its subsidiaries.
SECTION 6. MISCELLANEOUS.
6.1 NOTICES. All notices, requests, demands and other communications to
be given pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given if delivered by hand, transmitted by telecopy or sent by
recognized overnight delivery service for next
35
<PAGE> 3
day delivery to the addresses set forth below or such other address as a party
shall have designated by notice in writing to the other party.
If to Galileo:
P.O. Box 550
Galileo Park
Sturbridge, MA 01566
Telecopy No: (508) 347-2270
Attention: Board of Directors
with a copy to:
David R. Pokross, Jr., Esq.
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
Telecopy No: (617) 227-4420
If to Employee:
10361 Parkstone Way
Boca Raton, FL 33498
Telecopy No: (561) 852-5936
6.2 INTEGRATION. This Agreement is the entire agreement of the
parties with respect to the subject matter hereof and supersedes any prior
agreement or understanding relating to Employee's employment with or
compensation by LMI or Galileo. This Agreement supersedes the Prior Agreement,
which shall be deemed terminated as of the date hereof. This Agreement may not
be amended, supplemented or otherwise modified except in writing signed by the
parties hereto.
6.3 BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their successors, assigns, heirs and
personal representatives.
6.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.5 SEVERABILITY. If any provision hereof shall for any reason be
held to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provision had not been
included herein. If any provision hereof shall for any reason be held by a court
to be excessively broad as to duration, geographical scope, activity or subject
matter, it shall be construed by limiting and reducing it to make it enforceable
to the extent compatible with applicable law as then in effect. 6.6 ENFORCEMENT
COSTS. If any action is brought to enforce any right under this Agreement, the
party prevailing in such action shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses in such action as
determined by the court.
6.7 GOVERNING LAW. This Agreement shall be governed by the laws
of Massachusetts without regard to its conflict of law provisions.
36
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first stated above.
GALILEO CORPORATION
By: /s/ Robert Happ
--------------------------------
Chairman, Compensation Committee
of the Board of Directors
EMPLOYEE
/s/ W. Kip Speyer
--------------------------------
W. Kip Speyer
37
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Agreement dated as of January 1, 1999 is between Galileo
Corporation ("Galileo"), a Delaware corporation with its principal offices at
Galileo Park, P.O. Box 550, Sturbridge, MA 01566, and Josef W. Rokus (the
"Employee") residing at 32 Old Village Road, Sturbridge, MA 01566. The parties
desire to set forth the terms and conditions of Employee's continued employment
as an executive officer of Galileo.
Accordingly, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF EMPLOYEE.
1.1 EMPLOYMENT. Subject to the terms and conditions of this
Agreement, Galileo agrees to employ Employee in a full time capacity as an
executive officer of Galileo with such specific duties as may reasonably be
assigned to Employee from time to time by the chief executive officer of Galileo
or its Board of Directors (the "Board") for the period commencing on the date
hereof and terminating on December 31, 1999, unless earlier terminated as herein
provided. During Employee's employment hereunder, Employee's principal place of
work will remain within 20 miles of the Sturbridge municipal limits unless
otherwise agreed by him. Employee hereby accepts such employment for the term
hereof. Neither Galileo nor Employee shall have any obligation to continue
employment after the term hereof. If Employee remains employed after the term
hereof, Employee's employment and compensation may be terminated at will, with
or without cause and with or without notice, at any time at the option of
Galileo or Employee.
SECTION 2. COMPENSATION. For all services to be rendered by Employee
to Galileo and its subsidiaries pursuant to this Agreement, Galileo shall pay to
and provide the Employee with the following compensation and benefits:
2.1 BASE SALARY AND BONUS. Galileo shall pay to Employee a base
salary at the rate of $130,000 per year, payable in substantially equal biweekly
installments. The Board may award a bonus to Employee in its discretion.
2.2 PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in all employee benefit plans or programs of Galileo to the extent
that Employee's position, title, tenure, salary, age, health and other
qualifications make Employee eligible to participate. Galileo does not guarantee
the adoption or continuance of any particular employee benefit plan or program
during the term of this Agreement, and Employee's participation in any such plan
or program shall be subject to the provisions, rules and regulations applicable
thereto. During the term of this Agreement, Employee shall be entitled to four
weeks vacation during which compensation shall be paid in full, with any
additional vacation time to be allowed only in accordance with applicable
Galileo policy. Any unused vacation will be accrued and paid to Employee upon
termination of employment.
2.3 EXPENSES. Galileo shall reimburse Employee for all ordinary and
necessary business expenses incurred in the performance of Employee's duties
under this Agreement, provided that Employee accounts properly for such expenses
to Galileo in accordance with the general corporate policy of Galileo as
determined by the Board and in accordance with the requirements of the Internal
Revenue Service regulations relating to substantiation of expenses.
38
<PAGE> 2
SECTION 3. CONFIDENTIAL INFORMATION. Employee agrees to be bound by the
terms of the attached Galileo agreement as if set forth herein, including
without limitation the terms relating to confidential information, inventions
and Galileo employees. The obligations of Employee under such agreement shall
survive termination of this Agreement for any reason.
SECTION 4. TERMINATION AND SEVERANCE PAYMENT.
4.1 EARLY TERMINATION. Employee's employment hereunder shall
terminate prior to the expiration of the term specified in Section 1.1:
(a) Upon Employee's death or inability by reason of physical or
mental impairment to perform substantially all of Employee's services as
contemplated herein for 90 days or more within any six-month period;
(b) By Galileo or Employee without cause upon not less than 30
days' prior written notice to the other; or
(c) By Galileo in the event of Employee's breach of any material
duty or obligation hereunder, or intentional or grossly negligent conduct that
is materially injurious to Galileo as reasonably determined by the Board, or
willful failure to follow the reasonable directions of the Board.
4.2 SEVERANCE PAYMENT. In the event of termination of the Employee's
employment by Galileo under Section 4.1(b), Galileo shall pay to Employee as
severance an amount equal to base salary at the rate specified in Section 2.1
for the balance of the term, payable in equal biweekly installments. In
addition, Galileo will continue the medical and dental insurance benefits of
Employee in effect at such termination for the balance of the term but not after
Employee secures other employment.
SECTION 5. NONCOMPETITION. Employee agrees that so long as he is
employed by Galileo and for two years after termination of his employment with
Galileo for any reason, Employee will not, directly or indirectly, except as a
passive investor in publicly held companies, engage in competition with Galileo
or any of its subsidiaries, or own or control any interest in, or act as a
director, officer or employee of, or consultant to, any firm, corporation or
institution directly or indirectly engaged in competition with Galileo or any of
its subsidiaries.
SECTION 6. MISCELLANEOUS.
6.1 NOTICES. All notices, requests, demands and other communications
to be given pursuant to this Agreement shall be in writing and shall be deemed
to have been duly given if delivered by hand, transmitted by telecopy or sent by
recognized overnight delivery service for next day delivery to the addresses set
forth below or such other address as a party shall have designated by notice in
writing to the other party.
If to Galileo:
P.O. Box 550
Galileo Park
Sturbridge, MA 01566
Telecopy No: (508) 347-2270
Attention: President
with a copy to:
David R. Pokross, Jr., Esq.
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
Telecopy No: (617) 227-4420
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<PAGE> 3
If to Employee:
32 Old Village Road
Sturbridge, MA 01566
Telecopy No: (508) 347-1942
6.2 INTEGRATION. This Agreement is the entire agreement of the
parties with respect to the subject matter hereof and supersedes any prior
agreement or understanding relating to Employee's employment with or
compensation by Galileo. This Agreement may not be amended, supplemented or
otherwise modified except in writing signed by the parties hereto.
6.3 BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their successors, assigns, heirs and
personal representatives.
6.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.5 SEVERABILITY. If any provision hereof shall for any reason be
held to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provision had not been
included herein. If any provision hereof shall for any reason be held by a court
to be excessively broad as to duration, geographical scope, activity or subject
matter, it shall be construed by limiting and reducing it to make it enforceable
to the extent compatible with applicable law as then in effect.
6.6 ENFORCEMENT COSTS. If any action is brought to enforce any right
under this Agreement, the party prevailing in such action shall be entitled to
reimbursement from the other party of its reasonable legal fees and expenses in
such action as determined by the court.
6.7 GOVERNING LAW. This Agreement shall be governed by the laws of
Massachusetts without regard to its conflict of law provisions.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first stated above.
GALILEO CORPORATION
By: /s/ W. Kip Speyer
-----------------
President
EMPLOYEE
/s/ Josef W. Rokus
-----------------
Josef W. Rokus
40
<PAGE> 1
EXHIBIT 10.3
November 19, 1998
Mr. William T. Hanley
P.O. Box 385
Fiskdale, MA 01518
Dear Mr. Hanley:
We propose that you perform consulting services for Galileo Corporation
("Galileo"), and we understand you are willing to perform such services for
Galileo, upon the terms and conditions set forth in this Agreement.
Therefore, it is hereby mutually agreed as follows:
You, William T. Hanley, will perform professional consulting services, as
Galileo may request, during the term of this Agreement. Your work will primarily
involve, but not be limited to, cooperation and assistance in the defense of any
legal claims, inquiries, investigations, etc. currently pending or subsequently
brought against the Company and also general corporate matters for Galileo.
You will be available to perform such services at all reasonable times
during the term of this Agreement as may be requested by us. You will report to
the President of Galileo.
2. As full compensation for your services hereunder, Galileo will pay you a
fee of ten thousand dollars ($10,000) per month, which will be compensation for
any time worked up to a maximum of 50 hours per month. For any time worked in
excess of 50 hours per month, your compensation will be two hundred dollars
($200) per hour. Any time worked in excess of 50 hours per month must be
expressly authorized in writing by the President of the Company. Payments will
be made on a monthly basis at the end of each month.
3. You will be reimbursed for all reasonable expenses for travel, meals, and
lodging that you incur with prior approval of the President of Galileo in
connection with your consultancy hereunder.
4. You will at all times be an independent contractor and not an employee of
Galileo. Except as set forth in paragraph six, below, the manner in which you
render services to us will be within your sole control and discretion. During
the term of this Agreement you shall undertake no act, nor make any statement,
written or verbal, contrary to the interests of Galileo nor make any commitment,
financial or otherwise, on behalf of Galileo without the express prior written
authorization of the President of Galileo. You hereby represent that you will
perform the tasks envisioned under this Agreement in a professional, responsible
and timely fashion.
5. Galileo has the right to accept or reject the recommendations made by you
as the consultant. At all times, the design of any products which relate to this
Agreement shall remain under the control and responsibility of Galileo.
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<PAGE> 2
6. You will observe our rules and regulations with respect to conduct and the
health and safety and protection of persons and property while on our premises
or engaged in Galileo business. You will comply with all applicable governmental
laws, ordinances, rules and regulations applicable to your services hereunder or
the performance thereof.
7. All patentable and unpatentable inventions, discoveries, and ideas which
are made or conceived by you in the course of or as a result of the services
performed hereunder shall become Galileo's sole and exclusive property
throughout the world. Promptly upon conception of such invention, discovery, or
idea, you will disclose same to Galileo and Galileo shall have full power and
authority to file and prosecute patent applications throughout the world thereon
and to procure and maintain patents thereon. Where appropriate, any patent
application made upon any inventions developed, in whole or part, by you shall
list you as an inventor. You shall, at our request and expense, execute
documents and perform such acts as our counsel may deem necessary or advisable,
to confirm in us all right, title and interest throughout the world, in and to,
such invention, discovery, or idea, and all patent application, patents and
copyrights thereon, and to enable and assist us in procuring, maintaining,
enforcing and defending patents, petty patents, copyrights, and other applicable
statutory protection throughout the world on any such invention, discovery, or
idea which may be patentable or copyrightable.
8. In connection with your work for us, you may be given confidential or
proprietary information of Galileo. All such information (whether or not
designated as confidential or proprietary) and know-how which you in any way
obtain from us and all inventions, discoveries and ideas which shall become our
property pursuant to paragraph seven hereof, shall be held secret and in
confidence by you and shall not be used or revealed by you to any third parties
unless, until and to the extent we shall consent thereto in writing, or until
such information, know-how, inventions, discoveries, and ideas are or shall
become generally available to the public.
9. It is understood that you will not disclose to us any knowledge,
information, inventions, discoveries and ideas which you possess under an
obligation of secrecy to a third party.
10. You hereby represent to us that you do not have any express or implied
obligation to a third party which in any way conflicts with any of your
obligations under this Agreement.
11. It is understood that we will have the royalty-free unrestricted right to
use and disclose to third parties, any and all unpatented information, know-how,
inventions, discoveries, and ideas disclosed to us by you in the course of your
services hereunder.
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<PAGE> 3
12. All written information, drawings, documents and materials prepared by you
in the course of your services hereunder shall be our sole and exclusive
property, and will be delivered to us by you promptly after expiration or
termination of this Agreement, together with all written information, drawings
documents and materials, if any, furnished by us to you in connection with your
services hereunder and not consumed by you in the performance of such services.
13. During the term of this Agreement, you agree not to perform, for any
competitor or potential competitor of Galileo, any services which are in the
field of this Agreement without first advising us in writing of the nature of
the services contemplated and the party for whom they are to be performed, and
receiving from Galileo the express written consent of Galileo to perform such
services. The determination of who is a competitor or potential competitor shall
be made solely by Galileo in its reasonable discretion. Breach of this section
shall be deemed cause for Galileo to terminate this Agreement without prejudice
to any other rights and remedies available to Galileo at law or in equity.
14. The term of this Agreement shall commence on November 19, 1998 and shall
terminate on November 18, 1999, unless sooner terminated upon mutual agreement
or upon your death or disability.
15. The provisions of paragraphs 7, 8, 11, 12, and 17 shall survive and
continue after expiration or termination of this Agreement.
16. Any assignment by you of this Agreement or of any of the rights or
obligations hereunder, without our written consent, shall be void. No
modification of this Agreement or waiver of any of the terms or conditions
contained hereunder shall be binding unless in writing and signed by both
parties.
17. The terms of this Agreement shall be governed in all respects by the laws
of the Commonwealth of Massachusetts, without regard to conflict of interest
principles.
18. This Agreement reflects the understandings of both parties and is the
entire agreement between the parties. All other prior agreements and obligations
are abrogated and withdrawn.
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<PAGE> 4
If you agree to the foregoing, please indicate your acceptance of this Agreement
by signing the enclosed duplicate copy of this Agreement and returning same to
us not later than November 23, 1998.
Very truly yours,
GALILEO CORPORATION
By: /s/ W. Kip Speyer
-------------------------
Title: PRESIDENT
-------------------------
Agreed to and accepted this
day of November 1998
- ------
/s/ William T. Hanley
- ---------------------
William T. Hanley
44
<PAGE> 1
EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
This Agreement dated as of December 17, 1998 is between Galileo
Corporation, a Delaware corporation (the "Company") and Stephen Todd ("Todd").
In order to induce Todd to continue as interim chief financial officer of the
Company, as an independent contractor through Argus Management Corp., the
Company hereby agrees as follows:
1. INDEMNIFICATION.
(a) In the event that Todd was or is a party to or witness or
other participant in, or is threatened to be made a party to
or witness or other participant in, any threatened or pending
action, suit or proceeding, or in any inquiry or
investigation, whether civil, criminal, administrative,
investigative or other, by reason of his service as interim
chief financial officer of the Company ("Claim"), the Company
shall indemnify Todd to the fullest extent permitted by law
against all judgments, fines, penalties, amounts paid in
settlement and reasonable expenses, including attorneys' fees
and all other costs incurred in connection with such Claim.
Notwithstanding anything in the Agreement to the contrary,
Todd shall not be entitled to indemnification pursuant to this
Agreement in connection with any Claim initiated by Todd
against the Company or any director or officer of the Company,
unless the Company has consented to the initiation of such
Claim.
(b) Todd shall promptly (but in no event later than 30 days)
after receiving notice of any Claim for which indemnification
may be sought hereunder give written notice thereof in
reasonable detail to the Company. The Company may elect to
defend or compromise, at its own expense, any Claim by its own
counsel who shall be reasonably satisfactory to Todd. Todd
shall not compromise or settle any Claim without the prior
written consent of the Company, which shall not be
unreasonably withheld. Todd may participate at his own expense
in the defense of any Claim as to which the Company is
controlling the defense or settlement. Todd shall cooperate
with and assist the Company in all reasonable respects in the
defense or settlement of any Claim.
2. COMPENSATION. The Company shall compensate Todd for any time spent by
him that is reasonably necessary or is requested by the Company in connection
with any Claim, including interviews, testimony and preparation, at the rate of
$100 per hour; provided, however, that such compensation will be reduced by any
amounts payable by the Company to Argus Management Corp. for such time spent by
Todd. Todd will render monthly bills in reasonable detail for such compensation,
payable within thirty days.
3. EFFECT OF INSURANCE AND TAX BENEFITS. Any amount payable to Todd by
the Company hereunder shall be reduced by the proceeds of any insurance
recovered by Todd and any tax benefits received by him.
4. LIABILITY INSURANCE. To the extent that the Company maintains
insurance providing directors' and officers' liability insurance, the Company
will cause Todd to be covered by such
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<PAGE> 2
insurance, in accordance with its terms, if such coverage is obtainable without
additional premium or cost.
5. BINDING EFFECT, ETC. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs and legal representatives. This Agreement shall continue in effect
regardless of whether Todd continues to serve as interim chief financial officer
of the Company. Nothing in this Agreement shall be deemed an agreement by the
Company to continue Todd's services in any capacity for any period, and the
Company may terminate Todd's services at any time without cause.
6. This Agreement shall be governed by the laws of Delaware.
Executed as one instrument under seal as of the date stated above.
GALILEO CORPORATION
By: /s/ Josef W. Rokus
-----------------------
Vice President
/s/ Stephen P. Todd
-----------------------
Stephen P. Todd
46
<PAGE> 1
EXHIBIT 10.5
1998 NSO-1 50,000 Shares
GALILEO CORPORATION
1991 Stock Option Plan
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") under
and subject to the Company's 1991 Stock Option Plan (the "Plan") exercisable on
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
Number of Shares: 50,000
Option Price: $3.875
Date of Grant: December 31, 1998
Exercisability Schedule:On or after the Date of Grant as to 20,000 shares
after September 30, 1999 as to 20,000 additional shares,
after September 30, 2000 as to 10,000 additional shares.
Expiration Date: December 31, 2008
Notwithstanding the foregoing, in the event of a Change in Control of
the Company (as defined in Section 3 of the attached terms and conditions), this
Option shall become exercisable as to all shares without regard to any deferred
exercise period.
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: /s/ Josef W. Rokus
------------------
Vice President
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<PAGE> 2
[Back of NSO Certificate]
GALILEO CORPORATION 1991 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION TERMS AND CONDITIONS
1. PLAN INCORPORATED BY REFERENCE. This Option is issued under and
subject to the terms of the Plan and may be amended as provided in the Plan.
Capitalized terms used and not otherwise defined in this certificate have the
meanings given to them in the Plan. This certificate does not set forth all of
the terms and conditions of the Plan, which are incorporated herein by
reference. The Committee administers the Plan and its determinations regarding
the operation of the Plan are 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 of the whole or any part of this Option 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 same 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 any 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 converted into voting securities of the
surviving entity) at least 50% of the combined voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation or (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 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 has 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 its discretion accelerate or waive any deferred
exercise period.
48
<PAGE> 3
7. OPTION NOT TRANSFERABLE. Except as otherwise permitted by the
Committee, this Option is not 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
Optionholder'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 in 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
of the shares to be paid by the Optionholder. 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 exercise of this Option, 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 Optionholder.
49
<PAGE> 1
EXHIBIT 10.6
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement is made as of the 25th day of
January, 1999 by and between
Galileo Corporation, a Delaware corporation, with its principal place
of business at Galileo Park, Sturbridge, Worcester County,
Massachusetts (the "Borrower"); and
BankBoston, N.A., a national banking association having its principal
offices at 100 Federal Street, Boston, Massachusetts (the "Bank")
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
WITNESSETH
WHEREAS, the Borrower and the Bank have entered into a Loan Agreement
dated as of January 27, 1998, as amended by a First Amendment to Loan Agreement
dated as of August 21, 1998 (as amended and in effect, the "Loan Agreement");
and
WHEREAS, certain Events of Default have arisen under the Loan Agreement
and the Borrower has requested the Bank to amend the Loan Agreement and to
forbear from exercising its rights and remedies as a result of the existence of
such Events of Default; and
WHEREAS, the Bank is willing to forbear from exercising its rights and
remedies as a result of the existence of the Events of Default and to amend the
Loan Agreement on the terms set forth herein.
NOW THEREFORE, it is hereby agreed as follows:
1. DEFINITIONS: All capitalized terms used herein and not otherwise
defined shall have the same meaning herein as in the Loan Agreement.
2. AMENDMENT TO SECTION 1. The provisions of Section 1.1 of the Loan
Agreement are hereby amended
a. by deleting the definition of "Adjusted Interest Coverage
Ratio" in its entirety.
b. by deleting the definition of "Current Ratio" in its entirety
and substituting the following in its stead:
CURRENT RATIO. At any time of determination, the
ratio of (x) Consolidated Current Assets to (y)
Consolidated Current Liabilities (exclusive of such
portion of the Obligations as may be properly
classified as current liabilities in accordance with
generally accepted accounting principles).
c. by amending the definition of "Indebtedness" by deleting the
words "other than accounts payable and accrued expenses arising in the ordinary
course of business" appearing in clause (i) of such definition and substituting
the words "including accounts payable and accrued expenses arising in the
ordinary course of business" in their stead.
d. by amending the definition of "Maximum Commitment" to read
"THIRTEEN MILLION and 00/100 DOLLARS ($13,000,000.00) through June 30, 1999, and
SIX MILLION and 00/100 DOLLARS ($6,000,000.00) from and after July 1, 1999,
subject to reduction in each case as provided in Section 2.1(b) hereof."
50
<PAGE> 2
e. by amending the definition of "Maturity Date" to read
"October 31, 2000".
f. by adding the following new definitions:
APPROVED SALE. The sale of the Sturbridge Property
for a purchase price and on terms substantially as
set forth in the offer dated December 8, 1998 from
IRE-POLUS Group.
OCF II. At any time of determination, an amount equal
to (i) Consolidated EBITDA, PLUS OR MINUS (ii)
Consolidated Working Capital Changes, MINUS (iii)
cash payments for all income taxes made during such
period MINUS (iv) capital expenditures made, and paid
in cash, by the BORROWER during such period, all as
determined in accordance with generally accepted
accounting principles.
STURBRIDGE PROPERTY. The real property owned by the
Borrower and known as Galileo Park, Sturbridge,
Massachusetts and ancillary parcels thereto and the
telecommunications assets of the Borrower.
3. AMENDMENTS TO SECTION 2. The provisions of Section 2 of the Loan
Agreement are hereby amended
a. by deleting the provisions of Section 2.1 in its entirety and
substituting the following in its stead:
2.1 THE LOAN. (a) Subject to the terms and conditions
hereof, the BANK will make available to the BORROWER
Loans in the aggregate amount outstanding of up to
the Maximum Commitment evidenced by a THIRTEEN
MILLION and 00/100 DOLLAR note ("Note") with interest
payable monthly at the aggregate of the Base Rate
plus two percent (2%) per annum. During the Revolving
Credit Period, the BORROWER may borrow, prepay, and
reborrow pursuant to this Agreement. The entire
outstanding balance of the Loan shall be paid in full
on the Maturity Date.
(b) The Borrower shall make a prepayment of the
Obligations in an amount equal to 100% of the Net
Cash Proceeds received by the Borrower or any of its
Subsidiaries from any Asset Sale. Upon any such Asset
Sale, subject to the final sentence of this Section
2.1(b), the Maximum Commitment will be reduced by an
amount equal to such Net Cash Proceeds. Any reduction
of the Maximum Commitment may not be reinstated.
Notwithstanding the foregoing,
(i) provided that no Event of Default then exists or
would arise therefrom, the Borrower shall not be obligated to reduce the Maximum
Commitment by Five Hundred Thousand Dollars ($500,000.00) of Net Cash Proceeds
from the sale of the Sturbridge Property in an Approved Sale (the Maximum
Commitment being reduced by all Net Cash Proceeds in excess of such amount); and
(ii) The Maximum Commitment of $6,000,000.00
effective from and after July 1, 1999 shall be reduced by Net Cash Proceeds from
Asset Sales occurring prior to that date only to the extent that such Net Cash
Proceeds, together with any Maximum Commitment reductions from other sources
prior to July 1, 1999, exceeded $7,000,000.00 in the aggregate.
b. by adding the following new subsection at the end of Section
2.5:
f) An amendment fee in connection with the Second
Amendment to this Agreement in the sum of
$200,000.00. Such amendment fee shall be paid in
51
<PAGE> 3
four installments, each in the sum of $50,000.00,
payable quarterly, with the first such payment to be
made within seven (7) days after the effective date
of the Second Amendment to this Agreement and the
additional installments payable on April 30, 1999,
July 31, 1999, and October 31, 1999. The full amount
of the amendment fee shall be fully earned upon the
execution of the Second Amendment to this Agreement
and, except as set forth in the following sentence,
shall not be subject to refund or rebate under any
circumstances. Notwithstanding the foregoing, (1) if
(x) all Obligations have been reduced to SIX MILLION
DOLLARS ($6,000,000.00) on or before July 1, 1999,
and (y) the ratio of the outstanding Obligations to
the orderly liquidation value (as reasonably
determined by the BANK) of the Collateral is not
greater than 0.60:1.00. as of July 1, 1999 and/or
October 1, 1999, and (z) no Event of Default has
arisen after the date of the Second Amendment to this
Agreement as a result of which the BANK has
accelerated the time for payment of the Obligations
and commenced the exercise of its remedies upon
default, the required amendment fee due in connection
with the Second Amendment on July 31, 1999 and/or
October 31, 1999 (or either of those dates if the
foregoing conditions are met on one but not both
dates) shall be reduced to $25,000.00, or (2) (A) if
no Event of Default has arisen after the date of the
Second Amendment to this Agreement as a result of
which the BANK has accelerated the time for payment
of the Obligations and commenced the exercise of its
remedies upon default and (B) all Obligations are
paid in full before July 1, 1999, and (C) all
obligations to BancBoston Leasing Inc. under a Master
Lease Agreement dated March 20, 1998 and all
Schedules thereto are paid in full before July 1,
1999, the BANK will waive payment of the installments
of the amendment fee due on July 31, 1999 and October
31, 1999.
c. by deleting the provisions of Section 2.6 in their entirety
and substituting the following in its stead:
2.6 INTEREST RATE AND PAYMENTS OF INTEREST. Each Base
Rate Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to
the aggregate of the Base Rate plus two percent (2%),
which rate shall change contemporaneously with any
change in the Base Rate. Interest shall be payable
monthly in arrears on the first day of each month.
4. AMENDMENTS TO SECTION 5. The provisions of Section 5 of the Loan
Agreement are hereby amended
a. by deleting the provisions of Section 5.8 in their entirety
and substituting the following in its stead:
5.8. CURRENT RATIO. The BORROWER and its Subsidiaries
will maintain a Current Ratio of no less than
1.50:1.00 as of the end of each month.
b. by deleting the provisions of Section 5.9 in their entirety
and substituting the following in its stead:
5.9 RATIO OF INDEBTEDNESS TO CONSOLIDATED
TANGIBLE NET WORTH. The BORROWER and its
Subsidiaries will maintain a ratio of
Indebtedness to Consolidated Tangible Net
Worth of no more than the following as of
the end of each of the quarters indicated:
------------------ -------------
Quarter Ending Maximum Ratio
------------------ -------------
March 31, 1999 2.00:1.00
------------------ -------------
52
<PAGE> 4
------------------ -------------
June 30, 1999 1.50:1.00
------------------ -------------
September 30, 1999 1.25:1.00
------------------ -------------
December 31, 1999 1.25:1.00
------------------ -------------
March 31, 2000 1.25:1.00
------------------ -------------
June 30, 2000 1.25:1.00
------------------ -------------
September 30, 2000 1.25:1.00
------------------ -------------
c. by deleting the provisions of Section 5.10 in their entirety
and substituting the following in its stead:
5.10 INTEREST COVERAGE RATIO. The BORROWER and its
Subsidiaries shall achieve an Interest Coverage Ratio
of at least (i) 1.25:1.00 for the fiscal quarter
ending June 30, 1999, and (ii) 3.00:1.00 for each
fiscal quarter thereafter beginning with the fiscal
quarter ending September 30, 1999.
d. by deleting the provisions of Section 5.11 in their entirety
and substituting the following in their stead:
5.11 LIMITATIONS ON CAPITAL EXPENDITURES. The
BORROWER and its Subsidiaries shall not make or incur
capital expenditures in excess of the following
amounts in the aggregate in the following fiscal
quarters:
------------------ ---------------
Quarter Ending Maximum Capital
Expenditures
------------------ ---------------
March 31, 1999 $1,340,000.00
------------------ ---------------
June 30, 1999 $1,570,000.00
------------------ ---------------
September 30, 1999 $1,504,000.00
------------------ ---------------
December 31, 1999 $ 775,000.00
------------------ ---------------
March 31, 2000 $ 605,000.00
------------------ ---------------
June 30, 2000 $ 635,000.00
------------------ ---------------
September 30, 2000 $ 635,000.00
------------------ ---------------
e. by deleting the provisions of Section 5.13 in their entirety
and substituting the following in its stead:
5.13 CONSOLIDATED NET INCOME. The BORROWER and
its Subsidiaries shall achieve Consolidated
Net Income (before taxes and excluding any
extraordinary gains and extraordinary losses
which would otherwise be included in the
calculation of Consolidated Net Income), for
each month commencing with the month ending
January 31, 1999 equal to or greater than
the amounts set forth below:
53
<PAGE> 5
<TABLE>
----------------------------- -------------------------------------------------
<S> <C>
Month Ending Minimum Consolidated Net Income "( )" means loss
----------------------------- -------------------------------------------------
January 31, 1999 ($200,000.00)
----------------------------- -------------------------------------------------
February 28, 1999 ($200,000.00)
----------------------------- -------------------------------------------------
March 31, 1999 ($100,000.00)
----------------------------- -------------------------------------------------
April 30, 1999 and each month
end thereafter $1.00
----------------------------- -------------------------------------------------
</TABLE>
f. by deleting the provisions of Section 5.14 in their entirety.
g. by deleting the provisions of Section 5.17 in their entirety
and substituting the following in its stead:
5.17 PROCEEDS OF COLLATERAL. The BORROWER and its
Subsidiaries have previously established a lock box
with the BANK. All proceeds of the Collateral shall
continue to be directed to the lockbox, and shall be
deposited into the BORROWER'S operating account
maintained with the BANK until the occurrence of an
Event of Default, at which time the BANK may apply
the proceeds in the lockbox daily to the Obligations.
h. by adding the following new sections to the Loan Agreement:
5.19 COMMERCIAL FINANCE EXAMS/APPRAISAL. The BORROWER
will cooperate with the BANK and permit the BANK to
undertake (at the expense of the BORROWER) commercial
finance examinations at such times as the BANK
determines; provided that the BORROWER shall not be
responsible for the cost of more than one commercial
finance examinations in any four (4) month period
unless an Event of Default exists (in which event the
BORROWER shall be responsible for all such expenses
incurred by the BANK). If the Sturbridge Property has
not been sold as of July 1, 1999, the BANK may
arrange for an appraisal of such property at the
BORROWER'S expense. All commercial finance exams and
appraisals shall be in form and substance
satisfactory to the BANK.
5.20 OCF II. The BORROWER and its Subsidiaries shall
achieve OCF II for each of the following fiscal
quarters equal to or greater than the following
amounts:
<TABLE>
------------------------------------ ---------------
<S> <C>
Fiscal Quarter Ending Minimum OCF II
------------------------------------ ---------------
------------------------------------ ---------------
March 31, 1999 ($3,750,000.00)
------------------------------------ ---------------
------------------------------------ ---------------
June 30, 1999 ($1,750,000.00)
------------------------------------ ---------------
------------------------------------ ---------------
September 30, 1999 $200,000.00
------------------------------------ ---------------
------------------------------------ ---------------
December 31, 1999 and each month end
thereafter $500,000.00
------------------------------------ ---------------
</TABLE>
54
<PAGE> 6
5. AMENDMENTS TO SECTION 6. The provisions of Section 6 of the Loan
Agreement are hereby amended
a. by adding the following clause to Section 6.1:
g) Capital Leases entered into by Optical Filter
Corporation in an amount not to exceed $2,800,000.00
in the aggregate.
b. by deleting the provisions of Section 6.4(vi) in their
entirety and substituting the following in their stead:
(vi) Sell the Sturbridge Property in the Approved
Sale (upon which sale and the receipt of the Net Cash
Proceeds to which the BANK is entitled hereunder, the
BANK will release its mortgage liens on the
Sturbridge Property so sold).
c. by adding the following at the end of Section 6.5 of the Loan
Agreement:
(other than the sale and leaseback of a portion of
the Sturbridge Property in connection with the
Approved Sale on terms reasonably satisfactory to the
BANK).
d. by adding the following new section:
6.6 DIVIDENDS AND DISTRIBUTIONS. The Borrower shall not:
declare or pay any dividend on or in respect of any shares of
any class of capital stock of the Borrower; purchase, redeem
or otherwise retire any shares of any class of capital stock
of the Borrower, directly or indirectly by the Borrower,
through a Subsidiary or otherwise; return capital by the
Borrower to its shareholders; or any other distribution on or
in respect of any shares of any class of capital stock of the
Borrower.
6. CONDITIONS TO EFFECTIVENESS. This Second Amendment to Loan Agreement
shall not be effective until each of the following conditions precedent
have been fulfilled to the satisfaction of the BANK:
a. This Second Amendment to Loan Agreement shall have been duly
executed and delivered by the BORROWER, the Guarantors and the BANK, and shall
be in full force and effect. The BANK shall have received a fully executed copy
hereof and of each other document required hereunder.
b. All action on the part of the BORROWER and the Guarantors
necessary for the valid execution, delivery and performance by the BORROWER of
this Second Amendment to Loan Agreement shall have been duly and effectively
taken. The BANK shall have received from each of the BORROWER and Guarantors,
true copies of their respective certificates of the resolutions adopted by their
respective boards of directors authorizing the transactions described herein,
each certified by their respective secretaries as of a recent date to be true
and complete.
55
<PAGE> 7
c. The BORROWER shall have received additional equity proceeds from
Andlinger Trust XIII LLC in the sum of at least $6,000,000.00 substantially on
the terms set forth in the December 22, 1998 Securities Purchase Agreement, a
copy of which has been furnished the BANK.
d. The Obligations due to the BANK shall have been reduced to no
more than the principal sum of $13,000,000.00.
e. The BANK shall have received a list of all customers of the
BORROWER and its domestic Subsidiaries (including, without limitation, all
names, addresses, contact persons and telephone numbers).
f. The BANK shall have received opinions of counsel to each of the
BORROWER and Guarantors satisfactory to the BANK and the BANK's counsel.
g. No Default or Event of Default shall have occurred and be
continuing.
h. The Borrowers and Guarantors shall have provided such additional
instruments and documents to the BANK as the BANK and its counsel may have
reasonably requested.
7. MISCELLANEOUS.
a. In the event that the BORROWER pays all Obligations in full, all
obligations to BancBoston Leasing Inc. under a Master Lease Agreement dated
March 20, 1998 and all Schedules thereto shall become immediately due and
payable (notwithstanding any contrary payment provisions in those documents) and
the BORROWER shall contemporaneously with such payment to the BANK repay all
obligations of BancBoston Leasing Inc. thereunder.
b. Except as provided herein, all terms and conditions of the Loan
Agreement and the other Loan Documents remain in full force and effect. All
collateral previously or hereafter granted to secure the Obligations and the
Guaranties shall continue to secure the Obligations, as amended by this Second
Amendment to Loan Agreement. The BORROWER and the Guarantors hereby ratify,
confirm, and reaffirm all of the representations, warranties and covenants
therein contained (except to the extent that such representations and warranties
expressly relate to an earlier date or as set forth on Schedule I attached
hereto). The BORROWER and the Guarantors further acknowledge and agree that none
of them have any offsets, defenses, or counterclaims against the BANK under the
Loan Agreement or the other Loan Documents and, to the extent that the BORROWER
or the Guarantors have, or ever had, any such offsets, defenses, or
counterclaims, the BORROWER and the Guarantors each hereby waive and release the
same.
c. The BANK hereby agrees to forbear from exercising its rights and
remedies as a result of the existence of any Defaults or Events of Default
existing prior to the date hereof under Sections 4.14, 5.1, 5.4, 5.8, 5.10,
5.11, 5.13, 5.14 and 7(n) (only insofar as such section relates to defaults
under Paragraphs 14, 16.1(d)(insofar as it relates to Paragraphs 14 and 16.1(i)
thereof) and 16.1(i)(insofar as it relates to events of default under the Loan
Agreement) of a Master Lease Agreement dated March 20, 1998 between the BORROWER
and BancBoston Leasing Inc.) of the Loan Agreement until the earlier of the
Maturity Date or the occurrence of any additional Event of Default under the
Loan Agreement. This agreement to forbear is not a waiver of any Defaults or
Events of Default which hereafter arise under such Sections of the Loan
Agreement, as amended
56
<PAGE> 8
hereby.
d. Within seven days after the effective date of this Amendment, the
BORROWER shall pay all costs and expenses incurred by the BANK in connection
with this Second Amendment, including, without limitation, all reasonable
attorneys' fees and expenses, commercial finance examination fees, appraisal
fees, consultant's fees, and all reasonable travel expenses incurred by the
BANK.
e. This Second Amendment may be executed in several counterparts and
by each party on a separate counterpart, each of which when so executed and
delivered, each shall be an original, and all of which together shall constitute
one instrument.
f. This Second Amendment expresses the entire understanding of the
parties with respect to the matters set forth herein and supersedes all prior
discussions or negotiations hereon.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed and their seals to be hereto affixed as the date first
above written.
"BORROWER"
GALILEO CORPORATION
By: /s/ Josef W. Rokus
--------------------------
Name: Josef W. Rokus
Title: Vice President
"GUARANTORS"
LEISEGANG MEDICAL, INC.
By: /s/ Josef W. Rokus
--------------------------
Name: Josef W. Rokus
Title: Secretary
OPTICAL FILTER CORPORATION
By: /s/ Josef W. Rokus
--------------------------
Name: Josef W. Rokus
Title: Secretary
"BANK"
BANKBOSTON, N.A.
By: /s/ Corinne M. Barrett
--------------------------
Name: Corinne M. Barrett
Title: Vice President
57
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 754
<SECURITIES> 0
<RECEIVABLES> 7990
<ALLOWANCES> (1290)
<INVENTORY> 8711
<CURRENT-ASSETS> 24,520
<PP&E> 39728
<DEPRECIATION> (32875)
<TOTAL-ASSETS> 51910
<CURRENT-LIABILITIES> 22331
<BONDS> 992
0
0
<COMMON> 81
<OTHER-SE> 28506
<TOTAL-LIABILITY-AND-EQUITY> 51910
<SALES> 10762
<TOTAL-REVENUES> 10762
<CGS> 6845
<TOTAL-COSTS> 14604
<OTHER-EXPENSES> (27)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320
<INCOME-PRETAX> (4135)
<INCOME-TAX> 6
<INCOME-CONTINUING> (4141)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4141)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
