-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lub/cyM+wbkaotHKIjY28MK15RvALgeVBZyUxazYNWfz+GZO8VdWZP30AB3/NjqC XbvncIaKXvuXeeIA/SE09g== 0000950135-99-000782.txt : 19990217 0000950135-99-000782.hdr.sgml : 19990217 ACCESSION NUMBER: 0000950135-99-000782 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GALILEO CORP CENTRAL INDEX KEY: 0000711425 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 042526583 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11309 FILM NUMBER: 99540557 BUSINESS ADDRESS: STREET 1: PO BOX 550 STREET 2: GALILEO PARK CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083479191 MAIL ADDRESS: STREET 1: GALILEO PARK STREET 2: PO BOX 550 CITY: STURBRIDGE STATE: MA ZIP: 01566 FORMER COMPANY: FORMER CONFORMED NAME: GALILEO ELECTRO OPTICS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 GALILEO CORPORATION 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 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 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GALILEO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
(Unaudited) Dec. 31, 1998 Sept. 30, 1998 ------------- -------------- 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 ======== ========
See Notes to Condensed Consolidated Financial Statements. 3 4 GALILEO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in thousands except per share data)
For the Three Months Ended December 31, 1998 1997 --------------------- 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) ==================
See Notes to Condensed Consolidated Financial Statements. 4 5 GALILEO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (Dollars in thousands)
Additional Other Total Common Paid-In Accumulated Comprehensive Shareholders' Stock Capital Deficit Loss Equity ===================================================================================================== 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 ============================================================
See Notes to Condensed Consolidated Financial Statements. 5 6 GALILEO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
For the Three Months Ended December 31, 1998 1997 -------------------------- 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 ======== =======
See Notes to Condensed Consolidated Financial Statements. 6 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 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 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 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 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 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 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 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 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 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 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 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 EX-3 2 AMENDED AND RESTATED BY-LAWS 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 2 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 20 3 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 21 4 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 22 5 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 23 6 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 25 7 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. 26 8 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 27 9 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. 28 10 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 29 11 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 30 12 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 31 13 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 32 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 EX-10.1 3 EMPLOYMENT AGREEMENT - W. KIP SPEYER 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. 34 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 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 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 EX-10.2 4 EMPLOYMENT AGREEMENT - JOSEF W. ROLVUS 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 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 39 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 EX-10.3 5 CONSULTING AGREEMENT - WILLIAM T. HANLEY 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. 41 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. 42 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. 43 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 EX-10.4 6 INDEMNIFICATION AGREEMENT - STEPHEN P. TODD 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 45 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 EX-10.5 7 NONSTATUTORY STOCK OPTION PLAN 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 47 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 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 EX-10.6 8 SECOND AMENDMENT TO LOAN AGREEMENT 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 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 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 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 5 ----------------------------- ------------------------------------------------- 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 ----------------------------- -------------------------------------------------
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: ------------------------------------ --------------- 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 ------------------------------------ ---------------
54 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 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 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 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1999 OCT-01-1998 DEC-31-1998 754 0 7990 (1290) 8711 24,520 39728 (32875) 51910 22331 992 0 0 81 28506 51910 10762 10762 6845 14604 (27) 0 320 (4135) 6 (4141) 0 0 0 (4141) (0.51) (0.51)
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